Sparebanken Sør Boligkreditt AS

Investor Presentation March 2016

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Executive summary

Sparebanken Sør

The fifth largest savings bank in Norway with a strong market position in Southern Norway

High capitalization; Capital ratio of 15.5 % - Core Tier 1 ratio of 12.7 % at December 31th 2015

Rated A1 (stable outlook) by Moody’s

Strong asset quality – 65 per cent of loan book to retail customers

New rights issue of NOK 600 million in progress will strengthen capital ratio even further

Sparebanken Sør Boligkreditt

100 % owned and dedicated covered bond subsidiary of Sparebanken Sør

Cover pool consisting of 100 % prime Norwegian residential mortgages

High quality cover pool reflected by the weighted average LTV of 55.3 %

Covered bonds rated Aaa by Moody’s with 5 notches of “leeway”

Strong legal framework for covered bonds in Norway with LTV limit of 75 % for residential mortgages

Norwegian economy

Low interest rates, weak NOK and fiscal stimulus are counterbalancing economic slowdown

stemming from the lower oil investments

Unemployment is expected to increase gradually but from a very low level and the unemployment

rate remains well below the European levels

The Norwegian government has a strong financial position with large budget surplus. The

government pension fund, which accounts over 200% of the GDP, provides the government with

substantial economic leeway

Southern region economy

The Southern region is clearly less exposed to oil production than Western Norway

Registered unemployment in the Southern region remains below 4 % and has moved up only

slightly, at a similar pace than the national average

House price development over the past years has been more moderate than average in Norway

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Financial key figures

Sparebanken Sør Boligkreditt

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Table of content

Norwegian economy

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Historical milestones 190 years of development and renewal

Arendal Sparebank was founded in 1825 as one of the first savings banks in Norway.

1973 The bank merged with 4 other savings banks in Aust-Agder, and formed Aust-Agder Sparebank.

Sparebanken Sør was established in 1984 after a merger between Aust-Agder Sparebank, 2 other savings banks in Aust-Agder and 9 from Vest-Agder.

1985 The bank entered for the first time Telemark, through a merger with Nissedal Sparebank and totals today 7 branches in the county, where the latest was the opening of an office in Skien in the fall of 2012.

The bank´s history dates back to 1824 when Christianssand Sparebank was established as one of the first savings banks in Norway.

The banks more recent history starts in 1984 when Sparebanken Agder was established through a merger between Christianssands Sparebank, Halse and Harkmark Sparebank, Iveland Sparebank, Oddernes Sparebank, Vennesla Sparebank and Øvrebø and Hægeland Sparebank.

Four savings banks in Telemark and Sparebanken Agder joined forces in 1987. Through the merger the bank was named Sparebanken Agder and Telemark. In 1988 the name was changed to Sparebanken Pluss

In January 1997 Sparebanken Pluss and Sparebanken NOR agreed that Sparebanken NOR was to take over Sparebanken Pluss’ branches in Telemark while Sparebanken Pluss was to take over Sparebanken Nor`s office in Kristiansand. Through this deal the banks business again was concentrated in the Agder counties.

2014 Merger between Sparebanken Pluss and Sparebanken Sør and the new bank is named Sparebanken Sør.

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Sparebanken Sør Proven operational platform | Established customer base| Stable outlook

Note(*): based on the share price per 03.02.16

1

2

4

6

7

8

5

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Sparebanken Sør is an independent financial group with a history dating back to 1824

The 5th largest Norwegian-owned bank with assets above NOK 100 billions in 2015

Geographical presence mainly in Aust-Agder, Vest-Agder and Telemark

Some 450 employees in 36 locations in the Southern part of Norway.

General banking services- and products, in addition to real-estate agency, life- and non-life insurance, security trade services and leasing through wholly- and partially owned subsidiaries and companies.

Sparebanken Sør is an independent savings bank offering its products and services to the retail banking market, corporate market and to the public sector.

4,768,674 equity certificates listed on Oslo Stock Exchange with a market capitalization of NOK 711m *

With a strong and powerful ambition, Sparebanken Sør is committed to create further growth and development in its region.

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Complete provider of financial services Significant product range - still potential for increased product sales

Subsidiaries Vendors Affiliates

Sparebanken Sør Boligkreditt AS is a wholly owned subsidiary of Sparebanken Sør

Sparebanken Sør Boligkreditt AS is licensed as a financial enterprise with the right to issue bonds where investors receive preferential coverage in home mortgages issued by the bank

Covered bond financing allows Sparebanken Sør Group to offer mortgages with competitive terms to its customers

ABCenter and Plussmegleren have merged under the name Sørmegleren.

Sparebanken Sør owns 91% of Sørmegleren Holding AS which is the parent to the real estate company Sørmegleren AS

Sørmegleren is headquartered in Kristiansand as well as 9 branches in 9 other cities

Conveys about 2,000 homes a year and is thereby the regions largest real estate agent

Sparebanken Sør bought 10% of Frende Holding in 2008, and is one of 15 independent savings banks with stakes in the company

Frende has 175 000 customers and offers insurance, both life and non-life to corporates and private customers

Brage Finans is a leasing company owned by 10 independent savings banks, Sør owns 14%

Distribution of the company's products is done through own banks, via dealers of capital and through its own sales organization

Sør bought 18% of Norne Sec. in 2008

Norne a full service investment bank with corporate finance - services, analysis, and stock and bond brokerage

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Company structure

Sparebanken Sør (parent bank)

rated A1 Moody’s

Sørmegleren (real estate broker)

Ownership 91 %

Sparebanken Sør Boligkreditt (covered bond company)

rated Aaa Moody’s Ownership 100 %

Frende (insurance) Ownership 10 %

Brage (leasing)

Ownership 14 %

Norne (brokerage) Ownership 18 %

Subsidiaries

Affiliates

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A broad geographical footprint Important operator in the south: Aust-Agder, Vest-Agder and Telemark

Local relationships and market proximity is essential for good savings bank operations Supporter of local business development

INDUSTRY

The market is totalling 450.000 people and about 9 percent of all business in Norway. Sparebanken Sør is the only bank covering this area.

COMMERCIAL REAL ESTATE

TRANSPORTATION

TRAVEL

HEALTH

AGRICULTURE

FINANCIAL SERVICES

RETAIL

PUBLIC SECTOR

EDUCATION

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Financial key figures

Sparebanken Sør Boligkreditt

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Table of content

Norwegian economy

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8,9 % 8,4 %

2014 2015

43,2 % 46,2 %

2014 2015

1.511 1.521

2014 2015

Financial key figures Solid foundation, both financially and operationally

Note(*): 2014 is adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m |

Net interest income (NOKm) Cost ratio* Impairment ratio Net income (NOKm) *

Total assets (NOKm) Net lending (NOKm) Return on equity* CET 1 ratio

0,33%

0,11%

2014 2015

94.062 101.334

2014 2015

80.913 88.387

2014 2015

13,1 % 12,7 %

2014 2015

0.7% 6.9% -66.7% 1.6%

7.7% 9.2% -5.8% -3.2%

614 624

2014 2015

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Diversified loan portfolio(I)

High retail share and a broad geographic presence contribute to a balanced portfolio

Note(*): KNIF = Kristen-Norges interessefellesskap -> consists of more than 70 national organizations

Lending by region Distribution of retail banking - SME/corporate banking

46 %

27 %

27 %

Vest-Agder Aust-Agder Telemark & Other

35 %

65 %

SME/Corporate (CM) Retail market (RM)

Gross loans Gross loans

# 1 in Vest-Agder and Aust-Agder and # 3 in Telemark.

Close and long-term cooperation with major stakeholders in the region. The agreement with KNIF* is a good example, which contributes to growth outside the region

The lending portfolio is concentrated in the bank's market sectors, concentration risk is low, and is significantly diversified compared to other regions

Large share of Retail lending which in itself contributes to lower risk, and combined with low average loan size (< NOK 2m) and a low average LTV, even in a case of a 30% house price drop, lead to a low overall risk level

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20%

13%

20%

30%

12%

5%

< 40 % 41 - 50 % 51 - 60 %61 - 70 % 71 - 75 % > 75 %

Diversified loan portfolio(II) Detailed overview of the retail and commercial portfolio

Note(*): Other includes : construction of real estate(4%), wholesale and retail(4%), industry (3%), housing associations(3%), primary(2%), public sector(2%), transportation (2%), hotel and restaurants (1%) Note(**): 100% subsidiary= important funding instrument

SME/corporate loans grouped by industry Retail loans grouped by size (NOK m) Share of loans in the Retail portfolio

Key points for SME/corporate LTV for Sparebanken Sør Boligkreditt Key points for Retail market

50%

12%

11%

7%

20%

Rental real estate Social services

Property development Commercial services

Other (Trade, Manufacturing etc.)

44 % 56 %

Sparebanken Sør Boligkreditt AS Sparebanken Sør

54%

25%

12%

4% 2% 2%

< 1 1-2 2-3 3-4 4-5 > 5

44 % of the Retail portfolio is transferred to Sparebanken Sør Boligkreditt **

~ 80 % of the Retail loans have a principal below NOK 2m

95 % of the mortgage portfolio in SBK has LTV below 75%

Comfortable with the Retail portfolio, even in “stormy weather”

Long term relationships and good quality in the SME-portfolio

Clearly defined industry approach based on local expertise and balanced risk appetite

Diversified across sectors

The KNIF-agreement contributes significantly in the sector ”Social services”

Long contracts in the public sector

Gross loans Gross loans

Gross loans

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Diversified loan portfolio(III) Low exposure to oil & offshore | stable exposure to real estate

Note(*): Industribyggerne 2015 - Rapport IRIS 2015/031 (direkte og indirekte sysselsatte knyttet til petroleumsindustrien) || Note(**): Swedbank Research, EAD Oil and Oil service, except ** - in % of total lending

Norway's largest oil regions * Exposure to oil and the oil industry**

Østfold

Ytre Sogn

Grenland

Molde/Kristiansund

Trondheims region

Arendal- og Kr.sand region

Vestfold (expanded) region

Sunnmøre

Sunnhordaland

Bergens region

Oslo/Akershus

Stavanger region

0,1 %

0,9 %

1,1 %

1,9 %

3,1 %

4,9 %

7,0 %

8,9 %

SØR*

Sandnes Sparebank*

Sparebanken Vest

Sparebank 1 Nord Norge*

Sparebanken More*

Sparebank 1 SMN

DNB

Sparebank 1 SR

Overall real estate exposure in SME/corporate

17,5 %

3,7 %

1,4 % 0,9 %

23,5 %

Overall real estate exposure Split

Rental real estate Property development

Construction Cooperative housing

Gross loans

Sør has virtually no exposure to oil & offshore, due to a long-term strategic choice Although the Vest-Agder area is more exposed to oil than average, the bank as a whole is below average, due to the portfolio in Aust-Agder

and Telemark

The bank's overall property exposure constitutes ~ 68% of the corporate market portfolio -> The latter constitutes only 23.5% of total loans

Large parts of the real estate exposures is related to commercial property (rental and condominium). Sør has considerable expertise in this area, along with its customers that operate very effectively with high level of occupancy

Exposure towards traditional construction is low

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Credit risk(I) Manageable risks across the portfolio

Note(*): Individual commitments

Loans grouped by size*

Deposits grouped by size

SME/corporate portfolio grouped by risk

Retail portfolio grouped by risk

51,3 %

18,5 %

30,2 %

< 2m 2 - 8m > 8m

77,0 %

17,6 %

5,4 %

< 10 mill 10 - 100 mill > 100 mill

94,5 %

4,2 % 1,3 %

Low Medium High

69,6 %

19,9 %

10,5 %

Low Medium High

Key points

Risk categories

Category Lower bound Upper bound

A 0,00 0,10

B 0,10 0,25

C 0,25 0,50

D 0,50 0,75

E 0,75 1,25

F 1,25 2,00

G 2,00 3,00

H 3,00 5,00

I 5,00 8,00

J 8,00 99,99

K 100

~70% of the deposits is lower than NOK 8m

~95% of Retail portfolio is in the low risk category

~95% of SME/corporate deposits is below NOK 100m (few large individual commitments)

~90% of the SME/corporate portfolio is in the low or medium risk category

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608

488 457

576 594

479 488 418

0,77%

0,61% 0,57%

0,71% 0,72%

0,57% 0,57% 0,48%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

Gross loans in arrears > 90 days Arrears in % of loans

Credit risk(II) Solid buffer in place –no surprises expected due to strong risk management

Note(*): Annualised|| Note(**): Consists of: ”arrear >31 – 60 days”, ”arrear > 61 – 90 days”,” arrear >90 days” and ”remaining doubtful loans”, || Note(***): Sparebank 1 Markets, ukerapport 11.01.2016

Loan loss expenses

Gross arrears > 90 days

Loan loss provisions (collective and individual)

Non-performing and doubtful loans** Key points

Total non-performing and doubtful loans amounted to 1.5% of the gross loan portfolio for Q4-15

Loan loss provisions, both collective and individual, represented more than 50% of the total non-performing and doubtful loans in Q4-2015

Sør is well prepared for the future through a solid loan loss provision level vs. similar banks in Norway

Total provisions compared to other banks ***

0,82% 0,77%

0,72%

0,62% 0,57%

0,45% 0,45% 0,37%

SOR

DN

B

SVEG

MO

RG

NO

NG

SB1

HE

SRB

AN

K

MIN

G

1.500

1.271

1.944

1.651 1.634 1.457 1.434

1.320

1,90% 1,60%

2,42%

2,04% 1,98% 1,74% 1,68%

1,51%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

Non-performing and doubtful loans As % of gross loans

NOKm NOKm

NOKm

669 637

806 714 681 692 694 722

44,6 % 46,0 %

50,1 %

39,7 % 41,5 %

44,8 % 48,0 %

52,4 %

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015Total deposits

Collective

% of defaulted and doubtful loans

NOKm % of loans

1

56

23

112

45

3

15 24

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

Loss provisions Unexpected losses Reversals

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44,2 % 46,8 %

36,3 %

45,8 %

42,6 % 43,9 %

54,2 %

45,7 %

Q1 ** Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

1,64% 1,60% 1,58% 1,59% 1,57% 1,57% 1,55% 1,53%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

Operational effectiveness Low interest margin offset by good cost and loss rate

Note(*): Annualised (Figures from the income statement x4) || Note(**): Adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m

Net interest margin* Impairment ratio* Cost ratio

0,14% 0,14%

0,97%

0,09% 0,07% 0,09% 0,08%

0,22%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

As a result of increased provisions

for future losses after an extensive

review of the bank's loan portfolio to CM

Net interest income / average assets Operating expenses before loss / net income Losses on loans and guarantees / average net loans to customers

Slightly decreasing net interest income in 2015, but strengthened nominal income growth due to volume growth

Among the most cost-effective banks in Norway -> Influenced by a general spread widening in the bond market affecting the bond portfolio in 2015

Impairment ratio significantly reduced in 2015, after a thorough review of the corporate market portfolio in 2014 with the associated strengthening of loss provisions

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Capital requirements Core capital of 12,7% in 2015 – expected core capital in 2016 of 14,5%

Sør has implemented ICAAP for 2015 and the Financial Supervisory Authority will conclude on individual Pillar II requirements later in 2016

Through dialogue with the Financial Supervisory Authority ("FSA"), there has been an expectation to bank on CET 1 at the end of 2016 of 14.5% (including Pillar II)

To reach the expectation from the FSA, Sør will continue to strengthen profitability, making adjustments in the balance sheet and restricting growth in lending

In addition, Sør will implement rights issue of NOK 600m during H1-16

The rights issue will strengthen core capital per 31.12.2015 from 12.7% to 13.7%

Further measures are expected to ensure that Sør will have CET1 of 14.5% at the end of 2016

Sparebanken Sør - Actual coverage, requirements and objectives Key points

7,0 %

11,0 % 11,5 % 12,7 %

14,5 %

1,5 % 1,5 %

0,8 %

1,5 %

2,0 % 2,0 %

1,9 %

2,0 %

Unweightedcore capital ratio

Requirements from the FSA31.12.2015 (Pilar I)

Requirements from the FSA31.12.2016 (Pilar I)

Capital ratio31.12.2015

Expected capital requirementsfrom the FSA

31.12.2016 (Pilar II)

CET1 Additional tier 1 Additional Tier 2

Leverage ratio Requirements Today Expected

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Financial key figures

Sparebanken Sør Boligkreditt

Contact Details

Table of content

Norwegian economy

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Sparebanken Sør Boligkreditt Executive summary

Dedicated covered bond company of Sparebanken Sør

The covered bonds have full recourse to the issuer (Sparebanken Sør Boligkreditt), which is a wholly-owned subsidiary of Sparebanken Sør

Sparebanken Sør Boligkreditt has established a revolving credit facility with Sparebanken Sør which secures the refinancing risk

The cover pool consists 100 % of prime Norwegian residential assets

Low LTV of 55.3 % (indexed)

There are no non-performing assets in the cover pool

Current OC of 16.8 %, of which 2.0 % is provided on committed basis Main cover pool exposure is towards Southern Norway, where price developments have been relatively

stable

Aaa rating assigned by Moody’s with 5 notches of leeway, pointing to significant buffer against potential downgrades

Collateral score of 5.0 % (4.3 % excluding systemic risk)

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Sparebanken Sør Boligkreditt Breakdown of portfolio

29 %

36 %

35 %

Cov.bond Other retail SME/corporate

20%

13%

20%

30%

12%

5%

< 40 % 41 - 50 % 51 - 60 %

61 - 70 % 71 - 75 % > 75 %

Sparebanken Sør total loan portfolio LTV breakdown of Sparebanken Sør Boligkreditt (cover pool)

55,3 % 59,7 % 67,2 %

76,8 %

16,8 % 14,5 % 10,3 % 2,9 %

0%

25%

50%

75%

100%

Status Q4 15 House price decline 10 % House price decline 20 % House price decline 30 %

Weighted average LTV Nominal OC

Stress test of the cover pool

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Category

Type of Collateral 100 % residential

Total loan balance NOK 25,673,390,250

Average loan balance NOK 1,017,614

No. of loans 25,229

WA seasoning (in months): 36

WA remaining term (in months): 206

NO. of borrowers 22,752

NO. of properties 24,755

WA Indexed LTV 55.30 %

WA LTV 58.30 %

Percentage of variable mortgages (S.Def.): 100.00 %

Loans in arrears > 90 days (e.g. 1% or 0.01): 0.00 %

Committed over collateralisation: 2.00 %

Over Collateralisation: 16.76 %

Total Cover Pool 25,673,390,250

The Cover Pool(I)

Cover pool composition

100 % prime Norwegian residential mortgages

No non-performing mortgages in the cover pool

Current OC level of 16.8 % and commitment to maintain level above 2.0 %

0%

5%

10%

15%

20%

25%

30%

35%

0-≤40% >40%-≤50% >50%-≤60% >60%-≤70% >70%-≤80% >80%

The weighted-average LTV is 55 % on an indexed basis. This is well below the legislative maximum of 75 % for residential mortgages

Indexed LTV distribution

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The Cover Pool(II)

Source: Moody’s deal-by-deal overview Q2 2015 and Sparebanken Sør Boligkreditt performance overview Sep 2015

Cover pool geographic split

The cover pool is primarily exposed towards Vest-Agder and Aust-Agder, as well as Oslo and Telemark to some extent

Property price development in Vest-Agder and Aust-Agder has been more modest than in the rest of the country

A low c-score points to strong credit quality of the cover pool

Sparebanken Sør Boligkreditt covered bond program has been assigned a c-score of 5.0% (4.3% excluding systemic risk)

This is stronger than the national average and also compares well with international peers

Sparebanken Sør Boligkreditt covered bond program has been assigned a TPI of ’high’ and has ’Aaa’ rating with 5 notches of leeway. This indicates strong resilience against potential issuer rating downgrades

Vest-Agder (44%) Aust-Agder

(29%)

Telemark (8%)

Oslo (9%)

Moody’s collateral scores

0%

5%

10%

15%

20%

25%

CA FR FI NL SE UK Sør NO IE PT BE IT DE AT DK ES

Avg. c-score assigned by jurisdiction and to Sparebanken Sør BK

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Funding Well diversified maturity profile giving great confidence during turmoil

Total funding amounted to NOK 42bn, of which NOK 22 billion is issued as covered bonds

International turmoil has been affecting liquidity and price volatility in Norwegian bonds

The bank has a diversified maturity profile and few expiring bonds in 2016 and 2017

Funding > 12 months totalled 89%

Liquidity indicator 1 is 106%

LCR is 108% on a group level

The average maturity is 3.4 years corresponding with the average among similar Norwegian banks

Key points Remaining maturity of outstanding wholesale funding

3.314 2.702

3.719 3.238

4.687

860 520 819

1.314 2.202

4.521

4.542

6.444

2.000

405

600

4.628 4.904

8.240

7.780

11.131

2.860

520 405

1.419

2016 2017 2018 2019 2020 2021 2022 2023 > 2024

Sparebanken Sør Sparebanken Sør Boligkreditt

11% 3% 1% 7% 27% 19% 20% 12% 1%

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Covered Bond programme

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Financial key figures

Sparebanken Sør Boligkreditt

Contact Details

Table of content

Norwegian economy

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Key indicators for the Norwegian economy Temporary slowdown in growth

Source: Estimates from Norges Bank’s December Monetary Policy report and Statistics Norway (Current account)

In % 2014 2015 2016E 2017E 2018E

GDP growth, mainland 2.3 1.0 1.1 1.9 2.3 Core inflation 2.4 2.7 2.9 2.5 2.0 Unemployment rate registered 2.8 3.0 3.3 3.4 3.3 Key policy rate 1.5 1.1 0.5 0.4 0.7 Current account surplus / GDP 9.7 8.0 7.1 7.9 8.2 Sovereign wealth fund / GDP 204 224 N.A N.A N.A

Economic growth in Norway has edged down due to lower oil investments

Low interest rates, historically weak NOK and fiscal stimulus are sustaining growth in rest of the economy

Unemployment is expected to increase gradually but from a very low level and remains well contained in the European context

Excellent financial position of the Norwegian government with large budget surplus and the government pension fund accounting over 200% of GDP

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Mainland growth Weaker growth due to lower oil investments

28

NOK, oil price and competitiveness Weak NOK has reduced cost level significantly

29

Mainland exports Export sector benefits from weak NOK and is boosting growth

30

Breakdown of Norwegian exports Norwegian exports is more than oil

Source: Statistics Norway

Fish 20 %

Food 2 %

Raw materials 4 %

Chemicals 15 %

Metals 19 %

Machines 28 %

Other 12 %

Export of traditional goods

Traditional goods 32 %

Oil and Gas 39 %

Services 29 %

Exports

REGION

EU ex Nordic Asia North

America Nordics South

America Europe ex EU Oceania Africa

SHARE OF GOODS EXPORT

30 % 20 % 16 % 14 % 6 % 5 % 3 % 3 %

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Public finances Strong fiscal power to support the economy

The Government Pension Fund currently amounts to NOK 7,000bn (approx. EUR 737bn) which is more than twice the size of the Mainland GDP and equals to five annual national budgets

This gives the Norwegian government substantial economic leeway

The fiscal rule: 4% of the fund’s value can be used in the national budget (expected real return on the fund)

The rule is to ensure that the fund itself would not be tapped. Thus the fiscal break even oil price is zero

In response to lower oil price public spending has increased. The fiscal policy stimulus is estimated to be 0.7% of the Mainland GDP in 2016

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Western Norway is the oil region Sparebanken Sør’s operating regions is less exposed to oil

Source: IRIS

Indirect employment

Supply industry export

Supply industry home market

Employed onshore

Employed offshore

Indirect employment

Supply industry export

Supply industry home market

Employed onshore

Employed offshore

Direct and indirect employment in the oil sector Employed in oil sector in absolute numbers and % of employment

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Bank specific exposure to oil related industries

* Source: Industribyggerne 2015 – Rapport IRIS 2015/031 (direct and indirect employment petroleum) ** Source: Swedbank Research, EAD Oil and Oil service, except * - in % of total lending

Sparebanken Sør has practically no exposure to oil or oil service industry

0,1 % 0,9 % 1,1 %

1,9 %

3,1 %

4,9 %

7,0 %

8,9 %

SØR* SADG* SVEG NONG* MORG* MING DNB SRBANKØstfold

Ytre Sogn

Grenland

Molde/Kristiansund

Trondheims region

Arendal- og Kr.sand region

Vestfold region +,+

Sunnmøre

Sunnhordaland

Bergens region

Oslo/Akershus

Stavanger region

Norway’s largest petroleum regions* Banks exposure towards oil- and oil service**

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Unemployment Only moderate increase in unemployment in Sparebanken Sør’s regions

35

Household economy Low interest rate burden and solid financial buffers

Estimates from Norges Bank’s December Monetary Policy report

36

Norwegian housing market(I) House prices have increased alongside income growth

City 2009 2010 2011 2012 2013 2014 2015 Sum

Oslo 1 % 8 % 10 % 10 % 5 % 1 % 10 % + 45 %

Kr.sand 2 % 7 % 6 % 1 % - 2 % - 1 % 6 % + 19 %

Stavanger 2 % 12 % 13 % 8 % 4 % - 2 % 1 % + 38 %

Norway 2 % 8 % 9 % 7 % 5 % 2 % 7 % + 40 %

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Norwegian housing market(II) Key characteristics

Source: Finance Norway, Norwegian Labour and Welfare Administration

High home ownership

Around 80 % of Norwegian households own their home which is among the highest home ownership ratios in the world. Hence, buy-to-let market is limited in Norway

Key features of residential mortgage loans in Norway

Residential mortgage loans are predominantly granted by banks and mortgage credit institutions (97 % as of January 2015)

Lenders have access to wide range of information about borrowers before granting the mortgage (e.g. tax records for the last three years, any debt collection outstanding, any bankruptcies)

Properties are registered in a central register to which banks have direct access

Typical maturity of a new loan is 25 to 30 years

The majority of residential mortgage loans have a floating interest rate meaning that banks are allowed to increase the interest rate with a six weeks’ notice

Borrowers are personally liable for their debt also after foreclosure or forced sale

Good tax incentives and supportive social security system

Borrowing costs on mortgages are tax deductible (the tax rate applied is 25 %)

Tax valuation of dwellings is favourably treated in the wealth tax system

If a dwelling is occupied by the owner for a minimum of one year, capital gain is tax free when the dwelling is sold

Unemployment benefit equals approximately 62 % of the previous calendar year’s gross income and is paid for up to 104 weeks

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Financial key figures for 2015 and expectations for 2016 Operational measures are implemented to ensure the bank's continued growth

Cost development (The bank)

Return on equity Common equity (The group) Lending growth

Dividend ratio

50% 50%

2015 2016

9,2 %

2,0 %

2,0 %

2015 2016

12,7 % 14,5 %

1,0 %

2015 2016

Equity emission added

8,4 % 9,0 %

2015 2016

Potential buffer / Effect of initiatives

46,2 % 42%

2015 2016

Satisfying level given the banks solid equity ratio

2015 was impacted by the spread widening in the liquidity portfolio

13.7%

4.0%

39

Contact details and website

Marianne Lofthus – Managing director/CEO Sparebanken Sør Boligkreditt AS

Phone, direct line + 47 38 17 35 38

Phone, mobile + 47 90 51 41 83

E mail marianne.lofthus@sor.no

Bjørn Erik Kittelsen – Head of Treasury, Sparebanken Sør

Phone, mobile + 47 90 92 86 63

E mail bjorn.kittelsen@sor.no

www.sor.no

40

Disclaimer

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