ANNUAL REPORT 2015

NOK SPV

“EVERYTHING WE DO, WE DO TO MAKE LIFE IN WESTERN EVEN BETTER”

Sparebanken Vest was created by and for the people of Western Norway. We know who we are and we know where we come from. Our heart beats for Western Norway, for the people who live there and the work they do. That’s our commitment. We are engaged in many different arenas, in many ways and using different tools suited to different target groups. From sponsoring local festivals, to supporting young sporting talents, to helping support education and young people’s upbringing, and, not least, by activating, sharing and facilitating local expertise, we can help to stimulate economic development in Western Norway.

Photo: Bent René Synnevåg

Sparebanken Vest strives for an active and future-oriented focus on the environment, both internally and externally. Because of this, the report is made in electronic form only. The report is available on www.spv.no Contents

Key figures for the Group...... 5 Local identity through generations...... 7 Organizational model...... 9 Corporate Management...... 11 The Board of Directors...... 13 Board of Directors’ report ...... 15

Accounting and notes...... 31 Auditors Report ...... 100 Control Committee ...... 102 Responsibility Statement ...... 103 Group Key Figures ...... 104 Corporate governance ...... 113 Subsidiaries and Associated Companies ...... 122 Branch locations of 31st December 2015 ..... 123 •

Sparebanken Vest Annual Report 2015 Page 4 Key figures for the Sparebanken Vest Group

Amounts in NOK millions 2015 2014 2013 2012 2011 INCOME STATEMENT Net interest and credit commission income 2 354 2 320 2 161 1 797 1 590 Net other operating income 594 910 768 861 603 Total operating expenses 1 443 1 470 1 428 1 228 1 335 Profit/loss before write-downs and tax expense 1 505 1 760 1 501 1 430 858

Net profit on tangible fixed assets 76 143 0 0 0 Write-downs and losses on loans and guarantees 185 410 280 147 126 Profit/loss before tax expense 1 396 1 493 1 221 1 283 732

BALANCE SHEET Assets under management 161 663 147 070 134 396 127 748 115 985

Net lending 128 927 118 643 112 024 106 789 99 304 Securities 28 563 22 627 18 889 17 790 13 970

Deposits 63 900 66 448 62 172 60 032 53 142 Subordinated loan capital 1 838 2 426 2 271 1 626 1 613 Equity 11 314 9 094 8 135 7 394 6 691

KEY FIGURES Net interest and credit commission income as % of primary capital 1,55 1,68 1,67 1,45 1,46 Pre-tax profit/loss as % of primary capital 0,92 1,08 0,94 1,04 0,67

Return on equity after tax 11,0 13,7 11,7 14,1 8,7

Loss percentage, loans 0,15 0,35 0,25 0,14 0,13

Change in net lending 8,7 5,9 4,9 7,5 12,3 Change in deposits -3,8 6,9 3,6 13,0 9,1

Net subordinated capital (NOK) 12 434 10 706 9 541 7 973 7 191 Capital adequacy 16,9 15,6 14,3 12,6 11,6 Core capital adequacy 15,0 13,6 13,2 12,3 10,8 Core Tier 1 capital adequacy 13,7 12,2 11,2 10,6 9,6 Capital adequacy IRB 18,6 17,9 18,1 16,6 15,6

Dividend per equity certificate (NOK) 1,10 4,00 3,00 2,50 2,00 Listed price per equity certificate at year-end (NOK) 35,0 41,6 37,3 24,2 26,1 Direct return 3,1 9,6 8,1 10,3 7,7 Effective return per equity certificate in % -6,2 18,1 62,6 -1,0 -25,1 Owner fraction after the distribution of dividend 24,6 19,5 20,5 21,2 21,5

See page 106 for a full overview of key figures and definitions

Sparebanken Vest Annual Report 2015 Page 5 Sparebanken Vest Annual Report 2015 Page 6 Local identity through generations

1823 Bergens Sparebank is established

1964 Alvøen Sparebank (1877) Sparebank (1899)

1970 Os Sparebank (1926) 1971 Alversund Sparebank (1910) Sparebank (1911) 1973 Sparebank (1916) Haus Sparebank (1866) & Åsane Sparebank (1904) 1975 Lindås Sparebank (1865) Sparebank (1889) Sparebank (1901)

1982 Sparebanken Vest 1982 & Sparebank (1911) 1983 Fjære Sparebank (1875) & Sparebank (1975) Sparebank (1903) Eid sokn Sparebank (1842) 1986 Sparebank (1865) Sparebank (1858) new Sparebank (1928) Sparebank (1874) 1989 Sparebanken (1852) Skånevik Sparebank (1863) Sparebank (1842) Sparebank (1862) Sparebank (1853) Sund & Sparebank (1896) Vikøy Sparebank (1860)

2000 Acquisition of Vår Bank og Forsikring,

2006 Establishment Haugesund and 2007 Acquisition of Fokus Banks’ business in & Fjordane 2008 Establishment Stavanger Establishment Sandnes 2009 Sauda Sparebank (1892) Establishment Hinna and Sola 2011 Sparebanken (1846) 2012 Establishment Establishment Nærbø

Sparebanken Vest Annual Report 2015 Page 7 Sparebanken Vest Annual Report 2015 Page 8 Organizational model

MANAGING DIRECTOR

JAN ERIK KJERPESETH

RISK MANAGEMENT CSR

FRANK JOHANNESEN HALLGEIR ISDAHL

OPERATIONAL INNOVATION AND SERVICES CUSTOMER EXPERIENCE

SIREN SUNDLAND JAN ERIK KJERPESETH holds the position until vacancy filled

RETAIL MARKET CORPORATE MARKET BJØRG MARIT EKNES RAGNHILD J. FRESVIK

Sparebanken Vest Annual Report 2015 Page 9 BØMLO TEATER

Bømlo Teater er en frivillig organisasjon med målsetting om å styrke Bømlo som et senter for scenekunst ut fra kompetanse, kvalitet, bredde og engasjement. Gjennom god samhandling og sunn økonomistyring skal Bømlo Teater skape en bærekraftig, åpen og inkluderende organisasjon. Bømlo Teater skal arbeide for å fremme musikk, sang, dans og drama mellom unge på Bømlo og i . Teateret har representert et viktig kulturelt innslag i lokalmiljøet helt siden starten i 1973. Med ulik alder og yrkesbakgrunn har en gruppe amatører tatt stadig nye utfordringer og nådd stadig nye mål. (Foto: Bømlo Teater)

Sparebanken Vest Annual Report 2015 Page 10 Corporate Management

Jan Erik Kjerpeseth (Born 1971) Managing Director since 31 October 2013. Joined the bank in 1999, previously filled the position of Deputy Managing Director. Chair of the board of Frende Liv, Frende Skade and Brage Finans. Former chair of the board of Bergen Chamber of Commerce and board member of Nets. Graduate in marketing from the Norwegian School of Marketing and holds an MBA from Heriot-Watt University and an Executive MBA in Brand Management from the Norwegian School of Economics (NHH).

Hallgeir Isdahl (Born 1956) Director of CSR since 21 December 2015. Joined the bank in 2008 as chief economist, and then became Director of SPV Markets in 2011 and in 2013 Director of Retail Market. Chair of the board of Eiendomsmegler Vest and MADE AS. Has previously worked as CEO of Finansbanken in Bergen. Has also held a number of positions in DNB, including head of DNB›s Private Banking activities, chief economist and investment strategist in DnB Investor, head of discretionary management in DnB Luxembourg and chief analyst and portfolio manager for Realforvaltning AS. Economist by education from the University of Bergen.

Ragnhild Janbu Fresvik (Born 1980) Director of Corporate Market since 27 November 2013. Joined the bank in 2012. At Sparebanken Vest, she has been senior business developer, head of investor relations and CFO. She has wide-ranging consulting and finance experience from Boston Consulting Group in Oslo, and later as Investment Manager with the private equity company Borea Opportunity Management. Former board member of Tide ASA and Sparebanken Vest Boligkreditt. Masters degree in business economics (siviløkonom) from the Norwegian School of Economics (NHH).

Bjørg Marit Eknes (Born 1969) Director of Retail Market since 21 December 2015. Has worked for Sparebanken Vest since 1997. Has wide- ranging management experience from various positions in Sparebanken Vest. Director of Business Support and Development since 2013 and previously filled the position of managing director of Sparebanken Vest Eiendomsforvaltning AS. She has previously worked for Sparebank and the insurance company KLP Forsikring. Board member of Bank ID Norge AS, Bergen Aquarium and Banksjef C.J. Eges Stipendielegat. Has a master`s degree in business economics from the Norwegian School of Economics (NHH), and an MBA from Bond University in Australia. Has completed the MBA Brand Management module at NHH, and the AFF Solstrand leadership programme.

Siren Sundland (Born 1971) Director of Operational Services since 21 December 2015. Director of HR and Corporate Communication since 2009. Joined the bank in 2007. She has worked in the field of brand management and strategic communication for a number of companies in Western Norway. Wide-ranging experience from various professional environments, including Bergen Academy of Art and Design, the Norwegian Broadcasting Corporation (NRK) and the newspaper Bergens Tidende. Chair of the board of Den Nationale Scene and board member of Eiendomsmegler Vest and NHH’s Advisory Board. Has a cand.philol. degree from the University of Bergen, majoring in Nordic literature and Executive MBA in Management Control at NHH.

Frank Johannesen (Born 1959) Director of Risk Management since 21 December 2015. Joined the bank in 1985. Has a very wide-ranging banking background and has held various management positions in the bank. Has been Director of Risk Management in Sparebanken Vest since 2002 and Director of Economy and Finance since 2013. Has a law degree from the University of Bergen as well as an Executive MBA in Strategic Management from the Norwegian School of Economics (NHH). He has also completed the AFF Solstrand leadership programme.

Sparebanken Vest Annual Report 2015 Page 11 Sparebanken Vest Annual Report 2015 Page 12 The Board of Directors

Trygve Bruvik (Born 1952) – Chair and member of the board since April 2008. Currently manages a family- owned property and investment company. Former Managing Director/CEO of Vesta from 1994 to 2002. Holds directorships in G.C. Rieber AS (deputy chair) and several smaller companies. He has previously held the offices of chair of the main board of the Norwegian Financial Services Association and chair of the main board of the Norwegian Insurance Association. Has a degree in business economics from BI Norwegian Business School and an engineering degree from Bergen Engineering College.

Marit Solberg (Born 1956) – Deputy chair Member of the board since April 2008. Chief Operating Officer Farming of Marine Harvest ASA. Currently holds a directorship in the Norwegian Seafood Export Council AS. Graduate from the University of Bergen with a Master’s degree in microbiology.

Øyvind Atle Langedal (Born 1965) Member of the board since April 2007. Deputy Managing Director of Coast Center Base AS, Ågotnes. Has been CFO/ Deputy Managing Director of Coast Center Base AS since 1998. Has previous experience from Økonomipartner Bergen AS, Rieber Skinn AS and Jebsens Rederi AS. Currently chair of the board of Vardø Barents Base AS and Maritime Waste Management AS and member of the board of Sambygg AS, Kirkenesbase AS and Helgelandsbase Holding AS. Graduate of the Bank Academy and has studied economics and management at NHHK (continuing and further education at NHH).

Richard Rettedal (Born 1971) Member of the board since April 2008. Managing Director of Sekal AS. Former CFO of Skanem AS and head of finance and administration at Roxar. Worked for Roxar in Dubai for a prolonged period. Board member of Multi Markets AS. MBA with specialisation in finance from the University of Wisconsin – Madison, Florida International University and the University of Stavanger.

Birthe Kåfjord Lange (Born 1973) Member of the board since April 2012. Director of NHH Executive. Former PLD manager for Statoil ASA. Former member of the board of Bergen Private Gymnas AS, the board of the Norwegian School of Economics (NHH), the nomination committee of BOB and various other offices. Deputy member of the board of directors of NHH. She has a PhD and degree studies from the NHH and a cand.mag degree from the University of Bergen/Bergen University College.

Arild Bødal (Born 1965) Member of the board since April 2011. Founder and general manager of Septik24 AS since 2003. General manager/business developer in Isco AS from 1998 to 2003, general manager of Karstad from 1996 to 1998 and CFO of Karstad from 1989 to 1996. Chair of the board of Smartek AS, Miljøservice AS, Johny Birkeland Transport, HØST Valuable Waste AS, Fjord Invest Såkorn, Gode Busser Holding AS, Vidre AS and NSM Bygginvest AS. Qualified as an authorised accountant at BI Norwegian Business School, has a university college degree in business and administration, studied business economics at NKS and took part of a Master’s degree in business administration (MBA) at Heriot-Watt University. Has also taken various management development courses at BI Norwegian Business School, NHH and the Norwegian University of Science and Technology (NTNU).

Berte-Elen Reinertsen Konow (Born 1960) Member of the board since April 2015. Konow is a lawyer and holds the post of law professor at the Faculty of Law at the University of Bergen. She has been the Vice-Dean for Research since 2013. Konow’s own research and teaching is related to the fields of contract law, mortgage law and private international law. Her work experience includes practising as an assistant advocate and a period as acting judge at Gulating Court of Appeal. She has been a member of Sparebanken Vest’s Control Committee. She chairs the Complaints Board for Insurance and Reinsurance Brokering Activities and is a board member of the Supervisory Council for Legal Practice. She has many years’ experience as a member of the faculty board at the Faculty of Law, as well as from various committees and councils at the University of Bergen.

Kristin Axelsen (Born 1966) Member of the board since April 2013 as an employee representative. Joined Sparebanken Vest in 2007. Has worked in banking since 1984. Authorised financial adviser. Bachelor’s degree in banking and finance from BI Norwegian Business School/the Bank Academy. Has served as vice chair of Ungt Entreprenørskap (Junior Achievement Young Enterprise) .

Anne-Marit Hope (Born 1959) Member of the board since April 2010 as an employee representative. Chief employee representative for the Finance Sector Union of Norway. Joined Sparebanken Vest in 1977. Member of the board of the Hordaland branch of the Finance Sector Union of Norway. Qualified financial adviser from BI Norwegian Business School. Authorised financial adviser.

Sparebanken Vest Annual Report 2015 Page 13 FARGESPILL

Fargespill er en eksplosiv og sterk forestilling presentert av omkring 80 barn og ungdom fra ca 30 ulike nasjoner, inkludert Norge, som bor i Bergen. Et nært, musikalsk møte med unge menneskers historie om hvem de er og hvor de kommer fra, avdekket gjennom musikk og dans fra deres respektive land. På en imponerende måte forenes disse musikalske perlene med urban ungdomskultur og norske musikktradisjoner. Fargespill har et solid rykte på seg for å framkalle både hjertevarme, tårer og mye glede. Fargespill debuterte med stor suksess under Festspillene i Bergen i 2004. (Foto: Thor Brødreskift)

Sparebanken Vest Annual Report 2015 Page 14 Board of Directors’ report

Sparebanken Vest achieved a pre-tax profit THE BANK’S EQUITY CERTIFICATE of NOK 1,396 million (NOK 1,493 million) The price of the bank’s equity certificate (ticker: in 2015, and a return on equity of 11% SVEG) showed a dividend-adjusted return of -9.47% (13.7%). The financial year 2014 was in 2015, while the equity certificate index at Oslo positively affected by the sale of the Børs (OSEEX) showed a return of -6.7%. The decrease compared with the equity certificate index shareholding in Nets AS for NOK 166 can be ascribed to the bank’s implementation of a million and the sale of some of the bank’s rights issue of equity certificate capital in the fourth properties for NOK 143 million. quarter 2015. Around 7.5 million SVEG equity certificates were traded in 2015. The figure is The profit for 2015 was positively affected adjusted for the issue with the ex-date 19 November by an increase in net interest and credit 2015. The adjustment factor was 0.822856, which commission income, lower costs and a means that all prices and shares traded are adjusted stable contribution to profits from correspondingly from the ex-date. associated companies. The negative The Board of Directors’ goal is that, over time, SVEG, contribution from financial instruments will yield an attractive risk-adjusted return for reduces the profit. investors. An investment in SVEG represents:

Good cost control has resulted in better cost • Pure exposure to the Norwegian economy development for the Group in recent years. • Exposure to Norway’s most attractive region with a Sparebanken Vest achieved a total cost sound customer base and good growth reduction of 5% in the parent bank from • A solid retail market portfolio that dominates the 2012 to 2015, corresponding to an average overall risk situation and provides access to favourable funding reduction of 1.7% per year during the • A big equity buffer with a large holding of primary period. The Board of Directors is satisfied capital with the profit performance in 2015. • A distribution policy that provides flexibility for self-financing even with attractive dividend levels • A high direct return

The Investor Relations contact is the bank’s liaison with capital market participants, including equity certificate holders, debt investors and analysts.

In the fourth quarter, the bank carried out a successful equity capital increase in the amount of NOK 750 million through a rights issue to existing equity certificate holders. The issue was carried out because of increased capital requirements on the Norwegian authorities’ part.

The capital increase was registered on 21 December 2015. Existing owners showed great interest in participating in the issue, which led to it being oversubscribed. The equity certificate capital in Sparebanken Vest is now NOK 1,475,850,425 divided between 59,034,017 equity certificates.

Sparebanken Vest Annual Report 2015 Page 15 The Board of Directors proposes that the General land-based insurance). Meeting adopt a cash dividend of NOK 1.10 (4.00) per equity certificate for 2015, corresponding to a The securities company Norne Securities AS direct return of 3.1%. increased its turnover by 19% in 2015 compared with 2014. The greatest improvement took place in THE NATURE OF THE BUSINESS Corporate Finance. Norne Securities will invest Sparebanken Vest is an independent, listed financial further in all business areas in 2016. services group that is engaged in banking and financing activities in the counties of Hordaland, At year-end 2015, Norne had more than 42,500 Rogaland and Sogn og Fjordane. The Group’s head customers and 43 employees divided between the office is in Bergen, and at the end of 2015, the bank offices in Bergen, Oslo and Vilnius. had 44 points of sale. The financing company Brage Finans AS had its fifth The group is engaged in estate agency business year of operation in 2015. It had 37 employees at through Eiendomsmegler Vest AS and home year-end. The company’s capital adequacy was mortgages through Sparebanken Vest Boligkreditt strengthened in 2015 through a subordinated bond AS. These two limited liability companies are wholly issue in the market. Brage is thereby well capitalised owned by the parent bank. On 1 July 2015, the in relation to meeting the capital adequacy bank’s wholly owned property company requirements, and the company had a Core Tier 1 Sparebanken Vest Eiendomsforvaltning AS was capital adequacy ratio of 13.7% at year-end 2015. merged with Sparebanken Vest. Brage enjoyed great success with its sales activities Sparebanken Vest is also the largest owner of the in 2015 and it increased its lending portfolio by 33% securities company Norne Securities AS, with a during the period. Car loans for private customers holding of 47.6%, and it is the largest owner of the were a strategic focus area in 2015, and all the 10 insurance company Frende Holding AS, with a owner banks have decided to distribute car loans holding of 39.7%. These companies are jointly through Brage. The company showed progress in owned with 14 other savings banks. this segment in the second half-year 2015, and substantial growth is also expected in 2016. The home mortgages company Verd Boligkreditt AS is jointly owned with eight independent savings STRATEGIC DIRECTION banks, and it is run by Sparebanken Vest Sparebanken Vest continues to pursue its vision Boligkreditt AS. Sparebanken Vest owns 40% of the adopted in 2014, which highlights its distinctive shares. Sparebanken Vest owns 49.9% of the nature as a savings bank: ‘Everything we do, we do shares in the leasing company Brage Finans AS, a to make life in Western Norway even better’. company that is jointly owned with nine other savings banks. The bank adopted and implemented measures aimed at achieving the company’s primary goals: a The bank’s ownership interests in the associated return on equity in excess of 11% and the companies help to supplement the range of services achievement of the customer promise: ‘Trust, and products offered by the bank. simplicity and local commitment – because it makes a difference’. The insurance company Frende Holding AS continued to make strong progress last year. The The digitalisation that has dominated the banking and company has two subsidiaries, Frende Skade­ financial sector in recent years increased further in forsikring and Frende Livsforsikring, which have a strength in 2015. Customers demand and expect total of 175 full-time equivalents, and recorded a digital services that are easy to use and have high combined pre-tax profit of NOK 188 million (NOK utility value. Sparebanken Vest has made the 182 million) and a return on equity of 17.1 (20.2)%. strategic decision that the development of the digital Combined, the companies have around 175,000 services of the future will largely be carried out by the customers and a market share of 3.51% (private bank itself in collaboration with selected partners.

Sparebanken Vest Annual Report 2015 Page 16 Sparebanken Vest’s strategic ambition is to bank will satisfy the new capital requirements, strengthen and consolidate its market position in which resulted in an equity issue in autumn 2015. Western Norway, create profitable growth and be There was also a strong emphasis in 2015 on a one of the simplest and most forward-looking banks management development programme for the in which to be a customer. bank’s senior management.

CORPORATE GOVERNANCE The Board of Directors has appointed four Sparebanken Vest’s principles and policy for committees as part of its work: corporate governance are based on the current • The Audit Committee is charged with ensuring that version of the Norwegian Code of Practice for Sparebanken Vest has an independent and Corporate Governance issued by the Norwegian effective external and internal audit function, and Corporate Governance Board (NUES), as well as financial and risk reporting that is in accordance applicable regulations in the area. with laws and regulations. • The Risk Committee is charged with ensuring that Sparebanken Vest’s principles and policy are Sparebanken Vest’s risk and capital management intended to ensure that its corporate governance is underpins the bank’s strategic development and in accordance with generally accepted and goal attainment, while at the same time ensuring recognised perceptions and standards, and in financial stability and acceptable asset compliance with laws and regulations. Moreover, the management. bank’s corporate governance shall ensure good • The Board’s Credit Committee, which deals with cooperation between its different stakeholders, such credit matters under the authorisation of the Board as owners of equity certificates, lenders, customers, of Directors. employees, governing bodies, management and • The Compensation Committee, which is tasked society as a whole. In the Board of Directors’ view, with ensuring that the bank has a competitive, but the bank’s corporate governance is satisfactory and not leading, pay policy that complies with the in compliance with its principles and policy. regulations for financial institutions, and is seen as motivating by the bank’s management in relation to Fifteen board meetings and one board conference implementing the adopted strategy and achieving were held in 2015. The Board of Directors’ main the goals set. focus has been on following up operations, strategy, risk and capital management, and on monitoring A full account of corporate governance in markets and framework conditions. The Board of Sparebanken Vest is provided in a separate section Directors has adopted an annual plan for its work, of the annual report. and it places great emphasis on ensuring that its members have the requisite knowledge and expertise. STATEMENT CONCERNING THE ANNUAL Throughout 2015, the bank’s manage­ment has been ACCOUNTS involved in a process aimed at shaping the bank of The annual accounts have been prepared on the the future. At year-end 2015, the Board of Directors basis of the going concern assumption and of the adopted significant changes to the company’s overall accounts for 2015, as well as development targets organisation in order to adapt the bank to future for next three years. customer needs and innovations. Sparebanken Vest’s consolidated and company The bank’s Articles of Association were amended accounts for 2015 have been prepared in with effect from 1 January 2016 in connection with accordance with International Financial Reporting the introduction of a new Financial Institutions Act. Standards (IFRS), the Financial Supervisory In that connection, the name of the bank’s supreme Authority of Norway’s Regulations relating to annual governing body was changed from Supervisory reports and accounts, and the Regulations relating Board to General Meeting. The Control Committee to the accounting treatment of loans and guarantees. was also dissolved. In the company accounts, the bank exercises its right to use a simplified form of IFRS. Consequently, In 2015, the Board has focused on ensuring that the dividend/group contributions from subsidiaries are

Sparebanken Vest Annual Report 2015 Page 17 included in the basis for the parent bank’s dividend Good cost control has resulted in better cost in the same year as they are earned. development for the Group in recent years. Sparebanken Vest achieved a total cost reduction of Changes in accounting principles implemented with 5% in the parent bank from 2012 to 2015, effect from 2015 are described in Note 1. corresponding to an average reduction of 1.7% per year during the period. The Group’s operating The annual accounts have been prepared in expenses amounted to NOK 1,443 million in 2015 accordance with applicable regulations. In the (NOK 1,470 million). The parent bank’s operating Board of Directors’ view, they provide a true and fair expenses amounted to NOK 1,199 million (NOK picture of the Group’s profit performance and 1,262 million). The reduction can primarily be financial position. ascribed to a reduction in payroll expenses and general administrative expenses. PROFIT PERFORMANCE Sparebanken Vest recorded a pre-tax profit of NOK Write-downs on loans and losses on guarantees 1,396 million in 2015 (NOK 1,493 million). That amount to NOK 185 million (NOK 410 million) for corresponds to a return on equity of 11% (13.7%). the Group, corresponding to 0.15% (0.35%) of The financial year 2014 was positively affected by gross lending. the sale of the shareholding in Nets AS for NOK 166 million and the sale of some of the bank’s properties The group’s return on equity is 11% (13.7%). The for NOK 143 million. Banking operations (excluding profit per equity certificate was NOK 6.32 (7.66). financial instruments and non-recurring items) The diluted profit is the same. showed significant progress in 2015, with a profit of NOK 1,403 million (NOK 1,103 million). The parent The Group’s assets under management amount to bank’s pre-tax profit amounted to NOK 1,049 million NOK 161.7 billion (NOK 147.1 billion), an increase of (NOK 1,226 million). NOK 14.6 billion compared with 2014. The parent bank’s assets under management alone amount to The profit for 2015 was positively affected by an NOK 106 billion (NOK 104.4 billion). increase in net interest and credit commission income, lower costs and a stable contribution to REVENUES profits from associated companies. The negative Net interest and credit commission income contribution from financial instruments reduces the Net interest income amounts to NOK 2,354 (2,320) profit. The bank has made active efforts in a highly million, corresponding to an increase of NOK 34 competitive market to reprice both its lending and million from 2014 to 2015. The parent bank’s net deposits portfolio in order to be competitive. interest income was NOK 1,708 million (NOK 1,562 million). The increase of NOK 146 million is largely The contribution from financial instruments is due to higher volume, and to the deposit margin negative in the amount of NOK ÷ 83 million (NOK more than compensating for the falling lending + 248 million). This is largely due to effects of the margin in the retail market. widening of spreads in the bank’s liquidity portfolio, especially in the second half-year. On a positive Lower money market interest rates have reduced note, the bank’s activities in customer brokerage the bank’s average financing costs in 2015. The and proprietary fixed-interest and currency trading credit mark-ups for long-term financing increased in made a substantial contribution. the second half-year 2015. This effect is compensated by the fact that new borrowings have Net commission income from payment transfers, largely been used to refinance older debt with a insurance and investment products continued to high credit mark-up. increase in 2015, with a contribution to profits of NOK 403 million (NOK 400 million). The develop­ The net interest for the Group amounted to 1.55% ment in associated companies was stable in 2015, (1.68%) of the average assets under management. with a contribution of NOK 70 million (NOK 74 million). Gross lending increased by NOK 10.4 billion to NOK

Sparebanken Vest Annual Report 2015 Page 18 129.9 billion (NOK 119.5 billion), corresponding to income increased by NOK 16 million compared with year-on-year growth of 8.7%. The growth in lending the year before. breaks down as 8.1% in the retail market segment and 10.9% in the corporate market segment. The contribution to profits from associated Underlying growth in the corporate market is 6% companies showed stable development throughout adjusted for currency effects and credit for 2015, with a combined contribution of NOK 70 Jonsvollskvartalet, which is now an associated million (NOK 74 million). company after the sale of shares in the fourth quarter. The parent bank’s net lending is up NOK OPERATING EXPENSES 6.5 billion on 2014. The Group’s operating expenses amounted to NOK 1,443 million in 2015 (NOK 1,470 million). Payroll The Group’s lending margin measured against the expenses for 2015 amounted to NOK 621 million. three-month NIBOR rate decreased by an average That is a reduction of NOK 13 million from 2014. of 31 basis points in 2015. The development in margins must be seen in conjunction with the Costs as a percentage of income excl. financial prevailing strong competition. instruments (C/I) were 47.6% in 2015 (49.3%).

Deposit volumes were reduced by 3.8% for 2015, The Group employed 803 full-time equivalents at the corresponding to NOK 2.5 billion. The net reduction end of 2015, compared with 813 in 2014. The in deposits breaks down as plus NOK 2.1 billion, or number of full-time equivalents in the parent bank 5.3%, in the retail market segment, and minus NOK has been reduced from 699 to 694. 4.6 billion, or 17.2%, in the corporate market segment. The reduction can be explained by WRITE-DOWNS ON LOANS AND GUARANTEES repricing of large financial deposits. The deposits Write-downs on loans and losses on guarantees margin measured against the three-month NIBOR amounted to NOK 185 million (NOK 410 million), rate improved by an average of 50 basis points in corresponding to 0.15% (0.35%) of gross lending. 2015. Individual write-downs in the retail market segment Net other operating income decreased to NOK 23 million (NOK 30 million). Net other operating income decreased to NOK 594 Group write-downs amount to NOK 56 million (NOK million (NOK 910 million). The reduction is largely 48 million). The increase in 2015 must be seen in due to the decrease of NOK 331 million in the conjunction with the somewhat more uncertain contribution from financial instruments compared macroeconomic situation in the region. The risk in with the corresponding period the year before. the retail market portfolio is still low and stable, however. Around 95% of the retail market portfolio The contribution from financial instruments is consists of loans secured by residential mortgage negative in the amount of NOK 83 million (NOK 248 with a low loan-to-asset-value ratio. million). This is largely due to effects of the widening of spreads in the bank’s liquidity portfolio, especially Individual write-downs in the corporate market in the second half-year. On a positive note, the segment amounted to NOK 539 million (NOK 473 bank’s activities in customer brokerage and million). Group write-downs amount to NOK 379 proprietary fixed-interest and currency trading have million (NOK 290 million). The increase in write- made substantial contributions, while 2014 was downs reflects the somewhat more uncertain positively affected by the bank’s sale of its macroeconomic situation in the region. shareholding in Nets AS (NOK 166 million). THE PARENT BANK’S ALLOCATION OF PROFIT Net commission income amounted to NOK 403 The parent bank’s profit after tax amounted to NOK million, compared with NOK 400 million in 2014. 884 million (NOK 1,121 million). Adjusted for a The income from Eiendomsmegler Vest’s estate change in the reserve for unrealised gains, the basis agency activities amounted to NOK 194 million in for dividend is NOK 980 million. 2015 (NOK 182 million). Total other operating

Sparebanken Vest Annual Report 2015 Page 19 The owner fraction for the allocation of profit in 2015 the retail market is secured by mortgages with a is 19.6%. The Board of Directors proposes a cash loan-to-asset-value ratio of less than 70%. The dividend of NOK 1.1 (4.00) per equity certificate for risk-adjusted return on the portfolio is good. 2015. That means a total dividend payment of NOK 65 million (NOK 127 million), which corresponds to The bank’s priority market segment in the corporate a distribution percentage of 33.8% (52.9%). At the market is small and medium-sized enterprises, and General Meeting on 16 March 2016, the Board of active efforts were made in 2015 to change the Directors will recommend that the dividend for 2015 structure of the portfolio. be paid as a cash dividend. Figure 1 Breakdown of gross lending

The Board of Directors also proposes allocating NOK 20 20 million (NOK 50 million) in donations for the 18 17,1 public benefit. That is equivalent to a distribution 16 15,3

percentage of 2.5% (5.4%). 14

12

After allocation of the profit for the year, the owner 10

fraction is 24.6 %. 7,5 8 7,0

6 4,2 NOK 127 million will also be transferred to the 3,9 equalisation reserve and NOK 768 million to the 4 bank’s primary capital. The proposed allocation of 2 profit takes account of the need to increase financial 0 0–50 50–150 150–> strength in order to meet the new and more 2014 2015 stringent capital requirements. The total retained profit is NOK 895 million in the parent bank and In the fourth quarter, the bank started repricing the amounts to 90.4% (84.2%). corporate market portfolio with expected effect from the first quarter 2016. The risk in the corporate RISK AND CAPITAL MANAGEMENT market portfolio is deemed to be moderate, and the Risk and capital management underpins the bank’s risk-adjusted return improved during the year. In strategic development and ambitions and is one of 2014, Sparebanken Vest carried out restructuring of the Board of Directors’ priority areas. Based on a number of commitments in default and potential quarterly reports, the Board evaluates the bank’s bad debt commitments in the corporate market risk and capital situation in relation to adopted portfolio. This reduced the downside risk in the control parameters. The exposure lies within the portfolio. With the exception of the fourth quarter bank’s defined risk profile. In the Board of Directors’ 2015, the level of defaults and other potential bad view, the bank’s guidelines and processes for risk debt in the portfolio has been relatively stable in and capital management function well. 2015. The increase in the fourth quarter was mainly due to one large commitment. The bank’s risk and capital tolerance is specified through targets and parameters. Risk-adjusted Defaults and other potential bad debt amounted to capital is calculated for all main areas. Through the NOK 1,256 million (NOK 1,119 million) for the bank’s risk and capital assessments (ICAAP1), corporate market and NOK 218 million (NOK 237 capital buffers and capital adequacy targets are set million) for the retail market. in order to safeguard the bank’s operations also under stressed market conditions.

Credit risk The risk in the bank’s retail market portfolio is stable and low. As much as 95% of the loan portfolio in

1) Internal Capital Adequacy Assessment Process

Sparebanken Vest Annual Report 2015 Page 20 Figure 2 Potential bad debt and commitments in default Total losses on loans and guarantees amounted to NOK 185 million in 2015. The net effect on profit/ 1600 5 % loss of individual write-downs amounted to NOK 89 1400 million for the year, while group write-downs 4 % 1200 amounted to NOK 97 million. The total percentage provided for in the portfolio was 0.77% (0.70%) at 1000 3 % year-end 2015. 800 1.119 1.080 1.092 1.053 1.256 2 % Figure 4: Total write-downs 600

400 0,98 % 0,94 % 0,92 % 0,87 % 0,99 % 0,9 1200 1 % 0,8 0,77 % 200 0,70 % 0,70 % 0,70 % 0,72 % 1000 237 230 229 220 218 0,7 0 0 % Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 0,6 800 Retail Corporate % of total

0,5 338 373 409 424 435 600 The more demanding macroeconomic situation 0,4 Capitalised write-downs (MNOK) 0,3 400 increases the risk in the part of the portfolio that is Write-downs as % of gross lendings

directly affected, especially offshore-related 0,2 200 enterprises. This has not manifested itself in 0,1 501 476 465 492 563

significantly higher losses in the bank’s lending 0,0 0 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 portfolio. This must be seen in conjunction with the Individual write-downs Group write-downs Write-downs as % of gross lendings fact that Sparebanken Vest has a relatively high proportion of retail market customers in its portfolio, Market risk and operational risk at the same time as the offshore exposure in the Sparebanken Vest’s interest rate and currency risk is corporate market is limited. On a positive note, the managed within limits adopted by the Board of weakening of the Norwegian krone has Directors and is considered to be low. The bank is strengthened the competitiveness of export exposed to credit spread risk, primarily through the industries. management of interest-bearing securities in the bank’s liquidity portfolio, and to a lesser extent In 2015, Sparebanken Vest made allowance for the through proprietary trading. The portfolio mainly somewhat more uncertain macroeconomic situation consists of securities issued by Norwegian banks, through higher group write-downs. Together with residential mortgage companies, municipalities, previously recognised write-downs, the bank, overall, county authorities, the Norwegian state and non- has a robust percentage provided for in its corporate financial enterprises. The bank’s credit spread risk market portfolio. The total percentage provided for is somewhat reduced in relation to year-end 2014. in the corporate market portfolio was around 3% at This is largely due to adaptation to new regulatory year-end 2015. requirements.

Figure 3: Write-downs in the corporate market portfolio The bank’s stock market exposure (excluding 1200 subsidiaries and associated companies) at the end of the fourth quarter amounted to NOK 380 million 1000 (NOK 531 million). In its management, the bank focuses on the total exposure and the concentration 800 in companies and industries. In the fourth quarter 338 373 409 424 435 600 2015, the bank wound up its trading portfolio in shares. Capitalised write-downs (MNOK) 400 Write-downs as % of gross lendings The identification, analysis and follow-up of 200 operational risk is addressed at a general level 501 476 465 492 563 through management confirmations, continuous 0 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 assessments and the registration of events. No Individual write-downs Group write-downs

Sparebanken Vest Annual Report 2015 Page 21 matters that are critical to the bank’s operations billion (NOK 19.3 billion). were uncovered during the year. The Group’s Liquidity Coverage Ratio (LCR) is 205%. Liquidity and financing For NOK and EUR (significant currencies), the LCR Sparebanken Vest’s liquidity has been managed is 200% and 177%, respectively. The reason why within the control parameters. In the Board’s view, the LCR is high in relation to regulatory require- the bank’s liquidity situation is satisfactory. ments (70%) is that the bank has built up its liquidity to redeem debts that mature in the first In 2015, the bank pursued a strategy whereby the quarter 2016. longest-term financing is raised by issuing covered bonds through the bank’s wholly owned subsidiary The Group has a well-diversified bond portfolio that Sparebanken Vest Boligkreditt AS. is invested in covered bonds, bonds issued by municipalities and county authorities, bank bonds Sparebanken Vest Boligkreditt carried out three and government bonds. The majority of the public issues in 2015. Two of the issues were in securities are denominated in NOK. EUR, while one was in NOK. The EUR issues were both worth EUR 500 million (corresponding to The total capital market financing amounted to NOK approx. NOK 8.8 billion in total), while the issue in 79.6 billion (NOK 64.5 billion). The bank’s relative NOK was NOK 3.5 billion. Altogether, the company proportion of covered bonds at the end of the fourth issued new bonds (covered bonds) for NOK 16.6 quarter was approximately 70% of the bank’s capital billion in 2015. Sparebanken Vest carried out 16 market financing. The proportion of financing with a private placements under the bank’s EMTN remaining term to maturity of more than three years programme in 2015. The financing is diversified in was approximately 43% at the end of the year. relation to currency, term to maturity and size. Rating The total volume of covered bonds issued by Sparebanken Vest is rated by Moody’s and Fitch Sparebanken Vest Boligkreditt AS at year-end 2015 Ratings. On 12 May 2015, Moody’s upgraded was approximately NOK 56.5 billion. Sparebanken Vest’s rating from A2 Review for Upgrade to A1 Stable. The bank’s rating from During 2015, Norges Bank cut the key interest rate Moody’s for long-term borrowing is A2 with a from 1.25% to 0.75%. The money market interest negative outlook. Fitch confirmed all the bank’s rate (3-month NIBOR) was on average about 24 ratings on 19 May 2015, including the bank’s rating basis points above the key interest rate in 2015. The for long-term borrowings of A-, with a stable outlook. corresponding figure in 2014 was 22 basis points. Capital adequacy

The credit spreads (the interest rate mark-up on The bank’s Core Tier 1 capital adequacy ratio, taking 3-month NIBOR) for the bank’s borrowing in the into account the Basel I floor, increased by 1.5 bond market increased during the year. At the end percentage points in 2015 to 13.7% (12.2%). This is of 2015, the credit spread for five-year senior bond due to the issue of NOK 750 million in equity issues by Sparebanken Vest was at a higher level certificate capital, and profit accumulation. The than at the beginning of 2015 – a widening from bank meets the applicable combined minimum and approximately 60 basis points to approximately 130 buffer requirement of at least 11% Core Tier 1 basis points. capital at year-end 2015.

The Group’s liquidity indicator (six-month rolling From 1 July 2016, the countercyclical capital buffer average) at year-end 2015 was 103.9% (104.6%), will be increased to 1.5 percentage points, which while its deposits/loans ratio was 49.6% (56%). The will increase the total requirement to 11.5% plus an reduction in the deposits/loans ratio must be seen addition for Pilar II. Sparebanken Vest already meets in conjunction with the planned repricing of parts of this requirement. The bank wishes to meet the bank’s deposits volume. At year-end, the regulatory minimum requirements through Group’s net liquidity was approximately NOK 22.0 maximum use of hybrid capital (1.5%) and

Sparebanken Vest Annual Report 2015 Page 22 supplementary capital (2%). At year-end 2015, the profit accumulation are important explanations for level of hybrid capital was 1.3% and supplementary the increased Core Tier 1 capital adequacy ratio. In capital 1.9%. The overall capital adequacy is 16.9%. the first quarter 2015, even more stringent requirements were introduced for housing loan In letters sent to the regional savings banks in the models, which increased the calculation basis third quarter 2015, the Financial Supervisory pursuant to IRB in this quarter. The effect of the Authority of Norway expressed an expectation of a new requirements on the bank’s Core Tier 1 capital level of 14.5% for Core Tier 1 capital at the end of ratio was approximately 1 percentage point. 2016. The Board of Directors of Sparebanken Vest immediately took note of this expectation and Sparebanken Vest is still in dialogue with the decided that the bank should strengthen its equity Financial Supervisory Authority of Norway about the certificate capital through a rights issue of NOK 750 use of advanced IRB for the corporate market million to existing equity certificate holders. The portfolio. Clarification is expected in the first issue was carried out in the fourth quarter. There half-year 2016. was great interest in the issue, with the result that it was oversubscribed. The Board is very pleased with Figure 6: Capital adequacy IRB

the implementation of the transaction. As a result of 20 % 18,6 % the issue and after carrying out the bank’s ICAAP 17,9 % 18 % 16,7 % 2,0 % process in the fourth quarter 2015, the bank has 16,3 % 16,4 % 2,3 % 2,1 % increased its target for the Core Tier 1 capital 16 % 2,1 % 2,0 % 1,4 % 1,6 % adequacy ratio to 14.5% by year-end 2016. The 14 % 1,4 % 1,4 % 1,4 % level of the addition for Pilar II is quantified in the 12 % bank’s ICAAP process. Feedback from the Financial Supervisory Authority on the bank’s assessments is 10 %

expected in 2016. In the Board’s assessment, the 8 % bank’s capital buffers are satisfactory seen in 14,0 % 12,8 % 13,2 % 13,0 % 15,1 % 6 % relation to the total regulatory requirements. 4 % Figure 5: Capital adequacy, Basel I floor 2 %

18 % 12,716,9 % 0 % 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 15,6 % 15,7 % 15,6 % 16 % 12,7 % 12,7 % 12,7 % 12,715,3 % 1,9 % Total Capital 17,9 % 16,3 % 16,7 % 16,4 % 18,6 % 2,0 % 2,0 % 1,9 % Tier 2 Capital 2,3 % 2,1 % 2,1 % 2,0 % 2,0 % 1,9 % 1,3 % 14 % Add. Tier 1 Cap. 1,6 % 1,4 % 1,4 % 1,4 % 1,4 % 1,4 % 1,4 % 1,4 % 1,3 % Core Tier 1 Capital 14,0 % 12,8 % 13,2 % 13,0 % 15,1 % 12 %

10 % THE RETAIL MARKET Sparebanken Vest has seen positive development in 8 % the retail market throughout 2015. At the end of the 6 % year, the bank had 260,214 retail customers, and it 12,2 % 12,3 % 12,3 % 12,2 % 13,7 %

4 % had made great progress in prioritised customer segments. 2 %

0 % 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 The number of retail customers increased by around Total Capital 15,6 % 15,7 % 15,6 % 15,3 % 16,9 % 1% in 2015, and there was 8.1 % growth in lending Tier Capital 2,0 % 2,0 % 1,9 % 1,9 % 1,9 % Add. Tier 1 Cap. 1,4 % 1,4 % 1,4 % 1,3 % 1,3 % activities, which is slightly higher than the general Core Tier 1 Capital 12,2 % 12,3 % 12,3 % 12,2 % 13,7 % credit growth in the economy. Loans to retail customers constitute 76% of the bank’s lending Pursuant to IRB, the bank’s Core Tier 1 capital portfolio, corresponding to NOK 98 billion (NOK 91 adequacy ratio is up 1.1 percentage points in 2015, billion) at 31 December 2015. Deposits in the retail and it was 15.1% (14.0%) at the end of the year. market have also increased by 5.3 %, and The overall capital adequacy ratio is 18.6% (17.9%). amounted to NOK 43 billion (NOK 41 billion) at the The effect of the equity certificate capital issue and end of the year.

Sparebanken Vest Annual Report 2015 Page 23 Increased diversification of income has been an new solutions quickly on the market will be priority important part of the bank’s strategy in recent years. areas in the retail market segment in Sparebanken Important business areas in this context have been Vest in 2016. insurance, and savings and investments. Both of these areas have seen solid growth during 2015, THE CORPORATE MARKET and make a significant contribution to other income. At year-end 2015, Sparebanken Vest had more than Saving in funds has shown strong growth. 10,000 corporate customers. There was a good increase in customers in 2015 as a result of targeted The bank’s own quarterly surveys show that prospecting for new SME customers. At the same customer satisfaction continues to be high. This is time, there were fewer losses of customers in 2015 reflected in the bank being perceived as an easy – fewer than in the preceding year. The increase in bank to use, and our customers having a positive lending in 2015 ended at 10.9% and most of the impression of our advisers. growth was in the SME segment. Adjusted for currency effects and Jonsvoll, the growth in lending Adjustments were made to our network of branch in 2015 was 6%. The average lending growth in the offices in 2015, nine of which were closed down preceding three years was 3.4% in the corporate following a closure decision in 2014. The trend market, which is below the average Q2 growth for towards increased use of digital banking and non-financial undertakings in the same three-year banking services has gained further ground. The period. change in customer behaviour increased in pace in relation to the year before, and there was a marked The growth in lending to the corporate market will decrease in the use of branch offices and strong continue to be characterised by a conscious policy growth in the use of online banking and mobile of strengthening the bank’s capitalisation, and the banking services. The decrease in the use of branch lending growth target for 2016 is 2.5%. At year-end offices is particularly linked to the reduction in 2015, gross lending to the corporate market transactions, and 67% fewer retail customers used segment was NOK 31.6 billion (NOK 28.5 billion), over the counter services in 2015 than in 2104. which is 24% of the bank’s total lending.

Intense competition and associated pressure on After a period of increasing competition and margins, tighter regulation and changed customer pressure on lending margins, the trend reversed in behaviour all require further rationalisation and cost the fourth quarter 2015. This is due, among other adjustments. Throughout 2015, the bank developed things, to more stringent capital requirements, an new self-service solutions that our customers increase in credit spreads and a slight increase in demand. In parallel, through systematic work at our risk for parts of the portfolio. Towards the end of the branch offices, we have offered customers help to fourth quarter, the price of loans to the corporate use self-service solutions. The growth in self-service market was therefore increased in order to improve through digital platforms has contributed to greater the risk-adjusted return on the portfolio. efficiency and more forward-looking customer services. In 2015, around 80% of the bank’s loans Deposits from the corporate market was reduced by to retail customers were confirmed by electronic 17% during 2015, due to withdrawals of a few large signature. individual deposits. Work on adjusting the profitability of the bank’s deposits from corporate The competition situation in the bank market was customers continued in 2015 as well, and deposit characterised by intensive competition throughout margins measured against the three-month NIBOR 2015, largely driven by the biggest banks. This rate improved from minus 0.23% to plus 0.15% increased competition means stronger pressure on during 2015. At the end of 2015, the deposits the bank’s margins, which we assume will continue portfolio amounted to NOK 22.3 billion (NOK 26.9 during 2016 as well. Creating better customer billion). experiences digitally, in the Direct Bank and at branch offices, working more efficiently through There has also been extensive customer-oriented automation and robot technology, and introducing activity in the Markets area in 2015, among other

Sparebanken Vest Annual Report 2015 Page 24 things because of high volatility in the currency responsibility to society to do more than just make a markets. The total customer revenues from currency profit. The interest organisations Finance Norway and fixed-interest products ended at NOK 34 million (FNO) and the Norwegian Savings Banks in 2015, an increase of NOK 6 million from 2014. Association, and the Confederation of Norwegian Enterprises (NHO), have all placed corporate social Customer satisfaction increased in the corporate responsibility high on the agenda. In Sparebanken market in 2015. New service concepts and a Vest, corporate social responsibility is an integral stronger focus on digital development in the part of business operations, among other things corporate market as well will be important means of through activities for the public benefit. maintaining and strengthening customer satisfaction in 2016. This work was strengthened in 2012 through the implementation of a dedicated CRS strategy. The After several major restructuring processes in the development of the strategy is based on best corporate market portfolio in 2013 and 2014, 2015 practice in companies the bank wishes to compare was characterised by somewhat more moderate itself with, and a structure has been chosen that individual write-downs. As a result of the more highlights how the bank works to promote demanding macroeconomic outlook, the bank sustainable value creation along three dimensions, increased its group provisions in the corporate namely financial value creation, corporate social market portfolio in 2015. The bank has moderate responsibility and climate and environmental exposure to the offshore sector. The total exposure considerations. to the offshore sector amounts to around 1.5% of the bank’s overall lending. Despite this, the bank Through activities and donations for the public has made allowance in its capital planning for benefit, the bank cooperates, among other things, somewhat higher losses in the corporate market in on projects that address the challenges posed by 2016 and 2017. climate change. Sparebanken Vest’s corporate social responsibility is also reflected in the vision Further portfolio growth in 2016 will continue to ‘Everything we do, we do to make life in Western target a diversified SME portfolio. The proportion of Norway even better’. commercial property in the portfolio will be given less weight, while the bank will focus more on other Sparebanken Vest endeavours to demonstrate industries in Western Norway, for example fisheries. corporate social responsibility in all its activities. Equity investments and activities and donations for EQUITY INVESTMENTS the public benefit are therefore described in the Sparebanken Vest’s equity investments are intended Board of Directors’ report. to make a positive contribution to the bank’s earnings by delivering a return on equity that is in ACTIVITIES AND DONATIONS FOR THE PUBLIC accordance with the bank’s goals. In 2015, BENEFIT Sparebanken Vest wound up its portfolio of shares Pursuant to the Savings Banks Act, savings banks in listed companies. can allocate part of their profit after tax and dividend to projects for the public benefit. Equity investments amounted to NOK 380 million (NOK 531 million) as of 31 December 2015. In Over several years, Sparebanken Vest has defined addition, NOK 2,813 million (NOK 2,765 million) such activities as a strategic priority area. When was paid into subsidiaries as equity. NOK 746 donating funds from Sparebanken Vest for the million (NOK 650 million) was invested in associated public benefit, our goal is to ensure that these funds, companies in which the bank has holdings of which belong to the community, provide the best between 20% and 50%. possible return. Our assessments of which collaborative projects the bank should say yes to are CORPORATE SOCIAL RESPONSIBILITY (CSR) based on our vision and objective. The projects There has been increasing awareness in recent should contribute to raising and sharing years that the business community has a competence, and they should stimulate

Sparebanken Vest Annual Report 2015 Page 25 interdisciplinary cooperation and sustainable value which it started with in 2014. Various gatherings creation in Western Norway. It is also a goal to have been held for 90 managers, focusing on create good customer relations and to motivate strategy, change management, coaching and Sparebanken Vest’s employees. performance management. These topics are part of a more comprehensive management development Every year, we award funding to projects that are of programme, which will continue in 2016. great value and benefit to Western Norway. Our intention is always that everything we do, we do to THE BOARD OF DIRECTORS make life in Western Norway even better, and we In the election in 2015, Øyvind A Langedal, Arild base the donations on three main perspectives: Bødal and Kristin Axelsen (employee representative) Upbringing and Education, Business and Industry, were re-elected for two years. Berte-Elen R Konow and Sport and Culture. was elected as a new board member for two years.

Based on the profit for the financial year 2014, the WORKING ENVIRONMENT board proposed in 2015 to allocate NOK 50 million The bank has done work on a new organisation to activities and donations for the public benefit. survey that will be carried out in 2016. The survey, The bank’s gift fund stood at NOK 175 million at 31 which will focus on research and best practice, has December 2015 been considerably simplified in relation to previous years. EMPLOYEES As of 31 December 2015, the Group had 803 In 2015, as before, the bank spent substantial full-time equivalents, 694 of whom were affiliated to resources on joint activities aimed at encouraging the parent bank. and promoting team spirit in the organisation. The bank is still investing in various social activities for Sparebanken Vest makes continuous endeavours to its employees, including a company sports ensure that the bank’s staff have the competence association, walking group, art club and a company they need to do their jobs. In recent years, the bank orchestra. has devoted extensive resources to ensuring that its financial advisers meet the requirements of the ETHICS authorisation scheme for financial advisers (AFR) The bank’s Code of Ethics is of central importance and that those who sell and give advice on insur- to Sparebanken Vest and its employees. All the ance meet the requirements of the approval scheme bank’s employees have in-depth knowledge about for general insurance (GOS). This is in order to and an understanding of the rules, which are ensure that customers are given correct information discussed both in the introduction given to new and that financial advisers have the right attitudes employees and in annual performance appraisal and skills. Competence updating has been carried and development interviews. No breaches of the out in 2015 in ethics, AFR, GOS and related Code of Ethics were reported in 2015. common topics. Several new members of the bank’s staff have also qualified as authorised financial SICKNESS ABSENCE AND INCLUSIVE advisers. WORKPLACE Overall sickness absence in Sparebanken Vest was The bank has continued its work of rationalising and 4.5% in 2015, up by 0.2% from 2014. Of the total, modernising its training channels by increasing the 3.2% (1.9%) was long-term absence and 1.3% focus on e-learning, webcasts and the use of video, (2.4%) short-term absence. The bank has a good among other things. Moreover, videoconferencing system of cooperation on sickness absence and a has become a common tool for holding meetings strong focus on reducing the proportion of between employees across geographical distances. employees on long-term sick leave. Through its Management and employee development are key participation in the Inclusive Workplace (IA) topics in relation to work and organisational Agreement, it is important for the bank to work development. In 2015, the bank continued to focus systematically on reducing and following up strongly on management development at all levels, sickness absence. The bank’s target is to have a

Sparebanken Vest Annual Report 2015 Page 26 work attendance rate of at least 96.5 % in 2018. mentally conscious in relation to its use of paper, By taking a proactive role and cooperating with the waste management and recycling. corporate health service, the bank is able to offer employees guidance on exercise, diet and health. The bank has a broadly differentiated corporate The bank also makes arrangements for employees portfolio. Several enterprises to which the bank has who, for various health reasons, require adaptations furnished loans are engaged in business activities to be made in the workplace. that have an impact on the natural environment.

The bank has a comprehensive plan for its work on Through extending credit, the bank has an indirect HSE (Health, Safety and the Environment) and IW opportunity to influence the natural environment. (Inclusive Workplace), which it discusses with safety This factor is therefore considered in connection delegates, the corporate health service, employee with the bank’s credit assessments and is reported representatives and the Norwegian Labour and on in a separate CSR report. Welfare Administration (NAV). The HSE Calendar ensures continuity in the bank’s HSE work and Sparebanken Vest reports on a number of shows how partners are involved. The good, parameters that, together, are intended to create strengthened cooperation and dialogue the bank awareness among managers and employees about enjoys with NAV and the corporate health service environmentally conscious behaviour. This concerns was maintained in 2015. requirements relating to reducing energy consumption, waste management, sorting waste at HUMAN RIGHTS source, HSE procedures and focusing on the Sparebanken Vest supports and respects the environment with respect to procurements, protection of international human rights. This is transport and travel. underpinned by the Group’s strategy to report on corporate social responsibility, as well as by policies It is also the bank’s clear goal that the new building and requirements for suppliers and other partners. in Jonsvollskvartalet, whose construction was completed in October 2015, will successfully CORRUPTION integrate good architecture and environmentally Sparebanken Vest has developed a set of proce- friendly/energy-efficient solutions. The intention is dures intended to detect any violations of corruption that the building shall achieve environmental rules. This applies to corruption in relation to certification, and that a separate environmental plan employees, customers and other partners. Internally, with main goals and sub-goals will be implemented. the issue is specifically addressed in the Code of Ethics. In addition, laws and regulations serve as OUTLOOK guidelines. No matters that can be defined as The macroeconomic situation corruption have been reported in 2015. Growth in the world economy continues to be moderate, but the drivers appear to be changing. It GENDER EQUALITY is particularly USA where the cyclical upturn seems Sparebanken Vest makes determined efforts to to have progressed furthest. In December, for the promote gender equality and prevent unequal first time since 2006, the American Federal Reserve treatment and discrimination. The bank’s Board of raised the key interest rate. Growth has decreased Directors consists of nine members. Four of the in the emerging economies. Uncertainty has elected members are women. The corporate increased about whether the Chinese economy will management team consists of six members, with an experience a hard landing. There is still a lot of equal number of men and women. spare capacity in the eurozone, and the indications are that growth will remain low. Global growth of THE NATURAL ENVIRONMENT AND CLIMATE around 3% is expected this year. Among our trading CHANGE partners, overall growth is expected to be lower, at Sparebanken Vest does not use input factors or 2.25%. production methods that directly pollute the natural environment. The bank endeavours to be environ- Oil prices have fallen even further recently and oil

Sparebanken Vest Annual Report 2015 Page 27 has been traded at around 30 dollars a barrel. The Sparebanken Vest fall in the oil price is related to the substantial Changed customer behaviour, increased surplus on the supply side, OPEC’s unwillingness to digitalisation and tighter regulation will entail big and reduce production and weaker prospects for growth changed demands on banking operations in the in the emerging economies. The lower oil price has time ahead. In autumn 2015, Sparebanken Vest weakened growth prospects in the Norwegian started a project called ‘Customer 2016’, which economy and contributed to a weaker exchange rate includes offensive measures aimed at addressing for the Norwegian krone. future trends. A number of measures have now been announced that will speed up the development Norway’s economy is expected to see a further of new products and services for which there is slow-down in growth in 2016 as a result of the fall in customer demand. oil prices and a reduction in oil-related investments. The effects of the lower activity level and prospects The bank wants to be at the forefront of new digital of lower earnings in oil-related businesses are now developments and is increasing its focus on spreading to other sectors where growth has not innovation and digital services, while also been affected until now. Higher unemployment and implementing changes to its organisation and low wage growth will probably lead to growth in distribution system in order to adapt the bank to private consumption and to house prices decreasing new customer behaviour, expectations and needs. throughout 2016. As a consequence of changed distribution and new On the other hand, the weakening of the exchange service concepts, the establishment of a new direct rate has improved industry’s competitiveness. The bank, increased automation and utilisation of robot traditional export sector and public sector demand technology, and simplification of the bank’s work will help to maintain growth in the mainland economy. processes, Sparebanken Vest has decided to GDP growth of around 1% is expected in the main­ reduce the number of its branch offices from 44 to land economy this year. Norges Bank is expected to 35 and the number of full-time equivalents by cut the key interest rate once or twice in 2016. around 100 by the end of 2016. In some parts of the organisation, there is also a need to recruit new Western Norway expertise. Sparebanken Vest’s own index for Western Norway, Vestlandsindeks, shows that the negative trend has This will underpin the bank’s financial targets, which been reinforced. The expectation index is now are a return on equity of more than 11% and a Core falling more than the performance index. The Tier 1 capital ratio of 14.5% at the end of 2016. It activity level is decreasing in several industries and will also help to ensure a flat cost development in unemployment is rising. the coming year.

Sogn og Fjordane is a positive exception in Western During 2016, Sparebanken Vest will incur Norway, while Rogaland is the county in Western restructuring costs of around NOK 110 million. Norway where optimism has been weakest in the past eighteen months. For the city of Stavanger Competition is strong in the market, and seen in isolation, the performance index for the Sparebanken Vest expects it to remain so. Interest fourth quarter dropped under 50 for the first time. rates are expected to remain low this year, and the pressure on lending margins in the retail market is The expectation index, which measures the expected to persist. In the corporate market, the expected development in the next six months, fell bank wants to increase its risk-adjusted return and even more strongly. The gap between the will introduce measures to increase its product performance and expectation index has never been margins in 2016. smaller than it is now, which indicates that the optimism about the future that has characterised Demand for loans is satisfactory, although it enterprises in Western Norway in the last four years decreased slightly in December. Sparebanken Vest’s is now waning. target maximum lending growth for 2016 is 5% in

Sparebanken Vest Annual Report 2015 Page 28 the retail market and 2.5% in the corporate market. reduction in the calculation basis and profit accumulation, this resulted in a Core Tier 1 capital Priority will be given to growth in profitable ratio of 13.7% at year-end. Sparebanken Vest thus segments, and segments where Sparebanken Vest satisfies the current regulatory requirements and will has comparative advantages, primarily in the retail grow its capital organically going forward through market and among small and medium-sized positive profit accumulation. enterprises. The bank’s operations have been good in 2015, and The bank’s cost development has been good. The a sound foundation has been laid for the positive annual average cost development in the parent bank profit performance trend to continue in 2016. in the period 2012 to 2015 is minus 1.7%. The measures announced in connection with the THANKS TO CUSTOMERS, BUSINESS ASSOCIATES, presentation of the fourth quarter report are OFFICERS OF THE COMPANY, THE MANAGEMENT intended to ensure flat cost development also in AND EMPLOYEES 2016 and 2017. In a time of major change in the banking sector, the Board of Directors wishes to thank the bank’s Write-downs are expected to increase somewhat in employees and officers for their great enthusiasm, 2016 in relation to the current level. Sparebanken excellent efforts and constructive cooperation in Vest expects write-downs to be in the region of NOK 2015. The Board also wishes to thank the bank’s 250–300 million. customers, equity certificate holders and other partners for their continued support for Sparebanken Vest carried out an issue of equity Sparebanken Vest in 2015. The Board will work certificate capital in the fourth quarter in order to actively to continue this positive cooperation in the strengthen its capital adequacy. Combined with a time ahead.

Bergen, 31 December 2015 / 18 February 2016 The Board of Directors of Sparebanken Vest

Trygve Bruvik Marit Solberg Richard Rettedal Chair of the Board Deputy Chair

Birthe Kåfjord Lange Arild Bødal Øyvind A. Langedal

Berte-Elen Reinertsen Konow Anne Marit Hope Kristin Axelsen

Jan Erik Kjerpeseth Managing Director

Sparebanken Vest Annual Report 2015 Page 29 Sparebanken Vest Annual Report 2015 Page 30 Accounting and notes

Income statement ...... 32 Statement of comprehensive income ...... 32 Balance sheet...... 33 Cash flow statement...... 35 Changes in equity...... 36 Note 1 Accounting principles...... 36 Note 2 Accounting estimates and discretionary assessments...... 41 Note 3 Segment information...... 42 Note 4 Classification of financial instruments...... 44 Note 5 Fair value of financial instruments valued at amortised cost ...... 46 Note 6 Valuation hierarchy for financial instruments at fair value...... 47 Note 7 Financial risk management ...... 48 Note 8 Risk classification of the credit portfolio ...... 50 Note 9 Loans broken down by type of receivable and geographical area ...... 52 Note 10 Commitments broken down by industry and the retail market ...... 53 Note 11 Capitalised write-downs of commitments ...... 55 Note 12 Development in losses and commitments in default ...... 56 Note 13 Secured debt ...... 58 Note 14 Loans to and receivables from credit institutions ...... 58 Note 15 Guarantees and secured debt ...... 59 Note 16 Certificates and bonds ...... 60 Note 17 Shareholdings in subsidiaries and associated companies ...... 61 Note 18 Market risk ...... 63 Note 19 Interest rate sensitivity ...... 64 Note 20 Currency positions ...... 65 Note 21 Financial derivatives ...... 66 Note 22 Shares ...... 67 Note 23 Liquidity risk/ remaining term to maturity ...... 69 Note 24 Net interest and credit commission income ...... 70 Note 25 Interest on individual balance sheet items ...... 71 Note 26 Net other operating income ...... 72 Note 27 Operating expenses ...... 73 Note 28 Pensions ...... 74 Note 29 Tax ...... 78 Note 30 Intangible assets ...... 80 Note 31 Tangible fixed assets...... 82 Note 32 Debt to credit institutions ...... 83 Note 33 Offsetting ...... 84 Note 34 Deposits from customers ...... 85 Note 35 Securitised debt ...... 86 Note 36 Subordinated loan capital and subordinated bond loans ...... 88 Note 37 Capital adequacy ...... 89 Note 38 The equity certificate ...... 92 Note 39 Transactions with related parties ...... 95 Note 40 Disputes ...... 99 Auditor’s Report ...... 100 Control Committee ...... 102 Responsibility Statement ...... 103 Group key figures – 5 years...... 104 Group key figures – per quarter for two years...... 108 Corporate governance ...... 113 Subsidiaries and Associated Companies ...... 122 Regional map...... 123

Sparebanken Vest Annual Report 2015 Page 31 Income statement

PARENT BANK GROUP 1 Jan.–31 Dec. 1 Jan.–31 Dec. 2014 2015 Notes 2015 2014 3 594 3 173 Interest income and similar income 4 653 5 265 2 032 1 465 Interest expenses and similar expenses 2 299 2 945 1 562 1 708 Net interest and credit commission income 24 2 354 2 320

490 489 Commission income and income from banking services 489 490 89 85 Commission expenses and expenses relating to banking services 86 90 724 450 Income from shareholdings in group companies and associated companies 70 74 218 -135 Net gain/(loss) on financial instruments -83 248 3 4 Other operating income 204 188 1 346 723 Net other operating income 26 594 910 2 908 2 431 Net operating income 2 948 3 230

974 934 Payroll and general administration expenses 28,39 1 083 1 131 100 102 Depreciation 30,31 118 109 188 163 Other operating expenses 242 230 1 262 1 199 Total operating expenses 27 1 443 1 470 1 646 1 232 Profit/loss before write-downs and tax expense 1 505 1 760

-12 0 Net profit on tangible fixed assets 76 143 408 183 Write-downs of loans and losses on guarantees 12 185 410 1 226 1 049 Profit/loss before tax expense 1 396 1 493

105 165 Tax expense 29 349 305 1 121 884 Profit/loss for the financial year 1 047 1 188

Majority share of the profit/loss for the period 1 047 1 188 Minority share of the profit/loss for the period 0 0

Allocations -127 -65 Dividend on equity certificates 51 95 Transferred to/from the reserve for unrealised gains -882 -768 Transferred to primary capital -113 -127 Transferred to the equalisation reserve -50 -20 Transferred to gift fund -1 121 -884 Total allocations

7,23 5,34 Equity certificates' share of profit/loss divided by the number of equity certificates 6,32 7,66 7,23 5,34 Diluted profit/loss per equity certificate 6,32 7,66

Statement of comprehensive income

PARENT BANK GROUP 1 Jan.–31 Dec. 1 Jan.–31 Dec. 2014 2015 2015 2014 1 121 884 Profit/loss for the period 1 047 1 188 -129 45 Estimate variance, pensions 48 -133 35 -12 Tax effect of estimate variance, pensions -13 36 0 3 Effect of change in tax rules 3 0 -94 36 Other profit/loss elements that will not be reclassified to profit or loss after tax 38 -97 0 0 Other profit/loss elements that will be reclassified to profit or loss after tax 0 0 -94 36 Total other profit/loss elements in the period 38 -97 1 027 920 Total profit/loss for the period 1 085 1 091

Majority share of the total profit/loss for the period 1 085 1 091 Minority share of the total profit/loss for the period 0 0

Sparebanken Vest Annual Report 2015 Page 32 Balance sheet

PARENT BANK GROUP 31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Noter 2015 2014 Assets 2 209 631 Cash in and receivables from central banks 631 2 209 8 529 5 171 Loans to and receivables from credit institutions 14 2 167 1 556 67 006 73 539 Net lending 8,9,10,11,12,13 128 927 118 643 531 380 Shares at fair value through profit or loss 22 380 531 20 143 20 666 Certificates and bonds 16 21 455 16 525 1 290 1 029 Financial derivatives 21 6 728 5 571 2 765 2 813 Shareholdings in group companies 17 650 746 Shareholdings in associated companies 17 841 681 0 38 Deferred tax asset 36 0 0 292 263 Other intangible assets 30 279 315 81 130 Tangible fixed assets 31 177 781 29 539 Prepaid expenses 21 29 882 5 Other assets 57 229 104 407 105 950 Total assets 161 663 147 070

Liabilities and equity 5 377 5 883 Debt to credit institutions 32 4 849 4 350 66 732 63 946 Deposits 33,34 63 900 66 448 18 536 20 687 Securitised debt 35 77 069 62 151 1 463 1 607 Financial derivatives 21 1 611 1 463 168 183 Accrued expenses and pre-paid income 196 187 282 226 Pension obligations 28 226 308 19 0 Deferred tax 29 12 63 2 2 Other provisions for liabilities 2 2 138 238 Tax payable 29 414 334 2 426 1 838 Subordinated loan capital 36 1 838 2 426 363 277 Other liabilities 232 244 95 506 94 887 Total liabilities 150 349 137 976

794 1 476 Equity certificates 38 1 476 794 0 0 Own equity certificates 0 0 568 617 Share premium reserve 617 570 351 490 Equalisation reserve 555 478 1 713 2 584 Total equity certificate capital 2 648 1 842

6 904 7 713 Primary capital 7 733 6 953 175 175 Gift fund 175 175 14 14 Compensation fund 14 14 7 093 7 902 Total primary capital 7 923 7 142

95 0 Reserve for unrealised gains 0 0 Other equity 166 109 0 577 Hybrid capital 577 0 Minority interests 0 1

8 901 11 063 Total equity 11 314 9 094

104 407 105 950 Total liabilities and equity 161 663 147 070

Sparebanken Vest Annual Report 2015 Page 33 Bergen, 31 December 2015 / Bergen 17 February 2016 The Board of Directors of Sparebanken Vest

Trygve Bruvik Marit Solberg Richard Rettedal Chair of the Board Deputy Chair

Birthe Kåfjord Lange Arild Bødal Øyvind A. Langedal

Berte-Elen Reinertsen Konow Anne Marit Hope Kristin Axelsen

Jan Erik Kjerpeseth Managing Director

Sparebanken Vest Annual Report 2015 Page 34 Cash flow statement

PARENT BANK GROUP 1/1–31/12 1/1–31/12 2014 2015 2015 2014 Cash flows from operations 3 600 3 380 Interest, commission and customer fees received 5 192 5 621 -1 517 -1 030 Interest, commission and customer fees paid -1 014 -1 505 598 508 Interest received on other investments 375 421 -680 -550 Interest paid on other borrowings -1 400 -1 552 -547 -467 Payments to other suppliers for goods and services -553 -585 -620 -597 Payments to employees, pension schemes, empl. Nat. Ins. contr., tax withholdings etc. -735 -754 -158 -139 Payment of taxes -343 -338 5 8 Dividend received for securities held for trading purposes 8 5 -69 231 Payments made/received on purchase/sales of securities held for trading purposes 231 -69 612 1 344 Net cash flow from operations 1 761 1 244

Cash flows from investment activities 148 -6 718 Payments made/received on loans to customers -10 572 -6 872 -3 099 3 358 Payments made/received on receivables and tied-up loans to financial institutions -606 -233 31 10 Dividend received for securities not held for trading purposes 10 31 297 22 Payments made/received on purch./sales of shares not held for trading purposes 12 298 -523 -361 Payments made/received on purch./sales of other securities not held for trading purposes -4 770 -1 028 474 722 Dividend/group contributions received from group companies 13 0 93 207 Payments received from investments in assoc. comp./subs. 0 89 -65 -250 Payments made relating to investments in assoc. comp./subs. 0 -65 2 0 Payments received from sales of operating assets etc. 876 256 -84 -104 Payments made on purchases of operating assets etc. -277 -372 -2 726 -3 114 Net cash flow from investment activities -15 314 -7 896

Cash flows from financing activities 4 464 -2 790 Payments made/received on customer deposits -2 549 4 269 -584 417 Payments made/received on deposits from Norges Bank and other financial institutions 526 1 357 500 0 Payments received relating to subordinated loan capital 0 500 -360 0 Payments made in repayment of subordinated loan capital 0 -360 6 699 6 593 Payments received on issuing bond debt 26 187 14 128 -6 596 -4 575 Payments made relating to bond debt -12 735 -11 233 0 731 Payment received of new equity capital 731 0 -128 -184 Dividends paid / Donations for the public benefit -185 -128 3 995 192 Net cash flows from financing activities 11 975 8 533

1 881 -1 578 Net cash flow for the period -1 578 1 881

1 881 -1 578 Net change in cash and cash equivalents -1 578 1 881 328 2 209 Cash and cash equivalents at beginning of period 2 209 328 2 209 631 Cash and cash equivalents at end of period 631 2 209

Sparebanken Vest Annual Report 2015 Page 35 Changes in equity

Own Share Equity equity pre- Equalis Compen- certifi- certifi- mium -ation Primary Gift sation Other Hybrid Minority GROUP cates cates reserve reserve capital fund fund equity capital1) interests Total Equity at 31 Dec. 2013 794 -2 570 352 6 134 175 14 97 0 1 8 135

Profit/loss 2014 240 932 16 1 188 Statement of comprehensive income -19 -75 -3 -97 Purchase/sale of own equity certificates 2 2 4 Distributed dividend and donations -95 -40 -135 Equity at 31 Dec. 2014 794 0 570 478 6 953 175 14 109 0 1 9 094

Profit/loss 2015 192 788 67 1 047 Statement of comprehensive income 9 27 2 38 Issue of new equity certificates 682 49 731 Correction of previous years' errors in AC 6 6 Purchase/sale of own equity certificates 0 0 0 Merger Sparebanken Vest Eiendomsforvaltning AS -2 4 15 -17 0 Distributed dividend and donations -127 -50 -1 -178 Reclassification of hybrid capital as of 31 Dec. 577 577 Equity at 31 Dec. 2015 1 476 0 617 555 7 733 175 14 166 577 0 11 314

Own Reserve Equity equity Share Equa- Compen- for un- certifi- certifi- premium lisation Primary Gift sation realised Hybrid PARENT BANK cates cates reserve reserve capital fund fund gains capital1) Total Equity at 31 Dec. 2013 794 -2 568 257 6 095 175 14 146 0 8 047

Profit/loss 2014 240 932 -51 1 121 Statement of comprehensive income -19 -75 -94 Purchase/sale of own equity certificates 2 2 4 Allocated dividend and donations -127 -50 -177 Equity at 31 Dec. 2014 794 0 568 351 6 904 175 14 95 0 8 901

Profit/loss 2015 192 788 -95 884 Statement of comprehensive income 9 27 36 Issue of new equity certificates 682 49 731 Purchase/sale of own equity certificates 0 0 0 Merger Sparebanken Vest Eiendomsforvaltning AS 4 16 19 Allocated dividend and donations -65 -20 -85 Reclassification of hybrid capital as of 31 Dec. 577 577 Equity at 31 Dec. 2015 1 476 0 617 490 7 713 175 14 0 577 11 063

1) Subordinated bonds that do not satisfy the definition of a financial liability pursuant to IAS 32 are reclassified as equity as of 31 Dec. 2015

Note 1 Accounting principles

GENERAL INFORMATION In addition, Frende Holding AS, Norne Eierselskap AS, Verd The consolidated accounts for Sparebanken Vest comprise the Boligkreditt AS, Brage Finans AS and Jonsvollkvartalet AS are parent bank Sparebanken Vest and the wholly owned subsidiaries included as associated companies. See Note 17 for more details. Eiendomsmegler Vest AS with subsidiaries, Sparebanken Vest Boligkreditt AS and six single-purpose property companies. Unless otherwise specified, all amounts in the accounts and

Sparebanken Vest Annual Report 2015 Page 36 notes to the accounts are stated in NOK million. The consolidated ities and what triggering event obliges companies to include levies accounts have been prepared on the basis of the going concern as a liability in the accounts. The interpretation is most relevant to assumption. quarterly accounts and to when the fee to the Norwegian Banks’ Guarantee Fund should be recognised in the accounts. A bank that Sparebanken Vest’s equity certificates are listed on Oslo Børs. The is a member of the Guarantee Fund as of 1 January, is obliged to bank is located in the counties of Hordaland, Sogn og Fjordane pay the fee for the whole year. It is not regulated whether a bank and Rogaland, and its head office is in Bergen. The address of the that withdraws from the scheme is entitled to reimbursement of head office is Jonsvollsgaten 2, NO-5011 Bergen. any excess fee paid. Hence, it is argued that the whole fee should be recognised as a liability in the accounts for the first quarter. The 2015 annual accounts for the Sparebanken Vest Group were Precedence and equal treatment considerations warrant pro-rata considered and adopted at a board meeting on 18 February 2016. reimbursement in the event of cancellation of membership. Sparebanken Vest has therefore continued its practice of accruing The General Meeting is the bank’s supreme governing body. the fee as a monthly expense. This was discussed throughout 2015 and, in a circular of 19 November 2015, the Financial BASIS FOR THE PREPARATION OF THE ANNUAL ACCOUNTS Supervisory Authority of Norway pointed out that it expects the The consolidated accounts have been prepared in accordance with banks to discontinue their practice of accruing the fee with effect International Financial Reporting Standards (IFRS) as adopted by from the first quarter 2016. Sparebanken Vest will therefore the EU and published by the International Accounting Standards consider including the whole fee as an expense in the first quarter Board (IASB), and which are mandatory from 31 December 2015 2016.

The consolidated accounts are based on the principles of historical CONSOLIDATION PRINCIPLES cost accounting. The consolidated accounts include the parent bank, subsidiaries and associated companies, including underlying subsidiaries and Amortised cost is used for the valuation of financial assets and associated companies. The accounting principles are applied liabilities, with the exception of financial instruments at fair value consistently to the recognition of shareholdings in subsidiaries through profit or loss (including financial derivatives) and financial (and associated companies) and are based on the same reporting instruments designated for hedge accounting. periods as for the parent company.

Amortised cost is defined as the amount the instrument is initially Intercompany transactions and outstanding accounts, including measured at in the accounts (cost price) minus repayments of intercompany profit and unrealised gains and losses, are elimi- principal, with an addition or deduction for accumulated amortisa- nated when the consolidated accounts are prepared. tion of all differences between cost price and the nominal amount, minus all write-downs. Subsidiaries Subsidiaries are defined as companies in which the parent bank Fair value is defined as the price that would be received for selling has a controlling influence over the company’s operations (actual an asset or paid for transferring a liability between independent control). A controlled company is one in which the investor has market participants on the measurement date. power over the investee, is exposed or has rights to variable returns from the investee, and has the power to control the For financial instruments subject to hedge accounting, the hedging activities of the investee that materially affect the return. instruments are recognised at fair value and the hedged items at fair value for the hedged risks. The concept of control means that a consolidation obligation must also be considered for companies in which the bank does not have The consolidated accounts have been prepared on the basis of a majority shareholding. In addition, a consolidation obligation uniform accounting principles for similar transactions and events can arise in certain situations as a result of a loan, if the loan under otherwise identical circumstances. agreement entails such extensive rights that they could result in control. Such rights must be distinguished from ordinary rights the Sparebanken Vest’s company accounts have been prepared in bank has to protect its loans. accordance with a simplified form of IFRS. The same principles apply when using simplified IFRS for the company accounts as Subsidiaries are included in the consolidated accounts from the under IFRS, with the exception of the recognition of dividends, date on which actual control is transferred to the Group. Invest- group contributions and other distributions relating to the result ments in subsidiaries are recognised in the company accounts in for the financial year. In the company accounts, the proposed accordance with the cost method. dividend and donations for distribution are recognised in the year that forms the basis for the distribution. Associated companies An associated company is a unit in which the Group has Preparing annual accounts and using IFRS require the use of esti- considerable influence, but not a controlling interest. Considerable mates. The application of the international standards also requires influence is deemed to exist if an enterprise directly or indirectly the management to make discretionary assessments. Areas that to (e.g. through subsidiaries) controls 20 per cent or more of the a great extent involve such discretionary estimates, a high degree voting rights in the enterprise invested in, unless it can clearly be of complexity, or areas in which assumptions and estimates have a established that this is not the case. Conversely, if an enterprise material bearing on the parent bank or consolidated accounts, are directly or indirectly (e.g. through subsidiaries) controls less than described in Note 2. 20 per cent of the voting rights in the enterprise invested in, the enterprise is not deemed to have considerable influence unless it CHANGES IN ACCOUNTING PRINCIPLES can clearly be established that the enterprise has such influence. The Group applied the following new standards and amendments However, the fact that an investor owns a significant holding or a in 2015. majority holding does not preclude another enterprise from having considerable influence. Investments in associated companies IFRIC Interpretation 21 Levies are recognised in the consolidated accounts in accordance with The interpretation concerns levies imposed by government author- the equity method, and in the company accounts in accordance

Sparebanken Vest Annual Report 2015 Page 37 with the cost method. On the acquisition date, the investment is gain, or that are of such a nature that a sale would be considered recognised at acquisition cost. in the event of an attractive offer, in the category financial instruments held for trading purposes. Derivatives are also Business combinations classified in this category insofar as they are not designated for Business combinations are recognised in accordance with the hedging purposes. acquisition method. The consideration is measured at fair value on the acquisition date. Direct acquisition costs are expensed as they Derivatives are recognised in the balance sheet at fair value arise, with the exception of issue costs and expenses relating to when the derivative contract is entered into, and thereafter at the the raising of loans. current fair value. For more information about the scope and use of derivatives in the Group, see Note 21. Acquired assets and liabilities are recognised in the balance sheet at fair value in the Group’s opening balance. If the consideration Financial instruments classified for recognition at fair value through exceeds the value of identifiable assets and liabilities, the profit or loss difference is recognised as goodwill. For more details relating to Financial instruments classified for recognition at fair value how goodwill is treated for accounting purposes, see the separate through profit or loss are recognised at fair value excluding section under intangible assets. If the acquisition cost is lower transaction costs. Fair value is also used in subsequent valuations. than the value of identifiable assets and liabilities (badwill), the difference is recognised on the date of the transaction. Badwill Financial instruments are classified in this category if one of the is entered under the accounting line ‘Net gain/(loss) on financial following criteria is met: instruments’. • The classification eliminates or significantly reduces accrual accounting differences for gains and losses on hedging instru- Contingent considerations are classified as a liability pursuant to ments and hedged items in connection with financial hedging. IAS 39 and recognised at fair value in subsequent periods. The • The financial instruments are part of a portfolio that is managed adjustment of contingent considerations in subsequent periods is and valued on the basis of fair value in accordance with a recognised in accordance with relevant standards. documented risk management or investment strategy.

SEGMENT INFORMATION Financial assets initially classified for recognition at fair value The Group’s activities are divided into the following segments: through profit or loss include fixed-interest loans, investments the Corporate Market (CM), the Retail Market (RM), Treasury in certificates and bonds, as well as shares.Financial liabilities and Estate Agency activities. Operating expenses are allocated at fixed interest rates are also assigned to this category. This directly, with the exception of IT expenses, staff-related costs and includes debt to credit institutions, deposits, securitised debt and depreciation. The classification is based on internal management subordinated loans and subordinated bonds at fixed interest rates. reporting and resource allocation. Financial assets recognised at fair value through profit or loss are RECOGNITION OF INTEREST AND FEES recognised at fair value on acquisition, and transaction costs are Interest income is taken to income using the effective interest rate charged to income. Subsequent measurement is at fair value. The method. This entails recognition of nominal interest income and fair value of listed investments is based on the market price on amortisation of establishment fees after the deduction of direct the balance sheet date. In the case of unlisted securities where establishment costs, as they arise. The effective interest rate there is no active market, the Group values bonds and certificates method is used for the recognition of interest for both balance using prices from Nordic Bond Pricing AS. The fair value of other sheet items valued at amortised cost and balance sheet items securities is stipulated using various valuation techniques. The valued at fair value through profit or loss. valuations are based on the last issue price, traded prices known to the Group and discounted cash flows. In the case of securities Fees that are direct payment for services rendered are taken to in which there is no trading, the value is based on available income as the services are delivered. The accounting item ‘Net accounting information, mainly in order to test for the need for other operating income’ includes fees and commission from write-downs and any obvious excess values. payment transfer, the issuing of guarantees, estate agency and insurance sales. See Note 26 for further specification. The value of the fixed-interest loans is estimated by discounting the cash flows using a risk-adjusted discount factor that takes FINANCIAL ASSETS AND LIABILITIES market players’ preferences into account. The discount factor is Financial assets and liabilities are valued and classified in calculated on the basis of an observable swap interest rate with accordance with IAS 39, and presented in accordance with IFRS the addition of a margin requirement. 7. Note 4 specifies the volume for each main group of financial instruments classified in the different measurement categories. The fair value of financial instrument liabilities is calculated by discounting the cash flow from the loans using the required rate Recognition and derecognition of return derived from the zero coupon curve. The credit spread Financial assets and liabilities are recognised in the balance sheet on interest-bearing securities is changed on the basis of an when the Group becomes a party to the instrument’s contractual overall assessment that takes account of observed trading in the terms. Financial assets and financial liabilities are derecognised market, credit margin reports from various brokers, and internal when the advantage or liability that follows from the contractual evaluations. A change in the credit spread will affect the required terms is met, cancelled or terminates. rate of return in that the supplement added to the zero coupon curve will change. Financial instruments at fair value through profit or loss The buy-back of securities issued by the bank is netted against This category has two sub-categories: financial instruments held securities debt in the balance sheet. for trading purposes, and financial instruments initially classified for recognition at fair value through profit or loss. Realised gains/losses and changes in the value of financial instruments at fair value through profit or loss, including dividends, Financial instruments held for trading purposes are presented in the accounts under ‘Net gain/(loss) on financial The bank has classified shares and bonds acquired for short-term instruments’ in the period in which they arise.

Sparebanken Vest Annual Report 2015 Page 38 Financial instruments valued at amortised cost translated at the exchange rate on the balance sheet date. Lending and receivables at floating interest rates are valued at Currency items are largely hedged by matching them with amortised cost. Lending and receivables are defined as non-de- corresponding items on the other side of the balance sheet, or by rivative financial assets with fixed or determinable payments that using derivatives. are not traded in an active market. Lending is initially valued at fair value with the addition of direct transaction costs. In periods Income and expenses in foreign currency are translated into NOK after the initial measurement, lending is valued at amortised cost at the rates on the transaction date. based on the effective interest rate method. If there is objective evidence of a decline in the value of individual loans or groups of TANGIBLE FIXED ASSETS loans, the loans are written down. The amount of the write-down Tangible fixed assets are valued at historical cost and depreciated is calculated as the difference between the balance sheet value over the asset’s expected useful life. and the current value of future expected cash flows, based on the expected life of the loan. Write-downs are recognised in the period All of the Group’s properties are considered to be operating assets the objective evidence arises, and are classified as a loss expense. for own use, and the accounting treatment is in accordance with IAS 16. The properties are initially valued at historical cost and Interest income from loans is recognised under net interest also in depreciated over their expected useful life. Different elements cases where a write-down has been carried out. Interest income with different useful lives must be differentiated and depreciated on written-down loans is recognised using the original effective separately. interest rate and on the basis of the written-down loan. Changes in a loan’s interest rate that reflect changes in the market interest Ordinary depreciation is based on the cost price, and assets are rate do not affect the value of the loan. depreciated on a straight-line basis over the useful life of the asset. The depreciation period and method are assessed every year to Certificates and bonds that are held to maturity are recognised at ensure that they are in accordance with the economic realities of amortised cost. They are initially recognised using the transaction the fixed assets in question. price with an addition for direct transaction costs. Recognition in the profit and loss account and subsequent value measurements The ordinary depreciation for the year is included in operating are based on the effective interest rate method as described expenses for the year. in the section on the taking to income of interest and fees. For subsequent value measurements, the amortised cost is set to the On derecognition, any gains or losses are recognised under ‘Net present value of contractual cash flows during the expected term profit on tangible fixed assets’. to maturity, discounted by the effective interest rate. INTANGIBLE ASSETS Interest income relating to these instruments is included under the Developed software accounting item Net interest income. Software development is recognised in the balance sheet and classified as an intangible asset when the value is deemed to Financial liabilities at floating interest rates are recognised in the be material and the asset is expected to have lasting value. In balance sheet at amortised cost. The liability is initially valued at connection with software development, the use of own resources fair value with the addition of direct transaction costs. In periods is capitalised insofar as expenses incurred can be measured after the initial measurement, the loan is valued at amortised cost in a reliable manner. Costs relating, among other things, to based on the effective interest rate method. pre-planning, implementation and training are expensed as they arise. Capitalised software that has been developed by the bank is Financial instruments designated for hedge accounting depreciated using the straight-line method over its expected useful The Group uses hedge accounting to achieve an accounting life. Depreciation commences on the date the software is available treatment that reflects how interest rate risk and currency risk are for use in the company, so that software under development is managed for long-term borrowings relating to the housing credit recognised at cost price until the development is completed. company. This leads to a comparison in the income statement of gains and losses on bonds issued at fixed interest rates and/or Whether a write-down is necessary as a result of the expected foreign currency (hedged item) with gains and losses on pertaining economic benefits being less than the balance sheet value is interest rate and currency swaps (hedging instrument). This is continuously assessed. recognised as fair value hedging. Goodwill Formal earmarking and documentation of the hedging relationship Goodwill is the difference between the acquisition cost of a takes place when the hedging relationship is established. There is business and the fair value of the Group’s share of net identifiable a clear, direct and documented connection between fluctuations in assets in the business on the acquisition date. Each goodwill item the value of the hedged item that are due to the hedged risk and in the balance sheet is allocated to cash flow-generating units fluctuations in the value of the financial derivatives. The hedging that benefit from the purchased asset. The choice of assessment is documented with reference to the Group’s risk management unit is based on whether it is possible to identify and separate strategy, clear identification of the hedged item and the hedging cash flows relating to the business in question. Goodwill is tested instrument, a clear description of the hedged risk and a descrip- annually for possible value depreciation and is recognised in the tion of why the hedging is expected to be effective. The hedging balance sheet at acquisition cost minus write-downs. The write- instruments are valued at fair value and entered under ’Net gain/ down test of capitalised goodwill is carried out by discounting (loss) on financial instruments’ in the income statement. expected future cash flows from the assessment units.

CURRENCY Acquired customer portfolio The Group’s presentation currency is Norwegian kroner. It is also The value of the customer portfolio is included in the cost price the functional currency of the parent company, subsidiaries and of acquisitions. The value is set as the future cash flow, without associated companies. taking into account the customer’s right to renewal. The customer portfolio is depreciated using the straight-line method over the The bank’s receivables and liabilities in foreign currency are expected contract period.

Sparebanken Vest Annual Report 2015 Page 39 TAX POST BALANCE SHEET EVENTS Deferred tax and deferred tax assets are recognised in the balance Events that occur after the balance sheet date are disclosed in sheet in accordance with IAS 12 Deferred Tax. accordance with IAS 10. The information concerns events that are not recognised in the consolidated financial accounts, but whose The tax expense in the income statement includes both the nature makes them material to assessing the business. tax payable for the period and the change in deferred tax. The deferred tax/deferred tax asset is calculated at a rate of 25% of CASH FLOW STATEMENT net temporary differences between accounting and tax values The cash flow statement is broken down into cash flows from at the end of the financial year. Tax-increasing and tax-reducing operations, investment activities and financing activities. temporary differences that are reversed or can be reversed in the same period are offset and entered net. Cash flows from operations are defined as current interest, commission and fees related to lending, borrowings and deposits, The deferred tax asset is capitalised on the basis of expectations interest relating to liquidity, unpaid operating expenses and direct of taxable income through earnings in future years. and indirect taxes paid. Liquidity flows relating to securities held for trading purposes are also classified here. Tax payable in the balance sheet is the tax payable on the profit for the year, tax payable on capital assets and tax payable on group Investment activities are defined as cash flows from changes in contributions received. the nominal lending volume, cash flows from securities transac- tions not held for trading purposes and investments in operating PENSION OBLIGATIONS assets and real property. The Group has both defined benefit and defined contribution schemes. See Note 28 for more details. Cash flows relating to the volume of deposits, the raising and repayment of subordinated loans and bond debt and equity are Defined benefit scheme defined as financing activities. Pension obligations are calculated in accordance with IAS 19. Financial assumptions used to calculate the pension obligations EQUITY are updated on the balance sheet date, including the discount rate, Equity consists of equity certificate capital, primary capital, the which is based on market interest rates on the balance sheet date. reserve for unrealised gains, other group equity and minority Reference is made to Note 28 for further information and assess- interests. ments relating to the financial and actuarial assumptions used. The equity certificate capital includes paid-up capital linked The net pension obligation is calculated and entered as a to equity certificates, own holdings of equity certificates, the long-term liability in the accounts. Net pension obligations are premium reserve and the equalisation reserve. The primary capital the difference between the gross pension obligation, which is the includes paid-up and retained primary capital, the gift fund and present value of expected future pension benefits, and pension compensation fund. assets in the insurance fund and the pension premium fund. In the parent bank, the reserve for unrealised gains consists of the Pension expenses are divided into three components in the income increase in the value of financial instruments where the principles statement: pension earnings, net interest expenses and change in used for valuation pursuant to IFRS deviate from the principles set value. The earned pension entitlements and net interest expenses out in Norwegian GAAP. for the period are presented under ordinary profit/loss. The effect of deviations between estimated parameters and final parameters, Other group equity consists of retained equity in subsidiaries and and the return on the pension assets over and above the net associated companies after the establishment of the Group, and interest expense, are included in the statement of comprehensive the effect of equity eliminations in the consolidated accounts. income in the period in which they arise. When buying own equity certificates, the purchase price including The pension expense for the year is entered net in the income direct costs will be recognised as a reduction in equity. The statement under ‘Payroll and general administration expenses’. nominal value of own equity certificates is entered as a negative amount on a separate line under equity certificate capital. Any Defined contribution scheme purchase price in excess of the nominal value is deducted from The defined benefit scheme was closed to new members in 2007 the bank’s primary capital. and a voluntary transition to a defined contribution scheme was offered. The contributions are recognised in the accounts and Hybrid capital consists of subordinated bonds that do not satisfy accrued as payroll expenses. See the note on the breakdown the definition of ‘financial liability’ in IAS 32. between the two schemes. The profit for the year is allocated to the equity certificate owners CONTINGENT LIABILITIES/ PROVISIONS and primary capital in proportion to the ratio between the equity A provision has been made for contingent liabilities in accordance certificate capital plus the premium reserve, and primary capital with IAS 37. For a provision to be made, a contingent liability plus the compensation fund. The part of the year’s profit that must exist as a result of previous events, and it must be highly is allocated to equity certificate capital and not distributed as likely that the liability will have to be met. The provision has been dividend is allocated to the equalisation reserve. calculated as the present value of future payments required to In the consolidated balance sheet, the proposed dividend and meet the liability. distribution of donations are classified as part of equity until the final resolution has been adopted by the General Meeting. The proposed dividend and donations for distribution had not been formally decided on the balance sheet date and thus do not meet UPCOMING AMENDMENTS TO STANDARDS AND the criteria for being defined as a liability under IAS 37. INTERPRETATIONS In the company accounts, dividends and donations are recognised Below is an overview of standards and amendments to existing in the financial year that forms the basis for the allocation. standards that have not entered into force, and where the Group

Sparebanken Vest Annual Report 2015 Page 40 has not chosen early application. The matters discussed focus business model and the characteristics of the individual financial on amendments that are expected to have consequences for the asset. A financial asset is measured at amortised cost if the Group’s future reporting. objective of the company’s business model is to hold the asset in order to receive the contractual cash flows, and the cash flows Amendment of IFRS 3 - Business combinations. Note that from the asset are solely payments of instalments and interest on contingent considerations classified as assets or liabilities must be the principal outstanding. The standard is expected to affect the measured at fair value on each reporting date. Group’s accounts, particularly as a result of a new model for the recognition and measurement of losses on financial instruments at IFRS 15 Revenue from Contracts with Customers. The standard amortised cost. IFRS 9 applies with effect from accounting years introduces a new model for the recognition of revenue from that start on or after 1 January 2018. The EU has not approved customer contracts. The standard is expected to have a limited the standard. The Group has not completed its evaluation of the effect on the Group, and it will enter into force for the financial effects of IFRS 9. year starting 1 January 2017. The standard has not been approved by the EU. Amendment of IAS 1 – Clarification of disclosure requirements. The amendments explain and clarify the guidelines on materiality, IFRS 9 Financial Instruments. IFRS 9 will replace the present presentation requirements and how to structure notes to the IAS 39. In IFRS 9, measurement is determined by the company’s accounts. The amendments have not been approved by the EU.

Note 2 Accounting estimates and discretionary assessments

When preparing the annual accounts in accordance with IFRS, risk properties. The assessment is based on objective indications of the Group’s management has used estimates and assumptions a fall in value having occurred on the balance sheet date that can be that affect the amounts recognised for assets, liabilities, equity linked to the Group. The calculation of the need for write-downs is and profit/loss. The estimates used are based on discretionary based on the bank’s risk classification system, which is intended to assessments and assumptions that were deemed to be realistic on (be able to) identify impaired payment status based on observable the balance sheet date. New information and future events may and registered data. Any impairment in the portfolio as a result of lead to significant changes in estimates with pertaining changes in macroeconomic factors that have not been taken into account in the recognised amounts. The Group’s most important estimates and models shall be identified by reviewing loss events at industry and assumptions are discussed below. geographical level. Based on qualitative assessments performed by the customer divisions, necessary adjustments are estimated for Losses on loans and guarantees industry and geographical factors in the bank’s risk classification If there is objective evidence of one or more events having occurred system. since the initial recognition of the asset that are expected to entail a risk of reduced debt-servicing ability, an individual loss assessment Fair value of financial instruments is carried out for the commitment. Objective events could be default The fair value of financial instruments that are not traded in an of payment, illiquidity or other material financial problems on the active market is determined using various valuation techniques. part of the debtor. This is based on assumptions about what the market will use as the basis for the valuation of corresponding financial instruments and The bank’s loss assessments will be the result of a process that the information available on the balance sheet date. See the notes involves the business areas and important credit environments. on financial instruments and the statement on accounting principles for a description of the techniques used. Considerable discretion The amount of the write-down is determined based on an must be exercised in the valuation of financial instruments that are assessment of the difference between the balance sheet value (loan not traded in an active market. principal + accrued interest on the valuation date) and the present value of future cash flows discounted on the basis of the effective Fixed-interest loans: interest rate over the useful life of the loan. Write-downs are Pursuant to IFRS, the valuation shall be based on an assessment classified as a loss expense in the income statement. of what an external investor would have assumed when investing in corresponding loans. A well-functioning market does not exist Estimates of future cash flows are based on experience data and for the purchase and sale of fixed-interest loans between market discretion based on conditions that existed on the balance sheet players. The value of the fixed-interest loans is estimated by date. When estimating write-downs on individual customers, both discounting the cash flows using a risk-adjusted discount factor that the current and expected future financial position is taken into takes market players’ preferences into account. The discount factor account. For commitments in the corporate market, the market is calculated on the basis of an observable swap interest rate with situation for the customer, the market conditions in the sector the addition of a margin requirement. in question and general market conditions of significance to the commitment are taken into account. The possibilities for restructur- When estimating the margin requirement, the bank looks at observa- ing, refinancing and recapitalisation are also assessed. The overall ble market interest rates for corresponding loans. The swap interest assessment of these factors forms the basis for estimating future rate element of the discount factor fluctuates continuously, while cash flows. The discounting period is estimated on an individual the observable market interest rates for corresponding loans does basis or based on experience data about the period up until a not change as frequently. The market players’ margin requirement is solution is found to the conditions that have led to a fall in the value thereby not directly observable, and it is estimated on the basis of of the commitment. the difference between the observable market interest rates and the swap interest rate over a given period. Since the margin requirement Commitments that are not identified by individual valuations or that is not directly observable, there is uncertainty attached to the have been subject to an individual assessment, and for which no calculation of the fair value of fixed-interest loans. individual write-down has been carried out, will be included in the assessment unit for group write-downs. When assessing the need For the volume of financial instruments classified at level 3 for write-downs, the loans are broken down into groups with similar (subjective elements in the valuation), reference is made to

Sparebanken Vest Annual Report 2015 Page 41 Note 6. It also provides information about sensitivity relating to the Pension obligations parameters used in the calculations. The present value of pension obligations depends on financial and actuarial assumptions. Key assumptions include the discount rate, Impairment of goodwill future wage growth, pension adjustments, the expected return on For all assessments units, tests are carried out to test for possible pension assets, plus demographic factors relating to disability and impairment of goodwill. Write-down tests are performed when there mortality. Any changes in these assumptions will affect the amount is an indication of a fall in value, and at least once a year. of the pension obligation and pension expenses recognised in the balance sheet. The choice of assessment unit is made on the basis of whether it is possible to identify and separate cash flows relating to the business The assumptions are based on guidelines issued by the Norwegian in question. Future cash flows are based on historical results and, if Accounting Foundation, but they are considered in relation to the relevant, they take into account expectations of future conditions. situation in the Group before being finally stipulated. Among other The estimation of future cash flows will therefore include assump- things, this applies to assessments of future wage growth, especially tions and estimates relating to highly uncertain factors. as a result of the existing defined benefit scheme being closed to new members and the fact that the average age of the scheme’s The required rate of return is based on a discretionary assessment of members is relatively high. the required rate of return in the market for the type of business the assessment unit involves. The required rate of return chosen shall Reference is made to Note 28 for further details on the Group’s seek to reflect the risk in the business being assessed and it shall pension obligations, including sensitivity calculations of material be based on information available on the balance sheet date. assumptions.

Reference is made to Note 30 for comments relating to the individual assessment units.

Note 3 Segment information

The management has considered which segments it is expedient directly, with the exception of IT expenses, staff-related costs and to report on in relation to management and control. The segments depreciation. Net interest is allocated on the basis of internally are divided into the Corporate Market, the Retail Market, Treasury calculated intragroup interest based on 3-month NIBOR. and Estate Agency activities. Operating expenses are allocated Banking operations Estate Corporate Retail Agency Unallocated Market Market Treasury activities by segment Total GROUP 2015 Results Net interest 757 1 522 73 2 0 2 354 Operating income 160 297 -56 193 0 594 Operating expenses -111 -355 -13 -179 -785 -1 443 Net profit on tangible fixed assets 76 76 Loss -174 -11 0 0 0 -185 Pre-tax profit 632 1 453 4 16 -709 1 396 Tax expense -349 Profit/loss for the year 632 1 453 4 16 -709 1 047

Balance sheet Net lending 29 927 99 000 0 0 0 128 927 Deposits 18 068 43 354 2 478 0 0 63 900

2014 Results Net interest 783 1 493 42 2 0 2 320 Operating income 194 275 30 182 229 910 Operating expenses -126 -369 -14 -165 -796 -1 470 Net profit on tangible fixed assets 143 143 Loss -395 -15 0 0 0 -410 Pre-tax profit 456 1 384 58 19 -424 1 493 Tax expense -305 Profit/loss for the year 456 1 384 58 19 -424 1 188

Balance sheet Net lending 27 137 91 506 0 0 0 118 643 Deposits 20 596 41 162 4 690 0 0 66 448

Sparebanken Vest Annual Report 2015 Page 42 Note 3 Segment information (contd.)

Banking operations

Corporate Retail Unallocated Market Market Treasury by segment Total PARENT BANK 2015 Results Net interest 754 989 -35 0 1 708 Operating income 160 297 266 0 723 Operating expenses -111 -355 -13 -720 -1 199 Net profit on tangible fixed assets 0 0 Loss -174 -9 0 0 -183 Pre-tax profit 629 922 218 -720 1 049 Tax expense -165 Profit/loss for the year 629 922 218 -720 884

Balance sheet Net lending 29 570 43 969 0 0 73 539 Deposits 18 068 43 352 2 526 0 63 946

2014 Results Net interest 780 819 -37 0 1 562 Operating income 194 275 30 847 1 346 Operating expenses -126 -369 -14 -753 -1 262 Net profit on tangible fixed assets -12 -12 Loss -395 -13 0 0 -408 Pre-tax profit 453 712 -21 82 1 226 Tax expense -105 Profit/loss for the year 453 712 -21 82 1 121

Balance sheet Net lending 27 346 39 660 0 0 67 006 Deposits 20 596 41 160 4 976 0 66 732

Sparebanken Vest Annual Report 2015 Page 43 Note 4 Classification of financial instruments

Financial instruments at fair value through profit or loss Financial instr. GROUP Held for designated Recognised trading Recognised for hedge Held to at amortised 31/12-2015 purposes at fair value accounting1 maturity cost Total Assets Cash in and receivables from central banks 631 631 Loans to and receivables from credit institutions 2 167 2 167 Lending 23 857 105 070 128 927 Shares 6 374 380 Certificates and bonds 154 20 640 661 0 21 455 Financial derivatives 1 029 5 699 6 728 Total 1 189 44 871 5 699 661 107 868 160 288

Liabilities Debt to credit institutions 200 4 649 4 849 Deposits 66 63 834 63 900 Securitised debt 3 567 36 591 36 911 77 069 Financial derivatives 1 611 1 611 Subordinated loan capital 462 1 376 1 838 Total 1 611 4 295 36 591 106 770 149 267

31/12-2014 Assets Cash in and receivables from central banks 2 209 2 209 Loans to and receivables from credit institutions 1 556 1 556 Lending 9 847 108 796 118 643 Shares 155 376 531 Certificates and bonds 195 16 330 16 525 Financial derivatives 1 290 4 281 5 571 Total 1 640 26 553 4 281 112 561 145 035

Liabilities Debt to credit institutions 193 4 157 4 350 Deposits 36 66 412 66 448 Securitised debt 3 935 29 910 28 306 62 151 Financial derivatives 1 463 1 463 Subordinated loan capital 473 1 953 2 426 Total 1 463 4 637 29 910 100 828 136 838

The Group has no financial instruments classified as available for sale.

1) The Group uses hedge accounting to manage interest rate risk and currency risk for long-term financial liabilities relating to the housing credit company. For financial liabilities designated for hedge accounting, the hedged risks are recognised at fair value, while the rest is recognised at amortised cost. The hedging derivatives are valued at fair value.

Sparebanken Vest Annual Report 2015 Page 44 Note 4 Classification of financial instruments (contd.)

Financial instruments at fair value through profit or loss

PARENT BANK Recognised Held for trading Recognised Held to at amortised 31/12-2015 purposes at fair value maturity cost Total Assets Cash in and receivables from central banks 631 631 Loans to and receivables from credit institutions 5 171 5 171 Lending 18 045 55 494 73 539 Shares 6 374 380 Certificates and bonds 154 19 851 661 20 666 Financial derivatives 1 029 1 029 Total 1 189 38 270 661 61 296 101 416

Liabilities Debt to credit institutions 200 5 683 5 883 Deposits 66 63 880 63 946 Securitised debt 3 567 17 120 20 687 Financial derivatives 1 607 1 607 Subordinated loan capital 462 1 376 1 838 Total 1 607 4 295 88 059 93 961

31/12-2014 Assets Cash in and receivables from central banks 2 209 2 209 Loans to and receivables from credit institutions 8 529 8 529 Lending 9 847 57 159 67 006 Shares 155 376 531 Certificates and bonds 195 19 948 20 143 Financial derivatives 1 290 1 290 Total 1 640 30 171 67 897 99 708

Liabilities Debt to credit institutions 193 5 184 5 377 Deposits 36 66 696 66 732 Securitised debt 3 935 14 601 18 536 Financial derivatives 1 463 1 463 Subordinated loan capital 473 1 953 2 426 Total 1 463 4 637 88 434 94 534

The Group has no financial instruments earmarked for hedging purposes or classified as available for sale.

Sparebanken Vest Annual Report 2015 Page 45 Note 5 Fair value of financial instruments recognised at amortised cost

31 Dec. 2015 31 Dec. 2014

Balance Fair Balance Fair GROUP Notes sheet value value sheet value value Cash in and receivables from central banks 631 631 2 209 2 209 Loans to and receivables from credit institutions 14 2 167 2 167 1 556 1 556 Loans to customers 9 105 070 105 012 108 796 108 784 Certificates and bonds held to maturity 4 661 653 0 0 Total assets recognised at amortised cost 3 459 3 451 3 765 3 765

Debt to credit institutions 32 4 649 4 975 4 157 4 342 Customer deposits 63 834 63 835 66 412 66 413 Securitised debt 35 36 911 38 861 28 306 29 155 Subordinated loan capital 36 1 376 1 371 1 953 2 000 Total liabilities recognised at amortised cost 106 770 109 042 100 828 101 910

Securities debt designated for hedge accounting 36 591 36 510 29 910 29 901

PARENT BANK

Cash in and receivables from central banks 631 631 2 209 2 209 Loans to and receivables from credit institutions 14 5 171 5 171 8 529 8 529 Loans to customers 9 55 494 55 436 57 159 57 147 Certificates and bonds held to maturity 4 661 653 Total assets recognised at amortised cost 61 957 61 891 67 897 67 885

Debt to credit institutions 32 5 683 6 009 5 184 5 369 Customer deposits 63 880 63 881 66 696 66 696 Securitised debt 35 17 120 18 095 14 601 15 321 Subordinated loan capital 36 1 376 1 371 1 953 2 000 Total liabilities recognised at amortised cost 88 059 89 356 88 434 89 386

Securities debt designated for hedge accounting 0 0 0 0

Valuation of financial instruments recognised at amortised cost It is mainly lending, deposits and borrowing at floating interest rates that are valued at amortised cost. Fair value assessments are made on the basis of the instruments’ properties and value on the balance sheet date. There will always be uncertainty associated with valuation at fair value.

Loans to and receivables from credit institutions Mainly consists of short-term receivables with floating interest rates. This means that the fair value is virtually the same as the amortised cost on the balance sheet date.

Certificates and bonds held to maturity Fair value is calculated based on prices provided by Nordic Bond Pricing AS.

Loans to customers Only loans with a fixed mark-up on NIBOR are subject to valuation in this group. For all other loans at amortised cost, the deviations between fair value and amortised cost are non-material, since any changes in value are reflected in the portfolio’s group and individual write-downs.

Customer deposits The Group believes that amortised cost provides a good indication of the fair value of customer deposits.

Debt to credit institutions, securitised debt and subordinated loans Fair value is calculated on the basis of a theoretical market value valuation based on interest rate and spread curves.

Sparebanken Vest Annual Report 2015 Page 46 Note 6 Valuation hierarchy for financial instruments at fair value

GROUP available and, as far as possible, are not based on the Group’s own estimates. If all the material data required to determine the Fair value valuation fair value of an instrument are observable data, the instrument is included in level 2. Instruments included in level 2 comprise Level 1 certain equity instruments on the OTC list, other certificates and Financial instruments traded in active markets are classified as bonds, financial derivatives and all financial liabilities valued at fair level 1. A market is deemed to be active if the market prices value. are easily and regularly available from a stock exchange, broker, industry group, pricing service or regulatory authority, and these Level 3 prices represent actual and regularly occurring market transactions If one or more data items are not based on observable market at arm’s length. The market price used for financial assets is the information, the instrument is included in level 3. Non-listed applicable purchase price, while the applicable sales price is used equity instruments, certain equity instruments on the OTC list and for financial liabilities. Instruments included in level 1 comprise loans to customers valued at fair value are classified as level 3. listed shares, investments in unit trusts and treasury certificates.

Level 2 The fair value of financial instruments that are not traded in an active market is determined by using valuation methods. These valuation methods maximise the use of observable data where

31/12-2015 Note Level 1 Level 2 Level 3 Total Assets Loans to customers 9 23 857 23 857 Shares recognised at fair value through profit or loss 22 51 61 268 380 Certificates and bonds 16 1 045 19 749 20 794 Financial derivatives 21 1 029 1 029 Financial derivatives earmarked for hedge accounting 21 5 699 5 699 Total 1 096 26 538 24 125 51 759

Liabilities Debt to credit institutions 32 200 200 Deposits from and debt to customers 66 66 Securitised debt 35 3 567 3 567 Financial derivatives 21 1 611 1 611 Subordinated loan capital 36 462 462 Total 5 906 5 906

Loans to customers Shares Financial instruments valued at level 3 at 1.1.2015 9 847 283 Additions/acquisitions 15 818 10 Sale/redemption/repayment -1 865 -21 This year's value adjustment 57 -4 Reclassification between levels 2 and 3 0 0 Financial instruments valued at level 3 at 31 Dec. 2015 23 857 268 An increase in the discount rate of 10 basis points for loans valued at fair value will lead to a reduction in value of NOK 64 million.

Sparebanken Vest Annual Report 2015 Page 47 Note 6 Valuation hierarchy for financial instruments at fair value (contd.)

31/12-2014 Note Level 1 Level 2 Level 3 Total Assets Loans to customers 9 9 847 9 847 Shares recognised at fair value through profit or loss 22 197 51 283 531 Certificates and bonds 16 16 525 16 525 Financial derivatives 21 1 290 1 290 Financial derivatives earmarked for hedge accounting 21 4 281 4 281 Total 197 22 147 10 130 32 474

Liabilities Debt to credit institutions 32 193 193 Deposits from and debt to customers 33 36 36 Securitised debt 35 3 935 3 935 Financial derivatives 21 1 463 1 463 Financial derivatives earmarked for hedge accounting 21 0 0 Subordinated loan capital 36 473 473 Total 6 100 6 100

Loans to customers Shares Financial instruments valued at level 3 at 1.1.2014 6 153 450 Additions/acquisitions 4 820 31 Sale/redemption/repayment -1 301 -153 This year's value adjustment 175 -41 Reclassification between levels 2 and 3 0 -4 Financial instruments valued at level 3 at 31 Dec. 2014 9 847 283

Note 7 Financial risk management

Risk and capital management stipulated risk tolerance and the bank’s operations and that it is Good risk and capital management is a key strategic instrument in sufficiently capitalised in relation to regulatory requirements. The Sparebanken Vest’s value creation process. Good risk and capital Board also defines the bank’s targets and limits in all risk areas, management contributes to profitability and a satisfactory rating including adopting guidelines for the bank’s risk and capital man- and ensures that the bank has good access to the capital market. agement. Reporting in relation to targets and limits takes place For more detailed information about risk and capital management, quarterly to the Board of Directors. see the Pilar III document on the bank’s website. The Board’s Credit Committee deals with credit matters within the Sparebanken Vest has established its own risk strategies that bounds of the authorisations granted by the Board. specify control parameters for the individual risk areas. These strategies are reviewed at least once a year in connection with the The Risk Management and Audit Committee is charged with en- bank’s overall planning process. The control parameters are in- suring that Sparebanken Vest has an independent and effective ex- tended to help to ensure the bank’s profitability, financial strength ternal and internal audit function, and financial and risk reporting and liquidity in the short and long term. that is in accordance with laws and regulations. The committee shall also support the Board of Directors in connection with its The Board of Directors delegates authority to the Managing Direc- management and supervisory responsibility relating to capital tor within each of the risk areas. Decision support and portfolio needs, the capital adequacy target and risk profile, and manage- management systems have been established for both the retail ment and control schemes, including risk management, internal market and the corporate market. control and internal audits.

Organisation and responsibility The Managing Director is responsible for the bank’s overall risk and Responsibility for, and performance of, the bank’s risk and capital capital management, including ensuring that the bank, at all times, management and control is divided between the bank’s Board of has good models and frameworks for management and control. Directors, management and business units. Normally, unless the matter is considered by the bank’s Board of Directors, all decisions relating to risk and capital management are The Board of Directors of Sparebanken Vest is responsible for made by the Managing Director in consultation with other mem- stipulating the bank’s overall risk tolerance. The Board shall also bers of the bank’s management. ensure that the bank has sufficient own funds in relation to the

Sparebanken Vest Annual Report 2015 Page 48 Risk Management attends to important functions relating to Insurance risk. The associated company Frende is exposed to management, control, reporting and analysis. Risk Management is insurance risk. Sparebanken Vest is affected by this risk through also responsible for the bank’s models and frameworks for risk and its holding in the company. capital management. Pension risk. The bank’s pension assets relating to the defined The Validation Committee, which is chaired by the Managing benefit scheme for employees are managed by DNB Livsforsikring. Director, deals with both model validation and validation relating to the application of the bank’s credit systems and regulations. Estimated capital need The bank uses internal measurement methods (IRB) to calculate The banks process for assessing its capital needs (ICAAP) is capital in relation to credit risk. Validation is a cornerstone of the rooted in business strategy (vision, goals and business idea) and IRB system that is intended to ensure that the system is adapted strategic measures that are given priority in order to reach the to the portfolios to which it is applied. An annual validation report bank›s goals. The targeted development three years hence is is prepared for the Board of Directors. used as the basis for assessing the bank›s capital buffers, capital tolerance and self-financing. The scenario is intended to give The Credit Committee, which is chaired by the Managing Director, direction to and set a level for the bank›s budget, and the risk and deals with major commitments and matters of an unusual nature. capital analysis can set constraints and limitations based on the Major commitments that involve risk are reviewed quarterly by the bank›s financial and operational capacity, and external framework Credit Committee. conditions.

All managers in Sparebanken Vest are responsible for manag- The bank›s capital adequacy and capital adequacy target are test- ing risk and ensuring good internal control in their own areas of ed by exposing its income statement and balance sheet to a stress responsibility in accordance with the risk profile adopted by the scenario. The capital adequacy target is formulated as a margin bank. In order to ensure good financial and administrative man- (buffer capital) over and above the minimum requirement. The agement, all managers must have the requisite knowledge about purpose of performing the stress test is to confirm that the buffer material risk factors within their own areas. capital is sufficient for the bank to also satisfy the regulatory minimum requirement in an economic situation that is realistic but The role of the internal audit function is to monitor the bank’s over- not very probable. all risk and capital management and internal control on behalf of the Board of Directors. The internal audit function is also tasked In addition to calculating regulatory capital, the bank also esti- with checking whether procedures and guidelines are complied mates its internal capital need (economic capital). It differs from with and with assessing whether the bank’s models for risk and the regulatory capital in that it is based solely on a business eco- capital management provide a correct picture of the bank’s overall nomics perspective and has fewer limitations in relation to which risk and capital situation. The internal audit function prepares an methods are applied. Economic capital is used in the bank’s day- annual internal control report that also contains assessments of to-day management and forms the basis for commercial decisions. the bank’s IRB system and capitalisation process (ICAAP). For credit risk purposes, Sparebanken Vest uses internal systems Risk areas to estimate economic capital. Expected losses and economic cap- The bank’s risk and capital management mainly relates to four risk ital are calculated on the basis of the following three components: areas: probability of default, exposure and loss given default. The bank operates with a confidence level of 99.9% for a timeframe of one Credit risk is the risk of a loss being incurred if the bank›s cus- year, which corresponds to an A rating. The same model has been tomers / counterparties fail to meet their commitments relating to implemented for pricing the bank’s commitments. loans, credit facilities, guarantees and similar. For a more detailed description of credit risk, see Notes 8 to 17. The bank also calculates economic capital for the concentration in the credit portfolio. For the concentration risk resulting from Market risk is defined as the risk of losses on open positions in fi- large individual commitments, this capital is calculated using a nancial instruments as a result of changes in market variables and/ simulation model. For industry/sector concentration, a more tem- or market conditions within a specified timeframe. This includes plate-based amount is calculated based on the size and cyclicality stock market, interest rate, currency and credit spread risk. For a of the industry or sector. more detailed description of market risk, see Note 18. For market risk purposes, economic capital is determined using Liquidity risk consists of two elements – refinancing risk and price stress tests for stock market, interest rate, currency and credit risk. By refinancing risk is meant the risk of not being able to spread risk, respectively. refinance debt and not being able to finance an increase in assets. By price risk is meant the risk of not being able to refinance com- For liquidity risk purposes, economic capital is calculated using a mitments without incurring considerable extra costs in the form of model that consists of four weighted variables: unusually expensive financing or a fall in the price of assets that - Maturity structure of own borrowings must be realised. For a more detailed description of liquidity risk, - Market price of own bonds (spread) see Note 23. - Rating - Diversification of funding sources. Operational risk is the risk of losses as a result of inadequate internal processes or systems or of a failure in such processes For operational risk, regulatory capital is also used for the bank›s or systems, human error or external events. Compliance risk is internal economic capital. managed as part of operational risk.

Other risk areas: Owner risk can be defined as the risk of losses or of necessary infu- sions of new capital into companies where the bank has a strategic ownership interest, as a result of the underlying risk in such companies.

Sparebanken Vest Annual Report 2015 Page 49 Note 8 Risk classification of the credit portfolio

Credit risk iii) Loss given default (LGD) indicates the loss ratio on a Credit risk is the risk of losses if the bank’s customers fail to meet commitment in default expressed as a percentage of EAD. For the their commitments to the Group. retail market (RM), it is calculated on the basis of internal models. The type and value of loan security and the probability of recovery Credit risk arises through loans, credit facilities, guarantees, are key parameters in calculating the loss ratio. In addition to documentary credit and various derivative transactions with retail calculating the expected loss ratio, adjustments are made for market and corporate market customers. Credit risk relating to periods of economic downturn by calculating a ‘downturn LGD’. derivative transactions is quantified using conversion factors that The latter is used for capital adequacy purposes. Where the bank depend on the contract type and term to maturity. uses the basic IRB method for the corporate market, LGD rates from the Capital Adequacy Regulations are used. For economic Risk classification of loans and guarantees capital, LGD is calculated using internal models (IRBA) for both The measurement of credit risk is based on the following main the retail and corporate markets. components: i) probability of default (PD), ii) expected exposure at default (EAD) and iii) loss given default (LGD). The scorecard models are statistical models for predicting future outcomes. They use data from internal and external sources, i) Probability of default (PD) is defined as the probability of a and all commitments are risk-classified monthly. The bank has customer defaulting on a loan within the next 12 months. A a system for automatic capture of risk data for all commitments. default can be default of payment in excess of 90 days or other For corporate commitments, it also carries out manual follow-up concrete circumstances (‹unlikeliness to pay›, cf. Basel II) that and updating. The frequency depends on the size and risk of the affect the customer›s ability to service the debt. The probability of commitment. The risk classification results in key figures that play default is calculated using statistical models (scorecards) based a central role in the bank›s management. on logistic regression. Eleven risk classes from A to K are used in order to group the credit portfolio in Sparebanken Vest by debt- Sparebanken Vest is in dialogue with the Financial Supervisory servicing ability. Risk class K comprises commitments in default Authority of Norway about approval of capital adequacy rules based on advanced IRB (IRBA). ii) Expected exposure at default (EAD) is an estimated amount that shows the expected exposure in relation to the customer at the time of default. EAD is estimated as the expected utilisation of credit plus the expected utilisation of unutilised drawing rights (CF).

Risk classes based on probability of default

Risk class From and incl. Up to A 0,00 % 0,10 % B 0,10 % 0,25 % C 0,25 % 0,50 % D 0,50 % 0,90 % E 0,90 % 1,50 % F 1,50 % 2,75 % G 2,75 % 5,00 % H 5,00 % 10,00 % I 10,00 % 25,00 % J 25,00 % 99,99 % K 100,00 % 100,00 %

Sparebanken Vest Annual Report 2015 Page 50 Note 8 Risk classification of the credit portfolio (contd.)

PARENT BANK GROUP Individual Individual Loans broken down by risk class Commitments 1) write-downs 2) Commitments 1) write-downs 2) 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 2015 2014 2015 2014 2015 2014 2015 2014 Corporate market A–D 16 075 14 093 0 0 16 670 14 622 0 0 E–H 20 339 20 042 0 0 20 524 20 223 0 0 I–J 1 162 1 011 0 0 1 170 1 026 0 0 K 1 255 1 119 539 474 1 256 1 119 539 474 Corporate market total 38 831 36 265 539 474 39 620 36 990 539 474

Retail market A–D 42 754 38 446 0 0 100 418 92 330 0 0 E–H 5 235 5 092 0 0 7 587 7 628 0 0 I–J 584 607 0 0 754 747 0 0 K 176 191 23 28 218 237 23 29 Retail market total 48 749 44 336 23 28 108 977 100 942 23 29 Total2) 87 580 80 601 562 502 148 597 137 932 562 503

1) The definition of a customer›s commitment in connection with calculating risk classification will deviate somewhat from the definition of credit exposure pursuant to IFRS in a few areas. Credit risk relating to derivative transactions is not included in Note 10, but is presented in other notes.

Total commitments in Note 8 will therefore not be completely reconcilable with commitments as defined in Note 10.

2) All individual write-downs on loans and guarantees are allocated to the highest risk class.

Sparebanken Vest Annual Report 2015 Page 51 Note 9 Lending broken down by type of receivable and geographical area

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Lending broken down by type of receivable 2015 2014 7 816 6 549 Overdraft facilities 21 262 23 594 1 196 1 417 Building loans 1 417 1 196 48 856 48 412 Instalment loans 83 231 84 693 149 133 Accrued interest 182 176 -24 -25 Amortisation (fees etc.) -25 -24 57 993 56 486 Gross loans to and receivables from customers at amortised cost 106 067 109 635 9 432 17 628 Loans to and receivables from customers at fair value 23 369 9 432 10 20 Accrued interest 26 10 405 397 Adjustment to fair value 462 405 9 847 18 045 Gross loans to and receivables from customers at fair value 23 857 9 847 67 840 74 531 Gross loans to and receivables from customers 129 924 119 482 -500 -562 Individual write-downs on loans -562 -501 -334 -430 Group write-downs, loans -435 -338 67 006 73 539 Net loans to and receivables from customers 128 927 118 643

Loans to customers recognised at fair value 6 153 9 847 Balance sheet value at 1.1. 9 847 6 153 3 519 8 060 Net additions/disposals 13 953 3 519 175 65 Value change in period 57 175 9 847 17 972 Book value at 31 Dec. 23 857 9 847

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 26).

GROUP

31 Dec. 2014 31 Dec. 2015 Proportion Individual Gross Gross Individual Proportion net lending write-downs lending Lending broken down by geogr. area lending write-downs net lending 70,4 389 84 127 Hordaland 90 826 478 69,8 8,4 8 9 943 Sogn og Fjordane 10 399 7 8,0 15,6 8 18 615 Rogaland 21 576 21 16,7 5,4 46 6 486 Rest of Norway 6 610 0 5,1 99,8 451 119 171 Total, Norway 129 411 506 99,6 0,2 50 311 Abroad 513 56 0,4 100,0 501 119 482 Total, geographical areas 129 924 562 100,0

PARENT BANK

31 Dec. 2014 31 Dec. 2015 Proportion Individual Gross Gross Individual Proportion net lending write-downs lending Lending broken down by geogr. area lending write-downs net lending 65,4 388 44 422 Hordaland 48 713 478 65,2 10,5 8 7 083 Sogn og Fjordane 7 120 7 9,6 17,8 8 11 969 Rogaland 14 244 21 19,2 6,0 46 4 082 Rest of Norway 4 003 0 5,4 99,7 450 67 556 Total, Norway 74 080 506 99,5 0,3 50 284 Abroad 451 56 0,5 100,0 500 67 840 Total, geographical areas 74 531 562 100,0

Sparebanken Vest Annual Report 2015 Page 52 Note 10 Commitments broken down by industry and the retail market

Defaults and Unused credit Total other potential Individual 2015 Lending facilities Guarantees commitment1) bad debt write-downs GROUP Primary industries 2 870 317 6 3 193 2 0 Manufacturing and mining 1 346 412 91 1 849 34 7 Power and water supply 1 447 244 19 1 710 0 0 Building and construction industry 3 648 756 717 5 121 5 11 Commerce 1 403 644 175 2 222 30 9 International shipping and transport 5 261 269 561 6 091 880 457 Hotels and restaurants 463 52 6 521 3 0 Property management 12 337 434 104 12 875 214 41 Service sector 2 559 810 204 3 573 42 14 Public administration 26 0 0 26 0 0 Abroad (other) 204 0 0 204 0 0 Total business and industry 31 564 3 938 1 883 37 385 1 210 539 Retail customers 98 360 11 337 14 109 711 234 23 Total gross commitments 129 924 15 275 1 897 147 096 1 444 562 - Individual write-downs -562 -2 -564 - Group write-downs -435 0 -435 Total net commitments 128 927 15 275 1 895 146 097

GROUP Primary industries 2 792 307 6 3 105 2 0 Manufacturing and mining 1 327 408 91 1 826 34 7 Power and water supply 1 447 245 19 1 711 0 0 Building and construction industry 3 474 734 717 4 925 5 11 Commerce 1 353 634 175 2 162 30 9 International shipping and transport 5 105 259 561 5 925 880 457 Hotels and restaurants 463 51 6 520 3 0 Property management 12 359 432 104 12 895 214 41 Service sector 2 343 791 234 3 368 42 14 Public administration 26 0 0 26 0 0 Abroad (other) 204 0 0 0 0 0 Total business and industry 30 893 3 861 1 913 36 463 1 209 539 Retail customers 43 638 5 705 14 49 357 191 23 Total gross commitments 74 531 9 566 1 927 85 820 1 401 562 - Individual write-downs -562 -2 -564 - Group write-downs -430 0 -430 Total net commitments 73 539 9 566 1 925 84 826

Sparebanken Vest Annual Report 2015 Page 53 Note 10 Commitments broken down by industry and the retail market (contd.)

Unused Defaults and credit Total other potential Individual 2014 Lending facilities Guarantees commitment1) bad debt write-downs GROUP Primary industries 2 784 131 8 2 923 1 0 Manufacturing and mining 994 422 230 1 646 19 2 Power and water supply 1 157 159 24 1 340 13 3 Building and construction industry 3 455 946 660 5 061 32 11 Commerce 1 262 526 137 1 925 11 8 International shipping and pipeline transport 4 947 192 682 5 821 662 371 Hotels and restaurants 351 26 8 385 3 0 Property management 10 720 473 150 11 343 177 27 Service sector 2 645 511 207 3 363 79 51 Public administration 13 0 0 13 0 0 Abroad (other) 125 0 0 125 78 0 Total business and industry 28 453 3 386 2 106 33 945 1 075 473 Retail customers 91 029 10 992 14 102 035 249 30 Total gross commitments 119 482 14 378 2 120 135 980 1 324 503 - Individual write-downs -501 -2 -503 - Group write-downs -338 0 -338 Total net commitments 118 643 14 378 2 118 135 139

PARENT BANK Primary industries 2 726 131 8 2 865 1 0 Manufacturing and mining 974 422 230 1 626 19 2 Power and water supply 1 157 159 24 1 340 13 3 Building and construction industry 3 297 946 660 4 903 32 11 Commerce 1 216 526 137 1 879 11 8 International shipping and pipeline transport 4 805 192 682 5 679 662 371 Hotels and restaurants 351 26 8 385 3 0 Property management 11 260 473 180 11 913 177 27 Service sector 2 441 511 207 3 159 79 51 Public administration 13 0 0 13 0 0 Abroad (other) 125 0 0 0 78 0 Total business and industry 28 365 3 386 2 136 33 762 1 075 473 Retail customers 39 475 5 789 14 45 278 218 29 Total gross commitments 67 840 9 175 2 150 79 040 1 293 502 - Individual write-downs -500 -2 -502 - Group write-downs -334 0 -334 Total net commitments 67 006 9 175 2 148 78 204

1) The definition of a customer›s commitment in connection with calculating risk classification will deviate somewhat from the definition of credit exposure pursuant to IFRS in a few areas. Credit risk relating to derivative transactions is not included in Note 10, but is presented in other notes. Total commitments in Note 8 will therefore not be completely reconcilable with commitments as defined in Note 10.

Sparebanken Vest Annual Report 2015 Page 54 Note 11 Capitalised write-downs of commitments

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

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Individual write-downs of loans 2015 2014 408 500 Individual write-downs of loans as of 1.1. 501 408 -436 -80 Reversal of write-downs as a result of confirmations in the period -80 -436 199 8 Increased write-down of loans previously written down 8 199 357 104 Write-downs of loans not previously written down 105 358 -28 -9 Reversal of individual write-downs in the period -11 -28 39 Exchange rate adjustment 39 0 500 562 Individual write-downs of loans 562 501

Group write-downs 447 334 Write-downs of groups of loans at 1.1.(nominal values) 338 450 -113 96 Change in group write-downs in the period 97 -112 334 430 Write-downs of groups of loans 435 338 834 992 Total write-downs of loan commitments 997 839

Provision for bad debt rel. to guarantees 17 2 Provision for bad debt to cover losses on guarantees at 1.1. 2 17 -15 -1 Changes in write-downs on guarantees in the period -1 -15 2 2 Specified provision for bad debt to cover losses on guarantees 2 2

All commitments that are to be subject to individual assessment shall be assessed in order 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 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. When estimating future cash flows, account shall only be taken of the credit loss caused by loss events that have occurred. The estimation of future cash flows from a loan shall also take into account security that is taken over and sold, including costs in this connection.

Confirmation of the loss write-down (booked against the customer›s commitment) takes place when all security has been realised and it is certain that the bank will receive no further payments 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.

Sparebanken Vest Annual Report 2015 Page 55 Note 12 Development in losses and commitments in default

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Losses on loans, guarantees etc. 2014 2015 93 24 Changes in individual write-downs for the period 24 94 439 72 Confirmed losses in the period with previous individual write-down 72 439 16 20 Confirmed losses in the period without previous individual write-down 20 16 -12 -28 Recoveries in previously confirmed write-downs -28 -12 536 88 Net effect on profit/loss from individual write-downs 89 537 -113 96 Change in group write-downs in the period 97 -112 423 184 Losses on loans in the period 186 425

0 0 Confirmed losses on guarantees 0 0 -15 -1 Changes in write-downs on guarantees in the period -1 -15 -15 -1 Confirmed losses on guarantees in the period -1 -15

408 183 Total write-downs of loans and guarantees 185 410

The Group›s net loss expense in 2015 corresponded to 0.15% of average gross lending of NOK 124.5 billion.

Expected losses for the next 12 months are expected to be approx. 0.17%, compared with the long-term average, which is estimated to be approx. 0.25% of commitments.

Defaults and other potential bad debt The table shows the recognised defaults and other potential bad debt, where the total reported is based on definitions pursuant to the Basel regulations.

PARENT BANK GROUP

31 Dec. 2015 31 Dec. 2015 Retail Corporate Retail Corporate Market Market Total Market Market Total 127 49 176 Loans in default more than 90 days 155 49 204 64 1 161 1 225 Other potential bad debt 79 1 161 1 240 191 1 209 1 401 Total defaults and potential bad debt 234 1 210 1 444 -23 -539 -562 - Individual write-downs on loans -23 -539 -562 169 671 839 Net defaults and potential bad debt 211 671 882

PARENT BANK GROUP

31 Dec. 2014 31 Dec. 2014 Retail Corporate Retail Corporate Market Market Total Market Market Total 212 133 345 Loans in default more than 90 days 243 133 376 6 942 948 Other potential bad debt 6 942 948 218 1 075 1 293 Total defaults and potential bad debt 249 1 075 1 324 -29 -471 -500 - Individual write-downs on loans -30 -471 -501 189 604 793 Net defaults and potential bad debt 219 604 823

Sparebanken Vest Annual Report 2015 Page 56 Note 12 Development in losses and commitments in default (contd.)

Age breakdown of defaults of payment The table shows the book value of loans registered in default, where the amount in default exceeds NOK 1,000 in one of the commitment›s accounts and is not due to payment delays.

PARENT BANK GROUP 31 Dec. 2015 31 Dec. 2015 Retail Corporate Retail Corporate Market Market Total Market Market Total 356 398 753 Up to 30 days 669 398 1067 35 10 45 31–60 days 62 10 72 19 1 20 61–90 days 24 1 25 127 49 176 More than 90 days 155 49 204 537 458 994 Gross loans in default 909 458 1 367

PARENT BANK GROUP 31 Dec. 2014 31 Dec. 2014 Retail Corporate Retail Corporate Market Market Total Market Market Total 571 218 789 Up to 30 days 742 218 960 174 118 292 31–60 days 212 118 330 42 16 58 61–90 days 46 16 62 212 133 345 More than 90 days 243 133 376 999 485 1 484 Gross loans in default 1 243 485 1 728

Sparebanken Vest Annual Report 2015 Page 57 Note 13 Secured debt

Gross lending is largely secured by mortgages. Security in the retail market mostly consists of real property. In the corporate market, the majority of assets furnished as security are tangible fixed assets.

The table below shows the percentage breakdown of commitments relating to different levels of secured debt. For example, the line 0–50% denotes that the commitments are worth less than 50% of the value of the asset furnished as security, while 100%– means that the loan amount exceeds the value of the asset furnished as security.

PARENT BANK GROUP 31 Dec. 2015 31 Dec. 2015 Retail Corporate Retail Corporate market market Total Security level market market Total 17,7 % 31,2 % 22,8 % 0%–50% 23,1 % 31,2 % 25,0 % 24,4 % 37,5 % 29,4 % 50%–75% 45,0 % 37,5 % 43,2 % 32,8 % 13,3 % 25,4 % 75%–90% 18,6 % 13,3 % 17,4 % 12,0 % 3,8 % 8,9 % 90%–100% 6,2 % 3,8 % 5,7 % 4,1 % 11,1 % 6,7 % 100%– 2,5 % 11,1 % 4,5 % 1,1 % 0,0 % 0,7 % Other security 0,6 % 0,0 % 0,4 % 7,9 % 3,1 % 6,1 % Unsecured 4,0 % 3,1 % 3,8 % 100,0 % 100,0 % 100,0 % Total 100,0 % 100,0 % 100,0 %

31 Dec. 2014 31 Dec. 2014 Retail Corporate Retail Corporate market market Total Security level market market Total 15,5 % 34,5 % 23,1 % 0%–50% 23,5 % 34,5 % 26,2 % 21,8 % 29,2 % 24,8 % 50%–75% 43,5 % 29,2 % 40,0 % 35,6 % 13,0 % 26,5 % 75%–90% 19,0 % 13,0 % 17,5 % 14,6 % 3,1 % 10,0 % 90%–100% 7,3 % 3,1 % 6,3 % 8,6 % 13,2 % 10,4 % 100%– 4,8 % 13,2 % 6,8 % 1,6 % 0,0 % 1,0 % Other security 0,8 % 0,0 % 0,6 % 2,3 % 7,0 % 4,2 % Unsecured 1,1 % 7,0 % 2,6 % 100,0 % 100,0 % 100,0 % Total 100,0 % 100,0 % 100,0 %

Note 14 Loans to and receivables from credit institutions

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 2015 2014 8 489 4 956 No agreed term to maturity or period of notice 1 952 1 516 40 215 With an agreed term to maturity or period of notice 215 40 8 529 5 171 Loans to and receivables from credit institutions 2 167 1 556

Geographical areas 7 993 3 331 Hordaland 327 1 020 6 7 Sogn og Fjordane 7 6 22 9 Rogaland 9 22 230 217 Rest of Norway 217 230 278 1 607 Abroad 1 607 278 8 529 5 171 Total, geographical areas 2 167 1 556

Sparebanken Vest Annual Report 2015 Page 58 Note 15 Guarantees and secured debt

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Breakdown by guarantee type 2015 2014 924 640 Payment guarantees 640 924 865 939 Contract guarantees 939 865 0 0 Loan guarantees 0 0 1 1 Guarantees for taxes 1 1 360 347 Other guarantee liabilities 317 330 2 150 1 927 Guarantee liabilities in relation to customers 1 897 2 120 39 622 56 382 Intercompany liquidity facility 0 0 41 772 58 309 Total guarantee liabilities 1 897 2 120

Secured debt 11 492 12 275 Nominal value of bonds deposited in Norges Bank 12 275 11 492 11 492 12 275 Total secured debt 12 275 11 492

Sparebanken Vest Annual Report 2015 Page 59 Note 16 Certificates and bonds

GROUP 31 Dec. 2015 Spread Cost Book Market Rel. Broken down by sector risk price value value distribution Banking and finance 182 7 502 7 831 7 825 36 % Covered bonds 182 8 005 7 964 7 963 37 % Municipalities and county authorities 49 3 691 3 719 3 719 17 % Enterprises etc. 21 896 896 896 4 % Government 0 1 041 1 045 1 045 5 % Certificates and bonds 434 21 135 21 455 21 448 100 %

Listed/unlisted Av. interest rate Listed 1,61 % 14 402 14 710 14 709 69 % Unlisted 2,02 % 6 733 6 745 6 739 31 % Certificates and bonds1) 2) 21 135 21 455 21 448 100 %

31 Dec. 2014 Spread Cost Book Market Rel. Broken down by sector risk price value value distribution Banking and finance 227 5 779 6 057 6 057 37 % Covered bonds 167 7 654 7 727 7 727 47 % Municipalities and county authorities 41 2 369 2 415 2 415 15 % Enterprises etc. 25 333 326 326 2 % Certificates and bonds 460 16 135 16 525 16 525 100 %

Listed/unlisted Av. interest rate Listed 1,65 % 10 184 10 509 10 509 64 % Unlisted 1,87 % 5 951 6 016 6 016 36 % Certificates and bonds1) 2) 16 135 16 525 16 525 100 %

PARENT BANK 31 Dec. 2015 Spread Cost Book Market Rel. Broken down by sector risk price value value distribution Banking and finance 417 8 402 8 737 8 736 42 % Covered bonds 165 7 308 7 266 7 259 35 % Municipalities and county authorities 49 3 691 3 719 3 719 18 % Enterprises etc. 21 896 896 896 4 % Government 0 44 48 48 0 % Certificates and bonds 652 20 341 20 666 20 658 100 %

Listed/unlisted Av. interest rate Listed 1,62 % 12 817 13 128 13 127 64 % Unlisted 2,34 % 7 524 7 538 7 531 36 % Certificates and bonds1) 2) 20 341 20 666 20 658 100 %

31 Dec. 2014 Spread Cost Book Market Rel. Broken down by sector risk price value value distribution Banking and finance 227 5 780 6 057 6 057 30 % Covered bonds 498 11 239 11 345 11 345 56 % Municipalities and county authorities 41 2 368 2 415 2 415 12 % Enterprises etc. 25 333 326 326 2 % Certificates and bonds 791 19 720 20 143 20 143 100 %

Listed/unlisted Av. interest rate Listed 1,76 % 13 878 14 237 14 237 71 % Unlisted 1,87 % 5 842 5 906 5 906 29 % Certificates and bonds1) 2) 19 720 20 143 20 143 100 %

1) Includes NOK 73.4 (52.2) million in subordinated loans in the Group and NOK 977.1 (953.5) million in the parent bank. 2) Of which NOK 3,136 (1,450) million is foreign.

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

Sparebanken Vest Annual Report 2015 Page 60 Note 17 Shareholdings in subsidiaries and associated companies

Balance sheet value Balance sheet value Subsidiaries in sub-group in parent bank Eierandel (balance sheet value, parent bank) Antall aksjer i % 31/12-15 31/12-14 31/12-15 31/12-14 Sparebanken Vest Boligkreditt AS 2 750 000 100 2 750 2 500 Sparebanken Vest Eiendomsforvaltning AS (merged in 2015) 100 15 Sparebanken Vest Eiendom Dale AS (sold in 2015) 100 1 Sparebanken Vest Eiendom Lonevåg AS 1 100 1 1 Sparebanken Vest Eiendom Nordfjordeid AS 1 100 1 1 Sparebanken Vest Eiendom Norheimsund AS 1 100 2 2 Sparebanken Vest Eiendom Sogndal AS 1 100 2 2 Sparebanken Vest Eiendom Stord AS 1 100 3 3 Sparebanken Vest Eiendom Sauda AS 1 100 2 2 Eiendomsmegler Vest AS 1 200 100 53 53 Kyte Næringsmegling AS 1 350 90 2 7 Herland Eiendom AS 210 100 11 10 Jonsvollskvartalet AS (sold in 2015) 100 197 Vestlandskonferansen AS 100 100 0 0 Total group companies in parent bank 2 813 2 765

Associated companies (balance sheet value) No of Holding 31 Dec. 31 Dec. Associated companies (balance sheet value, parent bank) shares (%) 2015 2014 Frende Holding AS 2 684 911 39,72 323 323 Norne Eierselskap AS 87 512 964 49,00 18 18 Verd Boligkreditt AS 90 000 40,00 90 90 Brage Finans AS 24 950 000 49,90 244 220 Jonsvollkvartalet AS 34 34,00 70 0 Total shares in associated companies 746 650

Frende Norne Jonsvoll- Holding AS Eier- Verd Bolig- Brage kvartalet Associated companies (balance sheet value, group) 2015 Group selskap AS kreditt AS Finans AS AS Total Balance sheet value at beginning of period 343 15 101 220 0 681 Capital increase/acquisition 0 0 0 25 0 25 Acquisition 0 0 0 0 70 70 Dividend 0 0 -11 0 0 -11 Correction of previous years' errors 6 0 0 0 0 6 Share of profit/loss 50 2 7 9 1 70 Balance sheet value at end of period 400 18 97 255 71 841

Frende Holding AS Norne Eier- Verd Bolig- Brage Associated companies (balance sheet value, group) 2014 Group selskap AS kreditt AS Finans AS Total Balance sheet value at beginning of period 284 20 104 148 555 Capital increase 0 0 0 65 65 Dividend 0 -13 0 -13 Share of profit/loss 60 -4 11 7 74 Balance sheet value at end of period 343 15 101 220 681

Sparebanken Vest Annual Report 2015 Page 61 Note 17 Shareholdings in subsidiaries and associated companies (contd.)

Associated companies (company information) Frende Holding AS Norne Eier- Verd Bolig- Brage Associated companies – company information – 20141) Group selskap AS kreditt AS Finans AS Total Cash and cash equivalents 77 1 146 65 289 Other current assets 500 0 797 8 1 305 Fixed assets 4 403 34 4 881 2 522 11 840 Total assets 4 980 35 5 824 2 595 13 434 Short-term financial liabilities 0 0 491 0 491 Other short-term liabilities 142 4 24 27 197 Long-term financial liabilities 4 057 0 5 054 2 126 11 237 Other long-term liabilities 15 0 1 0 16 Equity 766 31 254 442 1 493 Total equity and liabilities 4 980 35 5 824 2 595 13 434

Operating income 592 0 45 66 703 Depreciation -24 0 0 -3 -27 Other operating expenses -410 -2 -7 -42 -461 Interest income 45 0 0 0 45 Interest expenses -21 -4 0 0 -25 Tax expense -42 0 -10 -6 -58 Total profit/loss after tax 140 -6 28 15 177

Dividend received from associated company 0 0 11 0 0

1)Last official accounts 31 Dec. 2014.

Frende Holding AS is a holding company that owns 100% of the shares in Frende Livsforsikring AS and Frende Skadeforsikring AS. The company was formed in June 2007.

In 2008, Sparebanken Vest formed the securities company Norne Securities AS together with Fondsfinans 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 97.1% of Norne Securities AS, while Must Invest AS owns 2.9%.

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 Boligkreditt AS. Sparebanken Vest has an ownership interest of 40%. The remaining 60% is owned by the other eight savings banks in proportion to their assets under management.

Brage Finans AS was formed at the end of 2010 as a collaboration between Sparebanken Vest and nine independent savings banks. The company offers customised financing products with the main emphasis on the leasing of all types of operating equipment, plus loans secured by the purchased object. Sparebanken Vest owns 49.9% of the shares in the company.

After completion of the construction project for Jonsvollskvartalet AS, the bank sold 64% of the shares in the company. The company was thus derecognised as a subsidiary and is now presented as an associated company in which the bank has an ownership interest of 34%. The sale took place with effect from 1 Dec. 2015.

Sparebanken Vest Annual Report 2015 Page 62 Note 18 Market risk

Sparebanken Vest defines market risk as the risk of a loss on a financial instrument as a result of changes in market variables and/ or market conditions within a specified timeframe. Market risk arises as a result of the bank holding open positions in various financial instruments. It can be subdivided into the following main groups:

• Interest rate risk: The risk of a loss as a result of changes in the interest rate markets (see Note 19) • Stock market risk: The risk of a loss as a result of changes in share prices (see Note 22) • Currency risk: The risk of a loss as a result of changes in exchange rates (see Note 20) • Credit spread risk: The risk of a loss as a result of changes in credit spreads (see Note 16)

The management of market risk is enshrined in the bank’s market risk strategy and market risk policy. The market risk strategy, which is adopted by the Board of Directors, sets out overriding guidelines for the bank’s activities in the capital markets, and the risk is managed through defined position limits in each risk area. The bank’s market risk policy, which is adopted by the Managing Director, further specifies and delegates limits and authorisations.

Sparebanken Vest’s investments shall be justified on the basis of the of the banking operations or the goal of increasing other earnings in the bank. Sparebanken Vest continuously measures and monitors the market risk to which the bank is exposed. The bank largely uses traditional control targets and limits, but supplements them with stress tests in order to assess market risk.

Note 19 shows the sensitivity of the bank’s interest rate risk to the effect of a parallel shift in the yield curve. The sensitivity of the bank’s exchange rate risk is shown in Note 20. The sensitivity of the bank’s stock market risk to a percentage fall in all share prices is shown in Note 22. Note 16 shows the sensitivity of the bank’s credit spread risk.

The bank expresses market risk as risk-adjusted capital allocated to each investment mandate within the adopted parameters for each individual risk area. The timeframe is one year, and the calculations do not take into account the correlation between the defined portfolios. Therefore, no diversification effect is calculated between the types of risks.

The total capital need relating to market risk can be summed up as follows: 31 Dec.15 31 Dec.14 Market risk 1 452 1 105

Sparebanken Vest Annual Report 2015 Page 63 Note 19 Interest rate sensitivity

Interest rate risk is the risk of losses as a result of changes in the interest rate. Sparebanken Vest incurs interest rate risk through ordinary banking operations (borrowing and lending) and by actively taking market positions. Sparebanken Vest also has holdings of bonds and certificates, mainly in order to meet the bank›s liquidity requirements.

In managing its interest rate exposure, the bank takes account of the fact that different maturities can develop differently (yield curve shift).

Bonds issued at a fixed interest rate account for part of the bank›s borrowings 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 valued at fair value in the consolidated balance sheet. In order to give a balanced picture in the consolidated balance sheet, bonds issued at a fixed interest rate by the parent bank are classified as recognised at fair value. The interest risk associated with the bank›s fixed-interest loans to customers is reduced through interest swap agreements. In order to give a balanced picture in the consolidated balance sheet, fixed-interest loans to customers are classified as recognised at fair value.

The changes in value in the tables assume a parallel shift in the yield curve for all durations. The changes are calculated by taking into account the average remaining term to maturity of the positions, positions on the balance sheet date and the assumed change in the interest rate. The tables below show the financial consequences of a 1% interest rate increase for the Group and the parent bank’s balance sheet total broken down by time intervals and balance sheet items. By balance sheet total is meant all balance sheet items that entail an interest rate risk as well as contract amounts of derivatives.

Interest rate sensitivity by period

GROUP 0–3 months 3–12 months 1–3 yrs 3 to 5 yrs > 5 years Total 31 Dec. 2015 Change in value, bal. sheet total 10,0 -27,4 -16,8 -19,4 10,8 -42,8 31 Dec. 2014 Change in value, bal. sheet total -22,9 2,6 28,3 -20,9 13,5 0,6

PARENT BANK 0–3 months 3–12 months 1–3 yrs 3 to 5 yrs > 5 years Total 31 Dec. 2015 Change in value, bal. sheet total 21,6 -22,6 -3,8 -12,1 12,6 -4,3 31 Dec. 2014 Change in value, bal. sheet total -8,6 2,6 28,3 -20,9 13,5 14,9

Interest rate sensitivity broken down by balance sheet items

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Balance sheet 2015 2014 -278,7 -486,6 Fixed-interest loans -651,4 -278,7 -95,4 -69,4 Other loans -128,9 -155,4 -126,3 -244,2 Bonds/certificates -251,2 -126,5 -5,6 -2,4 Other 0,0 -10,4 -506,0 -802,6 Total assets - 1 031,5 -571,0 0,4 0,3 Fixed-interest deposits 0,3 0,4 106,7 102,3 Other customer deposits 102,3 106,7 132,5 123,2 Bonds/certificates 1 242,1 183,2 1,8 1,5 Other borrowings 1,5 1,8 241,4 227,3 Total liabilities 1 346,2 292,1 279,5 571,1 Derivatives -357,3 279,5 14,9 -4,2 Total -42,6 0,6

Sparebanken Vest Annual Report 2015 Page 64 Note 20 Currency positions

The table shows Sparebanken Vest’s net currency exposure at 31 December including financial derivatives as defined by Norges Bank. An institution’s open net positions in each individual foreign currency cannot amount to more than 15% of the institution’s own funds. The total net currency position (including positions in NOK) cannot amount to more than 30% of the institution’s own funds.

Currency USD EUR GBP CHF DKK SEK OTHER Aggregated Net currency exposure at 31 Dec. 2015 20 32 14 10 -21 1 5 60 Effect on profit and equity of change in exchange rates of 5% 1 2 1 1 -1 0 0 3 Net currency exposure at 31 Dec. 2014 25 54 1 5 -19 -20 6 52 Effect on profit and equity of change in exchange rates of 5% 1 3 0 0 -1 -1 0 3

Sparebanken Vest Annual Report 2015 Page 65 Note 21 Financial derivatives

Sparebanken Vest uses financial derivatives to manage interest rate and currency risk. Financial derivatives are agreements entered into with financial institutions or customers to stipulate interest terms, exchange rates and the value of equity instruments for specific periods.

Method of valuation and accounting principles All derivatives are valued at fair value and exchange rate gains/losses are classified as net gain/(loss) on financial instruments. Interest from derivatives entered into to manage the interest rate risk associated with 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 contracts These are agreements to purchase or sell specific amounts of currency at an agreed exchange rate on a future date.

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

Interest rate and currency derivatives • Cross-currency interest rate swaps where the swap agreement includes both interest rate and currency terms.

Portfolio guarantee The bank participates in a guarantee arrangement against risk relating to the volatility of the value of Eksportfinans’s liquidity portfolio. The bank’s share is NOK 50 million.

The table below shows the nominal value of financial derivatives broken down by the type of derivative in addition to positive and negative market values. Positive market values are recognised in the balance sheet as assets, while negative market values are recognised as liabilities.

31 Dec. 2015 31 Dec. 2014 Nominal Positive Negative Nominal Positive Negative GROUP value market value market value value market value market value Interest swap agreements 57 241 778 1 360 32 046 909 1 156 Options/Cap/Floor/Collar/Swaption 30 1 1 80 0 2 Total interest rate instruments 57 271 779 1 361 32 126 909 1 158

Interest rate derivatives earmarked for hedging 12 192 890 0 13 692 1 062 0 Interest rate and curr. derivat. earmarked for hedging 26 498 4 809 0 21 936 3 219 0 Total derivatives earmarked for hedging purposes 38 690 5 699 0 35 628 4 281 0

Portfolio guarantee 50 0 3 50 2 0

Interest rate and currency derivatives 1 399 93 174 1 150 71 103 Instalments 9 234 157 73 6 188 308 202 Total interest rate and currency-related contracts 10 633 250 247 7 338 379 305

Total OTC derivatives 106 644 6 728 1 611 75 142 5 571 1 463

Sparebanken Vest Annual Report 2015 Page 66 Note 21 Financial derivatives (contd.)

31 Dec. 2015 31 Dec. 2014 Nominal Positive Negative Nominal Positive Negative PARENT BANK value market value market value value market value market value Interest swap agreements 62 091 778 1 356 32 046 909 1 156 Options/Cap/Floor/Collar/Swaption 30 1 1 80 0 2 Total interest rate instruments 62 121 779 1 357 32 126 909 1 158

Portfolio guarantee 50 0 3 50 2 0

Interest rate and currency derivatives 1 399 93 174 1 150 71 103 Instalments 9 234 157 73 6 188 308 202 Total interest rate and currency-related contracts 10 633 250 247 7 338 379 305

Total OTC derivatives 72 804 1 029 1 607 39 514 1 290 1 463

See Note 18 for a description of the bank’s market risk management. See Notes 19 and 20 for a further description of the bank’s interest rate and currency management.

Interest rate and currency derivatives earmarked for hedge accounting exclusively concern the subsidiary Sparebanken Vest Boligkreditt AS.

Note 22 Shares

Shares are classified at fair value through profit or loss 31 Dec. 31 Dec. Cost price 2015 2014 Shares valued at fair value through profit or loss are divided between the following portfolios Trading portfolio (listed) 8 6 155 Recognised at fair value 454 374 375 Shares recognised at fair value through profit or loss 380 531 Valuation method Listed 51 181 Investments priced by the investment management company 0 26 Shares valued on the basis of the OTC list 62 51 The companies' own valuation based on EVCA 1) 50 47 Shares valued on the basis of other valuation techniques 2) 217 226 Shares recognised at fair value through profit or loss 380 531

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

2) Value assessments are based on the last issue price, traded prices known to us and/or available accounting information if the share has not been traded. Obvious excess values are accounted for through a value adjustment, while smaller items are written down where necessary.

The committed amount relating to share investments for 2014 amounted to NOK 100 million, NOK 70 million of which was paid-up. The Group has committed itself to paying further equity relating to the following ordinary share investments and venture investments in 2015.

Comm. amount Paid up Fjord Invest Sørvest AS 14 10 Borea Opportunity AS 50 36 Contango Ventures 5 5 Sarsia Seed AS 26 19 Vekstfondet AS 5 3 Committed amounts relating to share investments 100 74

Sparebanken Vest Annual Report 2015 Page 67 Note 22 Shares (contd. I)

Sales agreement between Visa Europe Ltd and Visa Inc “An agreement has been entered into between Visa Europe Ltd and Visa Inc regarding the sale of all shares in Visa Europe. Visa Europe is priced at a maximum of NOK 21.2 billion in the agreement. This includes cash, shares in Visa Inc and an earn-out agreement. Sparebanken Vest has an interest in this transaction through its ownership interest in Visa Norge, which owns one share in Visa Europe Ltd. Sparebanken Vest has chosen not to recognise the transaction in the accounts as its value cannot be reliably measured. The relevant assessment is based on the following uncertainty factors:

• The implementation of the transaction is contingent on approval from the competition authorities in Turkey, the EU and Jersey. At the end of the year, only Turkey had accepted the agreement. • There is uncertainty about the amount of consideration to be awarded to Visa Norge. Visa Europe has made preliminary estimates, but they can change in the months ahead. • There is great uncertainty linked to the distribution of Visa Norge’s share to Sparebanken Vest. Each bank’s interest in Visa Norge varies based on the indirect taxes paid, adjusted for discounts. As of the balance sheet date, Visa Norge cannot specify a distribution formula.

Specification of shares, units and funds as of 31 Dec. 2015 Balance sheet value in NOK 1,000 Number of shares Holding (%) Balance sheet value

Amundsen Brands AS 418 500 16,5 % 3 139 Bankid Norge AS 1 460 2,9 % 2 311 Beat.no AS 412 500 6,7 % 2 970 Bergensavisen Konsern AS 315 840 9,8 % 6 317 Borea Opportunity II AS 22 500 4,4 % 6 840 Christian Michelsen Research AS 1 400 5,0 % 6 300 Eiendomskreditt AS 286 285 9,3 % 30 060 Eksportfinans AS 2 638 1,0 % 67 256 Epsis AS 20 202 6,7 % 2 020 Ez Systems AS 705 904 5,0 % 7 765 Filmfondet Fuzz 4 910 831 17,9 % 4 911 Fjordinvest Sørvest AS 9 870 647 17,3 % 6 909 Holberg Eeg AS 2 442 8,7 % 2 913 Hordaland Maritime Miljøselskap AS 3 333 7,5 % 2 500 Icon Capital III AS 18 184 9,1 % 5 000 K.F.S. Egenkapitalbevis 4 140 8,3 % 4 140 Musit-Music Interactive Technology AS 82 111 8,3 % 3 695 Norsk Innovasjonskapital II AS 3 116 15,3 % 14 022 Novel Diagnostics AS 1 250 512 11,8 % 4 877 Oslo Børs VPS Holding ASA 700 000 1,6 % 61 600 Osmolife AS 24 250 000 9,6 % 2 425 Sarsia Development AS 201 851 10,1 % 6 800 Sarsia Seed AS 4 838 432 12,6 % 4 838 Sea-Hawk Navigation AS 92 875 16,9 % 6 037 Sorbwater Technology AS 118 422 14,1 % 16 579 Sparebank1 Næringskreditt 52 909 0,6 % 6 614 Sparebanken Sør 45 000 0,9 % 6 210 Tide ASA 2 175 600 9,6 % 45 035 Wellis AS 93 193 17,7 % 13 979 Other companies 25 942 Total investments in shares, units and funds 380 003

Sparebanken Vest Annual Report 2015 Page 68 Note 23 Liquidity risk/remaining term to maturity

Liquidity risk is the risk of the bank being unable to service its debt as it falls due or being unable to finance an increase 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 financing from sources other than its customers, and the additional costs involved in raising long-term funds from the capital market. Sparebanken Vest manages its liquidity risk in accordance with a number of targets and parameters. The most important are the Liquidity Coverage Ratio (the bank’s ability to cover its liquidity needs in a 30-day perspective) and the liquidity indicator (stable financing with maturity more than one year hence in relation to illiquid assets).

Most of the bank’s long-term financing with more than one year until the final due date has agreed interest terms based on fixed short- term interest rates. This is in order to reduce the interest rate risk associated with 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.

GROUP 0–1 1–3 3–12 From 1 to More than Residual time to maturity at 31 Dec. 2015 month months months 5 years 5 years Total Debt to credit institutions 3 839 0 0 598 392 4 829 Interest disbursements 0 0 22 75 55 152

Customer deposits 63 017 815 63 0 0 63 895 Interest disbursements 3 0 1 0 0 4

Securitised debt 144 5 063 4 541 58 475 7 256 75 479 Interest disbursements 175 245 789 2 150 297 3 656

Loan approvals and unused credit facilities 15 275 0 0 0 0 15 275

Subordinated loan capital and subordinated bonds 0 0 0 0 1 775 1 775 Interest disbursements1) 4 8 67 324 491 894

Total disbursements 82 457 6 131 5 483 61 622 10 266 165 959

Financial derivatives Outgoing contractual cash flows 6 088 7 081 1 675 19 209 8 345 42 398 Incoming contractual cash flows 6 168 8 180 1 744 23 869 6 590 46 551

1) Interest disbursements are included for subordinated bonds up to 2040.

GROUP 0–1 1–3 3–12 From 1 to More than Residual time to maturity at 31 Dec. 2014 month months months 5 years 5 years Total Debt to credit institutions 3 484 0 0 337 515 4 336 Interest disbursements 0 0 18 67 33 118

Customer deposits 65 469 919 31 17 0 66 436 Interest disbursements 4 8 0 0 0 12

Securitised debt 172 1 693 7 708 47 749 2 925 60 247 Interest disbursements 98 248 906 2 520 402 4 174

Loan approvals and unused credit facilities 14 378 0 0 0 0 14 378

Subordinated loan capital and subordinated bonds 0 0 0 0 2 350 2 350 Interest disbursements1) 0 14 98 479 2 357 2 948

Total disbursements 83 605 2 882 8 761 51 169 8 582 154 999

Financial derivatives Outgoing contractual cash flows 2 609 3 663 6 563 19 964 1 271 34 070 Incoming contractual cash flows 2 703 3 678 7 167 22 429 1 479 37 456

1) Interest disbursements are included for subordinated bonds up to 2034, 2040 and 2042.

Sparebanken Vest Annual Report 2015 Page 69 Note 24 Net interest and credit commission income

PARENT BANK GROUP

2014 2015 2015 2014 91 85 Interest and similar income from loans to and receivables from credit institutions 6 20 Interest and similar income from loans to and receivables from customers 2 744 2 226 - valued at amortised cost 3 808 4 587 273 486 - valued at fair value 505 273

Interest and similar income from certificates, bonds and other interest-bearing securities 0 8 - valued at amortised cost 8 0 485 368 - valued at fair value 326 385 3 594 3 173 Interest income and similar income 4 653 5 265

Interest and similar expenses on debt to credit institutions 89 56 - valued at amortised cost 35 43 8 9 - valued at fair value 9 8 Interest and similar expenses on deposits from and debt to customers 1 380 890 - valued at amortised cost 876 1 366 1 1 - valued at fair value 1 1 Interest and similar expenses on issued securities 297 211 - valued at amortised cost 516 648 89 124 - valued at fair value 124 89 - designated for hedge accounting 553 611 Interest and similar expenses on subordinated loan capital 82 83 - valued at amortised cost 83 82 25 32 - valued at fair value 32 25 15 10 Other interest expenses and similar expenses1) 21 26 46 49 Fee to the Saving Banks› Guarantee Fund 49 46 2 032 1 465 Interest expenses and similar expenses 2 299 2 945 1 562 1 708 Net interest and credit commission income 2 354 2 320

1)Interest from derivatives entered into to manage the interest rate risk associated with 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 Annual Report 2015 Page 70 Note 25 Interest on individual balance sheet items

Average interest rate as percentage1) Average volume Group 2015 2014 2015 2014 Assets Loans to and receivables from credit institutions 0,26 1,09 2 485 1 769 Loans to customers 3,48 4,23 123 982 114 596 Certificates and bonds 1,90 2,39 17 737 16 340

Liabilities Debt to credit institutions 0,84 1,84 4 466 2 743 Customer deposits 1,35 2,16 65 141 63 265 Securities debt 1,81 2,29 66 613 59 093

PARENT BANK Assets Loans to and receivables from credit institutions 1,29 1,85 6 554 4 918 Loans to customers 3,89 4,46 73 692 67 656 Certificates and bonds 2,01 2,47 18 691 19 635

Liabilities Debt to credit institutions 1,01 1,73 6 414 5 578 Customer deposits 1,37 2,18 64 187 63 465 Securities debt 1,80 2,30 19 153 16 759

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

Sparebanken Vest Annual Report 2015 Page 71 Note 26 Net other operating income

PARENT BANK GROUP

2014 2015 2015 2014 44 36 Guarantee commission 36 44 274 265 Fees from payment transfer/interbank fees 265 274 172 188 Other commission and fees 188 172 490 489 Commission income and income fram bankig services 489 490

47 47 Fees, payment transfers 47 46 17 17 Fees, payment transfers/interbank fees 17 17 25 21 Other commission and fees 22 27 89 85 Commission expenses and banking service expenses 86 90

710 439 Income from shareholdings in group companies 14 11 Income from shareholdings in associated companies 70 74 724 450 Income from shareholdings in group companies and associated companies 70 74

37 18 Dividend 18 37 -16 0 Write-downs, associated companies 0 0 93 -220 Gain/(loss) on certificates and bonds -224 108 152 14 Gain/(loss) on shares 14 150 -162 -160 Gain/(loss) on financial derviatives -164 -162 26 41 Gain/(loss) on currency 41 28 Net gain/(loss) on financial instruments, recognised at fair value2) 175 71 - lending 63 175 0 0 - deposits 0 0 1 4 - debt to credit institutions 4 1 -56 20 - securitised debt 20 -56 -18 11 - subordinated loan capital 11 -18 -7 68 - gain/loss on change in credit spread, own liabilities 68 -7 Net gain/(loss) on financial instruments, recognised at amortised cost -7 -2 - securitised debt -12 -8 Net gain/(loss) on financial instruments relating to hedge accounting - derivater øremerket for sikringsbokføring 1 139 2 192 - gjeld stiftet ved utstedelse av verdipapirer, sikret -1 061 -2 192 218 -135 Net gain/(loss) on financial instruments1) -83 248

Brokerage commission 194 182 3 4 Other operating income 10 6 3 4 Other operating income 204 188 1 346 723 Net other operating income 594 910

1) Of which trading portfolio: 5 8 Dividend 8 5 3 -1 Gain/(loss) on shares -1 3 7 18 Gain/(loss) on certificates and bonds 18 7 1 9 Gain/(loss) on financial derivatives 9 1 8 15 Gain/(loss) on currency 15 8

2) See Notes 9, 32, 33, 35 and 36

Sparebanken Vest Annual Report 2015 Page 72 Note 27 Operating expenses

PARENT BANK GROUP

2014 2015 2015 2014 519 510 Payroll expenses including empl. Nat. Ins. contributions 621 634 64 63 Pensions1) 57 71 51 47 Other personnel expenses 64 64 63 64 External fees 70 67 216 197 ICT expenses 211 228 61 53 Marketing 60 67 974 934 Payroll and general administration expenses 1 083 1 131

100 102 Depreciation 118 109

134 112 Operating expenses, premises 100 93 20 17 Wealth tax 17 20 34 34 Other operating expenses 125 117 188 163 Other operating expenses 242 230 1 262 1 199 Total operating expenses 1 443 1 470

1) See Note 28.

The average number of employees measured in FTEs in 2015 was 687 (700) in the parent bank and 804 (818) in the Group.

Fee for elected auditor (NOK 1,000)

PARENT BANK GROUP

2014 2015 2015 2014 842 946 Audit fee 1 375 1 291 109 131 Attestation services 460 392 0 146 Tax advice 438 58 226 451 Other services 566 624 1 177 1 674 Total fees 2 839 2 365

Sparebanken Vest Annual Report 2015 Page 73 Note 28 Pensions

Pursuant to the Act relating to Mandatory Occupational Pensions, the Sparebanken Vest Group is required to have an occupational pension scheme, and the Group›s pension scheme meets the requirements of the Act. The pension scheme includes:

1. A company pension scheme with a life insurance company. The full retirement pension corresponds to almost 70% of the final salary based on the present National Insurance basic amount (G), limited to a maximum of 12G. The scheme covers 885 persons, 503 of whom receive pensions under the scheme. The scheme includes disability benefits. The defined benefit scheme was closed to new members in 2007.

2. A defined contribution scheme covering 514 (parent bank 396) employees. All new employees become part of the defined contribution scheme.

3. A scheme for senior executive personnel covering nine employees, with the option of retiring at the age of 65. The Managing Director is entitled, and, should the Board of Directors so desire, obliged to take early retirement at the age of 60.

The pension benefits correspond to 70% of the final salary up to the age of 67. The Managing Director and employees who can retire at the 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 removed from the company pension scheme but will be compensated from the ordinary retirement age for the reduction in pension entitlements. The scheme for senior executive personnel is unsecured and is covered through operations.

The subsidiary Sparebanken Vest Eiendomsforvaltning was merged with Sparebanken Vest with effect from 1 July 2015. This is shown as an increase in pension obligations and pension assets in the parent bank’s presentation.

From 31 December 2015, all employees of the subsidiary Eiendomsmegler Vest AS switched to a defined contributions pension scheme. These are the plan change effects shown in the Group’s presentation. The pension obligations and pensions assets are thus the same in the parent company and the Group in the closing balance.

Financial assumptions used to calculate pension expenses and obligations

Costs Obligations Percentage 2015 2014 31 Dec. 15 31 Dec. 14 Discount rate 2,30 3,80 2,60 2,30 Annual wage growth 2,45 3,20 2,25 2,45 Annual pension adjustment 0,00 0,40 0,00 0,00 Regulation of Nat. Insurance basic amount 2,50 3,25 2,25 2,50 Turnover (over/under 40 years) 0-8,00 0-8,00 0-8,00 0-8,00 Tendency to take AFP early retmnt. 50,00 50,00 50,00 50,00 Tariff K2013 K2013 K2013 K2013

Investment of pension assets Percentage 2015 2014 Bonds 40 48 Shares 9 11 Money market etc. 37 27 Property 14 14

The value-adjusted return on the pension assets is estimated at 4.0% for 2015. The value-adjusted return for 2014 was 5.4%.

The average remaining earnings period is nine years.

The expected premium for 2016 amounts to NOK 35 million.

The expected return on the pension assets is calculated by assessing the expected return on the assets that are included in the current investment strategy.

Sparebanken Vest Annual Report 2015 Page 74 Note 28 Pensions (contd.)

GROUP 2015 2014 Pension expenses Secured Unsecured Total Secured Unsecured Total Pension earnings for the year 27 3 30 27 4 31 Net interest expense 5 1 6 4 1 6 Administration expenses 1 0 1 1 0 1 Recognised plan change -11 0 -10 0 4 4 Net pension expense 22 4 26 32 9 41 Employer’s National Insurance contr. 3 1 4 4 1 5 Recognised pension expense 25 5 30 36 10 46 Recognised premiums paid to the defined contr. scheme, incl. AFP 27 25 Total pension expenses 57 71

2015 2014 Estimate variances rel. to gross pens. oblig. rec. through comp. inc. -65 125 Estimate variances rel. to pens. assets rec. through comp. inc. 16 -16 Employer’s National Insurance contributions -7 16 Administration expenses 6 8 Total pensions recognised through comprehensive income -48 133

31 Dec. 2015 31 Dec. 2014 Pension obligations Secured Unsecured Total Secured Unsecured Total Present value of earned pension obligation 1 118 24 1 142 1 199 28 1 227 Fair value of pension assets -943 0 -943 -958 0 -958 Net pension obligation 174 24 198 242 28 270 Employer’s National Insurance contributions 25 3 28 35 4 39 Capitalised pension obligation 199 27 226 276 32 308

Change in pension obligation during the year 2015 2014 Pension obligation at 1.1. 1 227 1 071 Pension earnings for the year 30 31 Interest expense on pension obligations 30 40 Plan change -38 4 Estimate variance as a result of financial assumptions -55 171 Estimate variance as a result of other variables -10 -46 Pension payments -44 -43 Pension obligation at 31 Dec. 1 142 1 227

Change in pension assets during the year Pension assets (market value) at 1.1. 958 905 Interest income on pension assets 25 35 Estimate variances relating to pension assets 6 11 Return on pension assets excl. interest income -23 5 Premiums paid/ to premium fund 48 45 Administration expenses -7 -8 Plan change -27 0 Pension payments -36 -34 Pension assets (market value) at 31 Dec. 943 958

Sparebanken Vest Annual Report 2015 Page 75 Note 28 Pensions (contd. II)

Reg. of Nat. Ins. Sensitivity Discount rate Wage growth basic amount Pension regulation Consequences of: Oblig. Exp. Oblig. Exp. Oblig. Exp. Oblig. Exp. Increase in assumptions of 0.5% -83 1 33 3 -11 -1 72 4 Reduction in assumptions of 0.5% 93 -1 -30 -2 11 -1

The sensitivity shows the change in gross pens. obligations and gross pens. expenses in the event of the referred changes in assumptions.

PARENT BANK 2015 2014 Pension expenses Secured Unsecured Total Secured Unsecured Total Pension earnings for the year 24 3 27 24 3 27 Net interest expense 5 1 5 4 1 5 Administration expenses 1 0 1 1 0 1 Recognised plan change 0 0 0 0 4 4 Net pension expense 29 4 33 29 8 37 Employer’s National Insurance contr. 4 1 5 4 1 5 Recognised pension expense 33 4 37 32 10 42 Recognised premiums paid to the defined contri- bution scheme, incl. AFP 26 22 Total pension expenses 63 64

2015 2014 Est. variances rel. to gross pens. obligations rec. through comp. inc. -59 120 Est. variances rel. to pens. assets rec. through comp. Inc. 15 -13 Employer’s National Insurance contributions -6 16 Administration expenses 6 7 Total pensions recognised through comprehensive income -45 129

31 Dec. 2015 31 Dec. 2014 Pension obligations Secured Unsecured Total Secured Unsecured Total Present value of earned pension obligation 1 118 24 1 142 1 130 24 1 154 Fair value of pension assets -943 -943 -907 -907 Net pension obligation 174 24 198 222 24 247 Employer’s National Insurance contributions 25 3 28 32 3 35 Capitalised pension obligations 199 28 226 254 28 282

Sparebanken Vest Annual Report 2015 Page 76 Note 28 Pensions (contd. III)

Change in pension obligations during the year 2015 2014 Pension obligations at 1.1. 1 154 1 008 Pension earnings for the year 27 27 Interest expense on pension obligations 29 38 Plan change 0 4 Estimate variance as a result of financial assumptions -54 164 Estimate variance as a result of other variables -5 -45 Merger with Sparebanken Vest Eiendomsforvaltning as of 1 July 2015 32 0 Pension payments -41 -42 Pension obligations at 31 Dec. 1 142 1 154

Change in pension assets during the year 2015 2014 Pension assets (market value) at 1.1. 907 861 Interest income on pension assets 24 33 Estimate variances relating to pension assets 7 10 Return on pension assets excl. interest income -22 3 Premiums paid/ to premium fund 46 41 Administration expenses -7 -7 Merger with Sparebanken Vest Eiendomsforvaltning as of 1 July 2015 24 0 Pension payments -36 -34 Pension assets (market value) at 31 Dec. 943 907

Reg. of Nat. Ins. Sensitivity Discount rate Wage growth basic amount Pension regulation Consequences of: Oblig. Exp. Oblig. Exp. Oblig. Exp. Oblig. Exp. Increase in assumptions of 0.5% -83 1 33 3 -11 -1 72 4 Reduction in assumptions of 0.5% 93 -1 -30 -2 11 -1

The sensitivity shows the change in gross pens. obligations and gross pens. expenses in the event of the referred changes in assumptions.

Sparebanken Vest Annual Report 2015 Page 77 Note 29 Tax

PARENT BANK GROUP

2014 2015 Tax expense for the year 2015 2014 119 225 Tax payable 1) 401 314 1 1 Paid withholding tax and correction of previous years' tax assessment 2 1 0 3 Effect of change in tax rules 2 0 0 7 Deducted issue expenses recognised against equity 7 0 -15 -71 Change in deferred tax through profit or loss -64 -11 105 165 Tax expense for the year 349 305 1) Tax payable in the balance sheet also includes wealth tax in the amount of NOK 13 million (NOK 19 million)

1 226 1 049 Profit/loss before tax expense 1 396 1 493 27% tax on: 331 283 Pre-tax profit/loss for accounting purposes 377 403 0 0 Share of profit/loss from associated company -19 -20 5 4 Expensed wealth tax, non-deductible 4 5 -273 -154 Non-taxable income -42 -123 39 25 Non-deductible expenses 26 35 1 0 Paid withholding tax 0 1 0 6 Effect of change in tax rules 2 0 1 1 Insufficient/(excess) provision for tax payable 1 4 105 165 Tax expense 349 305

9 % 16 % Effective tax rate 25 % 20 %

Change in capitalised deferred tax: 71 19 Capitalised deferred tax (tax asset) at 1.1 63 117 -15 -71 Recognised in the period -64 -11 -3 2 Correction of deferred tax previous year 2 -7 0 2 Transferred temporary differences upon merger 0 0 0 -3 Effect of change in tax rules -2 0 -35 12 Tax on pension expenses through comprehensive income 13 -36 19 -38 Capitalised deferred tax (tax asset) at 31 Dec. 12 63

Sparebanken Vest Annual Report 2015 Page 78 Note 29 Tax (contd.)

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

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Deferred tax asset 2015 2014 11 10 Tangible fixed assets 9 11 99 143 Financial instruments 121 99 76 57 Pension obligations 57 83 19 16 Other liabilities 20 20 0 0 Tax loss carryforward 0 2 206 226 Total deferred tax asset 207 214

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 Deferred tax 2015 2014 0 2 Profit and loss account 2 1 0 0 Tangible fixed assets 0 0 18 17 Goodwill 17 18 7 7 Other intangible assets 7 7 200 162 Financial instruments 193 252 225 188 Total deferred tax 219 278

19 -38 Net deferred tax (tax asset) 12 63

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

2014 2015 Deferred tax recognised 2015 2014 0 1 Profit and loss account 1 0 -4 -1 Tangible fixed assets 1 -5 1 -1 Goodwill and other intangible assets -1 1 -14 -82 Financial instruments -80 -7 4 9 Pension obligations 14 4 -2 3 Other liabilities -1 -2 0 0 Tax loss carryforward 2 -2 -15 -71 Total change in deferred tax -64 -11

Sparebanken Vest Annual Report 2015 Page 79 Note 30 Intangible assets

PARENT BANK GROUP

Excess Excess value value Software customer Software customer and licences portfolio Goodwill Total and licences portfolio Goodwill Total At 31 Dec. 2013 397 167 109 673 Acquisition cost 403 167 130 700 296 89 0 385 Accumulated depreciation 300 89 0 389 Balance sheet value at 102 78 109 290 31 Dec. 2013 103 78 130 311

The 2014 financial year Balance sheet value at 102 78 109 289 1.1.2014 103 78 130 311 75 0 0 75 Additions during the year 76 0 0 76 58 14 0 72 Depreciation during the year 58 14 0 72 Balance sheet value at 119 64 109 292 31 Dec. 2014 121 64 130 315

At 31 Dec. 2014 472 167 109 748 Acquisition cost 479 167 130 776 354 103 0 457 Accumulated depreciation 358 103 0 461 Balance sheet value at 119 64 109 292 31 Dec. 2014 121 64 130 315

The 2015 financial year Balance sheet value at 119 64 109 292 1.1.2015 121 64 130 315 47 0 0 47 Additions during the year 48 0 0 48 61 14 0 75 Depreciation during the year 62 14 8 84 Balance sheet value at 105 50 109 263 31 Dec. 2015 107 50 122 279

At 31 Dec. 2015 519 167 109 795 Acquisition cost 527 167 130 824 414 117 0 531 Accumulated depreciation 420 117 8 545 Balance sheet value at 105 50 109 263 31 Dec. 2015 107 50 122 279

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 expected contract period, which is estimated to be 12 years.

Sparebanken Vest Annual Report 2015 Page 80 Note 30 Intangible assets (contd.)

Goodwill The 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 based on whether it is possible to identify and separate cash flows relating to the business in question. The table below shows the different assessment units and the balance sheet value of goodwill in each unit.

PARENT BANK GROUP

31/12-14 31/12-15 Assessment unit Grounds for the choice of assessment unit 31/12-15 31/12-14 Goodwill from the acquisition of Fokus Bank in Retail and corporate market Sogn og Fjordane is included in the total activity 82 82 Region Sogn og Fjordane of Region Sogn og Fjordane. 82 82 Goodwill from the acquisition of Sauda Spare- Retail and corporate market bank is included in the total activity of Region 27 27 Region Sunnhordland Sunnhordland. 27 27 Kyte Næringsmegling AS has continued as a separate subsidiary of the Eiendomsmegler Vest 0 0 Kyte Næringsmegling AS Group and is a natural assessment unit. 0 8 Ottesen & Dreyer 0 0 Eiendomsmegler Vest AS (part of Eiendomsmegler Vest AS) 6 6 Herland Eiendom AS has continued as a separate subsidiary of the Eiendomsmegler Vest Group and 0 0 Herland Eiendom AS is a natural assessment unit. 7 7 109 109 Total goodwill 122 130

Testing of values The write-down test of capitalised goodwill is carried out by discounting expected future cash flows from the assessment units. The 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 risks associated with the activity. The write-down tests are performed on cash flows after tax. The tests have not uncovered any need to write down goodwill in the parent bank or Group as of 31 Dec. 2015.

Key assumptions for the write-down test

Assessment unit Required rate of return after tax Retail and corporate market Region Sogn og Fjordane 11,00 % Retail and corporate market Region Sunnhordland 11,00 % Eiendomsmegler Vest AS (Ottesen & Dreyer) 12,50 % Herland Eiendom AS 12,50 %

Sparebanken Vest Annual Report 2015 Page 81 Note 31 Tangible fixed assets

PARENT BANK GROUP

Machinery, Machinery, fixtures and fixtures and means of Land and means of Land and transport buildings Total transport buildings Total At 31 Dec. 2013 622 8 630 Acquisition cost 652 715 1 367 517 0 517 Accumulated depreciation 541 153 694 Accumulated write-downs 0 25 25 105 8 113 Balance sheet value at 31 Dec. 2013 112 537 649

The 2014 financial year 105 8 113 Balance sheet value at 1.1.2014 112 537 649 9 0 9 Additions during the year 14 277 291 14 0 14 Disposals during the year 14 108 122 27 0 27 Depreciation during the year 0 0 0 0 0 0 Write-downs during the year 31 6 37 73 8 81 Balance sheet value at 31 Dec. 2014 81 700 781

At 31 Dec. 2014 617 8 625 Acquisition cost 652 884 1 536 544 0 544 Accumulated depreciation 541 153 694 Accumulated write-downs 31 31 62 73 8 81 Balance sheet value at 31 Dec. 2014 81 700 781

The 2015 financial year 73 8 81 Balance sheet value at 1.1.2015 81 700 781 73 2 75 Additions during the year 75 154 229 0 0 0 Disposals during the year 0 800 800 26 0 26 Depreciation during the year 30 3 33 0 0 0 Write-downs during the year 0 0 0 120 10 130 Balance sheet value at 31 Dec. 2015 126 51 177

At 31 Dec. 2015 521 10 531 Acquisition cost 552 70 622 401 0 401 Accumulated depreciation 426 19 445 Accumulated write-downs 0 0 0 120 10 130 Balance sheet value at 31 Dec. 2015 126 51 177

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

Sparebanken Vest Annual Report 2015 Page 82 Note 32 Debt to credit institutions

Debt to credit institutions is classified as valued at amortised cost or recognised at fair value.

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 2015 2014 4 511 4 883 No agreed term to maturity 3 849 3 484 673 800 With agreed term to maturity 800 673 5 184 5 683 Recognised at amortised cost 4 649 4 157

193 200 With agreed term to maturity 200 193 193 200 Recognised at fair value 200 193

5 377 5 883 Debt to credit institutions 4 849 4 350

31 Dec. 31 Dec. 2014 1 Jan.–31 Dec. 15 2015 Balance Add./ Change in Bal. sheet Recognised at fair value sheet value disposals value value Cost value of debt in currency 165 165 Change in exchange rate 16 11 27 Value adjustment, interest rate 14 -7 7 Value adjustment, credit spread -3 3 0 192 7 199

Accrued interest 1 1 Recognised at fair value 193 200

Nominal value of currency EUR 20 20

The net gain/(loss) on debt recognised at fair value is included in the item net gain/(loss) on financial instruments recognised at fair value (Note 26).

Sparebanken Vest Annual Report 2015 Page 83 Note 33 Offsetting

Parent bank As a result of ISDA agreements entered into between the parent bank and most financial counterparties concerning derivative transactions, the right to offset applies if the counterparty defaults on its obligations. In addition, CSA agreements have been entered into with the most important financial counterparties.

Sparebanken Vest Boligkreditt AS Sparebanken Vest Boligkreditt also uses ISDA agreements with external counterparties in connection with entering into derivative agreements The agreements confer a right to offset in each currency, but not between currencies. The company has also entered into additional agreements (CSA) for weekly margin requirements for security that also apply to each currency. The agreements are unilateral, which means that only the counterparty must furnish security when the market value fluctuates. The counterparty shall furnish security when the market value exceeds a limit (in each currency) that depends on the counterparty’s rating. A higher rating leads to a higher market value limit for when the counterparty must furnish security. The CSA agreement contains rating clauses that mean that the counterparty must furnish additional security if the rating falls below defined rating triggers. If the rating falls below a pre-defined level, the derivatives shall be novated to another counterparty for the counterparty’s own account.

Gross Amount offset Balance Other Amount after balance sheet in the balance sheet Netting security/ possible net GROUP value sheet1) value agreements1) collateral settlement 31 Dec. 2015 Loans to and receivables from credit institutions 2 167 0 2 167 0 1 335 832 Financial derivatives – assets 6 728 0 6 728 195 3 738 2 795 Debt to credit institutions 4 849 0 4 849 0 3 738 1 111 Financial derivatives – liabilities 1 611 0 1 611 195 1 335 81

31 Dec. 2014 Loans to and receivables from credit institutions 1 556 0 1 556 0 924 632 Financial derivatives – assets 5 571 0 5 571 343 3 145 2 083 Debt to credit institutions 4 350 0 4 350 0 3 145 1 205 Financial derivatives – liabilities 1 463 0 1 463 343 924 196

Gross Amount offset Balance Other Amount after balance sheet in the balance sheet Netting security/ possible net PARENT BANK value sheet1) value agreements1) collateral settlement 31 Dec. 2015 Loans to and receivables from credit institutions 5 171 0 5 171 0 1 335 3 836 Financial derivatives – assets 1 029 0 1 029 195 0 834 Debt to credit institutions 5 883 0 5 883 0 0 5 883 Financial derivatives – liabilities 1 607 0 1 607 195 1 335 77

31 Dec. 2014 Loans to and receivables from credit institutions 8 529 0 8 529 0 924 7 605 Financial derivatives – assets 1 290 0 1 290 343 0 947 Debt to credit institutions 5 377 0 5 377 0 0 5 377 Financial derivatives – liabilities 1 463 0 1 463 343 924 196

1) Netting agreements are not offset in the balance sheet because the transactions are normally not settled on a net basis.

Sparebanken Vest Annual Report 2015 Page 84 Note 34 Deposits from customers

Breakdown of deposits from and debt to customers.

PARENT BANK GROUP

31 Dec. 2014 31 Dec. 2015 31 Dec. 2015 31 Dec. 2014 NOK % NOK % Breakdown of term to maturity NOK % NOK % 41 074 61,6 41 816 65,4 No agreed term to maturity 41 770 65,4 40 790 61,4 25 658 38,4 22 130 34,6 With agreed term to maturity 22 130 34,6 25 658 38,6 66 732 100,0 63 946 100,0 Total deposits from customers 63 900 100,0 66 448 100,0

31 Dec. 2014 31 Dec. 2015 31 Dec. 2015 31 Dec. 2014 NOK % NOK % Breakdown by industry NOK % NOK % 1 604 2,4 1 567 2,5 Primary industries 1 567 2,5 1 604 2,4 1 998 3,0 1 812 2,8 Manufacturing and mining 1 812 2,8 1 998 3,0 1 223 1,8 298 0,5 Power and water supply 298 0,5 1 223 1,8 2 269 3,4 2 236 3,5 Building and construction industry 2 236 3,5 2 269 3,4 1 852 2,8 1 667 2,6 Commerce 1 667 2,6 1 852 2,8 1 996 3,0 2 131 3,3 International shipping and transport 2 131 3,3 1 996 3,0 221 0,3 225 0,4 Hotels and restaurants 225 0,4 221 0,3 3 696 5,5 3 403 5,3 Property management 3 355 5,3 3 411 5,1 9 998 15,0 4 514 7,1 Service sector 4 516 7,1 9 999 15,0 2 107 3,2 4 201 6,6 Public administration 4 201 6,6 2 107 3,2 220 0,3 263 0,4 Abroad (other) 263 0,4 220 0,3 27 184 40,7 22 317 34,9 Total business and industry 22 271 34,9 26 900 40,5 39 548 59,3 41 629 65,1 Retail customers 41 629 65,1 39 548 59,5 66 732 100,0 63 946 100,0 Total corporate and retail customers 63 900 100,0 66 448 100,0

Geographical breakdown 49 387 74,0 49 316 77,1 Hordaland 49 270 77,1 49 103 73,9 6 332 9,5 5 961 9,3 Sogn og Fjordane 5 961 9,3 6 332 9,5 5 492 8,2 5 355 8,4 Rogaland 5 355 8,4 5 492 8,3 4 841 7,3 2 563 4,0 Rest of Norway 2 563 4,0 4 841 7,3 66 052 99,0 63 195 98,8 Total, Norway 63 149 98,8 65 768 99,0 680 1,0 751 1,2 Abroad 751 1,2 680 1,0 66 732 100,0 63 946 100,0 Total geographical breakdown 63 900 100,0 66 448 100,0

Under the Act on Guarantee Schemes for Banks and Public Administration etc. of Financial Institutions (the Guarantee Schemes Act), all savings banks are required to be members of the Norwegian Banks’ Guarantee Fund. The Fund is obliged to cover losses incurred by a depositor on deposits with a member institution in an amount not exceeding NOK 2 million of the total deposit. By deposit is meant any credit balance with the bank in an account registered by name, as well as obligations under certificates of deposit registered by name. The fee payable to the Norwegian Banks’ Guarantee Fund is determined in accordance with the provisions of the Guarantee Schemes Act.

Sparebanken Vest Annual Report 2015 Page 85 Note 35 Securitised debt

Securitised debt is classified as valued at amortised cost, designated for hedge accounting or recognised at fair value.

31 Dec. GROUP 2015 31 Dec. 2014 Balance Balance sheet Recognised at amortised cost Nominal value sheet value value NOK 27 448 27 477 22 040 EUR 841 8 089 4 923 USD 50 440 297 SEK 790 828 964 Accrued interest 76 82 36 911 28 306 Designated for hedge accounting NOK 4 400 4 892 4 395 EUR 3 206 31 271 24 731 SEK 0 0 338 Accrued interest 428 446 36 591 29 910 Recognised at fair value NOK 2 897 2 901 3 202 EUR 55 529 496 Value adjustment, interest rate and exchange rate 80 104 Value adjustment, credit spread – opening balance 53 50 Value adjustment, credit spread – this period -64 3 Accrued interest 69 80 3 567 3 935 Securitised debt 77 069 62 151

Matured/ Change in Other Balance sheet Issued redeemed exchange rate changes Balance sheet Change in securities debt 31 Dec. 2014 2015 2015 2015 2015 31 Dec. 2014 Certificates, nominal value 0 350 -350 0 Bonds, nominal value 60 247 25 585 -12 850 2 497 75 479 Value adjustments 1 904 -314 1 590 Total securities debt 62 151 25 935 -13 200 2 497 -314 77 069

The net gain/(loss) on securitised debt recognised at fair value is included in the item ‹Net gain/(loss) on financial instruments recognised at fair value’ (Note 26).

Sparebanken Vest Annual Report 2015 Page 86 Note 35 Securitised debt (contd.)

Classified for recognition Recognised at at fair value or designated amortised cost for hedging Total Maturity date securities debt NOK Currency NOK Currency 2016 3 868 589 0 5 291 9 748 2017 7 829 5 059 2 440 5 820 21 148 2018 5 550 1 684 850 5 484 13 568 2019 6 150 1 212 507 4 811 12 680 2020 4 050 818 1 400 4 810 11 078 2021 1 100 250 1 350 2022 500 4 811 5 311 2024 0 96 96 2027 500 500 Total securities debt, nominal value 75 479

31 Dec. 31 Dec. PARENT BANK 2015 2014 Nominal Balance Balance Recognised at amortised cost value sheet value sheet value NOK 7 713 7 738 8 383 EUR 841 8 090 4 923 USD 50 440 297 SEK 790 828 964 Accrued interest 24 34 17 120 14 601 Recognised at fair value NOK 2 897 2 969 3 359 EUR 55 529 496 Accrued interest 69 80 3 567 3 935 Securitised debt 20 687 18 536

Sparebanken Vest Annual Report 2015 Page 87 Note 36 Subordinated loan capital and subordinated bond loans

Balance sheet value Nominal 31 Dec. 31 Dec. Year of issue value Interest Redemption right 2015 2014 Ordinary subordinated loans 2012 Subordinated loan NOK 375 mill 3-month NIBOR + 3.50% call option 9/2-17 376 376 2013 Subordinated loan NOK 500 mill 3-month NIBOR + 1.85% call option 10/10-18 501 501 2014 Subordinated loan NOK 500 mill 3-month NIBOR + 1.50% call option 27/6-19 499 500

Subordinated bond loan 1) 2010 Subordinated bond loan NOK 400 mill Fixed interest 8,05 % call option 19/5-20 462 473 2012 Subordinated bond loan NOK 325 mill 3-month NIBOR + 5,0 % call option 9/2-17 0 325 2013 Subordinated bond loan NOK 250 mill 3-month NIBOR + 3,65 % call option 10/10-18 0 251 Subordinated loan capital 1 838 2 426

The above subordinated bond loans, and subordinated bonds classified as hybrid capital under equity, are in their entirety part of the bank’s core capital.

31 Dec. Matured/ Other 31 Dec. Change in sub. loans and sub. bond loans 2014 Issued redeemed changes 2015 Ordinary subordinated loan capital, nominal value 1 375 1 375 Subordinated bond loan, nominal value 1) 975 -575 400 Value adjustments 76 -13 63 Total sub. loans and sub. bond loans 2 426 0 0 -588 1 838 1) Subordinated bonds that do not satisfy the definition of a financial liability pursuant to IAS 32 are reclassified as equity as of 31 Dec. 2015.

31 Dec. 31 Dec. 2015 2014 Bal. sheet Bal. sheet Recognised at amortised cost Nominal value value value NOK 1 375 1 370 1 940 Accrued interest 6 13 1 376 1 953

Recognised at fair value NOK 400 395 395 Value adjustment, interest rate and exchange rate 47 55 Value adjustment, credit spread – opening balance 3 4 Value adjustment, credit spread – this period -3 -1 Accrued interest 20 20 462 473 Subordinated loan capital 1 838 2 426

Effective interest rate for subordinated loans recognised at fair value in 2015: 5.89% (2014: 5.17%)

The net gain/(loss) on subordinated loan capital recognised at fair value is included in the item ‘Net gain/(loss) on financial instruments recognised at fair value’ (Note 26).

Sparebanken Vest Annual Report 2015 Page 88 Note 37 Capital adequacy

Risk and capital management Banking operations entail risk in many areas, and good risk and capital management is a key strategic instrument in Sparebanken Vest’s value creation. For further information about risk and capital management, see Note 7 and the Group’s Pillar III document. The latter is available on Sparebanken Vest’s website.

For regulatory capital purposes, the transitional arrangement between the Basel I and CRD IV regulations still applies. It stipulates that the risk-weighted volume cannot be reduced to less than 80% of the corresponding figure calculated pursuant to the Basel I regulations. The Basel I regulations thereby still represent a ‘floor’ as regards the minimum requirement for own funds.

Calculation of economic capital and regulatory capital The bank’s capital assessment is based on a quantification of economic capital for the individual risk areas. Stress tests simulate the effects of situations that are unlikely to arise, but that could result in large unexpected losses for the bank. Qualitative assessments supplement the quantitative assessments.

In 2007, Sparebanken Vest was given permission by the Financial Supervisory Authority of Norway to use internal methods to calculate credit risk (IRB) and has since met the regulatory requirements for this approval. One condition for IRB approval is that the IRB system and its use are validated at least once a year. In Sparebanken Vest, the results of the validation are considered by the bank’s Validation Committee. An annual validation report is submitted to the Board of Directors for consideration. The internal audit function regularly audits the system and its use, including compliance with the Capital Adequacy Regulations. The IRB system is audited at least once a year, and a report is submitted to the Board of Directors for consideration. The parameters and processes used by the bank to manage and control the IRB system follow from its credit strategy, policy and procedures.

When calculating capital in relation to credit risk, all of the bank’s customers who are covered by the IRB system shall be scored using the bank’s internal score models. The bank also calculates values for Loss Given Default (LGD) for retail market customers and small corporate customers. For corporate customers, LGD rates set out in the Capital Adequacy Regulations are used. The bank has prepared models for own estimates of LGD also for CM, and the bank is in the process of applying for their approval (AIRB). The bank does not use external rating, nor does it have self-determined risk parameters beyond those that are used to set the basis for the calculation of and the amount of expected losses. The value of any security furnished is taken into account when calculating LGD and in the scoring of retail market customers.

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 value of furnished security is updated annually or when a new commitment starts. In the corporate market, the value of furnished security is updated as 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 for amounts of NOK 1,000 or more. Default can also be deemed to exist based on an ‘unlikeliness to pay’ criterion, such as insolvency, if information to this effect is received.

Sparebanken Vest uses a template-based method for operational risk, while market risk is calculated using the standard method.

The minimum requirement for own funds is 8%, of which 4.5% must be Core Tier 1 capital. The remaining 3.5% of the minimum requirement must be 1.5% subordinated bonds (core capital) and 2% subordinated loans (supplementary capital). Other buffer requirements, including a systemic risk buffer (3%), conservation buffer (2.5%), countercyclical buffer (1.0%) and Pilar II requirements, are met by Core Tier 1 capital. The countercyclical capital buffer will be increased to 1.5% from 1 July 2016. Sparebanken Vest’s total capital requirement will be 14.5% plus an addition for Pilar II – 11.5% of which must be met by Core Tier 1 capital. The Board of Directors of Sparebanken Vest has adopted a capital adequacy target of 14.5% in Core Tier 1 capital for 2016.

Sparebanken Vest Annual Report 2015 Page 89 Note 37 Capital adequacy (contd.)

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 2015 2014 Weighted calculation basis 21 167 22 487 Enterprise – SME 22 610 21 271 2 829 2 364 Enterprise – Specialised 2 364 2 829 3 871 3 048 Enterprise – Other 3 048 3 871 152 275 Mass market with secured by property – SME 414 268 6 498 10 927 Mass market with mortgage secured by property – not SME 19 947 13 366 68 62 Mass market – Other SMEs 62 68 2 548 2 516 Mass market – Other not-SMEs 2 540 2 579 3 129 2 920 Equity positions IRB 0 0 40 262 44 599 Total credit risk, IRB 50 985 44 252

714 645 Position risk, debt instruments 645 714 310 12 Position risk, equity instruments 12 310 3 704 3 243 Operational risk 5 078 5 680 14 824 14 528 Commitment pursuant to the standard method 8 559 7 736 279 327 Risk of credit valuation adjustment for counterparty (CVA) 1 745 1 087 0 0 Other deductions 0 0 60 093 63 354 Total weighted calculation basis before correction to transitional arrangement 67 024 59 779

0 0 Correction to transitional arrangement 6 621 8 784 60 093 63 354 Weighted calculation basis pursuant to the transitional arrangement 73 645 68 563

Own funds 794 1 476 Equity certificates 1 476 794 0 0 - Own equity certificates 0 0 568 617 Share premium reserve 617 570 6 904 7 713 Primary capital 7 733 6 953 14 14 Compensation fund 14 14 175 175 Gift fund 175 175 351 490 Equalisation reserve 555 478 95 0 Other equity / Reserve for unrealised gains 166 109 Minority interests 0 1 8 901 10 486 Total book equity excluding hybrid capital 10 737 9 094

-267 -239 Deferred tax asset, goodwill and other intangible assets -301 -344 34 -15 Value adjustment, own liabilities -15 34 -181 -121 Deduction for expected losses IRB and own funds fin. inst. -185 -236 0 -46 Value adjustment for requirement for justifiable valuation -53 0 0 0 Deduction for provision for dividend/gifts -85 -177 8 487 10 065 Total Core Tier 1 capital 10 098 8 371 966 966 Subordinated bonds 966 966 9 453 11 031 Core capital 11 064 9 337

1 369 1 370 Perpetual own funds 1 370 1 369 1 369 1 370 Supplementary capital 1 370 1 369

10 822 12 401 Net own funds 12 434 10 706

Sparebanken Vest Annual Report 2015 Page 90 Note 37 Capital adequacy (contd. II)

PARENT BANK GROUP

31 Dec. 31 Dec. 31 Dec. 31 Dec. 2014 2015 2015 2014 Minimum requirement 4 807 5 068 Minimum capital adequacy requirement: 8% 5 892 5 485 6 015 7 333 Surplus own funds 6 543 5 221 6 015 7 333 Of which surplus Core Tier 1 capital to meet buffer requirements 6 543 5 221 Buffer requirements 1 502 1 584 Conservation buffer: 2.5% 1 841 1 714 1 803 1 901 Systemic risk buffer: 3.0% 2 209 2 057 0 634 Countercyclical buffer: 1% (from 30 June 2015) 736 0 3 305 4 118 Total buffer requirement Core Tier 1 capital 4 787 3 771 2 709 3 215 Surplus Core Tier 1 capital 1 756 1 450

14,1 % 15,9 % Core Tier 1 capital adequacy 13,7 % 12,2 % 1,6 % 1,5 % Subordinated bonds 1,3 % 1,4 % 2,3 % 2,2 % Supplementary capital 1,9 % 2,0 % 18,0 % 19,6 % Capital adequacy, transitional arrangement 16,9 % 15,6 %

14,1 % 15,9 % Core Tier 1 capital adequacy 15,1 % 14,0 % 1,6 % 1,5 % Subordinated bonds 1,4 % 1,6 % 2,3 % 2,2 % Supplementary capital 2,0 % 2,3 % 18,0 % 19,6 % Capital adequacy, Basel II fully implemented 18,6 % 17,9 %

Sparebanken Vest Annual Report 2015 Page 91 Note 38 The equity certificate

The equity certificate capital at 31 December 2015 consisted of 59,034,017 equity certificates, each with a nominal value of NOK 25.

Owner fraction 31 Dec. 31 Dec. Figures for parent bank (NOK 1,000) 2015 2014 Equity certificates 1 475 850 794 032 Own equity certificates -37 -149 Share premium reserve 617 324 568 467 Equalisation reserve 490 643 350 422 Total equity certificate capital (A) 2 583 781 1 712 772

Primary capital 7 713 112 6 903 672 Compensation fund 14 378 14 378 Gift fund 175 000 175 000 Total primary capital (B) 7 902 491 7 093 050

Reserve for unrealised gains 0 95 471 Hybrid capital 576 926 0 Equity 11 063 198 8 901 293

Owner fraction after the distribution of dividend (A /(A+ B)) 24,6 % 19,5 %

Weighted owner fraction 19,6 % 20,5 %

Dividend per equity certificate 1,10 4,00

Total dividend on 59,034,017 (31,761,290) equity certificates (NOK 1,000) 64 937 127 045

Own equity certificates When buying own equity certificates, the purchase price including direct costs is recognised as a deduction from 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.

2015 2014 Number of own equity certificates at 1.1 5 961 89 620 Equity certificates purchased 109 190 52 254 Equity certificates sold 113 683 135 913

Number of own equity certificates at 31.12 1 468 5 961

Effective return per equity certificate 2015 2014 Listed price at 31.12 35,00 50,50 Dividend paid during the year 4,00 3,00 Listed price at 1.1 41,55 45,30 Effective return in NOK -2,55 8,20 Effective return as a percentage -6,15 18,10

The price as of 1 Jan. 2015 has been adjusted for the rights issue with a conversion factor of 0.822856 as a result of the allocation of subscription rights.

Sparebanken Vest Annual Report 2015 Page 92 Note 38 Equity certificates (contd. I)

Proportion of The twenty largest owners of ECs No of ECs EC capital % SPAREBANKSTIFTINGA HARDANGER 14 954 394 25,33 SPAREBANKSTIFTELSEN SAUDA 4 900 354 8,30 PARETO AS 3 923 368 6,65 VPF NORDEA NORGE VERDI 2 665 071 4,51 MP PENSJON PK 2 583 294 4,38 BERGEN KOMMUNALE PENSJONSKASSE 2 273 492 3,85 WIMOH INVEST AS 2 196 699 3,72 BERA AS 1 000 000 1,69 EIKA UTBYTTE 897 319 1,52 SPAR SHIPPING AS 743 480 1,26 WENAASGRUPPEN AS 697 694 1,18 VPF NORDEA KAPITAL 624 423 1,06 AW CAPITAL INVEST AS 472 558 0,80 VPF NORDEA AVKASTNING 467 851 0,79 FONDSFINANS NORGE 450 000 0,76 TROVÅG AS 433 700 0,73 MERRILL LYNCH PROF. CLEARING CORP 404 387 0,69 HOLBERG NORGE 393 444 0,67 LARRE EIENDOM 2 AS 382 194 0,65 JAL HOLDING AS 371 740 0,63 Total 40 835 462 69,17

Sparebanken Vest Annual Report 2015 Page 93 Note 38 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, as defined in Section 7-26 of the Accounting Act and Section 8-20 of the Supplementary Regulations to the Act.

No of ECs Jan Erik Kjerpeseth, Managing Director 49 114 Bjørg Marit Eknes, Director of Retail Market 16 385 Ragnhild Janbu Fresvik, Director of Corporate Market 7 912 Hallgeir Isdahl, Director of CSR 14 469 Frank Johannesen, Director of Risk Management 21 017 Siren Sundland, Director of Operational Services 25 117 Trygve Bruvik, Chair of the Board of Directors 108 893 Marit Solberg, Deputy Chair of the Board of Directors 26 620 Kristin Axelsen, member of the Board of Directors 2 359 Arild Bødal, member of the Board of Directors 14 869 Anne Marit Hope, member of the Board of Directors 4 117 Øyvind Atle Langedal, member of the Board of Directors 5 934 Inger Johanne Thraning Westad, deputy member 424 Wenche W Anglevik, member of the Supervisory Board 737 Jon Askeland, member of the Supervisory Board 376 Bodil Digranes, member of the Supervisory Board 1 933 Ove Ellingsen, member of the Supervisory Board 21 067 Liv Erstad, member of the Supervisory Board 2 078 Anne Grethe Grøttvedt, member of the Supervisory Board 1 625 Kirsten Guldbrandsen, member of the Supervisory Board 1 098 Solfrid Hagen, member of the Supervisory Board 1 130 Jens Petter Helland, member of the Supervisory Board 2 977 Eirik A Hjelle, member of the Supervisory Board 214 Tone Haaland, member of the Supervisory Board 4 518 Anne Maria Langeland, member of the Supervisory Board 3 298 Jostein Lid, member of the Supervisory Board 288 Svein Ove Lid, member of the Supervisory Board 2 000 Kjell Gunnar Lilleøren, member of the Supervisory Board 3 379 Eivind Lunde, member of the Supervisory Board 19 058 Trond Mohn, member of the Supervisory Board 43 098 Lisbeth Ormevik, member of the Supervisory Board 2 156 Unni Grethe B Våge, member of the Supervisory Board 2 973 Jan Øvrebø, member of the Supervisory Board 17 455 Berte-Elen Reinertsen, deputy chair of the Control Committee 1 680 430 368

Breakdown by number Volume intervals No of ECs Percentage No of owners Percentage 1 - 100 14 298 0,02 252 6,63 101 - 1 000 805 037 1,36 1 833 48,24 1 001 - 5 000 2 626 763 4,45 1 163 30,61 5 001 - 10 000 1 647 158 2,79 233 6,13 10 001 - 15 000 000 53 940 761 91,37 319 8,39 Total 59 034 017 100,00 3 800 100,00

Sparebanken Vest Annual Report 2015 Page 94 Note 39 Transactions with related parties

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

Sparebanken Vest defines subsidiaries, associated companies, board members and the corporate management as related parties in relation to this accounting standard. Information about remuneration of the Supervisory Board and the Control Committee is provided pursuant to the requirements of the Accounting Act.

Shareholdings in group companies and associated companies are specified in Note 17.

Transactions with related parties are conducted in accordance with generally accepted business terms and principles.

Sub- Associated Key Intragroup transactions 2015 (NOK 1,000) sidiaries companies personnel Results Interest from loans to customers 106 875 11 201 Interest from interest-bearing securities (issued by the housing credit company) 49 224 1 528 Interest and similar expenses on deposits from customers -40 504 -9 943 Commission income received relating to distribution 104 897 Gain/(loss) on financial instruments -712 Group dividend/contributions received 439 000 11 200 Pay, pension and fees to executive personnel and officers of the company 21 811 Rent 66 131 Management fees 50 185 Fees received for the sale of services 7 332 5 312 Fees paid for the purchase of services -1 153 -1 324

Balance sheet Shares in subsidiaries, associated companies: - Capital increases 250 000 24 950 Group contributions/dividend receivable 439 000 Net loans transferred to the housing credit company, present year 3 230 963 Loans transferred to the housing credit company, accumulated 55 417 467 Loans to related parties as of 31 Dec. 3 034 603 467 504 Deposits from related parties 4 820 502 106 103 Holding of covered bonds issued by Sparebanken Vest Boligkreditt AS 120 609 38 955 Holding of subordinated loans issued by Sparebanken Vest Boligkreditt AS 903 698 0 Holding of covered bonds issued by associated companies 352 394 Holding of subordinated loans issued by associated companies 41 160

Sparebanken Vest Annual Report 2015 Page 95 Note 39 Transactions with related parties (contd.)

Sub- Associated Key Intragroup transactions 2014 (NOK 1,000) sidiaries companies personnel Results Interest from loans to customers 96 884 23 918 Interest from interest-bearing securities (issued by the housing credit company) 107 253 7 817 Interest and similar expenses on deposits from customers -62 959 -14 672 Commission income received relating to distribution 101 662 Gain/(loss) on financial instruments -14 038 Group dividend/contributions received 710 893 Pay, pension and fees to executive personnel and officers of the company 18 751 Rent -114 868 Management fees 47 327 Fees received for the sale of services 7 119 4 473 Fees paid for the purchase of services -5 688

Balance sheet Shares in subsidiaries, associated companies: - Capital increases 64 870 Group contributions/dividend receivable 710 893 Net loans transferred to the housing credit company, present year 7 248 812 Loans transferred to the housing credit company, accumulated 52 191 957 Loans to related parties as of 31 Dec. 7 784 528 716 306 Deposits from related parties 4 458 253 323 552 Holding of covered bonds issued by Sparebanken Vest Boligkreditt AS 3 035 785 302 283 Holding of subordinated loans issued by Sparebanken Vest Boligkreditt AS 900 318 31 942

Subsidiaries mainly refer to Eiendomsmegler Vest AS and Sparebanken Vest Boligkreditt AS.

Internal transactions with the estate agency company are limited and mainly consist of interest on deposits and loans with associated balance sheet items.

Sparebanken Vest Boligkreditt AS is a wholly owned company that manages housing loans financed by the issuing of covered bonds. Sparebanken Vest sells loans to the company, which in turn finances its activities by issuing covered bonds. Sparebanken Vest owns part of the bonds issued by the housing credit company and receives interest income on these bonds. In addition, the subsidiary has both deposits and liabilities in relation to the parent company on which interest is calculated in accordance with the arm’s length principle. Sparebanken Vest Boligkreditt pays management fees for transferred loans and buys administrative services from Sparebanken Vest. Associated companies comprise Frende Forsikring, Norne Securities, Brage Finans, Verd Boligkreditt and Jonsvollskvartalet AS. Sparebanken Vest sells general and life insurance through Frende Forsikring on a commission basis. Leasing products are sold through Brage Finans in a corresponding manner.

Loans transferred to Sparebanken Vest Boligkreditt are specified above. The contractual relationship between the parent bank and Sparebanken Vest Boligkreditt AS indicates that the parent bank has no further involvement in transferred housing loans, since all credit risk relating to the loans has been transferred to the housing credit company. These are loans that are within 75% of the objects’ value. The housing credit company has a rolling liquidity facility linked to the maturing of bonds in the next 12 months. The latter is exclusively an intercompany agreement between the parent bank and the housing credit company. The realisation of such a facility will provide access to issued bonds and non-transferred assets (loans).

Sparebanken Vest Annual Report 2015 Page 96 Note 39 Transactions with related parties (contd. I)

Pay and other remuneration of executive personnel (figures in NOK 1,000)

Executive personnel are defined as members of the corporate management team. The information includes pay and total taxable remuneration, the proportion of the overall remuneration that relates to bonuses, and calculated, earned pension rights. Earned pension comprises earned pension rights for the year in the bank’s company pension scheme and earned pension in the scheme for the remuneration of executive personnel. See Note 28 ‘Pensions’ for a description of the pension schemes.

Pay and payments Bonus Total remu- Pension 2015 – Members of the corporate management team as of 31 Dec. in kind paid neration expense Jan Erik Kjerpeseth – Managing Director 3 467 695 4 162 1 164 Frank Johannesen – Director of Risk Management 2 033 426 2 459 761 Ragnhild Janbu Fresvik – Director of Corporate Market 1 633 94 1 727 167 Hallgeir Isdahl – Director of CSR 1 943 411 2 354 517 Siren Sundland – Director of Operational Services 1 765 397 2 162 559 Bjørg Marit Eknes – Director of Retail Market 1 755 219 1 974 456 Total 12 596 2 242 14 838 3 624

Pay and payments Bonus Total remu- Pension 2014 – Members of the corporate management team as of 31 Dec. in kind paid neration expense Jan Erik Kjerpeseth – Managing Director 2 817 514 3 331 990 Frank Johannesen – Director of Finance and Risk Management 1 808 317 2 125 581 Ragnhild Janbu Fresvik – Director of Corporate Market 1 304 85 1 389 128 Hallgeir Isdahl – Director of Retail Market 1 844 296 2 140 441 Siren Sundland – Director of Market, Corporate Communication and CSR 1 614 297 1 911 437 Bjørg Marit Eknes – Director of Business Support and Development 1 639 149 1 788 394 Total 11 026 1 658 12 684 2 971

On the recommendation of the Compensation Committee, the Board of Directors sets the salary of the Managing Director. The Managing Director determines the remuneration of other executive personnel after consultation with the Compensation Committee.

A provision of NOK 3.6 (3.1) million has been made for the 2015 financial year for bonuses to be distributed among executive and key personnel following a thorough assessment.

Members of the corporate management team, the heads of Sparebanken Vest Boligkreditt AS and Eiendomsmegler Vest AS have a reciprocal period of notice of six months and a non-competition clause that applies for a further six months. With respect to the Managing Director, a mutual period of notice of six months applies. The Board of Directors can decide to terminate the employment relationship earlier without a reduction in pay. In the case of termination by Sparebanken Vest, salary is retained for a period of 18 months with a deduction for any pay received during that period. Members of the corporate management team, the heads of Sparebanken Vest Boligkreditt AS and Eiendomsmegler Vest AS also have an early-retirement agreement that applies from the age of 65. It gives them a right and an obligation to retire on 66–70% of their pay until they reach the age of 67. The Managing Director is entitled to, and, should the Board of Directors so wish, is obliged to take early retirement at the age of 62. Over and above this, there are no service contracts between members of the Board of Directors, the management or supervisory bodies and Sparebanken Vest or Sparebanken Vest’s subsidiaries that provide for remuneration on termination of the employment relationship.

Sparebanken Vest Annual Report 2015 Page 97 Note 39 Transactions with related parties (contd. II)

Remuneration of officers of the company (in whole NOK) 2015 2014

Directors’ Additional Total remu- Total remu­ Styret fee fee neration neration Trygve Bruvik Chair of the Board of Directors 368 750 40 600 409 350 403 000 Marit Solberg Deputy Chair of the Board 184 375 22 000 206 375 189 000 Richard Rettedal 152 917 46 000 198 917 180 000 Øyvind A Langedal 152 917 46 000 198 917 186 000 Sivert Sørnes Until April 2015 62 500 40 000 102 500 212 000 Birthe Kåfjord Lange 152 917 6 000 158 917 159 000 Arild Bødal 152 917 25 000 177 917 179 000 Anne Marit Hope 152 917 0 152 917 150 000 Kristin Axelsen 152 917 0 152 917 150 000 Berte-Elen R Konow From April 2015 93 334 15 000 108 334 0 Arnulf Ingvaldsen Deputy member 25 583 19 000 44 583 43 000 Bernt Bergheim Deputy member 25 583 37 500 63 083 61 000 Inger Johanne W Thraning Deputy member 0 0 0 9 000 Fredrik Skaarer Fjose Until April 2015 Deputy member 0 0 0 9 000 Fred David Risløw From April 2015 Deputy member 0 0 0 0 Total 1 677 627 297 100 1 974 727 1 930 000

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

Remuneration of the parent bank’s Supervisory Board amounted to NOK 139,897 (181,869). Meeting attendance fees of NOK 1,092,500 (594,000) come in addition.

2015 2014

Additional Total remu- Total remu­ Control Committee Remuneration fee neration neration Tom W Horne Chair 127 916 0 127 916 125 000 Charlotte H Lem Deputy chair 93 750 0 93 750 85 000 Berte-Elen R Konow Until April 2015 36 667 0 36 667 63 333 Magni Haugland 87 334 0 87 334 85 000 Camilla Madsen From April 2015 51 917 0 51 917 0 Kjell Steinsbø Until April 2014 0 0 0 31 667 Total 397 584 0 397 584 390 000

Sparebanken Vest Annual Report 2015 Page 98 Note 39 Transactions with related parties (contd. III)

Loans and security furnished to executive personnel, employees and officers of the company (NOK 1,000)

PARENT BANK GROUP Loans and security furnished to the Managing Director (NOK 1,000) 2015 2014 2015 2014 Man. Dir. Jan Erik Kjerpeseth 40 1 8 007 6 563 Other members of the corporate management team 12 359 5 452 14 587 12 650 Loans are furnished on standard terms for employees 12 399 5 453 22 594 19 213

Loans and security furnished to officers of the company (NOK 1,000), parent bank Board of Directors Øyvind A Langedal, board member 0 0 4 061 1 823 Sivert Sørnes, board member (until 2015) 1 1 Arnulf Ingvaldsen, deputy member 12 1 115 125 Kristin Axelsen, employee representative 4 9 2 475 2 480 Anne Marit Hope, employee representative 0 0 1 100 909 Inger Johanne Thraning, deputy employee repr. 2 538 47 2 538 887 Fred David V Risløp, deputy employee repr. (from 2015) 4 412 4 412 Fredrik Skaarer Fjose, deputy employee representative (until 2015) 3 446 3 446 Loans are furnished on standard customer terms, with the exception of loans to employee representatives 6 966 3 504 14 701 9 671

Chair of the Supervisory Board Borghild Storås Ones (from 2015) 25 25 Erling Syvertsen (until 2015) 1 143 1 143 Loans are furnished on standard customer terms 25 1 143 25 1 143

Total loans and furnishing of security to employees (NOK 1,000)1) 622 080 516 133 1 643 982 1 555 543

Total loans and furnishing of security to other members of the Supervisory Board and Control Committee (NOK 1,000) Supervisory Board 2) 5 314 9 780 20 664 24 212 Control Committee 0 0 0 0

1) Excluding the corporate management team and employee representatives. 2) Excluding the Chair of the Supervisory Board 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 40 Disputes

As of 31 December 2015, Sparebanken Vest was not involved in any lawsuits or legal disputes of material financial significance to the Group’s activities. There are at all times various claims against the bank relating to its activities. Provision for bad debt has been made where it has been deemed necessary.

Sparebanken Vest Annual Report 2015 Page 99 DeloitteAS .elo1tte Damsgardsveien 135 Postboks 6013 Postterminalen N0-5892 Bergen Norway

Tlf.: +47 55 21 81 00 Faks: +47 55 21 81 33 www.deloitte.no

Translation from the original Norwegian version

To the Annual Shareholders' Meeting of Sparebanken Vest

TNDEPENDENT AUDITOR' S REPORT

Report on the Financial Statements We have audited the accompanying financial statements of Sparebanken Vest, which comprise the financial statements of the parent company and the financial statements of the group. The financial statements of the parent company comprise the balance sheet as at 31 December 2015, and the income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements of the group comprise the balance sheet as at 31 December 2015, and the income statement, statement of comprehensive income, statement of changes in equity, and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

The Board of Directors and the Managing Director's Responsibility for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these financial statements in accordance with simplified application of international accounting standards according to the Norwegian accounting act § 3-9 for the company accounts and in accordance with International Financial Reporting Standards as adopted by EU for the group accounts, and for such internal control as The Board of Directors and the Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor 's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Oeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee. and its network of members firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/no/omoss for a detailed description of the Medlemmer av Den Norske Revisorforening legal structure of Deloitte Touche Tohmatsu Limited and its member firms. org.nr: 980 211 282

Sparebanken Vest Annual Report 2015 Page 100 Page 2 Independent Auditor's Report to the Annual Shareholders' Meeting ofSparebanken Vest

Opinion on the financial statements for the parent company In our opinion, the financial statements of the parent company are prepared in accordance with the law and regulations and give a true and fair view of the financial position of Sparebanken Vest as at 31 December 2015, and of its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to the Norwegian accounting act § 3-9.

Opinion on the financial statements for the group In our opinion, the financial statements of the group are prepared in accordance with the law and regulations and give a true and fair view of the financial position of the group Sparebanken Vest as at 31 December 2015, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by EU.

Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors' report and the statements on Corporate Governance and Corporate Social Responsibility Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors report and in the statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements, the going concern assumption and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations.

Opinion on Registration and Documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (JSAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company's accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Bergen, 18 February 2016 Deloitte AS

Helge-Roald Johnsen (signed) State Authorised Public Accountant (Norway)

[Translation has been made for information purposes only]

Sparebanken Vest Annual Report 2015 Page 101 THE GENERAL MEETING OF SPAREBANKEN VEST

Statement from the Control Committee for 2015

The Control Committee of Sparebanken Vest was dissolved with effect from 1 January 2016 in accordance with a resolution passed at the meeting of the bank’s Supervisory Board on 26 October 2015.

As a result of the above-mentioned decision, the Committee is unable to submit its usual statement to the General Meeting relating to the annual accounts for 2015.

The present statement is submitted in accordance with Circular No 16/2015, dated 18 December 2015, from the Financial Supervisory Authority of Norway.

Until the time of its dissolution, the Committee has carried out the control measures deemed necessary to comply with the guidelines and instructions set out for the Committee in the Savings Bank Act and in the instructions for the Control Committee.

During its work, the Committee has had contact with both the internal and the external auditor, the Chair of the Board, the Managing Director and the directors of the bank’s different business areas.

Until the time of its dissolution, the Committee did not find that the bank’s activities had been in violation of the Savings Bank Act, the Financial Institutions Act, the bank’s Articles of Association, resolutions by the Supervisory Board / the General Meeting, or other relevant provisions.

Bergen, 15 December 2015 / 21 January 2016

Tom W Horne (sign.) Charlotte Hartvigsen Lem (sign.) Tom W Horne, Chair Charlotte Hartvigsen Lem

Magny Haugland (sign.) Camilla M Madsen (sign.) Magny Haugland Camilla Meland Madsen

Sparebanken Vest Annual Report 2015 Page 102

Responsibility Statement

We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2015 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the group taken as a whole.

We also confirm that the management report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.

Bergen, 31 December 2015/18 February 2016 The Board of Directors of Sparebanken Vest

Trygve Bruvik Marit Solberg Richard Rettedal Chairman Deputy Chairman

Birthe Kåfjord Lange Arild Bødal Øyvind A. Langedal

Berte-Elen Reinertsen Konow Anne-Marit Hope Kristin Axelsen

Jan Erik Kjerpeseth Managing Director

Sparebanken Vest Annual Report 2015 Page 103 Group key figures – 5 years

PROFIT DEVELOPMENT 2015 2014 2013 2012 2011 Interest income and similar income 4 653 5 265 5 074 4 944 4 390 Interest expenses and similar expenses 2 299 2 945 2 913 3 147 2 800 Net interest and commission income 2 354 2 320 2 161 1 797 1 590

Commission income and income from banking services 489 490 465 444 417 Commission expenses and banking service expenses 86 90 87 98 82 Net banking services 403 400 378 346 335 Income from shareholdings in associated companies 70 74 50 34 -50 Net gain/(loss) financial instruments -83 248 142 276 124 Other operating income 204 188 198 205 194 Net other operating income 594 910 768 861 603 Net operating income 2 948 3 230 2 929 2 658 2 193

Payroll and general administrative expenses 1 083 1 131 1 108 886 1 058 Depreciation 118 109 112 114 107 Other operating exenses 242 230 208 228 170 Total operating expenses 1 443 1 470 1 428 1 228 1 335 Profit before write-downs and tax expense 1 505 1 760 1 501 1 430 858

Net profit on tangible fixed assets 76 143 0 0 0 Write-downs on loans and guarantees 185 410 280 147 126 Pre-tax profit 1 396 1 493 1 221 1 283 732

Tax expense 349 305 313 353 184 Profit for the financial year 1 047 1 188 908 931 548

Majority share of the profit/loss for the period 1 047 1 188 908 931 548 Minority share of the profit/loss for the period 0 0 0 0 0

Sparebanken Vest Annual Report 2015 Page 104 Group key figures – 5 years (contd. I)

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. BALANCE SHEET DEVELOPMENT 2015 2014 2013 2012 2011 Assets Cash and receivables from central banks 631 2 209 328 877 668 Lendings to and receivables from credit institutions 2 167 1 556 1 318 878 481 Net lending 128 927 118 643 112 024 106 789 99 304 Shares at fair value through profit or loss 380 531 686 709 738 Certificates and bonds 21 455 16 525 15 440 15 152 11 537 Financial derivatives 6 728 5 571 2 763 1 929 1 695 Holdings in associated companies 841 681 555 473 349 Othe intangible assets 279 315 311 309 330 Tangible fixed assets 177 781 649 494 496 Prepaid costs 21 29 107 31 56 Other assets 57 229 215 107 331 Total assets 161 663 147 070 134 396 127 748 115 985

Liabilities and equity Debt to credit institutions 4 849 4 350 3 070 5 430 7 971 Deposits 63 900 66 448 62 172 60 032 53 142 Securitised debt 77 069 62 151 56 695 50 753 44 606 Financial derivatives 1 611 1 463 705 1 475 1 089 Incurred costs and prepaid income 196 187 197 182 116 Pension obligations 226 308 190 136 187 Deferred tax 12 63 117 83 109 Other provisions for liabilities 2 2 17 22 28 Tax payable 414 334 330 323 113 Subordinated loan capital 1 838 2 426 2 271 1 626 1 613 Other liabilities 232 244 497 292 320 Total liabilities 150 349 137 976 126 261 120 354 109 294

Equity certificates 1 476 794 794 794 765 Own equity certificates 0 0 -2 -11 -12 Premium 617 570 570 570 564 Equalisation reserve 555 478 352 259 176 Total equity certificate capital 2 648 1 842 1 714 1 612 1 493

Primary capital 7 733 6 953 6 134 5 527 5 078 Gift fund 175 175 175 175 175 Compensation fund 14 14 14 14 14 Total primary capital 7 923 7 142 6 323 5 716 5 267

Reserve for unrealised gains 0 0 0 0 0 Other equity 166 109 97 65 -70 Hybrid capital 577 0 0 0 0 Minority interests 0 1 1 1 1

Total equity 11 314 9 094 8 135 7 394 6 691

Total liabilities and equity 161 663 147 070 134 396 127 748 115 985

AVERAGE ASSETS UNDER MANAGEMENT (PRIMARY CAPITAL) 151 992 138 502 129 289 123 903 109 260

Sparebanken Vest Annual Report 2015 Page 105 Group key figures – 5 years (contd. II)

PROFIT/LOSS AS % OF PRIMARY CAPITAL 2015 2014 2013 2012 2011 Interest income and similar income 3,06 3,80 3,92 3,99 4,02 Interest expenses and similar expenses 1,51 2,13 2,25 2,54 2,56 Net interest and credit commission income 1,55 1,68 1,67 1,45 1,46

Commission income and income from banking services 0,32 0,35 0,36 0,36 0,38 Commission expenses and banking service expenses 0,06 0,06 0,07 0,08 0,08 Net banking services 0,27 0,29 0,29 0,28 0,31 Income from shareholdings in associated companies 0,05 0,05 0,04 0,03 -0,05 Net gain/(loss) financial instruments -0,05 0,18 0,11 0,22 0,11 Other operating income 0,13 0,14 0,15 0,17 0,18 Net other operating income 0,39 0,66 0,59 0,69 0,55 Net operating income 1,94 2,33 2,27 2,15 2,01

Payroll and general administrative expenses 0,71 0,82 0,86 0,72 0,97 Depreciation 0,08 0,08 0,09 0,09 0,10 Other operating expenses 0,16 0,17 0,16 0,18 0,16 Total operating expenses 0,95 1,06 1,10 0,99 1,22 Profit before write-downs and tax expense 0,99 1,27 1,16 1,15 0,79

Net profit on tangible fixed assets 0,05 0,10 0,00 0,00 0,00 Write-downs on loans and guarantees 0,12 0,30 0,22 0,12 0,12 Pre-tax profit 0,92 1,08 0,94 1,04 0,67

Tax expense 0,23 0,22 0,24 0,28 0,17 Profit for the financial year 0,69 0,86 0,70 0,75 0,50

Majority share of the total profit/loss for the period 0,69 0,86 0,70 0,75 0,50 Minority share of the total profit/loss for the period 0,00 0,00 0,00 0,00 0,00

OTHER KEY FIGURES

Return on assets, earnings and capital structure (percentage) 1. Return on equity after tax 11,0 13,7 11,7 14,1 8,7 2. Return on total assets before losses and tax 1,0 1,4 1,2 1,2 0,8 3. Net return on total assets 0,7 0,9 0,7 0,8 0,5 4. Total operating expenses as percentage of net operating income (cost-income) 48,9 45,5 48,8 46,2 60,9 5. Deposits/loans ratio 49,6 56,0 55,5 56,2 53,5

Balance sheet development (percentage) 6. Change in net lending 8,7 5,9 4,9 7,5 12,3 7. Change in certificates and bonds 29,8 7,0 1,9 31,3 -13,9 8. Change in deposits -3,8 6,9 3,6 13,0 9,1 9. Change in assets under management 9,9 9,4 5,2 10,1 10,2

Defaults, provisions and losses on loans 10. Loss percentage, loans 0,15 0,35 0,25 0,14 0,13 11. Gross defaults as percentage 0,16 0,31 0,34 0,40 0,40 12. Net defaults as percentage 0,13 0,24 0,25 0,32 0,33 13. Percentage provided for of loans in default 20,1 24,7 28,0 20,2 17,4

Capital adequacy 14. Net own funds 12 434 10 706 9 541 7 973 7 191 15. Calculation basis 73 645 68 563 66 620 63 300 62 200 16. Capital adequacy 16,9 15,6 14,3 12,6 11,6 17. Core capital adequacy 15,0 13,6 13,2 12,3 10,8

Sparebanken Vest Annual Report 2015 Page 106 Group key figures – 5 years (contd. III)

Equity certificates (parent bank) 2015 2014 2013 2012 2011 18. Equity certificate capital (NOK mill.) 1 476 794 794 794 765 19. Dividend per equity certificate (NOK) 1,10 4,00 3,00 2,50 2,00 20. Listed price at 31 Dec. 35,00 41,55 37,28 24,19 26,08 21. Owner fraction after the distribution of dividend 24,64 19,50 20,50 21,20 21,50 22. Share of profit per equity certificate (NOK) 5,34 7,23 5,68 6,51 6,07 23. Diluted profit per equity certificate (NOK) 5,34 7,23 5,68 6,51 6,07 24. Effective return per equity certificate -6,15 18,10 62,59 -0,95 -25,11 25. Direct return 3,14 9,63 8,05 10,33 7,67 26. Dividend provision as a percentage of the equity certificates' share of the profit 20,60 55,33 52,82 38,40 32,95

Personnel figures at 31 Dec. Number of employees 839 855 864 926 920 Number of full-time equivalents 803 813 821 881 886

Distribution network Points of sale 44 48 54 64 68

Definitions: 1. Profit/loss for the financial year as a percentage of average equity through the year. 2. Operating profit/loss before losses and tax as a percentage of average assets under management. 3. Profit/loss on ordinary operations after tax as a percentage of average assets under management. 5. Deposits from and debt to customers as a percentage of loans to and receivables from customers. 6. Change in net lending at 31 Dec. as a percentage of net lending the year before. 7. Change in securities at 31 Dec. as a percentage of securities the year before. 8. Change in deposits at 31 Dec. as a percentage of deposits the year before. 10. Losses on loans and guarantees etc. as a percentage of gross lending at 31 Dec. 11. Gross defaults as a percentage of gross lending. 12. Loans in default with deductions for individual write-downs on such loans, as a percentage of net lending. 13. Individual write-downs on loans in default as a percentage of the gross volume of such loans. 21. Equity certificate capital as a percentage of the parent bank's equity as of 31 Dec. 22. Equity certificates' share of profit/loss divided by the number of equity certificates 24. Dividend paid plus change in exchange rate 1 Jan.–31 Dec., as a percentage of the listed price at 1.1. 25. Provision for dividend as a percentage of the listed price at year end.

Sparebanken Vest Annual Report 2015 Page 107 Group key figures – per quarter for two years

31 Dec. 30 Sept. 30 June 31 March 31 Dec. 30 Sept. 30 June 31 March PROFIT DEVELOPMENT (accumulated) 2015 2015 2015 2015 2014 2014 2014 2014 Interest income and similar income 4 653 3 534 2 387 1 208 5 265 3 946 2 621 1 299 Interest expenses and similar expenses 2 299 1 771 1 217 622 2 945 2 229 1 480 733 Net interest and credit commission income 2 354 1 763 1 170 586 2 320 1 717 1 141 566

Commission income and income from banking services 489 367 238 120 490 353 229 114 Commission expenses and expenses relating to banking services 86 68 39 20 90 62 41 21 Net banking services 403 299 199 100 400 291 188 93 Income from shareholdings in associated companies 70 39 34 14 74 62 48 18 Net gain/(loss) on financial instruments -83 -29 39 50 248 270 241 221 Other operating income 204 159 113 52 188 143 97 39 Net other operating income 594 468 385 216 910 766 574 371 Net operating income 2 948 2 231 1 555 802 3 230 2 483 1 715 937

Payroll and general administration expenses 1 083 804 547 269 1 131 846 565 280 Depreciation 118 78 51 26 109 83 56 29 Other operating expenses 242 190 125 61 230 175 108 55 Total operating expenses 1 443 1 072 723 356 1 470 1 104 729 364 Profit/loss before write-downs and tax expense 1 505 1 159 832 446 1 760 1 379 986 573

Net profit on tangible fixed assets 76 0 0 0 143 143 143 0 Write-downs of loans and losses on guarantees 185 104 77 39 410 385 170 47 Profit/loss before tax expense 1 396 1 055 755 407 1 493 1 137 959 526

Tax expense 349 274 188 100 305 227 187 114 Profit/loss for the period 1 047 781 567 307 1 188 910 772 412

Majority share of the profit/loss for the period 1 047 781 567 307 1 188 910 772 412 Minority share of the profit/loss for the period 0 0 0 0 0 0 0 0

AVERAGE ASSETS UNDER MANAGEMENT (PRIMARY CAPITAL) 151 992 149 077 146 460 146 152 138 502 137 717 136 559 137 170

PROFIT/LOSS AS % OF PRIMARY CAPITAL

Interest income and similar income 3,06 3,17 3,29 3,35 3,80 3,83 3,87 3,84 Interest expenses and similar expenses 1,51 1,59 1,68 1,73 2,13 2,16 2,19 2,17 Net interest and credit commission income 1,55 1,58 1,61 1,63 1,68 1,67 1,68 1,67

Commission income and income from banking services 0,32 0,33 0,33 0,33 0,35 0,34 0,34 0,34 Commission expenses and expenses relating to banking services 0,06 0,06 0,05 0,06 0,06 0,06 0,06 0,06 Net banking services 0,27 0,27 0,27 0,28 0,29 0,28 0,28 0,27 Income from shareholdings in associated companies 0,05 0,03 0,05 0,04 0,05 0,06 0,07 0,05 Net gain/(loss) on financial instruments -0,05 -0,03 0,05 0,14 0,18 0,26 0,36 0,65 Other operating income 0,13 0,14 0,16 0,14 0,14 0,14 0,14 0,12 Net other operating income 0,39 0,42 0,53 0,60 0,66 0,74 0,85 1,10 Net operating income 1,94 2,00 2,14 2,23 2,33 2,41 2,53 2,77

Payroll and general administration expenses 0,71 0,72 0,75 0,75 0,82 0,82 0,83 0,83 Depreciation 0,08 0,07 0,07 0,07 0,08 0,08 0,08 0,09 Other operating expenses 0,16 0,17 0,17 0,17 0,17 0,17 0,16 0,16 Total operating expenses 0,95 0,96 1,00 0,99 1,06 1,07 1,08 1,08 Profit/loss before write-downs and tax expense 0,99 1,04 1,15 1,24 1,27 1,34 1,46 1,69

Net profit on tangible fixed assets 0,05 0,00 0,00 0,00 0,10 0,14 0,21 0,00 Write-downs of loans and losses on guarantees 0,12 0,09 0,11 0,11 0,30 0,37 0,25 0,14 Profit/loss before tax expense 0,92 0,95 1,04 1,13 1,08 1,10 1,42 1,56

Tax expense 0,23 0,25 0,26 0,28 0,22 0,22 0,28 0,34 Profit/loss for the period 0,69 0,70 0,78 0,85 0,86 0,88 1,14 1,22

Majority share of the profit/loss for the period 0,69 0,70 0,78 0,85 0,86 0,88 1,14 1,22 Minority share of the profit/loss for the period 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Sparebanken Vest Annual Report 2015 Page 108 Key figures – per quarter for two years (contd. I)

PROFIT DEVELOPMENT PER QUARTER (isolated) Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 Interest income and similar income 1 119 1 147 1 179 1 208 1 319 1 325 1 322 1 299 Interest expenses and similar expenses 528 554 595 622 716 749 747 733 Net interest and credit commission income 591 593 584 586 603 576 575 566

Commission income and income from banking services 122 129 118 120 137 124 115 114 Commission expenses and expenses relating to banking services 18 29 19 20 28 21 20 21 Net banking services 104 100 99 100 109 103 95 93 Income from shareholdings in associated companies 31 5 20 14 12 14 30 18 Net gain/(loss) on financial instruments -54 -68 -11 50 -22 29 20 221 Other operating income 45 46 61 52 45 46 58 39 Net other operating income 126 83 169 216 144 192 203 371 Net operating income 717 676 753 802 747 768 778 937

Payroll and general administration expenses 279 257 278 269 285 281 285 280 Depreciation 40 27 25 26 26 27 27 29 Other operating expenses 52 65 64 61 55 67 53 55 Total operating expenses 371 349 367 356 366 375 365 364 Profit/loss before write-downs and tax expense 346 327 386 446 381 393 413 573

Net profit on tangible fixed assets 76 0 0 0 0 0 143 0 Write-downs of loans and losses on guarantees 81 27 38 39 25 215 123 47 Profit/loss before tax expense 341 300 348 407 356 178 433 526

Tax expense 75 86 88 100 78 40 73 114 Profit/loss for the period 266 214 260 307 278 138 360 412

Majority share of the profit/loss for the period 266 214 260 307 278 138 360 412 Minority share of the profit/loss for the period 0 0 0 0 0 0 0 0

AVERAGE ASSETS UNDER MANAGEMENT (PRIMARY CAPITAL) (isolated) 160 482 154 038 146 869 146 152 142 308 138 465 136 596 137 170

PROFIT/LOSS AS % OF PRIMARY CAPITAL (isolated)

Interest income and similar income 2,77 2,95 3,22 3,35 3,68 3,80 3,88 3,84 Interest expenses and similar expenses 1,31 1,43 1,62 1,73 2,00 2,15 2,19 2,17 Net interest and credit commission income 1,46 1,53 1,59 1,63 1,68 1,65 1,69 1,67

Commission income and income from banking services 0,30 0,33 0,32 0,33 0,38 0,36 0,34 0,34 Commission expenses and expenses relating to banking services 0,04 0,07 0,05 0,06 0,08 0,06 0,06 0,06 Net banking services 0,26 0,26 0,27 0,28 0,30 0,30 0,28 0,27 Income from shareholdings in associated companies 0,08 0,01 0,05 0,04 0,03 0,04 0,09 0,05 Net gain/(loss) on financial instruments -0,13 -0,18 -0,03 0,14 -0,06 0,08 0,06 0,65 Other operating income 0,11 0,12 0,17 0,14 0,13 0,13 0,17 0,12 Net other operating income 0,31 0,21 0,46 0,60 0,40 0,55 0,60 1,10 Net operating income 1,77 1,74 2,06 2,23 2,08 2,20 2,28 2,77

Payroll and general administration expenses 0,69 0,66 0,76 0,75 0,79 0,81 0,84 0,83 Depreciation 0,10 0,07 0,07 0,07 0,07 0,08 0,08 0,09 Other operating expenses 0,13 0,17 0,17 0,17 0,15 0,19 0,16 0,16 Total operating expenses 0,92 0,90 1,00 0,99 1,02 1,07 1,07 1,08 Profit/loss before write-downs and tax expense 0,86 0,84 1,05 1,24 1,06 1,13 1,21 1,69

Net profit on tangible fixed assets 0,19 0,00 0,00 0,00 0,00 0,00 0,42 0,00 Write-downs of loans and losses on guarantees 0,20 0,07 0,10 0,11 0,07 0,62 0,36 0,14 Profit/loss before tax expense 0,84 0,77 0,95 1,13 0,99 0,51 1,27 1,56

Tax expense 0,19 0,22 0,24 0,28 0,22 0,11 0,21 0,34 Profit/loss for the period 0,66 0,55 0,71 0,85 0,78 0,40 1,06 1,22

Majority share of the profit/loss for the period 0,66 0,55 0,71 0,85 0,78 0,40 1,06 1,22 Minority share of the profit/loss for the period 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Sparebanken Vest Annual Report 2015 Page 109 Key figures – per quarter for two years (contd. II)

31 Dec. 30 Sept. 30 June 31 March 31 Dec. 30 Sept. 30 June 31 March BALANCE SHEET DEVELOPMENT 2015 2015 2015 2015 2014 2014 2014 2014 Assets Cash in and receivables from central banks 631 704 462 252 2 209 468 2 220 700 Loans to and receivables from credit institutions 2 167 2 003 1 607 1 597 1 556 1 861 1 870 1 707 Net lending 128 927 126 853 123 936 120 868 118 643 115 815 115 234 113 116 Shares at fair value through profit or loss 380 591 609 549 531 533 887 872 Certificates and bonds 21 455 17 931 17 490 16 489 16 525 15 785 15 932 16 692 Financial derivatives 6 728 6 266 3 832 4 836 5 571 2 358 2 814 2 540 Shareholdings in associated companies 841 716 712 694 681 669 655 601 Deferred tax asset 0 0 19 0 0 0 0 0 Other intangible assets 279 292 298 309 315 316 308 308 Tangible fixed assets 177 973 933 854 781 720 634 678 Prepaid expenses 21 57 19 59 29 25 68 18 Other assets 57 148 681 355 229 314 681 744 Total assets 161 663 156 534 150 598 146 862 147 070 138 864 141 303 137 976

Liabilities and equity Debt to credit institutions 4 849 5 353 2 948 3 907 4 350 2 380 3 049 4 729 Deposits 63 900 63 041 67 686 64 862 66 448 64 267 64 179 61 939 Securitised debt 77 069 73 478 64 483 63 308 62 151 58 841 60 853 58 114 Financial derivatives 1 611 1 439 1 063 1 719 1 463 859 792 795 Accrued expenses and pre-paid income 196 159 175 152 187 179 167 180 Pension obligations 226 305 307 307 308 259 187 191 Deferred tax 12 50 0 0 63 51 87 117 Other provisions for liabilities 2 2 2 2 2 21 27 21 Tax payable 414 319 297 342 334 346 284 307 Subordinated loan capital 1 838 2 416 2 400 2 428 2 426 2 398 2 389 2 279 Other liabilities 232 268 1 747 614 244 402 514 893 Total liabilities 150 349 146 830 141 108 137 641 137 976 130 003 132 528 129 565

Equity certificates 1 476 794 794 794 794 794 794 794 Own equity certificates 0 0 0 -1 0 0 0 -2 Share premium reserve 617 568 570 570 570 570 570 570 Equalisation reserve 555 354 350 350 478 246 257 257 Total equity certificate capital 2 648 1 716 1 714 1 713 1 842 1 610 1 621 1 619

Primary capital 7 733 6 919 6 904 6 903 6 953 6 055 6 096 6 095 Gift fund 175 175 175 175 175 175 175 175 Compensation fund 14 14 14 14 14 14 14 14 Total primary capital 7 923 7 108 7 093 7 092 7 142 6 244 6 285 6 284

Other equity 166 880 683 416 109 1 006 868 507 Hybrid capital 577 0 0 0 0 0 0 0 Minority interests 0 0 0 0 1 1 1 1

Total equity 11 314 9 704 9 490 9 221 9 094 8 861 8 775 8 411

Total liabilities and equity 161 663 156 534 150 598 146 862 147 070 138 864 141 303 137 976

Sparebanken Vest Annual Report 2015 Page 110 Key figures – per quarter for two years (contd. III)

Return on assets, earnings and capital structure 31 Dec. 30 Sept. 30 June 31 March 31 Dec. 30 Sept. 30 June 31 March (percentage) 2015 2015 2015 2015 2014 2014 2014 2014 Return on equity after tax 10,7 8,9 11,1 13,6 12,2 6,2 16,8 19,8 Return on total assets before losses and tax 1,0 0,8 1,1 1,2 1,1 1,1 1,6 1,7 Net return on total assets 0,7 0,6 0,7 0,9 0,8 0,4 1,1 1,2 Total operating expenses as % of net operating income, accumulated (cost-income) 48,9 48,1 46,5 44,4 45,5 44,5 42,5 38,8 Total operating expenses as % of net operating income, isolated in the quarter (cost-income) 51,7 51,6 48,7 44,4 49,0 48,8 46,9 38,8 Total operating expenses as % of net operating income, corrected for exchange rate gain/loss, acc. (cost-income) 47,6 47,4 47,7 47,3 49,3 49,9 49,5 50,8 Deposits/loans ratio 49,6 49,7 54,6 53,7 56,0 55,5 55,7 54,8

Financial strength (percentage) Capital adequacy, transitional arrangement 16,9 14,5 15,0 15,3 15,6 14,2 14,2 14,0

Personnel Number of full-time equivalents 803 809 799 805 813 819 808 830

Owner fraction Equity certificate capital's share of profit/loss divided by (the) number of equity certificates 1,54 1,31 1,59 1,88 1,79 0,89 2,32 2,66 Diluted profit per equity certificate 1,54 1,31 1,59 1,88 1,79 0,89 2,32 2,66 Owner fraction 25,1 19,5 19,5 19,4 20,5 20,5 20,5 20,5 Book equity per equity certificate 45,6 59,4 58,1 56,5 58,7 57,2 56,6 54,4

Sparebanken Vest Annual Report 2015 Page 111 Sparebanken Vest Annual Report 2015 Page 112 Corporate governance

Sparebanken Vest has devised a corporate The bank’s policy is specified in various governing governance policy that has been approved documents that apply to Sparebanken Vest’s by the Board of Directors. It aims to ensure activities. They include the bank’s Articles of that the Group’s corporate governance is Association, its strategies, including its corporate in accordance with generally accepted and social responsibility strategy, rules of procedure for the Board of Directors, the framework for recognised perceptions and standards, and management and control (including Compliance), in compliance with laws and regulations. ethical guidelines and procedures for suitability, The policy describes the general principles insider trading and proprietary trading. The that apply. The goal is to ensure good governing documents are based, among other cooperation between the bank’s different things, on the current version of the Norwegian stakeholders, such as holders of equity Code of Practice for Corporate Governance1) and certificates, lenders, customers, employees, applicable regulations in the area. governing bodies, management and society as a whole. The policy describes how The same principles for corporate governance apply to Sparebanken Vest’s subsidiaries and associated the bank is managed and controlled in companies. order to create value for the bank and its stakeholders. With effect from 1 January 2016, the Savings Bank Act, among other laws, was replaced by a new Financial Institutions Act, and the financial institutions were given a deadline of one year to meet the requirements of the new act. Some of the provisions of the act apply from 1 January 2016. Sparebanken Vest has taken measures to ensure that it largely complies with the act from 1 January 2016. These measures include the adoption of new Articles of Association adapted to the act, changing the name of the bank’s supreme governing body from Supervisory Board to General Meeting and dissolution of the Control Committee.

The Articles of Association and Corporate Governance Policy are available on the bank’s website www.spv.no. In accordance with Section 1 of the Norwegian Code of Practice, a report on the bank’s compliance with the Code of Practice follows below. The report shall also meet the disclosure requirements set out in the Norwegian Accounting Act Section 3-3b.

THE BUSINESS Sparebanken Vest is a financial services group consisting of the parent bank and the subsidiaries Eiendomsmegler Vest AS, Sparebanken Vest Boligkreditt AS, Kyrkjebøkvartalet AS and

1) www.nues.no

Sparebanken Vest Annual Report 2015 Page 113 Vestlandskonferansen AS. Unless otherwise stated, exchange listing of the equity certificates ensures references to the bank and/or Sparebanken Vest in that the bank accepts and complies with the market this text concern the Sparebanken Vest Group. conditions that prevail at all times in the market for equity certificates, and it means that the bank Pursuant to Sparebanken Vest’s Articles of accumulates historical data that can help it to utilise Association, its object is to deliver transactions the stock market as a source of equity if the need and services that it is common or natural for should arise. savings banks to deliver pursuant to the legislation applicable at all times and the licences granted at The Board of Directors evaluates the bank’s all times. Moreover, Sparebanken Vest can provide capital situation at least once a year. The most investment services and related services within recent evaluation was carried out at the end of the bounds of the licences granted at all times. 2015. The regulatory regime relating to capital The bank’s primary market area is the Western adequacy (CRD IV2) has been adopted by the EU Norway region, and the business shall be run at a and will be implemented in Norway through the satisfactory profit and with acceptable risk. EEA Agreement. The bank continually assesses its capital adequacy in relation to regulatory The Board of Directors’ report contains a description requirements. of the bank’s goals and strategies. The strategic basis is evaluated at least once a year by the Board Sparebanken Vest’s profit for the year is divided and the management, and the bank’s plans are between equity certificate capital and primary adjusted and adapted continuously. The market is capital in proportion to the owner fraction. The updated about the bank’s strategic agenda through equity certificate holders’ share of the profit the presentation of quarterly reports. is divided between a cash dividend and the equalisation reserve. Sparebanken Vest endeavours Sparebanken Vest has a customer-oriented to distribute an attractive cash dividend to equity organisation that focuses on the Retail Market certificate holders. Sparebanken Vest’s financial and the Corporate Market as business areas. The goal for its business is to achieve results that bank’s organisational structure is dynamic, and it provide a satisfactory overall return in the form of is assessed on the basis of changing needs and dividend and an increase in value. The development framework conditions. In that connection, significant of the bank’s equity situation and its financial changes were made to the company’s overall strength are emphasised when allocating profit. organisation with effect from 21 December 2015 in order to adapt to future customer needs and The Board of Directors is authorised by the innovation. Supervisory Board to acquire and pledge as security own equity certificates for a total nominal value of EQUITY AND DIVIDENDS NOK 100 million within the limits set out in laws and Sparebanken Vest is a self-owned institution. The regulations. The total holding of equity certificates infusion of external capital takes place through that the bank owns and/or has a charge created the issuing of equity certificates and subordinated by agreement on cannot exceed 10 per cent of the bonds. Following an issue of new equity certificates equity certificate capital stipulated in the Articles in autumn 2015, Sparebanken Vest’s equity of Association. The minimum amount that can certificate capital amounts to NOK 1,475,850,425 be paid for the equity certificates is NOK 1 and divided between 59,034,017 equity certificates with the maximum amount is NOK 150. This limit also a value of NOK 25 fully paid up. applies to any charge created by agreement, which means that the claim the charge is intended to Holders of equity certificates shall have a secure must not exceed the amount that follows predictable framework with respect to equal from these limitations. treatment, the return on their investment and as regards influencing how the bank is run. The stock The acquisition of equity certificates takes place through purchases in the securities market via 2) Capital Requirement Directive Oslo Børs, and disposals take place through sales

Sparebanken Vest Annual Report 2015 Page 114 in the same market, or as private placements FREE NEGOTIABILITY with employees within the limits provided for in Sparebanken Vest’s equity certificate is listed applicable laws and regulations. The authorisation is on Oslo Børs and it is freely negotiable. The only valid for 24 months from the date of the Supervisory limitation on ownership is a statutory requirement Board’s resolution in April 2015 or until such time that currently states that the acquisition of a as the Financial Supervisory Authority of Norway qualified proportion of the equity certificate capital revokes the authorisation. (10 per cent or more) requires the consent of the Ministry of Finance (authorisation delegated to the EQUAL TREATMENT OF EQUITY CERTIFICATE Financial Supervisory Authority of Norway). HOLDERS AND TRANSACTIONS WITH RELATED PARTIES GENERAL MEETING Sparebanken Vest has one class of equity The bank’s supreme body is the General Meeting, certificates. It is a goal that equity certificate which is composed of equity certificate holders, holders shall be ensured equal treatment and equal customers, employees and representatives of the opportunities to exert influence in Sparebanken Vest. authorities. The business of the General Meeting In order to safeguard the interests of owners of small is to approve the annual report and accounts, holdings, the bank’s Articles of Association contain including the allocation of profit and declaration a limitation on voting rights that means that, at an of dividends. It is also the General Meeting election meeting for equity certificate holders, no that elects members of the Board of Directors one may vote for equity certificates that represent and the Nomination Committee. Resolutions or more than 15 per cent of the total number of equity authorisations by the General Meeting to take certificates issued by Sparebanken Vest. out subordinated loans and issue subordinated bonds are subject to the same rules for a qualified The owner fraction at year-end 2015 is 25.6 per majority as apply to amendments of the Articles of cent. The biggest owner is Sparebankstiftinga Association. Hardanger, which represents 25.3 per cent of the equity certificate capital. The bank’s 20 biggest The bank’s Articles of Association have been owners own 69.2 per cent of the equity certificate amended and adapted to the new Financial capital. Institutions Act in accordance with the standard articles of association for savings banks drawn up The rules of procedure for the Board of Directors by the Norwegian Savings Banks Association and include provisions relating to ethics and approved by the Financial Supervisory Authority of impartiality. The bank’s ethical guidelines apply Norway. The Articles of Association contain detailed to both officers of the Company and employees. provisions on the composition of the General Among other things, they contain guidelines for Meeting and the election of its members. The customer relations, benefits/gifts, the duty of General Meeting has 48 members, 12 of whom are confidentiality, participation in other business elected by the equity certificate holders. The right of activities and transactions with related parties. As equity certificate holders to attend General Meetings a rule, transactions, including the purchase/sale of is thereby limited compared with Chapter 5 of the assets and services, shall not take place between Public Limited Liability Companies Act. Sparebanken Vest, its employees and its equity certificate holders and officers, nor with their related Decisions are reached by simple majority. Decisions parties. to amend the Articles of Association require a two- thirds majority of the votes cast. Provisions have been included in the rules of procedure for the Board of Directors that emphasise The General Meeting is convened by the Board board members’ duty to exercise due care in of Directors. The rules on convening and holding relation to ethical conduct, impartiality and integrity. General Meetings follow from the provisions of the Moreover, board members must inform the Chair Public Limited Liability Companies Act Sections of the Board if they become aware of a possible 5-5 to 5-16. Notices of and minutes of meetings of conflict of interest. the General Meeting are sent to Oslo Børs and are

Sparebanken Vest Annual Report 2015 Page 115 made available on the bank’s website. Directors or representatives of the management are members of the Nomination Committee. The Annual General Meeting is held before the end of March each year to consider the annual There is a separate nomination committee for report and accounts, and the auditor’s report, and elections by equity certificate holders. This to elect members of the Board of Directors and committee prepares elections by equity certificate Nomination Committee. This meeting also considers holders to the General Meeting. Sparebanken Vest the allocation of profit for the year / declaration takes steps to enable equity certificate holders to of a dividend and the allocation of donations. submit proposals for candidates to this nomination Separate elections are held among employees, committee. The committee has three members equity certificate holders and customers to elect elected by the equity certificate holders. representatives to the General Meeting. Public representatives are appointed by the City of Bergen THE BOARD OF DIRECTORS: COMPOSITION AND and the county councils of Sogn og Fjordane, INDEPENDENCE Hordaland and Rogaland. Pursuant to Sparebanken Vest’s Articles of Association, with effect from the elections in 2016, The General Meeting has elected a Nomination the Board of Directors shall have 10 members and 5 Committee, which nominates candidates to the deputy members elected by the General Meeting for Board of Directors, as well as candidates to the a term of 2 years at a time. Three of these members General Meeting for election by the depositors. A and their personal deputies shall be elected by separate election is held for the Chair of the General and from among the employees. The Chair and Meeting. Deputy Chair are elected by the General Meeting in separate elections. At present, four of the full The Board of Directors, Managing Director, members of the Board of Directors are women. A members of the bank’s management and specialists presentation of the members of Sparebanken Vest’s also attend the General Meeting as required. Board of Directors is available on the bank’s website and in this annual report. NOMINATION COMMITTEES Pursuant to the Articles of Association, the main The Rules of Procedure for the Board of Directors Nomination Committee in Sparebanken Vest shall of Sparebanken Vest contain guidelines for the consist of seven members elected by the General composition of the Board and terms of office. Meeting, and it shall include representatives of all Important criteria for members of the Board and its groups represented at the General Meeting, plus an composition are qualifications, gender, capacity and independent member who is elected from among independence. The composition of the Board shall former members of the Board of Directors. Grounds be such that it is capable of acting independently must be stated for the Nomination Committee’s of special interests and the bank’s management. recommendations, which should contain relevant The Board’s overall competence shall be regularly information about the candidates, including assessed in relation to the challenges facing the information about their competence, capacity and bank. The Nomination Committee shall be informed independence. The recommendation shall also about the results of the assessment. Pursuant to the contain a description of the committee’s work. rules of procedure for the Board of Directors, board The Nomination Committee participates in the members can own equity certificates in the bank. deliberations of the General Meeting and presents its proposals. Separate rules of procedure have THE WORK OF THE BOARD OF DIRECTORS been adopted for the Nomination Committee. The The Board of Directors of Sparebanken Vest holds remuneration of the Nomination Committee is 12 to 14 regular meetings every year, as well as decided by the General Meeting. meetings in connection with strategy work. In addition, the Board organises thematic days with a The Nomination Committee submits proposals to view to developing its expertise. Rules of procedure the General Meeting for the remuneration of officers have been drawn up and adopted for the Board, of the Company. No members of the Board of with a pertaining calendar for the Board’s work.

Sparebanken Vest Annual Report 2015 Page 116 The Board places particular emphasis on work on with ensuring that the bank has a competitive, the annual rolling strategy plan. The Board also but not leading, pay policy that complies with the considers whether the bank’s capital situation and regulations for financial institutions, and is seen as risk situation are commercially acceptable and motivating by the bank’s management in relation to within the statutory limits. implementing the adopted strategy and achieving the goals set. In cooperation with the Chair of the Board, the Managing Director prepares matters for The bank’s internal auditor is subject to the Board’s consideration by the Board. The Board of Directors authority and is entitled to attend board meetings. has adopted job instructions for the Managing An annual report is submitted to the Board on Director. internal control, the Capital Adequacy Regulations and the Securities Trading Act. The Board of The Board of Directors has overall responsibility Directors approves the internal audit function’s for the management of Sparebanken Vest and annual plan and resource needs. for overseeing the day-to-day management and the bank’s activities. The Board’s management RISK MANAGEMENT AND INTERNAL CONTROL responsibility includes responsibility for organising Good risk and capital management play a central the bank in an adequate manner, responsibility role in Sparebanken Vest’s long-term value creation. for adopting plans and budgets, responsibility The bank’s overriding goals follow from its strategic for keeping informed about the bank’s financial business basis. The target rate of return governs the position and for ensuring that its business, asset bank’s activities and specification of sub-goals. The management and accounts are subject to adequate focus is on maintaining the bank’s competitiveness in control. the short and long term. Sparebanken Vest’s market and business goals must be balanced against the The Board of Directors shall comply with the bank’s bank’s ability and willingness to take risk. Risk and object as set out in its Articles of Association, and capital adequacy assessments are an integral part of it shall comply with the guidelines and framework the bank’s strategic and business processes. conditions issued by public bodies, including the Financial Supervisory Authority of Norway. The bank’s risk management is related to four main areas: The Board of Directors has appointed four • Credit risk committees as part of its work: • Market risk • Liquidity risk • The Audit Committee is charged with ensuring • Operational risk that Sparebanken Vest has an independent and effective external and internal audit function, and The Board of Directors of Sparebanken Vest financial and risk reporting that is in accordance requires the bank to be well-capitalised. A review with laws and regulations. of the bank’s most important risk areas and capital • The Risk Committee is charged with ensuring that adequacy assessments (ICAAP3) is carried out at Sparebanken Vest’s risk and capital management least once a year and considered by the Board underpins the bank’s strategic development of Directors. The bank’s capital strategy must be and goal attainment, while at the same time based on the actual risk to which the business is ensuring financial stability and acceptable asset exposed, supplemented by the effect of various management. stress scenarios. • The Board’s Credit Committee, which deals with credit matters under the authorisation of the Board In 2007, the Financial Supervisory Authority of of Directors. Norway gave Sparebanken Vest its approval for the • The Compensation Committee, which is tasked use of internal measurement methods (IRB4) to calculate capital in relation to credit risk. This is an important stamp of approval for the bank’s risk and 3) Internal Capital Adequacy Assessment Process 4) Internal Ratings-Based capital management.

Sparebanken Vest Annual Report 2015 Page 117 Responsibility for implementing the bank’s risk and and the organisation and implementation of its capital management and control is divided between work on internal control. The policy also includes the bank’s Board of Directors, management and reporting on the status of the bank’s risk situation business units. and the quality of internal control, as well as follow- up of risk reduction measures. The main elements The Board is also responsible for ensuring that the are the annual reviews of risk and internal control, bank has sufficient own funds in relation to the and the registration of events and continuous risk desired risk and the bank’s operations, and for assessment. The elements are described in the ensuring that it is sufficiently capitalised in relation to bank’s risk strategy and in the IC policy, which has regulatory requirements. The Board also defines the been considered by the bank’s Board of Directors. bank’s targets and limits in all risk areas, including Follow-up of identified risk areas and any material adopting guidelines for the bank’s risk and capital deviations found in the internal control of the bank’s management. Reporting to the Board of Directors in financial reporting are also part of the quarterly risk relation to targets and limits takes place quarterly. reporting to the management and Board.

The Managing Director is responsible for the bank’s The bank’s Finance/Accounting Department is overall risk management, including the development responsible for financial reporting, internal financial of good models and frameworks for management management, direct and indirect taxes, and and control. internal control of financial reporting. This includes responsibility for quarterly financial reporting in The bank’s Risk Management department attends to accordance with applicable legislation, accounting important functions relating to management, control, standards and the accounting principles adopted reporting and analysis. It is also responsible for the for the Group. A template has been developed bank’s models for risk and capital management. for group reporting, which is intended to ensure The Director of Risk Management reports to the the completeness of the reporting basis and the Managing Director. Guidelines have been prepared consistent application of principles. to ensure independence in control and risk reporting. The Board of Directors’ Audit Committee prepares the financial reporting process before consideration The bank’s overall compliance function is part and approval by the Board. The Audit Committee’s of the Risk Management department, and there tasks are related to the process of financial reporting are separate compliance officers for banking and and the submitted financial statements, monitoring securities operations, respectively. The heads of of internal control and risk management systems, the various entities have executive responsibility for internal and external audits and the independence ensuring that their entity operates in compliance of the auditor. The Board of Directors’ Risk with applicable regulations. Committee prepares the Board’s deliberations relating to the Board’s responsibility for monitoring The Validation Committee, which is chaired by the and managing the bank’s overall risk exposure Managing Director, deals with model validation and and its consideration of whether the management validation relating to the application of the bank’s and control systems are adapted to the actual risk credit systems. The Credit Committee, which is level and scope of the business. In addition to chaired by the Managing Director, deals with major reviewing accounts and risk reports, the corporate commitments and matters of an unusual nature. management team carries out monthly reviews of operating reports seen in relation to the budget All managers in Sparebanken Vest are responsible for banking operations, and briefs the Board of for managing risk and ensuring good internal control Directors. in their areas of responsibility in accordance with the bank’s adopted risk profile. The bank’s Code of Ethics include a duty on the part of employees to report matters that warrant Sparebanken Vest has established a policy for criticism, including breaches of internal guidelines, internal control (IC policy) that defines goals for laws and regulations, and a procedure for how such

Sparebanken Vest Annual Report 2015 Page 118 notification is to be given. Managing Director and executive personnel.

Sparebanken Vest’s business is subject to the The bank has adopted guidelines for remuneration supervision of the Financial Supervisory Authority arrangements. In accordance with the regulations of Norway. In addition to supervisory visits, the and the Code of Practice for Corporate Governance, Financial Supervisory Authority reviews the they include provisions that set a ceiling on the bank’s annual and interim accounts, risk reports performance-related remuneration of executive and capital adequacy assessments. The Board personnel, and a requirement that 50 per cent of Directors and the management endeavour to of such remuneration shall be paid in the form of maintain an open and constructive dialogue with the equity certificates in the bank, allocated over a Financial Supervisory Authority. period of three years. Executive personnel’s pay and benefits are described in the notes to the accounts. A more detailed description of the bank’s risk and Information about the bank’s remuneration capital management is available on the bank’s arrangements is also available on the bank’s website. website. INFORMATION AND COMMUNICATION REMUNERATION OF THE BOARD OF DIRECTORS The Board of Directors of Sparebanken Vest Directors’ fees are decided by the General Meeting has adopted separate guidelines for financial on the recommendation of the Nomination information. They are intended to ensure that the Committee. The remuneration is not performance- financial markets receive correct, relevant and based, and options are not issued to members of timely information about the bank’s development the Board of Directors. and results. Information is given to the market through quarterly open investor presentations, stock As a rule, board members or companies to exchange announcements and press releases, the which they are affiliated shall not take on specific bank’s website and accounting reports. assignments for the bank in addition to their office as board member. Any additional fees are subject to A financial calendar is available on the bank’s approval by the General Meeting. In urgent matters, website that, among other things, announces the however, the chairs of the General Meeting and the dates of quarterly presentations. The website Nomination Committee may jointly make decisions also contains an activity calendar that includes concerning additional fees. An overview of the information about elections by depositors to the remuneration of the Board of Directors is provided bank’s Supervisory Board. in a note to the annual accounts. In addition to the annual accounts, the Sparebanken REMUNERATION OF EXECUTIVE PERSONNEL Vest Group prepares quarterly financial reports. The The remuneration of the Managing Director and annual accounts are audited by an external auditor. internal auditor is decided by the bank’s Board of Directors, while the remuneration of other executive Regular presentations are also held for international personnel is decided by the Managing Director partners, lenders and investors, and the bank is on the basis of principles adopted by the Board rated by two international rating agencies. of Directors and following consultation with the Compensation Committee. The Board of Directors’ TAKEOVERS declaration on executive pay shall be set out in a Sparebanken Vest is an independent institution that separate case document to the General Meeting. cannot be taken over by others through acquisition. The Managing Director can grant additional In the case of acquisitions on the bank’s part, remuneration to employees based on the results emphasis is placed on satisfactorily safeguarding they have achieved and their work performance. the interests of all stakeholders. Good information Such additional remuneration is also intended to and equal treatment of shareholders/owners are ensure the bank’s attractiveness in the employment paramount. It is a goal that such acquisitions shall market, while at the same time not being a risk have as little negative effect as possible on day-to- driver. There are no option schemes for the day operations.

Sparebanken Vest Annual Report 2015 Page 119 Sparebanken Vest Annual Report 2015 Page 120 AUDITOR The relationship with the auditor is regulated in a The external auditor is appointed by the General letter of assignment, which, among other things, Meeting after obtaining the opinion of the Audit describes the parties’ responsibilities, how the Committee. The auditor submits an annual auditor’s auditor’s fee is stipulated and how other services are report to the General Meeting and holds regular to be agreed and paid. meetings with the Board of Directors at which, among other things, the ‘Management Letter’ is The external and internal auditors hold quarterly presented and commented on. The letter contains meetings with the Board’s Audit Committee. If an assessment of the bank’s internal control, necessary, the Managing Director is present during including areas in which the internal control should the consideration of certain matters. The minutes of be improved. the meetings of the Audit Committee are presented to the Board of Directors.

OVERVIEW OF GOVERNING AND CONTROL BODIES IN SPAREBANKEN VEST

GOVERNING BODIES CONTROL BODIES

GENERAL MEETING EXTERNAL AUDITOR

NOMINATION COMMITTEE

BOARD OF DIRECTORS

BOARD INTERNAL AUDITOR COMMITTEES

MANAGING DIRECTOR

Sparebanken Vest Annual Report 2015 Page 121 Subsidiaries and Associated Companies

Since 2006, Sparebanken Vest has worked systematically on strategic offshoots and this has resulted in the formation of several new companies in different areas of financial services and products.

FRENDE FORSIKRING consists of the sister companies Frende Livsforsikring and Frende Skadeforsikring. The company was formed in 2007 and its head office is in Bergen. Sparebanken Vest has an ownership interest of 39,7% in the parent company Frende Holding AS. The remaining shareholding is owned by fourteen other independent savings banks. www.frende.no

NORNE SECURITIES AS was formed in 2008. It has established three business areas: online brokering, stockbroking and corporate finance. The company’s head office is in Bergen and Sparebanken Vest is the biggest owner with 47,6%. The remaining shareholding is owned by thirteen other independent savings banks. www.norne.no

BRAGE FINANS AS is a financing company that was formed in 2010. Its head office is in Bergen. In addition to Sparebanken Vest, which is the biggest owner with an ownership interest of 49.9%, Brage Finans is owned by nine other independent savings banks. The company offers customised financing products with the main emphasis on the leasing of all types of operating equipment, plus loans secured by the purchased object. www.brage.no

VERD BOLIGKREDITT AS is a housing credit company that is owned by Sparebanken Vest holding 40% and eight independent savings banks. Verd Boligkreditt became fully operational in 2010 and is licensed as a credit company with the right to issue covered bonds. The company is run by Sparebanken Vest Boligkreditt AS. www.verdboligkreditt.no

SPAREBANKEN VEST BOLIGKREDITT AS is wholly owned by Sparebanken Vest. It was formed in 2008 for the purpose of managing loans and issuing covered bonds. www.spv.no/boligkreditt

EIENDOMSMEGLER VEST is wholly owned by Sparebanken Vest and it is a leading regional player in the real estate market in Western Norway. Kyte Næringsmegling AS and Herland Eiendom are also part of the company. www.emvest.no

SPAREBANKEN VEST EIENDOMSFORVALTNING AS is a wholly owned subsidiary of Sparebanken Vest. It is responsible for realising/developing and managing/operating all of the group’s buildings and premises. Formed in 1939. Sparebanken Vest Eiendomsforvaltning AS is responsible for managing/operating all of the EIENDOMSFORVALTNING group’s rented premises including contract signing/administration, maintenance/restoration, electricity/cleaning and other operating expenses relating to the premises (around 70 locations covering a total of 45,000 m3).

The company also rents out premises to external tenants. The company has ten subsidiaries (‘single-purpose’ companies).

The subsidiary Sparebanken Vest Eiendomsforvaltning was merged with Sparebanken Vest with effect from 1 July 2015.

Sparebanken Vest Annual Report 2015 Page 122 Branch locations of 31st December 2015

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Stord Husnes Region Rogland Fitjar og Sunnhordland Husnes Bremnes Jonsvoll Region Sauda Leirvik Haugesund Starvhusgaten Bergen Åsane Haugesund Arna Etne Loddefjord Sauda Oasen Sand Lagunen Os Stavanger Sandnes Stavanger Klepp Hinna Sola Sandnes Nærbø Jonsvollsgaten 2 | NO-5011 Bergen | Tel. 05555 | www.spv.no