Being local – makes a difference Annual Report 2009print-run and printed on paper approved by the...

Annual Report 2009

EIENDOMSMEGLER VEST | FRENDE FORSIKRING | NORNE SECURITIES | KYTE NÆRINGSMEGLING

Being local – makes a difference

SWIFT: SPVNOBBCOMPANY NUMBER: 832554332

Annual Report 2009

– Focusing on Western Norway– Focusing on Western Norway

Sparebanken Vest aims to be the leading financial services group in Western Norway.

The environment: Sparebanken Vest pursues an active, forward-looking environmental policy, both internally and externally. This report has therefore been published in a limited print-run and printed on paper approved by the Nordic Ecolabel. PDF-version available at www.spv.no

Other contributors: Photos by Knut Egil Wang, design and layout by Reaktor. Printed by Grafisk Formidling AS. The cover photo is one of several everyday portraits that are used in Sparebanken Vest’s communication with the market and society at large.

Regional Map

Sogndal

Sandnes

Sauda

Klepp

Stavanger

Haugesund

Bergen

Askøy

Sotra

Arna

Os

Husnes

Odda

Stord

Knarvik

Førde Florø

Eid

MåløyStadlandetSeljeMåløyStrynBryggjaDavikNordfjordeidFlorøFørdeÅrdalSogndalHøyanger

MasfjordenLindåsMastrevikFedjeMangerLonevågKnarvikFrekhaug

RongKleppestøÅgotnesStraumeSkogsvågOsStorebøBekkjarvik

FitjarHusnesSagvågBremnesMosterhamnLeirvikSveioHaugesundSæbøvikSkånevikEtneSaudaSand

StavangerHinnaSolaSandnes

DaleBjørkheimNorheimsundStrandebarmEikelandsosenOddaRøldal

RegionHardanger /Midthordland

KaigatenKorskirkeallmenningenXhibitionDanmarksplassSlettenÅsaneArnaLoddefjordOasenNesttunLagunen

RegionBergen

RegionSogn ogFjordane

RegionNordhordland

Region Vest

RegionSunnhordland /Haugalandet

RegionRogaland

Contents Key figures for the Sparebanken Vest Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Managing directors article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Board of Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Accounts and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Note 1 Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Note 2 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Note 3 Net interest and credit commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Note 4 Interest on individual balance sheet items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Note 5 Net other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Note 6 Payroll and general administration expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Note 7 Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Note 8 Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Note 9 Classification of financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Note 10 Fair value of financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Note 11 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Note 12 Commitment in default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Note 13 Loans to and receivables from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Note 14 Accounting integration of Sauda Sparebank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Note 15 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Note 16 Shares at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Note 17 Commercial paper and bonds recognised at fair value through profit or loss . . . 60Note 18 Shares in group companies and associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Note 19 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Note 20 Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Note 21 Debt to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Note 22 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66Note 23 Securitised debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Note 24 Pension commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Note 25 Subordinated loan capital and subortinated bond loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Note 26 Capital adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74Note 27 Equity certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Note 28 Guarantees and secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Note 29 Liquidity risk/Residual time to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Note 30 Sensitivity analysis - market risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Note 31 Interest rate sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Note 32 Currency positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Note 33 Transactions with related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Note 34 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Auditor’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Control Committee’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Declaration from BoD & CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Group key figures - 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87Group key figures per quarter for 2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96Regional map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

ANNuAL REPORT 2009 PAGE 3

Key figures for the Sparebanken Vest Group

Amounts in NOK millions 2009 2008 2007 2006 2005Income statementNet interest and credit commission income 1 453 1 308 1 126 1 042 972Net other operating income 489 375 678 624 471Total operating expenses 1 172 1 068 973 921 875Profit before write-downs and tax 770 615 831 745 568

Write-downs and losses on loans and guarantees 270 204 (34) (48) (75)Pre-tax profit 500 411 865 793 643

Balance sheetAssets under management 97 661 94 893 75 048 60 232 54 680

Net lendings 82 302 76 235 64 683 53 451 46 672Securities 13 129 11 463 6 876 4 418 4 383

Deposits 44 881 40 521 37 611 31 119 27 390Subordinated loan capital 2 062 1 437 1 042 724 942Equity 4 885 4 372 4 293 3 798 3 272

Key figures in %Net interest and credit commission income as % of primary capital 1.58 1.60 1.69 1.85 1.93Pre-tax profit as % of primary capital 0.54 0.50 1.30 1.41 1.28

Return on equity after tax 8.01 4.85 16.24 17.86 15.44

Percentage loss on lendings 0.17 0.27 (0.06) (0.09) (0.16)

Change in net lendings 7.96 17.86 21.01 14.52 12.55Change in deposits 10.75 7.74 20.86 13.61 10.61

Net subordinated capital (NOK) 6 111 4 858 4 597 4 048 3 909Capital adequacy 11.78 9.06 9.67 10.21 11.36Core capital adequacy 10.54 7.73 8.33 9.44 9.95Basel II fully implemented 13.16 11.21 14.72 17.49

Dividend per equity certificate (NOK) 4.00 3.75 19.00 18.25 17.10Listed price per equity certificate at year end (NOK) 102.00 86.50 190.00 213.00 206.00Effective return per equity certificate 22.25 (44.47) (2.23) 11.70 16.59Owner fraction, profit per equity certificate calculated pursuant to NRS 7 9.43 6.63 6.34 7.30 8.36

See page 87 for a full overview of key figures and definitions.

ANNuAL REPORT 2009PAGE 4

A year of great economic contrasts

For Western Norway, as for the rest of the world, the year 2009 can be summed up as a year of contrasts. The start of the year was dominated by negative prospects both in Norway and internationally, great uncertainty, a weakened real economy and a wide range of political measures in Norway and abroad aimed at counteracting the financial crisis.

The housing market picked up during the year and we saw a normalisation of the financial markets in the latter part of 2009. unemployment was lower than expected and we saw positive developments, but some sectors still faced challenges. At the beginning of 2009, the bank was concerned about the risks to which parts of the region’s business and industry were exposed. At year end, we were happy to note that the financial crisis had not hit Western Norway as hard as we and many others initially feared.

For Sparebanken Vest, losses in 2009 were lower than we had reason to fear at the start of the year. I believe there are two important reasons for this:In part, the markets recovered more quickly than many had dared to hope, but the low figures for losses were also partly due to sound banking operations, expertise and close cooperation with our customers. The business community in Western Norway has to a large extent weathered the storm that followed in the wake of the financial crisis. Our region is in a strong position, with sound and highly competent businesses that are working hard and purposefully to seize new opportunities and meet the challenges their industries are facing. We in Sparebanken Vest are convinced

that Western Norway’s value creation capacity will be strengthened and further developed in the years ahead.

As Managing Director of the leading financial services group in Western Norway, it is with great satisfaction I note that we as an organisation have succeeded in meeting the challenges and maintained good banking operations in a turbulent period. We are very happy that both our retail customers and our corporate customers are even more satisfied with the bank than they were a year ago. I am also pleased to see that our strategic offshoots have developed in a positive direction, also during the financial crisis. In Sparebanken Vest, we are proud of the products and the distribution platform we are developing together with 13 other savings banks around Frende Forsikring, Norne Securities and Verd Boligkreditt.

I would like to thank our customers for excellent cooperation in 2009. We in Sparebanken Vest are already fully occupied with the big questions of the future: What can we create together with you? How can we ensure further value creation in Western Norway?

We know that there are very many factors that have a part to play in strengthening and developing the regional economy here in Western Norway, but our aim and our vision is to be a driving force for economic and social growth and development in the region. These values have been the bank’s foundation since 1823, and we see no reason to stray from them in future.

«We in Sparebanken Vest are convinced that Western Norway’s value creation capacity will be strengthened and further developed in the years ahead.»


The Sparebanken Vest group recorded a pre-tax profit of NOK 500 million in 2009, compared with NOK 411 million in 2008. The result reflects the fact that the economy in Western Norway has fared better than originally feared at the beginning of the year. The financial performance is the result of good operations in the bank and its subsidiaries, positive development in the securities market and lower losses than expected. The board is satisfied with the result.

The beginning of the year was dominated by the economic downturn and the financial crisis. The authorities in Norway and abroad introduced extensive measures to stimulate the economy. These measures entailed a sharp drop in interest rates, an expansive fiscal policy and measures aimed specifically at the finance sector.

Employment in Western Norway is now better than expected. During the last six months of the year, we saw a normalisation of the financial markets, and the housing market is now more active than expected. However, industries exposed to competition and export industries are still facing market challenges. The demand and growth impulses from our trading partners are

weak and the Norwegian krone (NOK) is strengthened.

New statutory provisions entered into force in 2009 that simplify mergers and acquisitions in the savings bank sector. Sparebanken Vest was well prepared for these amendments. Sparebanken Vest and Sauda Sparebank decided to merge, and the merger was then implemented as the first savings bank merger to take place under the new statutory provisions. The merger meant that Sparebanken Vest took over all the assets and liabilities of Sauda Sparebank. Stiftelsen Sauda Sparebank has been formed to own equity certificates in Sparebanken Vest and to use the return to support sports, culture, organisations and other philanthropic causes in the local community.

Board of Directors’ Report


Full technical integration was completed in February 2010. At the time of the merger, Sauda Sparebank had 14 employees and branches in Sauda and Sand in Suldal municipality.

The merger with Sauda Sparebank is part of Sparebanken Vest’s focus on the county of Rogaland. In 2009, the bank opened branches in Hinna in Stavanger and in Sola, and it is now represented in seven locations in the county. The bank has operated in Rogaland since 2006. Business in the county has grown well, there have been few defaults and customer satisfaction is high. The bank is collocated with Eiendomsmegler Vest in five of its branches.

Sparebanken Vest’s liquidity and capital adequacy were strengthened in 2009 through the issuing of subordinated bonds in the amount of NOK 960 million. The reason for the agreement with the State Finance Fund was a wish on the bank’s part to maintain satisfactory customer activity and good capital adequacy.

Sparebanken Vest signed a new contract with EDB Business Partner in 2009 for the purchase of product solutions and operating services for the bank’s business. The contract, which runs until the end of 2014, is worth approximately NOK 550 million. The contract will enable the bank to influence and introduce EDB’s new, forward-looking solutions at an early stage.

The parent bank’s profit after tax amounted to NOK 457 (249) million. Adjusted for changes in the reserve for unrealised gains, the basis for dividend is NOK 470 million. The board proposes a cash dividend for 2009 of NOK 4.00 per equity certificate. The proposal is in accordance with the bank’s dividend policy.

The board proposes that NOK 33.3 million be transferred to the equalisation reserve and that NOK 25 million be spent on donations for the public benefit. The group’s capital adequacy is 11.8 (9.1)% based on the board’s proposal for allocation of the profit for the year in the parent bank.


The nature of the businessSparebanken Vest is an independent listed financial services group that is engaged in banking and financing activities in the counties of Hordaland, Rogaland, Sogn og Fjordane and parts of Møre og Romsdal.

The group’s head office is in Bergen, and the bank has 63 sales outlets. The group is engaged in estate agency business through Eiendomsmegler Vest AS, property management through AS Filialbygg, and home mortgages through Sparebanken Vest Boligkreditt AS.

These three limited liability companies are wholly owned by the parent bank. Moreover, Sparebanken Vest is the largest owner in the securities company Norne Securities AS with a holding of 41.96%, and the largest owner in the insurance company Frende Holding AS with a holding of 44.7%. These companies are owned together with 13 other savings banks. Together with eight independent savings banks, Sparebanken Vest formed the home mortgage company Verd Boligkreditt AS in 2009. The company is run by Sparebanken Vest, which owns 40% of the shares.

Strategic directionSparebanken Vest’s vision is for the bank, through professional banking operations, to be a driving force for social and economic development in Western Norway.

Sparebanken Vest’s strategic direction remains unchanged. The goal for the coming years is that the bank shall attain the position of Western Norway’s leading and preferred financial services group. There are four key strategic areas: realising the goal of Sparebanken Vest as a financial services group, strengthening the group’s culture and competence-building, improving and rationalising distribution and operations, and further developing the brand.

Sparebanken Vest is making determined efforts to develop and improve the bank’s competitiveness in the short and long term. This includes developing the bank’s staff, products and management systems. Sparebanken Vest has chosen to be independent in a sector where the prevailing trend is centralisation and greater distance to customers as a result of demanding mergers, alliances and acquisitions. Its independent position gives Sparebanken Vest freedom of manoeuvre. The bank emphasises closeness to its customers, being knowledgeable about the region’s business and industry and local decision-making authority.

Corporate governanceSparebanken Vest’s principles and policy for corporate governance are intended to ensure that the bank’s corporate governance is in accordance with generally accepted perceptions and standards and in compliance with laws and regulations. Moreover, the bank’s corporate governance shall ensure good cooperation between its different stakeholders, such as owners of equity certificates, lenders, customers, employees, governing bodies, management and society as a whole.

The Board of Directors of Sparebanken Vest emphasises compliance with the principles of the Norwegian Code of Practice for Corporate Governance in its management of the group. In the board’s view, the bank’s corporate governance is satisfactory and in compliance with the Code of Practice.

In October 2009, the Norwegian Corporate Governance Board (NuES) published a revised edition of the Norwegian Code of Practice. Sparebanken Vest compared its policy with the revised edition in December 2009.

Sixteen board meetings were held in 2009. Follow-up of operations, strategy, structural changes and risk and capital


management under uncertain market conditions have been the board’s main focus areas. The board has drawn up a yearly plan for its work, and it focuses on ensuring that the members of the board have adequate knowledge and expertise. The board has carried out a self-evaluation of how it works, its expertise, priorities and cooperation between the board and the management.

The board has appointed three committees as part of its work. The Audit Committee is charged with ensuring that Sparebanken Vest has an independent and effective external and internal audit function, and financial and risk reporting in accordance with laws and regulations. The Credit Committee deals with credit matters under the authorisation of the board. The Compensation Committee is tasked with ensuring that the bank practises a competitive, but not leading, pay policy that is seen as motivating by the bank’s management in relation to implementing the adopted strategy and achieving the goals set.

Statement concerning the annual accounts The annual accounts have been prepared on the basis of the going concern assumption and are based on forecasts for operations in 2010 and projections for three years thereafter.

Sparebanken Vest’s consolidated and company accounts for 2009 have been prepared in accordance with IFRS Regulations, the Financial Supervisory Authority of Norway’s Regulations relating to annual reports and accounts and the Regulations relating to the accounting treatment of lendings and guarantees. In the company accounts, the bank exercises its right to use a simplified form of IFRS. Consequently, the dividend/group contribution from subsidiaries is included in the basis for the parent bank’s dividend in the same year as it is earned.

Sauda Sparebank was taken over on 1 November. Operating revenues and operating expenses for November and December are included in the accounting figures for 2009, while the balance sheet at 31 December 2009 contains lendings of NOK 1,251 million and deposits of NOK 893 million.

Sparebanken Vest has not changed its accounting principles in 2009. The annual financial statements have been prepared in accordance with the above-mentioned regulations and, in the board’s view, provide an accurate picture of the group’s financial position.

ProfitThe group’s pre-tax profit for 2009 was NOK 500 (411) million.

The change from 2008 was positively affected by nominal growth in net interest and net income from financial instruments. Earnings from banking services and other income declined by NOK 14 million, while operating expenses and write-down costs increased by NOK 170 million.

Sparebanken Vest values fixed interest loans to customers and fixed-interest debt at market value. This principle means that, in addition to changes in interest rates, changes in value as a result of a change in the credit spread are also recognised in the income statement.

In 2009, in accordance with this principle the net credit spread effect was recognised in the income statement in the amount of minus NOK 240 (+ 182) million.

The group’s return on equity is 8.01 (4.85)%. The profit per equity certificate is NOK 9.06 (NOK 5.34). The diluted result is the same. Adjusted for the credit spread effect on fixed-interest debt and fixed-interest loans, the return on equity is calculated to be 11.8 (1.8)%.


The parent bank’s profit after tax amounted to NOK 457 (249) million. Adjusted for changes in the reserve for unrealised gains, the basis for dividend is NOK 470 million. The board proposes a cash dividend for 2009 of NOK 4.00 per equity certificate. The board proposes that NOK 33.3 million be transferred to the equalisation reserve and that NOK 25 million be spent on donations for the public benefit.

The group’s capital adequacy is 11.8 (9.1)% based on the board’s proposal for allocation of the profit for the year in the parent bank. The capital adequacy after full implementation of Basel II is 13.2 (11.2)%. RevenuesNet interest and credit commission incomeThere was a substantial drop in interest rates in 2009. Norges Bank’s key interest rate was 3.0% at the beginning of the year. As a result of a reduction in the interest rate during the first six months, it was reduced to 1.25% in June. In October and November, the key interest rate was raised to 1.5 and 1.75%, respectively.

At the beginning of the year and during the first six months, access to long-term financing was limited in the capital market. Both the interbank and credit

margins remained unusually high. Through Sparebanken Vest Boligkreditt AS, Sparebanken Vest has secured an infusion of liquidity through a swap arrangement linked to covered bonds. The arrangement was established in October 2008.

The financial markets improved in 2009, and the interest rate was both relatively low and relatively stable in the second half-year.The interbank and credit margins have been reduced, but they remain higher than before the financial crisis.The interest rate was increasing at year end.The swap arrangement from October 2008 has been discontinued.

The interest market was volatile in 2009. The bank carried out eight changes in its interest rates in 2009. The changes in the first half-year were interest rate reductions, while the changes carried out at the end of June and the end of December were increases. The changes in interest rates reflect changes in the interest rate level.

The group’s net interest income in 2009 amounted to NOK 1,453 (1,308) million. The positive change of NOK 145 million is the result of lower interest income of NOK 1,593 million and lower interest expenses of NOK 1,738 million.

In 2009, the bank paid the full fee to the Norwegian Banks’ Guarantee

Main elements underlying changes in the result

0100200300400500600700800900

10001100

Net interest2008

Fin. instr. ex. Credit spread FVO

Credit spread FVO

Other income

Banking services

Operating expenses

Write-downs2009

411 500

145

550422

2 12

104

66

Expected losses

0%10%20%30%40%50%60%70%80%90%

100%

79.5

%

80.2

%

78.0

%

77.1

%

78.4

%

78.6

%

77.1

%

76.4

%

14.3

%

14.9

%

15.3

%

15.5

%

14.8

%

15.7

%

17.1

%

16.8

%

6.2% 4.9% 6.7% 7.4% 6.8% 5.7% 5.7% 6.8%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

< 0.2% 0.2%><0.75% > 0.75%

Capitalised write-downs and percentage provided for

050

100150200250300350400450500550600

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.63%

0.60%

0.51%0.49%

0.43%

0.29%

0.24%0.23%0.22%0.21%

0.28%

Development of liquidity and structural liquidity

-6000-4000-2000

02000400060008000

10000120001400016000

0

2468

10

12

14

1618

StateBanksCovered bondsInterbank

Municipalities and county authoritiesOthersShares’Use as security in Norges Bank’

mar.08 jun.08 sep.08

des.08 mar.09 jun.09 sep.09

des.09

9.1%10.2% 10.2% 9.9%

11.8%

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

1.3%1.7% 1.6% 1.5%

1.2%

Core capital Additional capital

Capital coverage – Transitional scheme

7.7% 8.5% 8.6% 8.4%

10.6%

11.8 10.7% 11.5% 11.0%11.8%

4 kv 2008 1 kv 2009 2 kv 2009 3 kv 2009 4 kv 2009

1.7% 1.6% 1.6% 1.5%1.2%


Capital coverage – Basel II

10.0% 9.2% 9.9% 9.5%

11.8%

Mill Mnd

Capi

talis

ed w

rite-

dow

ns

Individual write-downs Group write-downs Percentage provided for

Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs

67

104

104 10

4

114

124 14

4

233

238 23

8

243 28

3

29

40 39

45

70

94

139

166

130

240

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009


0100200300400500600700800900

10001100

Net interest2008


Credit spread FVO

Other income

Banking services

Operating expenses

Write-downs2009

411 500

145

550422

2 12

104

66

Expected losses

0%10%20%30%40%50%60%70%80%90%

100%

79.5

%

80.2

%

78.0

%

77.1

%

78.4

%

78.6

%

77.1

%

76.4

%

14.3

%

14.9

%

15.3

%

15.5

%

14.8

%

15.7

%

17.1

%

16.8

%

6.2% 4.9% 6.7% 7.4% 6.8% 5.7% 5.7% 6.8%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

< 0.2% 0.2%><0.75% > 0.75%


050

100150200250300350400450500550600

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.63%

0.60%

0.51%0.49%

0.43%

0.29%

0.24%0.23%0.22%0.21%

0.28%


-6000-4000-2000

02000400060008000

10000120001400016000

0

2468

10

12

14

1618





des.09

9.1%10.2% 10.2% 9.9%

11.8%

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

1.3%1.7% 1.6% 1.5%

1.2%



7.7% 8.5% 8.6% 8.4%

10.6%

11.8 10.7% 11.5% 11.0%11.8%

4 kv 2008 1 kv 2009 2 kv 2009 3 kv 2009 4 kv 2009

1.7% 1.6% 1.6% 1.5%1.2%



10.0% 9.2% 9.9% 9.5%

11.8%

Mill Mnd

Capi

talis

ed w

rite-

dow

ns


Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs

67

104

104 10

4

114

124 14

4

233

238 23

8

243 28

3

29

40 39

45

70

94

139

166

130

240

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009


Fund, compared with a third in 2008. This represents an extra expense for Sparebanken Vest of NOK 37 million.

The lower interest rate means a reduction in the bank’s earnings on net assets and liabilities.

In 2009, net interest was also affected by the bank having increased its liquid holdings (structural liquidity). The competition for deposits remains keen. A low interest rate stimulates customers to repay debt and to invest large parts of their available funds in alternative forms of savings, for example unit trusts.

Of the total operating income in 2009, net interest accounted for 74.8 (77.7)%. The net interest is 1.58 (1.60)% of the average funds under management. Net other operating revenues The group’s total other operating revenues in 2009 amounted to NOK 489 (375) million. Of this change of NOK 114 million, NOK 128 million can be attributed to financial instruments and minus NOK 12 million to net banking services, while other income was down by NOK 2 million.

The bank’s share of losses in associated companies has been incorporated in the amount of NOK 42 (37) million in the consolidated accounts for 2009.

The bank did not sell structured savings products in 2009. In accordance with the bank’s accounting principles, income from previous sales is amortised over the lifetime of the product. The portfolio is reduced through the redemption of previous sales.

As part of its positioning in the market, the bank dropped bank charges for customers with customer programmes in June 2008. Adaptation to the market has had full effect on the income statement in 2009. Changes in the Norwegian Visa organisation resulted in one-off income of NOK 18 million in 2009. The change in other operating revenues was affected by the bank having taken to income part of the final settlement of commission with former insurance suppliers in 2008.

Operating expensesCost developments reflect the strong focus on raising competence and the fact that the group is still in a build-up phase in relation to strategic decisions. The growth in costs was also affected by a good increase in the number of customers, growth in business volume and the year’s many changes in interest rates.

Total expenses in 2009 amounted to NOK 1,172 (1,068) million. The increase in costs is largely due to payroll expenses (NOK 46 million including NOK 8 (0) million


0100200300400500600700800900

10001100

Net interest2008


Credit spread FVO

Other income

Banking services

Operating expenses

Write-downs2009

411 500

145

550422

2 12

104

66

Expected losses

0%10%20%30%40%50%60%70%80%90%

100%

79.5

%

80.2

%

78.0

%

77.1

%

78.4

%

78.6

%

77.1

%

76.4

%

14.3

%

14.9

%

15.3

%

15.5

%

14.8

%

15.7

%

17.1

%

16.8

%

6.2% 4.9% 6.7% 7.4% 6.8% 5.7% 5.7% 6.8%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

< 0.2% 0.2%><0.75% > 0.75%


050

100150200250300350400450500550600

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.63%

0.60%

0.51%0.49%

0.43%

0.29%

0.24%0.23%0.22%0.21%

0.28%


-6000-4000-2000

02000400060008000

10000120001400016000

0

2468

10

12

14

1618





des.09

9.1%10.2% 10.2% 9.9%

11.8%

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

1.3%1.7% 1.6% 1.5%

1.2%



7.7% 8.5% 8.6% 8.4%

10.6%

11.8 10.7% 11.5% 11.0%11.8%

4 kv 2008 1 kv 2009 2 kv 2009 3 kv 2009 4 kv 2009

1.7% 1.6% 1.6% 1.5%1.2%



10.0% 9.2% 9.9% 9.5%

11.8%

Mill Mnd

Capi

talis

ed w

rite-

dow

ns


Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs

67

104

104 10

4

114

124 14

4

233

238 23

8

243 28

3

29

40 39

45

70

94

139

166

130

240

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009


in provision for bonuses under the bank’s general scheme), an increase in pension expenses 1 (NOK 42 million) and an increase in IT expenses (NOK 23 million). Expenses relating to two months’ operations in Sauda are recognised in the accounts. Organisation and integration costs have been expensed.

The cost-income ratio for 2009 is 60.4 (63.5)%.

Operating expenses amounted to 1.27 (1.31)% of average funds under management in 2009. The key figures show a growth in productivity.

Write-downs of lendings and guarantees Expensed write-downs of loans and losses on guarantees amount to NOK 270 (204) million. NOK 46 million of the write-downs was due to an increase in group write-downs relating to corporate commitments. Individual write-downs increased by NOK 203 (52) million during the year. The total confirmed losses for the year amount to NOK 96 (36) million, NOK 57 (- 1) million of which was covered by previous write-downs.

In 2009, the total loss expense amounted to 0.34 (0.28)% of gross loans. Potential bad debts not defaulted on amounted to NOK 904 (328) million.

They largely related to commitments in industries exposed to cyclical fluctuations.

Capitalised group write-downs at year end amounted to NOK 283 (233) million. Capitalised individual write-downs amounted to NOK 240 (94) million. The total percentage provided for was 0.63 (0.43)% of loans.

The increase in write-downs is related to volume growth and a somewhat increased risk profile as a result of poorer prospects for the real economy.

At year end, the bank had NOK 224 (195) million in defaulted loans (default of payment for more than 90 days) in the retail market, and NOK 170 (98) million in the corporate market. The default percentage was 0.36 (0.37)% in the retail market and 0.47 (0.41)% in the corporate market.

Volume developmentsThe group has total assets of NOK 97.7 (94.9) billion. Sparebanken Vest is increasing customer satisfaction and strengthening its market share in both the retail and corporate markets.

At year end, deposits amounted to NOK 44.9 (40.5) billion. Retail deposits amounted to NOK 26.1 (25.4) billion, while corporate deposits amounted


0100200300400500600700800900

10001100

Net interest2008


Credit spread FVO

Other income

Banking services

Operating expenses

Write-downs2009

411 500

145

550422

2 12

104

66

Expected losses

0%10%20%30%40%50%60%70%80%90%

100%

79.5

%

80.2

%

78.0

%

77.1

%

78.4

%

78.6

%

77.1

%

76.4

%

14.3

%

14.9

%

15.3

%

15.5

%

14.8

%

15.7

%

17.1

%

16.8

%

6.2% 4.9% 6.7% 7.4% 6.8% 5.7% 5.7% 6.8%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

< 0.2% 0.2%><0.75% > 0.75%


050

100150200250300350400450500550600

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.63%

0.60%

0.51%0.49%

0.43%

0.29%

0.24%0.23%0.22%0.21%

0.28%


-6000-4000-2000

02000400060008000

10000120001400016000

0

2468

10

12

14

1618





des.09

9.1%10.2% 10.2% 9.9%

11.8%

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

1.3%1.7% 1.6% 1.5%

1.2%



7.7% 8.5% 8.6% 8.4%

10.6%

11.8 10.7% 11.5% 11.0%11.8%

4 kv 2008 1 kv 2009 2 kv 2009 3 kv 2009 4 kv 2009

1.7% 1.6% 1.6% 1.5%1.2%



10.0% 9.2% 9.9% 9.5%

11.8%

Mill Mnd

Capi

talis

ed w

rite-

dow

ns


Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs

67

104

104 10

4

114

124 14

4

233

238 23

8

243 28

3

29

40 39

45

70

94

139

166

130

240

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

1) Pension expenses were low in 2008 because of the effects of a change in the pension plan. ANNuAL REPORT 2009PAGE 12

to NOK 18.7 (15.1) billion. Deposits increased by 10.9% during the year, by 24.5% in the corporate market and 2.8% in the retail market. The relatively moderate growth in the retail market was influenced by the fact that deposits relating to the redemption of previous years’ sales of structured savings products were reduced by NOK 1.5 billion.

Net lending amounted to NOK 82.3 (76.2) billion. Of the total, NOK 60.1 (55.2) billion were loans to retail customers while NOK 22.2 (21.1) billion were loans to the corporate market. Lending growth for the year was 7.9%, which was within the bank’s defined lending limits. Lending to the retail market grew by 9.0%, while lending to the corporate market grew by 5.3%.

Loans at a fixed interest rate increased by NOK 0.9 billion, NOK 0.8 billion of which relates to the retail market.

Risk and capital managementRisk and capital management underpin the bank’s strategic development and ambitions, and are one of the board’s key focus areas. The main objective in this context is to ensure that the bank attains its goals within its financial and operational capacity. On the basis of quarterly reports, the board evaluates the bank’s risk situation in relation to adopted control parameters.

The board considers the bank’s total risk exposure to be low. The exposure lies within the bank’s defined risk profile. In the board’s view, the bank’s guidelines and procedures for risk and capital management function satisfactorily. The bank’s risk tolerance is specified in targets and parameters. Risk-adjusted capital is calculated for all risk areas. Through the bank’s risk and capital assessments, capital buffers and capital adequacy targets are set in order to safeguard the bank’s operations even under stressed market conditions.

Credit riskThe macroeconomic repercussions of the financial turmoil were deemed to be great in early 2009. In line with the board’s expectations, the risk profile of the credit portfolio has been reduced somewhat during the year, but less than indicated by the most pessimistic estimates. Developments in the retail market correlate strongly with macroeconomic developments and with interest rates in particular. The corporate market portfolio has been more affected by the international economic downturn. This applies in particular to internationally-oriented sectors. The growth in the bank’s credit portfolios was moderate in 2009, partly as a result of the macroeconomic situation and partly as a result of a conscious policy.


0100200300400500600700800900

10001100

Net interest2008


Credit spread FVO

Other income

Banking services

Operating expenses

Write-downs2009

411 500

145

550422

2 12

104

66

Expected losses

0%10%20%30%40%50%60%70%80%90%

100%

79.5

%

80.2

%

78.0

%

77.1

%

78.4

%

78.6

%

77.1

%

76.4

%

14.3

%

14.9

%

15.3

%

15.5

%

14.8

%

15.7

%

17.1

%

16.8

%

6.2% 4.9% 6.7% 7.4% 6.8% 5.7% 5.7% 6.8%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

< 0.2% 0.2%><0.75% > 0.75%


050

100150200250300350400450500550600

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.63%

0.60%

0.51%0.49%

0.43%

0.29%

0.24%0.23%0.22%0.21%

0.28%


-6000-4000-2000

02000400060008000

10000120001400016000

0

2468

10

12

14

1618





des.09

9.1%10.2% 10.2% 9.9%

11.8%

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

1.3%1.7% 1.6% 1.5%

1.2%



7.7% 8.5% 8.6% 8.4%

10.6%

11.8 10.7% 11.5% 11.0%11.8%

4 kv 2008 1 kv 2009 2 kv 2009 3 kv 2009 4 kv 2009

1.7% 1.6% 1.6% 1.5%1.2%



10.0% 9.2% 9.9% 9.5%

11.8%

Mill Mnd

Capi

talis

ed w

rite-

dow

ns


Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs

67

104

104 10

4

114

124 14

4

233

238 23

8

243 28

3

29

40 39

45

70

94

139

166

130

240

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009


Expected losses In the board’s view, the bank’s risk profile is low in the retail market and moderate in the corporate market, even though write-downs and the percentage provided for increased somewhat in 2009. The expected losses (based on debt-servicing ability and security coverage) show that more than 75% of the portfolio has a risk profile that the board deems to be low. Liquidity risk The crisis in the capital market in 2008/2009 underlines the importance of having a liquidity strategy that ensures access to long-term financing and diversified sources of financing. The bank’s operations have shown that its strategy is also robust under stressed framework conditions.

Liquidity has been managed well within the control parameters despite considerable turmoil in the capital markets. Sparebanken Vest’s liquidity situation was good at year end 2009, with substantial reserve liquidity and the capacity to operate without access to financing from the capital market for more than 12 months (structural liquidity).

The bank’s wholly owned subsidiary Sparebanken Vest Boligkreditt AS takes over well secured home loans from the bank and issues covered bonds for financing purposes. Through the swap arrangement with Norges Bank, the group has issued covered bonds for a total amount of NOK 7.8 billion, NOK 1.2 billion of which have been sold in the market. The total volume of covered bonds issued is NOK 10.5 billion. Financing through the company helps to reduce the group’s overall liquidity risk through greater diversification with respect to funding and more favourable terms.

Market risk Interest rate risk relates to the bank’s holding of interest-bearing securities,

lendings at a fixed interest rate and deposits at a fixed interest rate. The market turmoil in 2008 resulted in higher interbank and credit spreads. The capital markets virtually returned to normal during 2009 and the spreads were reduced. In accordance with the bank’s accounting principles, this has a substantial negative result effect in connection with the market valuation of fixed interest borrowings. The bank has defined limits on both interest rate risk and credit spread risk for asset items, and it has remained within these limits in 2009. The exposure is moderate.

The foreign exchange regulations stipulate the maximum exposure permitted for the bank’s currency risk. Sparebanken Vest’s limits for currency risk and its aggregate currency position are moderate. Its total exposure corresponded to NOK 54 million at the turn of the year.

The bank’s share portfolio consists of investments in subsidiaries/associated companies, shares held for sale and shares that are traded on a continuous basis. The exposure (excluding subsidiaries and associated companies) at the end of the fourth quarter was NOK 716 million. The limits and exposure are based on commercial considerations, and the bank’s ambition of playing an active role in social and economic development in Western Norway. Seen in conjunction with the bank’s other activities, the board deems the risk attached to the bank’s share portfolio to be moderate.

Operational risk The identification of operational risk is based on expert assessments, management confirmations and events registered in the bank’s events database. Major events are reported to the bank’s BoD. The bank’s actual operating losses were small in 2009, and no material matters have been uncovered that


have a negative effect on the bank’s operations.

The board emphasises that the bank must have adequate procedures in place to ensure compliance with laws and regulations. The current procedures are deemed to be satisfactory. However, work has been initiated to ensure a more comprehensive plan for this area.

Equity and financial strength The group’s equity at year end amounted to NOK 4,885 (4,372) million. The group also has subordinated bonds and subordinated loan capital of NOK 2,062 (1,437) million. At 31 December 2009, the qualifying capital amounted to NOK 6,111 million.

The group is IRB-approved pursuant to the Basel II regulations, and it reports regulatory capital adequacy pursuant to both Basel II and the transitional rules. The transitional rules will continue to apply in 2010 and 2011. Pursuant to the transitional rules, the group’s core capital and total capital at year end were 10.6% and 11.8%, respectively (11.8% and 13.2% pursuant to Basel II).

The board considers the bank’s risk and capital adequacy assessments (ICAAP) at least annually. This analysis forms the basis for stipulating risk targets/limits, including the bank’s capital adequacy targets. The capital adequacy targets are intended to ensure that the bank has sufficient buffer capital over and above the minimum requirement, also in an economic situation that is realistic, but not very probable. Pursuant to Basel II, the group’s targets for core capital and the capital base are 9% and 12%, respectively. Other factors emphasised in the analysis and assessment of capital adequacy and the composition of the capital base are result effects, diversification of capital sources, market initiatives and capital quality.

In light of the uncertain market conditions, the board has maintained a strong focus on the bank’s capital situation in 2009. In order to ensure satisfactory customer activity and good capital adequacy, the group carried out a capital issue with the State Finance Fund in the form of subordinated bonds in the amount of NOK 960 million in the second half-year 2009.

The retail market VAt year end 2009, Sparebanken Vest had 220,000 retail customers. The number of exclusive customers increased by 3,300 and non-exclusive customers by 2,800 compared with the previous year.

The growth in net lendings in this segment in 2009 was NOK 4.9 billion, or 9%. Growth in the retail market largely takes the form of housing loans, including housing loans for young people (BSu).Deposits increased by 2.8% during the year. The changes in deposits are affected by the low interest rate, which, together with the improvement in the finance markets, stimulated customers to repay debt and make use of alternative forms of saving.

Since the start-up of Frende Forsikring in 2008, Sparebanken Vest has put a lot of effort into selling insurance. At the end of December 2009, the bank had generated NOK 200 million in premiums for Frende Skade. A total of 21,000 customers in the retail market have general insurance policies with the company. That is an increase of 69% on 2008. For life insurance, the corresponding figure is 19,000 retail customers, up 41% on 2008. The share trading service provided by Norne Securities made a good start in 2009, and after two months, 1,600 retail customers had access to this service.

Sparebanken Vest focused strongly on raising staff competence in 2009 through the national authorisation scheme. The goal is that, by year end 2010, all the


bank’s advisors in the Retail Market Division shall have completed training and taken the exams necessary for authorisation as financial advisors. Sixty-three advisors passed both the theory exam and practical exam in 2009, with good results. This competence boost will improve the quality of our customer contact.

The corporate market The bank’s corporate market segment recorded more than 1,600 new customers in 2009. The increase in net lendings was NOK 1.1 billion in 2009, or 5.3%. Lending to the corporate customer segment now accounts for 30% of the bank’s lendings. Deposits increased by 24.0% during the year.

In recent years, the bank has focused on good cooperation with business and industry in Western Norway, and on the SME segment in particular. The bank strengthened its advisory capacity in the field of insurance and new members of staff were taken on in Bergen and in the region. Eighteen of the bank’s 63 branches have corporate advisors, and many branches are visited by advisors on certain days of the week. The positive trend in Rogaland continued. The bank improved both its market share and customer satisfaction in 2009, in the Bergen area in particular. In all, the bank had 105 members of staff in the corporate segment at 31 December 2009.

The securities company Norne Securities began full operations in autumn 2009. The company is now fully operational in online brokerage, stockbroking and corporate finance. Norne Securities had approx. 10,000 registered customers at the end of December. The securities company is a collaborative project between Sparebanken Vest, Fondsfinans and 13 other savings banks. Norne Securities had 18 employees at year end 2009. Together with the bank’s Capital Market Division, Norne Securities supplements the range

of services offered to corporate customers. The potential for further developing this area in 2010 is deemed to be good. In light of the cyclical challenges facing business and industry, in 2010, the bank will continue to focus on credit follow-up and providing good advice to enterprises that encounter challenges.

The capital marketIn addition to activity in connection with customer-related trading in the interest and foreign currency area, proprietary trading in the same areas and payment services, the Capital Market Division attends to the bank’s treasury function.

The escalation and internationalisation of the financial crisis in autumn 2008 changed the framework conditions for financing, both in Norway and internationally. For the bank, this resulted in access to financing being difficult at times and a high risk mark-up in the early part of 2009. The establishment of Sparebanken Vest Boligkreditt and the issuing of covered bonds ameliorated this situation through participation in the swap arrangement with Norges Bank. Good management and a well-established network of partners in both Norway and abroad contributed significantly to satisfactory financing solutions being found.

The Capital Market Division manages the bank’s bond and money market investments. At year end 2009, these investments amounted to NOK 11,808 million. Equity investments amounted to NOK 716 million. In addition, NOK 491 million was paid into subsidiaries as equity. NOK 270 million was invested in associated companies with holdings of between 20 and 50%.

Corporate social responsibility There has been an increasing perception in recent years that the business


community has a responsibility to society over and above making a profit. Sparebanken Vest’s social responsibility is expressed in the bank’s vision that it shall be a driving force for social and economic development in Western Norway. Sparebanken Vest endeavours to display social responsibility in all its activities. Equity investments and the bank’s philanthropic activities are described in the BoDs’ report. Equity investmentsSparebanken Vest’s equity investments have a twofold purpose. Over time, they shall contribute to the banks earnings. At the same time, however, they shall strengthen business and industry in the region. Such investments call for considerable insight, willingness to take risk and patience on the investor’s part before a return can be expected. In the period from the scheme was introduced until year end 2009, the invested funds have produced a satisfactory return for the bank, particularly the investments in the energy and marine sectors. Philanthropic activitiesPursuant to the Savings Banks Act, savings banks may allocate part of their profits after tax and dividend to projects of public benefit.

Over several years, Sparebanken Vest has defined such activity as a strategic priority area. When making awards to projects, the bank is concerned that the projects that receive such grants yield a social return. The projects should contribute to raising competence and stimulate interdisciplinary cooperation in Western Norway.

The awards in 2009 targeted projects relating to children and adolescents, culture, culture-based businesses, research and competence, innovation, climate, transport and communications and humanitarian causes.

NOK 30 million from the accounts for 2008 were allocated to grants for the public benefit. The Board’s proposal for 2009 is NOK 25 million. The bank’s gift fund stands at NOK 175 million. Employees At year end 2009, the group had employer responsibility for 835 full-time equivalents, down eight since 2008. Two new branches were opened and 13 employees taken on in connection with the takeover of Sauda Sparebank. Considerable effort has been put into competence-raising, in terms of both funds and activities. The activities were completed in accordance with the adopted plan.

Sparebanken Vest’s goal is to be one of the region’s most attractive workplaces. As part of the bank’s organisational development, the bank, in its planning of the new bank building in Jonsvollskvartalet, has strong focus on the project not just being about a new office building but that it should also represent the collocation and public face of the financial services sector in Bergen.

BoD Anne Kverneland Bogsnes, Øyvind Langedal and Gerd Kjellaug Berge were re-elected for two years in 2009. Employee representative Tone Mattsson was re-elected for two years.

The working environmentThe bank maintains continuous focus on the working environment. This is important if we are to produce good results and be a good and competitive workplace for employees and managers. The bank carries out annual organisational surveys, and the survey in 2009 showed a high level of employee satisfaction.

EthicsThe bank has continuous focus on ethics and rules of conduct, both through


its introduction programme for new employees and in the annual performance appraisal and development interviews. No breaches of the bank’s Code of Ethics were reported in 2009. In the board’s view, the bank has high ethical standards, both internally and in its dialogue with customers. HSE – sickness absence Overall sickness absence was 4.8% in 2009, up 0.1% from 2008. Of the total, 2.3% was short-term and 2.5% long-term absence. This breakdown is virtually unchanged in relation to the three preceding years. Sickness absence among women was 5.9% and 3.4% among men. This breakdown is also virtually unchanged in relation to the three preceding years.

Sparebanken Vest is an Inclusive Workplace (IW) enterprise, and the main focus areas for its HSE work in 2009 were: substance abuse and the role of manager, exercise, diet and physical activity as preventive measures, HSE courses for new managers and continuous follow-up of and measures to reduce sickness absence. These measures are based on the bank’s action plan for HSE. Cooperation between the chief safety delegate, the corporate health service Arsana and the HSE Manager has been good, and endeavours are made to resolve matters at the lowest possible level and as quickly as possible. Gender equalityThe bank works actively and purposefully to promote equality and prevent discrimination. The bank’s BoD consists of nine members. Four of the nine elected members are women (45%). Of the members of the bank’s Supervisory Board, 25 are women (52%) and 23 men (48%). The Control Committee consists of two women and two men. The bank’s total workforce consists of 57.8% women and 42.2% men. The corporate

management team consists of three women and five men. Of personnel in executive positions, 42.9% are women and 57.1% men. The board continues its work to achieve a more even gender balance at executive level.

The natural environment and climate changeSparebanken Vest does not use input factors or production methods that directly pollute the natural environment. The bank endeavours to be environmentally aware in relation to its use of paper, waste management and recycling.

The bank has a broadly differentiated corporate portfolio. Several enterprises to which the bank has furnished loans are engaged in business that will have an impact on the natural environment. Through its extending of credit, the bank considered in connection with the bank’s credit assessments.

In 2009, the offices in Kaigaten and at Korskirkalmenning were certified as Miljøfyrtårn (Environmental lighthouses). Ambitious environmental and energy targets have been set in connection with the work on planning the bank’s new building in Jonsvollskvartalet

Macroeconomy and prospectsThe new emerging economies are expected to provide the pulling power in the global economy, while both the Euro zone and the uSA will probably experience relatively modest growth. Financial conditions are improving and the credit situation is returning to normal.

Oil prices are expected to be somewhat higher in 2010 than in 2009, while the chance of a serious drop in prices is seen as small. Interest rates will probably be influenced by low growth in the industrialised world and the probability


of a marked increase in interest rates is small.

In 2010, the Norwegian economy is expected to be affected by relatively low growth among our trading partners, continued low interest rates in the international market and oil prices continuing at their current level or increasing. This can lead to further weakening of Norway’s export industry. The investment trend in mainland industry is expected to remain weak. A fall in the investment level in the oil and gas industry from 2009 to 2010 is also probable.

Private consumption is expected to continue to increase in 2010. A higher interest rate level will reduce the growth in house prices, but it may be a threat to Norway’s export industry because it strengthens the Norwegian krone.

Western Norway Hordaland and Rogaland are Norway’s two biggest counties for industry and Hordaland is the biggest export county in the country. A weak cyclical trend internationally could affect economic activity in the region. Moreover, there is uncertainty attached to developments in the oil service industry. This also applies to parts of the shipbuilding industry and its subcontractors.

While the prospects for aquaculture and fisheries are again looking good in 2010, it is probable that the downturn in other industries exposed to competition will result in a certain increase in unemployment in the region.

Sparebanken Vest produces a Business Barometer together with other important players in Western Norway. The barometer for 2010 shows that business leaders’ future expectations are to a certain extent positive. uncertainty is greatest in export industries and the shipbuilding/ engineering industry.

Sparebanken VestSparebanken Vest has strengthened its market position in Western Norway. The bank’s ambition is to further improve its position in 2010 based on its current strategy. Among other things, the board expects a nominal increase in other revenues through the distribution of insurance, other savings products and increased activity in the capital market. Competition is very intense, however. Combined with a certain macroeconomic uncertainty, particularly in internationally-oriented sectors, this will influence growth and profit developments.

The growth in the bank’s lending is expected to be somewhat higher than general credit growth in the market. The growth in deposits will be affected by the interest rate and developments in the stock market, and it is expected to be on a par with or slightly better than 2009.

The banking sector’s increased capital capacity is expected to be used in part as the basis for increased market efforts. Sparebanken Vest’s interest margins are therefore expected to be somewhat lower in 2010 than in 2009.

The macroeconomic uncertainty means that losses may be somewhat higher in 2010 than in a ‘normal’ year. Sparebanken Vest’s financial strength and capital adequacy were improved in 2009 through issuing subordinated bonds in the amount of NOK 960 million. The bank’s own goals and the market and the authorities’ expectations and requirements call for higher core capital in the time ahead. Seen in isolation, this will have a negative effect on the bank’s return on equity.

Based on growth and profit estimates, the board expects the bank’s return on equity in 2010 to be on a par with or slightly better than 2009.


Thanks to customers, business associates, officers of the company, management and employeesThe year 2009 was a demanding one, also for Sparebanken Vest. A united organisation has demonstrated great work capacity, the ability to see things

through and the ability to deliver. The BoD would like to thank customers, business associates, officers of the company, management and employees for constructive cooperation and the satisfactory results achieved.

Bergen, 31st December 2009 / 25th February 2010The Board of Directors of Sparebanken Vest

Trygve Bruvik Anne Kverneland Bogsnes Richard RettedalChairman Deputy Chairman

Jan O. Yttredal Marit Solberg Øyvind A. Langedal

Gerd Kjellaug Berge Arve Havnerås Tone Mattsson

Stein Klakegg Managing Director


Accounts and Notes

The Sparebanken Vest Group comprises Sparebanken Vest, Sparebanken VestBoligkreditt AS, Eiendomsmegler Vest AS and AS Filialbygg.

Sparebanken Vest was founded in 1823 as Bergens Sparebank. The bank is an equity certificate bank and it has been listed on Oslo Børs since 1995.

Income statement

PARENT BANK

1/1-31/12

GROuP

1/1-31/122008 2009 Noter 2009 20085 576 3 875 Interest income etc. 3 955 5 5484 266 2 498 Interest expenses etc. 2 502 4 2401 310 1 377 Net interest and credit commission income 3 1 453 1 308

393 388 Commission income and income from banking services 388 39376 83 Commission expenses and expenses relating to banking services 83 7610 89 Income from ownership interests in group companies and associated companies 18 (42) (37)

(64) 150 Net gain/(loss) on financial instruments 77 (56)52 7 Other operating income 149 151

315 551 Net other operating income 5 489 3751 625 1 928 Net operating income 1 942 1 683

748 838 Salaries and general administration expenses 6 945 84469 74 Depreciation 19/20 87 86

149 134 Other operating expenses 7 140 138966 1 046 Total operating expenses 1 172 1 068659 882 Profit before write-downs and tax 770 615

203 270 Write-downs and losses on loans and guarantees 11 270 204456 612 Pre-tax profit 500 411

207 155 Tax 8 137 204249 457 Profit for the financial year 363 207

Majority share of the profit for the period 362 206Minority share of the profit for the period 1 1

Allocations(10) (13) Dividend on equity certificates(96) 13 Transferred to/from the reserve for unrealised gains

(113) (399) Transferred to primary capital(33) Transferred to the equalisation reserve

(30) (25) Transferred to gifts(249) (457) Total allocations

6.45 11.44 Equity certificates' share of profits divided by the number of equity certificates 27 9.06 5.346.45 11.44 Diluted profit per equity certificate 9.06 5.34

Statement of comprehensive income 1/1-31/12 1/1-31/12

2008 2009 2009 2008249 457 Profit for the period 363 207

0 45 Financial assets available for sale 15 45 0249 502 Total profit for the period 408 207

Majority share of the total profit for the period 407 206Minority share of the total profit for the period 1 1


Balance sheet

PARENT BANK GROuP

31/12-08 31/12-09 Noter 31/12-09 31/12-08Assets

4 753 299 Cash to and receivables from central banks 299 4 7534 913 1 427 Loans to and receivables from credit institutions 13 143 1 291

68 365 70 719 Net lendings 11 82 302 76 235463 604 Shares at fair value through profit or loss 15/16 604 463

12 760 21 067 Commercial papers and bonds 17 11 808 8 56567 112 Shares available for sale 15 112 67

2 368 605 Financial derivatives 10 605 2 368510 521 Shareholdings in group companies 18 0 0160 270 Shareholdings in associated companies 18 185 121

0 62 Deferred tax asset 8 74 0252 303 Other intangible assets 19 318 266117 113 Tangible fixed assets 20 469 46634 123 Prepaid expenses 28 2643 0 Customer funds - defined-contribution pension agreements 0 43

215 683 Other assets 714 22995 020 96 908 Total assets 97 661 94 893

Liabilities and equity12 140 15 016 Liabilities to credit institutions 21 14 583 12 14040 997 44 969 Deposits 22 44 881 40 52133 949 28 402 Securitised debt 23 29 732 34 249

1 338 458 Financial derivatives 10 458 1 338103 105 Accrued expenses and pre-paid income 90 102137 182 Pension commitments 24 189 144160 0 Deferred tax 8 0 162

12 16 Other provision for commitments 19 1413 399 Tax payable 8 407 15

1 437 2 062 Subordinated loan capital 25 2 062 1 437399 350 Other liabilities 355 399

90 685 91 959 Total liabilities 92 776 90 521

267 398 Equity certificates 27 398 267(4) 0 Own equity certificates 0 (4)7 8 Premium reserve 10 96 39 Equalisation reserve 39 6

276 445 Total equity certificate capital 447 278

3 684 4 083 Primary capital 4 083 3 684175 175 Gift fund 175 175

14 Compensation fund 143 859 4 272 Total primary capital 4 272 3 859

200 232 Reserve for unrealised gains 105 600 0 Other equity 60 174

Minority interests 1 1

4 335 4 949 Total equity 4 885 4 372

95 020 96 908 Total liabilities and equity 97 661 94 893


Bergen, 31 December 2009 / 25. February 2010The Board of Directors of Sparebanken Vest

Trygve Bruvik Anne Kverneland Bogsnes Richard RettedalChairman Deputy Chairman

Jan O. Yttredal Marit Solberg Øyvind A. Langedal

Gerd Kjellaug Berge Arve Havnerås Tone Mattsson

Stein Klakegg Managing Director


Cash flow statement

PARENT BANK

1/1-31/12

GROuP

1/1-31/122008 2009 2009 2008

Cash flows from operations5 302 3 337 Interest, commission and customer fees received 3 677 5 3122 152 1 332 Interest, commission and customer fees paid 1 331 2 029

17 21 Payment received for previously written-off receivables 21 17(1 885) (2 183) Net payments made/received relating to customers' instalment loans (3 997) (6 862)(1 698) 704 Changes in utilised overdraft facilities (1 201) (4 755)3 208 3 061 Net payments received/made relating to customer deposits 3 449 2 777

454 515 Payments to other suppliers for goods and services 325 510

513

506Payment to employees, pension schemes, employer's National Insurance contributions, tax withholdings etc.

593

581

129 (7) Payment of direct and indirect taxes (8) 135102 566 Payments received from sale of securities for short-term trading purposes 566 93252 620 Payments made on purchases of securities for short-term trading purposes 619 252

1 546 2 540 Net cash flow from operations (345) (6 925)

Cash flows from investment activities21 0 Payments received from sales of shares and shareholdings in other companies 0 21

2 0 Payments made on purchase of shares and shareholdings in other companies 0 015 979 19 978 Payment received from other short-term securities 16 615 20 07923 182 29 586 Payments made on the purchase of other short-term securities 20 413 23 182

19 142 Payment received from sales of securities, real property etc. 22 9528 199 Payments made on purchases of securities, real property etc. 153 41

0 4 Payments received from the sale of operating assets etc. 4 077 63 Payments made on purchases of operating assets etc. 86 88

2 Net cash effect of takeover of Sauda Sparebank 2(7 770) (9 722) Net cash flow from investment activities (4 009) (3 202)

Cash flows from financing activities(4 216) 3 609 Net payments made/received on loans to and receivables from other financial institutions 1 205 (613)9 205 2 506 Net payments received/made on deposits from Norges Bank and other financial institutions 2 086 9 205

0 960 Payments received relating to subordinated loan capital 960 050 50 Payments made relating to subordinated loan capital 50 50

12 928 3 952 Payments received relating to bond debt 3 952 13 2288 579 8 193 Payments made relating to bond debt 8 187 8 579

121 56 Dividends paid / Gifts for the public benefit 66 1219 167 2 728 Net cash flow from financing activities (100) 13 070

2 943 (4 454) Net cash flow for the period (4 454) 2 943

2 943 (4 454) Net change in cash and cash equivalents (4 454) 2 9431 810 4 753 Cash and cash equivalents at beginning of period 4 753 1 8104 753 299 Cash and cash equivalents at end of period 299 4 753


Changes in equityGROuP

Equity certificates

Own equity certificates

Premium reserve

Equalisa- tion reserve

Primary capital

Gift fund

Compensa- tion fund

Reserve for unrealised

gains 1)

Other equity

Minority interests Total

Equity 31 Dec. 2007 250 (3) 4 6 3 573 175 60 228 1 4 294Sale of own equity certificates 4 (1) 3Purchase of own equity certificates (5) (1) (6)Capitalisation issue in lieu of dividend 3)

17

5

22

Payment of divi-dends and gifts (148) (148)Intra-group dividends 0Owner transactions and gifts 17 (1) 5 0 (2) 0 0 0 (148) 0 (129)

Profit for the financial year 113 93 206Comprehensive income 0Equity 31 Dec. 2008 267 (4) 9 6 3 684 175 0 60 174 1 4 372

Sale of own equity certificates 4 4Payment of dividends and gifts (39) (1) (40)Issue of equity certificates 2) 131 1 14 146Correction deferred tax (6) (6)Owner transactions and gifts 131 4 1 0 0 0 14 0 (45) (1) 104

Profit for the financial year 33 399 (69) 1 363Comprehensive income - change in value of shares available for sale 45 45Equity 31 Dec. 2009 398 0 10 39 4 083 175 14 105 60 1 4 885


Changes in equityGROuP

Equity certificates

Own equity certificates

Premium reserve

Equalisa- tion reserve

Primary capital

Gift fund

Compensa- tion fund


gains 1)

Other equity

Minority interests Total

Equity 31 Dec. 2007 250 (3) 4 6 3 573 175 60 228 1 4 294Sale of own equity certificates 4 (1) 3Purchase of own equity certificates (5) (1) (6)Capitalisation issue in lieu of dividend 3)

17

5

22

Payment of divi-dends and gifts (148) (148)Intra-group dividends 0Owner transactions and gifts 17 (1) 5 0 (2) 0 0 0 (148) 0 (129)

Profit for the financial year 113 93 206Comprehensive income 0Equity 31 Dec. 2008 267 (4) 9 6 3 684 175 0 60 174 1 4 372

Sale of own equity certificates 4 4Payment of dividends and gifts (39) (1) (40)Issue of equity certificates 2) 131 1 14 146Correction deferred tax (6) (6)Owner transactions and gifts 131 4 1 0 0 0 14 0 (45) (1) 104

Profit for the financial year 33 399 (69) 1 363Comprehensive income - change in value of shares available for sale 45 45Equity 31 Dec. 2009 398 0 10 39 4 083 175 14 105 60 1 4 885

PARENT BANKEquity

certificatesOwn equity certificates

Premium reserve

Equalisa-tion reserve

Primary capital Gift fund

Compensa-tion fund


gains 1) TotalEquity 31 Dec. 2007 250 (3) 2 6 3 573 175 104 4 107Sale of own equity certificates 4 (1) 3Purchase of own equity certificates

(5)

(1)

(6)

Capitalisation issue in lieu of dividend 3)

17

5

22

Owner transactions and gifts 17 (1) 5 0 (2) 0 0 0 19

Profit for the financial year 113 96 209Comprehensive income 0Equity 31 Dec. 2008 267 (4) 7 6 3 684 175 0 200 4 335

Sale of own equity certificates 4 4Issue of equity certificates 2) 131 1 14 146Owner transactions and gifts 131 4 1 0 0 0 14 0 150

Allocation of profit for the year to equity 33 399 (13) 419Comprehensive income - change in value of shares available for sale 45 45Equity 31 Dec. 2009 398 0 8 39 4 083 175 14 232 4 949

1) Of which unrealised gains on shares available for sale not recognised through profit or loss amounted to NOK 105 million at 31 December 2009

2) Sparebanken Vest has issued 1,318,221 new equity certificates to Sparebankstiftelsen Sauda in connection with the takeover of Sauda Sparebank. The premium, based on the fair value of the consideration on the takeover date, is divided between the premium reserve and the compensation fund on the basis of the ‘owner fraction’ (the ratio of equity certificate capital to total equity capital) after the issue. 3) The Supervisory Board resolved at its meeting on 13 March 2008 to give the owners of the primary capital certificates the opportunity to subscribe for new primary capital certificates for an amount corresponding to the dividend for 2007. The subscription price for the new primary capital certificates was set at NOK 133 per certificate so that the dividend for seven old primary capital certificates conferred the right to subscribe for and be allocated one new one. The settlement date was 6 May 2008. Under the issue, new primary capital certificates corresponding to ap proximately 46% of the dividend for 2007 were subscribed. The issue increased the bank’s core capital by NOK 22 million, of which NOK 5 million was credited to the premium reserve. Issue costs of NOK 0.3 million were debited to the premium reserve.


Note 1 Accounting principles GENERALSparebanken Vest’s consolidated accounts comprise Sparebanken Vest, Sparebanken Vest Boligkreditt AS, Eiendomsmegler Vest AS and AS Filialbygg as wholly owned subsidiaries. AS Filialbygg and Eiendomsmegler Vest AS also have a number of subsidiaries (see note 18). Frende Holding AS, Norne Eierselskap AS and Verd Boligkreditt AS are also included as associated companies. Sparebanken Vest was formed in 1823 as Bergens Sparebank. The bank’s equity certificates are listed on Oslo Børs. The bank is located in the counties of Hordaland, Sogn og Fjordane and Rogaland, and its head office is in Bergen. Its registered address is Kaigaten 4, 5016 Bergen.

The consolidated annual accounts for 2009 for the Sparebanken Vest Group were considered and adopted at a board meeting on 25 February 2010.

unless otherwise specified, all amounts in the accounts and the notes to the accounts are stated in NOK millions and the individual notes refer to both the parent bank and the group.

ACCOuNTING PRINCIPLES The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the Eu and published by the International Accounting Standards Board (IASB), and which are mandatory from 31 December 2009. Since the financial year 2007, the company accounts have been prepared in accordance with a simplified form of IFRS.

The same principles apply when using simplified IFRS as under IFRS, with the exception of the recognition of dividends, group contributions and other allocations relating to the year’s financial result. In the company accounts, the proposed dividend and gifts for distribution are recognised in the year that forms the basis for the distribution.

using IFRS entails management making assumptions that affect the estimates of assets, liabilities, income, expenses and information relating to contingent liabilities. Future events may result in changes to these assumptions. The effect of these changes will be recognised in the accounts when new estimates can be determined with sufficient certainty.

The group applied the following new standards and amendments in 2009

• IFRS7FinancialInstruments:Disclosures(amended).The amendment requires further disclosures about the measurement of fair value and liquidity risk, including disclosure of the valuation method applied for measuring fair value. This amendment only affects the presentation. See Note 9, for example.• IAS1PresentationofFinancialStatements(revised).Therevised standard requires income and expense items that used to be recognised directly against equity to be presented in a statement of comprehensive income. For the financial year 2009, the revaluation of shares classified as available for sale is presented in the statement of comprehensive income.• IFRS3BusinessCombinations(revised).Theacquisitionmethodfor

business combinations has been substantially modified. For example, all considerations in connection with the acquisition of a business shall be recognised at fair value on the acquisition date. Contingent considerations are normally classified as a liability and any subsequent changes in value must be recognised in the income statement. For each individual acquisition, the group may choose whether any non-controlling interests in the acquired company will be measured at fair value or as the proportionate share of net assets, excluding goodwill. All transaction costs must be expensed. The standard is applied to acquisitions with an acquisition date after 1 January 2010, but the group has elected to implement it earlier.

New and amended standards without relevance to the 2009 annual accounts

• IFRS2Share-basedPayment(amended).Thechangesrelateto vesting conditions and cancellations.• IAS23BorrowingCosts(amended).Capitalisationofborrowingcosts as part of the acquisition cost of the asset.

Standards, amendments and interpretations of existing standards that have not entered into force and where the group has not chosen early application • IAS27ConsolidatedandSeparateFinancialStatements(revised). According to the revised standard, the effects of all transactions with non-controlling interests are entered as equity transactions provided there is no change in control. Such transactions will no longer result in goodwill or profit or loss. In the event of loss of control, all remaining interests in the unit will be measured at fair value, and recognised as profit or loss.• IAS38IntangibleAssets(amended).• IFRS5Measurementofnon-currentassets(ordisposalgroup) classified as held-for-sale (amended).• IAS1PresentationofFinancialStatements(revised).Thechange states that the contingent settlement of a liability by issuing equity has no effect on classification as current or non-current liability.• IFRS2(amended).GroupCash-settledandShare-basedPayments Transactions.• IFRS9Financialinstruments.Thisstandardreplacesthe measurement rules in IAS 39 for financial assets. In IFRS 9, measurement is determined by the entity’s business model and the characteristics of the individual financial asset. A financial asset is measured at amortised cost if the objective of the entity’s business model is to hold the asset to collect the contractual cash flows, and the cash flows from the asset are solely payments of principal and interest on the principal outstanding. The standard applies to annual accounts that start on or after 1 January 2013. The Group has not completed its evaluation of the effects of IFRS 9.• IFRIC18TransfersofAssetsfromCustomers.IFRIC18requiresa company receiving an asset from a customer to determine whether the asset meets the definition of an asset under the IASB Framework and, if so, to capitalise the asset at fair value. Revenue recognition must comply with IAS 18. The interpretation is not expected to have a material effect on the consolidated accounts.

Interpretations of and amendments to existing standards that have not entered into force and are not relevant to the group

• IFRIC17DistributionofNon-cashAssetstoOwners• IAS24RelatedPartyDisclosures(revised).Achangerelatingto transactions with public related parties.• IAS32FinancialInstruments.• IFRIC19ExtinguishingFinancialLiabilitieswithEquityInstruments

RECOGNITION OF INTEREST AND FEES Interest income is taken to income using the effective interest rate method. This entails recognition of nominal interest income as it arises and amortisation of establishment fees after the deduction of direct establishment costs. The effective interest rate method is used for both balance sheet items valued at amortised cost and balance sheet items valued at fair value through profit or loss.

Fees that are direct payment for services rendered are taken to income as they are paid. Loan establishment fees that exceed the direct external cost of establishing the loan are amortised over the expected life of the loan.


CONSOLIDATION The consolidated accounts comprise the parent bank and subsidiaries in which the parent bank has a controlling influence over the company’s operations. This is normally the case where the parent bank directly or indirectly owns more than 50% of the shares. The consolidated accounts are prepared on the basis of uniform accounting principles. Subsidiaries are incorporated in accordance with IFRS and all internal transactions and intercompany accounts payable and receivable are eliminated.

On the acquisition of subsidiaries, the cost price of the shareholding in the parent company is eliminated against the equity of the subsidiary on the acquisition date. Any differences between cost price and net book value are defined as excess or negative values and assigned to the assets or liabilities to which they relate. Any part of excess or negative values that cannot be assigned to identifiable assets or liabilities is classified as goodwill. Investments in subsidiaries are recognised in the company accounts in accordance with the cost method.

ASSOCIATED COMPANIES An associated company is an entity in which the group has considerable influence but not a controlling interest. Considerable influence is deemed to exist when the group owns between 20% and 50% of the voting capital. Investments in associated companies are recognised in the consolidated accounts in accordance with the equity method and in the company accounts in accordance with the cost method. On the date of purchase, the investment is recognised at acquisition cost.

SEGMENT INFORMATION The group’s activities are divided into the following segments: banking activities in the Retail Market (RM), the Corporate Market (CM) and the Capital Market (Cap. M), as well as estate agency activities within the group. The bank’s investments and related depreciation charges are not assigned to the segments but are included under ‘unallocated by segment’.

FINANCIAL ASSETS Financial assets are valued and classified in accordance with IAS 39, and the presentation is in accordance with IFRS 7. Value changes in the period are recognised in the income statement, except where they relate to financial assets that are available for sale, in which case they are included in the statement of comprehensive income. The contract date has been chosen as the accounting date.

Financial assets at fair value in the income statement This category has two sub-categories: financial assets held for trading purposes, and financial assets initially recognised at fair value through profit or loss. This includes classified shares and interest rate securities that have been acquired for profit-taking or are of such a nature that a sale would be considered if a good offer were made. Financial assets recognised at fair value through profit or loss are recognised at fair value on acquisition, and transaction costs are charged to income.

Financial assets initially recognised at fair value through profit or loss are recognised in the balance sheet at fair value as this method of valuation eliminates or greatly reduces any inconsistent measurement and recognition that would otherwise have arisen had the asset been measured or capital gains/losses been calculated on the basis of different assumptions. This means that the effect of value changes on financial instruments managed together is reflected at the same time in the accounts.

Financial assets initially recognised at fair value through profit or loss include lendings at fixed rates, commercial papers, bonds and shares.

Financial assets available for saleFinancial assets available for sale are non-derivative financial assets that are assigned to this category or not classified in any other category. The group has shareholdings classified in this category. Financial assets available for sale are initially recognised in the balance sheet at fair value plus transaction costs.

Subsequent measurement Financial assets available for sale and financial assets recognised at fair value through profit or loss are valued at fair value after the initial entry in the balance sheet. The fair value of listed investments is based on the year-end market price. In the case of unlisted securities where there is no active market, the group applies valuation techniques to determine fair value. The valuations are based on the last issue price, traded prices known to us and discounted cash flows. In the case of securities where there is no trading, the value is based on available accounting information, mainly in order to assess the need for write-down and any obvious excess values.

DerecognitionFinancial assets are removed from the balance sheet when the right to receive cash flows from the investment terminates or is transferred on realisation.

Profit or loss recognition Realised gains/losses and changes in the value of financial assets recognised at fair value through profit or loss, including dividends, are posted in the accounts under ‘Net gain/loss(-) on financial instruments’ in the period in which they arise. Changes in the value of equity certificates classified as available for sale are entered directly against equity.

When securities classified as available for sale are derecognised, the aggregate value adjustment that has been entered against equity is recognised in the income statement as a gain or loss on investments in securities. Dividends from shares classified as available for sale are posted in the income statement when the group’s right to the dividend is established.

Lendings and accounts receivableLendings and accounts receivable are non-derivative financial assets with fixed or determinable payments that are not traded in an active market. Lendings and receivables in the balance sheet comprise floating-rate loans, fixed-rate loans and loans with a built-in derivative.

Floating rate loansLoans are initially recognised at fair value plus direct transaction costs. In periods after the initial valuation, loans are recognised at amortised cost based on the effective interest rate method, as an expression of the fair value of the loan. If there is objective evidence of a decline in the value of individual loans or groups of loans, the loans are written down. The amount of the write-down is calculated as the difference between the balance sheet value and the present value of future cash flows, based on the expected life of the loan. Write-downs are classified as a loss expense.

Interest income is taken to income on the basis of the effective interest rate method. For commitments with individually determined write-downs, the effective interest rate is locked in cases where a) the loan is not in default, or b) the interest rate change is independent of the fact that the loan is in default and the interest rate change affects the expected cash flow.

Fixed-rate loans and loans with a built-in derivativeFixed rate loans and loans with a built-in derivative are recognised at fair value. The fair value of fixed-rate loans is calculated by discounting the loan cash flow using the required rate of return derived from the zero coupon curve, including the effect of the credit spread.


Derivatives A derivative is a financial instrument with the following characteristics:• Thevalueoftheinstrumentchangesasaresultofchangesinthe interest rate, the exchange rate or the price of an underlying object. • Theinstrumentrequiresnoorlittleinitialinvestment.• Theprofitorlossontheinstrumentisdeterminedatafuturedate.

Derivatives are recognised in the balance sheet at fair value when the derivative contract is made, and thereafter at the current fair value. Derivatives in the balance sheet include forward foreign exchange transactions, forward rate agreements, interest rate swaps, foreign currency interest rate swaps, interest rate options and share options (linked to bank deposits with a stock exchange return). Realised and unrealised gains/losses and changes in the value of derivatives are posted under ‘Net gain/loss(-) on financial instruments’ in the period in which they arise.

CuRRENCY The bank’s receivables and liabilities in foreign currency are translated at the rate on Oslo Børs at year end. Income and expenses denominated in foreign currency are translated into NOK at the rates prevailing on the transaction date. Foreign currency items are generally hedged by matching them against corresponding items on the other side of the balance sheet, or through off-balance sheet hedging items.

TANGIBLE FIXED ASSETS All of the group’s properties are considered to be operating assets for own use and the accounting treatment is in accordance with IAS 16. The properties are initially recognised at historical cost and depreciated over their expected useful life. Different elements with different useful lives are required to be differentiated and depreciated separately. The group has used the fair value option as the new cost price on implementation of IAS 16. As a result, new prices for separated items such as lifts, equipment and ventilation systems have been used along with external valuations of the buildings. Excess values on the aforementioned basis are included in the acquisition cost of the properties. Where there has been a decline in the market value, the asset in question is required to be written down and the effect recognised in the income statement. Tangible fixed assets are recognised at acquisition cost minus accumulated ordinary depreciation.

Ordinary depreciation is based on the cost price, which is depreciated on a straight line basis over the useful life of the asset. The depreciation period and method are assessed every year to ensure that they are in line with the economic realities of the fixed assets in question.

The ordinary depreciation for the year is included in operating expenses for the year.

INTANGIBLE ASSETS Developed softwareSoftware that has been developed is recorded in the balance sheet under intangible assets when the amounts involved are deemed to be material and the items are expected to have lasting value. In connection with the development of software, costs relating to the use of own resources, pre-planning, implementation and training are expensed. Software that has been developed by the bank and capitalised is depreciated over its expected life. It is continually assessed whether a write-down is necessary as a result of the expected economic benefits being less than the balance sheet value.

GoodwillGoodwill is the difference between the acquisition price of a business and the fair value of the group’s share of the net identifiable assets of the business on the acquisition date. Goodwill is tested each year for possible value depreciation and is recognised in the balance sheet at acquisition cost minus write-downs.

Customer portfolioThe value of the customer portfolio is part of the cost price of acquisitions. The value is set as the future cash flow, disregarding the customer’s right to renewal. The customer portfolio is depreciated on a straight-line basis over the expected remaining contract period.

FINANCIAL LIABILITIES Financial liabilities at a floating interest rate are recognised in the balance sheet at amortised cost. Amortised cost is defined as the amount of the instrument initially recognised in the accounts (cost price) minus repayments of principal, with an addition or deduction for accumulated amortisation of all differences between cost price and the nominal amount, minus all write-downs. Amortisation is based on the effective interest rate method.

Financial liabilities at a fixed rate of interest are recognised in the balance sheet at fair value. This includes debt to credit institutions, securitised debt and perpetual subordinated loans. In the case of indexed bonds and deposits, the derivative is separated from the main contract and recognised separately. Bonds and deposits are capitalised at fair value and the option is classified and posted in the balance sheet under Other derivatives.

Financial liabilities at a fixed rate of interest are recognised in the balance sheet at fair value as this method of evaluation eliminates or substantially reduces inconsistent measurement and calculation that would have arisen had the liabilities been measured or the capital gains/losses calculated on the basis of different assumptions. This means that the effect of value changes on financial instruments that are managed together is reflected at the same time in the accounts.

Fair value is calculated by discounting the cash flow from the loans using the required rate of return derived from the zero coupon curve. The credit spread on interest-bearing securities is changed on the basis of an overall assessment that takes account of observed trading in the market, credit margin reports from various brokers, and internal evaluations. A change in the credit spread will affect the required rate of return as thesupplement added to the zero coupon curve will be changed.

When the bank buys back its own securities, the difference between the balance sheet value and the consideration paid is posted as ‘Net gain/ (loss) on financial instruments’. The buy-back of securities issued by the bank is netted against securities debt in the balance sheet.

TAXATIONDeferred tax and deferred tax assets are recognised in the balance sheet in accordance with IAS 12 Deferred tax. The tax expense in the income statement includes both the tax payable for the period and the change in deferred tax. The deferred tax/ deferred tax asset is calculated at a rate of 28% of net temporary differences between accounting and tax values at year end. Tax-increasing and tax-reducing temporary differences that are reversed or can be reversed in the same period are offset and entered net.

The deferred tax asset is capitalised on the basis of expectations of taxable income through earnings in future years.Tax payable in the balance sheet relates to the tax on the profit for the year, tax payable on capital assets, and tax payable on the group contribution received.

PENSION COMMITMENTS Pension commitments are calculated in accordance with IAS 19. Financial parameters used to calculate the pension commitments are updated at year end, including the discount rate, which is based on year-end market interest rates. IAS 19 permits the effect of differences between estimated and actual parameters to be entered in a ‘corridor’.


Such deviations from estimates and assumptions are measured against the greater of gross pension commitments and total pension assets. If the deviations exceed 10% of the basis for the measurement, the difference is amortised over the average remaining period of service.

The net pension commitment is calculated and recognised as a long-term liability in the accounts. The net pension commitment is the difference between the gross pension commitment, which is the present value of expected future pensions, and pension assets in the insurance fund and the pension premium fund. Furthermore, the net pension commitment carried in the balance sheet has been adjusted for accumulated deviations from estimates and the effect of changed assumptions, including employer’s national insurance contributions.

The pension expense for the year is stated net in the income statement under ‘Salaries and general administration expenses’.

The defined benefit scheme was closed to new members in 2007 and voluntary transition to a defined contributions scheme offered. The contributions are recognised in the accounts and accrued as payroll expenses. See the separate note on the distribution between the two schemes.

COMMITMENTS / PROVISIONS A provision has been made for commitments in accordance with IAS 3. A provision is required where a commitment exists as a result of a previous event, and there is a high probability that the commitment will have to be met. The provision has been calculated as the present value of future payments required to meet the commitment.

The proposed dividend and gifts for distribution were not formally decided at year end and thus do not meet the criteria for a commitment under IAS 37.

In the company accounts, dividends and gifts are recognised in the financial year that forms the basis for the allocation

POST BALANCE-SHEET EVENTS Events occurring after the balance sheet date are disclosed in accordance with IAS 10. The information concerns events that are not included in the consolidated financial accounts, but whose nature makes them material to assessing the business.

CASH FLOW STATEMENTThe cash flow statement has been prepared on the basis of gross cash flows from operations, investment and financing activities.

Cash flows from operations are defined as ongoing interest relating to customer borrowings and deposits, net receipts/payments relating to lending and deposit activities, and payments relating to the cost of ordinary operations.

Investment activities are defined as cash flows from securities transactions apart from the trading portfolio, as well as purchases of operating assets and real property.

Cash flows from other securities transactions, the raising and repayment of subordinated loans, bond debt and equity are defined as financing activities.

EQuITY Equity consists of equity certificate capital, primary capital, the reserve for unrealised gains, other group equity and minority interests.

The equity certificate capital includes paid-up capital linked to equity certificates, own holdings of equity certificates, the premium reserve

and the equalisation reserve. The primary capital includes paid-up and retained primary capital, the gift fund and compensation fund. The reserve for unrealised gains relates to changes in the value of financial assets classified as available for sale. In the parent bank, the reserve for unrealised gains also includes changes in the value of financial assets where the principles used for valuation in IFRS deviate from Norwegian GAAP.

Other group equity is retained equity in subsidiaries and associated companies after the establishment of the group, and the effect of equity elimination in the consolidated accounts.

When buying own equity certificates, the purchase price including direct costs is deducted from equity. The nominal value of own equity certificates is entered as a negative amount on a separate line under equity certificate capital. Any purchase price in excess of the nominal value is deducted from the bank’s primary capital. In the event of subsequent sales of equity certificates, any purchase price in excess of the acquisition price is credited to the premium reserve.

The profit for the year is allocated to the owners of equity certificate capital and primary capital in proportion to the ratio between the equity certificate capital plus the premium reserve, and primary capital plus the compensation fund. The part of the year’s profit allocated to equity certificate capital and not distributed as dividend is allocated to the equalisation reserve.

In the consolidated accounts, the proposed dividend and gifts for distribution are classified as part of equity until the final resolutions have been adopted by the Supervisory Board.

IMPORTANT DISCRETIONARY ASSESSMENTS IN THE APPLICATION OF THE GROuP’S ACCOuNTING PRINCIPLESIn applying accounting principles relating to certain IFRS accounting standards, the group makes certain discretionary assessments. Estimates and assumptions entail a considerable risk of major changes in the balance sheet values of assets and liabilities, the most important of which are discussed below.

Impairment of goodwill Goodwill in the balance sheet is depreciated. On reporting dates, it is considered whether there is objective evidence to indicate any impairment of goodwill. If such evidence exists, a write-down test is carried out. All assessment units are tested annually to verify that values are still intact. The choice of assessment unit is made on the basis of whether it is possible to identify and separate cash flows related to the activity in question. Future cash flows are based on historical results, and on budgets. The required rate of return / discount rate is based on an assessment of the required rate of return in the market for the type of activity that is included in the assessment unit. The required rate of return reflects the risk attached to the activity.

Fair value of financial instruments, including derivatives The fair value of financial instruments that are not traded in an active market is determined by using various valuation techniques. See the note on financial assets and commitments, and the statement of accounting principles, for a description of the techniques used.

Loan write-downs All commitments that are subject to an individual valuation shall be assessed to determine whether there is objective evidence showing that a loss event has occurred and whether the loss event has reduced the estimated future cash flows from the loan.

If there is objective evidence of loan impairment, the loss on the loan is calculated as the difference between the balance sheet value (loan


principal + accrued interest on the valuation date) and the present value of future cash flows discounted on the basis of the effective rate of interest and the expected life of the loan. When estimating future cash flows, account is only taken of the credit loss caused by loss events that have occurred. The estimation of future cash flows from a loan also takes account of the takeover and sale of security for the loan, including costs in this connection.

The need to write down the loan (the loss being booked against the customer’s loan) is determined once all security has been realised and it is certain that no further payments will be received on the loan. The claim on the customer remains and will be followed up, unless it has been agreed with the customer that the loan is to be written off.

Pension commitmentsThe present value of pension commitments depends on economic and actuarial assumptions. Any change in relation to these assumptions affects the pension commitment and pension expense amounts recorded in the balance sheet. The calculation is based on guidelines for assumptions issued by the Norwegian Accounting Foundation.


Note 2 Segment information

Operating income and expenses are allocated directly, with the exception of staff-related costs and depreciation. Net interest is allocated on the basis of internally calculated intragroup interest based on 3-month NIBOR.

Income statement Banking operations

Corporate market

Retail market

Capital market

Property management

Not allocated by segment Total

GROuP

2009Net interest income 515 892 24 0 22 1 453Operating income 85 218 135 142 (91) 489Operating expenses (135) (370) (42) (114) (511) (1 172)Losses (226) (44) 0 0 0 (270)Pre-tax profit 239 696 117 27 (579) 500Tax (137)Profit for the year 239 696 117 27 (579) 363

2008Net interest income 366 767 74 4 97 1 308Operating income 88 289 (108) 100 6 375Operating expenses (122) (350) (32) (110) (454) (1 068)Losses (170) (34) 0 0 0 (204)Pre-tax profit 162 672 (66) (6) (351) 411Tax (204)Profit for the year 162 672 (66) (6) (351) 207

PARENT BANK

2009Net interest income 511 817 24 0 25 1 377Operating income 85 218 135 0 113 551Operating expenses (135) (359) (42) 0 (510) (1 046)Losses (226) (44) 0 0 0 (270)Pre-tax profit 235 632 117 0 (372) 612Tax (155)Profit for the year 235 632 117 0 (372) 457

2008Net interest income 366 727 74 0 143 1 310Operating income 88 279 (108) 0 56 315Operating expenses (122) (341) (32) 0 (471) (966)Losses (170) (33) 0 0 0 (203)Pre-tax profit 162 632 (66) 0 (272) 456Tax (207)Profit for the year 162 632 (66) 0 (272) 249


Note 2 Segment information (contd.)

Balance sheet Banking operations

Corporate market

Retail market

Capital market

Property management

Not allocated by segment Total

GROuP

31/12-09

Net lendings 21 564 60 416 321 1 82 302Other assets 14 603 50 706 15 359Deposits 14 361 27 426 2 739 355 44 881Other liabilities and equity 45 671 64 7 045 52 780

31/12-08

Net lendings 20 652 55 532 331 (280) 76 235Other assets 18 404 81 175 18 660Deposits 13 562 26 281 677 1 40 521Other liabilities and equity 48 445 81 5 848 54 374

PARENT BANK

31/12-09

Net lendings 21 773 48 623 321 2 70 719Other assets 25 528 661 26 189Deposits 14 793 27 424 2 739 13 44 969Other liabilities and equity 45 671 6 268 51 939

31/12-08

Net lendings 20 652 47 381 331 1 68 365Other assets 25 899 756 26 655Deposits 13 562 26 707 677 51 40 997Other liabilities and equity 48 445 5 578 54 023


Note 3 Net interest and credit commission income

PARENT BANK GROuP

2008 2009 2009 2008

142 90 Interest and similar income from loans to and receivables from credit institutions 24 121Interest and similar income from loans to and receivables from customers

4 424 2 759 - valued at amortised cost 3 108 4 442579 495 - valued at fair value 495 580431 531 Interest and similar income on commercial papers, bonds and other debt-bearing securities 328 405

5 576 3 875 Interest income etc. 3 955 5 548

Interest and similar expenses on debt to credit institutions 153 297 - valued at amortised cost 284 151

12 51 - valued at fair value 51 12Interest and similar income on deposits from and debt to customers

1 837 986 - valued at amortised cost 980 1 81142 32 - valued at fair value 32 42

Interest and similar expenses on issued securities1 030 564 - valued at amortised cost 587 1 032

665 475 - valued at fair value 475 665Interest and similar expenses on subordinated loan capital

38 28 - valued at amortised cost 28 3827 26 - valued at fair value 26 27

448 (12) Other interest expenses etc. 1) (12) 44814 51 Fee to the Saving Banks' Guarantee Fund 51 14

4 266 2 498 Interest expenses and similar expenses 2 502 4 2401 310 1 377 Net interest and credit commission income 1 453 1 308

1) Interest from derivatives entered into to manage the interest rate risk attached to the bank’s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank’s other interest income/ interest expenses.

Note 4 Interest on individual balance sheet items

GROuP Average percentage interest rate 1)

Average volume

2009 2008 2009 2008AssetsLoans to and receivables from credit institutions 1.87 5.28 1 262 2 285Loans to customers 4.59 7.15 78 750 70 686Commercial papers and bonds 3.15 6.35 10 387 6 359

LiabilitiesLiabilities to credit institutions 2.87 4.98 11 666 3 272Customer deposits 2.37 4.66 42 824 39 751Securities debt 3.57 5.49 29 770 30 909

PARENT BANK Average percentage interest rate 1)

Average volume

2009 2008 2009 2008AssetsLoans to and receivables from credit institutions 3.00 5.48 2 995 2 583Loans to customers 4.68 7.15 69 399 69 994Commercial papers and bonds 3.10 6.27 17 172 6 876

LiabilitiesLiabilities to credit institutions 2.87 4.80 12 094 3 436Customer deposits 2.37 4.73 42 824 39 751Securities debt 3.46 5.49 36 556 30 909

1) The average rate of interest is calculated as the interest as a percentage of the average volume.


Note 5 Net other operating income

PARENT BANK GROuP

2008 2009 2009 2008

25 27 Guarantee commissions 27 25214 238 Fees from payment transfers/interbank credit charges 238 214154 123 Other commission and fees 123 154393 388 Commission income and income from banking services 388 393

40 48 Fees payment transfers/BBS/EFTPOS 48 4023 21 Fees payment transfers/interbank debit charges 21 2313 14 Other commissions and fees 14 1376 83 Commission expenses and expenses relating to banking services 83 76

10 89 Income from ownership interests in group companiesIncome from ownership interests in associated companies (42) (37)

10 89 Income from ownership interests in group companies and associated companies (42) (37)

21 12 Dividend 12 21(47) 209 Gain/(loss) on commercial papers and bonds 136 (41)

(270) 37 Gain/(loss) on shares 37 (268)543 (200) Gain/(loss) on financial derivatives (200) 543

43 20 Gain/(loss) on currency 20 43Net gain/(loss), financial instruments, recognised at fair value 3)

78 68 - lendings 68 78(99) (39) - deposits (39) (99)

7 (27) - debt to credit institutions (27) 7(249) (82) - securitised debt (82) (249)(133) 129 - subordinated loan capital 129 (133)

42 23 Product margin amortised 23 42(64) 150 Net gain/(loss) on financial instruments 1) 77 (56)

Brokerage commission 106 7452 7 Other operating income 2) 43 7752 7 Other operating income 149 151

315 551 Net other operating income 489 375

1) Of which trading portfolio:3 2 Dividend 2 3

(60) 75 Gain/(loss) on shares 75 (60)(57) (1) Gain/(loss) on financial derivatives (1) (57)19 9 Gain/(loss) on currency 9 19

2) Of which the final settlement from previous insurance suppliers of NOK 51 million in 2008.

3) See notes 11, 21, 22, 23 and 25


Note 6 Payroll and general administration expenses

PARENT BANK GROuP

2008 2009 2009 2008341 368 Pay 452 406

71 115 Pensions 1) 117 7571 66 Non-wage costs 68 72

132 155 IT expenses 155 132133 134 Administration expenses 153 159748 838 Payroll and general administration expenses 945 844

1) See note 24

The average number of employees in 2009 was 736 (729) for the parent bank and 833 (828) for the group.

PAYROLL AND OTHER REMuNERATION OF EXECuTIVE PERSONNELExecutive personnel are defined as members of the corporate management team. The information includes annual salaries at 31 December 2009, all taxable remuneration expensed and paid in 2009 and calculated, earned pension rights in 2009 (2008 figures in brackets). Earned pension comprises earned pension rights for the year in the bank’s company pension scheme and earned pension in the scheme for executive personnel. See note 24 ‘Pension commitments’ for a description of the pension schemes. Bonuses earned/expensed in 2007 were paid in 2008, and are not included in this information. The Managing Director, the Deputy Managing Director and other executive personnel have not earned bonuses in 2008. At 31 December 2009, the Managing Director had an annual salary of NOK 2 166 000 and received total taxable remuneration of NOK 2 433 000 (2 298 000). Earned pension rights in 2009 are calculated at NOK 1 530 000 (1 418 000). The annual salary is unchanged in relation to 2008 and the Managing Director has waived any bonus for 2009. At 31 December 2009, the Deputy Managing Director had an annual salary of NOK 1 605 000 and received total taxable remuneration of NOK 1 761 000 (1 613 000) in 2009. Earned pension rights in 2009 are calculated at NOK 380 000 (331 000). The corresponding information, in the same order, for other executive personnel is as follows: Director of Corporate Market NOK 1 322 000, NOK 1 505 000 (1 466 000) and NOK 442 000 (397 000); Director of Retail Market NOK 1 244 000. NOK 1 431 000 (1 342 000) and NOK 548 000 (477 000); Director of Legal NOK 1 193 000, NOK 1 381 000 (1.274.000) and NOK 500 000 (504 000); Director of Corporate Communications NOK 1 000 000, NOK 1 083 000 and NOK 215 000; Director of Capital Market NOK 1 397 000, NOK 1 642 000 (1 495 000) and NOK 534 000 (505 000) and Director of Human Resources NOK 1 200 000, NOK 1 075 000 and NOK 250 000; Director of Risk Management NOK 1 062 000, NOK 1 235 000 (1 383 000) and NOK 478 000 (361 000). The Director of Corporate Communications has been employed since 20 April 2009 and the Director of Human Resources from 1 March 2009. Payments were made to the former Director of Corporate Communications in the amount of NOK 1 489 000 and the former Director of Human Resources in the amount of NOK 495 000. On the recommendation of the Compensation Committee, the Board of Directors sets the salary paid to the Managing Director, the Deputy Managing Director and the head of the internal audit department. The Managing Director determines remuneration for other executive personnel after consultation with the Compensation Committee. Provision of NOK 1 million has been made in 2009 for bonuses to be distributed among executive and key personnel, following assess-ment. This does not include the Managing Director and the Deputy Managing Director. If at the bank’s request, members of the corporate management resign their positions, they are entitled to severance pay correspond-ing to one year’s salary in addition to their ordinary salary during the period of notice (6 months). Severance pay is only paid if the em-ployee leaves his/her position at the bank’s request and complies with the provisions prohibiting competition. If the employee resigns at his/her own initiative, he/she is not entitled to severance pay. With respect to the Managing Director, there is a mutual period of notice of six months. The board can decide to terminate employment earlier without a reduction in pay. If the bankterminates the employment relationship, salary and additional benefits are paid for 18 months from the expiry of the period of notice after deducting any external pay received during the period.


Note 6 Payroll and general administration expenses (contd. I)

OFFICERS OF THE COMPANY (in whole NOK) 2009 2008

The Board of DirectorsDirectors'

feesAdditional

feesTotal

remunerationTotal

remunerationTrygve Bruvik, chair From May 2008 360 000 48 000 408 000 258 000Anne Kverneland Bogsnes, deputy chair 180 000 40 500 220 500 189 833Jan O. Yttredal 150 000 6 000 156 000 143 000Øyvind A. Langedal 150 000 39 000 189 000 152 000Gerd Kjellaug Berge 150 000 6 000 156 000 143 000Arve Havnerås 150 000 150 000 140 000Tone Mattsson 150 000 150 000 140 000Richard Rettedal From May 2008 150 000 39 000 189 000 112 000Marit Solberg From May 2008 150 000 24 000 174 000 106 000Pål W Lorentzen, chair until May 2008 106 666Anne Gine Hestetun until May 2008 40 000Inger Karin Larsen until May 2008 40 000Total 1 590 000 202 500 1 792 500 1 570 499

Directors’ fees and additional fees for participating in committees are decided by the Supervisory Board.

2009 2008

Control Committee RemunerationAdditional

feesTotal

remunerationTotal

remunerationTom W Horne, chair From May 2009 130 834 130 834Kjell Steinsbø, deputy chair From May 2009 110 000 110 000 93 333Liv Henjum 85 000 85 000 83 333Magni Haugland From May 2009 56 667 56 667Roald Korsøen until May 2009 28 333 28 333 88 333Karin Margrethe Vedø Deputy member 10 000Anne Marit Steen until August 2008 78 750Total 410 834 410 834 353 749

Remuneration of the parent bank’s Supervisory Board amounted to NOK 115 000 (2008: NOK 116 666).In addition to meeting fees of NOK 771 000 (2008: NOK 762 500)


Note 6 Payroll and general administration expenses (contd. II)

PARENT BANK GROuP

2008

2009

Loans and security furnished to the Managing Director and Deputy Managing Director (NOK 1 000)

2009

2008

11 2 030 Man. Director Stein Klakegg 2 654 2 7116 304 5 538 Deputy Man. Director Jan Erik Kjerpeseth 5 538 6 304

Loans are furnished on standard terms for employees

Loans and security furnished to officers of the company (NOK 1 000) parent bankChair of the board

4 4 Trygve Bruvik 4 4Loans are furnished on standard customer terms

Loans to board members2 281 0 Øyvind A. Langedal 2 285 2 281

0 0 Marit Solberg 2 187 2 6450 0 Jan Orninggård Yttredal 513 0

Loans are furnished on standard customer terms

Employee representatives773 15 Arve Havnerås 691 773

0 0 Tone Mattsson 1 366 1 390Loans are furnished on standard terms for employees

Chair of the Supervisory Board0 170 Lillian Marie Torsvik 170 0

Loan is furnished on standard customer terms

633 974 641 182 Total loans and furnishing of security to employees (NOK 1 000) 1) 1 043 924 1 005 011

Total loans and furnishing of security to other members of the Supervisory Board and Control Committee (NOK 1 000)

394 456 18 092 The Supervisory Board 2) 20 061 398 0080 8 The Control Committee 8 0

1) Excluding the Managing Director, the Deputy Managing Director and employee representatives.2) Excluding the chair of the Supervisory Board, board members, Control Committee members and employee representatives.

The cost of subsidising the interest rate on loans to employees is not recognised as an operating expense and affects the bank’s net interest. Loans to employees are subsidised by a 20% discount on standard customer terms.


Note 7 Other operating expenses

PARENT BANK GROuP

2008 2009 2009 20080 0 Operating expenses, real property 16 2

89 91 Rent and other operating expenses for rented premises 47 598 8 Expensed operating assets 9 10

38 24 Other operating expenses 57 5314 11 Wealth tax 11 14

149 134 Other operating expenses 140 138

2008 2009 Fees to elected auditor (NOK 1 000) 2009 20081 218 1 237 Audit fee 1 746 1 570

207 481 Attestation services 773 26516 104 Tax advice 149 38

112 629 Other services 1 474 7171 553 2 451 Total fees 4 142 2 590

Fees are inclusive of value added tax. Other services in the group in 2009 are related to the demerger of subsidiaries in AS Filialbygg in the amount of NOK 654.000 (NOK 439.000 in 2008). Attestation in connection with the State Finance Fund amounted to NOK 321.000.


2008 2009 Change in capitalised deferred tax: 2009 2008(92) 160 Capitalised deferred tax (tax asset) at 1 January 162 (81)

252 (231) Recognised through profit or loss in the period (254) 2430 6 Purchase of deferred tax as result of acquisitions with tax continuity 7 00 (3) Group contribution paid 0 00 6 Repayment of loss carryforward - the government's package of measures 6 00 0 Correction of deferred tax in subsidiaries 4 00 0 Changes entered against equity 0 0

160 (62) Capitalised deferred tax (tax asset) at 31 December (74) 162

The deferred tax and tax asset in the balance sheet relate to the following temporary differences

31/12-08 31/12-09 Deferred tax asset 31/12-09 31/12-081 1 Profit and loss account 0 08 7 Tangible fixed assets 0 0

115 106 Financial instruments 107 11538 51 Pension commitments 53 4010 1 Other liabilities 1 1110 0 Tax loss carryforward 6 16

182 166 Total deferred tax asset 167 182

31/12-08 31/12-09 Deferred tax 31/12-09 31/12-080 0 Profit and loss account 1 10 0 Tangible fixed assets 8 18 11 Goodwill 11 80 7 Other intangible assets 7 0

334 87 Financial instruments 67 334342 105 Total deferred tax 94 344

160 (62) Net deferred tax (tax asset) (74) 162

Note 8 Tax

PARENT BANK GROuP

2008 2009 Tax expense for the year 2009 2008(45) 386 Tax payable 391 (43)

252 (231) Change in deferred tax (254) 247207 155 Tax expense for the year 137 204

456 612 Pre-tax profit/loss 500 41128% tax on

128 171 Pre-tax profit 140 1150 0 Share of profit from associated companies 12 100 0 Write-down of goodwill 0 14 3 Expensed wealth tax, non-deductible 3 4

(7) (34) Non-taxable income (34) (8)82 14 Non-deductible costs 15 8245 0 Correction of deferred tax asset 0 45

(45) 0 Insufficient/excess provision for tax payable 0 (45)207 155 Tax expense 137 204

45% 25% The effective tax rate is 27% 50%


Note 8 Tax (contd.)

Deferred tax in the income statement relates to the following temporary differences

PARENT BANK GROuP

2008 2009 Deferred tax recognised through profit or loss 2009 20080 0 Profit and loss account 0 (3)1 0 Tangible fixed assets 1 03 3 Goodwill 3 4

236 (239) Financial instruments (260) 23612 (12) Pension commitments (11) 1110 9 Other liabilities 10 10

(10) 8 Tax loss carryforward 4 (16)0 0 Deferred tax asset from subsidiaries not previously capitalised 0 4

252 (231) Total change deferred tax (254) 247

In accordance with the exception provided for in IAS 12, the deferred tax liability relating to the takeover of excess value on a property in Jonsvollskvartalet AS is not recognised. It amounts to NOK 33 million. In the parent company, the deferred tax asset relating to intragroup transfers of properties in 2002 has been capitalised, and the capitalised value amounts to NOK 4 million.


Note 9 Classification of financial instruments

GROuP

31/12-2009Financial instruments recognised at fair value through profit or lossHeld for sale Recognised at fair value Valued at amortised cost Available for sale Total

AssetsCash in and receivables from central banks 299 299Loans to and receivables from credit institutions 143 143Lendings 13 028 69 274 82 302Shares 173 431 112 716Commercial papers and bonds 11 808 11 808Financial derivatives 605 605Total 778 25 267 69 716 112 95 873

LiabilitiesDebt to credit institutions 1 224 13 359 14 583Deposits 753 44 128 44 881Securitised debt 8 949 20 783 29 732Financial derivatives 458 458Subordinated loan capital 384 1 678 2 062Total 458 11 310 79 948 0 91 716

The bank has no financial instruments classified as held to maturity or hedging items.


AssetsCash in and receivables from central banks 4 753 4 753Loans to and receivables from credit institutions 1 291 1 291Lendings 9 983 66 252 76 235Shares 51 412 67 530Commercial papers and bonds 8 565 8 565Financial derivatives 2 368 2 368Total 2 419 18 960 72 296 67 93 742

LiabilitiesDebt to credit institutions 1 182 10 958 12 140Deposits 3 034 37 487 40 521Securitised debt 13 014 21 235 34 249Financial derivatives 1 338 1 338Subordinated loan capital 589 848 1 437Total 1 338 17 819 70 528 0 89 685


Note 9 Classification of financial instruments (contd. I)

PARENT BANK


AssetsCash in and receivables from central banks 299 299Loans to and receivables from credit institutions 1 427 1 427Lendings 13 028 57 691 70 719Shares 173 431 112 716Commercial papers and bonds 21 067 21 067Financial derivatives 605 605Total 778 34 526 59 417 112 94 833

LiabilitiesDebt to credit institutions 1 224 13 792 15 016Deposits 753 44 216 44 969Securitised debt 8 949 19 453 28 402Financial derivatives 458 458Subordinated loan capital 384 1 678 2 062Total 458 11 310 79 139 0 90 907

The bank has no financial instruments classified as held to maturity or hedging items.


AssetsCash in and receivables from central banks 4 753 4 753Loans to and receivables from credit institutions 4 913 4 913Lendings 9 666 58 699 68 365Shares 51 412 67 530Commercial papers and bonds 12 760 12 760Financial derivatives 2 368 2 368Total 2 419 22 838 68 365 67 93 689

LiabilitiesDebt to credit institutions 1 182 10 958 12 140Deposits 3 034 37 963 40 997Securitised debt 13 014 20 935 33 949Financial derivatives 1 338 1 338Subordinated loan capital 589 848 1 437Total 1 338 17 819 70 704 0 89 861


Note 9 Classification of financial instruments (contd. II)

GROuP AND PARENT BANK

Recognition of fair value: Valuation techniques: With effect from 1 January 2009, the group has implemented the changes in IFRS 7 relating to financial instruments valued at fair value on the balance sheet date. The changes require that fair value measurements are presented by level with the following breakdown of levels for the measurement of fair value : - The listed price in an active market for an identical asset or liability (level 1) - Valuation based on other observable factors than the listed price (used in level 1) for the asset or liability, either directly (price) or indirectly (derived from price) (level 2) - Valuation based on factors that are not obtained from observable market data (non-observable assumptions) (level 3)

31/12-2009 Level 1 Level 2 Level 3 TotalAssetsLoans to customers 13 028 13 028Shares recognised at fair value through profit or loss 359 24 221 604Shares available for sale 112 112Commercial papers and bonds 6 140 5 668 11 808Financial derivatives 585 20 605Total 7 084 18 740 333 26 157

LiabilitiesDebt to credit institutions 1 224 1 224Deposits from and debt to customers 753 753Securitised debt 8 949 8 949Financial derivatives 437 21 458Subordinated loan capital 384 384Total 437 11 331 0 11 768

Specification of changes relating to financial instruments valued pursuant to level 3. The valuation of financial instruments that is not obtained from observable market data is exclusively linked to the shareholding.

Financial instruments valued pursuant to level 3 at 1 January 2009. 274Net purchase/sale of shares classified at fair value through profit or loss 43Reclassifications 0Value adjustment linked to shares at fair value through profit or loss (29)Value adjustment of shares available for sale (comprehensive income) (note 15) 45Financial instruments valued pursuant to level 3 at 31 December 2009 333

Comments: The fair value of financial instruments traded in active markets is based on the market price on the balance sheet date. A market is deemed to be active if the market prices are easily and regularly available from a stock exchange, broker, industry group, pricing service or regulatory authority, and these prices represent actual and regularly occurring market transaction at arm’s length. The market price used for financial assets is the applicable purchase price, and the applicable sales price used for financial commitments. These instruments are included in level 1. The instru-ments included in level 1 primarily comprise equity and interest rate instruments listed on Oslo Børs and classified as held for trading purposes or available for sale. The fair value of financial instruments that are not traded in an active market (e.g. certain over-the-counter derivatives) is determined by using valuation methods. These valuation methods maximise the use of observable data where available, and are based as little as possible on the group’s own estimates. If all the material data required to determine the fair value of an instrument are observable data, the instrument is included in level 2. If one or more data items are not based on observable market information, the instrument is included in level 3. Special valuation methods used to value financial instruments include: - Listed market price or trading price for similar instruments. - The fair value of interest swap agreements is calculated as the present value of estimated future cash flows based on observable yield curves. - The fair value of currency forward contracts is determined using the currency’s forward exchange rate on the balance sheet date, with the resulting value being discounted back to the present value. - Other techniques, such as discounting cash flows, are used to stipulate the fair value of the remaining financial instruments. No financial instruments have been transferred from one level to another during the accounting period. ANNuAL REPORT 2009 PAGE 45

Note 10 Fair value of financial instruments

GROuP 31/12-09 31/12-08

NotesCapitalised

valueFair

valueCapitalised

valueFair

valueAssetsCash in and receivables from central banks 299 299 4 753 4 753

Loans to and receivables from credit institutions 13 143 143 1 291 1 291

Lendings, valued at fair value 13 028 13 028 9 983 9 983Lendings, valued at amortised cost 69 274 69 187 66 252 66 252Lendings 11 82 302 82 215 76 235 76 235

Shares at fair value through profit or loss 15/16 604 604 463 463

Shares available for sale 15 112 112 67 67

Commercial papers and bonds 17 11 808 11 808 8 565 8 565

Financial derivatives 605 605 2 368 2 368Total 95 873 95 786 93 742 93 742

LiabilitiesDebts to credit institutions, valued at fair value 1 224 1 224 1 182 1 182Debt to credit institutions, valued at amortised cost 13 359 13 313 10 958 10 909Debt to credit institutions 21 14 583 14 537 12 140 12 091

Deposits, valued at fair value 753 753 3 034 3 034Deposits, valued at amortised cost 1) 44 128 44 128 37 487 37 487Deposits 22 44 881 44 881 40 521 40 521

Securities debt, valued at fair value 8 949 8 949 13 014 13 014Securities debt, valued at amortised cost 20 783 20 809 21 235 20 665Securitised debt 23 29 732 29 758 34 249 33 679

Financial derivatives 458 458 1 338 1 338

Subordinated loan capital, valued at fair value 384 384 589 589Subordinated loan capital, valued at amortised cost 1 678 1 595 848 619Subordinated loan capital 25 2 062 1 979 1 437 1 208Total 91 716 91 613 89 685 88 837

See note 28 for guarantee liability and secured debt off-balance sheet.

1) These are deposits with floating interest rates whose fair value is almost the same as amortised cost.


Note 10 Fair value of financial instruments (contd. I)

PARENT BANK 31/12-09 31/12-08

NotesCapitalised

valueFair

valueCapitalised

valueFair

valueAssetsCash in and receivables from central banks 299 299 4 753 4 753

Loans to and receivables from credit institutions 13 1 427 1 427 4 913 4 913

Lendings, valued at fair value 13 028 13 028 9 666 9 666Lendings, valued at amortised cost 57 691 57 604 58 699 58 699Lendings 11 70 719 70 632 68 365 68 365

Shares at fair value through profit or loss 15/16 604 604 463 463

Shares available for sale 15 112 112 67 67

Commercial papers and bonds 17 21 067 21 067 12 760 12 760

Financial derivatives 605 605 2 368 2 368Total 94 833 94 746 93 689 93 689

LiabilitiesDebt to credit institutions, valued at fair value 1 224 1 224 1 182 1 182Debt to credit institutions, valued at amortised cost 13 792 13 746 10 958 10 909Debt to credit institutions 21 15 016 14 970 12 140 12 091

Deposits, valued at fair value 753 753 3 034 3 034Deposits, valued at amortised cost 1) 44 216 44 216 37 963 37 963Deposits 22 44 969 44 969 40 997 40 997

Securities debt, valued at fair value 8 949 8 949 13 014 13 014Securities debt, valued at amortised cost 19 453 19 466 20 935 20 365Securitised debt 23 28 402 28 415 33 949 33 379

Financial derivatives 458 458 1 338 1 338

Subordinated loan capital, valued at fair value 384 384 589 589Subordinated loan capital, valued at amortised cost 1 678 1 595 848 619Subordinated loan capital 25 2 062 1 979 1 437 1 208Total 90 907 90 791 89 861 89 013

See note 28 for guarantee liability and secured debt off-balance sheet.

1) These are deposits with floating interest rates whose fair value is almost the same as the amortised cost


Note 10 Fair value of financial instruments (contd. II)

FINANCIAL DERIVATIVES

Financial derivatives are agreements entered into with finance institutions or customers to stipulate interest terms, exchange rates and the value of equity instruments for specific periods.

Method of valuation and accounting principlesAll derivatives are valued at fair value and gains/losses are classified as net gain/(loss) financial instruments. Interest from derivatives entered into to manage interest rate risk attached to the bank's ordinary portfolios is classified as interest income and recognised as an adjustment of the bank's other interest income/ interest expenses.

Sparebanken Vest has used the following financial derivatives during the year. Forward currency transactionsThese are agreements to purchase or sell specific amounts of currency at an agreed exchange rate on a future date.

Interest rate agreements comprise- Forward Rate Agreements (FRA) which stipulate a certain rate of interest on a nominal amount for a future period of time. - Interest swap agreements, which are agreements to exchange interest rate terms (fixed for floating) for a specific amount over a given period of time. - Interest rate options (call) entitle the buyer to receive from the seller the difference between the market rate and the agreed rate of interest, if the market rate is higher than the agreed rate of interest for a specific amount over a given period.- Interest rate options (put) entitle the buyer to receive from the seller the difference between the market rate and the agreed rate of interest, if the market rate is lower than the agreed rate of interest for a specific amount over a given period.

Portfolio guaranteeThe bank participates in a guarantee that guarantees against risk relating to the volatility of the value of Eksportfinans’ liquidity port-folio. The bank’s share is NOK 50 million.

OptionsThe bank's holding of options relates to bank deposits with an indexed return. Indexed products sold to customers are hedged by counter items in the market, and the bank's open positions in such options is very limited.

Financial derivatives 31/12-09 31/12-08 Credit

equivalent Nominal

value Positive

market value Negative

market value Credit

equivalent Nominal

value Positive

market value Negative

market value FRA 24 000 3 5 92 500 362 401Interest swap agreements 695 22 708 541 267 116 24 485 784 422Options/Cap/Floor/Collar/Swaption 2 992 19 20 5 139 21 24Total interest rate instruments 49 700 563 292 122 124 1 167 847

Portfolio guarantee 50 10 50 27

Options 58 1 516 1 1 161 4 575 93 89Total equity-related contracts 1 516 1 1 4 575 93 89

Forward contracts 148 10 547 41 155 158 14 189 1 108 376Total currency-related contracts 10 547 41 155 14 189 1 108 376Total listed contracts 0 0 0 0 0 0Total OTC derivatives 61 813 605 458 140 938 2 368 1 338

See note 30 for a description of the bank's management of market risk.See notes 31 and 32 for a further description of the bank's interest rate and currency management.


Note 10 Fair value of financial instruments (contd. II)

FINANCIAL DERIVATIVES

Financial derivatives are agreements entered into with finance institutions or customers to stipulate interest terms, exchange rates and the value of equity instruments for specific periods.

Method of valuation and accounting principlesAll derivatives are valued at fair value and gains/losses are classified as net gain/(loss) financial instruments. Interest from derivatives entered into to manage interest rate risk attached to the bank's ordinary portfolios is classified as interest income and recognised as an adjustment of the bank's other interest income/ interest expenses.

Sparebanken Vest has used the following financial derivatives during the year. Forward currency transactionsThese are agreements to purchase or sell specific amounts of currency at an agreed exchange rate on a future date.

Interest rate agreements comprise- Forward Rate Agreements (FRA) which stipulate a certain rate of interest on a nominal amount for a future period of time. - Interest swap agreements, which are agreements to exchange interest rate terms (fixed for floating) for a specific amount over a given period of time. - Interest rate options (call) entitle the buyer to receive from the seller the difference between the market rate and the agreed rate of interest, if the market rate is higher than the agreed rate of interest for a specific amount over a given period.- Interest rate options (put) entitle the buyer to receive from the seller the difference between the market rate and the agreed rate of interest, if the market rate is lower than the agreed rate of interest for a specific amount over a given period.

Portfolio guaranteeThe bank participates in a guarantee that guarantees against risk relating to the volatility of the value of Eksportfinans’ liquidity port-folio. The bank’s share is NOK 50 million.

OptionsThe bank's holding of options relates to bank deposits with an indexed return. Indexed products sold to customers are hedged by counter items in the market, and the bank's open positions in such options is very limited.

Note 11 Loans

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-08Loans broken down by type of receivable, nominal principal

14 668 13 412 Overdraft facilities 18 375 17 7251 412 1 978 Building loans 1 978 1 412

42 732 42 724 Instalment loans 49 335 47 22958 812 58 114 Gross loans to customers 69 688 66 366

(94) (241) Individual write-down loans (241) (94)58 718 57 873 Loans to customers after individual write-downs 69 447 66 272

228 117 Accrued interest 128 228(15) (17) Amortisation (fees etc.) (18) (15)

(232) (282) Group write-downs, loans (283) (233)58 699 57 691 Loans to and receivables from customers at amortised cost 69 274 66 252

9 597 12 896 Loans to and receivables from customers, nominal loan principal 12 896 9 91428 23 Accrued interest 23 2842 109 Adjustment to fair value 109 42

9 666 13 028 Loans to and receivables from customers, fair value 13 028 9 98368 365 70 719 Loans to and receivables from customers 82 302 76 235

Loans to customers recognised at fair value through profit or loss7 068 9 666 Book value at 1 January 9 983 7 0682 556 3 294 Net additions/disposals 2 977 2 873

110 19 Value change in period 19 110(68) 49 Value change in credit spread in period 49 (68)

9 666 13 028 Book value at 31 Dec. 13 028 9 983

Loans broken down by market47 129 48 289 Wage earners 60 029 55 18521 255 22 682 Industries/sectors 22 516 21 070

24 39 Public sector 39 2468 409 71 010 Gross loans and receivables 82 584 76 280

256 140 Accrued interest 151 256(15) (17) Amortisation (fees etc.) (18) (15)42 109 Adjustment to fair value 109 42

(94) (241) Individual write-down loans (241) (94)(232) (282) Group write-downs, loans (283) (233)

68 365 70 719 Loans to and receivables from customers 82 302 76 235

Of which subordinated loan capital43 43 Subordinated loan capital in other financial institutions 43 4343 43 Subordinated loan capital booked under lendings 43 43

The net gain/(loss) on loans recognised at fair value is included in the item net gain/(loss), financial instruments recognised at fair value (note 5).


Note 11 Loans (contd. I)

Credit riskCredit risk is the risk of losses if the bank’s customers are unable to meet their commitments relating to loans, credit facilities, guarantees etc. Credit risk is managed on the basis of stipulated targets for risk profile, rate of return, concentration risk and growth. A key element in the quantification of the bank’s risk profile is the calculation of the default probability for individual customers and portfolios, see below. The target rate of return is based on the Return on Risk-Adjusted Capital (RORAC). Concentration risk is managed on the basis of the targets set for the proportion for each sector, the largest individual commitments and the overall targets for major commitments.

Risk classification of loans and guaranteesSparebanken Vest’s credit portfolio is split into 11 risk classes from A to K on the basis of debt-servicing ability (default probability). Default probability is defined as the probability of a customer defaulting on a loan within the next 12 months. A default may be default of payment on a loan over 90 days or other concrete circumstances (‘unlikely to pay’, cf. Basel II), affecting the customer’s ability to service the debt. The default probability is calculated using statistical models (score cards) based on logical regression. The models combine internal and external data to predict statistical relationships. The results are interpreted and form the basis for logical key figures. A risk classification of all commitments is carried out each month using automatic collection of data from internal and external sources. There is also manual follow-up of corporate commitments. The frequency of these assessments depends on the size and nature of the commitment. Commitments are priced to reflect the level of exposure, so that those with highest exposure are priced highest.

Risk classification in Sparebanken Vest Probability of default

Risk class From and incl. untilA 0.00 0.15B 0.15 0.30C 0.30 0.45D 0.45 0.62E 0.62 0.78F 0.78 1.01G 1.01 1.41H 1.41 2.59I 2.59 4.48J 4.48 100.00K 100.00


31/12-09 31/12-08

PARENT BANK GROuP PARENT BANK GROuP

Loans broken down by geographical area Share Loans

Write-downs Share Loans



Write-downs

Hordaland 73.4 51 877 169 75.9 62 480 169 76.7 52 432 69 77.7 59 223 69Sogn og Fjordane 10.7 7 565 14 10.1 8 339 14 10.7 7 343 12 10.1 7 705 12Rogaland 9.5 6 721 32 8.4 6 923 32 6.3 4 281 12 6.0 4 575 12Rest of Norway 6.1 4 280 14 5.2 4 280 14 5.9 4 063 1 5.9 4 473 1Total Norway 99.6 70 443 229 99.7 82 022 229 99.6 68 119 94 99.7 75 976 94Abroad 0.4 276 12 0.3 280 12 0.4 246 0.3 259Total geographic areas 100.0 70 719 241 100.0 82 302 241 100.0 68 365 94 100.0 76 235 94

Note 11 Loans (contd. II)

PARENT BANK GROuP

CommitmentIndividual

write-downs CommitmentIndividual

write-downsLoans broken down by risk class 31/12-09 31/12-08 31/12-09 31/12-08 31/12-09 31/12-08 31/12-09 31/12-08Corporate marketA-D 5 323 6 297 0 0 5 691 6 578 0 0E-H 14 818 14 793 0 0 14 818 14 793 0 0I-J 6 302 4 671 0 0 6 302 4 671 0 0K 1 086 397 222 94 1 086 397 222 94Total - Corporate market 27 529 26 158 222 94 27 897 26 439 222 94

Retail marketA-D 34 532 34 539 0 0 45 420 42 128 0 0E-H 13 149 11 596 0 0 15 133 12 761 0 0I-J 5 064 5 374 0 0 5 350 5 446 0 0K 288 217 19 0 289 217 19 0Total - Retail market 53 033 51 726 19 0 66 192 60 552 19 0Total 80 562 77 884 241 94 94 089 86 990 241 94

(All individual write-downs are assigned to the highest risk class) The group’s net losses in 2009 corresponded to 0.33% of total gross loans of NOK 82.584 million. Expected losses for the next 12 months are estimated to exceed the long-term average, which is estimated to be 0.3 % of the commitment. Secured debt The gross loans specified above are largely secured by mortgage. Security in the retail market largely consists of real property. In the corporate market, security mainly consists of tangible fixed assets. The table below shows the commitments broken down into the percentages relating to different levels of secured debt.. For example, the line 0-50% denotes that the commitments are lower than 50% of the value of the security, 100% means that the loan amount exceeds the value of the security.

31/12-09

PARENT BANK GROuP

Security level Retail market Corporate market Total Retail market Corporate market Total

0% - 50% 22.7% 4.9% 16.7% 27.2% 4.9% 20.6%50% - 75% 34.1% 22.1% 30.1% 37.5% 22.1% 32.9%75% - 90% 21.8% 19.1% 20.9% 17.9% 19.1% 18.3%90% - 100% 12.5% 11.9% 12.3% 10.2% 11.9% 10.7%100% - 6.8% 39.4% 17.8% 5.5% 39.4% 15.5%Unsecured 2.1% 2.6% 2.2% 1.7% 2.6% 2.0%Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


Note 11 Loans (contd. III)

2009

Net loans and guarantees broken down by industries and retail market Net loans Guarantees unused limit

Defaults and other potential

bad debts

Write-downs of loans and guarantees

Group write-downs

GROuP

Retail customers 60 096 138 7 151 227 19 53Abroad (retail customers) 110 0 15 5 0Total - retail customers 60 206 138 7 166 232 19 53Primary industries 1 792 47 241 9 4Manufacturing and mining 1 976 510 1 131 75 21Building and construction, power and water supply 1 615 207 548 36 4Commerce, hotels and restaurants 1 121 131 465 159 57International shipping and pipeline transport 3 200 169 66 434 59Transport, post and telecommunications 853 67 146 1 2Property management 8 997 152 570 232 69Insurance and finance 830 0 0 59 0Services 1 503 0 454 6 2Municipal/public sector 39 0 97 0 0Abroad 170 0 0 55 20Group write-downs, business and industry 230Total - business and industry 22 096 1 283 3 718 1 066 238 230Total 82 302 1 421 10 884 1 298 257 283

PARENT BANK

Retail customers 48 348 138 5 891 227 19 52Abroad (retail customers) 106 0 15 5 0Total - retail customers 48 454 138 5 906 232 19 52Primary industries 1 782 47 241 9 4Manufacturing and mining 1 972 510 1 131 75 21Building and construction, power and water supply 1 578 207 517 36 4Commerce, hotels and restaurants 1 106 131 465 159 57International shipping and pipeline transport 3 200 169 66 434 59Transport, post and telecommunications 821 67 143 1 2Property management 9 311 182 570 232 69Insurance and finance 830 0 0 59 0Services 1 456 0 452 6 2Municipal/public sector 39 0 97 0 0Abroad 170 0 0 55 20Group write-downs, business and industry 230Total - business and industry 22 265 1 313 3 682 1 066 238 230Total 70 719 1 451 9 588 1 298 257 282


Note 11 Loans (contd. IV)

2008

Net loans and guarantees broken down by industries and retail market Net loans Guarantees unused limit

Defaults and other potential

bad debts

Write-downs of loans and guarantees

Group write-downs

GROuP

Retail customers 55 158 167 5 220 197 0 53Abroad (retail customers) 113 0 12 4 0Total - retail customers 55 271 167 5 232 201 0 53Primary industries 1 661 24 145 5 3Manufacturing and mining 1 600 689 838 41 14Building and construction, power and water supply 1 424 225 444 13 9Commerce, hotels and restaurants 1 295 120 378 179 38International shipping and pipeline transport 3 790 193 94 3 0Transport, post and telecommunications 1 029 64 50 5 2Property management 7 945 135 355 149 21Insurance and finance 43 0 0 19 0Services 2 007 0 250 12 11Municipal/public sector 24 0 120 0 0Abroad 146 0 0 0 8Group write-downs, business and industry 180Total - business and industry 20 964 1 450 2 674 426 106 180Total 76 235 1 617 7 906 627 106 233

PARENT BANK

Retail customers 47 104 167 5 220 197 0 52Abroad (retail customers) 100 0 12 4 0Total - retail customers 47 204 167 5 232 201 0 52Primary industries 1 658 24 145 5 3Manufacturing and mining 1 597 689 838 41 14Building and construction, power and water supply 1 404 225 444 13 9Commerce, hotels and restaurants 1 286 120 378 179 38International shipping and pipeline transport 3 805 193 94 3 0Transport, post and telecommunications 1 012 64 50 5 2Property management 8 203 155 355 149 21Insurance and finance 43 0 0 19 0Services 1 983 0 250 12 11Municipal/public sector 24 0 120 0 0Abroad 146 0 0 0 8Group write-downs, business and industry 180Total - business and industry 21 161 1 470 2 674 426 106 180Total 68 365 1 637 7 906 627 106 232


Note 11 Loans (contd. V)

Losses on loans, guarantees etc.

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-0852 203 Change in individual write-downs in period 203 52

128 46 Change in group write-downs in period 46 12937 39 Confirmed losses not covered by previous write-downs 39 37(17) (22) Recoveries on previously confirmed losses (22) (17)

200 266 Write-downs and losses on loans 266 2010 0 Confirmed losses on guarantees not covered by previous provision for bad debt 0 03 4 Change in guarantees for provision for bad debt in period 4 33 4 Loss on guarantees 4 3

203 270 Losses on loans, guarantees etc. 270 204

(1) 57 Confirmed losses on loans covered by previous write-downs 57 (1)0 0 Confirmed losses on guarantees not covered by previous provision for bad debt 0 0

37 39 Confirmed losses on loans not covered by previous write-downs 39 3736 96 Confirmed losses 96 36

Write-downs for impaired commitments. Individually assessed.

31/12-08 31/12-09 31/12-09 31/12-08Commitments in default

299 394 Gross commitments in default 394 299(23) (61) Write-down (61) (23)

276 333 Net commitments in default 333 2768% 15% Percentage provided for 15% 8%

The above table shows potential bad debts and defaults (in excess of 90 days) where the balance in default in one of the commitment’s accounts exceeds NOK 1.000.

31/12-08 31/12-09 31/12-09 31/12-08Potential bad debts not defaulted on

328 904 Gross commitments assessed for impairment 904 328(71) (179) Write-down (179) (71)

257 725 Net commitments assessed for impairment 725 25722% 20% Percentage provided for 20% 22%


Note 11 Loans (contd. VI)

Capitalised write-downs of commitments

Changes in individual and group write-downs and provision for bad debt relating to guarantees.

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-08

Individual write-downs40 94 Individual write-downs of loans at 1 January (nominal values) 94 40(1) (57) Confirmed losses on loans covered by previous write-downs (57) (1)0 34 Increase in write-downs of loans previously written down 34 0

60 203 Write-downs of loans not previously written down 203 60(5) (35) Reduction in previous years' write-downs of individually assessed loans (35) (5)0 2 Sauda 2 0

94 241 Individual write-downs 241 94

Group write-downs104 232 Write-downs of groups of loans at 1 January (nominal values) 233 104128 46 Increase in write-downs of groups of loans 46 129

0 0 Reduction in write-downs of groups of loans 0 00 4 Sauda 4 0

232 282 Write-downs of groups of loans 283 233326 523 Total write-downs of commitments 524 327

Provision for bad debt for guarantees10 12 Provision for bad debt to cover losses on guarantees at 1 January 12 1012 8 Provision for bad debt on guarantees not previously provided for 8 12

(10) (4) Reduction in previous years' provision for bad debt (write-back) (4) (10)0 0 Confirmed losses on guarantees covered by previous provision for bad debt 0 0

12 16 Specified provision for bad debt to cover losses on guarantees 16 12

All commitments which are subject to individual assessment shall be assessed to determine whether there is objective evidence showing that a loss event has occurred and that the loss event has reduced the estimated future cash flows from the loan.

If there is objective evidence of loan impairment, the loss on the loan is calculated as the difference between the balance sheet value (balance + accrued interest on the valuation date) and the present value of future cash flows. In estimating future cash flows, account is only taken of the credit loss caused by the loss events that have occurred. The estimation of future cash flows from a loan also takes account of security taken over and sold, including costs in this connection. When the best estimate of the future cash flow is estimated and recorded, the system will calculate the new value of the loan (amortised cost) and the difference will be the amount of the write-down.

Confirmation of the loss write-down (the loss being booked against the customer’s loan) takes place when all security has been realised and it is certain that no further payments will be received on the loan. The claim on the customer remains and will be followed up, unless it has been agreed with the customer that the loan is to be written off.


Note 12 Commitments in default

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-08Retail market

214 133 31 - 60 days 135 21842 32 61 - 90 days 32 42

195 224 More than 90 days 224 195451 389 Total retail market 391 455

Corporate market111 76 31 - 60 days 76 111

12 60 61 - 90 days 60 1298 170 More than 90 days 170 98

221 306 Total corporate market 306 221

325 209 31 - 60 days 211 32954 92 61 - 90 days 92 54

293 394 More than 90 days 394 293672 695 Total 697 676

The table shows defaults on payments exceeding 30 days where the amount in default is more than NOK 1.000 for one of the commitment’s accounts.

Note 13 Loans to and receivables from credit institutions

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-084 742 1 293 Loans to and receivables from credit institutions with no agreed term or period of notice 75 1 120

171 134 Loans to and receivables from credit institutions with an agreed term or period of notice 68 1714 913 1 427 Net loans to and receivables from credit institutions 143 1 291

Geographic areas3 696 1 301 Hordaland 17 74

30 0 Rogaland 0 3015 15 Sogn og Fjordane 15 1555 40 Rest of Norway 40 55

1 117 71 Abroad 71 1 1174 913 1 427 Total geographic areas 143 1 291


ConsiderationFair value of equity certificates issued (1,318,221) 147Cash consideration 28Total consideration 175

The fair value of the equity issued represents the listed price on the date of the transaction.

Assignment of acquisition costCash in and receivables from central banks 30Loans to and receivables from credit institutions 34Net loans to and receivables from customers 1 217Securities 49Tangible fixed assets 9Identifiable intangible excess values 1) 27Goodwill* 27Other assets 3Debt to credit institutions (180)Deposits from and debt to customers (904)Securitised debt (100)Other liabilities (37)Total assets and liabilities taken over 175

1) Excess values in connection with the acquisition were primarily linked to identifiable intangible excess values (customer portfolio) and goodwill. Goodwill arises as the result of expectations about future synergies, earnings and market knowledge and expertise in the organisation that has been acquired. If the merger had taken place before 1 January 2009, the figures would have been as follows:

Net interest and credit commission income 1 471Net operating income 1 963Profit after tax 368

Note 14 Accounting integration of Sauda Sparebank

Sauda Sparebank was taken over with accounting effect from 1 November 2009. The pre-tax profit for the taken over business for November and December 2009 has been incorporated in the consolidated accounts in the amount of NOK 3 million after depreciation of intangible excess values of NOK 0.5 million. The breakdown of tangible and intangible values upon acquisition are as follow:


Note 15 Shares

Shares are classified at fair value through profit or loss or as available for sale.

Cost price 31/12-09 31/12-08Shares valued at fair value through profit or loss are divided into the following portfolios Trading portfolio (listed) 136 173 51 Recognised at fair value 520 431 412Total shares valued at fair value through profit or loss 604 463Valuation method Listed 238 184 Shares valued on the basis of the OTC list 24 96 Fund investments as priced by the investment management company 121 7 The companies’ own valuations on the basis of EVCA 1) 54 57 Shares valued on the basis of other valuation techniques 2) 167 119Shares valued at fair value through profit or loss 604 463

31/12-09 31/12-08

No of shares Holding (%) Cost price Book value Book valueNORDITO AS 367 645 3.62 7 112 67Shares classified as available for sale 112 67

In connection with the planned merger between Nordito AS and the Danish payment transfer group PBS Holding AS, the bank has decided torevalue the shares in Nordito AS to NOK 112 million. The adjustment is based on a valuation of Nordito AS and the negotiated conversion ratio inconnection with the merger, adjusted for a normal share discount. The value adjustment of NOK 45 million is entered directly against equity (reserve for unrealised gains) and is specified in the comprehensive income statement pursuant to IAS 1.

1) The bank’s investments in venture shares are mainly related to fund investments (or participation in investment companies). Some of the funds/companies prepare price assessments on the basis of underlying portfolio value, which we use for valuation purposes.

2) Value assessments are based on the last issue price, traded prices that we are aware of and/or the value recognised in the accounts with consideration given to the need for write-downs of our cost price if the share has not been traded. Obvious excess values are accounted for through a value adjustment, while smaller holdings are written down where necessary.

The group has a commitment to pay further equity related to the following ordinary share limits and venture investments in 2009. The committed amount relating to share investments for 2008 amounted to NOK 166 million

Comm. amount PaidOrdinary share limit:HitecVision Private Equity IV 11 7Borea Opportunity II AS 39 9

50 16Venture portfolio:Sarsia Life Science Fund 15 11Fjord Invest Sør Vest AS (Seedcorn) 12 4Vekstfondet 5 2Sarsia Seed 20 7Norgesinvestor Opportunity AS 5 3Incitia Ventures II AS 5 0Marin Vekst II AS 30 20Pareto Growth AS 10 9

102 56

Committed amount related to share investments 152 72


Note 16 Shares at fair value through profit or loss Specification of shares, units, funds and primary capital certificates at 31 December 2009Book value in NOK 1.000 No of shares Holding (%) Book valueNorwegian companiesAKER SOLuTIONS ASA 30 000 0.01 2 264BERGENSAVISEN KONSERN AS 315 840 9.84 6 317BIPPER COMMuNICATION AS 148 815 7.75 2 381BOREA NOTERTE 111 AS A-Shares 100 000 2.12 6 580BOREA Opportunity II AS 9 000 6.16 15 210CARBONTECH HOLDING AS 80 13.33 2 800DNB NOR ASA 50 000 0.00 3 138EIDESVIK OFFSHORE ASA 100 000 0.33 2 960EIENDOMSKREDITT AS 163 447 8.19 16 345EKSPORTFINANS AS 2 638 1.00 28 227ENERGY CONVERSION TECHNOLOGY AS 80 0.05 5 047EPSIS AS 13 202 4.39 3 301FJORDINVEST AS 14 500 14.05 10 875INCITIA VENTuRES 11 IS uNITS 1 779 8.41 1 281INDRE SOGN SPAREBANK GR 9 350 2.44 594IT'S LEARNING AS 6 700 2.48 12 416K.F.S. EGENKAPITALBEVIS Equity Certificates 3 220 6.44 3 220MEDIA NORGE ASA 1 050 164 1.05 52 508NETWORK NORWAY AS 1 500 000 0.38 3 000NORDIAG ASA 2 302 519 3.71 3 753NORGESINV. OPP. AS - B Total 48 000 shares 28 800 4.62 2 448NORSK HYDRO ASA 130 000 0.01 6 332NORSK TILLITSMANN ASA 4 000 3.71 8 000NORSuN AS 35 000 0.97 14 000NORWEGIAN AIR SHuTTLE ASA 20 000 0.06 2 300Nygårdstangen A/S 464 408 20.27 2 786ORKLA-BORREGAARD, A-Shares 70 000 0.01 3 980OSLO BØRS VPS HOLDING ASA 550 505 1.28 31 379PARETO GROWTH AS 43 780 1.93 5 691PHOTOCuRE, A-Shares 50 000 0.23 2 255PINOVO AS 25 000 7.73 3 200REC 80 000 0.01 3 580RIEBER & SØN, A-Shares 450 000 0.57 18 450SARSIA DEVELOPMENT AS 1 287 12.87 6 000SARSIA INNOVATION AS 12 200 4.23 2 318SARSIA LIFE SCIENCE FuND B-Shares 3 649 637 1.01 2 774SEAGARDEN ASA 400 000 8.45 4 000STATOIL ASA 40 000 0.00 5 792STOREBRAND, A-Shares 140 000 0.03 5 538TANDBERG ASA, A-Shares 20 000 0.02 3 400TELENOR ASA 80 000 0.00 6 484TIDE ASA, A-Shares 2 173 950 9.64 60 871VEKSTFONDET AS - Total NOK 5 million 21 916 1.88 1 753VESTKANTEN AS 3 112 1.22 3 112VOSS VEKSEL- OG LANDMANDSBANK, A-Shares 9 499 10.00 21 981WEYLAND AS 41 589 10.89 4 000Other Norwegian companies 47 570

462 210Foreign companiesVISA INC A-Shares 5 711 0.00 2 886VISA INC C-Shares 13 325 0.00 6 734HITECVISION PRIV. EQ. IV L.P. 1 122 328 0.40 5 833ROYAL CARIBBEAN CRuISE LTD, A-Shares 20 000 0.02 2 948ACERGY SA 20 000 0.01 1 833

20 235Shares in unit trustsHOLBERG NORDEN 38 624 0.26 7 152HOLBERG NORGE 186 217 1.84 58 558FONDSFINANS SPAR 12 012 9.13 55 485

121 195Total investments in shares, units and funds 603 639


Note 17 Commercial papers and bonds recognised at fair value through profit or loss

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-080 0 Trading portfolio 0 0

12 760 21 067 Recognised at fair value 11 808 8 56512 760 21 067 11 808 8 565

934 1 369 of which foreign 1 369 934

GROuP

31/12-08Average interest rate Acquisition cost 31/12-09Listed1) 2.11% 6 142 6 171 2 621unlisted 2.38% 5 536 5 602 5 897

11 773 8 518

Accrued interest 35 47Commercial papers and bonds 11 808 8 565

The Sparebanken Vest Group’s investments in commercial papers and bonds amount to approx. NOK 11.8 billion. Of this amount, about 46.5% is invested in public sector issues (state, county and municipal). A further 43.9% is invested in securities issued by financial institutions. The remaining approx. 9.6% is invested in securities issued by publicly owned enterprises or industrial enterprises.

PARENT BANK

Average interest rate Acquisition cost 31/12-09 31/12-08Listed1) 2.28% 15 315 15 411 6 815unlisted 2.38% 5 536 5 602 5 897

21 013 12 712

Accrued interest 54 48Commercial papers and bonds 21 067 12 760

Sparebanken Vest's investments in commercial papers and bonds amount to approx. NOK 21.1 billion. Of this amount, about 26.1% is invested in public sector issues (state, county and municipal). A further 68.5 % is invested in securities issued by financial institutions. The remaining approx. 5.4% is invested in securities issued by publicly owned enterprises or industrial enterprises.

The average interest rate is calculated by identifying the discount rate that results in a calculated value equal to the market value.

1) Including subordinated loans of NOK 7.6 (9.7) million.


Note 18 Shares in group companies and associated companies

Book value in sub-group Book value in parent bank

Group companies (book value in parent bank) No of shares Holding (%) 31/12-09 31/12-08 31/12-09 31/12-08Sparebanken Vest Boligkreditt AS 450 000 100 450 450AS Filialbygg 9 000 100 18 2 Jonsvollskvartalet AS 100 100 107 107 Filialbygg Dale AS 1 100 1 Filialbygg Kaigaten AS 1 100 6 3 Filialbygg Lonevåg AS 1 100 1 Filialbygg Nedre Korskirkealmenning AS 1 100 21 1 Filialbygg Nordfjordeid AS 1 100 1 Filialbygg Norheimsund AS 1 100 2 Filialbygg Sogndal AS 1 100 2 1 Filialbygg Stord AS 1 100 3 1 Filialbygg Sauda AS 1 100Eiendomsmegler Vest AS 1 200 100 53 53 Ottesen & Dreyer AS 1 680 80 6 5 Kyte Næringsmegling AS 1 200 80 6 5Vestlandskonferansen AS 100 100Total group companies in parent bank 521 510

Associated companies (book value in parent bank) No of shares Holding (%) 31/12-09 31/12-08Frende Holding AS 1 899 604 44.70 206 138Norne Eierselskap AS 14 700 000 49.00 44 22Verd Boligkreditt AS 20 000 40.00 20 0Total shares in associated companies 270 160

31/12-09 31/12-08Associated companies (book value in group )

Frende Holding AS

Norne Eierselskap AS

Verd Boligkreditt AS Total

Frende Holding AS

Norne Eierselskap AS Total

Book value at start of period 101 20 121 151 0 151Addition 1 0 20 21 0 22 22Capital increase 64 22 86 0 0 0Equity adjustment entered directly against equity (1) 0 (1) 0 0 0Disposal through reduction of holding 0 0 0 (15) 0 (15)Share of profit/loss (35) (6) (1) (42) (35) (2) (37)Book value at end of period 130 36 19 185 101 20 121

Excess values at end of period 0 0 0 0 0 0 0

Frende Holding AS is a holding company which owns 100% of the shares in Frende Livsforsikring AS and Frende Skadeforsikring AS. The company was formed in June 2007. In 2009, Sparebanken Vest took over shares belonging to Sauda Sparebank, increasing its holding from 44.3% to 44.7% In 2008, Sparebanken Vest formed the securities company Norne Securities AS in cooperation with the State Finance Fund and 13 independent savings banks. The securities company was established through the holding company Norne Eierselskap AS, of which Sparebanken Vest owns 49%. Norne Eierselskap AS owns 85.6% of Norne Securities AS, while the State Finance Fund owns 14.4%. Verd Boligkreditt AS was formed in 2009 as a collaboration between Sparebanken Vest and eight independent savings banks with the object of financing housing loans by issuing covered bonds. The company is managed by Sparebanken Vest. The bank will not transfer its own loan portfolios to Verd Bolligkreditt AS. At the time of formation, Sparebanken Vest owned 40%. The remaining 60% is owned by the other eight savings banks in proportion to their total assets.


Note 19 Intangible assets

PARENT BANK GROuP

Software and

licences

Excess value, customer portfolio Goodwill Total

Software and

licences

Excess value customer portfolio Goodwill Total

At 31 December 200787 140 82 309 Acquisition cost 87 140 98 32554 8 62 Accumulated depreciation 54 8 6233 132 82 247 Book value at 31 December 2007 33 132 98 263

Financial year 200833 132 82 247 Book value at 1 January 2008 33 132 98 26339 0 0 39 Year's additions 42 0 4223 11 0 34 Year's depreciation 24 11 35

0 0 0 0 Write-down of goodwill 4 449 121 82 252 Book value at 31 December 2008 51 121 94 266

At 31 December 2008126 140 82 348 Acquisition cost 129 140 98 367

77 19 0 96 Accumulated depreciation 78 19 0 970 0 0 0 Year's write-downs 4 4

49 121 82 252 Book value at 31 December 2008 51 121 94 266

Financial year 200949 121 82 252 Book value at 1 January 2009 51 121 94 26638 27 27 92 Year's additions 39 27 29 9529 12 0 41 Year's depreciation 30 13 0 4358 136 109 303 Book value at 31 December 2009 60 135 123 318

At 31 December 2009164 167 109 440 Acquisition cost 168 167 123 458106 31 0 137 Accumulated depreciation 108 32 0 14058 136 109 303 Book value at 31 December 2009 60 135 123 318

Software/licences are depreciated on a straight line basis over their expected useful life, which is estimated to be three years.

Excess value in the customer portfolio is depreciated over the remaining contract period, which is estimated to be 12 years.


Note 19 Intangible assets (contd.)

GoodwillThe individual goodwill items in the balance sheet of the Sparebanken Vest parent bank and group are allocated to cash flow generating units that benefit from the purchased asset. The choice of assessment unit is made on the basis of whether it is possible to identify and separate cash flows relating to the activity in question. The table below shows the different assessment units and the book value of goodwill in each unit.

PARENT BANK GROuP

31/12-08 31/12-09 Assessment unit Grounds for the choice of assessment unit 31/12-09 31/12-08

82 82Retail and corporate market, Region Sogn og Fjordane

Goodwill from the takeover of Fokus Bank in Sogn og Fjordane is included in the total activity of Region Sogn og Fjordane. 82 82

0 27 Retail and corporate market, Sauda

Goodwill from the takeover of Sauda Sparebank in 2009. The business was taken over on 1 November 2009, and is a separate assessment unit as of 31 December 2009. 27 0

0 0 Kyte Næringsmegling AS

Kyte Næringsmegling AS has continued as a separate subsidiary of the Eiendo-msmegler Vest group, and it is a natural assessment unit. 8 7

0 0 Ottesen & Dreyer AS

Ottesen & DreyerAS has continued as a separate subsidiary of the Eiendoms-megler Vest group, and it is a natural assessment unit . 6 5

82 109 Total goodwill 123 94

Testing of values The write-down test of capitalised goodwill is arrived at by discounting expected future cash flows from the assessment units. Cash flows are based on historical results from each assessment unit. The discount factor is based on an assessment of what the required rate of return is in the market for the type of activity that is included in the assessment unit. The required rate of return reflects the risk attached to the activity. The write-down tests are performed on the cash flows after tax. The tests have not uncovered a need to write down goodwill in the parent bank or group at 31 December 2009.

Key write-down test assumptionsAssessment unit Required rate of return after taxRetail and corporate market, Region Sogn og Fjordane 10.00%Retail and corporate market, Sauda 10.00%Kyte Næringsmegling AS 15.00%Ottesen & Dreyer AS 15.00%


Note 20 Tangible fixed assets

PARENT BANK GROuP

Machinery, FFE and means of transport

Land and buildings Total

Machinery, FFE and means of transport

Land and buildings Total

At 31 December 2007431 7 438 Acquisition cost 444 437 881325 0 325 Accumulated depreciation 333 87 420106 7 113 Book value at 31 December 2007 111 350 461

Financial year 2008106 7 113 Book value at 31 December 2007 111 350 461

39 0 39 Year's additions 46 6 520 0 0 Year's disposals 0 0 1

35 0 35 Year's depreciation 37 10 47110 7 117 Book value at 31 December 2008 120 346 466


Financial year 2009110 7 117 Book value at 1 January 2009 120 346 466

27 8 35 Year's additions 33 22 557 0 7 Year's disposals 7 0 7

32 0 32 Year's depreciation 35 10 4598 15 113 Book value at 31 December 2009 111 358 469


10-33% 0-10% Percentage rate for accounting depreciation 10-33% 0-10%


Note 21 Debt to credit institutions

Debts to credit institutions are classified as valued at amortised cost or recognised at fair value.

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-081 641 857 No agreed term 857 1 6419 317 12 935 With agreed term 1) 12 502 9 317

10 958 13 792 Valued at amortised cost 13 359 10 958

1 182 1 224 With agreed term 1 224 1 1821 182 1 224 Recognised at fair value 1 224 1 182

12 140 15 016 Debt to credit institutions 14 583 12 140

31/12-08 1/1 - 31/12-09 31/12-09

Recognised at fair value Balanseverdi Tilgang/avgang VerdiendringBalanse-

verdi Cost value of debt in NOK 1 000 1 000Value adjustment, interest 10 (4) 6Value adjustment, credit spread (9) 18 9

1 001 14 1 015

Cost value of debt in CuRRENCY 165 165Change in exchange rate 32 (30) 2Value adjustment, interest 12 (5) 7Value adjustment, credit spread (33) 20 (13)

176 (15) 161

Accrued interest 5 44 49Recognised at fair value 1 182 1 224

Nominal value NOK NOK 1 000 1 000Nominal value in CuRRENCY EuR 20 20

The net gain/(loss) on debt recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (note 5).

1) Including repurchase agreement (scheme whereby government securities are swapped for covered bonds) with a book value of NOK 7.288 million. Repurchase agreements (Repo) involve a transfer of assets whereby the bank retains the risk and the return, and therefore does not meet the requirements for derecognition. The transferred asset is recognised in its entirety with a counter entry for a financial commitment for the consideration received.


Note 22 Deposits

Customer deposits are classified as valued at amortised cost or recognised at fair value.

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-0837 963 44 216 Valued at amortised cost 44 128 37 487

3 034 753 Recognised at fair value 753 3 03440 997 44 969 Total deposits 44 881 40 521

31/12-08 1/1 - 31/12-09 31/12-09

Recognised at fair valueBook value

Additions/disposals

Change in value

Book value

Fixed-interest deposits 880 (736) 144Value adjustment, interest 13 (13) 0

893 144

Indexed deposits 1) 1 899 (1 372) 527Value adjustment, interest 226 (145) 81

2 125 608

Accrued interest 16 (15) 1Recognised at fair value 3 034 753

Nominal fixed-interest deposits NOK 880 144Nominal indexed deposits NOK 2 191 623

The net gain/(loss) on deposits recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (note 5).

1) These are savings products comprising a deposit element and a derivative element, and where the return to the customer depends on the development of defined market variables. Each element of the product is treated separately for accounting purposes.


Note 22 Deposits (contd.)

Breakdown of deposits from and debt to customers

PARENT BANK GROuP

31/12-08 31/12-09 31/12-09 31/12-08NOK % NOK % Breakdown by sector NOK % NOK %

993 2.42 982 2.18 Primary industries 982 2.19 993 2.45810 1.98 1 265 2.81 Manufacturing and mining 1 265 2.82 810 2.00

1 506 3.67 1 565 3.48 Building and construction, power and water supply 1 565 3.49 1 506 3.721 333 3.25 1 340 2.98 Commerce, hotels and restaurants 1 340 2.99 1 333 3.291 079 2.63 668 1.49 International shipping and pipeline transport 668 1.49 1 079 2.66

486 1.19 1 056 2.35 Transport, post and telecommunications 1 056 2.35 486 1.201 713 4.18 2 163 4.81 Property management 2 073 4.62 1 713 4.231 398 3.41 0 0.00 Insurance and finance 0 0.00 1 398 3.454 531 11.05 8 132 18.08 Services 8 132 18.12 4 055 10.011 364 3.33 1 343 2.99 Municipal/public sector 1 343 2.99 1 364 3.37

387 0.94 334 0.74 Abroad 334 0.74 387 0.9615 600 38.05 18 849 41.92 Total - business and industry 18 759 41.80 15 124 37.3225 397 61.95 26 120 58.08 Retail customers 26 122 58.20 25 397 62.6840 997 100.00 44 969 100.00 Total corporate and retail customers 44 881 100.00 40 521 100.00

Geographic breakdown32 831 80.08 34 113 75.86 Hordaland 34 025 75.81 32 355 79.85

4 534 11.06 4 752 10.57 Sogn og Fjordane 4 752 10.59 4 534 11.19930 2.27 2 542 5.65 Rogaland 2 542 5.66 930 2.30

2 315 5.65 3 228 7.18 Rest of Norway 3 228 7.19 2 315 5.7140 610 99.06 44 635 99.26 Total Norway 44 547 99.26 40 134 99.04

387 0.94 334 0.74 Abroad 334 0.74 387 0.9640 997 100.00 44 969 100.00 Total geographical breakdown 44 881 100.00 40 521 100.00

under the Act on guarantee schemes for banks and public administration etc. of financial institutions, all savings banks are required to be members of the Savings Banks’ Guarantee Fund. The Fund guarantees to cover losses incurred by a depositor on deposits with a member institution for an amount not exceeding NOK 2 million. of the depositor’s total deposits. By deposit is meant any credit balance with the bank in an account regis-tered by name, as well as commitments under certificates of deposit registered by name. The fee payable to the Savings Banks’ Guarantee Fund is determined in accordance with the provisions of the Guarantee Schemes Act.


Note 23 Securitised debt

Securitised debt is classified as being valued at amortised cost or recognised at fair value.

GROuP31/12-09 31/12-08

Valued at amortised cost Nominal value Book value Book valueNOK 11 897 11 887 10 336EuR 1 065 8 862 10 758

Total valued at amortised cost 20 749 21 094

Recognised at fair valueCommercial papers and bonds NOK 8 485 8 474 12 564Value adjustment, interest 156 292Value adjustment, credit spread - opening balance (193) (8)Value adjustment, credit spread - this period 255 (185)Total - recognised at fair value 8 692 12 663

Accrued interest 291 492Securitised debt 29 732 34 249

Change in securities debtBook value

31/12-08Issued

2009

Matured/ redeemed

2009

Change in exchange rate 2009

Other changes 2009

Book value 31/12-09

Commercial papers, nominal value 2 764 0 (2 764) 0Bonds, nominal value 30 919 3 952 (3 976) (1 651) 29 244Value adjustments 565 (77) 488Total securities 34 249 3 952 (6 740) (1 651) (77) 29 732

The net gain/(loss) on securitised debt established through the issue of securities recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (note 5).


Note 23 Securitised debt (contd.)

Valued at amortised cost Recognised at fair value

Maturity date securities debt: NOK Currency NOK Currency Total2010 4 040 832 2 400 7 2722011 2 070 4 036 2 100 8 2062012 2 442 2 704 550 5 6962013 2 000 832 2 000 4 8322014 955 458 1 435 2 8482015 390 0 0 390Total securities 29 244

PARENT BANK

31/12-09 31/12-08Valued at amortised cost Nominal value Book value Book value

NOK 10 570 10 557 10 036EuR 1 065 8 862 10 758

Total valued at amortised cost 19 419 20 794Total valued at fair value 8 692 12 663Accrued interest 291 492Securitised debt 28 402 33 949

Note 24 Pension commitments

Pursuant to the Act relating to mandatory occupational pensions, Sparebanken Vest is required to have an occupational pension scheme, and the group’s pension scheme meets the requirements of the Act. The pension scheme includes the following:

1. A company pension scheme with a life insurance company. The full retirement pension corresponds to almost 70% of final salary based on the present National Insurance basic amount (G) limited to maximum 12G. The scheme covers 983 (parent bank 929) persons, 280 of whom (parent bank 279) receive pensions under the scheme. Disability pension is covered by the scheme. Coverage of spouse’s pension and children’s pension was discontinued with effect from 1 January 2008. until 30 April 2007, the scheme covered all employees. The defined-benefit scheme was closed to new members in 2007, with voluntary transition to a defined-contribution scheme.

2. A defined-contribution scheme covering 216 (parent bank185) employees. All persons employed after 1 May 2007 are covered by

the defined-contribution scheme.

3. The collective early retirement (AFP) scheme with supplementary benefits from 62 to 67 years. Pensions are currently being paid to 103 (parent bank 102) persons under the scheme. The scheme is unsecured and is covered through operations.

4. A scheme for executive personnel covering 15 (parent bank 13) employees, with the option of a retirement pension from the age of 65 (64 for two employees). The Managing Director is entitled to, and at the request of the board is obliged to take early retirement at the age of 60.

The pension benefits correspond to 70% up to the age of 67. After that employees who can retire at 64 will become members of the collective scheme. The Managing Director and employees with a retirement age of 65 have an additional agreement that ensures 66% of pay in excess of 12 times the National Insurance basic amount from the age of 67. under other early retirement schemes than AFP, employees are withdrawn from the company pension scheme but will be compensated from the ordinary retirement age for the reduction in pension entitlements. The scheme for executive personnel is unsecured and is covered through operations.


Note 24 Pension commitments (contd. I)

Financial assumptions used to calculate pension expenses and commitments

Expenses

CommitmentsPercentage 2009 2008 31/12-09 31/12-08Discount rate 3.80 4.70 4.50 3.80Expected return on pension assets 5.80 5.75 5.00 5.80Annual wage growth 4.00 4.50 4.50 4.00Annual pension adjustment 3.75 3.38 4.25 3.75Adjustment of National Insurance basic amount (G) 3.25 4.25 3.38 3.25Voluntary termination (over/under 40 years) 0-8.00 0-8.00 0-8.00 0-8.00Tendency to take early retirement under AFP scheme 50.00 50.00 50.00 50.00

Investment of pension assetsPercentage 2009 2008Bonds 56 61Shares 9 6Money market etc. 18 16Real property 17 17

The value-adjusted return on pension assets at 30 September 2009 was 3.5%. The value-adjusted return for 2008 was 0.3%.

GROuP2009 2008

Pension expenses Secured unsecured Total Secured unsecured TotalYear's pension earnings 40 14 54 33 11 44Interest expense on pension commitments 39 7 47 40 8 48Expected return on pension assets (38) 0 (38) (37) 0 (37)Administration expenses 4 0 4 5 0 5Plan change recognised through profit or loss 1) 0 5 5 (39) 5 (34)Estimate variances plan change recognised through profit or loss 1)

0

0

0

16

0

16

Other estimate variances recognised through profit or loss 27 11 37 17 8 25Net pension expense 72 36 109 35 32 67Employer's National Insurance contributions 6 3 9 5 3 8Pension expense recognised through profit or loss *) 78 39 118 40 35 75Premiums paid to the defined-contribution scheme. 5 4

*) Total included in payroll expenses (note 6)

31/12-09 31/12-08Pension commitment Secured unsecured Total Secured unsecured TotalPresent value of earned pension commitment 1 054 187 1 241 1 043 202 1 245Fair value of pension assets (698) 0 (698) (670) 0 (670)Net pension commitment 356 187 543 373 202 575Employer's National Insurance contributions 50 26 76 53 28 81Estimate variances not recognised through profit or loss (357) (74) (430) (410) (102) (512)Capitalised pension commitment 49 139 189 16 128 144


Note 24 Pension commitments (contd. II)

Change in the pension commitment during the year 2009 2008Pension commitment at 1 Jan. 1 245 1 091Year's pension earnings 54 44Interest expense on pension commitments 47 48Plan change1) 4 (54)Estimate variances (80) 147Other changes in the balance sheet 0 5Acquisition of enterprise 14 0Pension payments (44) (36)Pension commitment at 31 Dec. 1 241 1 245

Change in pension assets during the year Pension assets (market value) at 1 Jan. 670 619Return on pension assets 38 37Plan change 1) 0 (24)Estimate variances (38) (23)Premiums paid/ paid to premium fund 42 78Administration expenses (4) (4)Acquisition of enterprise 9 0Pension payments (20) (13)Pension assets (market value) at 31 Dec. 698 670

1) Coverage of spouse’s pension and children’s pension under the collective occupational pension scheme was discontinued with effect from 1 January 2008. The net effect of the plan change, taking into account the reduction in estimate variances not recognised through profit or loss, amounted to NOK 22 million for the group. The plan change has been taken to income in the income statement for 2008.

2) Gross pension commitments include employer’s National Insurance contributions.

PARENT BANK

2009 2008Pension expenses Secured unsecured Total Secured unsecured TotalYear's pension earnings 37 13 50 31 10 41Interest expense on pension commitments 38 7 45 38 8 46Expected return on pension assets (37) 0 (37) (35) (35)Administration expenses 4 0 4 4 4Plan change recognised through profit or loss 1) 0 5 5 (36) 5 (31)Recognised estimate variances, plan change1) 0 0 0 15 0 15Other estimate variances recognised through profit or loss 26 10 36 16 7 23Net pension expense 68 35 103 33 30 63Employer's National Insurance contributions 5 3 8 5 3 8Pension expense recognised through profit or loss *) 73 37 111 38 33 71Premiums paid to the defined-contribution scheme. 5 3 *) Total included in payroll expenses (note 6)

Historical development 31/12-09 31/12-08 31/12-07 31/12-06 31/12-05Gross pension commitments 2) 1 317 1 326 1 158 1 273 935Gross pension assets (698) (670) (619) (559) (507)Estimate variances not recognised through profit or loss (430) (512) (353) (484) (205)Net capitalised pension commitments 189 144 186 230 223


Note 24 Pension commitments (contd. III)

31/12-09 31/12-08Pension commitment Secured unsecured Total Secured unsecured TotalPresent value of earned pension commitment 1 020 179 1 200 1 007 194 1 201Fair value of pension assets (675) 0 (675) (648) 0 (648)Net pension commitment 345 179 525 359 194 553Employer's National Insurance contributions 49 25 74 51 27 78Estimate variances not recognised through profit or loss (346) (71) (417) (392) (102) (494)Capitalised pension commitment 48 133 182 18 119 137

Change in year's pension commitment 2009 2008Pension commitment at 1 Jan. 1 201 1 056Year's pension earnings 50 41Interest expense on pension commitments 45 46Plan change 1) 4 (50)Estimate variances (72) 139Other changes in the balance sheet 0 5Acquisition of enterprise 14 0Pension payments (42) (36)Pension commitment at 31 Dec. 1 200 1 201

Change in year's pension assets 2009 2008Pension assets (market value) at 1 Jan. 648 598Return on pension assets 37 35Plan change 1) 0 (22)Estimate variances (37) (22)Premiums paid/ paid to premium fund 40 75Administration expenses (3) (4)Acquisition of enterprise 9 0Pension payments (20) (12)Pension assets (market value) at 31 Dec. 675 648

1) Coverage of spouse’s pension and children’s pension under the collective occupational pension scheme was discontinued with effect from 1 January 2008. The net effect of the plan change, taking into account the reduction in estimate variances not recognised through profit or loss amounted to NOK 22 million for the group. The plan change has been taken to income in the income statement for 2008.

2) Gross pension commitments including employer’s National Insurance contributions.

Historical development 31/12-09 31/12-08 31/12-07 31/12-06 31/12-05Gross premium commitments 2) 1 274 1 279 1 121 1 235 903Gross pension assets (675) (648) (598) (542) (498)Estimate variances not recognised through profit or loss (417) (494) (343) (468) (193)Net capitalised pension commitments 182 137 180 226 212


Note 25 Subordinated loan capital and subordinated bond loans

Book valueIssue year Nominal value Interest Redemption right 31/12-09 31/12-08Ordinary subordinated loans2007 Subordinated loans EuR 85 mill 3-mth EuRIBOR + 0.375% Call option 12/7-12 706 848Subordinated bond loans* 2004

Subordinated bond loans 1)

uSD 60 mill

Fixed interest 7.30%

Call option 30/4-14

384

589

2009Subordinated bond loans NOK 960 mill

6-mth synthetic Treasury note interest rate + 5.5% points

“Call option with 30 days notice” 972

Subordinated loan capital 2 062 1 437

Subordinated bonds are included in their entirety in the bank’s core capitalAccumulated 31/12-08 1/1 - 31/12-09 31/12-09

Valued at amortised costOriginal book

value NOKChange in

exchange rate Change in value

Change in exchange rate

Change in value Book value

Subordinated loan EuR 85 million 677 160 (131) 706Subordinated bond loan 960 960Amortised interest and charges 12

1 678

Recognised at fair value Subordinated bond loan, nominal value uSD 60 mill. 429 (9) (74) 346Accrued interest 4Value adjustment 155 (126) 29Value adjustment, credit spread 9 (4) 5

384

Total 2 066 151 164 (205) 130 2 062

Effective rate of interest for the subordinated loan recognised at fair value in 2009: 6.64% (2008: 4.79 %)

The net gain/(loss) on subordinated loan capital recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (note 5).

1) The interest rate on the loan is fixed until 2034, after which a floating rate of interest will apply.


Note 26 Capital adequacy

Banking operations entail risk in many areas. Good risk and capital management is a key strategic element in Sparebanken Vest’s value creation process. The goal of Sparebanken Vest’s Board of Directors is for the bank to have a moderate risk profile. The bank’s ability to balance its ambitions against its ability and willingness to take risk will have both quantative and qualitative effects. A strong risk culture is characteristic of an organisation with a high focus on risk and profitability. This will strengthen the bank’s rating and ensure good access to the capital market. Risk-adjusted capital is used to express the bank’s risk measurement and risk tolerance.

Although expected losses are taken into account in its pricing, Sparebanken Vest must have capital reserves to cover unexpected losses. Risk-adjusted capital is calculated for all risk areas. This capital shall correspond to the capital required to engage in banking operations. The risk-adjusted capital and the statutory minimum requirement shall be seen in conjunction with the bank’s actual equity.

The bank’s processes relating to capital assessment are based on quantification of the capital requirement for the individual risk areas. Stress tests are carried out in order to simulate the effects of situations that are unlikely to arise, but which could result in large unexpected losses. The quantitave analyses are also supplemented by qualitative assessments.

At the start of 2007, the Financial Supervisory Authority of Norway gave Sparebanken Vest approval to use basic IRB methods. The approval was subject to certain conditions, all of which were met by Sparebanken Vest in 2009. Status as an IRB bank entails follow-up activities that are part of the Authority’s supervision of the bank. For regulatory capital purposes, there are transitional regulations for the calculation of capital until 2010.

All of the bank’s customers who are covered by the IRB system are scored in the bank’s internal score models. The bank also calculates values for Loss Given Default (LGD) for retail market customers and small corporate clients. For corporate clients, LGD rates set out in the capital adequacy regulations are used. No external rating is used by the bank, and nor does it have self-determined risk parameters beyond those that are used to set the basis for calculation of and the amount of expected losses. Any values used for commitment security are taken into account when calculating LGD and in the scoring of retail market customers. The framework and processes used by the bank to manage and control the IRB system follow from its credit strategy, policy and procedures. Sparebanken Vest has also drawn up a validation mandate to ensure verification of model tools (PD, LGD,EAD) and their application. An annual validation report is drawn up for the Board of Directors.

The bank classifies all commitments covered by the IRB system every month. Quantification of the risk parameters takes place in the same operation, and they are also updated each month. In the retail market, the commitment security values are adjusted annually or when a new commitment starts. In the corporate market, the updating of commitment security values is part of the procedure for monitoring commitments. The bank applies the definition of default used in the capital adequacy regulations, which is when an account has been overdrawn for 90 days or more or for amounts of NOK 500 or more. Default can also be deemed to exist based on an ‘unlikely to pay’ criterion, such as insolvency, where information to this effect is received.

Validation is carried out annually for PD, EAD and LGD. The bank has outcome data for seven years.

Definitions:

EAD (exposure at default): risk parameter representing the commitment amount on default.

LGD (loss given default): risk parameter representing a commitment’s loss percentage on default.

PD (probability of default): risk parameter representing the likelihood of default within a period of one year.


Note 26 Capital adequacy (contd. I)

PARENT BANK GROuP Calculation basisCalculation basis

31/12-08 31/12-09 (NOK 1.000) 31/12-09 31/12-08Credit risk

0 0 Sovereign states 0 01 922 766 Central banks 766 1 922

707 734 528 539 Regional/local authorities 528 539 707 7342 904 795 4 097 224 Institutions 1 268 660 1 324 266

501 022 1 672 535 Other commitments 2 046 293 766 373558 702 460 156 Off-balance sheet items/ non-trading items 260 156 558 702

4 674 175 6 759 220 Total exceptional commitments pursuant to IRB 4 104 414 3 358 997LGD LGD

16 341 982 18 366 875 41.58 % Company, no specialised lending 41.58 % 18 366 875 16 341 9825 376 577 7 125 241 45.00 % Company, specialised lending 45.00 % 7 125 241 53 7657 406 026 7 462 900 13.94 % Mass market, real property 13.94 % 8 388 103 7 406 0262 191 217 2 150 394 71.25 % Mass market, other 71.25 % 2 150 394 2 191 217

279 989 262 049 19.87 % Mass market, SME 19.76 % 273 038 279 98931 595 791 35 367 459 Total IRB method 36 303 651 31 595 791

0 Real property/SME 0 2 853 011Standard method 0 2 853 011

1 172 410 1 502 718 unlisted low-risk/ well diversified portfolios 0 262 6291 849 171 2 008 012 Other equity positions 2 008 012 1 769 988

3 021 581 3 510 730 Total equity positions/ simple risk weight method 2 008 012 2 032 61739 291 547 45 637 409 Total credit risk 42 416 077 39 840 416

Market risk316 357 578 963 Position risk, debt instruments 578 963 316 357

76 439 259 850 Position risk, equity instruments 259 850 76 439118 225 16 413 Currency risk 16 413 118 225511 021 855 226 Total market risk 855 226 511 021

Operational risk581 137 639 312 Proprietary trading and brokerage 766 088 800 916714 075 879 775 Banking services for corporate clients (Corporate Market) 879 775 714 075

1 487 181 1 551 150Banking services for mass market customers (Retail Market) 1 551 150 1 487 181

2 782 393 3 070 237 Total operational risk 3 197 013 3 002 172

(29 592) Deduction from calculation basis (29 592)

42 584 961 49 533 280 Calculation basis Basel II 46 438 724 43 353 609

8 % 3 406 797 3 962 662 8 % Capital adequacy requirement Basel II 8 % 3 715 098 3 468 289 8%713 908 0 Correction to transitional scheme 435 550 820 680

4 120 705 3 962 662Capital adequacy requirement under transitional scheme 4 150 648 4 288 969


Note 26 Capital adequacy (contd. II)

PARENT BANK Calculation basis

GROuP Calculation basis

31/12-08 31/12-09 (NOK 1.000) 31/12-09 31/12-08Capital adequacy/ Net core capital

1 176 536 2 012 850 Subordinated loan capital 2 012 850 1 176 5364 334 249 4 948 928 Equity 4 885 427 4 331 165

(652 628) (631 170) Deduction (787 525) (649 585)4 858 157 9.43% 6 330 608 12.78% Net subordinated capital 6 110 752 11.78% 4 858 116 9.06%

4 152 651 8.06% 5 704 555 11.52% Net core capital 5 469 485 10.54% 4 144 047 7.73%4 064 782 4 550 517 Reserves 4 487 016 4 059 700

269 467 398 411 Primary capital certificates 398 411 271 465420 758 1 306 500 Subordinated bonds 1 306 500 420 758(602 356) (550 873) Deduction (722 442) (607 876)

705 506 1.37% 626 053 1.26% Net supplementary capital 641 267 1.24% 714 069 1.33%755 778 706 350 Subordinated loan capital 706 350 755 778(50 272) (80 297) Deduction (65 083) (41 709)

737 452 2 367 946 Calculated regulatory surplus, Basel I 1 960 104 569 147

On completion of the de-escalation period, the capital adequacy percentages based on current figures will be as follows:

4 858 157 11.41% 6 330 608 12.78% Net subordinated capital 6 110 752 13.16% 4 858 116 11.21%4 152 651 9.75% 5 704 555 11.52% Net core capital 5 469 485 11.78% 4 144 047 9.56%

705 506 1.66% 626 053 1.26% Net supplementary capital 641 267 1.38% 714 069 1.65%

1 451 360 2 367 946 Calculated regulatory surplus, Basel II 2 395 654 1 389 827


Note 27 Equity certificates

The equity certificate capital at 31 December 2009 consists of 3.984.108 equity certificates each with a nominal value of NOK 100.

Dividend and donationsAs a result of the amendment to the Act on financing activity and financing institutions, the regulations for the calculation of dividends on equity certificate capital and donations for the public benefit were changed with effect from 2009. Pursuant to the new regulations, the year’s dividend funds are divided between the equity certificate capital and primary capital, in proportion to the ratio between the equity certificate capital plus the premium reserve and the primary capital plus the compensation fund. The agreement with the State Finance Fund concerning the infusion of capital through subscription for subordinated bonds limits the distribution of dividend on equity certificate capital and donations for the public benefit. Pursuant to the agreement, the bank cannot decide or distribute dividend in excess of the lowest of: 1. 50% of the equity certificate capital’s share of the year’s dividend basis (the year’s profit adjusted for changes in the reserve for unrealised gains) 2. 50% of the equity certificate capital’s share of the year’s profit. 3. The average interest on subordinated bonds from the State Finance Fund for the financial year in question. Pursuant to the agreement, the bank cannot decide or distribute donations for the public benefit in excess of 10% of the part of the year’s profit assigned to primary capital.

Owner fractionFigures for Parent Bank (NOK 1.000) 31/12-09 31/12-08Equity certificates 398 411 266 589Own equity certificates (338) (3 934)Premium reserve 8 252 6 812Equalisation reserve 38 597 5 324Total equity certificate capital (A) 444 922 274 791

Primary capital 4 082 900 3 683 939Compensation fund 14 379 0Gift fund 175 000 175 000Total primary capital (B) 4 272 279 3 858 939

Reserve for unrealised gains 231 726 200 519Equity 4 948 927 4 334 249

Owner fraction (A /(A + B) 9.4% 6.7%Weighted owner fraction 7.1% 6.6%

Dividend per equity certificate 4.00 3.75

Total dividend on 2.665.887 equity certificates (NOK 1.000) 9 997Total dividend on 3.984.108 equity certificates (NOK 1.000) 1) 13 300

1) Equity certificates issued to Sparebankstiftelsen Sauda on the takeover of Sauda Sparebank have, by agreement, reduced entitlement to dividends in 2009. In total, this covers 1.318.221 equity certificates that receive a dividend of NOK 2 per certificate, corresponding to 50% of the ordinary dividend.

Own equity certificates Where the bank purchases its own equity certificates, the purchase price including direct costs is debited to equity. The nominal value of the bank’s own equity certificates is recognised as a negative amount on a separate line under equity certificate capital. Any purchase price in excess of the nominal value is deducted from primary capital. In connection with sales of own equity certificates where the consideration exceeds the acquisition cost, the payment in excess of the acquisition cost is credited to the premium reserve.

2009 2008The number of equity certificates at 1 January 39 342 33 450Equity certificates purchased 0 44 191Equity certificates sold 35 958 38 299

Number 3 384 39 342


Note 27 Equity certificates (contd. I)

Effective return per equity certificate2009 2008

Listed price at 31 December 102.00 86.50Dividend paid in year 3.75 19.00Listed price at 1 January 86.50 190.00Effective return in NOK 19.25 (84.50)Effective return as a percentage 22.25 (44.47)

The twenty biggest owners No of ECs Percentage of EC capital

Sparebankstiftelsen Sauda 1 318 221 33.09Frank Mohn AS 131 428 3.30Goldman Sachs & Co 1) 118 600 2.98Bergen Kommunale Pensjonskasse 100 000 2.51MP Pensjon 52 771 1.32Kaare Holmefjord AS 44 000 1.10Solvang ASA 39 400 0.99Aske Investering AS 35 050 0.88Per Gunnar Sælemyr 30 057 0.75Grunnfond invest AS 29 600 0.74Citibank N.A. 1) 28 700 0.72Forsvarets personellservice 27 200 0.68Terra utbytte 25 789 0.65DnB NOR, Luxembourg 23 150 0.58Aristar AS 22 914 0.58Flyfisk AS 21 000 0.53Jan H. Freuchen 20 150 0.51Albrecht Halvor Paul Eika 18 571 0.47Torbertra kapital AS 18 000 0.45Neumann invest AS 17 142 0.43Total 2 121 743 53.26

1) Nominee accounts


Breakdown by numberNo of ECs No of ECs Percentage No of owners Percentage

1 - 100 49 692 1.25 691 26.98 101 - 1 000 533 172 13.38 1 460 57.01

1001 - 5 000 706 552 17.73 329 12.85 5001 - 10 000 286 167 7.18 39 1.52

10001 - 3 984 108 2 408 525 60.45 42 1.64 Sum 3 984 108 100.00 2 561 100.00

Note 27 Equity certificates (contd. II)

Equity certificates owned by the Managing Director, executive personnel, members of the Board of Directors, members of the Supervisory Board and Control Committee, and persons closely related to the aforementioned, defined in section 7-26 of the Accounting Act and section 8-20 of the Supplementary Regulations to the Act.

No of ECsArne Buanes, member, Supervisory Board 22Trond Mohn, member, Supervisory Board 11 428Siri Birkeland, member, Supervisory Board 114Jan S. Aske, member, Supervisory Board 12 942Widar Slemdal Andersen, member, Supervisory Board 428Kjell Sævdal, member, Supervisory Board 300Bodil Digranes, member, Supervisory Board 314Inger Finne, member, Supervisory Board 400Lisbeth Ormevik, member, Supervisory Board 385Rune Pedersen, member, Supervisory Board 300Linda K. Nordeide, member, Supervisory Board 528Liv Erstad, member, Supervisory Board 125Morten Monsen, member, Supervisory Board 314Johnny Iden, member, Supervisory Board 600Karen Dahle, member, Supervisory Board 400Marianne Ringen, member, Supervisory Board 314Eivind Lunde, member, Supervisory Board 1 000Ove Ellingsen, member, Supervisory Board 500Trygve Bruvik, chair 1 600Arve Havnerås, member of the Board 485Tone Mattsson, member of the Board 200Stein Klakegg, Managing Director 1 457Jan Erik Kjerpeseth, Deputy Managing Director 642Henning Nordgulen, Director of Corporate Market 314Kate Henriksen, Director of Retail Market 100Pål Pedersen, Director of Legal 314Benedicte Schilbred Fasmer, Director of Capital Market 314Bjørn Carlsen, Director of Human Resources 100Frank Johannesen, Director of Risk Management 214Bernt R. Petersen, head of the internal audit department 885


Note 29 Liquidity risk/ Residual time to maturity

Liquidity risk is the risk of the bank being unable to service its debt as it falls due or being unable to fund increases in assets. The bank’s liquidity risk is assessed on the basis of an evaluation of the bank’s balance sheet structure, including the bank’s dependence on funding from sources other than its customers, and the extra costs involved in raising long-term funding from the capital market. Sparebanken Vest manages liquidity risk in accordance with a number of targets and parameters. The most central of these are structural liquidity (time without access to funding from the capital market), liquidity indicator (stable financing with maturity later than one year hence in relation to illiquid assets) and financing ratio (deposits in relation to loans).

Most of the bank’s long-term funding with final due date later than one year hence is related to agreements where the interest terms are tied to fixed short-term interest rates. This is done in order to reduce the interest rate risk involved in long-term borrowings.

In the following table, bond debt and deposits are included at nominal value and placed in the time band for final maturity. The earliest time band (0- 1 month) includes sight deposits, loan approvals and unused credit. Interest due later than one month hence is specified in order to distinguish between the loan principal and interest payments.

GROuP

Residual time to maturity at 31 Dec. 2009 0-1 month 1-3 months 3-12 months 1-5 yearsOver 5 years Total

Debt to credit institutions 2 740 0 2 070 9 503 166 14 479Interest payments 3 67 253 499 93 915

Customer deposits 43 921 22 580 358 0 44 881Interest payments 268 803 13 1 083

Securitised debt 795 1 750 4 727 21 582 390 29 244Interest payments 11 178 558 1 378 2 2 127

Loan approvals and unused credit facilities 7 670 7 670

Subordinated loan capital and subordinated bonds 2 012 2 012Interest payments 2) 12 2 65 420 6 666 7 165

Financial derivatives, gross settlement (outflows) 1) 5 823 4 312 1 456 1 480 506 13 577

Total payments 60 975 6 599 10 512 35 233 9 835 123 153

1) Financial derivatives, gross settlement (inflows) 5 738 4 006 1 585 2 060 878 14 267

2) Interest payments are included for subordinated bonds up to 2034 and 2099

Note 28 Guarantees and secured debt PARENT BANK GROuP

31/12-08 31/12-09 Guarantees Note 31/12-09 31/12-08Breakdown of guarantee types

861 522 Payment guarantees 522 861549 663 Contract guarantees 663 549

37 32 Loan guarantees 32 371 1 Guarantees for taxes 1 1

189 233 Other guarantee liabilities 203 1891 637 1 451 Total customer guarantees 11 1 421 1 637

0 82 Guarantee on behalf of Saving Banks' Guarantee Fund 82 01 637 1 533 Total guarantee liability 1 503 1 637

Secured debt

4 151 9 497Bonds and commercial papers - as security for overnight loans from Norges Bank - with a value of 9 497 4 151

4 151 9 497 Total secured debt 9 497 4 151


Note 29 Liquidity risk/ Residual time to maturity (contd.)

GROuP

Residual time to maturity at 31 Dec. 2008 0-1 month 1-3 months 3-12 months 1-5 yearsOver 5 years Total

Debt to credit institutions 4 251 3 624 489 3 521 197 12 082Interest payments 17 69 214 748 119 1 167

Customer deposits 36 789 987 1 820 782 182 40 560Interest payments 604 1 209 1 813

Securitised debt 450 2 314 3 426 25 737 1 758 33 685Interest payments 219 308 1 283 3 012 82 4 904

Loan approvals and unused credit facilities 7 238 7 238

Subordinated loan capital 1 259 1 259Interest payments 12 67 316 827 1 222

Financial derivatives, gross settlement (outflows) 1) 10 174 3 886 1 762 2 897 1 276 19 995

Total payments 59 150 11 792 10 270 37 013 5 700 123 925

1) Financial derivatives, gross settlement (inflows) 10 565 4 157 1 601 2 727 1 480 20 530

Note 30 Sensitivity analysis - market risk

Assumptions used to calculate market risk

Market risk arising from the bank’s activities is limited by using risk parameters set by the Board of Directors. There are separate limits for equity, interest, credit spread and currency positions, respectively. Risk is reported each quarter to the Board of Directors. Market risk parameters are stipulated at a level that limits the risk so that the bank’s basic operations are not affected. Market risk arises as a result of open positions in currency, interest and equity instruments. The risk is related to loss of earnings as a result of fluctuations in market prices and exchange rates.

The bank expresses market risk as risk-adjusted capital and with a confidence level of 99%, the capital shall cover all potential losses related to the market risk associated with the balance sheet date’s positions over a period of one year. The bank bases its calculations of the risk-adjusted capital requirement on historical volatility and adopted limits. The model has a one-year time horizon and the calculation does not take into account the correlation between the defined portfolios. No diversification effects are calculated between the types of risks. The total capital requirement related to market risk can be summed up as follows:

31/12-09 31/12-08Market risk 875 1.045*)

*) In 2009, the bank changed its method of calculating economic capital and has also established a parameter for credit spread exposure. In this note, the figures for 31 Dec. 2008 have been adjusted to incorporate the changes for the sake of comparison. Using the former method, the reported figure was NOK 601 million.


Note 31 Interest rate sensitivity

Interest rate sensitivity by period

Sparebanken Vest has holdings of bonds and commercial papers mainly for the purpose of meeting statutory requirements relating to liquidity reserves and deposits required as security for payment settlement and loans from Norges Bank. In managing its interest rate exposure, the bank takes account of the fact that different maturities can develop differently (yield curve shift). Bond loans at a fixed interest rate account for part of the bank’s funding in the bond market. In order to reduce the interest rate risk, the bank has entered into interest swap agreements. These interest swap agreements are recognised at fair value in the balance sheet in the consolidated accounts. In order to give a balanced picture of the consolidated balance sheet, bond borrowings at a fixed rate of interest are classified as being recognised at fair value. In connection with the lower market risk associated with indexed products, derivative agreements have been entered into with other financial institutions. The derivative agreements are recognised at fair value and the bank has therefore decided to classify the indexed products under the counter entry as recognised at fair value. The interest risk associated with the bank’s fixed-interest loans to customers is partly reduced through interest swap agreements. In order to give a balanced picture of the consolidated balance sheet, loans to customers are recognised at fair value. The table shows the potential losses in the event of a parallel increase of one percentage point for the bank’s overall positions.

GROuP 0-1 month 1-3 months 3 -12 months 1-5 yearsOver 5 years

Total

31 Dec. 2009NOK 2.8 4.4 17.5 (14.4) 12.8 23.1Foreign currency (1.7)31 Dec. 2008NOK (4.7) 22.8 (11.5) (13.8) 11.6 4.4Foreign currency (3.4)

PARENT BANK 0-1 month 1-3 months 3 -12 months 1-5 years

Over 5 years

Total

31 Dec. 2009NOK 3.9 2.5 17.5 (14.4) 12.8 22.3Foreign currency (1.7)31 Dec. 2008NOK (4.8) 20.1 (11.5) (13.9) 11.6 1.5Foreign currency (3.4)

Note 32 Currency positions

The figures show Sparebanken Vest’s net currency exposure at 31 December including financial derivatives as defined by Norges Bank. Net positions in each currency cannot exceed 2.5% of equity and the aggregate currency position cannot exceed 5% of the bank’s equity.

Currency uSD EuR GBP SEK DKK JPY OTHER AggregateNet currency exposure at 31 Dec. 2009 23 (13) 11 2 (3) 1 11 32Net currency exposure at 31 Dec. 2008 13 82 1 (5) 10 (2) 19 118


Note 33 Transactions with related parties

The information provided is in accordance with IAS 24 'Related Party Disclosures'.

Sparebanken Vest defines subsidiaries, associated companies, owners and exective personnel as related parties in relation to this accounting standard. Transactions with executive personnel and officers of the company are specified in note 6.An overview of owners is provided in note 27.Transactions with related parties are conducted on generally accepted business terms and in accordance with accepted business principles.

Total intragroup transactions (NOK 1.000) 2009 2008Income statementInterest and credit commission from related parties 290 358 77 497Interest paid on related parties' deposits 19 075 26 227Rent 91 714 87 558Management fee for transferred loans 14 076 1 063Commission income linked to the distribution of life and general insurance 25 846 6 978

Balance sheetLoans to subsidiaries at 31 Dec. 1 534 549 3 901 987Covered bonds 9 192 909 4 201 565Deposits from subsidiaries 522 559 476 673Group contributions receivable 105 246 16 250Liabilities linked to group contributions paid 15 374

In 2008, Sparebanken Vest formed Sparebanken Vest Boligkreditt AS. In the period up to 31 December 2009, NOK 11.890 (8.135) million in gross loans to customers have been transferred, of which NOK 10.500 (4.500) million was financed by issuing covered bonds and NOK,1.218 (3.622) million was financed through short-term credit. Of this amount, Sparebanken Vest owned bonds corresponding to NOK 9.173 (4.200) million. During the period, Sparebanken Vest received interest income on covered bonds amounting to NOK 203.5 (26.6) million and interest income under the credit framework amounting to NOK 66.0 (20.9) million. In the same period, Sparebanken Vest has paid interest on deposits to Sparebanken Vest Boligkreditt AS amounting to NOK 12.9 (11.7) million relating to the company's current account. Management fees totalling NOK 14.1 (1.1) million have been debited to Sparebanken Vest Boligkreditt AS.

Interest and credit commission received from other subsidiaries amounted to NOK 21 (30) million, while interest on other subsidiaries' deposits amounted to NOK 6.2 (14.5) million.

Note 34 Disputes

At 31 December 2009, Sparebanken Vest was not involved in any lawsuits or legal disputes of material financial significance to the group’s activities. At any given time, the bank is otherwise subject to various claims relating to its activities. Provision for bad debt has been made where it has been deemed necessary.


THE SuPERVISORY BoD OF SPAREBANKEN VEST

Control Committee’s Report for 2009

The Control Committee has carried out the controls considered necessary to comply with the guidelines and directives which the Committee is required to observe under the Savings Banks Act and in accordance with the instructions issued to the Control Committee.

The Committee has worked closely with the internal auditor, while maintaining contact with the external auditor. The Committee has had meetings with the chairman of the Supervisory BoD, the chairman of the BoD, the CEO and directors responsible for various areas of operations.

The Committee has not found the Bank’s activities to be in conflict with the provisions of the Savings Banks Act, the Financing Activity Act, the Securities Trading Act, the Bank’s Articles of Association, resolutions of the Supervisory BoD or other relevant provisions.

The Committee is of the view that the BoD’ assessment of the Bank’s financial position, as presented in the annual report, is adequate.

In the view of the Committee, the annual accounts have been prepared in accordance with the Savings Banks Act and regulations laid down by the Financial Supervisory Authority of Norway. The Committee recommends that the profit and loss account and the balance sheet for 2008, as submitted by the BoD, be approved by the Supervisory BoD as the accounts of Sparebanken Vest and the Group for 2008.

Bergen, 24th February 2010


Group key figures - 5 years

PROFIT DEVELOPMENT 2009 2008 2007 2006 2005

Interest income etc. 3 955 5 548 3 642 2 359 1 883Interest expenses etc. 2 502 4 240 2 516 1 317 911Net interest and credit commission income 1 453 1 308 1 126 1 042 972

Commission income and income from banking services 388 393 422 399 368Commission expenses and expenses relating to banking services 83 76 75 78 79Net banking services 305 317 347 321 289Income from ownership interests in associated companies (42) (37) (4) 0 0Net gain/(loss), financial instruments 77 (56) 212 187 102Other operating income 149 151 123 116 80Net other operating income 489 375 678 624 471Net operating income 1 942 1 683 1 804 1 666 1 443

Payroll and general administration expenses 945 844 767 739 708Depreciation 87 86 68 63 59Other operating expenses 140 138 138 119 108Total operating expenses 1 172 1 068 973 921 875Profit before write-downs and tax 770 615 831 745 568

Write-downs and losses on loans and guarantees 270 204 (34) (48) (75)Pre-tax profit 500 411 865 793 643

Tax 137 204 215 190 168Profit for the financial year 363 207 650 603 475

Majority share of the profit for the period 362 206 649 603 475Minority share of the profit for the period 1 1 1


Group key figures - 5 years (contd. I)

BALANCE SHEET DEVELOPMENT 31/12-09 31/12-08 31/12-07 31/12-06 31/12-05

Assets

Cash in and receivables from central banks 299 4 753 1 810 563 328Loans to and receivables from credit institutions 143 1 291 558 1 227 2 840Net lendings 82 302 76 235 64 683 53 451 46 672Shares at fair value through profit or loss 604 463 560 530 381Commercial papers and bonds 11 808 8 565 5 109 2 812 2 721Shares available for sale 112 67 67 67 62Financial derivatives 605 2 368 1 140 1 009 1 219Ownership interests in associated companies 185 121 151Deferred tax asset 74 0 81 112 48Other intangible assets 318 266 263 37 23Tangible fixed assets 469 466 461 318 336Prepaid expenses 28 26 11 47 25Customer funds - defined-contribution pension agreements 0 43 33Other assets 714 229 121 59 25Total assets 97 661 94 893 75 048 60 232 54 680

Liabilities and equity

Debt to credit institutions 14 583 12 140 2 781 1 219 1 097Deposits 44 881 40 521 37 611 31 119 27 390Securitised debt 29 732 34 249 27 142 21 060 19 862Financial derivatives 458 1 338 1 419 1 361 1 230Accrued expenses and pre-paid income 90 102 141 147 157Pension commitments 189 144 186 231 215Deferred tax 0 162Other provision for commitments 19 14 10 1 1Tax payable 407 15 189 264 223Subordinated loan capital 2 062 1 437 1 042 724 942Other liabilities 355 399 234 308 291Total liabilities 92 776 90 521 70 755 56 434 51 408

Equity certificates 398 267 250 250 250Own equity certificates 0 (4) (3) (3) (7)Premium reserve 10 9 4 4 4Equalisation reserve 39 6 6 9 2Total equity certificate capital 447 278 257 260 249

Primary capital 4 083 3 684 3 573 3 115 2 684Gift fund 175 175 175 150 100Compensation fund 14Total primary capital 4 272 3 859 3 748 3 265 2 784

Reserve for unrealised gains 105 60 60 60 58Other equity 60 174 227 213 181Minority interests 1 1 1

Total equity 4 885 4 372 4 293 3 798 3 272Total liabilities and equity 97 661 94 893 75 048 60 232 54 680

AVERAGE TOTAL ASSETS 92 017 81 572 66 706 56 253 50 500


Group key figures - 5 years (contd. II)

PROFIT AS PERCENTAGE OF AVERAGE TOTAL ASSETS 2009 2008 2007 2006 2005

Interest income etc. 4.30 6.80 5.46 4.19 3.73Interest expenses etc. 2.72 5.20 3.77 2.34 1.80Net interest and credit commission income 1.58 1.60 1.69 1.85 1.93

Commission income and income from banking services 0.42 0.48 0.63 0.71 0.73Commission expenses and expenses relating to banking services 0.09 0.09 0.11 0.14 0.16Net banking services 0.33 0.39 0.52 0.57 0.57Income from ownership interests in associated companies (0.05) (0.05) (0.01) 0.00 0.00Net gain/(loss), financial instruments 0.08 (0.07) 0.32 0.33 0.20Other operating income 0.16 0.19 0.18 0.21 0.16Net other operating income 0.53 0.46 1.02 1.11 0.93Net operating income 2.11 2.06 2.70 2.96 2.86

Payroll and general administration expenses 1.03 1.03 1.15 1.32 1.40Depreciation 0.09 0.11 0.10 0.11 0.12Other operating expenses 0.15 0.17 0.21 0.21 0.21Total operating expenses 1.27 1.31 1.46 1.64 1.73Profit before write-downs and tax 0.84 0.75 1.25 1.32 1.13

Write-downs and losses on loans and guarantees 0.29 0.25 (0.05) (0.09) (0.15)Pre-tax profit 0.54 0.50 1.30 1.41 1.28

Tax 0.15 0.25 0.32 0.34 0.33Profit for the financial year 0.39 0.25 0.97 1.07 0.95

Majority share of the total profit for the period 0.39 0.25 0.97 1.07 0.95Minority share of the total profit for the period 0.00 0.00 0.00 0.00 0.00

OTHER KEY FIGuRES

Profitability, earnings and capital structure (percentage)1. Return on equity after tax 8.01 4.85 16.24 17.86 15.442. Total profitability before losses and tax 0.84 0.75 1.25 1.32 1.133. Total net profitability 0.39 0.25 0.97 1.07 0.954. Total operating expenses as a percentage of net operating income 60.35 63.46 53.94 55.28 60.645. Deposits/loans ratio 54.53 53.15 58.15 58.22 58.70

Balance sheet development (percentage)6. Change in net loans 7.96 17.86 21.01 14.52 12.557. Change in commercial papers and bonds 37.86 67.65 81.69 3.34 7.688. Change in deposits 10.75 7.74 20.86 13.61 10.619. Change in total assets 2.91 26.44 24.60 10.15 15.18

Defaults, provisions and losses on loans10. Loss percentage, loans 0.17 0.27 (0.06) (0.09) (0.16)11. Gross defaults as percentage 0.48 0.39 0.21 0.28 0.3212. Net defaults as percentage 0.40 0.36 0.20 0.24 0.2613. Percentage provided for defaulted loans 15.48 7.69 4.52 14.86 17.45

Capital adequacy14. Net core capital 6 111 4 858 4 597 4 048 3 90915. Calculation basis 51 883 53 612 47 546 39 640 34 41416. Capital adequacy 11.78 9.06 9.67 10.21 11.3617. Core capital adequacy 10.54 7.73 8.33 9.44 9.95


Group key figures - 5 years (contd. III)

Equity certificates (parent bank) 2009 2008 2007 2006 200519. Equity certificate capital (NOK million) 398 267 250 250 25020. Dividend per equity certificate (NOK) 4.00 3.75 19.00 18.25 17.1021. Listed price at 31 Dec. 102.00 86.50 190.00 213.00 206.0022. Owner fraction, profit per equity certificate pursuant to NRS 7 9.43 6.63 6.34 7.30 8.3623. Book equity per equity certificate (NOK) 100.00 100.00 100.00 100.00 100.0024. Profit coverage (gross) per equity certificate (NOK) 114.82 93.26 262.80 220.80 182.0025. Share of profit per equity certificate (NOK) 11.44 6.45 19.19 20.47 17.2526. Diluted profit per equity certificate (NOK) 11.44 6.45 19.19 20.47 17.2527. Effective return per equity certificate 22.25 (44.47) (2.23) 11.70 16.5928. Direct return 3.92 4.34 10.00 8.57 8.3029. Payment percentage 3.48 4.02 7.23 8.27 9.4030. Dividend provision as a percentage of the equity certificates' share of the profit 34.96 58.13 99.02 89.15 99.13

PersonnelNumber of employees 867 879 845 795 802Number of full-time equivalents 834 841 803 750 749

Distribution networkSales outlets 63 59 60 57 58

Definitions:

1. The profit for the financial year as a percentage of the average equity through the year pursuant to IFRS + 50 per cent of the year's profit.

2. Operating profit before losses and tax as a percentage of average total assets.

3. Profit on ordinary operations after tax as a percentage of average total assets.

5. Deposits from and debt to customers as a percentage of loans to and receivables from customers.

6. Change in net loans at 31 December as a percentage of net lending the previous year.

7. Change in securities at 31 December as a percentage of securities the previous year.

8. Change in deposits at 31 December as a percentage of deposits the previous year.

10. Losses on loans and guarantees etc as a percentage of gross loans at 31 December.

11. Gross defaults as a percentage of gross lendings.

12. Defaulted loans with deductions for individual write-downs on such loans, as a percentage of net lendings.

13. Individual write-downs on defaulted loans, as a percentage of the gross volume of such loans.

22. Equity certificate capital as a percentage of the parent bank's equity at 31 December calculated pursuant to NRS 7.

24. Profit for the financial year divided by the number of equity certificates.

25. Equity certificates' share of profits divided by the number of equity certificates.

27. Dividend paid plus change in listed price 1 January - 31 December, as percentage of listed price at 1 January.

28. Provision for dividend as a percentage of listed price at year end.

30. Dividend as a percentage of gross profit coverage per equity certificate.


Write-downs and losses on loans and guarantees 270 205 112 59 204 89 32 11Pre-tax profit 500 352 196 30 411 361 293 128

Tax 137 101 66 27 204 147 98 49Profit for the period 363 251 130 3 207 214 195 79

Majority share of the profit for the period 362 250 129 3 206 213 195 79Minority share of the profit for the period 1 1 1 0 1 1 0 0

AVERAGE TOTAL ASSETS 92 017 90 885 89 344 90 533 81 572 78 840 76 751 74 993

PROFIT AS PERCENTAGE OF AVERAGE TOTAL ASSETSInterest income etc. 4.30 4.54 5.01 5.47 6.80 6.69 6.51 6.42Interest expenses etc. 2.72 2.95 3.39 3.95 5.20 5.13 4.98 4.89Net interest and credit commission income 1.58 1.58 1.62 1.53 1.60 1.57 1.53 1.53

Commission income and income from banking services 0.42 0.43 0.39 0.38 0.48 0.50 0.52 0.53Commission expenses and expenses relating to banking services

0.09 0.10 0.10 0.09 0.09 0.10 0.10 0.10

Net banking services 0.33 0.33 0.29 0.29 0.39 0.41 0.42 0.42Income from ownership interests in associated companies (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.04) (0.02)Net gain/(loss), financial instruments 0.08 0.06 (0.02) (0.21) (0.07) 0.02 0.14 (0.05)Other operating income 0.16 0.16 0.18 0.16 0.19 0.14 0.15 0.12Net other operating income 0.53 0.50 0.40 0.20 0.46 0.52 0.68 0.47Net operating income 2.11 2.09 2.03 1.72 2.06 2.09 2.21 2.00

Payroll and general administration expenses 1.03 1.02 1.05 1.05 1.03 1.04 1.06 0.97Depreciation 0.09 0.10 0.10 0.09 0.11 0.10 0,10 0.10Other operating expenses 0.15 0.15 0.18 0.18 0.17 0.19 0.19 0.19Total operating expenses 1.27 1.27 1.33 1.33 1.31 1.33 1.35 1.25Operating profit/loss before write-downs and tax 0.84 0.82 0.70 0.40 0.75 0.76 0.85 0.75

Write-downs and losses on loans and guarantees 0.29 0.30 0.25 0.26 0.25 0.15 0.08 0.06Pre-tax profit 0.54 0.52 0.44 0.13 0.50 0.61 0.77 0.69

Tax 0.15 0.15 0.15 0.12 0.25 0.25 0.26 0.26Profit for the period 0.39 0.37 0.29 0.01 0.25 0.36 0.51 0.42

Majority share of the profit for the period 0.39 0.37 0.29 0.01 0.25 0.36 0.51 0.42Minority share of the profit for the period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Group key figures per quarter for 2 years

PROFIT DEVELOPMENT 31/12-09 30/09-09 30/06-09 31/03-09 31/12-08 30/09-08 30/06-08 31/03-08Interest income etc. 3 955 3 084 2 220 1 222 5 548 3 951 2 485 1 197Interest expenses etc. 2 502 2 008 1 501 881 4 240 3 025 1 902 911Net interest and credit commission income 1 453 1 076 719 341 1 308 926 583 286

Commission income and income from banking services 388 291 172 85 393 298 199 98Commission expenses and expenses relating to banking services 83 65 43 20 76 58 39 19Net banking services 305 226 129 65 317 240 160 79Income from ownership interests in associated companies (42) (33) (21) (11) (37) (28) (15) (4)Net gain/(loss), financial instruments 77 40 (7) (46) (56) 13 55 (10)Other operating income 149 110 78 36 151 83 59 22Net other operating income 489 343 179 44 375 308 259 87Net operating income 1 942 1 419 898 385 1 683 1 234 842 373

Payroll and general administration expenses 945 693 467 235 844 613 404 180Depreciation 87 65 43 21 86 60 39 19Other operating expenses 140 104 80 40 138 111 74 35Total operating expenses 1 172 862 590 296 1 068 784 517 234Operating profit/loss before write-downs and tax 770 557 308 89 615 450 325 139


AVERAGE TOTAL ASSETS (isolated) 94 577 93 088 89 766 90 533 89 004 83 346 78 518 74 993

PROFIT AS PERCENTAGE OF AVERAGE TOTAL ASSETSInterest income etc. 3.65 3.68 4.46 5.47 7.14 7.00 6.60 6.42Interest expenses etc. 2.07 2.16 2.77 3.95 5.43 5.36 5.08 4.89Net interest and credit commission income 1.58 1.52 1.69 1.53 1.71 1.64 1.52 1.53

Commission income and income from banking services 0.41 0.51 0.39 0.38 0.42 0.47 0.52 0.53Commission expenses and expenses relating to banking services 0.08 0.09 0.10 0.09 0.08 0.09 0.10 0.10Net banking services 0.33 0.41 0.29 0.29 0.34 0.38 0.41 0.42Income from ownership interests in associated companies

(0.04)

(0.05)

(0.04)

(0.05)

(0.04)

(0.06)

(0.06)

(0.02)

Net gain/(loss), financial instruments 0.16 0.20 0.17 (0.21) (0.31) (0.20) 0.33 (0.05)Other operating income 0.16 0.14 0.19 0.16 0.30 0.11 0.19 0.12Net other operating income 0.61 0.70 0.60 0.20 0.30 0.23 0.88 0.47Net operating income 2.19 2.22 2.29 1.72 2.01 1.87 2.40 2.00

Payroll and general administration expenses 1.06 0.96 1.04 1.05 1.03 1.00 1.15 0.97Depreciation 0.09 0.09 0.10 0.09 0.12 0.10 0.10 0.10Other operating expenses 0.15 0.10 0.18 0.18 0.12 0.18 0.20 0.19Total operating expenses 1.30 1.16 1.31 1.33 1.27 1.27 1.45 1.25Operating profit/loss before write-downs and tax 0.89 1.06 0.98 0.40 0.74 0.60 0.95 0.75

Write-downs and losses on loans and guarantees 0.27 0.40 0.24 0.26 0.51 0.27 0.11 0.06Pre-tax profit 0.62 0.66 0.74 0.13 0.22 0.32 0.85 0.69

Tax 0.15 0.15 0.17 0.12 0.25 0.23 0.25 0.26Profit for the period 0.47 0.52 0.57 0.01 (0.03) 0.09 0.59 0.42

Majority share of the profit for the period 0.47 0.52 0.57 0.01 (0.03) 0.09 0.59 0.42Minority share of the profit for the period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Group key figures per quarter for 2 years (contd. I)

PROFIT DEVELOPMENT PER QuARTER (isolated)

Fourth qu. 2008

Third qu. 2009

Second qu. 2009

First qu. 2009

Fourth qu. 2008

Third qu. 2008

Second qu. 2008

First qu. 2008

Interest income etc. 871 864 998 1 222 1 597 1 466 1 288 1 197Interest expenses etc. 494 507 620 881 1 215 1 123 991 911Net interest and credit commission income 377 357 378 341 382 343 297 286

Commission income and income from banking services 97 119 87 85 95 99 101 98Commission expenses and expenses relating to banking services

18

22

23

20

18

19

20

19

Net banking services 79 97 64 65 77 80 81 79Income from ownership interests in associated companies

(9)

(12)

(10)

(11)

(9)

(13)

(11)

(4)

Net gain/(loss), financial instruments 37 47 39 (46) (69) (42) 65 (10)Other operating income 39 32 42 36 68 24 37 22Net other operating income 146 164 135 44 67 49 172 87Net operating income 523 521 513 385 449 392 469 373

Payroll and general administration expenses 252 226 232 235 231 209 224 180Depreciation 22 22 22 21 26 21 20 19Other operating expenses 36 24 40 40 27 37 39 35Total operating expenses 310 272 294 296 284 267 283 234Operating profit/loss before write-downs and tax 213 249 219 89 165 125 186 139

Write-downs and losses on loans and guarantees 65 93 53 59 115 57 21 11Pre-tax profit 148 156 166 30 50 68 165 128

Tax 36 35 39 27 57 49 49 49Profit for the period 112 121 127 3 (7) 19 116 79

Majority share of the profit for the period 112 121 126 3 (7) 18 116 79Minority share of the profit for the period 0 0 1 0 1 1 0 0


Liabilities and equity

Debt to credit institutions 14 583 12 707 11 805 13 538 12 140 3 311 1 830 1 845Deposits 44 881 43 367 44 450 40 605 40 521 42 326 41 385 38 648Securitised debt 29 732 30 585 30 396 30 906 34 249 32 465 31 232 29 279Financial derivatives 458 646 567 906 1 338 763 1 172 890Accrued expenses and pre-paid income 90 174 144 112 102 107 95 66Pension commitments 189 141 141 141 144 187 187 187Deferred tax 0 141 164 165 162 0 0 0Other provision for commitments 19 17 15 15 14 16 12 8Tax payable 407 132 70 29 15 74 22 (27)Subordinated loan capital 2 062 1 149 1 215 1 300 1 437 1 098 1 016 1 050Other liabilities 355 725 556 446 399 632 555 887Total liabilities 92 776 89 784 89 523 88 163 90 521 80 979 77 506 72 833

Equity certificates 398 267 267 267 267 267 267 250Own equity certificates 0 (4) (4) (4) (4) (7) (6) (3)Premium reserve 10 9 9 9 9 9 9 4Equalisation reserve 39 6 6 6 6 6 6 6Total equity certificate capital 447 278 278 278 278 275 276 257

Primary capital 4 083 3 684 3 684 3 684 3 684 3 572 3 572 3 572Gift fund 175 175 175 175 175 175 175 175Compensation fund 14Total primary capital 4 272 3 859 3 859 3 859 3 859 3 747 3 747 3 747

Reserve for unrealised gains 105 60 60 60 60 60 60 60Other equity 60 386 264 138 174 293 275 159Minority interests 1 1 1 1 1 1 1 1

Total equity 4 885 4 584 4 462 4 336 4 372 4 376 4 359 4 224

Total liabilities and equity 97 661 94 368 93 985 92 499 94 893 85 355 81 865 77 057

Profitability, earnings and capital structure (percentage)Return on equity after tax 8.01 7.48 5.92 0.24 4.85 6.69 9.19 7.52Total profitability before losses and tax 0.84 0.82 0.70 0.40 0.75 0.76 0.85 0.75Total net profitability 0.39 0.37 0.29 0.01 0.25 0.36 0.51 0.42Total operating expenses as percentage of net operating income 60.35 60.75 65.70 76.88 63.46 63.53 61.40 62.73Total operating expenses as percentage of net operating income. corrected for gain/(loss) in exchange rate 62.84 62.51 65,19 68.68 61.41 64.21 65.69 61.10Deposits/loans ratio 54.53 54.64 56.85 52.79 53.15 57.96 59.12 57.39

Group key figures per quarter for 2 years (contd. II) BALANCE SHEET DEVELOPMENT 31/12-09 30/09-09 30/06-09 31/03-09 31/12-08 30/09-08 30/06-08 31/03-08

Assets

Cash in and receivables from central banks 299 1 709 3 518 312 4 753 1 986 1 414 694Loans to and receivables from credit institutions 143 215 159 271 1 291 805 1 626 1 388Net lendings 82 302 79 369 78 193 76 919 76 235 73 022 70 004 67 339Shares at fair value through profit or loss 604 557 491 464 463 556 673 640Commercial papers and bonds 11 808 10 503 9 373 11 854 8 565 7 048 6 280 5 137Shares available for sale 112 67 67 67 67 67 67 68Financial derivatives 605 747 914 1 394 2 368 627 627 666Ownership interests in associated companies 185 154 163 174 121 130 136 148Deferred tax asset 74 0 0 0 0 81 80 81Other intangible assets 318 266 257 263 266 267 263 262Tangible fixed assets 469 456 467 465 466 464 466 458Prepaid expenses 28 69 36 46 26 83 80 35Customer funds - contribution-based pension agreements 0 0 0 0 43 40 45 38Other assets 714 256 347 270 229 179 104 103Total assets 97 661 94 368 93 985 92 499 94 893 85 355 81 865 77 057


Group key figures per quarter for 2 years (contd. III)

Financial strength (percentage) 31/12-09 30/09-09 30/06-09 31/03-09 31/12-08 30/09-08 30/06-08 31/03-08Capital adequacy 11.78 9.93 10.22 10.17 9.06 9.24 9.49 9.66

PersonnelNumber of full-time equivalents 834 826 834 837 841 840 819 812

Owner fractionEquity certificate capitals' share of profits divided by the number of equity certificates 9.06 6.33 3.26 0.08 5.34 5.51 5.03 2.03Diluted profit per equity certificate 9.06 6.33 3.26 0.08 5.34 5.51 5.03 2.03Owner fraction, profit per equity certifi-cate calculated pursuant to NRS 7 9.43 6.65 6.65 6.65 6.63 6.58 6.48 6.34


1) www.nues.no2) www.c-ebs.org

Corporate governance policySparebanken Vest’s corporate governance policy aims to ensure that the bank is run in accordance with generally accepted perceptions and standards, and with relevant laws and regulations. The policy sets out overriding principles intended to ensure that there is good cooperation between the bank’s various stakeholders, including the owners of equity certificates, lenders, customers, employees, governing bodies, the management and society as a whole. The policy thus describes how the bank is run and managed with a view to creating value for the bank and its stakeholders.

The bank’s policy is specified in various documents which govern Sparebanken Vest’s activities, including the bank’s articles of association, strategies, board instructions, management and control regulations, ethical guidelines and procedures relating to impartiality, insider trading and trading for own account. The governing documents are based on the Norwegian Code of Practice for Corporate Governance1 and the Committee of

European Banking Supervisors’2 principles of corporate governance. Sparebanken Vest aims as far as possible to satisfy the recommendations in these documents.

The bank’s corporate governance policy is available on the bank’s website: www.spv.no. In accordance with article 1 of the Norwegian Code of Practice, an account of the bank’s compliance with the code is provided below.

The bank’s activities Sparebanken Vest is a financial services group consisting of the parent bank and its subsidiaries Eiendomsmegler Vest, Sparebanken Vest Boligkreditt AS and AS Filialbygg. References to the bank and/or Sparebanken Vest in this article concern the Sparebanken Vest Group.

Pursuant to its articles of association, the bank’s object is to provide financial services to the general public, the business community and the public sector in Western Norway. The business shall be run with satisfactory profitability and an acceptable level of risk.

Corporate governance


The Directors’ Report contains a description of the bank’s goals and strategies. The strategic basis is evaluated by the Board and the management at least once a year, and the bank’s plans are adjusted and adapted on an ongoing basis. Through presentations and interim reports, the market is kept updated about the bank’s strategic agenda.

Sparebanken Vest exercises its considerable social responsibility in several ways, mainly through donations and participation and involvement in various discussion forums where the commercial and public sectors can meet, and through ownership of companies/funds whose object is to promote growth and development. The bank has a customer-oriented organisation focused on the Retail Market, the Corporate Market and the Capital Market as business areas. These divisions are supplemented by support and staff functions. The bank has a dynamic organisational structure that is assessed in light of changes in requirements and framework conditions.

Equity capital and dividendsThe bank is a self-owned institution. External capital is raised through the issuing of equity certificates and subordinated bonds. Sparebanken Vest’s equity certificate capital increased in 2009 as a result of the merger with Sauda Sparebank and, at year end 2009, it totalled NOK 398.4m, divided between 3.98 million equity certificates.

The holders of equity certificates shall be assured predictability with respect to equality of treatment, rate of return and influence on the running of the bank. The stock exchange listing of the bank’s equity certificates ensures that the bank accepts and complies with the market terms that apply at all times in the equity market for equity certificates and that a historical performance is established that helps to ensure that the bank has the stock market as a possible source of funding, if the need arises.

The bank’s capital position is assessed by the Board at least four times a year. The last time this was done was at the end of 2009.


Sparebanken Vest’s profit for the year shall be divided proportionately between equity certificate capital and primary capital. The proportion of the profit for the year that falls to the owners of equity certificates will be divided between a cash dividend and the equalisation reserve. The economic goal of Sparebanken Vest’s activity is to achieve results that provide a satisfactory overall return in the form of dividends and value appreciation. When allocating profit, importance will be attached to the bank’s equity position and financial strength.

Equal treatment of equity certificate holders and transactions with related parties Sparebanken Vest has one class of equity certificate. The bank aims to ensure that equity certificate holders are treated equally and have the same opportunity to exercise influence in Sparebanken Vest. However, in connection with the merger of Sauda Sparebank and Sparebanken Vest, a limitation on voting rights was introduced with the effect that, at election meetings of equity certificate holders, no one can cast votes for equity certificates representing more than 15% of the total number of equity certificates issued. This has been done in order to safeguard the interests of owners of small holdings of equity certificates.

At year end 2009, the proportion of the profit for the year falling to owners of equity certificates was approximately 9.6%. The largest owner is Sparebankstiftelsen Sauda, which represents 33.09% of the equity certificate capital. Together, the bank’s 10 largest owners hold 47.66% of the equity certificate capital.

The board instructions contain provisions relating to ethics and impartiality. The bank’s ethical guidelines apply to both elected officers and bank employees and provide guidance on customer contact, benefits/gifts, the duty of confidentiality, participation in other business activity and transactions with related parties. As a general rule, transactions, including the

purchase/sale of assets and services, shall not take place between Sparebanken Vest, its employees and its equity certificate holders and elected officers, and their related parties.

The board instructions include provisions underlining the obligation of board members to exercise due care in relation to ethical conduct, impartiality and integrity. Board members are also required to inform the Chair of the Board if a situation arises that could involve a conflict of interest.

Free negotiabilitySparebanken Vest’s equity certificates are listed on the Oslo stock exchange and can be traded freely. The only limitation will be statutory requirements, which currently require the acquisition of a qualified proportion of the equity certificate capital (10% or more) to be approved by the Ministry of Finance (authority delegated to the Financial Supervisory Authority of Norway).

Supervisory Board and Control CommitteeThe Supervisory Board, the bank’s highest authority, comprises equity certificate holders, customers, employees and representatives of public authorities. The Supervisory Board shall ensure that the bank’s activities are as provided for in its objects clause and that they are in accordance with the bank’s articles of association and resolutions of the Supervisory Board.

Pursuant to the bank’s articles of association, the ordinary annual meeting of the Supervisory Board shall be convened before the end of March to consider the accounts, the annual report, the auditor’s report and the statement from the Control Committee. This meeting also considers the proposed distribution of dividend to the bank’s equity certificate holders as well as grants/allocations to the gift fund. A meeting of the Supervisory Board shall be held before the end of April each year to


elect members of the Board of Directors and the Control Committee etc. Separate elections are held among employees, equity certificate holders and customers to elect representatives to the Supervisory Board.

The Supervisory Board elects a Nomination Committee which nominates depositor-elected members of the Supervisory Board, Board of Directors and Control Committee. The chair and deputy chair of the Supervisory Board are elected separately. The Control Committee, which is also elected by the Supervisory Board, shall supervise and control the work of the Board of Directors and the management. Pursuant to the articles of association, the Control Committee shall have four members and two deputy members.

Meetings of the Supervisory Board are also attended by the Board of Directors and the Managing Director, and by members of the management and specialists, as required.

Nomination CommitteesPursuant to the articles of association, the main Nomination Committee shall have seven members, including representatives of all the groups represented on the Supervisory Board. One member shall be independent and shall be elected from among previous members of the Board of Directors (preferably a previous chair or deputy chair). The Nomination Committee shall state the grounds for its recommendations, which shall contain relevant information about the candidates, including their competence, capacity and independence.

The recommendation shall also contain a description of the committee’s work. The Nomination Committee attends meetings of the Supervisory Board and submits its recommendations. Separate instructions have been drawn up for the Nomination Committee.

The Nomination Committee submits a recommendation for the remuneration

of elected officers. No board members or representatives of the management are members of the Nomination Committee. There is a separate Nomination Committee for elections by equity certificate holders. This committee prepares elections of representatives of equity certificate holders to the Supervisory Board. The committee consists of three members elected by the equity certificate holders.

Board of Directors, composition and independencePursuant to the articles of association, the Board shall consist of nine members and four deputy members elected for a period of two years and one year, respectively. The chair and deputy chair are elected by the Supervisory Board. Currently, four of the board members are women.

Important criteria for board members and the composition of the Board of Directors are qualifications, gender, capacity and independence. A majority of the board members shall be independent of the bank’s management and main business connections. The overall competence of the Board of Directors is assessed regularly in light of the challenges facing the bank, and the Nomination Committee is informed about result of the assessment.

The work of the Board of DirectorsThe Board has 12 to 14 regular meetings every year as well as meetings in connection with strategy work. In addition, the Board holds theme days aimed at raising its competence. Instructions have been prepared and adopted for the Board and a pertaining calendar for its work. The Board attaches particular importance to the annual work of maintaining the long-term strategy plan. The Board also assesses whether the bank’s capital position and risk exposure is justifiable and within the statutory limits.

In collaboration with the Chair of the Board, the Managing Director prepares


3) Internal Capital Adequacy Assessment Process4) Internal Ratings-Based

matters for consideration by the Board. The Board has adopted instructions for the Managing Director.

The Board has overall responsibility for the management of Sparebanken Vest and for supervising its day-to-day management and activities. The Board’s management responsibility is also understood to entail responsibility for satisfactory organisation of the bank, for adopting the bank’s plans and budgets, for keeping itself informed about the bank’s financial position, and for ensuring that the bank’s asset management and accounts are subject to satisfactory controls.

The Board shall comply with the bank’s object, as stated in its articles of association, and shall adhere to the guidelines and framework conditions set by public authorities, the Financial Supervisory Authority of Norway, the Supervisory Board and the Control Committee.

As part of the performance of its work, the Board has set up three committees:

• The Audit Committee shall ensure that Sparebanken Vest has an independent and effective external and internal audit function as well as accounting and risk reporting procedures in compliance with laws and regulations.

• TheCreditCommitteeshallconsidercredit matters within the scope of the authorisations granted by the Board of Directors.

• TheRemunerationCommitteeshall ensure that the bank has a competitive, but not leading, remuneration policy that the bank’s management finds motivating in relation to the implementation of the adopted strategy and the achievement of adopted goals.

The internal auditor reports directly to the Board of Directors and is entitled to attend Board meetings. The internal audit department prepares an annual

report for the Board on internal control, the IRB Regulations and the Securities Trading Act. The Board approves the internal audit department’s plan for the year and resource requirements.

Risk management and internal control Good risk and capital management is a key element in the bank’s long-term value creation. The bank’s overriding goals follow from its underlying business strategy. The target rate of return governs the bank’s activities and the specification of sub-goals. The focus is on securing the bank’s competitiveness in both the short and the long term. Sparebanken Vest’s market and commercial targets are balanced against its ability and willingness to bear risk. Risk and capital assessment is an integrated part of the bank’s strategic and business processes.

The bank’s risk management relates to four risk areas:

• Creditrisk• Marketrisk• Liquidityrisk• Operationalrisk

The bank’s aim is to have a moderate risk profile. It is a requirement on the Board of Directors’ part that the bank is well capitalised. Capital assessments (ICAAP3) are carried out at least once a year, and the bank’s capital strategy will be based on the real risk attached to the business, supplemented by the effect of different risk scenarios.

In 2007, the Financial Supervisory Authority of Norway gave Sparebanken Vest permission to apply internal measure-ment methods (IRB4) to calculate the credit risk attached to capital. This approval is an important stamp of quality for the bank’s risk and capital management.

Responsibility for implementation of the bank’s risk and capital management and control is divided between the Board of Directors, the management and the operative units.


The Board is responsible for ensuring that the capital base is adequate in relation to the bank’s desired level of risk and activities, and that the bank is adequately capitalised in light of regulatory requirements. The Board also sets the bank’s targets and parameters in all risk areas, including guidelines for risk and capital management. Reports on targets and parameters are submitted to the Board every quarter. The Managing Director is responsible for the bank’s overall risk management, including the development of good models and a framework for management and control.

The bank’s risk management and compliance department is responsible for key functions relating to management, control, reporting and analysis. This department is also responsible for the models used by the bank for risk and capital management. The head of risk management and compliance reports to the Managing Director.

The Validation Committee, which is chaired by the Managing Director, deals with model validation and validation relating to application of the bank’s credit systems. The Credit Committee, which is chaired by the Managing Director, deals with major commitments and matters of an extraordinary nature.

All of the bank’s managers are responsible for managing risk and ensuring that good internal control is exercised in their respective areas in line with the bank’s adopted risk profile. Sparebanken Vest has adopted an internal control policy that defines targets and the organisation and implementation of internal control activities. The policy also includes reporting on the status of the bank’s risk exposure and the quality of internal control, and follow-up of risk-reducing measures.

The bank’s ethical guidelines include a duty on the part of employees to provide

information about breaches of internal guidelines, laws and regulations, and procedures for how such information is to be communicated.

Sparebanken Vest’s activities are subject to the supervision of the Financial Supervisory Authority of Norway. As well as carrying out on-the-spot supervision, the Authority reviews the bank’s annual and interim accounts and risk reports. The Board of Directors and management endeavour to maintain an open and constructive dialogue with the Authority.

Further details of the bank’s risk and capital management and internal control are available on the bank’s website.

Remuneration of the Board of DirectorsRemuneration of the Board of Directors is decided by the Supervisory Board based on the recommendation of the Nomination Committee. The remuneration is not performance-based and no options are issued to board members. As a general rule, board members or companies to which they are linked cannot undertake special assignments for the bank in addition to their serving as board members. Any supplementary remuneration shall be approved by the Supervisory Board. In urgent matters, however, the chair of the Corporate Assembly and the chair of the Nomination Committee can jointly decide on supplementary remuneration. The remuneration paid to the Board of Directors and executive personnel is described in a note to the annual accounts. Remuneration of executive personnelRemuneration of the Managing Director, Deputy Managing Director and internal auditor is decided by the Board of Directors, while the remuneration of other executive personnel is decided by the Managing Director in accordance with principles adopted by the Board after prior discussion with the Remuneration Committee. The Managing Director can


award supplementary remuneration to employees based on results achieved and work performance. Such supplementary remuneration shall also serve to ensure the attractiveness of the bank in the labour market, while at the same time not having a risk-driving effect. There are no option schemes for the Managing Director and executive personnel.

Salaries and other remuneration paid to executive personnel are described in the notes to the accounts.

Information and communicationThe Board of Directors of Sparebanken Vest has drawn up separate guidelines for financial information that are designed to ensure that the financial markets receive correct, relevant and timely information about the bank’s development and results. Information for the market is given in quarterly open presentations for investors, stock exchange announcements and press releases, the bank’s website and financial reporting.

Financial reporting for the Sparebanken Vest Group takes place in the form of quarterly reports, in addition to the presentation of the annual accounts. The annual accounts are audited by an external auditor.

Regular presentations are also held for international partners, lenders and investors, and the bank is rated by two international rating agencies.

TakeoverSparebanken Vest is a self-owning institution that cannot be taken over by others through an acquisition. In the event of acquisitions on the bank’s part, the bank seeks to ensure that the interests of all stakeholders are satisfactorily attended to. Good information and equal treatment of shareholders/owners are key considerations in this respect. The bank aims to ensure that acquisitions take place with minimal negative effects for ongoing operations.

AuditorThe external auditor is elected by the Supervisory Board. The auditor submits an annual auditor’s report to the Supervisory Board and has an annual meeting with the Board of Directors at which a ‘Letter to the Management’ is presented and commented on. The letter contains an assessment of the bank’s internal control, including areas where internal control should be improved. The auditor has an annual meeting with the Control Committee to review the auditor’s report and comment on the Directors’ report and the annual accounts and notes.

The relationship with the auditor is regulated in a letter of appointment setting out the parties’ responsibilities, the auditor’s fee and how other services are to be agreed on and remunerated.

The external auditor and the internal auditor hold quarterly meetings with the Board of Directors’ Audit Committee at which the Managing Director is not present. The minutes of the meetings of the Audit Committee are presented to the Board.

Sparebanken Vest: Overview of governing and control bodies

Board of Directors

Governing bodies Control bodies

External auditor

Control Committee

Nomination Committee

Board-appointed committees

Corporate Assembly

Managing Director

Internal auditor


Sparebanken Vest aims to be the leading financial services group in Western Norway.

The environment: Sparebanken Vest pursues an active, forward-looking environmental policy, both internally and externally. This report has therefore been published in a limited print-run and printed on paper approved by the Nordic Ecolabel. PDF-version available at www.spv.no

Other contributors: Photos by Knut Egil Wang, design and layout by Reaktor. Printed by Grafisk Formidling AS. The cover photo is one of several everyday portraits that are used in Sparebanken Vest’s communication with the market and society at large.

Regional Map

Sogndal

Sandnes

Sauda

Klepp

Stavanger

Haugesund

Bergen

Askøy

Sotra

Arna

Os

Husnes

Odda

Stord

Knarvik

Førde Florø

Eid

MåløyStadlandetSeljeMåløyStrynBryggjaDavikNordfjordeidFlorøFørdeÅrdalSogndalHøyanger

MasfjordenLindåsMastrevikFedjeMangerLonevågKnarvikFrekhaug

RongKleppestøÅgotnesStraumeSkogsvågOsStorebøBekkjarvik

FitjarHusnesSagvågBremnesMosterhamnLeirvikSveioHaugesundSæbøvikSkånevikEtneSaudaSand

StavangerHinnaSolaSandnes

DaleBjørkheimNorheimsundStrandebarmEikelandsosenOddaRøldal

RegionHardanger /Midthordland

KaigatenKorskirkeallmenningenXhibitionDanmarksplassSlettenÅsaneArnaLoddefjordOasenNesttunLagunen

RegionBergen

RegionSogn ogFjordane

RegionNordhordland

Region Vest

RegionSunnhordland /Haugalandet

RegionRogaland

Annual Report 2009

EIENDOMSMEGLER VEST | FRENDE FORSIKRING | NORNE SECURITIES | KYTE NÆRINGSMEGLING

Being local – makes a difference

SWIFT: SPVNOBBCOMPANY NUMBER: 832554332

Annual Report 2009

– Focusing on Western Norway– Focusing on Western Norway

Being local – makes a difference Annual Report 2009print-run and printed on paper approved by the...

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