Sparebanken Møre

Quarterly Report • Oct 24, 2019

Sparebanken Møre – the Group

Presentation 3rd quarter 2019

Runar Sandanger EVP

24 October 2019

Contents

• Introduction and highlights
• Results
• Deposits and Loans
• Liquidity and Capital
• Main Targets

The largest bank in the region

Strong local presence

Our vision:

Sparebanken Møre shall be the leading contributor to creative enthusiasm in Nordvestlandet.

Every day.

The bank is expanding further and strengthening its position as market leader in our area Nordvestlandet

branch offices in our region Nordvestandet

man years

73 billion in total assets

Strong results

• The bank increases both profitability and efficiency in the third quarter
• Good revenue growth, moderate cost growth and low losses contribute to the best quarter so far this year
• The bank is solid and has good liquidity

Lending growth

Lending growth was 6.7 per cent over the last 12 months. Growth in deposits was 4.2 per cent

High efficiency

Cost/Income ratio at 40.1 per cent by quarter end – down 2.4 p.p. compared to last year

High and stable Net Interest Income

Growth in NOK and in percentage compared to 2018

Low losses

Net NOK 35 million in losses on loan and guarantees

Strong liquidity and solidity

Deposit to Loan ratio at 56.8 per cent, LCR at 125 and CET1 at 15.4 per cent. Leverage Ratio at 8.0 per cent

Return on Equity ended at 11.6 per cent for the first three quarters

MORG – price development and rating

With a MORG price of NOK 309 at the end of the third quarter of 2019, the Price/Book (P/B) ratio has strengthened to 0.99 from 0.93 as of 31.12.2018

The price of MORG rose by almost 13.6 per cent (Total Return) during 2018, about 8 p.p. more than the equity certificate index

As the figure shows, the MORG price increased further by about 16 per cent during the first three quarters of this year, slightly above the average price development in the equity certificate market

The CET1-ratio ended at 15.4 per cent by quarter end

Positive development at Oslo Stock Exchange

• June 13 2019, Moody`s confirmed the bank's A2- stable rating. Issuances from Møre Boligkreditt AS are rated Aaa

2019

• In December 2018 the Financial Supervisory Authority decided to reduce the bank's Pillar 2 requirement from 1.8 to 1.7 per cent from 31 March 2019

Source: Bloomberg

Launch of Mastercard

• Credit card with additional services
• Gives the bank's customers an even better card offer
• Complements the bank's range of services
• Distribution cooperation with Sparebank 1 Credit Card, in line with our Contract Banking model
• Other cards in new design
• One of the first banks to use quick read for card information

Sustainability profile for Sparebanken Møre

The bank has chosen five main areas

#8: Promote inclusive and sustainable economic growth, employment and decent work for all

#9: Build resilient infrastructure, promote sustainable industrialization and foster innovation

#11: Make cities inclusive, safe, resilient and sustainable

#12: Ensure sustainable consumption and production patterns

#17: Revitalize the global partnership for sustainable development

Committed to sustainable banking

The bank has signed the UN principles for Responsible Banking

• As a regional savings bank, we have considerable influence
• It is important to us that our products and services create sustainable values for customers, owners and society as a whole – ESG focus
• The principles will guide us in our work on sustainability
• The commitment supports the overall goals of society and the Paris Agreement

Key figures

We reach our goals

Return on Equity Cost/Income

0,09

0,04

In per cent of Average Assets

0,02 0,02

2015 2016 2017 2018 30.09.2019

0,06

Losses on Loans and Guarantees Common Equity Tier 1 Capital (CET1)

Balance sheet and key figures

	30.09.2019	30.09.2018	Changes
Balance in NOK million	NOK	NOK	NOK	%
Total Assets	73,144	69,876	3,268	4.7
Loans to customers	63,647	59,624	4,023	6.7
Deposits from customers	36,147	34,684	1,463	4.2
Net Equity and Subordinated Loans	6,593	6,479	114	1.8

Key Figures	30.09.2019	30.09.2018	Changes p.p.
Return on Equity	11.6	10.9	0.7
Cost/Income Ratio	40.1	42.5	-2.4
Total Capital	19.0	19.4	-0.4
Tier 1 Capital	17.0	17.4	-0.4
CET1	15.4	15.8	-0.4
Leverage Ratio	8.0	8.2	-0.2
Profit per EC (NOK, the Group)	25.60	22.85	2.75
Profit per EC (NOK, the Bank)	25.90	23.30	2.60

Positive outlook

• Sparebanken Møre is very well capitalized and has a strong liquidity position by quarter end. The bank has a healthy financial structure, results have been strong and stable and losses have been at a low level for many years
• Losses are also expected to be low in 2019. Overall, a good result is expected for the year
• Going forward, we expect a moderate increase in production and demand in the county
  • the interest rate level is still low
  • the krone exchange rate remains weak
  • The activity in the public sector remains high
  • and the expected rise in oil investments will have positive effects on large parts of the rest of the business sector
• However, geopolitical uncertainty, Brexit and the US-China trade conflict are contributing to curb growth in our export markets

Results

Strong results – good and rising profitability

12 per cent improved result compared to the result by Q3 2018 Profit after tax - NOK million

Return on Equity (ROE)

• in percent

Growth in income and low losses

Strong revenue growth in 2019 – Net Interest and Other Income

Moderate growth in expenses which is distributed with a 3.5% increase in personnel costs and an increase of 9.1% in other costs

Low loan losses

Result by 30.09.2019 compared to 2018

Results

The bank presents a good result for the first nine months, with a profit improvement after tax above 12 per cent

The bank's revenues show a positive development and the costs increase moderately. The losses are low

The bank has become more profitable and efficient compared to the corresponding period in 2018

	30.09.2019		30.09.2018			Changes
Results (NOK million and %)	NOK	%	NOK	%	NOK	p.p.
Net Interest Income	975	1.78	870	1.68	105	0.10
Net Income Financial Investments	48	0.09	32	0.06	16	0.03
Gains/losses liquidity portfolio	-1	0.00	-11	-0.02	10	0.02
Gains/losses on shares	12	0.02	16	0.03	-4	-0.01
Other Income	159	0.29	155	0.30	4	-0.01
Total Other Income	218	0.40	192	0.37	26	0.03
Total Income	1,193	2.18	1,062	2.05	131	0.13
Personnel costs	263	0.48	254	0.49	9	-0.01
Other costs	215	0.39	197	0.38	18	0.01
Total operating costs	478	0.87	451	0.87	27	0.00
Profit before losses	715	1.31	611	1.18	104	0.13
Losses on loans, guarantees etc	35	0.06	4	0.01	31	0.05
Pre tax profit	680	1.25	607	1.17	73	0.08
Taxes	159	0.29	143	0.27	16	0.02
Profit after tax	521	0.96	464	0.90	57	0.06

Good Net Interest Income in Q3

Good growth for both lending and deposits in the first nine months of 2019

Interest rate change implemented with effect from 9 August

Another change in interest rates is announced for existing loans from 13 November

Net Interest Income

• NOK million

Net Interest Income

• % of Average Assets

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Quarterly development in Other Income

Other Income - NOK million

5

61

4

56

Other Income - % of Average Assets

Other Income Financial Instruments

Increased value creation leads to growth in revenue

Revenues have risen every quarter in 2019

The bank is competitive and we are still gaining new customers

The bank is well-run and this results in new business and revenue growth

Over 70 per cent of our manyears are allocated to direct customer-oriented work

Total income

• NOK million

351

365

381

Total income

• % Average Assets

Improved efficiency - target will be met

Operational efficiency is a high priority in the bank and has been for a number of years

We are approaching the < 40 per cent target for cost efficiency

The bank is growing and efficiency is increasing

Operating Costs - NOK million

Operating Costs

• % of Average Assets

Cost/Income ratio Total Assets and Man Years

• Total Assets in NOK billion

Strong underwriting

Persistent low losses Losses on loans and guarantees

7 ^{12 13} 6 16 0,04 0,07 0,07 0,03 0,09

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

• NOK million

Q3-18 Q4-18 Q1-19 Q2-19 Q3-19

Losses on loans and guarantees

• % of Average Assets

20

Losses by sector

Losses on loans and guarantees

• NOK million

The expected credit loss (ECL) model is compliant with IFRS 9 and is used to calculate losses

Total calculated ECL by quarter end is NOK 105 million lower than by 31.12.2018

Changes in individual impairments and other losses amount to NOK 5 million for retail customers and an increase of NOK 135 million for corporate customers

Total losses are NOK 35 million by quarter end

Impairments comfortable levels

Impairments Impairments - NOK million -% of Gross Loans

0,21

0,33

Problem Loans and Impairments

Problem Loans are loans and guarantees more than 90 days over due and performing loans with individual impairments.

Per cent of

Problem Loans

Balance sheet

Continued good growth

The Bank is working well in the market and we strenghten our position in our region Nordvestlandet

Good growth in lending and deposits per Q3

We are constantly attracting new customers and customer surveys show that our customers are well satisfied with their bank

Loans Deposits

• NOK billion and per cent (y/y) - NOK billion and per cent (y/y)

• Customer lending has increased by 6.7 % over the last 12 months

• Deposit growth of 4.2 % over the last 12 months

• High deposit-to-loan ratio of 56.8 %

Lending

Stable growth in the retail – good growth in the corporate market

Retail market Corporate market

• NOK billion and per cent y/y - NOK billion and per cent y/y

2015 2016 2017 2018 Q3-19

• Retail lending has increased by 5.8 % over the last 12 months
• Loans to the retail market amount to 68.3 % of total loans

• Corporate lending has increased by 8,9 % over the last 12 months
• Loans to the corporate market amount to 31.7 % of total loans

Diversified loan book

Loans by sector

Other;

Other Industry	2.0 %	Retail/wholesale trade	0.9 %
Financial services	1.7 %	Agriculture	0.9 %
Ship Yards	1.3 %	Other	0.5 %
Building and Construction	1.4 %
Fishing Industry	1.1 %			28

Good quality in our retail portfolio

High portion of secured loans

Loans to retail customers Loan to Value – retail loans - % of total loans

• The Bank complies with the lending regulations (Boliglånsforskriften)
• Deviation from Boliglånsforskriften reported in the third quarter of 2019 were 4.9 % outside Oslo, and 5.0 % in Oslo

Housing price development

Based on pre-owned dwellings sold in September 2019, seasonal adjusted house prices increased with 0.2 per cent in Norway last month.

Last twelve months Norwegian house prices have increased in average by 2.6 per cent, mainly driven by the 4.7 per cent increase in Oslo.

The City of Ålesund and the Mid- Norway region have experienced around national average indexed development the last decade, but below average real house prices per square meter.

Indexed development, January 2008 = 100

Development housing in real prices, NOK per sqm

Key information (Sold pre-owned dwellings in September 2019)	Norway	Mid Norway	Greater Ålesund	Greater Stavanger	City of Oslo
Seasonal adj. development month	+0.2 %	-0.3 %	-0.4 %	-0.5 %	+0.7 %
Development 12 months	+2.6 %	+0.7 %	+2.7 %	-0.7 %	+4.7 %
Per square meter (NOK)	42,712	34,105	29,978	35,232	73,455
Average days on market	47 days	64 days	76 days	73 days	26 days
Price median dwelling (NOK)	3,226,996	2,748,184	2,500,000	3,200,000	4,202,086

Low exposure towards Oil Service

1.8 PSV 743 AHTS 188 Subsea Loans to Oil Service EAD by types of vessels - In per cent of total loans - In NOK million

(EAD in NOK million) Loans Guarantees Total EAD Individual impairments ECL-IFRS 9 Total Per cent of EAD Low Risk (Risk Class A-C) 0 0 0 0 0 0 0,0 % Medium Risk (Risk Class D-G) 698 185 883 0 15 15 1.7 % High Risk (Risk Class H-M) 206 41 247 0 21 21 8.7 % Loans and guarantees with individual impairments ^{220 518 749 196} 0 196 26.2 % Total 1,134 744 1,878 196 36 232 12.4 %

Seismic 738

208

Deposits

Retail market Corporate and public

• NOK billion and per cent y/y - NOK billion and per cent y/y

• Retail deposits have increased by 4.4 % over the last 12 months
• Deposits from the retail market amount to 59.8 % of total deposits

• Deposits from corporate and public customers have increased by 3.9 % the last 12 months

Discretionary Portfolio Management

Sparebanken Møre - Aktiv Forvaltning - Portfolio in NOK million

• In addition to deposits, increasingly more of Sparebanken Møre`s customers also ask for other investments
• Sparebanken Møre Aktiv Forvaltning (Discretionary Portfolio Management) offers the Bank's clients professional management services
• Our local Asset Managers continuously monitor the portfolio:
  • o 8 municipalities
  • o 10 foundations

Strong growth - NOK 5 billion under management

• o 1 pension fund
• o 2 insurance companies
• o 167 investment companies
• o 222 wealthy private individuals

33

Liquidity and Capital

Deposits from customers and market funding – strong rating

Deposits are the Group`s most important source of funding

Sparebanken Møre with good access to the market – diversifying the investor base

• Our strong deposit-to-loan ratio stood at 56,8 per cent by quarter end
• Total net market funding ended at NOK 28.6 billion by end of the quarter – more than 90 per cent with remaining maturity of more than one year
• Senior Bonds: Weighted average maturity of 2.00 years (FSA defined key figures)
• Covered Bonds issued through Møre Boligkreditt AS have a weighted average maturity of 4.24 years (FSA defined key figures)
• By quarter end Møre Boligkreditt AS had issued seven loans qualifying for Level 2A liquidity in LCR. Early October, the mortgage company placed its third successful semi-benchmark Public Issue of EUR 250 million in the European market
• June 13 2019, Moody`s confirmed the bank's A2- stable rating. Issuances from Møre Boligkreditt AS are rated Aaa

Equity and related capital

• CET1 and Leverage Ratio (LR) strengthened in the quarter and are well above current regulatory requirements
• The bank is solid and we are working hard to adapt to changes in future requirements

Tier 1 capital in Sparebanken Møre

• % of risk weighted assets

CET1 requirement for Sparebanken Møre

• % of risk weighted assets

• By quarter end our Common Equity Tier 1 capital stood at 15.4 %, Tier 1 capital at 17.0 % and Total Capital at 19.0 %
• Sparebanken Møre's capital targets are:
  • Total Capital: Minimum 18.2 %
  • Tier 1 capital: Minimum 16.2 %
  • CET1: Minimum 14.7 %

• The Group's capital adequacy ratio is well above the regulatory capital requirements
• Our capital is calculated according to the IRB Foundation Approach for corporate commitments, IRB Approach for the retail market
• The Pillar 2 requirement has been reduced to 1.7 % from March 31 2019

Our dividend policy stands firm

MORG – price and Price/Book (P/B) value

Sparebanken Møre aims to achieve financial results providing a good and stable return on the Bank's equity capital

Sparebanken Møre's results should ensure that the owners of the equity receive a competitive long-term return in the form of cash dividends and capital appreciation on their equity

Unless the capital strength dictates otherwise, about 50 % of the profit for the year will be distributed as dividends

Sparebanken Møre's allocation of earnings shall ensure that all equity owners are guaranteed equal treatment Equity per MORG Price P/B

Equity per MORG is calculated on Group figures

Equity Capital in Sparebanken Møre

• The PCCs/ECs of Sparebanken Møre (MORG) have been listed at Oslo Stock Exchange since 1989
• Total EC capital NOK 989 million by September 2019
• Good Total Return

2019

Source: Bloomberg

Annual dividend per EC (NOK)
1990	10	2005	20
1991	0	2006	20
1992	0	2007	23
1993	13	2008	20
1994	12	2009	12
1995	13	2010	12
1996	13	2011	8
1997	13	2012	12
1998	15	2013	8
1999	16	2014	13.50
2000	17	2015	11.50
2001	17	2016	14.00
2002	15	2017	14.00
2003	16	2018	15.50
2004 Dividend and EC-price	18

Equity Capital in Sparebanken Møre

About equity certificates

• Equity certificates are a special kind of equity instrument first introduced by savings banks in 1988. A total of 32 banks have now issued such certificates, and 19 of them are listed on the stock exchange
• Equity certificates are an important part of savings banks' capital base and confer ownership of between 14 % and 97 % of the individual bank
• A savings bank that has issued equity certificates has two types of equity. One is its primary capital, or "ownerless" equity, consisting of retained earnings built up by the bank over the years. The other is the certificate-holders' equity, consisting of equity certificate capital and related reserves (equalization reserve and premium account)
• Equity certificates have clear similarities to shares. The main difference is the owners' rights to the bank's assets and influence over the bank's governing bodies. The key principle is that profits are distributed proportionally on the basis of ownership share and the bank's other capital
• In a limited company, losses hit shareholders' equity directly. In a savings bank, losses are first absorbed by the primary capital and the equalization reserve before hitting the equity certificate capital

Source: The Norwegian Savings Bank Associationhttps://www.sparebankforeningen.no/en/egenkapitalbevis/about-equity-certificates/

Financial targets

Contact

sbm.no facebook.com/sbm.no @sbmno engasjert.sbm.no

CEO Trond Lars Nydal

+47 951 79 977 trond.nydal@sbm.no

EVP Runar Sandanger

+47 950 43 660 runar.sandanger@sbm.no

Disclaimer

This presentation has been prepared solely for promotion purposes of Sparebanken Møre. The presentation is intended as general information and should not be construed as an offer to sell or issue financial instruments.

The presentation shall not be reproduced, redistributed, in whole or in part, without the consent and Sparebanken Møre. Sparebanken Møre assumes no liability for any direct or indirect losses or expenses arising from an understanding of and/or use of the presentation. of Sparebanken Møre.