Annual Report 2005 Behind the figures. Contents

Page The story of SpareBank 1 Midt-Norge ...... 4 Important events in ...... 8 The recommended bank ...... 8 Main figures Group ...... 9 Business description ...... 12 Statement by the CEO ...... 26 Report of the Boards of Directors ...... 30 Presentation of the Boards of Directors ...... 46

GROUP IFRS Behind the figures there is a story that counts Income statement ...... 50 Balance sheet ...... 51 Pro forma profit and loss account ...... 52 Pro forma balance sheet ...... 53 Annual Report 2005 Every figure in the annual accounts has at least one story to tell. Change in equity ...... 54 Some stories are particularly absorbing since they say something about Balance sheet – impacts of IFRS ...... 55 the character of the bank, its ethos, which is exactly what enables us to Income statement – impacts of IFRS ...... 57 Notes ...... 58 deliver such good figures. 3 Cash flow statement ...... 81

PARENT BANK NGAAP Pro forma profit and loss account ...... 84 Pro forma balance sheet ...... 85 Profit and loss account ...... 86 Balance sheet ...... 87 Profit and loss account specifications ...... 88 Balance sheet specifications ...... 90 Contents Accounting principles ...... 92 Notes ...... 94 Cash flow statement ...... 113

Auditor’s Report ...... 116 Report of the Control Committee ...... 117 Financial summary ...... 118 Primary capital certificates ...... 120 Here when you need us ...... 123 Group managament ...... 124 Coverning bodies ...... 125 Marketing ...... 126

BENNETT AS Photo: Geir Mogen Front page photo: Romsdalen, E136 og Rauma The story of SpareBank 1 Midt-Norge

In an announcement in the Adresseavisen newspaper, building. A building committee was appointed and the Age of mergers Digital age five of Trondhjem’s (as the city was then known) most new bank building, costing 421,090 kroner was comple- Developments in the 1960s and 1970s forced a number The 1990s were also marked by the digital revolution. prominent men urged their fellow citizens to contribute ted in 1882. No truly hard times were encountered by of mergers. In 1975 Trondhjems Sparebank merged with Online banking became commonplace and new techno- towards the establishment of a savings bank, for the the bank until the banking crisis at the start of the 1920s. Strindens Sparebank. Trøndelag had now acquired its logy opened up new ways of doing one’s banking. Today “beneficent promotion of enterprise, thrift and public In 1921, Norges Bank (the central bank) described first major regional savings bank. The new bank featu- the Internet Bank and Customer Centre comprise a morality”. Thirty-nine men replied to the announcement. Norwegian banks’ credit needs as “insatiable”, and red a decentralised power structure with substantial complete approach to banking. All types of business can The year was 1823, and Trondhjem’s Sparebank was many banks were in dire straits despite government sup- decision-making at branch level. The philosophy was be transacted digitally. Customers make other demands duly established with an initial capital of 1,596 port. Early in April 1925 there were rumours that the cri- that the local community was best taken care of by the of an automated bank – it is important for the market to Specidaler. The first chapter of the story of SpareBank 1 sis had taken hold of Trondhjems Sparebank. When it local community itself. have access to the bank whatever the time of day and Midt-Norge had now been written. was heard that Orkedalens Sparebank had asked to be wherever one happens to be. At the same time the Merger discussions continued in the 1980s . In 1982 31 placed into administration, panic spread and people resourceful, automated customer has greater require- savings banks were invited to participate in the At the outset Norwegian savings bank managers took a started to withdraw their savings. In the space of just ments in terms of personal counselling and tailored establishment of Sparebanken Midt-Norge. Trondhjems personal responsibility for the common people’s assets. over a week, nervous savers withdrew a total of 6 million products. Annual Report 2005 Annual Report 2005 Sparebank and Strindens Sparebank had the new name In addition to creating secure institutions in which to kroner. The peak was reached on Thursday 23 April approved by the authorities the following year, but post- deposit savings, savings banks were also keen to promote when more than 1 million kroner were taken out of the poned the name change until the merger negotiations Romsdals Fellesbank diligence and public morality. bank in just one day. The story has it that this prompted were completed. In 1984 it was clear that 23 banks In 2004 SpareBank 1 Midt-Norge cast its eyes upon a flippant play on words by Bank Manager Kristian Bryn. 4 would be forming a new regional bank. Sparebanken Romsdals Fellesbank – a well run bank with conside- 5 He denied this, although he did later admit that he Social actor Inn-Trøndelag and Sparebanken Namdal were absorbed rable potential for improvement. An offer was made, thought his comment a witty one. By 30 April tempers The desire to be a social actor, and not “just a bank”, is in 1988. Spareskillingsbanken, which only joined Spare- and after a hard tug of war Mr. Haugan could say: “The were soothed, and the bank once again recorded a cash probably a legacy of the moral aspirations of that period. banken Midt-Norge in 1989, entered the negotiations at acquisition of Romsdals Fellesbank is probably the surplus at the end of the day. In 1840 it was decided that part of the bank’s profits an early stage but was sceptical of the new regional second most important event in the bank’s 183-year should be allotted “to public and charitable causes”. In bank. history. That is, next after the establishment of the bank the beginning the money often went to schools, nursing Society and technology in change itself”. homes, voluntary organisations or to the community’s In the 1960s the authorities looked with concern at the SpareBank 1 Alliance Whether the President’s words are to be taken literally, paupers. To this day the bank’s shared destiny with the banking structure in Norway; the banking system was In Sparebanken Midt-Norge’s annual report published or as a symbol of an important milestone in the bank’s region is a driver behind the support given to non-profit lagging behind general social developments. The trend in 1995, Managing Director Finn Haugan wrote that history, is difficult to tell. What is certain is that this level The story causes. Each year about a thousand causes benefit from elsewhere in society was one of centralisation: fewer, but The story 1996 would bring “a taste of the future”. Mr. Haugan of aspiration was intentional – promising that SpareBank 1 financial support from the savings bank’s reserves. larger entities. Banks still comprised a large number of was speaking of the SpareBank 1 Alliance between RomsdalsFellesbank would be an “even better bank for small entities. The challenge was to create a banking Upon the establishment of the bank a point was that Sparebanken Rogaland, Sparebanken Vest, Sparebanken people in Møre and Romsdal” was certainly a tall order. structure featuring financially solid banks that did not “small sums would be received from persons of either Nord-Norge and Sparebanken Midt-Norge. The object And what better benchmark of success than a 183-year draw all loanable capital away from the rural communi- sex”. Trondhjems Sparebank was not for men alone. of the alliance was to meet the competition from the history: ties. Indeed the first mortgage loan granted by the bank went major financial groups in the capital and to strengthen A savings bank, known as Trondhjem’s Sparebank, is hereby to a woman. That was in 1865, and the mortgaged items Concurrently new technology provided new opportunities the bank’s position at the local level. The four regions established, under adequate guarantees, in the city of included Sakshaug Church and some land properties in to extend the range of banking services and we begin to had already collaborated at an earlier stage. The new Trondhjem for the promotion of public morality, diligence, Sparbu. see the outlines of the self-service customer. Norway’s alliance put this collaboration on a formal, professional order and thrift. Under this arrangement, duly established first cash dispensers saw the light of day in the 1970s. footing. in the best interests of working people and servants, small Computer technology also erased many of the differen- Growth and crisis sums will be received from persons of either sex, and will ces between commercial banks and savings banks, and In the 1800s Trondhjems Sparebank grew in step with bear fruit for their owners by the calculation of interest.” the town. In 1874 the bank purchased the two upper- with their increasingly identical products they became most properties on the west side of Søndre Street, competitors to a larger degree than previously. prompted by the management’s desire for a new bank 5,463 shareholders

[ Behind the number: A story about believing in something. With both head and heart. ] “The acquisition of Romsdals Fellesbank is probably the second most important event in the bank’s 183-year history. Next after the establishment of the bank itself”.

The date is 5 April, and Finn Haugan, President and And today we know that this is precisely how people in CEO, stands in the foyer of Rica Seilet Hotel in Molde. Møre and Romsdal view SpareBank 1 Midt-Norge Annual Report 2005 He is about to meet Olav Arne Fiskerstrand from RomsdalsFellesbank. If we compare position surveys Sparebanken Møre in a head-to-head debate. Was Mr. carried out in April and September, customers confirm Haugan compelled to say what he said, or did it come that the bank has become “even better”. Because we from the heart? Romsdals Fellesbank’s portfolio consis- brought what we promised: New products, giving custo- 7 ted largely of deposits and loans. 35% of SpareBank 1 mers new opportunities, a renewed effort for local Midt-Norge’s total income was from activities other communities in the shape of the gift fund, and greater than normal business operations in 2004. In Romsdals proximity to the market – via the media and via direct Fellesbank’s case only 14% was “other income”. contact with customers. Mr. Haugan knew this long Business and development potentials were considerable. before he stood in the foyer of Rica Seilet. And he knew However, business potentials alone were hardly enough it would be tough. At the moment the words came, the for the President and CEO to rank this event above all real job started – fulfilling the promise. And if that pro- other events since the bank’s establishment. cess had gone wrong, everything would have been in vain. That is why the aspirations he voiced were so high. The answer is to be found in the ethos of SpareBank 1 Midt-Norge, and in the will to create. And a belief in The acquisition of Romsdals Fellesbank is important as what can be achieved. a business potential. As a story about ourselves, even the word “important” is inadequate. That is why Mr. Romsdals Fellesbank was in many ways a member of Haugan expressed himself the way he did in the foyer of the same species. It was well run, was the region’s own Rica Seilet. Not because he had to, but because it was a bank and had very close ties with its customers. Deve- true answer – an answer that came just as much from lopment would accordingly be based on what was alre- the heart as from the head. ady there, creating “an even better bank for the people of Møre and Romsdal”.

Romsdalen Important events in 2005 Main figures Group

Strategic events Operational events (NOK million) From the income statement: 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 • The bank is authorised to take over Romsdals Fellesbank • Pirsenteret (a rental complex) in Trondheim is acquired ASA on 11 March. for NOK 737 million and offered to the market as an alter- Net interest and credit commission income 961 864 864 896 827 785 767 707 676 679 • The bank decides to apply for permission to use the basic native saving/investment medium. The shares are sold Other operating income 826 540 408 229 273 256 288 185 163 183 IRB approach to credit risk and the standard approach to out in just a few weeks. Operating expenses -906 -724 -733 -681 -667 -635 -560 -523 -487 -558 operational risk. • One price, unlimited use – a new retail market product Operating profit before losses, gains and • The bank opts for a pro-active focus on, and expansion in, enjoying great success. 32,000 subscriptions sold. write-downs 881 680 539 445 434 406 495 369 352 303 the retail market. • Flexi-loan – a credit line secured by collateral in real estate Losses on loans and guarantees and gains The bank adopts a new credit strategy in the corporate launched on the retail market with great success. • and write-downs on disposals of fixed assets 38 -81 -223 -200 -115 -62 -56 -38 14 14 market along with a sharp focus on sales of occupational • Occupational pensions sales staff doubled. pensions. • New office opened in Åfjord, new office-opening scheduled Pre-tax operating profit 919 599 316 245 327 344 438 331 366 317 • The bank strengthens capacity and competence in the in Surnadal. capital market area with the emphasis on interest rate • Effort to bring down operating expenses to a level on a From the balance sheet: and currency products, securities and corporate finance. par with the best operators is crowned with success, and Total assets 54 327 38 505 36 876 35 991 33 286 30 929 26 369 22 579 18 629 18 629 • The bank decides, through a rights issue, to increase its will continue. Outstanding loans (gross) 45 280 34 226 32 553 31 089 29 278 26 611 23 707 20 909 17 696 16 859 PCC capital by NOK 217,424,200 by issuing 2,174,242 • Staff have faith in their undertaking; at year-end they own Customer deposits 27 048 20 725 19 876 19 049 17 871 17 287 15 238 13 636 12 830 12 830 new PCCs. The issue was oversubscribed by 74.5%. all told 3% of the bank’s PCC capital. Growth in lending, % 32% 5% 5% 6% 10% 12% 13% 18% 5% 10% • The bank decides on a staff placing which will increase its • Settlement with Finance Credit and the audit company Growth in deposits, % 31%4%4%7%3%13%12%6%0%6% PCC capital by up to NOK 30,000,000. Staff subscribe KPMG. Key figures and ratios: 239,000 PCCs. • Steep increase in funds allocated to non-profit causes, Posttax return on equity 24.1% 20.0% 10..2% 0.4% 10.1% 12.6% 18.2% 15.4% 19.7% 18.1% • The bank establishes a cooperation agreement with putting the effort to ensure that the funds will build, under- Cost-income ratio excl capital gains 56.0% 54.9% 61.5% 67.4% 64.1% 62.3% 57.8% 59.6% 58.2% 66.3% Core capital ratio 8.8% 10.8% 10.1% 8.1% 8.8% 8.3% 9.5% 9.4% 9.7% 9.9% Annual Report 2005 Annual Report 2005 SpareBank 1 Nordvest. pin and develop the region on an entirely new footing. Capital adequacy ratio 10.9% 12.7% 13.9% 11.1% 12.1% 10.7% 10.9% 11.3% 11.9% 12.6% • The bank opts to participate in the establishment of • The technological merger between Romsdals Fellesbank SpareBank 1 Boligkreditt AS. and SpareBank 1 Midt-Norge proceeds on schedule. No. of staff 898 772 772 825 781 811 818 795 794 872 • The Supervisory Board decides to reduce its number of • Competence Development Centre established for the No. of person-years worked 806 637 713 718 675 709 675 662 673 712 No. of branches 59 56 56 56 56 68 74 74 75 79 members from 56 to 43. Alliance, and premises and teaching modules completed. 8 9 Key figures PCC 1): PCC ratio 56.1% 49.8% 51.4% 53.0% 54.0% 56.2% 58.1% 60.4% 62.7% The recommended bank Total issued PCCs 50 489 085 38 425 375 38 425 375 38 425 375 38 121 450 37 831 869 37 500 000 37 500 000 37 500 000 PCC price 78 55 38 23 32 30 36 29 40 The bank’s vision for 2006 • Lending to the retail market to constitute at least 65% of Market value (NOK million) 3 951 2 113 1 476 891 1 214 1 132 1 368 1 074 1 488 Profit per PCC 8.5 5.8 3.1 0.9 4.2 2.6 5.3 4.1 4,7 The recommended bank – our vision – a heavy commitment overall lending. Dividend per PCC/PCC price 5,50 4,00 2,88 1,20 2,88 2,72 2,72 2,56 2,56 Growth in the retail market, particularly in well-secured in relation to our customers, our partners, our staff and our • P/E 9,2 9,5 12,4 26,5 7,5 11,5 6,8 7,0 8,5 PCC holders. mortgage loans. Direct yield 7,0% 7,3% 7,5% 5,2% 9,0% 9,1% 7,5% 8,9% 6,5% • Growth in the corporate market to be commensurate with Booked equity capital per PCC SpareBank 1 Midt-Norge will achieve its the bank’ responsibilities as market leader in the region. (including dividend) 42 35 32 30 33 39 36 32 29 targets by being Growth should be such that risk exposure is at all times Price/Booked equity capital 1,86 1,58 1,21 0,77 0,96 0,76 1,00 0,89 1,35 commensurate with the bank’s credit strategy, ensuring a Risk 01.01 the following year 2,39 2,26 0,37 -0,52 2,09 Successful – characterised by capableness, result orientation, moderate level of losses over time. Main figures Group The recommended bank competitiveness and pride. • The region’s leading provider of public service pensions. 1) For definitions of key figures for primary capital certificates, see page 121. Dynamic – having the courage to try one’s hand, and the • Greater focus on capital market activities. ability to get things done. • A clear profile in the savings and pensions market and in Responsible – being recognised for orderliness, reliability the “digitalised” world. and high ethical standards. • A focus on systematic competence building and on highly- Generous – showing enthusiasm and commitment in the skilled staff who are proud of working at SpareBank 1 Midt- community. Norge. • A return on equity equalling, at minimum, the risk-free Key goals and strategies interest rate plus 6%. • To be a regional savings bank for retail customers, small • A tier 1 capital ratio of at least 8%. and midsized businesses, the agricultural community and • Cost efficiency on a par with the three best banks in the public sector in Trøndelag, Møre and Romsdal. Norway and a cost-income ratio no higher than 55%. • Membership of the SpareBank 1 Alliance as a key aspect • A strong focus on risk management. of the bank’s strategic platform. The alliance makes for competitive products, critical size and a basis for cost efficiency through cooperation. NOK 1,060,000,000

[ Behind the figure: New, modern investment opportunities for customers. ] When the sign showing “SpareBank 1 Midt-Norge RomsdalsFellesbank” was put up, all expectations were to be fulfilled. Previous shareholders and customers were promised “new opportunities” and an “even better bank”. That was what they got.

Romsdals Fellesbank was a good investment for the sha- In addition we launched commercial real estate invest- reholders. With a final price of NOK 77 per share, many ment as an option for private individuals. A continuous Annual Report 2005 shareholders could cash in substantial gains. Once the effort is made to find new attractive properties. “new” bank took shape in the course of 2005, previous New products put a greater onus on comprehensive shareholders and other customers alike could weigh up counselling, which is the very backbone of SpareBank 1 numerous savings and investment solutions which up 11 Midt-Norge’s offering. In combination, the new savings to then had been unavailable to them. and investment products offer a variety of paths to the Nordic Energy Funds exemplifies a new investment customer’s objective – be it a reserve, a purchase or option which has provided good, steady return and is return. In many cases the objective varies with age and independent of the share market. life phase.

SpareBank 1 Midt-Norge also brought the opportunity to invest in Allegro PCC Portfolio. Investing in primary capital certificates was good news for those favouring annual dividend payouts and sound return over time.

Molde % of total % of total RM result overview (NOK million) 2005 income 2004 income Loan contribution 410 49% 382 54% Deposit contribution 154 18% 113 16% Interest on allocated capital 12 1% 15 2% Net interest income 576 69% 510 72% Business description Other financing income 2 0% 3 0% Saving 75 9% 55 8% Insurance 54 6% 39 6% Payments transmission 127 15% 100 14% Currency gains 5 1% 2 0% Other income 1 0% 1 0% Commission income 265 31% 200 28% Overview solutions. This, combined with round-the-clock access via Total income 841 100% 711 100% the internet bank and telephone bank along with our SpareBank 1 Midt-Norge is Central Norway’s largest bank Operating expenses *) 537 421 dedicated customer centre, gives the bank a unique competi- with assets totalling NOK 54.3 billion. In 2005 the bank’s Result before loss and tax 304 290 tive edge. Just one number is needed to call the bank: 07300. Loss on loans/guarantees -2 11 market area was enlarged by the takeover of Romsdals Estimated tax -86 -78 Fellesbank ASA. Head office is in Trondheim and the Group SpareBank 1 Midt-Norge has 71 offices in 51 municipalities. Profit 220 201 has 898 employees. The acquisition of Romsdals Fellesbank ASA expanded the bank’s geographical market area, thereby adding 11 offices, *) Contains both direct and distributed expenses As one of six members of the SpareBank 1 Alliance, the bank The bank’s presence extends from Åndalsnes in Møre and Return on allocated capital 21% is part of Norway’s third largest financial grouping. Romsdal county in the south to Bindal in Nordland county Organisational set-up in the north, and from Vestnes in Møre and Romsdal in the In 2005 a new counselling-services office was opened in offers innovative products and services geared to customer west to Lierne in North Trøndelag in the east. The bank’s Åfjord municipality. A total of 10 offices were converted in needs. This is particularly important in the savings/invest- SpareBank 1 Midt-Norge is organised in divisions to secure Annual Report 2005 Annual Report 2005 offices service the various customer categories via a variety the course of the year to a new office concept focusing on ment area with a view to offering customers the investment a customer-oriented and cost-effective organisation while of office solutions: financial advice. solutions best able to ensure that they achieve their finan- respecting the differing competencies required by the five • A total of 59 offices providing retail customers with coun- cial objectives. divisions. The retail market, corporate market and selling services in all product areas. 17 of these offices Business description, retail market RomsdalsFellesbank divisions focus on customer satisfac- The bank’s customer advisers are at the heart of our busi- 12 provide counselling services to corporate customers. All 13 ness. Sound competence, in tune with the times, within our tion, risk management and activity-based sales and coun- these offices offer self-service facilities, either alone or in Facts about the Division selling. Business support focuses on cost-effective work combination with OTC services. product areas is crucial. A continual competence-enhancing processes and support to ensure that the customer-facing No. of active customers 177 000 effort is made to meet the demands of today’s financial mar- • A total of 12 In-Store Banks providing basic manual Loanable capital NOK 28.5 billion divisions attain their goals. The finance division provides an payment services to private individuals as a supplement Contributed capital NOK 14.6 billion ket and to give the best possible assistance to the bank’s overall basis for decision making, risk management and to the counselling offices and self-service facilities. Other savings/investment products NOK 4.1 billion customers. The bank operates a wide-ranging programme financial and asset-liability management. Through the Spa- Premiums non-life insurance NOK 263 billion of training and certification for all staff members to this end. Premiums personal insurance NOK 74 billion reBank 1 Alliance and through its own subsidiaries, Spare- Deposits and loans by sector No. of debit cards 127 000 The Retail Market Division has the region’s most extensive Bank 1 Midt-Norge is assured access to competitive pro- No. of credit cards 34 000 distribution network for financial services. Our presence ducts in the fields of financing, insurance, savings and No. of internet banking agreements 103 000 No. of telephone banking agreements 108 000 affords our customers a total solution. They are free to investment, and money transfer services. Corporate Corporate market market Customer satisfaction rating 72 select service channel, whether in the office, online or on Retail market Market share 37% Retail market the phone. Business description Business description Presence FTEs 380 Public/ The way a customer is treated is crucial. Solid customer A key aspect of SpareBank 1 Midt-Norge’s strategy is to others maintain a presence in municipal and administrative Public/ The business treatment involves good customer reception with a high others centres in our natural catchment area via a variety of office Deposits Loans The retail market area's core business is providing financial service level and follow-up by a personal adviser who puts counselling to private individuals. Success in establishing the emphasis on high-quality customer contact. Our high good, lasting customer relationships rests on four pillars: activity level features thematic meetings on topical themes, Board of Directors • A broad-based product range that is right for the times and one-to-one sessions between customer and adviser are • Competent advisers a key element. In 2005 advisers contacted more than 23,000 CEO • Flexible and effective organisation of contact with customers customers based on significant events in their relationship Solid customer handling Internal Audit • with the bank, and more than 230 thematic meetings were held with more than 33,000 invited customers. The bank offers a broad-based and modern product range Legal Affairs Communications in the fields of financing, savings and investment, personal and non-life insurance and payment services. The breadth Customers and market position of the product range enables the customer to meet all his The Retail Market Division showed a positive market trend Economics/Finance/ Corporate Market Business Division financial needs in one spot, thereby simplifying the day to and a net increase in the number of active retail customers Operations/ Retail Market Division Operations Romsdals Fellesbank Development Division day business and affording a better overall view. The bank in 2005. In September 2005 TNS Gallup polled the share of the population reporting SpareBank 1 Midt-Norge as their growth in households’ credit demand is expected to mode- competence and capacity were substantially strengthened in Loans specified by sector and industry main bank. Almost four out of 10 report SpareBank 1 Midt- rate somewhat in the course of the year. Continued low inte- the capital markets and public service pensions area in 2005. Public sector Norge as their main bank, putting it at the forefront of the rest rates will maintain household debt-servicing ability and and others Since 2002-2003, when the bank was hit by the Finance Credit Agriculture/forestry/ retail market in the bank’s geographical catchment area. ensure low levels of loss and non-performance. The low fisheries/hunting fraud and major problems in parts of the fish farming interest rates and Norway’s boom conditions are expected Awareness of the bank is at a high level, and it is preferred industry, a continuous effort has been made to enhance to fuel buoyant demand for savings products with a higher by an ever growing number of customers. Customer satis- quality throughout the corporate market area. The main Property management/ Sea farming risk and return profile than that provided by traditional bank business services faction ratings show that we are maintaining our 2004 level, ingredients in this project are a new credit support system Manufacturing saving. which was the highest ever. The bank is making a purpose- based on an acknowledged rating model, a new authorisa- Building and construction ful effort to enhance customer satisfaction and customer Competition is strong, and keener than ever in some sub- tion structure along with a new credit strategy and credit

loyalty among all target groups, and has defined a strategy markets. Contributory factors include a greater range of policy. In 2005 a provisional halt was brought to this Transport and Commerce/hotel for growth in specific retail market areas. choice and an increasing number of market participants. process, and a period of consolidation was replaced by a other services The bank will face competition from both domestic and strategy of cautious growth. Financial developments Nordic actors in the central-Norwegian bank market. It is A new credit process, new credit policy and improved risk All in all these three areas account for a total of 72% of all (2005 contains full-year figures for Romsdals Fellesbank well equipped to meet competition in the retail market, and profile have resulted in a healthier corporate lending port- lending within the corporate market division. ASA. 2004 figures are exclusive of Romsdals Fellesbank competitive products and prices, good advice, an efficient folio. This, combined with the introduction of scoring as an ASA). See table on page 13. distribution network and sound customer handling hold out The majority of financial institutions are increasingly invol- aid in credit work is expected to produce a further improve- potentials for continued growth. Thanks to its dispersed ved in financing real estate operations. This also applies to The bank recorded operating income of NOK 841 million in ment in portfolio quality in 2006. A basis for sound portfolio branch network and digital services, the bank is uniquely SpareBank 1 Midt-Norge. About 30% of the bank’s loans to the retail market in 2005 – an improvement of NOK 130 mil- growth has thus been laid. Expansion in the corporate accessible. the corporate market are related to real estate. This figure is lion over the previous year – of which Romsdals Fellesbank market area will support the bank’s responsibility as expected to remain stable in the period ahead. accounts for NOK 118 million. This is ascribable to a very The bank aims to enhance customer satisfaction and custo- regional market leader, and exposed risk will at all times be positive volume trend in all business areas, a trend closely mer loyalty, and to retain skilled and motivated staff mem- consistent with the bank’s credit strategy, ensuring a mode- SpareBank 1 Midt-Norge has about 5,900 farming custo- related with sound underlying processes throughout the bers. A further objective for 2006 is to fulfil the synergy rate loss level over time. The bank is well on schedule in mers holding loans totalling about NOK 2.1 billion. The Annual Report 2005 Annual Report 2005 business. ambitions underlying the takeover of Romsdals Fellesbank terms of implementing the new Basel II requirements. bank is actively involved in further developing Trøndersk ASA and to maintain a satisfactory level of operational risk Landbruk (a regional agricultural trade fair) through The bank is making a continual effort to increase the management in the business. Customers and market position Tenkeloft Trøndersk Landbruk (a “think tank” for agriculture proportion of income earned on savings and insurance The bank services about 12,500 customers in the small and in the region), Oi! Trøndersk Mat og Drikke AS (a company business. The trend in gross annual sales of other savings 14 mid-size business segment and the agriculture and public uniting food and drink actors in the region) and the 2006 15 products and insurance is shown in the table below. Business description, corporate market sectors. SpareBank 1 Midt-Norge’s share of the region’s Trondheim Food Festival. Debit and credit cards are now the predominant means of Facts about the division 2005 corporate market is about 41%. With exposure totalling NOK 1,325 million to the fish payment. In 2005 the bank launched a subscription solution, Loans NOK 14.9 billion The corporate sector in Trøndelag features a large number farming and allied industries, SpareBank 1 Midt-Norge is “One price – Unlimited use”. This was very well received by Deposits NOK 11.9 billion of small and mid-size companies in a variety of segments. the region’s largest fish farming bank. A total of about customers, as evidenced by 32,000 sold units. No. of multi-relationship customers 12,500 No. of FTEs 123 As much as 83% of businesses in Trøndelag have fewer than 55,000 tonnes of trout and salmon are produced by the bank’s customers in this sector, about 35 in all, who are Sales volume per year Customer satisfaction index 71 five employees. This structure has a clear impact on the Market share 41% Figures in NOK million bank’s organisation of its corporate market operations. The monitored on a continual basis. They show a positive trend, 2000 bank’s ten largest customers account for an overall lending and the bank’s portfolio is considered to be one of good The business quality and moderate risk. 1500 volume of NOK 3,914 million, representing in total 9% of Other savings *) The corporate market business focuses on financial the bank’s loanable capital. products 1000 SpareBank 1 Midt-Norge leads the public sector market in Business description counselling in Business description After the takeover of Romsdals Fellesbank the bank launched Central Norway and services the county administrations of 500 • investment and operations financing long-lasting advertising campaigns and fostered much Møre and Romsdal and North and South Trøndelag in • insurance of individuals and buildings/operating 0 customer contact in order to achieve maximum visibility in addition to 33 of the region’s local authorities. Much of the 2001 2002 2003 2004 2005 equipment, the market. It is particularly important to tackle the growing bank’s effort in the public sector is based on its high profile 150 • investment of surplus liquidity competition in the corporate market. All tenders posted in in the field of payments transmission. • electronic and manual money transfers. the period since Romsdals Fellesbank became a division of 100 Insurance This business is physically located across the entire market SpareBank 1 Midt-Norge have been won, confirming the 50 area in order to secure proximity to customers, while bank’s excellent position in the region’s business market. bearing in mind the need to ensure that competence units In view of the composition of the business sector in Central 0 are of sufficient size. The business is very skills-intensive, 2001 2002 2003 2004 2005 Norway, a considerable share of the bank’s lending goes to and requires a continual focus on the competence of the *) Excluding money market funds property management and business services, agriculture individual staff member. The bank operates a systematic and forestry along with transportation and other services. Prospects for 2006 training programme for all staff working with corporate At the start of 2006 households are benefiting from a good customers. The programme contains credit, product and economic climate. Conditions for growth are expected to communication training – all of which are crucial factors in remain favourable in the bank’s product areas. The rapid the individual employee’s working day. Sales and counselling “I have cerebral palsy and I’m applying for a grant to arrange a sports fiesta”. This is the first line of the application from ten-year-old Marie Aune Bardal from Snåsa. And the outcome was a sports fiesta!

Marie’s idea was to organise an event open to everyone, “The first event was for invitees from Snåsa. The sports absolutely everyone who was interested. “Not everyone club helped to organise it. They also took charge of prizes. Annual Report 2005 can or wants to take part in ordinary sports events. Later on the idea is for the sports club to play a bigger I wanted to arrange a sports day for the disabled and the part in the planning and to turn the day into a larger non-disabled,” says Marie. event open to more participants. Maybe from the entire county. We are going to start planning fairly soon. 17 To turn this idea into reality, a lot of creativity is needed to think up good, exciting and fun activities. The partici- Marie is one of many individuals in Central Norway with pants at Marie’s sports fiesta could jump up and down plenty of guts. When you meet enthusiasts like her, even on a thick mattress, pick up a skipping rope, guess Central Norway’s largest bank feels small. But equally sounds, try out an obstacle course in a wheelchair, do proud. Proud to contribute. Guts is about having the the long jump, join a 60 or 100 metres race in a wheel- courage to do what you don’t really dare to do. Maste- chair or other locomotion aid, feel objects while blind- ring what you don’t really master. About the will to do folded, throw or kick a ball at tin cans, or play football. what others are unable to do. And carrying on where Just to mention some of the activities. Both disabled others stop. and non-disabled youngsters could have a go, although Guts is far bigger than money. That is precisely why it is the non-disabled had to reckon on being “hindered” a important not to allow money to stop it. In 2005 we little in some events. For example, non-disabled kids awarded 37 grants of up to NOK 50,000 each to talented had to play football tied back to back with someone else. individuals and enthusiasts who are willing to go the “Of the activities we had at the sports fiesta, I like the extra mile to make our region an even better place to 60 metres wheelchair race best”, says Marie who spent live. the whole summer planning the fiesta. She has already organised one sports event, and hopes to continue to do so on an annual basis. “Guts” grant worth NOK 20,000

[ Behind the figure: Marie’s sports fiesta. ] Financial developments Business description, capital market range of services offered to the bank’s corporate customers. building, competence building, shared processes/exploitation (2005 contains full-year figures for Romsdals Fellesbank A fully fledged service range provides greater opportunities of best practice and procurement are at centre stage. The The business ASA. 2004 figures are exclusive of Romsdals Fellesbank to reach new customers and corporate actors in the region. alliance has also established three competence centres for, SpareBank 1 Midt-Norge’s capital activities have largely ASA). See table below. respectively, the cash management area (in Trondheim), the comprised trading in interest rate and foreign exchange The bank aims to meet its need for capital market services credit area (in Stavanger) and training (in Tromsø). In the corporate market the bank recorded operating products along with the setting up and sale of structured by relying to a greater extent on its own resources. income of NOK 504 million in 2005, an increase of NOK savings products to the bank’s customers. Customers are The SpareBank 1 Alliance’s strategy for the period to 2007 102 million from 2004 of which Romsdals Fellesbank serviced from Head Office in Trondheim and a broker’s Business description, subsidiaries and takes account of expectedly tighter competition in national accounts for NOK 80 million. Additional increase is ascribable board in Molde, in addition to which customer needs are associated companies and regional financial markets alike. This will require to a positive trend in all business areas, above all cash identified via corporate market and retail market offices stronger collaboration in order to reap further benefits in SpareBank 1 Gruppen AS management and capital market services. throughout Central Norway. terms of lower costs, increased competence and high- quality customer service. In this respect, the alliance aspires At the start of the year the capital markets area comprises Results (NOK million) 2005 2004 Prospects for 2006 to higher ambitions than ever before. four FTEs in customer-facing activity, and a back-up and According to the autumn issue of Arena Trøndelag (a busi- – SpareBank 1 Livsforsikring AS 224 159 mid-office unit comprising three staff members. – ODIN Forvaltning AS 146 61 ness barometer for the Trøndelag counties) the region’s SpareBank 1 Finans Midt-Norge AS – SpareBank 1 Skadeforsikring AS 203 121 In December 2005 the bank adopted a new strategy for the economy is forging ahead. This suggests a good climate for – Bank 1 Oslo AS 192 95 Key figures (NOK million) 2005 2004 credit growth and credit demand, and low levels of loss and capital market area giving added focus to capital market – Other companies 3 2 defaults. After a period of restitution due to heavy individual activities. A corporate licence will be applied for in 2006, – IFRS-adjustments, subsidiaries 31 3 Income 38 34 enabling the bank to provide investment services on a par Expenses 21 18 losses and improvement of the risk profile, the corporate Total pre-tax profit, subsidiaries 800 441 market business area is once again geared to growth. with a fully fledged investment firm. Pre-tax profit 17 16 Total operating expenses, SB1G -45 -42 Staffing will be strengthened to this end, especially in the The number of staff in customer-facing activities will be Net financial, SB1G -35 -54 capital markets area. doubled to this end. Gain on disposal of securities 25 0 SpareBank 1 Finans Midt-Norge AS is Central Norway’s lea- Income from owner interests Professionalising the allocation of non-profit funds, in ding finance company and an active partner for businesses. Annual Report 2005 Annual Report 2005 in related companies 47 27 which substantial sums are channelled to equity capital Customers and market SpareBank 1 Finans Midt-Norge put the emphasis on local participation in new venture and seed-corn projects (70% to Customers are increasingly demanding products and services Profit before goodwill and tax 792 372 competence, and work for greater value creation in Central business development), will over time provide improved associated with management of interest rate and foreign Amortisation of goodwill, excess value etc. -37 -41 Norway. parameters and growth for the local business sector and, by exchange risk. In addition to these services the bank intends Profit before tax 755 331 The company has two interfaces with the market: the Bank’s 18 the same token, our future customers. to offer financial counselling in equity and debt capital 19 distribution channels and its own sales operation. The orga- products along with primary and secondary market trading Tax charge -76 -63 Autumn 2005 saw the passage of the Public Service Pensions nisation is distinctly sales- and customer-oriented, and is in bonds and money market instruments. Profit after tax 679 268 Act, requiring all enterprises with more than two employees geared to being a close and accessible finance partner with to introduce a pension scheme by 31 December 2006. Sales SpareBank 1 Midt-Norge enjoys a very strong position in short decision-making paths. The business community and of occupational pensions will accordingly be a central theme the Central Norwegian corporate market. Its capital market SpareBank 1 Midt-Norge is a part of the SpareBank 1 public sector are the company’s primary market, although for the corporate sector in Central Norway in 2006. strategy has been designed with a view to supporting the Alliance – a broad-based collaboration comprising 19 inde- car finance for private individuals is also an important area.

pendent SpareBank 1 banks with assets totalling close to The company has 16 employees in Trondheim, Steinkjer and % of total % of total NOK 270 billion. The alliance is coordinated through the Molde. At year-end the company managed leasing and car CM result overview (NOK million) 2005 income 2004 income jointly owned financial group SpareBank 1 Gruppen AS. finance agreements to a total of NOK 1 265 billion, of which Loan contribution 315 62% 273 68% leases accounted for NOK 1.1 billion and car finance for Deposit contribution 84 17% 59 15% SpareBank 1 Gruppen AS is owned jointly by SpareBank 1 Interest on allocated capital 12 2% 15 4% SR-Bank, SpareBank 1 Midt-Norge, Sparebank 1 Nord- NOK 165 billion. Business description Business description Net interest income 411 82% 348 86% Norge and Samarbeidende Sparebanker AS, each with a The company is a wholly owned subsidiary of the Bank. Other financing income 21 4% 16 4% 17.63% stake. Other owners are FöreningsSparbanken AB Saving 7 1% 7 2% (19.5%) and the Norwegian Confederation of Trade Unions Insurance 10 2% 6 2% Allegro Finans ASA Payments transmission 34 7% 23 6% (10%). Income capital market and currency gains 20 4% 1 0% SpareBank 1 Gruppen AS, Norway’s 42nd largest company, Key figures (NOK million) 2005 2004 Other income 1 0% 1 0% Commission income 93 18% 54 14% owns Bank 1 Oslo, SpareBank 1 Livsforsikring (life insurer), Income 88 47 Total income 504 100% 402 100% SpareBank 1 Fondsforsikring (unit linked), SpareBank 1 Ska- Expenses 40 24 Operating expenses *) 223 170 deforsikring (non-life insurer) and ODIN Forvaltning (fund Pre-tax profit 48 23 Result before loss and tax 281 232 manager) – along with 24.5% of First Securities and 19.9% Loss on loans/guarantees -36 69 of SpareBank 1 Bilplan AS. Estimated tax -89 -46 Allegro Finans ASA, an active asset management company, Profit 229 117 SpareBank 1 Gruppen AS also has administrative responsi- is headquartered in Trondheim. It is owned by SpareBank 1 bility for collaborative processes within the SpareBank 1 Midt-Norge and the Reitan Group. It is licensed to carry on *) Contains both direct and distributed expenses Alliance in which IT operations and development, brand- active asset management and manages assets for a number Return on allocated capital 18% of external clients in addition to those of its owners. The In 2005 EiendomsMegler 1 Midt-Norge sold 3,767 proper- The bank has given special emphasis to: fund if there is a need to prioritise the bank's equity capital company currently has nine employees and assets totalling ties representing about 31% of all dwellings sold in the • a structure assuring targeted and independent situation.” just over NOK 2,200 million. Bank’s catchment area. In doing so it handled more than management and control The authorisations available to the Board of Directors to 7,500 buyers and sellers. Co-location and coordination with systems assuring monitoring and accountability Active asset management offers a number of advantages • increase the bank’s capital are restricted to specified purpo- SpareBank 1 Midt-Norge are an essential aspect of its organisation, health, environment and safety compared with investing in individual shares and equity • ses. These authorisations are valid up to the next review of business strategy. In 2005 SpareBank 1 Midt-Norge financed effective risk management funds. Active management clients have their own personal • the annual accounts. Authorisation to buy back the bank’s 37% of properties sold through EiendomsMegler 1. full information and effective communication to underpin portfolio in which they own each individual share/security • PCCs has a duration of 18 months. the relationship of mutual trust between the supervisory without needing to spend time and resources on tracking The company is owned by SpareBank 1 Midt-Norge (92%) board, the board of directors and management SpareBank 1 Midt-Norge aims for a total capital ratio of the progress of their investments. Those interested in the and SpareBank 1 Nordvest (8%). non-discrimination of PCC holders and a balanced 12.0% and a tier 1 capital ratio of 8%. The bank has imple- opportunities provided by the share market will receive • relationship with other stakeholders mented a tool for measuring economic capital and risk-adju- detailed reports showing the number of shares they own in Midt-Norge Regnskap AS compliance with laws, rules and ethical standards sted return in the credit area, but will not be adjusting its each individual company, and are thus able to keep closer • capital adequacy targets until further notice. track than if they own units in a fund. Key figures (NOK million) 2005 2004 Principles of corporate governance Income 18 15 SpareBank 1 Midt-Norge owns 90.1% of the company. Expenses 17 14 Good corporate governance at SpareBank 1 Midt-Norge Free negotiability encompasses the values, goals and overarching principles The bank’s PCC is freely negotiable. Pre-tax profit 1 1 by which the bank is governed and controlled with a view to Key figures (NOK million) 2005 2004 securing the interests of PCC holders, depositors and other Information and communication Income 136 120 Midt-Norge Regnskap AS, founded in 1985, is South and stakeholders in the bank. The bank attaches importance to full and effective commu- Expenses 130 112 North Trøndelag’s largest independent, authorised, nication in underpinning the relationship of trust between Pre-tax profit 6 8 accountancy firm with offices in Trondheim, Rissa, Stjørdal, Operations the bank’s PCC holders, Board of Directors and manage- Levanger and Namsos. It has 35 highly qualified staff, an SpareBank 1 Midt-Norge’s object is: “to promote saving by ment, and in ensuring that the bank’s stakeholders are at all annual turnover of NOK 18.5 million and a solid financial accepting deposits from an unrestricted range of depositors times able to assess and relate to the bank. The bank’s infor- Annual Report 2005 Annual Report 2005 EiendomsMegler 1 Midt-Norge AS position. and to manage the funds at its disposal in a secure manner mation policy accordingly places a premium on proactive dialogue with respective stakeholder groups in which open- In 2005 EiendomsMegler 1 Midt-Norge reinforced its posi- Midt-Norge Regnskap AS is a forward looking one-stop in accordance with the legal rules applying at any and all ness, predictability and transparency are at centre stage. tion as Central Norway’s leading real estate agency in all supplier of financial services in the fields of counselling, times to savings banks.” The bank’s values, vision and object are described on page 8. 20 segments. 2005 is the latest of a string of years of positive profitability development, accounting, tax and other financi- The bank also attaches importance to correct, 21 growth in turnover and market share. With its solid market- ally related services and currently caters to about 1,000 relevant and timely information on the bank’s leader position in North and South Trøndelag, Romsdal and small and mid-size clients in the corporate, farming seg- Equal treatment of PCC holders and a balanced relation- progress and performance as a means of instil- Nord-Møre, the company has laid a good basis for further ments and housing cooperatives/co-ownerships segments. ship with other stakeholders ling investor market confidence. Information is development. While the bulk of its clients are based in Trøndelag, modern The bank will assure PCC holders and other stakeholder communicated to the market via quarterly investor presen- technology means that remoteness in relation to clients is groups the opportunity to express their views on the evolut- tations, an Investor Relations area on the bank’s website EiendomsMegler 1 Midt-Norge is now one of the country’s no impediment. ion of the bank’s strategy and business. and press releases. Presentations for international partners, financially soundest real estate companies. Additionally, it lenders and investors are also arranged on a regular basis. has developed and implemented quality assurance routines Midt-Norge Regnskap AS’s mission is to be a recommen- Compliance with laws, rules and ethical standards giving it with major competitive advantages on the logistics ded partner for its clients with a service range and techno- A prerequisite for sound banking is compliance with laws, SpareBank 1 Midt-Norge has received the Oslo Stock front. This is reflected in profile ratings showing high custo- logy that meet their needs both now and in the future. The rules and ethical standards. Through its ethical guidelines Exchange’s information award for meeting specific require- mer satisfaction and that EiendomsMegler 1’s position as quality requirement it sets itself – which as a minimum is to the bank has established a distinct set of values. The ethical ments as to the scope and distribution of information. the preferred brand among house sellers in Central Norway meet the quality criteria set by Kredittilsynet (Norway’s Business description Business description guidelines have been communicated across the organisa- was reinforced in 2005. financial supervisory authority) and the Norwegian Associa- tion and define desirable and undesirable conduct. Governing bodies tion of Authorised Accountants – provides its clients with a 2005 was marked by expansion into new areas. The company Governing bodies Control Committee guarantee of the quality of its operations. took over and reprofiled offices in Molde and Kristiansund, PCC capital and dividends Supervisory Board Control Committee and established a new office in Ålesund. The venture in The company is a wholly-owned subsidiary of the bank. The bank’s dividend policy: Møre and Romsdal was carried out in connection with “The financial goal of SpareBank 1 Midt-Norge's operations Election is to achieve results that yield a good, stable return on total Audit – external SpareBank 1’s takeover of Romsdals Fellesbank. In a short Corporate Governance Committee equity. space of time the company has positioned itself as a leading SpareBank 1 Midt-Norge has adopted a distinct corporate Board of Directors Audit – internal player in the region and is highly active in real estate, governance policy, and will further develop its corporate Profits are distributed between the PCC holders and the housing co-operatives and commercial property. With new governance structure within the framework of applicable reserves of the bank based on their respective shares of the office establishments in Møre and Romsdal, Eiendoms- laws and in keeping with recommendations emanating from bank's equity capital. Any deficit is charged to the reserves CEO Megler 1 Midt-Norge now has 13 offices in Central Norway. influential sources. of the bank, the dividend equalisation fund and in the event The company has specialised its operations and has the gift fund, on a proportional basis. Risk Management established separate units for recreational, project and Through its corporate governance policy the bank will commercial property broking alongside its traditional assure sound management of its assets and give increased SpareBank 1 Midt-Norge attaches importance to paying a residential agency business. assurance that its expressed goals and strategies will be competitive cash dividend. Variations may occur in the rela- attained and realised. tive distribution between cash dividends and equalisation 37% market share

[ Behind the figure: Siding with a local community. ]

Putting a number on a market share is not difficult – 37% in the retail market and 41% in the corporate market. But what does that mean – really – when almost half of the local community are our customers?

Big, but close at hand. That’s a special position to be in. We have seen situations where corporate customers find A position in which you are committed to turning a bank themselves in difficulties, and we are bound to do so Annual Report 2005 into something more than just a bank. again. An average of 37% of this particular company’s employees are customers of the bank. So there is no In addition to offering modern banking services, we are longer any point in thinking of the corporate customer expected to be a responsible and visionary actor that as a single customer who defaults on a loan, but as a 23 fosters the development of the local community that we part of a local community with which we share a rela- serve. tionship of mutual dependence and obligation. If our Indeed, it is not just an expectation – it is an obligation. corporate customer is in difficulties, than many of our Not least towards ourselves. retail customers will also be in difficulties. If the customer

Finding and telling the story of a company we have is sufficiently large, then an entire local community may helped to develop from the drawing board to actual jobs be in difficulties – a local community of which we are part. is a simple matter. It is just as simple finding companies “37%” is not just a figure to be documented together that have been in difficulties. But not so easy to tell with other figures. It is an obligation. We have chosen to others about it. The moment we use the term “social stake our future here in Central Norway. In this region actor” about ourselves, we must have the courage to and its local communities. acknowledge that not all aspects of this role are exclusively A physical presence is the least important dimension of positive. And it is on the negative side that we find the the terms “local” and “close”. All important is the will to true content of the “37 and 41%” commitment. assume responsibility and the ability to see things as they are seen by local business and industry and the sectors in which they operate. This understanding requires commitment. And, equally, thoughtfulness.

Foldereid Supervisory Board Election committee for depositors’ election of Supervisory All external board members are independent in relation to CEO attends these meetings. The Committee also meets By virtue of amendments to the bank’s Articles of Associa- Board members the definitions set forth in the corporate governance recom- the chairman of the Board of Directors on an annual basis. tion, the Supervisory Board was in autumn 2005 reduced The depositor-elected members of the Supervisory Board mendation. from 56 members and 56 alternates to 43 members and 32 appoint a separate Election Committee to undertake and External auditor An annual plan has been adopted for the Board of Directors. alternates. Seventeen members and 10 alternates are prepare the depositors’ election of members and alternates An external auditor is appointed by the Supervisory Board. The Supervisory Board has adopted new Instructions for the appointed from among the PCC holders. Eight members to the bank’s Supervisory Board. This Election Committee The bank utilises the same auditor in the parent company Board of Directors with effect from March 2006. and alternates are public appointees, distributed among the has three members, one from each of the counties of Møre and in all subsidiaries. The external auditor performs the stat- counties of Møre and Romsdal, South Trøndelag and North and Romsdal, South Trøndelag and North Trøndelag. The Board of Directors has appointed an audit committee utory confirmation of the financial information provided by Trøndelag. Eight members and alternates are elected by the on a trial basis. the companies in their public accounts. The external auditor depositors and distributed among the counties of Møre and Election Committee for PCC holders’ election of The Board of Directors conducts an annual self-evaluation. briefs the Board of Directors each year on the main features Romsdal, South Trøndelag and North Trøndelag. The Supervisory Board members of the audit plan, and attends the meeting of the Board of employees have 10 members and six alternates. The PCC holders appoint an Election Committee at a mee- Directors at which the annual accounts are reviewed. Annual Report 2005 Annual Report 2005 Remuneration to the Board of Directors ting of PCC holders. The Election Committee has three mem- The Supervisory Board approves the accounts and appoints The Supervisory Board fixes the directors’ fees. The Board of The external auditor has not provided the group with non- bers and two alternates. At least one of the members and the members of the bank’s Board of Directors, Control Com- Directors receives no remuneration over and above direc- audit services of significance. Any such services from the exter- one of the alternates must be members of the Supervisory mittee and Election Committee. The Supervisory Board also tors’ fees. nal auditor must comply with the Auditors Act section 4-5. Board. The Election Committee prepares the PCC holders’ 24 fixes the remuneration of the Board of Directors, Control 25 election of Supervisory Board members and alternates. Committee and Election Committee. The Supervisory Board Remuneration to senior employees Internal audit is also responsible, at a joint meeting with the Board of The Board of Directors has appointed a separate compen- With effect from 2004 SpareBank 1 Midt-Norge established Board of Directors Directors, for the appointment and in the event dismissal of sation committee to prepare the Board’s determination of an agreement with Ernst & Young on the provision of inter- The Board of Directors has ten members of whom nine are the President and CEO. the President and CEO’s remuneration, which is reviewed nal audit services. The agreement covers the parent bank, appointed by the Supervisory Board. The members are annually. The committee is informed of the remuneration to subsidiaries subject to the internal control regulations and appointed for two years at a time and can hold office for a Election committees senior employees of the company. Remuneration to the other significant subsidiaries. maximum of 20 years, but not more than 12 years continu- SpareBank 1 Midt-Norge has three election committees. managing director and senior employees is disclosed in ously in the same position. The chair and deputy chair are Note 1. The internal audit function’s main task is to confirm that elected by the Supervisory Board at separate elections for the established internal control system functions as inten- Election Committee for the Supervisory Board The Board of Directors has established the compensation two years at a time. The managing director is required by ded, and to ensure that established risk-management arran- The Supervisory Board appoints an Election Committee committee’s mandate. law to be a member of the Board of Directors. The Board gements are adequate in relation to the bank’s risk profile. from among the members of the Supervisory Board. The meets at least 11 times each year. The internal audit function reports on a quarterly basis to Business description Election Committee comprises one representative from, Business description Control bodies the Board of Directors which adopts annual plans and bud- respectively, the PCC holders, the depositors, public appoin- A guiding principle at SpareBank 1 Midt-Norge is that mem- Control Committee gets for the internal audit. The internal audit function per- tees and the employees, totalling four in all. The committee bers of the Board of Directors shall be independent. The Control Committee is appointed by the Supervisory forms no financial audit. gives due attention to a composition based on considerati- Board and has three members. ons of competence and gender. The committee’s task is to Board of Directors’ functions Risk management prepare the election of the chair and deputy chair of the The Board of Directors manages the bank’s operations in The Control Committee’s tasks include overseeing that the A separate risk management function has been established Supervisory Board, members and alternates of the bank’s compliance with laws, articles of association and further bank and the Group conduct their business in an appropri- at SpareBank 1 Midt-Norge. This function is independent of Board of Directors and Control Committee, and members provisions laid down by the Supervisory Board. The Board is ate and satisfactory manner in accordance with laws and the customer units and sees to the development of the of the Election Committee. The Election Committee is also responsible for ensuring that the assets at the bank’s dispo- regulations, articles of association, guidelines issued by the bank’s framework for overall risk management, overall risk charged with reviewing and recommending any changes to sal are managed in a safe and appropriate manner. The Supervisory Board and orders issued by Kredittilsynet (Nor- reporting and monitoring. Its area of responsibility includes the fee structure for the bank’s elected officers. Board is also required to see to it that accounting and asset way’s financial supervisory authority). The Control Commit- credit risk, operational risk and market risk (liquidity, management are subject to satisfactory control. tee normally meets 11 times each year. The President and interest rates and foreign exchange). of scale and at the same time enables the bank to focus on Developments in our new market area, Møre and Romsdal, Statement by the Chief Executive Officer its independence and strong regional and local identity. will receive particular attention in 2006, as previously.

In addition to making an excellent operating profit, the bank Coordination between the bank and our subsidiaries recovered substantial losses on the Finance Credit fraud. EiendomsMegler 1, Allegro Finans ASA, SpareBank 1 Finans and Midt Norge Regnskap will be even more in focus in Highly capable staff and an increasing focus on competence The bank’s best operating year ever 2006. In aggregate our market position is unique, we have building and sales play their part in the fine performance. the best market products along with a network in Central – major challenges ahead The bank’s main challenge ahead is to maintain its focus on Norway that no-one else is even close to emulating. The In 2005 the bank achieved the best performance in its improvement in all areas. We cannot rest on our laurels! We capable staff in the Group will ensure that 2006 is another history with a post-tax profit of NOK 717 million, corres- must move forward. That means continued hard work, an good year for the bank, the bank’s customers and the bank’s ponding to a return on capital of 24.1%. This result increased focus on expertise and further developing custo- PCC holders. unquestionably makes us one of Norway’s most profitable mer relationships to create added value for both parties. banks in 2005 and, along with SpareBank 1 SR-bank, one of Project 2010 was launched at a meeting of all Group I can proudly confirm that all the objectives we set for the two most profitable major banks in the country. The fine employees in Molde at the beginning of March 2006. The ourselves after taking over Romsdals Fellesbank have been result came in a year when much time and attention was project addresses important areas for improvement and attained. This is due to an extraordinary effort by a great devoted to integrating Romsdals Fellesbank into the Group. underpins our clear-cut ambition to maintain the industry’s many staff members in 2005. The spirit in which our new best profit performances throughout the above period. In Times are good in Norway. Business and industry are colleagues in Møre and Romsdal have acquired new compe- order to underscore each employee’s significant responsibi- Annual Report 2005 Annual Report 2005 performing well, investing and expanding their workforces. tence and adopted SpareBank 1 in their operating model is lity for the bank’s overall performance we concurrently Households have faith in a continued positive trend for the impressive, and fills us with optimism at the prospect of the launched a physical fitness programme for the entire orga- Norwegian economy and expect relatively moderate interest challenges facing us in our new geographical market. nisation with the following designation and goal: “Better rate increases. Higher turnover and rising prices are repor- Some challenges in 2006 will be especially important. We shape 2010”. This highlights our desire to develop Norway’s ted in the housing market. At the start of 2006 the demand are in the midst of a boom the likes of which few of us have healthiest organisation, which, if achieved, will have a 26 for recreational property exceeds the supply in Central 27 experienced. In such times a focus is needed on measures positive impact on the bank’s profit-generating ability. Norway. The growing interest shown in investing in a to ensure that we do not take on risks that will at some point “second home” attests to most households’ ample finances In conclusion I would add that 2006 will be a year in which in the future inflict abnormally heavy losses when the and faith in a continued positive trend. The bank’s savings the SpareBank 1 Alliance will reinforce its solid market economy levels off and indicators point down. products are in great demand – confirming the general pic- position in Norway. I expect new members to join the ture of sound finances, but also confirming our customers’ In 2006 we will make a substantial effort to obtain IRB status Alliance in the course of the year. I base this expectation on interest in a broader range of savings products, a pertinent under Basel II. This requires a keen focus on implementing the structure debate now under way throughout Norway’s example being the bank’s property syndicate in Molde which the best applications and routines to ensure optimal quality savings bank sector. Our takeover of Romsdals Fellesbank, was oversubscribed in the space of three hours in February in our credit process and internal control. Sparebanken Volda Ørsta’s entry into the Alliance, Tingvold 2006. The bank’s two other property syndicates in Sparebank’s desire for integration with a larger regional We expect a tight squeeze on interest margins in 2006, as Trondheim were similarly sold out very quickly. At the time bank and Sparebanken Sogn og Fjordanes’ desire to convert previously, particularly on the best secured loans. We will of writing a takeover bid has been made for the syndicated to limited liability status are examples of events prompting safeguard our competitive power by expanding sales, and property Solsiden which, assuming shareholder acceptance, debate on structural issues in the financial industry. Statement by the CEO Statement by the CEO thereby revenues, from products other than lending and will generate very good return for investors. The need for structural change is also driven by growing deposits. This requires a closer focus on sales. SpareBank 1 competition entailing pressure on interest margins, challen- While good times are a sound basis for good results for Midt-Norge’s sales units will utilise high-quality counselling ges linked with Basel II, possible future funding problems banks, this alone is not enough to deliver such a good result provided by the best qualified personnel in the market and and a continuing need for substantial investment in compe- as we did in 2005. All our partners in the SpareBank 1 the best products delivered by companies we control tence, marketing and technology. Alliance delivered excellent results in 2005 – placing them at directly or indirectly through SpareBank 1 Gruppen AS. the top of the year’s performance standings. The SpareBank Our capable staff will refine their counselling skills in a 1 Alliance’s operating model works better than that of other competence development programme involving certifica- banks. It provides SpareBank 1 Midt-Norge with economies tion and very high quality requirements.

Finn Haugan Chief Executive Officer Four product areas

[ Behind the figure: The complete offering. ]

“What are we going to call the baby?” “Thank you for the confirmation present, grandfather!” “Yes, I want to marry you!” “What are we going to call the baby?” “No, I don’t want to be married to you any longer!” “Gold watch? – thank you, thank you very much!” “Best wishes for your confirmation, dear grandchild!”

“We’re there when life changes. Whether it changes for have succeeded in transferring our strategy to the better or for worse” we said in one of our campaigns for practicalities of everyday life. Whether on the internet, Annual Report 2005 personal insurance in 2005. We have two key tools to telephone or face to face with the customer, our corps of hand when offering opportunities and security geared to advisers has the ability to create strong, long-lasting the various stages of life and life events: A complete customer relationships. This enables us to promise our range of products and services, and sound advice from customers that our bank creates the best finances over 29 a staff member. time.

Our offerings in the business areas payments, savings Our counselling and product portfolio go hand in hand. and investment, lending and insurance are, individually Through our focus on advice based on knowledge of the and in combination, complete – we offer all financial customer’s finances, we are one of the few banks to services needed by the customer, right from the “what have made a true success of cross-sales. Continuous are we going to call the baby” stage, regardless of how product development and use of access-enhancing tech- life may change. Everything you need, when you need it nology enable us to cater to customer needs at all times. – from one provider. The product range alone does not Allegro, the Pir Centre and Nordic Energy Funds are create sound finances for customers. Sound finances examples of new investment products that demonstrate start with good advice – perhaps our most important our ability to develop and market attractive products product. With more than 400 advisers in Central that perform well in the market. Norway, we are in a unique position in this context. No one has the same needs throughout, and a few customers are alike. Our active and enterprising advisers Report of the Board of Directors

General setting and the macro economy start of 2005 to about 86,000 at year-end, while Norway’s and an excess value of NOK 69 million. Goodwill is calcula- The excellent result is ascribable both to sound operations in 2005 overall unemployment rate fell from 3.8% to 3.2%. In South ted on the basis of the overall acquisition price of Romsdals and to the fact that 2005 brought very substantial gains on and North Trøndelag employment rose by, respectively, Fellesbank’s shares, including costs directly related to the securities and write-backs of loss provisioned loans. The improvement in the Norwegian economy continued in 5,000 and 0. The bankruptcy rate is falling both nationally acquisition, less Romsdals Fellesbank’s equity capital as of 2005. Among the prominent contributors to the positive SpareBank 1 Midt-Norge achieved strong growth in all busi- and in the Trøndelag counties. A total of 3,540 business 31 March 2005. development in 2005 were low interest rates, a favourable ness areas in 2005. Lending to retail and corporate custo- failures were noted in Norway in 2005 compared with 4,297 international economic climate and a high oil price. While The SpareBank 1 Midt-Norge Group achieved a net profit of mers rose by NOK 4.5 billion or 11.5% while deposits rose in 2004. North Trøndelag was one of the few counties to the Norwegian currency appreciated somewhat in the NOK 720 million in 2005. SpareBank 1 Midt-Norge is the by NOK 2.0 billion or 8.1% (pro forma figures including experience an increase in the number of businesses placed course of 2005, this was more than offset by increased majority owner with a profit share of NOK 717 million. It is Romsdals Fellesbank). The overall volume of other savings in administration from 2003 to 2004, but also showed one activity in the oil and offshore industry. The favourable the majority owner’s share of the profit that receives products rose by NOK 1.9 billion or 65% and the overall of the largest declines from 2004 to 2005. Only 64 business parameters witnessed in Norway were reflected in rising comment in the report. volume of personal and non-life insurance rose by 14%. failures were recorded here in 2005, a decline of almost employment towards year-end. 40%. South Trøndelag followed close behind with a decline The difference between the Group’s result under IFRS and The substantial improvement over 2004 is mainly ascribable Annual Report 2005 Annual Report 2005 The krone exchange rate showed a strengthening tendency of more than 30% to a total of 190 business failures. its result under Norwegian GAAP is shown in the table to the following factors: for much of 2005, but with a limited outcome: at year-and The picture is paralleled in Møre and Romsdal, where the below. The difference is essentially a consequence of diffe- • Inclusion of Romsdals Fellesbank’s result as from the the krone was about 2% stronger than at the start of the number of business failures dropped by 15% to 169 in 2005 ring rules for measuring the value of financial instruments second quarter. year. Although, at the time of writing, the krone is somewhat and employment rose by 1,000. and amortising goodwill. • Strong increase in commission income. 30 31 stronger than in 2004 and above the average level since • High trading gains on the bank’s securities. At the start of 2006, prospects for the Norwegian economy 1990, this is not viewed as particularly negative for Norway’s • Excellent result posted by the SpareBank 1 Group and a remain bright. We anticipate a gradual rise in Norwegian Difference IFRS Group – NGAAP parent bank 2005 competitively exposed manufacturing sector. satisfactory trend at the bank’s subsidiaries. interest rates, but do not expect the Norwegian currency to Net profit IFRS Group 717 IFRS real value financial investments -37 • Reduction in net loan losses. The Norwegian central bank has started, cautiously, to raise appreciate significantly from the level at the start of the year. NGAAP write downs goodwill • Write-back of previous loss provisions after a settlement its key interest rate from a still very low level of 2.25%. The Planned investments in the oil and offshore sectors will SpareBank 1 Gruppen -26 was reached in the Finance Credit affair. current low interest rate is related to very low inflation. Con- probably render the Norwegian economy more stable in NGAAP write downs goodwill parent bank -16 sumer prices rose 1.6% in 2005, i.e. still leaving a little 2006 than in 2005. This will also be reflected in continued NGAAP commision income The price of the bank's primary capital certificate (PCC) at ground to be covered before the central bank’s inflation labour market improvements. guaranteed-return products -4 end-2005 was NOK 78.25 (NOK 51.66). Dividend of NOK 4 target of 2.5% is reached. Core inflation in Norway (i.e. Net profit NGAAP parent bank 632 per PCC for 2004 was paid in 2005. Earnings per PCC were excluding indirect tax changes and energy prices) was a Accounts 2005 NOK 8.50 and book value per PCC was NOK 42.10 (inclu- ding dividend for payment in 2006). These are recalculated mere 1.1% in 2005. Despite the low inflation rate, the cen- (Consolidated figures. Figures in parenthesis refer to the preceding year tral bank has started a process of returning the interest rate unless otherwise stated) Romsdals Fellesbank was merged with SpareBank 1 Midt- figures after the split and bonus issue carried out in the Norge on 11 September 2005 and for accounting purposes fourth quarter. Report of the Board Directors Report of the Board Directors towards a more normal level. At their present level, interest rates have a highly stimulatory effect on the economy, and Accounting principles as from the third quarter. there is no contradiction between higher interest rates and Proposal for distribution of profit As from 2005 SpareBank 1 Midt-Norge’s accounts are pre- This report also presents, in addition to the official accounts, rising inflation. More and more segments of the Norwegian The accounts of the parent bank are prepared under pared under IFRS rules on a consolidated basis. The parent the pro forma accounts of the SpareBank 1 Midt-Norge economy reflect a need for higher interest rates. Norwegian GAAP. It is the parent bank’s accounts which bank’s 2005 accounts are also prepared under Norwegian Group including Romsdals Fellesbank. provide the basis for the distribution of profit. The favourable parameters for Norwegian business and GAAP, and are presented in notes. The Norwegian GAAP The accounts are presented on the going concern assumption The Board of Directors recommends the Supervisory Board industry have brought improvements in the labour market accounts are the basis for the distribution of profit. in compliance with guidelines given in the Accounting Act. and in the bankruptcy statistics. Employment appears to be to set a cash dividend of NOK 5.50 per PCC, altogether total- Romsdals Fellesbank ASA was acquired in the first quarter gathering momentum towards the end of 2005, and there ling NOK 278 million. of 2005, and permission for the takeover was granted by the Results for the full year 2005 are signs that we may now be at a stage where workforces Ministry of Finance on 11 March 2005. Romsdals Fellesbank Excellent result In keeping with the bank’s dividend policy, the profit is to be need be boosted if production is to rise any further. Accor- was consolidated into the SpareBank 1 Midt-Norge Group SpareBank 1 Midt-Norge recorded a net profit of NOK 717 distributed between the savings bank’s reserve and the PCC ding to the Employment Service (Aetat), the number of as a subsidiary as from 31 March 2005. The consolidated million (455 million) in 2005, corresponding to a return on capital in proportion to their relative shares of the bank’s persons who are unemployed or on employment program- balance sheet shows a goodwill item of NOK 454 million equity of 24.1% (20.0%). The profit measured 1.51% equity capital, such that dividends and the allocation to the mes in Norway was reduced from just under 105,000 at the (1.22%) of average total assets (ATA). dividend equalisation fund constitute 58.2% of the net profit. Of the share accruing to the savings bank’s reserve, NOK 89 High activity levels led to higher operating expenses Collective write-downs were reduced by NOK 16 million in Retail customer deposits rose by NOK 0.4 billion or 2.7% to million is to be set aside to the donation fund. This sum con- Operating expenses totalled NOK 906 million (NOK 724 2005 due to the improved quality of the loan portfolio, and NOK 13.8 billion in the full year 2005. Corporate customer stitutes 25% of the net profit after allocation to dividends. million). NOK 75 million of the total expenses were accoun- at year-end totalled NOK 278 million or 0.6% of gross out- deposits rose by NOK 1.7 billion or 14.3% in the same ted for by Romsdals Fellesbank. Operating expenses include standing loans. period. an imputed expense of NOK 28.5 million, charged to the At end-2005 individual write-downs totalled NOK 236 mil- Romsdals Fellesbank reported 12-month deposit growth of Distribution of profit 2005 2004 2003 fourth quarter accounts, equivalent to the discount on PCCs lion (329 million) and 0.5% (0.8%) of gross outstanding NOK 0.6 billion or 15%, with customer deposits totalling Net profit NGAAP parent bank 632 430 223 sold to the bank’s employees in connection with the placing loans. Of the reduction of NOK 95 million, NOK 45 million NOK 4.5 billion at year-end 2005. Dividends 278 152109 carried out in the summer of 2005. The bank’s equity capi- refers to effects of the switch to IFRS and is reflected in Equalisation fund 90 69 9 tal was increased by the same margin. This item is not take equity capital as per 1 January 2005, while NOK 50 million is Other savings and insurance products Savings bank‘s reserve 176 140 77 into account in the comments which follow. Donation fund 89 69 29 a reduction resulting from write-off of previous periods’ loss At year-end the total portfolio of savings products other In the parent bank – excluding Romsdals Fellesbank – costs provision and lower risk in the loan portfolio. than bank deposits came to NOK 4.8 billion compared with Total distributed 632 430 223 rose by NOK 58 million or 9.2%, while costs recorded by the NOK 2.9 billion one year previously, an increase of NOK 1.9 In the past 12 months doubtful loans were substantially subsidiaries rose by NOK 22 million or 17%. Cost growth at billion or 65%. The trend in the bank’s sales of savings reduced by NOK 303 million to NOK 622 million. This is the parent bank, over and above ordinary growth in wages products is highly satisfactory, aided to some extent by a Sound growth but reduced net interest margin due to write-off of loans to retail customers and a targeted and prices (estimated at NOK 20 million), refers essentially positive trend in portfolio values. Net interest and credit commission income totalled NOK focus on individual customers in the corporate market. to the costs of integrating Romsdals Fellesbank (NOK 21 961 million (864 million). Net interest income measured million), and to growth in costs of IT development and the Of loans in default for more than 90 days totalling NOK 353 2.01% (2.33%) in 2005. Savings products (NOK million) 2005 2004 Growth establishment of new offices (NOK 9 million). The growth million (431 million), NOK 83 million (185 million) or 24% Equity and fixed income funds 1 722 1 195 527 Of the net interest income of NOK 961 million, Romsdals at the subsidiaries refers essentially to EiendomsMegler 1’s (43%) are loss provisioned. Defaults in excess of 90 days Unit Link, Pension saving 1 058 642 416 Fellesbank accounted for NOK 120 million. Net interest new ventures in Molde, Ålesund and Kristiansund. measured 0.8% of gross outstanding loans. Active asset management 1 477 888 589 income excluding Romsdals Fellesbank was accordingly Relative operating expenses came to 1.84% of ATA (1.95%). Other doubtful exposures total NOK 270 million (331 million), Energy funds 500 160 340 reduced by NOK 23 million compared with 2004. Net inte- of which NOK 155 million (144 million) or 57% (44%) are Annual Report 2005 Annual Report 2005 Group expenses measured 53% (54%) of income (exc. gains Total 4 757 2 885 1 872 rest income for Romsdals Fellesbank in 2005 was on a par loss provisioned. Other doubtful exposures measured 0.6% on securities. with the 2004 figure. of gross outstanding loans. A more assertive competitive strategy in the retail market The bank’s insurance portfolio showed stable growth in Good return on financial investments was implemented as from the second quarter of 2005. This Balance sheet 2005, and overall premium volume for life and non-life insu- Overall gains and dividends on securities, currency trading 32 generated quicker lending growth, mainly in well secured The balance sheet, including loans and deposits, are com- rance combined grew by 14.0%. 33 and financial instruments and assets came to NOK 148 home mortgage loans. As expected, the lending margin was mented on based on pro forma figures since Romsdals Fel- million (85 million). Of this, NOK 36 million refers to reduced somewhat, which in profit terms was partially com- lesbank was only consolidated into the SpareBank 1 Midt- Sound profit performance for SpareBank 1 Gruppen AS unrealised gains under the new IFRS accounting standard. pensated for through the quicker growth in lending. Norge Group on 31 March 2005. SpareBank 1 Gruppen AS is owned by SpareBank 1 SR-Bank, Return on the bank’s portfolio of shares and bonds (inclu- SpareBank 1 Midt-Norge, SpareBank 1 Nord-Norge and As of end-2005 the Group’s assets totalled NOK 54 billion, ding dividends) came to NOK 115 million (68 million), of Samarbeidende Sparebanker AS, each with a 17.63% stake. Good sales and growth in commission income NOK 8 billion (18%) more than at the end of 2004. Roms- which NOK 40 million comprises gains and dividends on Other owners are the Swedish FöreningsSparbanken AB Good sales at the bank generated higher business volumes dals Fellesbank accounted for NOK 7 billion of the total the bank’s portfolio of short-term share investments. The (19.5%) and the Norwegian Confederation of Trade Unions in the payments, savings and insurance areas. Sales of assets. estate agency services and active management products by remaining NOK 75 million comprises value changes, gains (10%). and dividends on long-term shareholdings and bonds. the bank’s subsidiaries were on a highly satisfactory trend in Loans The result for SpareBank 1 Gruppen AS for 2005 shows that Gains on currency and derivatives trading totalled NOK 33 2005. Total outstanding loans came to NOK 45.3 billion at end- targets were attained in all business areas, and improved million (18 million). Net commission income and other operating income total- 2005, having risen by NOK 4.4 billion or 11% over the year. performances were delivered throughout. The group repor- led NOK 537 million (424 million), an increase of NOK 113 Gains on financial assets came to NOK 23 million, referring ted an aggregate net profit of NOK 679 million in 2005, Report of the Board Directors Report of the Board Directors Loans to retail customers rose by NOK 3.6 billion or 14% to in their entirety to gains on the disposal of long-term share- NOK 427 million higher than in 2004. SpareBank 1 Midt- million or 27%. Income from payment services rose by NOK NOK 29 billion in 2005, while loans to corporate customers holdings. Norges’s share of SpareBank 1 Gruppen’s result was NOK 19 million, from savings product by NOK 23 million and rose by NOK 0.9 billion or 6% to NOK 16.4 billion. from insurance by NOK 16 million (of which NOK 11 mil- 120 million (42 million). Low loan losses and a reduction in doubtful loans In the past 12 months Romsdals Fellesbank posted an over- lion refers to soft commissions due to the good quality of SpareBank 1 Gruppen AS’s product companies deliver good Loan losses are taken to income in a net amount of NOK 38 all lending growth of NOK 0.6 billion or 8.8%, and had loa- the non-life portfolio). competitive products to the banks in the savings, pensions million, compared with a loss cost of NOK 81 million in the nable funds of NOK 7.2 billion at year-end. Commission income reported by Romsdals Fellesbank total- and insurance area. 2005 brought an excellent trend in all same period of the previous year. Of this, NOK 73 million led NOK 22 million. Romsdals Fellesbank achieved good Loans to retail customers accounted for 64% (62%) of ordi- product areas. SpareBank 1 Skadeforsikring (non-life insu- refers to the compensation and insurance settlement in sales of savings products, related in particular to reinvest- nary loans to customers at year-end. The bank aims for a rance) established an insurance company in Sweden toget- connection with the Finans Credit bankruptcy. The net loss ment of capital from SpareBank 1 Midt-Norge’ settlement retail market share of 65%. her with Trygg-Hansa, which is to distribute non-life pro- on corporate customers in general came to NOK 58 million of the shares of that bank. ducts through FöreningsSparbanken. SpareBank 1 (72 million), while a net income of NOK 2 million was recor- Deposits Livsforsikring (life insurance) delivered products tailored to Commission income reported by the subsidiaries also rose ded on retail customers (loss of NOK 13 million). Customer deposits totalled NOK 27.0 billion at end-2005, the new act on compulsory company pensions which were appreciably: at Allegro Finans ASA to NOK 65 million (33 mil- A net write-back of losses on retail customers was a direct an increase of NOK 2.0 billion or 8.1% over the end-2004 well received in the market. ODIN Forvaltning (fund mana- lion), at EiendomsMegler 1 to NOK 103 million (92 million) result of the introduction of new lending regulations. figure. gement) again delivered returns in excess of index for all its and at Midt-Norge Regnskap to NOK 18 million (15 million). It is when customers do most of their banking unaided that they are most in need of a bank.

“A complete overview of your customer relationship”. In this context good service is about giving the custo- It is long since online banking was about paying bills mer the assistance he or she needs, at the time and in Annual Report 2005 from one’s own sofa. SpareBank 1 Midt-Norge internet the manner of their choosing. We exploit technology to bank is a complete online bank providing access to all enable the customer to transact banking services online product areas, including insurance. or over the phone. Any customer needing advice is free to choose between direct or electronic contact. 35 In addition to giving customers a complete overview of their relationship with the bank and enabling them to Efficiency turns on automation, making the customer carry out most transactions unaided, the internet bank self-sufficient. The financial gain is evident, but the offers a two-way facility for dialoguing with competent opportunity to focus on the advisory function is also an advisers. Hence our online bank is an internet bank with important dimension. Our complete offering, combined people at both ends. with good personal counselling, is what enables us to fulfil our promise of creating “the best finances over Today the Internet Bank and the Customer Centre com- time”. bine to provide a complete digital solution – an offer to customers who do not need, or wish to be in contact with, an adviser face to face to transact their business. All types of business can be transacted digitally. By this means we unite good service provision with efficiency and effectiveness. 27,000 self-servicing customers each day [ Behind the figure: From transaction to counselling. ]

Cross in Molde funds. Bank 1 Oslo established four new branches in 2005, 6% in 2005, and the company posted a net profit in excess Satisfactory result for Romsdals Fellesbank A stock issue carried out in the second quarter added an and started unrolling a plan for the opening of new offices of NOK 1 million for first time. Romsdals Fellesbank’s profit trend in 2005 was in keeping estimated 1.5 percentage points to total and tier 1 capital in Oslo, Akershus and Hedmark. with the expectations on which SpareBank 1 Midt-Norge adequacy. RoFe Invest, a property company in Romsdal, is being based the takeover. Romsdals Fellesbank’s first quarter The SpareBank 1 Alliance’s strategy for the period to 2007 is wound down. accounts showed a deficit of NOK 10 million as a result of based on the expectation of a yet tighter competitive situa- Figures in NOK million 2005 2004 negative findings made during the due diligence process. tion in both the national and the regional financial markets. Retail market Tier 1 capital 3 073 2 773 Stronger cooperation will be required if further competitive It is especially gratifying to note the good volume growth Subordinated loan 1 181 876 The Retail Market Division achieved good results through Capital adequacy reserve - 446 - 410 advantages such as lower costs, enhanced competence and posted by the Møre and Romsdal operation in sales of insu- professionalisation of the sales process, increased business Capital base 3 803 3 239 higher-quality customer service are to be achieved. In this rance and savings products as well as home mortgage volume per customer and a strong increase in commission Risk-weighted volume 34 914 25 562 respect, ambitions for the alliance collaboration are higher loans. The bank’s position in the corporate market was income. Total capital ratio 10,9 12,7 than ever before. strengthened by the integration with SpareBank 1 Midt- Tier 1 capital ratio 8,8 10,9 In 2005 the integration process with Romsdals Fellesbank Norge. Good trend for the bank’s subsidiaries received much attention. This has already borne fruit in the Romsdals Fellesbank’s result was consolidated into the Spa- Primary capital certificates (PCCs) The overall result of the bank’s subsidiaries was NOK 58 shape of increased sales and higher commission income. reBank 1 Midt-Norge Group as from the second quarter. The book value of the bank’s PCC was NOK 42,10 at end- million (35 million) after tax: The collaborative effort with EiendomsMegler 1 Midt-Norge produced income synergies, and is receiving higher priority Net profit for the second quarter was NOK 15.5 million, in 2005, including recommended dividend of NOK 5.50. the third quarter NOK 12.2 million and in the fourth quarter Earnings per PCC were NOK 8.50. Result (NOK million) 2005 2004 in both Trøndelag and Møre and Romsdal. NOK 14 million. For accounting purposes, Romsdals Felles- EiendomsMegler 1 Midt-Norge AS 5.6 5.8 The price at end-2005 was NOK 78.25. The P/E ratio was 9.2 Distributive power is further strengthened through the bank was merged with the parent company as from the third SpareBank 1 Finans Midt-Norge AS 11.6 11.7 and the P/B ratio was 1.86. Dividend of NOK 4 was paid per establishment of new offices in Åfjord and Surnadal, at the quarter. Midt-Norge Regnskap AS 1.0 0.5 same time as several existing offices are being re-equipped PCC in the first quarter, adjusted for the split and bonus Allegro Finans ASA 30.9 16.1 issue. and modernised. Integration and merger Property companies 1.5 0.9 The terms of the authorisation require the bank to complete Annual Report 2005 Annual Report 2005 RoFe Invest AS 7.7 Stock issue Corporate market the integration process within six months of the authorisa- Total 58.3 35.0 tion date. In the second quarter a rights issue was carried out in favour The Corporate Market Division has a strong focus on port- of existing PCC holders, along with PCC placing with the folio quality and on measures to increase the share of com- The merger was carried through by the deadline date in bank’s employees, to partially finance the acquisition of mission income. Portfolio quality has improved substanti- September 2005. The merger was effective in accounting 36 EiendomsMegler 1 Midt-Norge is the market leader in Romsdals Fellesbank. This has strengthened the bank’s 37 ally. This, combined with optimism and positive results for terms as from the third quarter. Central Norway. Its position was further strengthened in equity capital by a total of NOK 473 million. the Central Norwegian business sector, has enabled a fur- 2005 by new ventures in Møre and Romsdal, and it now has Technical integration through conversion to joint IT systems ther reduction in losses on business sector exposures. a presence in Kristiansund, Ålesund and Molde. The was carried through in November 2005, bringing the pro- Rights issue company’s profit is affected by start-up costs in Møre and Moderate growth is planned in lending to the business cess of merger and integration to completion. No problems The bank’s PCC capital has been raised by NOK 217,424,100 Romsdal. The company achieved buoyant growth in 2005 in sector. The focus on savings and insurance-related products of note affected this process. by the issue of 2,174,241 new PCCs at a subscription price business volume and turnover, and was awarded first place is intensifying. Continued good sales of cash management of NOK 200 per PCC. The gross issue proceeds came to in Creditinform’s overview of Norwegian real estate agencies’ products and a greater focus on capital market services to Liquidity NOK 434,848,200. 3.5 subscription rights were required to financial state of health. the business sector has produced results, and will be priori- The bank’s funding sources and products are amply diversi- be allotted one new PCC. The market showed great interest tised areas ahead. fied. The bank’s liquidity position is satisfactory and the pro- and the issue was heavily oversubscribed. SpareBank 1 Finans Midt-Norge is the region’s leading portion of money market funding above one year was 90% finance company in leasing and car loans. As previously, the In light of the introduction of compulsory company pensions (64%). The liquidity indicator according to Norges Bank’s Placing company showed good growth in 2005 and manages a port- in Norway, SpareBank 1 Midt-Norge is sharply intensifying norm was 106%. The bank’s Board of Directors consider it desirable and use- folio worth NOK 1.1 billion. SpareBank 1 Finans Midt-Norge its focus on sales of forward-looking pension solutions. The Report of the Board Directors Report of the Board Directors ful to enable the Group’s employees to acquire and own the has established regional office in Molde, thereby reinforcing bank’s customer portfolio offers major potentials which the Financial strength bank’s PCCs. On this occasion the Board chose to recom- the basis for continued growth. Corporate Market Division is prioritising by increasing the Capital adequacy is computed a Group level under mend the Supervisory Board to grant employees a 20% resource input while at the same time making a concerted The active asset company Allegro Finans ASA achieved Norwegian GAAP. No IFRS rules for capital adequacy exist discount on the subscription price in return for an under- effort to enhance competence in this area. substantial growth in active management services in both as yet. taking by the employees to own the PCCs for a minimum of 2004 and 2005. Due to the highly satisfactory return on assets The Corporate Market Division has a strong focus on imple- two years. The minimum period for the bank’s group mana- At end-2005 total capital adequacy was 10.9% (12.7%), under management, the company also achieves a solid ope- menting the bank’s corporate market and credit strategy in gement team is four years. The placing brought in a total while tier 1 capital adequacy was 8.8% (10.9%). rating profit. Collaboration with the parent bank has been Møre and Romsdal. subscription amount of NOK 38,160,000. important, and the company’s products have been well recei- Goodwill deductions resulting from the takeover of Roms- Development trends for the Central Norwegian business The rights issue and the placing took place at the end of ved by the bank’s customers throughout Central Norway. dals Fellesbank reduce the capital base by NOK 511 million sector, including Møre and Romsdal, are positive through- May and start of June. as per end-2005. The calculation base increased in 2005 as Midt-Norge Regnskap delivers accounting services to small out, featuring low unemployment and a rising willingness to a result of the consolidation of Romsdals Fellesbank and The costs of managing and carrying out the issues totalled and medium-size customers in North and South Trøndelag invest on the part of business and industry. lending growth. The bank’s overall lending growth was 11%, NOK 19 million and are reflected in the bank’s PCC and has five offices in the region. Turnover rose more than with highest growth in low-risk home mortgage loans. premium reserve, so that the net increase in equity capital NOK 89 million to non-profit causes

[ Behind the figure: The value of having an independent regional bank. ] There are a large number of non-profit causes. We could mention a thousand off the cuff.

Build, support and develop. These three words sum up “Developing” is about facilitating prosperity and growth the values we wish to give back to the local community in the region. We also contribute to business develop- of which we are part. Each year we support more than ment that can create jobs, and to cultural events such as

1,000 causes, large and small. Here is a small selection the St. Olav Festival and the Saint Olav Drama. Annual Report 2005 of gift fund recipients: As a strong and independent bank with a local identity, we Guts grant share a common destiny with the region. The size of the Children’s Ski Festival bank’s contribution to non-profit causes is closely related 39 Stiklestad National Culture Centre to our ability to operate successfully and profitably. Ringve Museum Our support to non-profit causes might readily be regar- St. Olav Festival ded as the bank’s “return” on the community that justi- Flood disaster in Southeast Asia fies our existence. That is why we give emphasis to the Younger Entrepreneurship breadth of our support. As a regional bank we are Frøya into the Future dependent on a large volume of positive activity, opti- Molde Jazz Festival mism and growth in our region. Whatever serves to Trøndersk Food Festival build, support and develop gives the bank renewed opp- Ski trail preparation machine in Namskogen ortunities. That is why it is not merely a desire, but an Sunndal Culture Festival obligation for us to contribute to such activity. Professorship in gas logistics at Molde University College The bank’s contribution to non-profit causes is not Fosen Trade Fair merely about sharing our profit by returning a part of it By “building” we wish to enhance activity levels among to our region. It is also the story of a bank that is willing, children and young people – the Children’s Ski Festival and able, to play its part. For the local community and is a pertinent example. “Supporting” describes our for the region as a whole. assistance to disadvantaged persons by way of organi- sations such as Kirkens Bymisjon ("Church City Aid") and the Salvation Army.

Bolsøysund Bridge controlled by the PCC holders was NOK 454 million. The risk profile and to apply risk monitoring of such high quality Market risk Compliance with frameworks PCC capital accordingly received NOK 241 million and the that no single event will seriously impair the bank’s financial Market risk is defined as the potential for losses from market One of the internal audit function’s tasks is to test compli- premium reserve NOK 232 million (redistributed after the position. As part of this effort, the bank scrutinises its most value falls due to fluctuations in fixed-income, currency and ance with frameworks and routines. The internal audit func- bonus issue in the fourth quarter). critical risk areas and the measures established to manage securities markets. Market risk is managed by means of tion reports its findings to the Board of Directors. these risks at least once a year. This scrutiny is an important detailed limits for investments in equities, bonds and on Split and bonus issue element in the bank’s ongoing risk management. Together positions taken in the fixed-income and currency markets. People and competence A split and bonus issue were carried out in the fourth quar- with the other banks in the SpareBank 1 collaboration, Spa- The limits are reviewed at least once a year and are adopted Quality of customer counselling ter of 2005 in line with a resolution passed by the Supervi- reBank 1 Midt-Norge continued the task of adapting exis- yearly by the bank’s Board of Directors. Exposures relative More competent customers and more complex products sory Board on 31 October 2005. The practical consequence ting risk management processes – including the relevant to the adopted limits are monitored by Risk Management are making increasing demands of the bank’s customer of the split was to reduce the PCC’s nominal value from framework, guidelines and organisation – to expected future and reported monthly to the Board of Directors. The limits advisers. With a view to meeting customers’ increased NOK 100 to NOK 25 and to quadruple the number of PCCs. requirements from Basel. are well within the maximum limits set by the authorities. expectations and the steadily stricter requirements imposed The bonus issue entailed the issue of one new PCC for four by the authorities, the industry established on a joint basis old PCCs (after the split), financed by transfers from the Credit risk Liquidity risk a set of competence requirements for financial advisers. equity premium fund and the dividend equalisation fund. The bank’s credit strategy and credit policy derive from its The bank’s most important source of finance is customer Competence was accordingly a major focal area across the The split and bonus issue are designed to strengthen the main strategy, and contain guidelines for risk profile, distri- deposits. At end-2005 the bank’s ratio of deposits to loans entire SpareBank 1 Alliance in 2005. The Alliance has position of the PCC. This does not affect equity capital, but bution between the retail market and the corporate market, was 60%; at end-2004 it was 62%. Due to changes in custo- founded a joint Training Centre which will play its part in merely entails redistribution between different PCC-owned geographical constraints, caps on overall exposure in some mer saving behaviour and relatively high credit demand, the ensuring that banks have access to satisfactory training classes of equity capital. The split and the bonus issue both sectors and on the size of individual exposures, as well as bank’s dependence on other sources of capital has increa- facilities for customer advisers at all times. increased the number of PCCs of the bank, and are expected separate rules for specific types of commitments. The credit sed. The bank expects this situation to persist. The bank to promote the PCC’s liquidity. strategy is reviewed and adopted by the Board of Directors mitigates its liquidity risk by diversifying funding across a Certification of customer advisers in terms of profession, on an annual basis. Compliance with the credit strategy and variety of markets, funding sources and instruments, and by products and ethics is a continuing process. At SpareBank The number of the bank’s PCC holders rose by 2,067 to limits adopted by the Board of Directors is monitored by employing long-term funding. 1’s Training Centre, customer advisers are given the oppor- 7,762. Risk Management and reported to the Board of Directors. tunity to build up and maintain their expertise on a par with Annual Report 2005 Annual Report 2005 The Board of Directors has adopted a liquidity strategy and the industry’s competence requirements. Basel II The bank’s risk classification system is designed with a view established a framework that promote a long-term perspec-

Through the SpareBank 1 Alliance the bank has over a long to managing the bank’s loan portfolio in line with the bank’s tive and balance in liquidity procurement. External rating is Management evaluation/management development period developed improved models for measuring credit credit strategy and to securing the risk-adjusted return. key when it comes to securing access to international The bank developed a 360-degree management evaluation 40 risk. The bank implemented the new tools in its credit Lending authorisations are related to size of commitment sources of capital. In December 2004 the bank was given a tool in the course of 2005. With a basis in the bank’s values, 41 processes in 2003 and 2004. and risk, and are delegated with a basis in the individual “positive outlook” by Moodys Investors Service. criteria have been defined which clarify the expectations the market area’s portfolio. In September 2005 the bank applied to Kredittilsynet Compliance with the limits is monitored by Risk Manage- bank has of its managers. The process has been carried (Norway’s Financial Supervisory Authority) for permission Corporate clients are classified in terms of likelihood of ment and reported to the Board of Directors on a monthly through with a high level of involvement and has kindled to utilise its internal credit models for capital adequacy default. A scoring model is employed that takes into basis. A reserve in the form of committed drawing rights is useful discussions about the exercise of management and purposes (IRB method). Kredittilsynet has started the account financial position along with internal and external maintained to further reduce liquidity risk. The bank has a leadership within the bank. Management evaluation will be approval process which will continue through 2006. behavioural data. Account is also taken of the estimated preparedness plan to handle both bank-specific and sector- followed up with a wide-ranging management development value of collateral upon realisation. A staff member is assig- related crisis scenarios. programme getting under way in 2006. There will be a special Under the new capital adequacy framework the level of ned responsibility for each client. This staff member is focus on measures to increase the proportion of female credit risk will affect the calculation of capital charges to a responsible for following up the client on a daily basis and Operational risk managers. larger extent than under the present framework. for checking that the client maintains his ability to pay. Operational risk is defined as the risk of loss inherent in the The bank expects the effect of the new credit models and In addition the bank has a Credit Support Division that takes bank’s ongoing operations as well as in external events Organisation development the methods for calculating capital charges to entail further over dealings with clients who are obviously unable, or are including risk of loss due to inadequate or faulty internal The organisation was marked by the integration of Romsdals Report of the Board Directors Report of the Board Directors differentiation between various actors in relation to risk level highly likely to become unable, to service their commit- processes and systems, human error and various forms of Fellesbank in 2005. Activity levels were high, with substantial and choice of model, and that this will reduce capital costs ments unless action is taken beyond ordinary follow-up. attack on the bank such as robbery, check counterfeiting, changes taking place throughout the organisation. for banks with good risk management and good systems. embezzlement, arson and computer crime. The bank The bank’s retail market customers are scored using a scoring No employees were dismissed in connection with the attaches importance to authorisation structures, good des- tool that takes into account financial and behavioural data. integration process. In addition to the comprehensive Risk management criptions of routines and clear definition of responsibilities training provided in products and systems, a development The credit models are adapted to anticipated Basel require- Assuming risk is a basic element in any bank's business in supply contracts between the respective divisions as programme called “Jobs in a new perspective” encouraged ments and assign each customer to one of 11 risk classes model. Hence the bank gives heavy emphasis to identifying, elements of a framework for handling operational risk. new staff members to make the most of their potentials based on likelihood of default, the two weakest of which are measuring, managing and monitoring central risks in such Operational risk is assessed in conjunction with the bank’s within the new regime. confined to defaulted and loss provisioned customers. The a way that the bank achieves its strategic objectives. Risk internal control process, and any flaws found are reported risk classification system and credit routines place clear-cut management is a key element of management philosophy, to appropriate levels of the organisation along with recom- requirements on credit processes and risk assessments to organisation, routines and systems, including good mana- mended improvements. gement by objectives using the balanced scorecard appro- be conducted when dealing with corporate and retail custo- ach. SpareBank 1 Midt-Norge aims to maintain a moderate mer commitments. Human resources strategy 2005, nor were any occupational injuries recorded. The or so staff members have sought new challenges within the Outlook further ahead In 2005 the bank started work on revising its staff policy and Liaison Committee, which doubles as the bank’s Work organisation. A particularly important job was done in 2005 as regards the devising an overarching HR strategy for the bank. To succeed Environment Committee, met four times. Of the bank’s employees, 51.9% are female and 48.1% men. takeover of Romsdals Fellesbank and merging the two orga- in its aim of becoming the recommended bank, the bank The bank's operations are not of a type that pollutes the Gender distribution at managerial level is 21% female and nisations. The job has been done to the entire satisfaction must be competitive in terms of recruiting and retaining its external environment. 79% men. of the Board of Directors, and the bank has already achieved most capable staff. A well-considered HR strategy will play a a high measure of acceptance in the corporate market and part in ensuring that the bank is at all times an attractive At year-end the average age of employees of both genders is Sickness absence the retail market alike. employer for capable individuals in all age groups and will 46, about the same as in 2004. Sickness absence has been at a relatively stable, low level in set the stage for a good balance between work and home The bank put its involvement with the community on a still recent years. The average absence rate in 2005 was 4.18% throughout life. Gender equality more professional footing and gave much attention to its compared with 4.15% in 2004. A main focus of the inclusive While there is a slight preponderance of female staff at the use of funds for non-profit causes. This effort will further employment agreement is on further reducing long-term Health, environment and safety (HES) bank, females only make up 21% of managers, all at mid- strengthen the bank’s position throughout its market area. Annual Report 2005 Annual Report 2005 absence. This is to support the goal of reducing the number Each year the bank conducts an organisation survey. management level. This is not satisfactory, and there was a The Directors expect 2006 to be another good year for the of new disability cases. The introduction of an individuali- The results for 2005 were generally good on all the factors particular focus on getting more women into senior positi- Norwegian economy and, by the same token, for the busi- sed follow-up plan for all persons who are sick for more than polled, and there was a positive development in relation to ons in 2005. Of 17 newly appointed mid-managers, six are ness sector in the bank’s catchment area. four weeks has put long-term absence on the agenda and 2004. The bank scores particularly well on questions related female. Five of six female staff are recruited from within the enabled closer follow-up than was previously the case. The Directors expect 2006 to be a good year the bank. They 42 to clarity of goals, feedback, competence development and bank. 43 do not expect to see loss recoveries and securities gains at improvement/development of work processes, while the Staffing Female salaries average 86% of male salaries. The difference the same level as in 2005. The Directors will continue to greatest room for improvement is in matters linked with 140 new staff were taken on by the bank in September 2005 is 3-5% at the same level of position, but the proportion of focus on initiatives to enhance the bank’s ordinary operati- management, rivalries and staff involvement. as a result of the integration of Romsdals Fellesbank. At females is low at higher levels within the organisation. ons with special emphasis on risk management/internal The bank provides annual HES training for managers and year-end the bank had 698 employees distributed on 677 control and on expanding the bank’s business volume. safety delegates, as well as courses and exercises for all staff positions. The turnover rate in 2005 was 5.7%. 52 staff left members. No robberies were carried out against the bank in and 61 were taken on in the course of the year. A further 40

Trondheim, February 23 2006 The Board of Directors of SpareBank 1 Midt-Norge Report of the Board Directors Report of the Board Directors

Per Axel Koch Eli Arnstad Christel Borge Kjell Eriksen Chairman Deputy Chair

Egill Vatne Terje Roll Danielsen Anne Brit Skjetne Venche Johnsen Employee representative

Stig O. Jacobsen Finn Haugan Chief Executive Officer 28,000 participants, large and small, at the Children’s Ski Festival [ Behind the figure: Substantial resources. And not quite as much money. ]

“I want to get there before mum”. Christian smiles from a toothless mouth, and has plenty of time. Lisa has a more determined look. “Haven’t got time to talk – I’m almost at the finishing line!”

Why is getting children out on their skis important for a bank?

The first time the Children’s Ski Festival was held it was The Children’s Ski Festival demonstrates what can be hoped to attract three hundred participants. Today the achieved with enthusiasm and community spirit. For us Annual Report 2005 event organisers count just as many volunteers. as the owner of the event it has been important to treat it with a light commercial hand – it is not the event’s No less than 600 children turned up for the first Children’s publicity value that is at centre-stage. The Children’s Ski Ski Festival – twice as many as hoped. This was an idea, Festival is about two things, and nothing more – 45 a commitment and an event that was to the liking of the children and their enjoyment of skiing. We believe this people of Trøndelag. There had to be a repeat. Today we to be of greater value to us in the long term. are proud of having been involved since the start. The Children’s Ski Festival is just one of many events It is also gratifying to see the effort made by our main- that put children at centre-stage and foster activity and stays on the technical front. Several hundred volunteers pleasure – one of many events that help to make along with Byåsen Ski Club and Selsbakk Sports Associ- Trøndelag an even better place to live. ation have turned the Children’s Ski Festival into a pro- fessional, well-run event. As a bank we know that such substantial resources cannot be bought – but supported. Today the Children’s Ski Festival draws people from the whole of Trøndelag – even from Sweden – to the World Championship facility at Granåsen. 45,000 children from schools and day care centres are invited from across Central Norway. From its beginnings as a local- level initiative, the Children’s Ski Festival has grown into a significant event that spawns memories for thousands of adults and children alike.

Granåsen Ski Centre Board of Directors

Per Axel Koch Christel Borge Egill Vatne jr. Finn Haugan Born: 1961 Born: 1967 Born: 1948 Born: 1953 Board member since 1994 Board member since 2004 Board member since 1997 Board member since 1991 Chair Assistant Director Strategy and Business Development, Personnel Manager, Namsos municipality CEO CEO, Adresseavisen ASA Strategi Telenor Nordic Board chairman of: Member of Supervisory Board of: Board chairman of: Member of: Namsos Industribyggeselskap AS Sparebanken Nord-Norge Adressa-Trykk AS Component Software Group ASA Verftsgate 8 AS Eksportfinans TVTrøndelag AS Sønnichsen AS Member of: Board chairman of: Papirkjøp AS ABC Startsiden AS Annual Report 2005 Annual Report 2005 Nordsjø Skalldyr AS EiendomsMegler 1 Midt-Norge Owns no PCCs as of 31.12.2005 Deputy Chair of: Owns no PCCs as of 31.12.2005 Chairman of: Kanal 24 AS Kjell Eriksen Direksjonen for Selskabet for Trondhjems bys Vel Venche Johnsen Board member of: Born: 1950 Deputy Chair of: Born: 1952 Mediebedriftenes Landsforbund Board member since 1998 Savings Banks‘ Guarantee Fund Dagens Næringsliv AS Board member since 2004 46 CEO Brekke Industrier AS Member of: 47 Norges Handel og Sjøfartstidene AS Employee representative, Finance Sector Union Board chairman of: of Norway (SpareBank 1 Midt-Norge) SpareBank 1 Gruppen AS Member of: Superlon OY, Finland Owns 5,000 PCCs as of 31.12.2005 Leiv Eriksson AS Supervisory Board of SpareBank 1 Gruppen AS UAB Superlon Baltic, Lithuania Fotograf Schrøders stiftelse Owns no PCCs as of 31.12.2005 AS Univa, Estonia Stig O. Jacobsen Adolf Øiens fond NTNU Samfunnsforskning Eli Arnstad Member of: Born: 1955 Owns 91,020 PCCs as of 31.12.2005 Born: 1962 Westnofa Industrier AS Board member since 2005 Board member since 2001 Person Norge AS Businessman Owns no PCCs as of 31.12.2005 Berg Jacobsen Gruppen Jan Gunnar Kvam Deputy Chair CEO at Enova SF Born: 1947 Board chairman of: Board member since 2004 Board member of: Anne-Brit Skjetne Berg Jacobsen Investor AS Sparebankforeningen Born: 1946 Bunnpris Møre AS Deputy Chair of: Senter for økonomisk forskning, NTNU Board member since 1998 Brødrene Ekornes AS Finance Sector Union of Norway (SpareBank 1 Midt-Norge) Nidaros Domkirkes Restaureringsarbeider Senior adviser at Hunt Research Centre, Norwegian Reularly attending employee representative Member of: Board of Directors Friskgården Stjørdal University of Science and Technology, Trondheim, NTNU Owns 2,500 PCCs as of 31.12.2005 Board of Directors Angvik Investor AS Member of Supervisory Board of: Member of: Olav Thon Eiendomsselskap ASA Det Kongelige Selskap for Norges Vel Nord Trøndelag Forskning og Utvikling AS Amfi Eiendom ASA Owns no PCCs as of 31.12.2005 Røde Kors Ambulanse Nord Trøndelag AS Stiftelsen Oslosenteret Tinnved Kulturhage AS Stompa AS Terje Roll Danielsen Norsk Helseinformatikk AS Owns 15,000 PCCs as of 31.12.2005 Born: 1956 Owns 1,560 PCCs as of 31.12.2005 (incl. related parties) Board member since 2001 Property developer Member of: Roll Severin AS David-Andersen AS Adresseavisen ASA Nedre Elvehavn AS Investorforum Trøndelag Owns 158,330 PCCs as of 31.12.2005 Budal Co-op. Or Singsås Co-op. The day’s newspaper, half a kilo of coffee, a loaf of bread and three bills are placed on the counter. The In-Store Bank may seem a legacy from the past, but is actually one of a number of ways to meet the challenges of tomorrow’s market.

Feelings ran high when we extended invitations to an We know that 20% of our customers use their local bank open meeting in Budal. The attendees’ message was in the traditional manner. The number is falling.

clear. “Don’t take our bank from us”. Nothing was We know that 60% of our customers use automated Årsrapport 2005 further from our thoughts – quite the contrary, we services such as the Internet Bank and Telephone Bank. wanted to expand our offering. In collaboration with the The figure is rising. Customer needs are becoming more local community we found a solution both to the need complex in step with the growing number of products 49 for counter services and for a forward-looking and and possibilities. The declining number of over-the- competent advisory staff. counter money transactions is accompanied by growing needs for financial counselling. Proximity and close In-Store Banks were the way to make ordinary banking customer relationships are our foremost competitive services accessible where they are needed. The demand advantage today, and will remain so in the future. for competent advisers was equally clear. That require- By bringing together our advisory competence, we are ment was met by boosting our offering at the Støren strengthening our offering. branch which now features a large, proactive team promising a stronger professional focus and competence In-Store Banking attends to customer needs for every- development. This benefits both the bank and the local day banking services. In addition, the service brings new communities. business opportunities for the shops and stores con- cerned. At the same time we take the demand for The story of Budal and Singsås is a successful combina- competent advisers seriously, and are strengthening the tion of counter services where they are needed – in the counselling function by focusing more heavily on a shape of In-Store Banking, over the phone or via the smaller number of units. Competence and technology internet – with a large advisory team at the Støren will be our greatest focal areas. At Budal Co-op – or was branch. This approach addresses the challenges of it Singsås? – the newspaper, coffee and loaves will be tomorrow’s market. But what will tomorrow’s market put in the plastic bag, together with three receipts actually be like? It is easy for the media to use the bank’s – receipts showing that we will be there tomorrow too. 177,000 active retail customers expressed goal of accessibility as a sounding board for asserting that “In-Store Bank” means “reducing the [ Behind the figure: The outlines bank’s offering”. of tomorrow’s market. ]

Stedsnavn Income statement Group IFRS Balance sheet Group IFRS

IFRS NGAAP (NOK million) Notes 2005 2004 2004 2003 (NOK million) Notes 31.12.05 31.12.04 Interest income 6 1 916 1 596 1 596 2 249 Assets Interest expenses 6 955 732 732 1 385 Cash and balances with central banks 1 669 989 Loans and advances to credit institutions 18 454 552 Net interest income 961 864 864 864 Loans and advances to customers 19 45 280 34 226 Fee and commission income 7 570 438 438 355 Individual allowance for impairment on loan and advances to customers 20 -236 -290 Fee and commissions expense 7 84 63 63 68 Group allowance for impairment on loan and advances to customers 20 -278 -314 Other operating income 9 52 49 49 45 Net loans to and receivables from customers 20 44 767 33 622 Net fee and commission income and other operating income 537 424 424 332 Trading securities 16 4 133 2 566 Financial derivatives 17 487 0 Total income 1 498 1 288 1 288 1 196 Investments in associates and joint ventures 15 498 292 Operating expenses 10 906 724 729 733 Goodwil 14 454 2 Property, plant and equipment 13 192 173 Operating profit before losses, gains and write-downs 592 564 559 463 Deferred tax assets 11 159 54 Net gain from investment, securities 8 170 74 74 82 Other assets 12 1 513 254 Income from associates and joint ventures 15 119 42 23 -5 Total assets 54 327 38 505 Net losses on loans, guarantees 20 -38 81 81 229 Liabilities Profit before income tax 919 599 574 311 Deposits from credit institutions 18 1 029 48 Annual Report 2005 Annual Report 2005 Income tax expense 11 199 144 144 89 Deposits from and debt to customers 21 27 048 20 725 Profit for the year 720 455 430 222 Debt securities in issue 22 18 036 13 048 Minority interests 3000 Financial derivatives 17 519 0 Deferred tax 11 156 0 Equity holders of the Company 717 455 430 222 Other liabilities 24, 25 2 201 822 50 Subordinated loan capital 23 1 667 1 347 51 Profit per PCC, in NOK 8.51 6.14 5.80 3.09 Total liabilities 50 656 35 990 Equity Primary capital certificates 1 262 761 Share premium reserve 010 Other reserves 2 400 1 744 Total issued and earned equity 3 662 2 515 Minority interests 90 Total equity 3 671 2 515 Total liabilities and equity 54 327 38 505 Balance sheet Group Income statement Group IFRS Trondheim, February 23 2006 The Board of Directors of SpareBank 1 Midt-Norge

Per Axel Koch Eli Arnstad Christel Borge Kjell Eriksen Chairman Deputy Chair

Egill Vatne Terje Roll Danielsen Anne Brit Skjetne Venche Johnsen Employee representative

Stig O. Jacobsen Finn Haugan Chief Executive Officer Pro forma income statement Group IFRS Pro forma balance sheets Group IFRS

(NOK million) 2005 2004 (NOK million) 2005 2004 Interest income 1 987 1 890 Cash and receivables from central banks 1 669 1 325 Interest expenses 982 850 Deposits with loans to credit institutions 454 565 Net interest income 1 005 1 041 Gross loans to customers before write-down 45 280 40 868 - Specified write-downs -236 -329 Fee and commission income 577 470 - Write downs by loan category -278 -394 Fee and commissions expense 87 72 Net loans to and receivables from customers 44 767 40 145 Other operating income 52 54 Fixed-income CDs and bonds at fair value 3 686 2 648 Net fee and commission income and other income 542 452 Shares, units and other equity interests 447 428 Total income 1 547 1 493 - Valued at fair value via profit/loss 411 131 Staff costs 500 440 - Valued as available for disposal 00 Administration costs 297 262 - Valued at cost 36 297 Other operating expenses 149 145 Investment in related companies 499 281 Total operating profit 945 846 Investment in group companies 00 Ordinary operating profit 602 647 Goodwill 454 487 Other assets 2 351 581 Dividends 15 12 Income from investment in related companies 119 40 Assets 54 327 46 459 Income from investment in group companies 0 0 Deposits from credit institutions 1 029 53 Net gain on securities trading 103 71 Deposits from and debt to customers 27 048 25 029 Annual Report 2005 Annual Report 2005 Net gain on currency trading and derivatives 33 20 Debt created by issue of securities 18 036 16 345 Write-down/reversal of write-down and gain/loss Subordinated loan capital 1 667 1 546 on financial assets valued at fair value 23 12 Other liabilities 2 876 933 Net return on financial investments 293 131 Total liabilities 50 656 43 906 Loss on loans, guarantees et. -11 87 Primary capital certiticates 1 262 769 52 Write-down on financial assets 00 53 Holding of own primary capital certiticates 0 -8 Result before tax 906 691 Equity premium fund 010 Dividend equalisation fund 581 372 Tax charge 195 166 Savings bank's reserve 1 450 1 152 Minority interests 3 Other equity capital 368 258 Net profit 707 525 Minority interests 9 Total equity capital 3 671 2 554 Total liabilities and equity 54 327 46 459 Pro forma balance sheets Group IFRS Pro forma income statement Group IFRS Change in equity Group Balance sheet Group Impacts of IFRS

Majority share Minority interest Changes Issued equity Earned equity (NOK million) 01.01.04 opening balance New 01.01.04 Primary Premium Savings Other Equalisation Mino- Total Cash and receivables from central banks 827 827 (NOK million) Notes capital fund bank's fund equity fund rity equity Deposits with loans to credit institutions 590 590 Gross loans to customers before write-down 32 553 32 553 Equity at 31.12.03 under Norwegian GAAP – Specified write downs -380 -380 Reclassification to market value through profit 607 10 1 040 57 482 0 2 196 – Write downs by loan category -318 -318 Change in accounting principles at Net loans to and receivables from customers 31 855 31 855 first-time implementation of IFRS 30 0 0 -56 137 -55 0 26 Fixed-income CDs and bonds at fair value 2 481 2 481 Adjusted equity 1 Jan 2004 607 10 985 194 427 0 2 222 Shares, units and other equity interests 290 290 Investment in related companies 263 -39 224 Change in result at restatement to IFRS 2004 0 0 12 0 12 0 25 Investment in group companies 0 0 Profit for the year 0 0 140 221 69 0 430 Other assets 570 26 596 Total income 2004 0 0 152 221 81 0 455 – Fair value derivatives 0 Dividend for 2003 finally decided in 2004 0 0 0 -137 0 0 -137 – Deferred tax benefit 43 26 69 Distribution of remaining Other Equity at Assets 36 876 -13 36 863 implementation of IFRS 0 0 18 -36 18 0 0 Bonus issue 154 0 0 0 -154 0 0 Deposits from credit institutions 1 114 1 114 Equity adjustments at subsidiaries and Deposits from and debt to customers 19 876 19 876 associated companies 0 0 0 -21 0 0 -21 Debt created by issue of securities 11 361 11 361 Subordinated loan capital 1 560 1 560 Annual Report 2005 Annual Report 2005 Equity 31 Dec 2004 761 10 1 155 221 372 0 2 519 Other liabilities 769 -39 730 – Fair value derivatives 0 – Pension commitments etc. 98 98 Equity 1 Jan 2005 761 10 1 155 221 372 0 2 519 – Purposed dividends and donations -137 -137 Change in accounting principles 0 0 72 0 71 0 143 – Deferred tax 0 54 55 Adjusted equity 1 Jan 2005 761 10 1 227 221 443 0 2 662 Total liabilities 34 680 -39 34 641 Profit for the year 0 0 211 368 137 4 720 Primary capital certiticates 607 607 Dividend finally decided in 2005 0 0 0 -221 0 0 -221 Holding of own primary capital certiticates 0 0 Stock issue 241 212 0 0 0 0 454 Equity premium fund 10 10 Bonus issue 252 -223 0 0 -29 0 0 Dividend equalisation fund 482 -55 427 Minority interest 0 0 0 0 0 5 5 Savings bank's reserve 1 040 -56 984 Purchase/sale of own PCCs 8 0 0 0 12 0 20 Other equity capital 57 57 Subscription rights and options to employees: 0 0 0 0 0 0 0 Total equity exclusive dividends 2 196 -111 2 085 – value to employees 0 0 12 0 17 0 29 Purposed dividends and donations 137 137 Equity 31 Dec 2005 1 262 0 1 450 368 581 9 3 671 Total liabilities and equity 36 876 -13 36 863 Change in equity Group Balance sheet Group: Impact of IFRS Balance sheet Group Income statement Group Impacts of IFRS Impacts of IFRS

Changes (NOK million) 2004 (NOK million) 31.12.04 opening balance New 31.12.04 Interest income Cash and receivables from central banks 989 989 Interest expenses Deposits with loans to credit institutions 552 552 Gross loans to customers before write-down 34 226 34 226 Net interest income 0 – Specified write downs -290 -290 Fee and commission income – Write downs by loan category -314 -314 Fee and commissions expense Net loans to and receivables from customers 33 622 33 622 Other operating income Fixed-income CDs and bonds at fair value 2 196 2 196 Shares, units and other equity interests 370 370 Net fee and commission income and other income 0 Investment in related companies 312 -39 273 Total income 0 Investment in group companies 0 0 Other assets 455 26 481 Staff costs -5 – Fair value derivatives 0 Administration costs – Deferred tax benefit 28 26 54 Other operating expenses Assets 38 496 -13 38 483 Total operating profit -5 Deposits from credit institutions 48 48 Ordinary operating profit 5 Deposits from and debt to customers 20 725 20 725 Dividends Debt created by issue of securities 13 049 13 049 Income from investment in related companies 20 Subordinated loan capital 1 347 1 347 Income from investment in group companies Annual Report 2005 Annual Report 2005 Other liabilities 941 -128 813 Net gain on securities trading – Fair value derivatives 0 Net gain on currency trading and derivatives – Pension commitments 94 94 Write-down/reversal of write-down and gain/loss on financial assets valued at fair value – Allocation to dividends and donations -222 -222 – Deferred tax 0 Net return on financial investments 20 56 Total liabilities 36 109 -128 35 981 Loss on loans, guarantees etc. 0 57 Write-down on financial assets 0 Primary capital certiticates 769 769 Holding of own primary capital certiticates -8 -8 Result before tax 25 Equity premium fund 10 10 Tax charge 0 Dividend equalisation fund 418 -53 365 Savings bank's reserve 1 198 -54 1 145 Net profit 25 Other equity capital 0 Profit for the year 0 Total equity exclusive dividends 2 387 -107 2 280 Purposed dividends and donations 222 222 Debt and equity capital 38 496 -13 38 483 Balance sheet Group Income statement Group Notes IFRS 2005 Group (Amounts in NOK million unless otherwise stated)

Note 1 General information retail market and corporate market in the regions mentio- Contents notes of Group ned. The bank also operates in the fields of real estate Business description agency, leasing, securities management, property manage- See the bank’s business description on page 12. ment and accounting.

Page Sparebank1 Midt-Norge Group The accounts were approved by the Board of Directors of SpareBank 1 Midt-Norge is headquartered in Trondheim, SpareBank 1 Midt-Norge on 23 February 2006. The Note 1 General information ...... 59 Søndre gt. 4 (parent bank). The bank’s market areas are Supervisory Board adopted the final accounts on 21 March essentially North and South Trøndelag and Møre and 2006. Note 2 IFRS accounting principles ...... 59 Romsdal. The bank’s business areas are essentially the Note 3 Financial risk management ...... 63 Note 4 Critical estimates and assessments concerning Note 2 IFRS accounting principles Norwegian rules have to some extent allowed provisioning for unspecified losses/collective write-downs in the absence the use of accounting principles ...... 63 Basis for preparing the consolidated annual of objective evidence of any impairment in the credit quality Note 5 Segment information ...... 64 accounts of categories of loans since first-time entry. The effect of the change in the principle for computing unspecified provisio- Note 6 Net interest income ...... 65 The Group accounts for 2005 SpareBank 1 Midt-Norge have been prepared in conformity with International Standards ning will be recognised directly in equity with effect from Note 7 Net fee and commission income ...... 65 for Financial Reporting (IFRS) which have been given effect 1 January 2005. in Norway. These include interpretations from the Inter- Note 8 Net gain from investments, securities ...... 66 national Financial Reporting Interpretations Committee Pensions The effect of unamortised estimate variances and change in Note 9 Other operating income ...... 66 (IFRIC) and its predecessor, the Standing Interpretations Committee (SIC). the discount rate is recognised in equity capital based on Note 10 Operating expenses ...... 66 actuarial calculations in conformity with IAS 19 as at 1 Janu- Annual Report 2005 Annual Report 2005 The Bank’s company accounts for 2005 have been prepared ary 2004. Hence pension expenses for 2004 computed Note 11 Income tax ...... 67 in conformity with the Accounting Act (No. 56 of 17 July under IFRS and may diverge from the official accounts for 1998) and associated regulations, and with Norwegian Note 12 Other assets ...... 67 2004 presented under the Norwegian Accounting Standard. GAAP. The accounting principles underlying the company The changed pension cost is presented in comparable figu- Note 13 Property, plant and equipment ...... 68 accounts are described separately. res for end-2004. The measurement base for the Group accounts is historical 58 Note 14 Goodwill ...... 68 Hedge accounting and financial instruments 59 cost, except in the cases described below. Note 15 Associates and joint ventures ...... 69 The bank has undertaken hedging that does not meet the requirements of hedge accounting under IFRS 39. Hedge Presentation currency Note 16 Trading securities ...... 69 accounting is still employed in cases where IFRS require- The presentation currency is the Norwegian krone (NOK), ments can be met in the future. In cases where hedge Note 17 Financial derivates ...... 70 which is also the Bank’s functional currency. All amounts accounting cannot be achieved, the effect will be directly are stated in millions of NOK, unless otherwise specified. Note 18 Credit institutions – loans and advances ...... 71 recognised in equity with effect from 1 January 2005. Note 19 Loans and advances to customers ...... 71 First-time application of IFRS Long-term shareholdings that were previously valued at cost Being a stock-exchange-listed company, the Group reports price are revalued at fair value and recognised through Note 20 Allowance for losses on loan and advances ...... 73 the consolidated accounts in conformity with IFRS as from equity (available for sale ) or through profit and loss. The Note 21 Customer deposits ...... 74 2005. value change on the Opening Balance date is recognised in equity at 1 January 2005. Equity items for which reliable Note 22 Debt securities in issue ...... 74 For the SpareBank 1 Midt-Norge Group, IFRS implementa- values were unavailable are treated at cost price. Notes Group tion requires adjustments in the form of a number of items Note 23 Subordinated loan capital ...... 75 being directly recognised in equity as per 1 January 2004 Joint ventures and associated companies Contents notes of Group Contents and 1 January 2005. This is due to changes in valuation Note 24 Other liabilities ...... 75 Joint ventures and associated companies are accounted for principles resulting from IFRS. IFRS 1 is applied upon first- by the equity capital method in the Group accounts. Note 25 Pensions ...... 76 time implementation. The following principles underlie the implementation of IFRS in the Group accounts. Equity capital effects recorded in joint ventures, associated Note 26 Equity and related capital – capital adequacy ratio (NGAAP) 77 companies and joint ventures are adjusted against the bank’s Note 27 Related parties ...... 78 Lending stake in the Group under IFRS. This stake is recognised in Charges previously recognised as income and which, under equity as at 1 January 2004 and 1 January 2005. Note 28 Subsequent events ...... 78 IFRS, are included in the calculation of effective interest and amortised over expected lifetime, have been recapitalised Reclassification of dividends Note 29 Acquisition of businesses ...... 79 and the effect will be recognised in equity capital. Capitali- In keeping with IFRS 10, allocated dividends are reclassified Note 30 PCC-based renumeration ...... 80 sed amounts are amortised over expected residual lifetime to other equity at 1 January 2005. This is a temporary effect with effect from 1 January 2005. which is recorded as a liability once the Supervisory Board has finally declared the dividends in its endorsement of the Norwegian rules have not permitted the bank to take inte- accounts. rest on defaulted commitments to income unless repay- ment has been highly probable. In some cases this has cau- Real estate sed loans to be booked at lower than fair value. The effect of Buildings employed in the ongoing operation of the bank recognising loans at fair value will be directly recognised in are not revalued to fair value at 1 January 2004. Most of the equity with effect from 1 January 2005 together with the bank’s buildings have been offered for sale, and any diver- effect of changes in specified loss provisioning / individual gence between valuation and book value is insignificant. write-downs. The bank’s head office has not been revalued since the buil- cash in- or out-payments over the financial instrument’s nised at acquisition cost and thereafter depreciated on a step with the provision of the service. Charges related to ding is under a preservation order and is not suitable for expected lifetime. Market value of floating rate loans to linear basis over expected lifetime. When a depreciation interest-bearing instruments are not entered as commis- sale without a lease contract for the neighbouring building. customers is book value less expected loss. plan is determined, the individual assets are, to the extent sion, but are included in the calculation of effective interest necessary, split up into components with differing lifetimes, and recognised through profit/loss accordingly. Consult- Hence valuation of loans in the consolidated accounts General principles and account is taken of estimated residual value. Property, ancy fees accrue in accordance with a consultancy agree- follows the same principles as apply to the company plant and equipment which are individually of minor signifi- ment, usually in step with the provision of the service. The Consolidation accounts under the lending regulations of 21 December cance, for example PCs and other office equipment, are not same applies to ongoing management services. Fees and The Group accounts include the Bank and all subsidiaries 2004, cf. Kredittilsynet’s circular no. 10/2005. not due for disposal in the near future, and shall therefore valued individually for residual value, lifetime or value charges in connection with the sale or mediation of finan- impairment, but are valued on a group basis. cial instruments, property or other investment objects be classified as held for sale under IFRS 5. All undertakings Leases which do not generate balance sheet items in the Bank’s controlled by the Bank, i.e. where the Bank has the power to Financial leases are entered under the main item “loans” in According to the definition in IAS 40, owner-occupied pro- accounts are recognised through profit/loss when the trans- control an undertaking’s financial and operational princi- the balance sheet and accounted for by the same principle perty is property which is mainly utilised by the Bank or its action is completed. ples with the intention of achieving benefits from the under- of amortised cost. All fixed revenues within the lease’s subsidiaries for their own purposes. Owner-occupied pro- taking’s activities, are regarded as subsidiaries. expected lifetime are included when computing the effective perty is accounted for by the cost method, in keeping with Transactions and holdings in foreign currency interest. IAS 16. Lifetimes of various classes of property, plant and Subsidiaries are consolidated from the date on which the Transactions in foreign currency are converted to Norwe- equipment are: Bank has taken over control, and are deconsolidated at the The Bank has no contracts of the type “sale and lease back” gian kroner at the transaction exchange rate. Gains and los- date on which the Bank relinquishes control. Mutual of plant, property and equipment. • Buildings 25 and 50 years ses on executed transactions or on conversion of holdings balance sheet items and all significant profit elements are • Machinery 5 years of monetary items on the balance sheet date are entered in eliminated. Securities and derivatives • IT equipment 3 years the profit and loss account, unless they are recognised Securities and derivatives comprise shares, units, money directly in equity based on hedging principles. Gains and Upon takeover of control of an enterprise (business combi- Property, plant and equipment which are depreciated are market instruments, bonds, derivative currency and inte- losses on conversion of items other than monetary items nation), all identifiable assets and liabilities are recognised subject to a depreciation test in keeping with IAS 36 when rest-rate instruments. Shares and units are classified either are recognised in the same way as the appurtenant balance at fair value in accordance with IFRS 3. A positive difference circumstances so indicate. between fair value of the consideration and the fair value of at fair value through profit/loss or as available for sale. The sheet item. money market instruments and bonds are classified at fair identifiable assets and liabilities is recorded as goodwill, Repossessed assets value through profit/loss or as held to maturity. Derivatives Hedge accounting while a negative difference is taken to income upon pur- As part of its treatment of non-performing loans and gua- are invariably reckoned at fair value through profit/loss The Bank evaluates and documents the effectiveness of the chase. Accounting of goodwill after first-time recognition is rantees, the Bank in a number of cases takes over assets described under the section on intangible assets. unless they are earmarked as hedging instruments. hedge, both at first-time classification and on an ongoing that have been put up as security for such commitments. basis. The Bank employees fair value hedging to manage its The Bank has not applied IFRS 3 retrospectively to business All financial instruments classified at fair value through pro- When repossessed, the assets are valued at presumed reali- interest rate risk. In its hedging operations, the Bank combinations carried out prior to 1 January 2004. fit/loss are measured at fair value, and change in value from sable value. Repossessed assets which are to be realised are protects against movements in the market interest rate. Annual Report 2005 Annual Report 2005 the opening balance is recognised as revenue from other classified as holdings or non-current assets held for sale Changes in credit spread are not taken to account in respect Associated companies financial investments. Shares and units classified as avai- and are accounted for under, respectively, IAS 2 or IFRS 5. of hedge effectiveness. Associated companies are companies in which the Bank has lable for sale are also measured at fair value, but the change Any losses/gains upon disposal or revaluation of such substantial influence. As a rule, influence is substantial in value from the opening balance is recognised in equity. assets are shown as additions or deductions in loan losses. The Bank’s fixed-interest loans are market valued based on where the Bank has an ownership interest of 20% or more. Shares which cannot be reliably measured are valued at cost the fair value option in IAS 39. Hedging of these loans is 60 Associated companies are accounted for by the equity capi- price under IAS 39.46. Write-down dealt with at portfolio level and credit spread is taken into 61 Amounts recorded on the bank’s balance sheet are, with account in the market valuation of the hedged object and tal method. The investment is initially recognised that acqui- Money market instruments and bonds classified as held to some exceptions, reviewed on the balance sheet date to the hedge instrument. In the case of fair value hedging, both sition cost and subsequently adjusted for change in the Ban- maturity are measured at amortised cost using the effective ascertain any indications of value impairment. Should such the hedge instrument and the hedged object are recorded at k’s share of the associated undertaking’s net assets. The interest rate method; see the account of this method under indications be present, an estimate is made of the asset’s fair value, and changes in these values from the opening Bank recognises its share of the result of the associated the section on loans. undertaking in its profit and loss account. recoverable amount. balance are recognised through profit/loss. Intangible assets Each year on the balance sheet date the recoverable In the case of cash flow hedging, the hedging instrument is Joint ventures Intangible assets only comprise goodwill in the SpareBank 1 amounts on goodwill, assets with unlimited useful lifetime, shown at fair value, and the value change from the opening Joint ventures may take the form of jointly controlled opera- Midt-Norge Group. Other intangible assets will be recogni- and intangible assets not yet available for use, are compu- balance is recognised in equity. Accumulated value changes tions jointly controlled assets or jointly controlled entities. sed once the conditions for entry in the balance sheet are ted. recognised in equity are written back through profit in the Joint control entails that the Bank by agreement exercises present. periods when the hedged cash flow is realised. control together with other participants. The Bank accounts Write-down is undertaken when the recorded value of an for jointly controlled operations and jointly controlled assets Goodwill arises as the difference between the fair value of asset or cash-flow-generating entity exceeds the recoverable Income taxes the consideration upon purchase of a business and the fair amount. Write downs are recognised through profit/loss. Notes Group Notes Group by recognising the Bank’s proportional share of assets, lia- Tax recorded in the profit and loss account comprises tax in bilities and balance sheet items in the Bank’s accounts. value of identifiable assets and liabilities; see description Write down of goodwill is not reversed. In the case of other the period (payable tax) and deferred tax. Period tax is tax Jointly controlled entities are accounted for by the equity under Consolidation. Goodwill is not amortised, but is sub- assets, write downs are reversed where there is a change in calculated on the taxable profit for the year. capital method. ject to an annual depreciation test with a view to revealing estimates used to compute the recoverable amount. any impairment, in keeping with IAS 36. Deferred tax is accounted for by the liability method in kee- SpareBank 1 Gruppen AS is owned jointly by SpareBank 1 Interest earnings and expenses ping with IAS 12. In the case of deferred tax, liabilities or Midt-Norge, SpareBank 1 SR-Bank, Sparebank 1 Nord- Non-current assets held for sale and discontinued Interest revenues and expenses related to assets and liabili- assets are calculated on temporary differences i.e. the diffe- Norge and Samspar, each holding a 17.63% stake in the operations ties which are measured at amortised cost are recognised rence between balance-sheet value and tax-related value of company. Other owners are FöreningsSparbanken AB Assets which the Board of Directors of the Bank has decided through profit/loss on an ongoing basis using the effective assets and liabilities. However, liabilities or assets are not (19.5%) and the Norwegian Federation of Trade Unions to sell are dealt with under IFRS 5. This type of asset is for interest rate method. All charges linked with interest-bea- calculated in the case of deferred tax on goodwill for which (10%). The governance structure of the SpareBank 1 colla- the most part assets taken over in connection with bad ring funding and lending are included in the computation of there is no deduction for tax purposes, nor on first-time- boration is regulated by agreement among the owners. The loans and the bank’s properties. In the case of assets which effective interest rate and are amortised over expected life- recognised items which affect neither the accounting nor Bank classifies its participation in SpareBank 1 Gruppen AS are initially depreciated, depreciation ceases when a time. the taxable profit. as an investment in a jointly controlled entity which it values decision is taken to sell. using the equity capital method. In the case of interest-bearing instruments measured at fair In the case of deferred tax an asset is calculated on a tax In the case of acquired limited companies, assets and liabi- value, the market value will be classified as income from loss carryforward. Assets in the case of deferred tax are Loans and loan losses lities are incorporated in the balance sheet under other other financial investments. In the case of interest-bearing recognised only to the extent that there is no expectation of Loans are measured at amortised cost in keeping with IAS assets and other liabilities and are specified in notes. instruments classified as held to maturity (HTM) and not future taxable profits that enable use of the appurtenant tax 39. Amortised cost is acquisition cost minus repayments of Profit/loss is included under other operating income. utilised in hedging contexts, the premium/discount is amor- asset. tised as interest income over the term of the contract. principle, plus or minus cumulative amortisation resulting Capital tax is presented as tax in the bank’s consolidated Property, plant and equipment from the effective interest rate method, with deductions for accounts. The bank views capital tax as part of the total tax Property, plant and equipment – apart from investment pro- Commission income and expenses any value fall or loss likelihood. The effective interest rate is charge, even though it is not defined as a tax charge under perties and owner-occupied properties – are initially recog- Commission income and expenses are generally accrued in the interest rate which precisely discounts estimated future IAS 12. Long-term loans ment will materialise and the financial consequences can be Note 3 Financial risk management Loans are initially recognised at the borrowing cost, which reliably calculated. Information is disclosed on uncertain is the fair value of the compensation received after deduc- commitments which do not meet the criteria for recognition Foreign exchange risk tion of transaction expenses. Loans are thereafter measured in equity if such commitments are substantial. The Bank manages its foreign exchange risk with a view to extent be related to the Norwegian fixed income market at amortised cost. Any difference between borrowing cost Restructuring expenses are provisioned in cases where the not incurring such risk. However, some foreign exchange where short-term imbalances may arise making it impos- and settlement amount at maturity is accordingly accrued bank has a contractual or legal obligation. risk may arise in connection with defaulted loans in foreign sible to refinance on acceptable terms. The bank seeks to over the loan period using the effective interest rate on the currency and equity capital investments in foreign currency minimise this type of risk by defining maturity structure loan. Subordinated debt and hybrid capital since such positions tend to be difficult to hedge to the full. limits in each maturity band. Additionally, minimum liquid Subordinated debt ranks behind all other liabilities. Dated Similarly, foreign exchange risk will arise in connection with reserve requirements are defined in order to ensure that the Pensions subordinated loans are eligible at 50% of tier 1 capital for the net interest margin on certain balance sheet items on bank has sufficient liquid reserves to handle a stress scena- The Bank operates a pension scheme which assures the capital adequacy purposes, while perpetual subordinated which risk is not fully hedged at all times. The bank will also rio. The bank conducts stress testing on an annual basis to majority of employees a retirement pension of 68% of final loans are eligible at up to 100 per cent of tier 1 capital. Sub- be exposed to indirect foreign exchange risk through its cus- assess whether liquidity risk is within the limits set by the salary limited to 12 times the basic amount. Employees can ordinated loans are classified as a liability in the balance tomers’ foreign exchange exposure. Board of Directors. take early retirement pension upon reaching the age of 62 sheet and are measured at amortised cost in the same way (AFP). as other long-term loans. Interest rate risk Liquidity crises at Norwegian banks have primarily arisen as The Bank has its own pension fund which is treated as a The bank measures interest rate risk as the result effect a result of substantial credit losses. The bank aims for a Hybrid capital denotes bonds with a nominal interest rate, defined benefit plan for salaries up to 12 times the basic associated with parallel shifts in the interest rate basket. minimum tier 1 capital adequacy ratio of 8%. The bank’s but the bank is not obliged to pay interest in a period where amount. The scheme is managed by SpareBank 1 Livs- The risk of non-parallel shifts is addressed by setting limits Board of Directors will consider taking necessary action dividends are not paid, and neither is the investor forsikring. on maximum exposure per maturity band. The bank also should the capital ratio falls below this level. subsequently entitled to interest that has not been paid, i.e. manages the risk of changes in the spread between fixed Costs of previous periods’ pension rights accumulation interest does not accumulate. Hybrid capital is approved as income markets. The bank has a policy of never getting into a situation where (plan changes) are recognised in the profit and loss account an element of tier 1 capital up to limit of 15 per cent of it is dependent on one or a small number of receipts in in respect of the portion deemed to have been accumulated, aggregate tier 1 capital. Kredittilsynet can require hybrid Loans and deposits where the bank is able to change the order to cover payments on the same day. while the non-accumulated portion is accrued over the resi- capital to be written down in proportion with equity capital interest rate entail an interest rate risk which cannot be fully dual accumulation period. should the bank’s tier 1 capital adequacy fall below 5 per hedged. The bank will typically have a floating rate deposit Active asset management cent or total capital adequacy falls below 6 per cent. Written- There are in addition commitments under the Early Retire- portfolio which far exceeds assets that can be repriced wit- The bank is involved in active management on behalf of down amounts on hybrid capital must be written up before ment Scheme (AFP) and some specific agreements on early hin the space of 1 month. There will however be a reaso- customers, but does not function as a nominee in any type dividends can be paid to shareholders or before equity retirement pensions and supplementary pensions. AFP is nable degree of balance in the 0 to 3 month maturity band. of transaction. Assets held under active management capital is written up. Hybrid capital is shown as other long- treated as a multi-company scheme and accumulation of agreements are not consolidated in the bank’s accounts. Annual Report 2005 Annual Report 2005 term debt at amortised cost. pension rights starts at the age of 50. Liquidity and settlement risk Liquidity risk is primarily associated with the bank’s ability Neither does the bank participate in sale and lease back The period’s pension cost comprises rights accumulated in Segment reporting to refinance funding in the securities market and funding transactions in its own assets and has no financial interests the period and interest expenses on previously accumulated The bank has the corporate market and retail market, as from other financial institutions. This risk will to some in special purpose entities as mentioned in SIC 12. rights less expected return on the pension assets and well as the key subsidiaries, as its primary reporting format. 62 accrued employer’s contributions. Pension assets are mea- The bank presents a sectoral and industry distribution of 63 sured at fair value less expected transaction costs. loans and deposits as its secondary reporting format. Note 4 Critical estimates and assessments concerning the use of accounting principles Expected return on pension assets is based on historical Events after the balance sheet date returns on the various asset classes adjusted for actual inte- The accounts are deemed to be approved for publication Losses on loans and guarantees Fair value of derivatives rest rate levels. The discount rate is determined on the basis once the Board of Directors has reviewed them. The Super- The bank rescores its loan portfolio monthly. Customers in Fair value of derivatives is usually determined using valuati- of the market interest rate for government bonds and a path visory Board and regulatory authorities can thereafter refuse a poor risk class, in payment default, negative migration or on models where the price of underlying items, for example corresponding to the expected term of the pension commit- to approve the accounts, but not to change them. contravening other objective criteria are assessed for indivi- interest rates and exchange rates, is obtained in the market. ments. dual write-down. Individual write-down is calculated as the In the case of options, volatilities will be observed implicit Events up to the time at which the accounts are approved difference between the loan’s book value and the current volatilities or estimated volatilities based on historical price In Norway employer’s contributions accrue on payments for publication, and which relate to circumstances already value of discounted cash flow based on the effective interest movements for underlying items. In cases where the bank’s into the pension scheme, and employer’s contributions are known on the balance sheet date, will be included in the rate at the time specified losses were initially determined. risk position is approximately neutral, middle rates will be due on uncovered commitments. Prepaid premiums will information base for accounting estimates and thus be fully applied. “Neutral risk position” means for example that also represent an accrued employer’s contribution. Other reflected in the accounts. Events concerning circumstances Individual write down of retail market commitments is interest rate risk within a maturity band is virtually zero. In Notes group forms of over-financing will be shown without the employer’s that were not known on the balance sheet date will be calculated based on the same principles. Write down is con- the opposite case the relevant bid or offer price is used to Notes Group contributions. The Bank’s group pension scheme resides in illuminated if significant. sidered in the case of exposures larger than NOK 250,000 assess the net position. SpareBank 1 Livsforsikring AS. that are in default, or where the bank has other relevant The accounts are presented on the going-concern assump- objective information. For derivatives where the counterparty has a poorer credit tion. The Board of Directors’ view was that this assumption rating than the bank, the price will reflect an underlying cre- Uncertain commitments was met at the time the accounts were approved for Collective write downs are calculated for groups of commit- dit risk. To the extent that market prices are obtained with a The Bank issues financial guarantees as part of its ordinary presentation. business. Loss assessments are made as part of the assess- ments subject to rising credit risk but where it is not basis in transactions with a lower credit risk, this will be ment of loan losses, are made based on the same principles The Board of Directors’ proposal for dividends is set out in possible to identify which commitment will cause loss. taken into account by amortising the original price differen- and are reported together with loan losses, see Note 20. the Directors’ report and in the equity capital statement. Calculation is based on increase in expected loss on port- ce measured against such transactions with lower credit Provisions are made for other uncertain commitments Proposed dividend is classified as equity capital until the folios which have migrated negatively since the date of risk over the term of the derivative. where there is a preponderant likelihood that the commit- proposal is finally adopted. approval. Intangible assets Fair value of equity capital interests Write down tests of intangible assets are largely based on Assets recognised at fair value through profit and loss will discounting of expected future cash flows. Cash flow esti- mainly be securities traded in an active market. Some key mates will invariably be subject to substantial uncertainty, shares will be based on internal valuations, transaction pri- and in some cases the methods whereby cash flows are ces or external analyses of the company. Such assets could assigned to different assets will also be a matter of uncer- be encumbered with uncertainty. Assets classified as avai- tainty. lable for sale will also be recognised at fair value through equity. Market values will generally be based on valuations or the latest known trade of the share. Shares which cannot be reliably valued will be carried at cost price. Pensions Note 6 Net interest income Net pension commitments and the pension cost for the year gross commitment and not to the net commitment shown are based on a number of estimates, including: return on in the balance sheet. Estimate changes resulting from pension assets, interest and inflation rates, wage trend, changes in the parameters mentioned will in large measure (NOK million) 2005 2004 turnover, the basic state pension entitlement and the gene- be accrued over average remaining earning period and not Interest income ral trend in the number of disability pensioners, all of which be immediately charged to profit in the same way as other Interest and similar income from loans to and claims on credit institutions 27 10 are of major significance. Uncertainty largely relates to the estimate changes. Interest and similar income from loans to and claims on customers 1 822 1 530 Interest and similar income from certificates, bonds and other interest-bearing securities 64 54 Other interest income 32 Note 5 Segment information Total interest income 1 916 1 596

Interest expense Management have made an assessment of which business which cannot be allocated to either private or business Interest and similar expenses on liabilities to credit institutions 60 19 areas are deemed reportable with respect to form of distri- segments. Interest and similar expenses relating to deposits from and liabilities to customers 344 273 bution, products and customers. The primary format of Interest and similar expenses related to the issuance of securities 466 354 reporting takes as a starting point risk and yield profiles of The Bank operates in a limited geographical area and repor- Interest and similar expenses on subordinated loan capital 83 85 various assets and reporting is divided into private custo- ting along the lines of geographic secondary segments Funds paid to the banks' guarantee fund 0 0 mers and business customers. The bank's own investing provides little additional information. Significant types of Other interest expenses and similar expenses 2 1 activities are not a separately reportable segment and assets (loan) allocated geographically in a separate note Total interest expense 955 732 appear under the item "unallocated" together with activities under loans. Net interest income 961 864

Average interest rate and average interest-bearing assets and liabilities for the period 2005 2004 SpareBank 1 Assets 2005 (NOK million) PM BM EM1 Allegro Finans Uncollated Total Average interest-bearing loans to customers 41 791 31 602 Average interest rate on loans to customers 4,38% 4,71% Net interest income 544 378 1 1 25 12 961 Net fee and commission income 261 91 102 66 9 7 536 Liabilities Operating expense 165 75 96 19 17 535 906 Average portfolio of interest-bearing deposits 25 739 20 067 Annual Report 2005 Annual Report 2005 Profit before losses 641 394 8 48 17 -516 591 Average interest rate on deposits 1,41% 1,38% Net profit on financial investments 0 0 0 0 -1 290 289 Net losses on loans and guarantees -3 -23 0 0 0 -12 -38 Interest taken to income on defaulted and problem assets Profit before income tax 644 417 8 48 17 -214 919 See note 20 – Interest taken to income on defaulted and problem assets totals NOK 9 million.

64 Loans and advances to customers 28 423 14 865 0 0 1 101 891 45 280 65 Individual allowance for impairment on loan -37 -196 0 0 -2 0 -236 Group allowance for impairment on loan -64 -201 0 0 -12 0 -278 Other assets 416 270 65 86 44 8 680 9 561 Note 7 Net fee and commission income Total assets per business area 28 738 14 737 65 86 1 130 9 571 54 327 Lending to and deposits to customers 14 559 11 860 0 0 979 679 28 077 (NOK million) 2005 2004 Other liabilities and equity 14 179 2 877 65 86 151 8 892 26 250 Fee and commission income Total equity and liabilities per business area 28 738 14 737 65 86 1 130 9 571 54 327 Guarantee commissions 19 14 Broker commision 87 75 Securities trading, administration and trust department services 126 77 SpareBank 1 Payment transmission services 231 188 Insurance services 60 43 Notes Group Notes Group 2004 (NOK million) PM BM EM1 Allegro Finans Uncollated Total Other commission income 46 42 Net interest income 579 420 1 0 30 -167 863 Total fee and commission income 570 438 Net fee and commission income 215 59 92 35 2 23 424 Operating expense 161 64 84 12 14 389 724 Fee and commission expenses Profit before losses 633 415 8 23 18 -534 563 Payment transmission services 83 62 Net profit on financial investments 0 0 0 0 0 116 116 Other commission expenses 21 Net losses on loans and guarantees 15 68 0 0 1 -3 82 Total fee and commission expenses 84 63 Profit before income tax 618 347 8 23 17 -416 597 Net fee and commission income 485 375 Loans and advances to customers 25 077 14 040 0 0 885 -5 775 34 226 Individual allowance for impairment on loan -112 -212 0 0 -5 39 -290 Group allowance for impairment on loan 0 0 0 0 -13 -301 -314 Other assets 323 141 70 39 32 4 279 4 883 Total assets per business area 25 288 13 969 70 39 899 -1 758 38 505 Lending to and deposits to customers 14 191 10 151 0 0 779 -4 396 20 725 Other liabilities and equity 11 097 3 818 70 39 119 2 637 17 780 Total equity and liabilities per business area 25 288 13 969 70 39 899 -1 759 38 505 Note 8 Net gain from investments, securities Note 11 Income tax

(NOK million) 2005 2004 (NOK million) 2005 2004 Value changes and profit/ loss on interest rate instruments 38 20 Major components of income tax – Net value changes – gains/losses on certificates, bonds and other interest-bearing securities 5 0 Current tax expense 188 133 – Net value changes – gains/losses on derivatives -7 0 Capital (property) tax 5 3 – Net value changes – gains/losses on hedged bonds and certificates 40 0 Change in deferred tax 7 15 Too small/large accrual for taxation previous year -1 -7 Dividend from equity instruments 15 9 Deferred tax 199 144 Value changes and profit/loss on equity instruments 101 28 Change in net deferred tax asset – Fair value through profit and loss 101 0 Deferred tax recognised in the income statement 7 15 – Derecognition of available for sale 0 0 – Impairment losses of available for sale instruments Total change in net deferred tax asset 7 15

Currency trading 16 16 Deferred tax – Net conversion gain 60 recognised in – Net transaction gain 10 0 Deferred tax the income in balance sheet statement Total income from other financial investments 170 74 Composition of deferred tax carried in the balance sheet and deferred tax tax recognised in the income statement 2005 2004 2005 Temporary differences: – Tangible fixed assets 84 93 9 Note 9 Other operating income – Pension liability 188 191 3 – Securities -22 -41 -18 (NOK million) 2005 2004 – Hedge derivatives -22 -5 17 – Other temporary differences -216 -203 13 Operating income real property 9 7 Annual Report 2005 Annual Report 2005 Property administration and sale of property 16 17 Total temporary differences 12 36 24 Other operating income 27 25 Deferred tax shown in balance sheet/shown through profit *) 3107

Total other operating income 52 49 *) OB effects of IFRS are included in 2004 figures to reflect change in deferred tax. This is not implemented in the balance sheet.

66 67 Note 10 Operating expenses Reconciliation of tax charge for the period recognised against profit and loss to profit before tax 2005 2004 (NOK million) 2005 2004 28% of profit before tax 279 154 Personnel expenses 485 374 Non-taxable profit and loss items (permanent differences) -84 -7 Administrative expenses 279 228 Capital (property) tax 5 3 Ordinary depreciation (note 13 and 14) 40 39 Too small accrual for taxation previous year -1 -7 Write-down fixed assets (note 13 and 14) 1 0 Taxation charge for the period 199 144 Other operating expense 101 83 Total operating expenses 906 724 Regulation of "RISK"-amount The RISK amount at 01.01.2005 for the bank's PCC is set at NOK 2.26. (recalculatede after bonus issue in 2005) At 01.01.2006 the RISK amount is NOK 2.39 per PCC. Audit fees (in NOK 1 000) Notes Group Notes Group Financial audit 729 Other attestations 407 Tax advice 173 Note 12 Other assets Other non-audit services 222 (NOK million) 2005 2004 Personnel expense 2005 2004 Capital contribution to the pension fund 14 14 Wages 384 288 Earned income not yet received 286 124 Pension costs (defined benefit plan) 26 26 Tenants' rentals 22 – defined benefit plan 26 26 Accounts receivable securities 954 28 Social costs 75 60 Other debtors 173 87 Total personnel expenses 485 374 Assets available for sale 85 0 Average number of employees 817 742 Other assets 1 513 254 Number of man-labour years as at 31 December 806 637 Number of employees as at 31 December 898 711

Emoluments Board of Directors 1 469 1 424 Emoluments Control Committee 330 350 Emoluments Board of Governors 705 289 Note 13 Property, plant and equipment Note 15 Associates and joint ventures

Buildings and Machinery, (NOK million) 2005 2004 other real inventory and As at 1 January 292 266 (NOK million) property vehicles Total Acquisition/sale 77 34 Cost of acquisition or adjusted value as at 1 January 2004 121 365 486 IFRS items recognised directly in equity 10 -51 Acquisitions 0 39 39 Share of the associates/joint ventures profit 133 42 Disposals 04848 Share of taxes -13 0 Revaluation 0 0 0 As at 31 December 498 292 Cost of acquisition or adjusted value as at 31 December 2004 121 356 477 The Group's ownership shares in associated companies and joint ventures: Accumulated depreciation and write-down as at 1 January 2004 19 246 265 Ownership Current period's depreciation 3 36 39 2005 Country Assets Liabilities Income Profit/loss share Current period's impairment 0 0 0 SpareBank 1 Gruppen Group Norway 7 696 7 261 1 554 120 18% Accumulated depreciation and impairment as at 31 December 2004 22 282 304 SpareBank 1 Utvikling DA Norway 62 44 58 0 20% Exchange adjustments 2004 0 0 0 SpareBank 1 Boligkreditt Norway 22 2 0 0 20% Book value as at 31 December 2004 99 74 173 Molde kunnskapspark Norway 2 0 0 0 20% 7 781 7 307 1 611 120 Cost of acquisition or adjusted value as at 1 January 2005 SMN 121 356 477 Cost of acquisition or adjusted value as at 1 January 2005 RF 102 50 153 2004 Cost of acquisition or adjusted value as at 1 January 2005 223 406 630 SpareBank 1 Gruppen konsern Norway 5 540 5 240 1 183 23 15% Acquisitions 11 60 71 SpareBank 1 Utvikling DA Norway 48 41 48 0 20% Disposals 54 10 64 5 588 5 281 1 231 23 Revaluation 0 0 0 Cost of acquisition or adjusted value as at 31 December 2005 181 456 637 Accounts receivables and liabilities Subordi- Annual Report 2005 Annual Report 2005 related to associated companies Loan Deposits nated loan Accumulated depreciation and write-down as at 1 January 2005 SMN 22 282 304 Accumulated depreciation and write-down as at 1 January 2005 RF 68 32 100 SpareBank 1 Gruppen Group 26 0 43 SpareBank 1 Utvikling DA 0 11 0 Accumulated depreciation and write-down as at 1 January 2005 90 314 404 Current period's depreciation 2 38 40 68 Current period's impairment 0 0 0 69 Accumulated depreciation and impairment as at 31 December 2005 92 352 445 Note 16 Trading securities

Exchange adjustments 2005 0 0 0 General description: Book value as at 31 December 2005 88 104 192 The bank classifies shares in the categories fair value and available for sale. Securities that can be reliably measured, and which are reported internally at fair value, are recognised at fair value through profit and loss. Other shares are classified as Of which buildings available for sale 53 available for sale. All bonds and money market instruments are recognised at fair value through profit and loss.

Provision of securities Fair value Available The Bank has not provided security or accepted any other infringements on its right of disposal of its fixed tangible assets. 2005 (NOK million) Through profit for sale

The gross value of fully depreciated assets still in use I) Shares and other securities The gross value of fully depreciated assets still in use is regarded as insignificant. Listed 170 0 Notes Group Notes Group Not listed 241 36 Total shares and other securities 411 36

III) Certificates and bonds according to sector of issuer Fair value Through profit and loss Note 14 Goodwill 2005 (NOK million) Nominal value Fair value Government 1 070 1 080 (NOK million) 2005 2004 Other public issuer 41 41 Financial institutions 2 553 2 566 Goodwill Acquisition cost at 1.1 00 Total shares, certificates and bonds 4 133 Takeover of subsidiaries (note 28) 454 0 Disposal 00 Fair value Through profit and loss Acquisition cost at 31.12 454 0 2005 (NOK million) Nominal value Fair value Accumulated write downs 1.1 0 0 Government 631 642 Write downs for the year 00 Other public issuer 20 20 Accumulated write downs 31.12 0 0 Financial institutions 1 606 1 610 Conversion differences 00 Total certificates and bonds 2 272 Goodwill shown in balance sheet 31.12 454 0 Certificates and bonds according to maturity Note 18 Credit institutions – loans and advances 31.12.05 < 6 months 6–12 months 1–3 years 3–5 years > 5 years Loans and advances to credit institutions Government 889 49 65 55 20 (NOK million) 2005 2004 Other public issuer 0 0 26 15 0 Financial companies 280 489 1 131 516 147 Loans and advances without agreed maturity or notice of withdrawal 48 78 Loans and advances with agreed maturity or notice of withdrawal 406 474 31.12.04 < 6 months 6–12 months 1–3 years 3–5 years > 5 years Total 454 552 Government 299 197 54 57 35 Other public issuer 0 20000 Average rate credit institutions 2.23% 1,.84% Financial companies 280 108 454 747 20 Deposits from credit institutions (NOK million) 2005 2004 Note 17 Financial derivates Loans and deposits from credit institutions without agreed maturity or notice of withdrawal 20 38 Loans and deposits from credit institutions with agreed maturity or notice of withdrawal 1 010 10 General description: Total 1 029 48 All derivatives are booked at real value through profit and loss. Gains are carried as assets and losses as liabilities in the case of all interest rate derivatives. This applies both to derivatives used, and to derivatives not used, for hedge purposes. Average rate credit institutions 3.23% 2.61% The bank does not employ cash flow hedging.

Currency- and interest rate intstruments (NOK million) Note 19 Loans and advances to customers Fair value through profit and loss 2005 Fair values (NOK million) 2005 2004 Currency instruments Contract amount Assets Liabilities Loans specified by type Foreign exchange derivatives (Forwards) 453 5 0 Financial lease 1 112 885 Bank overdraft and operating credit 2 783 1 390 Annual Report 2005 Annual Report 2005 Currency swaps 153 18 0 Fx-options 563 1 -5 Building loan 641 489 Amortising loan 40 744 31 462 Total currency instruments 1 169 23 -5 Gross loans to and claims on customers 45 280 34 226 Fixed income instruments 70 Impairments -514 -604 71 Interest rate swaps (including cross currency) 4 796 177 -228 Short-term interest rate swaps (FRA) 6 500 1 -1 Net loans to and advances to customers (amortised cost) 44 767 33 622 Other interest rate contracts 1 565 16 -25 Lending specified by markets Total non-standardised contracts 12 861 193 -254 Private market 29 032 21 491 Business market 16 126 12 646 Public sector 122 89 Hedging Foreign exchange instruments Gross loans and advances 45 280 34 226

Foreign exchange derivatives (Forwards) 0 0 0 Impairments -514 -604 Currency swaps 1 087 16 0 Net loans and advances 44 767 33 622 Total non-standardised contracts 1 087 16 0

Notes Group Of this subordinated loan capital Notes Group Interest rate instruments Subordinated loan capital credit institutions 0 0 Interest rate swaps (including cross currency) 18 513 293 -259 Subordinated loan capital other financial institutions 48 48 Short-term interest rate swaps (FRA) 0 0 0 Other subordinated loan capital 15 23 Other interest rate contracts 114 0 0 Subordinated loan capital shown under loans to customers 63 71 Total non-standardised contracts 18 627 293 -260 Loans to employees 568 465 Interest rate subsidies to employees 1 1 Total foreign exchange and fixed income instruments Total interest rate derivatives 31 488 487 (519) Total currency derivatives 2 256 39 Total financial derivatives 33 744 526 (519)

*) The market value of currency swaps and forwards and futures is carried net under other assets in the balance sheet. 31.12.05 31.12.04 31.12.05 31.12.04 31.12.05 31.12.04 31.12.05 31.12.04 Note 20 Allowance for losses on loans and advances Individual Expected annual Loans specified by risk group Total contracts Gross loans write-downs average net loss (NOK million) 2005 2004 Low risk 39 261 27 177 35 519 24 472 0 0 17 15 Period’s change in individual write downs 35 47 Medium risk 6 420 5 247 6 055 4 855 0 3 41 22 Period’s change in collective write downs -16 -3 High risk 3 165 4 009 2 973 4 188 0 9 50 44 Confirmed losses on loans not previously written down 41 55 Default 773 750 733 711 236 278 42 51 Incomings on previously written down loans, guarantees etc. -98 -18 Total 49 618 37 183 45 280 34 226 236 290 150 132 Total losses on loans, guarantees etc. -38 81

The bank calculates default probabilities for all customers in the loan portfolio at the loan approval date. It does this on the basis of key figures on earnings, impairment and behaviour. Individual write downs 2005 2004 Default probability is used as a basis for risk classification of the customer. Individual write downs to cover loss on loans, guarantees etc. at 01.01. 290 380 Loss given defaults (LGD) are also used to classify each customer in a risk group. Reduction at 01.01., implementation effect of lending regulations -45 Merger Romsdals Fellesbank 68 Customers are rescored in the bank’s portfolio management system on a monthly basis. – Confirmed losses in the period on loans, guarantees etc not previously Default monitoring is based on the exposure’s size, risk and migration. subject to individual write down -113 -137 Risk pricing of corporate commitments is done in light of expected loss and the individual commitment’s necessary – Reversal of previous years’ write downs -76 -46 economic capital. + Increase in write downs of commitments not previously subject to individual write down 25 37 Expected average annual net loss is calculated for the next 12 months. Expected loss is within the maximum limits for + Write downs of loans not previously subject to individual write down 86 55 expected loss established by the Board of Directors. Volume growth in 2005 did not significantly affect expected loss, and relative risk in the portfolio was reduced. = Individual write-downs 236 290 Collective write downs are calculated on the basis of customers who have migrated negatively since the loan approval date, but for whom individual write down has not been carried out. Collective write-downs 2005 2004 Collective write-downs to cover losses on loans, guarantees etc. at 01.01 314 318 31.12.2005 31.12.2004 Reduction at 01.01 due to implementation of IFRS -80 Loans specified by geographic areas Gross share Loans Gross share Loans Addition from Romsdals Fellesbank upon merger 60 Sør-Trøndelag 41% 18 665 49% 16 922 + Period’s collective write-down to cover losses on loans, guarantees etc. -16 -4 Annual Report 2005 Annual Report 2005 Nord-Trøndelag 31% 14 203 39% 13 280 = Collective write-downs to cover losses on loans, guarantees etc. at 31.01 278 314 Møre og Romsdal 16% 7 172 1% 435 Nordland 1% 240 1% 334 Other counties 10% 4 445 8% 2 905 2005 2004 Abroad 1% 554 1% 350 Proportion Proportion 72 73 Total gross loans broken down by geographic area 100% 45 280 100% 34 226 Losses specified by sector and industry of losses Losses of losses Losses Agriculture, forestry, fisheries and hunting 4% -1 5% 4 2005 2004 2005 2004 2005 2004 2005 2004 Fish farming 38% -14 16% 13 Total Individual Expected annual Industry and mining -69% 26 23% 18 Loans specified by sector and industry contracts Gross loans write-downs average net loss Building and construction, power and water supply -5% 2 0% 0 Wholesale and retail trade hotel and restaurant industry -28% 11 5% 4 Private sector 29 381 21 680 29 032 21 491 38 112 37 35 Other transport and communication -29% 11 12% 9 State administration and social Financing, property management and business services 134% -51 9% 7 security administration 587 289 122 89 - - 1 Abroad and others -10% 4 19% 15 Agriculture, forestry and fishing 3 439 2 974 3 145 2 633 11 14 5 2 Private sector 23% -9 16% 13 Fish farming industries 868 781 557 714 24 22 3 12 Collective write down, corporate 32% -12 -4% -3 Manufacturing 1 536 1 156 1 072 918 36 27 6 4 Collective write down, retail 10% -4 0% 0 Construction 1 331 982 812 692 3 8 5 3 Notes Group Notes Group Retailing/hotels 2 580 1 880 1 907 1 441 18 12 10 9 Losses on loans to customers 100% -38 100% 81 Prop. management/business serv. 7 609 5 141 6 571 4 271 49 44 56 43 Transport and other services 1 931 1 679 1 698 1 577 28 26 21 18 Abroad and others 356 621 362 401 29 25 6 6 Commitments in default and commitments at risk of loss 2005 2004 2003 2002 Total 49 618 37 183 45 280 34 226 236 290 150 132 Commitments in default at risk of loss 353 354 455 569 Commitments in default not at risk of loss 270 312 439 592 Loans and advances to customers related to financial leasing 2005 Total commitments in default 623 666 894 1 161 Gross advances related to financial leasing Individual write downs 236 290 379 531 – Maturity less than 1 year 94 – Maturity more than 1 year but not more than 5 years 822 Net commitments in default 387 376 515 630 – Maturity more than 5 years 168 Interest taken to income on defaulted and problem assets totals NOK 9 million. Received income related to financial leasing, not yet earned 26 Net investments related to financial leasing 1 110

Net investments in financial leasing may be analysed in the following way: – Maturity less than 1 year 96 – Maturity more than 1 year but not more than 5 years 842 – Maturity more than 5 years 172 1 110 Note 21 Customer deposits Note 23 Subordinated loan capital

2005 2004 (NOK million) 2005 2004 (NOK million) Proportion Deposits Proportion Deposits With definite maturity Deposits from and liabilities to customers without agreed maturity 90% 24 464 90% 18 692 2010 fixed rate 8% (Call option 2005) 0 200 Deposits from and liabilities to customers with agreed maturity 10% 2 584 10% 2 033 2010 3 month Nibor + margin (Call option 2005) 0 200 2012 3 month Nibor + margin (Call option 2010) 100 0 Total due to customers 27 048 20 725 2013 fixed rate 7,2 (Call option 2008) 162 162 2013 3 month Nibor + margin (Call option 2008) 189 189 Average interest rate 1.41% 1.38% 2014 3 month Nibor + margin (Call option 2007) 100 0 2015 3 month Nibor + margin (Call option 2009) 450 0 Fixed interest deposits account for 1.8% of total deposits - Discount subordinated debt 70 2005 2004 Total with definite maturity 1 007 750 Deposits specified by sector and industry Proportion Deposits Proportion Deposits Perpetual non-call (USD) Private sector 52% 14 080 54,31% 11 256 Perpetual non call 3 month libor + margin (USD 25 mill.) 227 227 Central government administration and social security administration 9% 2 414 6.89% 1 428 – Discount perpetual subordinated debt -7 -10 Wholesale and retail trade hotel og restaurant industry 8% 2 176 7.92% 1 640 – Perpetual non-call currency agio -56 -72 Agriculture, forestry, fisheries and hunting 5% 1 233 5% 1 134 Total perpetual non-call 164 145 Fish farming 0% 57 0% 38 Financing, property management and business services 11% 3 046 10% 2 136 Hybrid equity Building and construction, power and water supply 3% 787 2% 402 Hybrid equity 30 years libor+margin (USD 75 mill.) 527 527 Industry and mining 2% 592 2% 313 – Hybrid equity currency agio -32 -74 Transport and communication 8% 2 178 9% 1 785 Foreign sector 2% 484 3% 593 Total hybride equity 495 453 Total deposits from customers broken down by sector and industry 100% 27 048 100% 20 725 Total subordinated loan capital 1 667 1 347 Average rate NOK 4.43% 5.50% Avarage rate USD 5.59% 4.92% Annual Report 2005 Annual Report 2005 2005 2004 Deposits specified by geographic area Proportion Deposits Proportion Deposits Note 24 Other liabilities Sør-Trøndelag 41% 11 187 49% 10 192 Nord-Trøndelag 31% 8 383 40% 8 324 Møre og Romsdal 17% 4 683 1% 281 Other liabilities (NOK million) 2005 2004 74 Nordland 1% 214 1% 194 Pension liabilities (note 25) 195 49 75 Other counties 8% 2 093 6% 1 150 Provisions 67 105 Abroad 2% 489 3% 584 Other liabilities 1 647 457 Total deposits broken down by geographic area 100% 27 048 100% 20 725 Acurred costs/pre-paid income 292 211 Total other liabilities 2 201 822

Other liabilities Note 22 Debt securities in issue Creditors 23 24 Drawing debt 148 76 2005 2004 Debt from securities 987 26 Average Average Debt available for sale 61 0 interest interest Other liabilities 428 331 Debt securities in issue NOKm rate % NOKm rate % Notes Group Notes Group Total other liabilities 1 647 457 Certificates and other short-term borrowings 2 204 2.13% 3 330 2.68% Bond debt 15 833 3.25% 9 718 2.22% Guarantee commitments Total debt securities in issue 18 036 13 048 Payment guarantees 502 389 Performance guarantees 587 473 Bond debt specified by maturity 2005 %-maturity 2004 %-maturity Loan guarantees 11 Guarantees for taxes 65 2005 2 691 33% Other guarantee commitments 271 253 2006 3 190 20% 1 580 19% Guarantees for Savings Banks' Guarantee Fund 0 50 2007 4 408 28% 2 187 27% 2008 2 036 13% 470 6% Total guarantee commitments 1 368 1 171 2009 1 838 12% 550 7% 2010 3 243 20% 250 3% 2011 410 3% 409 5% Securities pledged Buildings Securities Total 2012 600 4% 0 0% Securities pledged in 2005 0 2 852 2 852 2013 201 1% 0 0% Relevant liability 2005 0 0 0 2035 80 1% 0 0% Foreign currency bonds 0 1 697 Securities pledged in 2004 0 2 180 2 180 Currency agio -14 0% 0 0% Relevant liability 2004 0 0 0 Market value, structured bonds -17 0% 0 0% Ongoing lawsuits Own holding at market value -142 -116 The Group is involved in legal disputes not considered to be of substantial significance for the Group's financial position. Bond debt and other long-term borrowings 15 833 9 718 Provision for loss has been made where appropriate. Note 25 Pensions Note 26 Equity and related capital – capital adequacy ratio (Norwegian GAAP)

General description of the company's pension liabilities Equity (NOK million) 2005 2004 The pension schemes are administered by a separate pension fund, conferring entitlement to specific future pension bene- Primary capital certificates 1 262 769 fits from age 67. The schemes also include spouse’s pension, children’s pension and disability pension under further rules. – Holding of own primary capital certificates 0 8 The Group also has pension obligations towards early retirees and some employees with earnings above 12G. The bank and Premium fund 010 financial industry has established an agreement on an early retirement pension scheme (“AFP”) for employees from age 62. Savings Bank's Fund 1 369 1 180 The bank’s contribution corresponds to the National Insurance Scheme’s accumulation of disbursed pension for employees Dividend Equalisation Fund 491 400 who take out early retirement. The bank contributes 100% from age 62. Donations and other equity 036 Total equity capital 3 122 2 387 Net pension liability in the balance sheet (NOK million) 2005 2004 Deferred tax, goodwill and other intangible assets 511 30 Net present value of pension liabilities in covered schemes 648 491 Hybrid equity 461 416 Estimated value of pension assets -516 -361 Total core capital 3 073 2 773 Net pension liability in covered schemes 132 130 Supplementary capital in addition to core capital Estimated discrepancies not incl in profit and loss account 40 0 Perpetual non-call 186 182 Non-recorded effect of plan change -1 0 Subordinated loan capital 995 695 Net pension commitment in the balance sheet exc. employer's contributtion 171 130 Subordinated capital in other financial institutions 5 65 Employer’s contribution 24 19 Capital adequacy reserve 446 345 Net pension commitment in the balance sheet 195 149 Net equity and related capital 3 803 3 239 Risk-weighted calculation base Assets which are not part of the trading portfolio 34 751 25 665 Pension cost for the year 2005 2004 Off-balance sheet items which are not part of trading portfolio 783 609 Present value of pension accumulated in the year 29 23 Currency risk and items in trading portfolio 344 302 Interest cost of pension liabilities 25 24 Deductions: Annual Report 2005 Annual Report 2005 Expected rate of return on plan assets -33 -21 Actuarial gains or losses -1 0 Subordinated capital in other financial institutions 5 65 Loss provisions 514 604 Net pension expenses exc. employer's contribution 20 26 Capital adequacy reserve 446 345 Employer's contribution – subject to accrual accounting 4 4 Total asset base for calculations 34 914 25 562 Net pension cost related to defined benefit plans 24 30 76 77 Defined-contribution pension cost 0 0 Capital adequacy ratio 10.89% 12.67% Total pension cost incl employer's contributions 24 30 of which core capital 8.80% 10.85% of which supplementary capital 2.09% 1.82% Actual return on pension assets in 2005 was NOK 59 million (2004: NOK 45 million)

Change in net pension liability in the balance sheet 2005 2004 Net pension liability in the balance sheet 1.1 149 51 Acquisition of Romsdal Fellesbank ASA 52 Zero setting of estimate variance *) 0 105 Net defined-benefit pension cost in profit and loss account -24 -30 Paid-in pension premium, defined-benefit schemes 19 23 Notes Group Notes Group Net pension liability in the balance sheet 31.12 195 149

Actuarial assumptions 2005 2004 Discount rate 4.5% 5.2% Expected rate of return on plan assets 6.2% 6.2% Future wage- and salary development 3.3% 3.3% Adjustment of basic amount (G) 2.5% 2.5% Increase in current pensions 2.5% 2.5% Employers contribution 14.1% 14..1% Voluntary retirement 50.0% 50.0% Estimated early retirement outtake at age 62 50.0% 50.0%

Zero setting of estimate variance for 2004 is included in the note. This is not implemented in the balance sheet. Note 27 Related parties Note 29 Acquisition of businesses

Transactions between related parties SpareBank 1 Midt-Norge acquired all the shares of Romsdals Fellesbank ASA on 01.04.2005 for NOK 1,060 million. The take- All loans to related parties are recorded at the parent bank. Strict requirements are applied to collateral for such loans. over was financed by cash and a stock issue. Romsdals Fellesbank ASA’ main business was banking and finance. The take- The interest subsidy for 2005 is calculated at NOK 0.7 million based on the interest rate on which taxation of employee over involved goodwill of NOK 447 million which is subject to an annual write down test. The management is of the view that benefits is based. Loans to subsidiaries, associated companies and joint ventures are granted at Nibor + margin. the takeover brings a further improved position in banking and finance and an enlarged market area which will impact positi- Loans to other related parties are granted at the rates generally applied at customers. No significant transactions have been vely on Group earnings. carried out between the bank, the Board of Directors and senior employees. (NOK million) Fair value Book value Board of Directors Other and top management Associated companies related parties Cash and balances with central banks 164 164 Loans and advances to credit institutions 17 17 Loans (NOK million) 2005 2004 2005 2004 2005 2004 Loans and advances to customers 6 820 6 751 Individual allowance for impairment on loan and advances to customers -68 -68 Outstanding loans as at 1.1 51 48 898 845 0 0 Group allowance for impairment on loan and advances to customers -60 -60 Loans issued in the period 18 26 210 76 0 0 Repayments 20 23 56 23 0 0 Net loans to and receivables from customers 6 691 6 622 Outstanding loans as at 31.12 48 51 1 052 898 0 0 Trading securities and Financial derivatives 560 544 Investments in associates and joint ventures 2 2 Interest rate income 1 2 19 18 0 0 Investment in group companies 3 3 Losses on loans 0 0 0 0 0 0 Immaterielle eiendeler 0 0 Property, plant and equipment 52 52 Deposits 2005 2004 2005 2004 2005 2004 Deferred tax assets 16 4 Deposits as at 1.1 37 35 443 418 1 1 Other assets 26 26 Contributions received during the period 0 174 9 162 6 089 9 1 Total other assets 657 631 Withdrawals 31 172 9 299 6 064 2 1 Total assets 7 530 7 435 Deposits as at 31.12 6 37 306 443 8 1 Interest rate costs 0 0 7 22 0 0 Deposits from credit institutions -7 -7 Annual Report 2005 Annual Report 2005 Deposits from and debt to customers -4 348 -4 348 Debt created by issue of securities -2 141 -2 141 Emoluments to the Managing Director (NOKt) 2005 2004 Deferred tax -19 0 Emoluments 2 215 1 780 Other liabilities -202 -162 AdditionaI pension expenses 545 465 Subordinated loan capital -200 -200 Share based payments (see note 30) 1 165 0 78 Total liabilities -6 917 -6 857 79 Total 3 925 2 245 Net identifiable assets and liabilities 613 578 Goodwill upon takeover 447 Emoluments to management (NOKt) 2005 2004 Total 1 060 Emoluments 6 215 6 273 Additional pension expenses 1 041 1 538 Issue of shares 473 Share based payments (see note 30) 6 111 0 Cash 552 Total 13 367 7 811 Acquisition cost 35 Total 1 060 Fees 2005 2004 As from the takeover date Romsdals Fellesbank ASA has contributed NOK 37 million to the Group’s post-tax profit. Had the Notes Group Notes Group Fee, Board of Governors and Control Committee 1 035 639 Fee, Board of Directors 1 486 1 154 takeover taken place at 1.1.2005 the contribution from Romsdals Fellesbank would have been NOK 27 million. No other significant acquisitions SpareBank 1 Midt-Norge has not carried out other takeovers over the year. Two companies were demerged from Romsdal Fellesbank in connection with the merger preparations. Romsdals Fellesbank’s properties were placed in the two companies mentioned. It is planned to sell the companies when the bank finds a buyer. EiendomsMegler 1 Midt-Norge merged with RF Note 28 Subsequent events Eiendomsmegling og EiendomsMegler 1 Nordvest in 2005. Identified excess values in these mergers totalled NOK 7 million.

No significant events have been recorded after the balance sheet date that affect the bank’s accounts. Note 30 PCC-based renumeration

All employees of SpareBank 1 Midt-Norge were given the opportunity to buy PCCs in connection with a placing with the Cash flow statement Group bank’s employees. The issue price to PCC holders was set at NOK 200. The price to employees was set at NOK 160. A lock- in period of 2 years applied. For the Group management the lock-in period was 4 years. The market price employed for salary- reporting purposes was reduced by an imputed option price in relation to lock-in.

Price Value (NOK million) 2005 2004 Placing with the bank’s employees No. NOK NOKm Profit before tax 919 599 Bought by employees 176 000 280 49 + Gains/Loss on sale of fixed assets 43 50 Bought by Group management 62 500 280 18 + Losses on loans and guarantees -38 81 - Payable tax -199 -129 Total market value at allotment date 67 Net cash increase from ordinary opertions 725 600 Cost price 238 500 160 38 Decrease/(increase) other receivables -1 324 68 Benefit on purchase of PCCs 29 Increase/(decrease) short term debt 1 761 184 The benefit upon purchase of PCCs was carried as an imputed wage cost through profit and an increase of the bank’s equity Increase/(decrease) pension cost commitments 124 -2 capital. Upon disposal the equity effect was set at zero. Increase/(decrease) other debt -38 24 Net cash changes in profit and loss accounts 523 274 Decrease/(increase) loans to customers -4 507 -1 848 Decrease/(increase) loans credit institutions 112 39 Increase/(decrease) deposits and debt to customers 2 018 849 Increase/(decrease) deposits to credit institutions 976 -1 066 Increase/(decrease) in short term investments -1 602 169 A) Net cash flow from operations -1 755 -983 Increase in tangible fixed assets -74 -38 Annual Report 2005 Annual Report 2005 Reductions in tangible fixed assets 64 0 Takeover of Romsdals Fellesbank -711 Paid-up capital, associated companies -77 Net investments in long-term shares and partnerships -66 -120 80 B) Net cash flow from investments -865 -157 81 Increase/(decrease) in subordinated loan capital 120 -213 Increase/(decrease) in equity 474 -17 Adjustment of equity 135 -118 Dividends and donations -177 -152 Increase/(reduction), other long-term debt 2 747 1 804 C) Net cash flow from financial activities 3 299 1 304 A) + B) + C) Net changes in cash and cash equivalents 680 163 Cash and cash equivalents at 01.01 989 827 Cash and cash equivalents at 31.12 1 669 989

Notes Group Net changes in cash and cash equivalents -680 -163

2005 includes changes in Romsdals Fellesbank from 01.01 to 31.12 Cash flow tatement Group Cash 120 person-years

[ Behind the figure: Perseverance, capability and growth. ]

”We’ve had our ups and downs, but the number of person-years worked has steadily risen. Finn Sinkaberg is general manager at SinkaBerg-Hansen – a business which despite a number of squalls in the fish farming industry has grown from one employee in 1977 to the equivalent of 120 full-time positions today

SinkaBerg-Hansen has been a client of SpareBank 1 Obviously the mutual relationship we have with the

Midt-Norge for 28 years. Local roots and close links with bank is highly important to both parties. For the bank it Årsrapport 2005 the Rørvik branch have been important to Mr. Sinkaberg. is important to create local growth and a sustainable business sector – which is where our customer base lies. “It is important that the bank knows your business and the To achieve that the bank needs to be on the business trade when you get in touch. In our experience the people at sector’s side – during the ups as well as the downs. After 83 the local branch are well versed in our line of business. That a generation in SpareBank 1’s customer chair, means they can take the initiative when they see a smarter Mr. Sinkaberg knows the value of a long-term customer way of doing things. We appreciate that. relationship. Both for his business and for us as a bank. When fish farming was in dire straits back in the eighties, We need to show caution in taking the credit for many banks withdrew. SpareBank 1 stayed put, believing we our customers’ success. Especially in cases such as would cope. And we did. Having a bank behind in bad SinkaBerg-Hansen, which has been a dependable com- times as well as good is crucial to us”, says Finn Sinkaberg. pany in an unstable industry – a company which is easy to have faith in, even when the going gets tough.

Stedsnavn Income statement parent bank NGAAP Balance sheet parent bank NGAAP Pro forma inclusive Romsdals Fellesbank Pro forma inclusive Romsdals Fellesbank

(NOK million) 2005 2004 (NOK million) 31.12.05 31.12.04 Interest income 1 968 1 868 Cash and claims on central banks 1 669 1 325 Interest expenses 990 857 Loans to and claims on credit institutions 1 344 1 345 Loans before loss provisions 44 240 40 015 Net interest and credit commission income 977 1 012 - Individual write downs -233 -324 Dividends and profits on securities with variabel return 15 12 - Collective write downs -266 -381 Income from holdings in associated/jointly controlled companies 95 23 Loans to and claims on customers 43 741 39 310 Income from holdings in group companies 72 35 CDs, bonds and other interest-bearing securities 3 686 2 764 Total commission and fee income 428 365 Shares (and other securities with variable yield) 363 427 Total commission expenses -86 -72 Holdings in associated companies and group companies 581 480 Net gain/loss on securities 61 71 Fixed assets 143 191 Net gain/loss on currency and financial instruments 39 20 Other assets 1 831 599 Other operating income 814 Prepayments and accrued incomes 244 124 Total other operating income (net) 632 468 Total assets 53 602 46 081 Total income 1 609 1 480 Debt to credit institutions 1 029 53 Salaries, fees and other personnel costs 399 359 Deposits from and debt to customers 27 115 25 070 Administrative expenses 275 242 Debt created by issuance of securities 17 960 15 981 Depreciation etc., of fixed assets etc. 60 42 Other debt and accrued expences etc. 2 335 856 Annual Report 2005 Annual Report 2005 Other operating expenses 94 86 Provision for commitments and costs 393 187 Subordinated debt 1 653 1 547 Total operating expenses 828 728 Total depts 50 485 43 694 Operating profit before losses, gains and write-downs 782 752 Primary capital (primary capital certificates) 1 262 761 Losses on loans and guarantees -11 86 Premium fund 010 84 Gains and write-downs on disposals of fixed assets 11 -10 85 Equalisation fund 488 400 Operating profit 803 656 Savings bank's fund 1 367 1 180 Taxes 169 152 Other equity 036 Profit for the year 634 504 Earned equity 1 855 1 616 Total equity 3 117 2 387 Total liabilities and equity 53 602 46 082 Balance sheet parent bank NGAAP Income statement parent bank NGAAP Income statement parent bank NGAAP Balance sheet parent bank NGAAP

(NOK million) Specifications/Notes 2005 2004 2003 (NOK million) Specifications/Notes 31.12.05 31.12.04 31.12.03 Interest income a 1 823 1 574 2 225 Cash and claims on central banks l 1 669 989 827 Interest expenses b 933 739 1 393 Loans to and claims on credit institutions n 1 344 1 331 1 304 Loans before loss provisions o 44 240 33 365 31 791 Net interest and credit commission income 890 835 832 – Individual write downs o -233 -285 -370 Dividends and profits on securities with variabel return c 13 9 6 – Collective write downs o -266 -301 -302 Income from holdings in associated/jointly controlled companies c 95 23 -5 Loans to and claims on customers 43 741 32 779 31 118 Income from holdings in group companies c 72 35 25 Total commission and fee income d 410 333 278 Repossessed assets t 0 0 1 Total commission expenses e -81 -63 -70 CDs, bonds and other interest-bearing securities p 3 686 2 312 2 481 Net gain/loss on securities f 58 59 54 Shares (and other securities with variable yield) q 363 370 288 Net gain/loss on currency f 38 18 15 Holdings in associated companies and group companies r 581 473 406 Other operating income g 7 13 7 Fixed assets s 143 140 141 Other assets t 1 837 97 117 Total other operating income (net) 611 427 309 Prepayments and accrued incomes u 244 105 214 Total income 1 501 1 261 1 141 Total assets 53 607 38 596 36 896 Salaries, fees and other personnel costs h 367 295 299 Administrative expenses h 249 210 224 Debt to credit institutions v 1 029 48 1 114 Depreciation etc., of fixed assets etc. i 50 34 33 Deposits from and debt to customers w 27 115 20 765 19 917 Annual Report 2005 Annual Report 2005 Other operating expenses i 86 73 71 Debt created by issuance of securities x 17 960 13 165 11 361 Other debt and accrued expences etc. y 2 335 740 624 Total operating expenses 751 612 627 Provision for commitments and costs z 393 144 125 Operating profit before losses, gains and write-downs 750 650 514 Subordinated debt æ, 21, 25 1 653 1 347 1 560 Total depts 50 485 36 209 34 700 86 Losses on loans and guarantees j -38 80 219 87 Gains and write-downs on disposals of fixed assets k 11 -10 6 Primary capital (primary capital certificates) ø, 24 1 262 761 607 Operating profit 799 559 301 Premium fund ø 0 10 10 Taxes 27 166 130 79 Equalisation fund ø 491 400 482 Savings bank's fund ø 1 369 1 180 1 040 Profit for the year 28 632 430 222 Other equity ø, 28 0 36 57

Allocation of profit Earned equity 28 1 860 1 616 1 579 Dividends on primary capital certificates -278 -152 -109 Total equity 3 123 2 387 2 196 Transferred to Sparebankens fund -176 -140 -76 Set aside to the public good -89 -69 -28 Total liabilities and equity 53 607 38 596 36 896 Transferred to dividends equalisation fund -90 -69 -8 Transferred to/from other funds 0 0 0 Amount allocated -632 -430 -222

Trondheim February 23 2006 Balance sheet parent bank NGAAP Income statement parent bank NGAAP The Board of Directors of SpareBank 1 Midt-Norge

Per Axel Koch Eli Arnstad Christel Borge Kjell Eriksen Chairman Deputy Chair

Egill Vatne Terje Roll Danielsen Anne Brit Skjetne Venche Johnsen Employees representative

Stig O. Jacobsen Finn Haugan Chief Executice Officer Income statement specifications parent bank NGAAP

Specifications parent bank continue (NOK million) Notes 2005 2004 2003 (NOK million) Notes 2005 2004 2003 a) Interest and similar income h) Salaries and general administrative expenses Interest and similar income on loans to and receivables from credit institutions 46 29 94 Salaries 1 290 222 226 Interest and similar income on loans to and receivables from customers 5, 6 1 714 1 490 2 038 Pensions 2172527 Interest and similar income on CDs, bonds and other interest-bearing securities 60 54 94 Social costs 60 48 46 Other interest and similar income 2 1 -1 Salaries etc. 366 295 299 Total interest income and similar income 1 823 1 574 2 225 EDP expenses 88 81 77 b) Interest and similar expenses Telephone, postage, freigh, computer-line rental 68 70 72 Interest and similar expenses on debt to credit institutions 65 25 36 Marketing 25 21 20 Interest and similar expenses on deposits from and debt to customers 331 276 701 Travel expenses 14 8 10 Interest and similar expenses on issued securities 454 354 541 Training expenses 333 Interest and similar expenses on subordinated debt 81 85 79 Office accessories, printed matter 7 7 7 *) Other interest and similar expenses 1 0 36 Other administrative expenses 43 20 36 Total interest expenses and similar expenses 933 739 1 393 Administrative expenses 249 210 224 Net interest and credit commission income 890 835 832 Salaries and general administrative expenses 615 505 523 *) Of which: levy to Savings Banks' Guarantees Fund 0 0 30 i) Depreciation and other operating expenses Ordinary depreciation 16 50 32 33 Annual Report 2005 Annual Report 2005 c) Dividend and other income from securities with variable yield Write-downs 020 Income from shares and other securities with variable yield 13 9 6 Income from holdings in associated/jointly controlled companies 95 23 -5 Depreciation etc., of fixed assets etc. 50 34 33 Income from holdings in group companies 72 35 25 Expenses on leased premises 2 3 3 Total dividend and gain on securities with variable yield 180 67 26 Operating expenses, real properties 53 40 44 Machinery, fixtures, vehicles 9 9 8 88 d) Commissions and income from banking services 89 Dues/fees/insurance 777 Charges on securities trading and management 17 50 22 Loss on disposal of capital assets 1 0 0 Charges on sale of insurance services 59 43 40 Misc. operating expenses 15 13 8 Charges from payments transmission system 219 188 163 Other charges 97 40 40 Other operating expenses 86 73 71 Total commission income 410 333 278 Total depreciation and other operating expenses 136 107 105 e) Commission expenses and expenses on banking services Operating expenses 751 612 627 Charges on payment transmission 68 62 67 Pre-tax profit 750 650 514 Charges of purchases of securities 13 1 3 j) Losses on loans and guarantees Total commision expenses and expenses on banking services 81 63 70 Loans losses -38 80 219 f) Net gain/loss on foreign currency and securities Losses on guarantees 000 Net gain/loss on CDs, bonds and other interest-bearing securities 49 31 13 Credit loss on certificates/bonds/other interest-bearing securities 0 0 0 Net gain/loss on shares and other securities with variable yield 20 35 28 41 Total losses on loans and guarantees 4, 5, 12 -38 80 219 Total gain/loss on securities 84 59 54 k) Write-down and gain/loss on long-term securities Net gain/loss on foreign exchange and financial derivatives 12 18 15 Income statement parent bank NGAAP Income statement parent bank NGAAP Write-downs 20 1 10 -6 Total net gain/loss on foreign currency and derivatives 96 77 69 Gains/losses 1200 g) Other operating income Total write-down and gain/loss on long-term securities 11 -10 6 Real estate income 322 Result from ordinary operations 799 559 301 Other operating income 17 4 11 4 Total other operating income 7 13 7 Commission income and other operating income 612 427 309 Balance sheet specifications parent bank NGAAP

Balance sheet specifications parent bank (NOK million) Notes 2005 2004 2003 (NOK million) Notes 2005 2004 2003 l) Cash and receivables from central banks 1 669 989 827 v) Debt to credit institutions Loans and deposits from credit institutions without agreed term or period of notice 20 38 50 n) Loans to and receivables from credit institutions Loans and deposits from credit institutions with agreed term or period of notice 1 010 10 1 064 Loans to and receivables from credit institutions without agreed term or period of notice 48 78 143 Loans to and receivables from credit institutions with agreed term or period of notice 1 296 1 253 1 160 Total debt to credit institutions 1 029 48 1 114 Total loans to and receivables from credit institutions 1 344 1 331 1 304 w) Deposits from and debt to customers o) Loans to and receivable from customers Deposits from and debt to customers without agreed term 24 624 18 732 17 850 Bank-, operating overdraft 2 783 1 390 2 135 Deposits from and debt to customers with agreed term 2 491 2 033 2 067 Building loans 641 489 367 Total deposits from and debt to customers 13 27 115 20 765 19 917 Repayment loan 40 816 31 486 29 288 x) Debt created by issuance of securities Gross outstanding loans 6, 7, 11, 14 44 240 33 365 31 791 Negiotable certificates and other short-term funding 2 204 3 330 3 897 – Individual write downs 4, 5 -233 -285 -370 Bonds 21 15 756 9 835 7 463 – Collective write downs 4, 5 -266 -301 -302 Total debt created by issuance of securities 17 960 13 165 11 361 Total loans to and receivables from customers 43 741 32 779 31 118 y) Other debt, accrued expenses and prepaid income p) CDs, bonds and other interest-bearing securities Other current liabilities 2 090 546 335 CDs and bonds issued by public institutions 952 497 427 Accrued expenses and prepaid incomes 245 194 289 Annual Report 2005 Annual Report 2005 CDs and bonds issued by other institutions 2 734 1 699 1 823 CDs and bonds, own holding 0 116 232 Total other debt, accrued expenses and prepaid income 2 335 740 624 Total CDs, bonds and other interest-bearing securities 7, 18 3 686 2 312 2 481 z) Provision for commitments and expenses Pension commitments etc. 2 171 39 44 q) Shares (and other securities with variable yield) Deferred tax assets 27 67 0 0 Shares, units and primary capital certificates 363 370 288 Other provisions 155 105 81 90 Units in general partnerships, limited partnerships etc. 0 0 0 91 Total provisions for commitments and expenses 393 144 125 Total shares (and other securities with variable yield) 20 363 370 288 æ) Other capital r) Ownership interests in group companies Perpetual subordinated loan capital 646 597 661 Ownership interests in connected companies 423 309 263 Subordinated loan capital 1 007 749 899 Ownership interests in credit institutions 86 104 92 Ownership interests in other group companies 72 60 51 Total other capital 21,25 1 653 1 347 1 560 Total ownership interests in group companies and associated companies 20, 26 581 473 406 ø) Equity capital Company capital (primary capital certificates) 24 1 262 769 615 s) Fixed assets Holding of own primary capital certificates 0 -8 -8 Machinery/fixtures/vehicles 91 67 66 Premium fund 01010 Buildings and real property 51 73 75 Total primary capital 1 262 771 617 Total fixed assets 16, 17 143 140 141 Savings bank's fund 1 369 1 180 1 040 t) Intangible assets Equalisation fund 491 400 482 Goodwill 43000 Other equity 03657 Deferred tax advantages 27 54 14 34 Total earned equity 1 860 1 616 1 579 Total intangible assets 484 14 34 Balance shhet specifications parent bank NGAAP Repossesed assets 001 Total equity capital 28 3 123 2 387 2 196 Balance shhet specifications parent bank NGAAP Other fixed assets 29 1 353 83 83 DEBT AND EQUITY CAPITAL 53 607 38 596 36 896 Total fixed assets 1 837 97 117 u) Prepayments and accrued revenues, other assets Accrued, unpaid revenues and prepaid non-accrued expenses 244 105 214 Total prepayments and accrued revenues, other assets 244 105 214 ASSETS 53 607 38 596 36 896 Accounting Principles All asset, liability and off-balance sheet items included in and loss account and include pension rights accumulated in the hedging portfolios are valued at original cost price adju- the period and interest expenses on pension commitments General comments future cash payments or receipts through the expected life sted for accrued premium/discount. Premium/discount is less estimated return on pension assets. of the financial instrument. shown in the profit and loss account as interest. All realised The annual report and accounts are drawn up in accordance In the balance sheet the net uncovered pension commit- capital gain/loss is entered in the profit and loss account as with applicable laws and provisions and good accounting Valuation of loans in the consolidated accounts accordingly ment is classified as long-term debt. The net pension com- interest earned or accrued. Own funding is valued at book practice. Unless otherwise stated in the individual note, the follows the same principles as apply to the company mitment shows as the difference between gross pension value. Repurchase of own issued securities is valued at mar- information in the notes refers to the Group. Unless other- accounts under the lending regulations of 21 December commitment, which is the current value of the presumed ket value. Hedging contracts are valued in accordance with wise stated, all amounts in the profit and loss account, 2004, cf. Kredittilsynet’s circular no. 10/2005. future pension benefit, and pension assets. The amount of the same principle as the hedged items. balance sheet and notes are in millions of kroner. uncovered pension commitment also includes employer’s Securities The trading portfolio comprises bonds and interest rate contributions which will accrue at the rates in effect at any instruments that the bank trades in on a daily basis, and given time. Moreover, variance in estimates and effects of Treatment of subsidiaries and participati- Shares, primary capital certificates and mutual fund units where the bank’s net interest rate exposure is placed. The changed assumptions are treated on an accruals basis in on in activity under joint control are classified as current assets in the trading portfolio, are Board of Directors have set limits on the size of interest rate the net pension commitment shown in the balance sheet. shown at true value on the balance sheet date when traded The group accounts encompass SpareBank 1 Midt-Norge exposure. The portfolio’s balance sheet items are valued at Such estimates and variance from expectations are measu- on a stock exchange or in a regulated market and have a and subsidiaries and associated companies. Subsidiaries acquisition cost or market value, whichever is lowest, and red in aggregate against the gross pension commitment or good owner spread and liquidity. Other shares, primary are defined as companies in which the bank has a long-term unrealised losses are expensed/taken to revenue with a con- total pension assets, whichever is largest. If the variances capital certificates and units are classified as current assets investment of more than 50% of the capital in the company tra entry in the balance sheet. exceed 10 per cent of the measurement base, the excess and are valued collectively at acquisition cost or true value, and has a determining influence on its operations. All signi- difference is accrued over the residual accumulation period. whichever is lowest. ficant investments in subsidiaries are consolidated using Repossessed assets the equity method. Long-term investments in shares and units are valued at Assets that are entirely or partially repossessed as settle- Other liabilities acquisition cost. Long-term trade investments are written The bank’s share of a subsidiary’s profit is based on the ment for loans are valued at their assumed realisation value The bank’s own subordinated bond debt is shown in the down when the true value is substantially lower than acqui- subsidiary’s post-tax profit, and is shown on the line on the repossession date and subsequently valued on the balance sheet at net nominal value after deduction of the sition cost and the drop in value is not assumed to be “revenues on ownership interests in group companies”. balance sheet date. Write-down as a result of possible bank’s own holding. In the case of sizeable amounts, pre- Annual Report 2005 Annual Report 2005 transient. Write-downs are reversed when the basis for the mium is taken to revenue and discount is expensed on a The bank’s ownership interest in SpareBank 1 Gruppen AS decline in value or loss incurred on disposal is entered as a write-down no longer exists. systematic basis as an adjustment of current interest expen- is valued as participation in joint controlled activity. The loan loss. Gain on sale of assets is booked, when risk has ses up to the due date of the bond. The bank’s ordinary shares of SpareBank 1 Gruppen AS are valued using the Certificates of deposit and bonds are classified as current been transferred to the purchaser, as reduction in/recovery bond loans are booked in the balance sheet at nominal equity method, and accounting data are incorporated using assets in the trading portfolio and are valued collectively at of losses. Assets repossessed for rapid realisation are clas- 92 value less the bank’s own holding booked at acquisition 93 the equity method. true value. Revenues and costs on these securities are sified as current assets, while assets repossessed for per- shown under the item “net gain on securities”. Certificates manent ownership or use is classified as capital assets. cost. Sizeable direct costs incurred on bond issues and SpareBank 1 Midt-Norge acquired all the shares of Romsdals of deposit and bonds are classified as current assets in the other funding are systematically expensed as an adjustment Fellesbank ASA on 1 April 2005. Identified excess values hedging portfolio and are valued collectively at original Real estate and capital assets of current interest expenses up to the due date of the bond were valued on this date. This analysis was carried over to acquisition price adjusted for premium/discount on securi- or loan. Buildings and other real estate in the bank’s balance sheet the merger with SpareBank 1 Midt-Norge as of 1 July 2005. ties. Premium/discount is expensed/taken to revenue over are valued at acquisition cost with the addition of any reva- the lifetime of the security. Tax Recording of income/expenses luation value, but with deduction for accumulated write-off and possible write-down. Ordinary depreciation is based on The tax charge for the year in the profit and loss account Interest and commissions are included in the accounts as Fixed income and foreign exchange the assets' assumed economic lifetime and is carried out comprises tax payable on the income for the year adjusted revenues or expenses as they are earned or incurred. Loan instruments using the straight-line method. Write-downs are undertaken by the amount (surplus or deficit) set aside in previous arrangement fees are amortised in relation to effective years and any change in deferred tax assets and deferred Financial instruments include transferable financial assets when the difference between actual value and book value of interest rate over the loan’s expected term. tax. Deferred tax is calculated against the background of and liability items as well as financial derivatives. Financial buildings is substantial and not assumed to be of a transi- Accounting Principles Accounting Principles temporary differences between accounting values and tax Share dividend and other commissions and fees received by assets in the balance sheet include shares, primary capital ent nature. The write-down is reversed when the basis for values at the end of the accounting year. Positive and nega- the bank are taken to income as they accrue. The recipient certificates, bonds and certificates of deposit. Financial deri- the write-down is no longer present. tive differences within the same time interval are elimina- company takes share dividend and group contributions vatives are contracts entered into with financial institutions ted. Write-up and write-down of capital assets and pension from group companies to income in the year they are or customers to fix financial values in the form of interest Assets and liabilities in foreign currency commitments are nonetheless appraised separately. Defer- allocated by the donor company. rate terms, exchange rates and the value of equity capital Assets and liabilities in foreign currency are converted at the red tax advantages arise and are shown as an asset in the instruments for specified periods. Such contracts include middle rate quoted by Norges Bank at the end of the Average acquisition cost is employed when calculating gains balance sheet if the bank has temporary differences that forward exchange contracts, interest rate swaps and currency accounting year. Income and expenditure in the bank’s on convertible financial assets. qualify for tax deductions in the future. swaps, currency and interest rate options, forward rate accounts are converted at the prices in effect on the date agreements and stock-exchange-quoted financial futures etc. Loans, defaults and losses on loans and they were earned/incurred. The foreign exchange items are International financial reporting hedged by corresponding items on the opposite side of the guarantees The hedging portfolios were introduced to limit interest rate standards (IFRS) risk on the bank’s subordinated debt, loans and funding at balance sheet or by off-balance sheet hedging transactions. Loans are measured at amortised cost in compliance with fixed interest, and to accrue agreed margins over the term See separate note on the consolidated accounts under IFRS. IAS 39. Amortised cost is acquisition cost minus principal of the transactions. One of the hedging portfolios comprises Pension costs and pension commitments repayments, plus or minus cumulative amortisation calcu- Business area fixed interest loans and funding and interest rate hedging of SpareBank 1 Midt-Norge’s pension commitments and pen- lated using the effective interest method, and minus both these items. sion costs are calculated in conformity with Norwegian SpareBank 1 Midt-Norge regards the operations of the bank amounts, if any, for impairment loss. The effective interest accounting standards for pension costs. Net pension costs as a single business area. rate is the interest rate that exactly discounts estimated are classified in their entirety under wage costs in the profit Notes 2005 parent bank NGAAP (Amounts in NOK million unless otherwise stated) Contents notes parent bank NGAAP Note 1 Salaries, fees and other personnel expenses

Page 2005 2004 2003 Note 1 Salaries, fees and other personnel expenses ...... 95 Salaries and remuneration to employees and elected officers 347 251 278 Note 2 Pension expenses and pension commitments ...... 95 Staffing Note 3 Assets and liabillities in foreign currency ...... 96 Number man-labour year 669 510 592 Number of employees 731 553 646 Note 4 Losses on loans and guarantees ...... 96 Under the Managing Director's employment contract the bank is obligated to pay salary and other compencation for up to Note 5 Loss provisions and loans in default ...... 96 36 months after his retirement, however such that compensation payable for the final 12 months shall be reduced by any Note 6 Loans and guarantees to officers and employees ...... 98 salary earned in other employment. The Managing Director is entitled to retire upon reaching the age of 60 and to receive a pension of 68 per cent of his pensionable income. The pension obligation to the Managing Director is included in the Note 7 Subordinated loan capital in other institutions ...... 98 bank's group occupational pension scheme, cf, Note 2. Note 8 Interest rate and foreign exchange agreements ...... 98 Emoluments and Fees (NOK 1 000) 2005 2004 2003 Note 9 Other off-balance sheet commitments ...... 99 Emoluments to the Board of Directors 1 469 1 154 1 140 Note 10 Distribution of guarantees by sector/industry ...... 100 Of which emoluments to leader of the Board of Directors 300 270 250 Emoluments to the Board of Governors 705 289 241 Note 11 Distribution of loans by sector/industry ...... 100 Emoluments to the Control Committee 330 350 425 Note 12 Distribution of losses on loans and guarantees Annual Report 2005 Annual Report 2005 Emoluments to the Managing Director 3 381 1 780 1 762 by sector/industry ...... 100 Additional pension expenses 545 465 466 Note 13 Distribution of customer deposits by sector/industry . . . . . 101 Fees to external auditor 495 Audit 388 Note 14 Geographical division of customer loans and guarantees . . 101 Tax advice 79 94 Note 15 Repossessed assets ...... 101 Advisory services 142 95 Note 16 Specification of business assets ...... 102 Note 17 Purchases and disposals of machinery, equipment, Note 2 Pension expenses and pension commitments vehicles, bank buildings and other property ...... 102 The pension schemes are administered by the Group's own pension fund, and confer the right to specified pension bene- Note 18 Bearer bonds and negotiable certificates ...... 102 fits as from the age of 67. The schemes also include spouse's pension, child's pension and disability pension in accordance with further rules. The Group also has commitments vis-à-vis early retirees and some employees with earnings in excess of Note 19 Residual maturity ...... 103 12 times the basic amount under the National Insurance Scheme. The banking and financial industry has entered into an Note 20 Shares, units and primary capital certificates ...... 104 agreement on contractual early retirement as from the age of 64. The bank's contribution is about 60 per cent of pensions dis- bursed to employees who take out early retirement. Retirement age has since been changed to 62 years, and the bank's Note 21 Subordinated debt and bond debt ...... 107 responsibility is 100% from 62 to 64 years. Calculations are based on the assumption that 50% will retire at age 62 and Note 22 Ongoing lawsuits ...... 107 100% at age 64. The expenses on the early retirement scheme will be systematically distributed over the average remaining qualifying period. Note 23 Contractual obligations ...... 107 2005 2004 2003 Note 24 Primary capital certificate holders ...... 108 Notes parent bank NGAAP Present value of pension accumulated in the year 23 19 17

Contents notes parent bank NGAAP Contents Note 25 Capital ...... 110 Interest expenses on pension commitments 23 22 23 Expected return on pension assets -31 -20 -20 Note 26 Associated companies and joint ventures ...... 110 Recorded effect of plan changes 0 1 1 Note 27 Tax calculations ...... 111 Recorded effect of estimate changes and difference between actual and expected return -1 3 3 Expenced employer's contribution 3 4 3 Note 28 Equity capital ...... 112 Net pension expenses 17 29 28 Note 29 Other assets/liabilities ...... 113 Pension commitments Note 30 PCC-based remuneration ...... 113 Estimated accrued commitments exc. contribution 601 461 421 Estimated value of pension assets -492 -354 -308 Estimated net pension assets 109 107 113 Non-recorded effect of estimate changes and difference between actual and expected return 41 -66 -67 Non-recorded effect of plan change -1 -7 -8 Employer’s contribution 21 5 5 Net pension commitment in the balance sheet 171 39 44 Assumptions underlying the calculation: Average retirement rate up to 50 yrs 2–3% Non-accrual loans (parent bank) *) 2005 2004 2003 2002 Discount rate 4.5% Thereafter 0% Expected wage growth 3.3% Annual growth of basic pension under nat. ins. scheme 2.5% Loans on which interest accruals have been suspended 254 272 470 490 Expected pensions growth 2.5% Annual growth of pensions 2.5% – Specified loss provision 85 118 156 351 Expected return on pension resources 6.2% Corridor size set at 10% Net loans on which interest accruals have been suspended 169 154 314 139 In 2005 the Group booked pension expenses and pension commitments in accordance with the Norwegian Accounting Provision rate 33% 43% 33% 72% Foundation's standard for accounting treatment of pension expenses. The pension schemes are treated as benefit plans and encompass 1047 members. The actuarial calculation of pension commitment as of 31.12.2005 is based, as an estmate, *) Non-accrual loans are defined as loans where interest is taken to income when the customer pays. members information as of 01.01.2005 The bank has utilised the opportunity in NRS 6A to record the bank’s pension liability in conformity with IAS 19. The estimate variance at 01.01.2005 was accordingly recognised in the bank’s equity. This was Change in interest on loans not taken to income identical to the equity effect utilised for the Group. Interest, accrued, not taken to income as at 01.01 46 44 37 34 The assumptions underlying the calculation have been changed in relation to 2004. The discount rate is reduced from 6.2% + Merger Romsdals Fellesbank 9 to 4.5%. Other assumptions are unchanged. The amount is calculated and shown in the balance sheet under provision for – Interest taken to income from previous periods 3 3 2 2 commitments. Deferred tax benefit is calculated and recorded in accordance with generally accepted accounting principles – Interest accrued, not taken to income, on loans no longer on the balance sheet 26 22 19 16 for the treatment of deferred tax. + Interest not taken to income on loans identified as problem loans 2 17 28 21 = Interest accrued, not taken to income, on loans on the balance sheet as at 31.12 10 37 44 37 Note 3 Assets and liabilities in foreign currency 2005 2004 2003 Risk classification of loans The bank calculates default probabilities for all customers in the loan portfolio at the loan approval date. It does this on the Assets 1 502 942 1 710 basis of key figures on earnings, impairment and behaviour. Default probability is used as a basis for risk classification of the Liabilities 6 296 2 487 2 965 customer. Loss given defaults (LGD) are also used to classify each customer in a risk group.

Commitments distributed on risk classes as at 31.12.2005 (Parent bank) Note 4 Losses on loans and guarantees Residual Guarantees and Spec. loss Risk class Commitment loan unutilised credit provision 2005 2004 2003 Low risk 38 163 34 481 3 983 0 Losses of the year on loans and guarantees Normal risk 6 420 6 055 429 0 Annual Report 2005 Annual Report 2005 Change in specified losses in the period -72 -86 -154 High risk 3 165 2 973 332 0 Change in general losses in the period -15 -1 -47 Default 772 731 50 233 Actual losses in the period on loans for which loss provisions were made earlier 111 132 228 Actual losses in the period on loans for which not loss provisions were made earlier 36 52 206 Total 48 518 44 240 4 795 233 Incomings in the period on loans for which loss provisions were made earlier -98 -18 -13 The bank takes account of risk when pricing loans. Hence pricing is normally relative to risk classification. Loans entailing 96 Losses of the year on loans and guarantees -38 80 219 the lowest risk carry a low interest rate. See also comments on risk factors in the Directors' Report. Individual write downs 97 are not assigned to a risk class.

Note 5 Loss provisions and loans in default Annual expected loss level distributed on risk classed The loss estimated for the next years is about 0.3% of gross outstanding loans. Individual write downs 2005 2004 2003 Gross outstanding loans and guarantees and defaulted/other problem loans and loss provisions as at 31.12.2005 Individual write downs to cover loss on loans at 01.01 285 370 525 (Parent bank) – Reduction at 01.01., implementation effect of lending regulations 45 + Merger Romsdals Fellesbank 65 Gross Guaran- Unutilised Problem Spec. loss Unspec. loss + Increase in individual write downs from previous period 24 36 38 loans tees limit Defaults loans provision provision – Reduction in individual write downs from previous period 70 44 30 + New individual write downs in the period 85 54 66 Retail customers 28 986 14 596 155 34 38 – Reduction in individual write downs due to previous realization 111 132 228 Other 451 85 411 0 43 29

Notes parent bank Individual write dows to meet losses as at 31 December 233 285 370 Sectors: Notes parent bank Retailing/hotels 1 683 174 443 24 12 18 Collective write downs Ariculture/forestry/fisheries and hunting 2 971 12 319 24 6 6 Collective write downs to meet losses as at 01.01 301 302 349 Fish farming industries 557 1 307 0 11 24 – Reduction at 01.01., implementation effect of lending regulations -80 Prop. management/business serv. 6 511 167 742 83 80 50 + Merger Romsdals Fellesbank 60 Construction 535 310 278 2 3 3 + Collective write downs in the period -15 -1 -47 Manufacturing 967 408 225 21 71 36 Transport and other services 1 580 197 107 43 11 28 Collective write downs to meet the losses as at 31.12 266 301 302 Total 2005 (all customers) 44 240 1 368 3 427 352 270 233 266 Total defaults 2005 2004 2003 2002 Total 2004 (all customers) 33 365 1 119 2 430 355 598 285 301 Loans in default for more than 90 days 352 354 455 569 Total 2003 (all customers) 31 791 873 1 930 455 858 370 302 – Specified loss provision 83 156 211 240 Collective write downs are undertaken at total portfolio level. Net defaults 269 198 244 329 Provision rate 24% 44% 46% 42% Problem loans Problem loans (not in default) 270 312 439 592 – Specified loss provision 150 129 159 285 Net problem loans 120 183 280 307 Provision rate 56% 41% 36% 48% Note 6 Loans and guarantees to officers and employees Settlement is such that if the short-term reference rate at a given due date is higher than the cap, the buyer will be paid the difference between the two rates. 2005 2004 2003 Interest Rate Floor Loans and guarantees to officers and employees 568 465 480 In contrast to a cap, the buyer of an interest rate floor will set a lower limit or minimum return for his high-floating invest- ment. Settlement is the same as in the case of the cap, but with opposite signs. Loans and guarantees to officers Interest Rate Collar Agreement between a seller and buyer (borower) that combines a cap and a floor. The buyer secures a maximum and mini- (NOK 1 000) Loans mum borrowing rate. By combining a cap and a floor a fluctuation range is established for the interest rate. In reality the CEO 1 161 buyer of a collar buys a cap and sells a floor, thereby ensuring that the interest rate will remain within a pre-agreed corridor. Chair of the Board of Director 919 Interest Rate Futures Board members Agreements to purchase or sell a specific number of bonds at a future date. Contracts are settled with the Norwegian Eli Arnstad 634 Options Central. Agreements of this kind are often made to reduce the interest rate exposure attached to a bond portfolio. Venche Johnsen 978 Egill Vatne 926 The Board of Directors have set an overall limit for maximum interest rate risk in losses/gains at 1 percent parallel shift in Jan Gunnar Kvam 791 the general interest rate level, and limit for total foreign currency exposure. Part of the interest rate risk covered in the Executives balance sheet is hedged by interest rate swaps, FRAs and bond futures. The bank considers it has good control over, and a Executive Director Corporate Market Division 1 502 well-balanced, interest rate and foreign currency exposure. Deputy CEO Executive Director Retail Market Division 1 700 Legal Director 1 356 The interest rate and foreign exchange agreements are essentially contracted with high-quality financial institutions, such Executive Director, Communications 874 that the bank regards the credit risk as minimal.

Control Committe 342 Contract amount Supervisory Board 39 550 Purchase Sale Net fair value Of which to the Chairman of the Supervisory Board 1 217 Forward exchange transaction 453 453 0 Total loans to employees include loans to senior employees and officers. All loans to employees are booked in the parent bank. Interest rate swaps 23 009 23 009 -24 Annual Report 2005 Annual Report 2005 Strict requirements as to collateral apply to these loans. The interest subsidy for 2005 is estimated at NOK 0,7 million using FRAs 4 500 2 000 0 the interest rate underlying the tax on the benefit of low-interest loans to employees. Currency put options 562 562 0 Currency call options 562 562 0 Interest Rate Cap/Floor 792 773 -3 Note 7 Subordinated loan capital in other institutions 29 878 27 359 -27 98 99 2005 2004 2003 Bearer bonds 004 Loans 152 71 76 Total subordinated loan capital 152 71 80 Note 9 Other off-balance sheet commitments Of which placed with financial institutions 137 55 4 2005 2004 2003 Note 8 Interest rate and foreign exchange agreements Guarantee commitments Payment guarantees 502 389 434 Off-balance sheet financial instruments are employed to meet customer's financing requirements, and to guide tha bank's Performance guarantees 587 473 209 foreign exchange and interest rate exposure. These instruments are also used to exploit expected interest rate and exchange Loan guarantees 1 1 2 rate movements. The bank has no netting agreements. In the context interest rate and exchange rate agreements are finan- Guarantees for taxes 6 5 5 Notes parent bank cial instruments defined as follows: Guarantees for Savings Banks' Guarantee Fund 0 50 50 Notes parent bank Other guarantee commitments 271 253 223 Forward contracts in foreign currencies Total guarantee commitments 1 368 1 171 924 These are agreements to buy or sell a specific amount in foreign currency at a future date at a predetermined exchange rate. It also includes agreements to exchange specific amounts of two different foreign currencies at a predetermined exchange Of which counter-guaranteed by banks 0 0 0 rate and pay interest on these for an agreed period of time (foreign currency swaps). Other commitments Interest Rate Swaps Letters of credit 99 86 77 An agreement whereby interest rate on nominal amounts are exchanged with customers or banks. Unutilised ordinary block credit 2 879 2 430 1 930 Total commitments 2 977 2 516 2 007 Forward Rate AAgreements (FRAs) Agreements which stipulate a certain interest rate on a nominal amount for a future period of time. Re foreign exchange, see note 8.

Currency Option Assets pledged as security A contract that gives the buyer a right, but not an obligation, to buy or sell a currency at a fixed price on a specified date or Bearer bonds at book value of this pledged as security in Norges Bank 2 852 2 180 2 303 within a specified period. Loans (D-loans) from Norges Bank 0 0 0

Interest Rate CAP An agreement between a seller and buyer (borrower) where the borrower puts a cap on his floating interest rate over a specified period. The reference rate which the buyer wishes to hedge may for example be NIBOR. At each due date NIBOR shows whether the reference rate is below or above the interest rate cap agreed by the buyer. Note 10 Distribution of guarantees by sector/industry Note 13 Distribution of customer deposits by sector/industry

2005 2004 2003 2005 2004 2003 Sectors Sectors Commercial sector 1 269 1 035 778 Public administration 2 414 1 428 1 268 Private customers 14 10 7 Commercial sectors 10 141 7 488 7 043 Other sectors 85 75 88 Private customers 14 075 11 256 11 252 Other sectors 484 593 354 Total 1 368 1 120 873 Total 27 114 20 765 19 917 Industries Commerce/hotels 174 215 217 Industries Primary industries 12 7 9 Commerce/hotels 2 176 1 640 1 399 Sea farming industries 1 0 0 Primary industries 1 233 1 134 1 189 Financing, real estate etc. 167 79 155 Sea farming industries 57 38 34 Building and constructions 310 275 153 Property operation/business services 3 117 2 176 1 885 Manufacturing 408 267 135 Building and construction 787 402 379 Transportation and services 197 191 109 Manufacturing 592 313 404 Transportation and services 2 178 1 785 1 753 Total 1 269 1 035 778 Total 10 141 7 488 7 043 Geographical distribution see note 14. Average interest rate customers 1.41% 1.38% 3.61% Average interest rate financial institution 3.23% 2.61% 2.68% Note 11 Distribution of loans by sector/industry

2005 2004 2003 Note 14 Geographical division of customer loans and guarantees Sectors Annual Report 2005 Annual Report 2005 Public administration 96 69 67 Loans Guarantees Commercial sectors 14 804 11 411 11 133 Sør-Trøndelag 18 153 651 Private customers 28 986 21 485 20 005 Nord-Trøndelag 13 853 295 Other sectors 355 401 587 Møre og Romsdal 7 129 259 Total 44 240 33 365 31 791 Nordland 225 2 100 Other parts of Norway 4 326 160 101 Industries Foreign 554 0 Commerce/hotels 1 683 1 246 1 268 Primary industries 2 971 2 560 2 522 Total 44 240 1 368 Sea farming industries 557 698 832 Loans are gross loans before specified loss provisions. Property operation/business services 6 511 4 220 3 682 Building and construction 535 452 391 Manufacturing 967 753 826 Transportation 1 580 1 482 1 612 Note 15 Repossesed assets

Total 14 804 11 411 11 133 2005 2004 2003 Geographical distribution see note 14. Repossesed financial assets 0 0 1 Repossesed assets 00 0 Total repossesed assets 0 0 1

Notes parent bank Note 12 Distribution of losses on loans and guarantees by sector/industry Notes parent bank

2005 2004 2003 Sectors Commercial sector -18 53 258 Private customers -9 13 8 Other sectors/foreign countries 4 15 0 Collective write downs for the year -15 -1 -47 Total -38 80 219

Industries Commerce/hotels 11 4 11 Primary industries -1 4 4 Sea farming industries -14 13 183 Property operation/business services -51 7 29 Building and construction 1 0 4 Manufacturing 26 18 8 Transportation and services 11 8 20 Total -18 53 258 Note 16 Specification of business assets Note 19 Residual maturity

Machinery/ Buildings/ Up to From 1 to 3 months From 1 year Over No Totalt Fixtures/Vehicles Properties Goodwill Assets 1 month 3 months to 1 year to 5 years 5 years residual maturity Original cost as of 01.01.05 SMN 334 86 Norwegian kroner Original cost as of 01.01.05 RF 53 99 Cash and receivables from central banks 1 669 1 669 Loans to and receivables Original cost as of 01.01.05 incl. previously written up 387 185 from credit institutions*) 1 344 1 344 Additions 43 0 447 Loans to and receivabl. from customers 3 552 492 2 687 9 274 27 558 -470 43 093 Disposal at original cost 4 86 Bonds/CDs and other Total depreciation and write-downs 335 47 16 interest-bearing securities 225 884 1 032 1 434 111 3 686 Assets with no residual maturity 2 926 2 926 Book value as at 31.12.05 91 51 430 Foreign currencies Depreciation and write-downs in the year 32 2 16 Cash and receivables from central banks 7 7 Loans to and receivables Expected economic lifetime for machinery/fixtures and means of transport is about 5 years, for EDP equipment between 3 from credit institutions 47 47 and 4 years, and for buildings about 50 years and 25 years respectively in towns and rural areas. Goodwill arose in connec- Loans to and receivabl. from customers 670 7 -29 648 tion with the takeover of Romsdal Fellesbank in spring 2005. Goodwill is amortised over 20 years. This is done based on Assets with no residual maturity 188 188 SpareBank 1 Midt-Norge’s business plans for the new market area, and the bank’s intention to further develop this market area ahead. Total assets 5 837 1 376 3 726 10 708 27 669 4 290 53 607

Buildings and other real property (NOK 1 000) Up to From 1 to 3 months From 1 year Over No Totalt Type of Book Area in square meters Liabilities 1 month 3 months to 1 year to 5 years 5 years residual maturity Place building value Own use Leased Vacant Total Remarks Norwegian kroner Verdal Seminar resort 8 773 Debt to credit institutions 16 190 206 Trondheim Bank building 23 546 2 500 2 500 Incl. lot Deposits from and debt to customers 26 464 107 318 26 889 Annual Report 2005 Annual Report 2005 Trondheim Apartment 102 32 32 Debt created by issuance of securities 1 110 706 2 464 8 673 589 13 542 Trondheim Office building 1 053 280 280 Incl. lot Other debt with no residual maturity 2 643 2 643 Malvik Bank building 2 329 473 473 Incl. lot Subordinated debt 168 839 1 007 Rennebu Bank building 3 782 842 850 1 692 Incl. lot Equity capital 3 123 3 123 Singsås Bank building 898 360 102 462 Incl. lot 102 Rennebu Bank building 307 395 395 Incl. lot Foreign currencies 103 Other real estate Cabins etc. 10408 Debt to credit institutions 215 255 353 823 Deposits from and debt to customers 226 226 Total 51 198 Debt incurred by issuance of securities 1 102 3 117 199 4 418 Other debt with no residual maturity 85 85 Subordinated debt 646 646 Note 17 Purchases and disposals of machinery, equipment, vehicles, bank buildings and other property Total liabilities and equity capital 28 032 2 360 2 817 12 276 2 273 5 850 53 607

(NOK 1 000) 2005 2004 2003 2002 2001 Net liq. exposure, balance sheet items -22 194 -984 909 -1 567 25 396 -1 560 Parent bank *)Overdraft, operating credits and similar facilities are grouped under 1 month's residual maturity Machinery/equipment/ Additions 43 163 34 075 29 351 19 497 36 948 vehicles Disposal 2 895 537 935 541 446 Gain/loss 920 301 585 133 347 Agreed/probable timing of interest rate changes Bank buildings and Additions 0 0 0 68 718 4 567 Notes parent bank other property Disposal 56 131 16 1 529 0 40 620 Up to From 1 to 3 months From 1 year Over No Totalt Notes parent bank Gain/loss 902 16 741 0 15 320 Assets 1 month 3 months to 1 year to 5 years 5 years residual maturity Norwegian kroner Cash and receivables from central banks 1 669 1 669 Loans to and receivables Note 18 Bearer bonds and negotiable certificates and other short-term investments from credit institutions 1 344 1 344 Loans to and receivabl. from customers 165 40 957 515 1 566 360 -470 43 093 Normal Book value/ Bonds/CDs and other Risk value market value interest-bearing securities 385 934 749 1 595 21 3 686 Assets with no residual maturity 2 926 2 926 Goverment issues 0% 1 070 1 080 Issued by Norwegian counties 20% 41 41 Foreign currencies Issued by financial institutions 20% 2 553 2 565 Cash and receivables from central banks 7 7 Total bearer bonds and certificates 3 664 3 686 Loans to and receivables Short-term investments in shares 128 from credit institutions 47 47 Loans to and receivabl. from customers 34 636 7 -29 648 Total short-term investments in securities 3 814 Assets with no residual maturity 188 188

The average effective interest rate is about 2.16%. The interest rate is calculated on the basis of interest income for the year Total assets 1 975 42 528 1 271 3 161 381 4 291 53 607 and the average holdning through the year. Up to From 1 to 3 months From 1 year Over No Totalt Specification of items: Liabilities 1 month 3 months to 1 year to 5 years 5 years residual maturity Our Original Market value/ Norwegian kroner Stake holding cost booked value Debt to credit institutions 7 199 206 Short-term investments (%) (number) (NOK 1000) (NOK 1000) Deposits from and debt to customers 85 235 168 325 26 075 26 889 Stock exchange listed companies: Debt created by issuance of securities 225 781 4 220 7 727 589 13 542 APL ASA 0.07 13 916 823 1 120 Other debt with no residual maturity 2 643 2 643 Cermaq ASA 0.02 20 088 884 1 095 Subordinated debt 450 557 1 007 Det Norske Oljeselskap AS 0.02 40 580 129 2 618 Equity capital 3 123 3 123 DnB NOR ASA 0.01 74 428 2 987 5 359 Eastern Drilling ASA 0.06 11 820 779 1 299 Foreign currencies Fred Olsen Energy ASA 0.02 9 371 826 2 263 Debt to credit institutions 215 255 353 823 Global Geo Services ASA 0.34 107 074 782 964 Deposits from and debt to customers 226 226 Kverneland ASA 0.06 8 024 643 602 Debt incurred by issuance of securities 2 897 1 521 4 418 Nordic Semiconductor ASA 0.10 30 323 362 1 971 Other debt with no residual maturity 85 85 Norsk Hydro ASA 0.00 8 428 3 172 5 857 Subordinated debt 165 481 646 Norske Skogindustrier ASA 0.01 19 880 2 123 2 127 Total liabilities and equity capital 533 1 470 8 087 10 295 1 070 32 152 53 607 Orkla ASA 0.01 15 263 2 315 4 266 Petroleum Geo-Services ASA 0.01 7 575 878 1 572 Net liq. exposure, balance sheet items 1 442 41 058 -6 815 -7 134 -689 -27 861 Royal Caribbean Cruises Ltd. 0.01 9 449 2 482 2 891 Schibsted ASA 0.01 5 174 668 1 053 The Board of Directors have set an overall limit for maximum interest rate risk in losses/gains at 1 per cent parallel shift in Statoil ASA 0.00 44 823 3 943 6 925 the general interest rate level, and a limit to total foreign currensies exposure. Part of the interest rake risk covered in the Storebrand ASA 0.01 41 254 1 281 2 413 balance sheet is secured by interest rate swaps, FRAs and bond futures. The tables above do not include interest rate posi- Tandberg 0.01 13 142805 544 tions for off-balance sheet financial instruments. Tandberg Television ASA 0.03 16 890 802 1 516 Telenor ASA 0.00 85 026 3 445 5 654 Tomra Systems ASA 002 32 015 1 102 1 550 Note 20 Shares, units and primary capital certificates Yara International ASA 0.00 12 998 1 352 1 280 Glamox ASA 0.00 59 20 20 Annual Report 2005 Annual Report 2005 Book value Market value Sparebanken Nord-Norge, Primary capital certificate 0.24 37 800 2 588 5 935 Sparebanken Rogaland, Primary capital certificate 0.09 20 870 1 550 4 800 Short-term investments in shares 128 128 Trøndelag Eiendom II AS 12 2076 2076 Long-term investments: – in shares in other commpanies 234 Unit funds – in units in other companies 0 Odin Franklin USA 0.00 44 823 2 052 2 227 104 – in shares in jointly-controlled activity 423 Odin Templeton Global Smb 0.00 41 254 5 168 6 487 105 – in shares in subsidiaries 158 Skagen Global 0.00 13 142 5 702 9 709 Total share investments 944 Romsdals Fellesbank 0.00 116 607 11 661 20 019 Tgsf/Franklin European Fund 0.00 16 890 15 000 21 578 Total parent bank 78 401 127 790

Our Original Stake holding cost Booked value Jointly controlled activity Headquarters (%) (number) (NOK 1000s) (NOK 1 000) SpareBank 1 Gruppen AS Oslo 15.45 241 495 477 431 382 420 Sparebank 1 Boligkreditt AS Stavanger 20.00 166 472 20 809 20 695 Molde Kunnskapspark AS Molde 20.00 2 000 2 030 2 030 SpareBank 1 Utvikling DA Oslo 20.00 18 000 18 000 Notes parent bank Notes parent bank Total parent bank 518 270 423 145

Book value corresponds to the bank's share of company's equity capital. Our Original Market value/ Note 21 Subordinated debt and bond debt Stake holding cost booked value Long-term investments (%) (number) (NOK 1000s) (NOK 1000s) Maturity 2005 2004 2003 Romsdal Eiendom I AS 0.00 250 39 500 39 500 2004 900 Föreningssparbanken AB (SEK) 0.06 335 000 39 943 39 324 2005 2 691 1 300 Adresseavisen ASA 4.64 88 210 26 471 26 471 2006 3 190 1 580 1 030 Viking Venture AS 13.16 240 878 22 311 22 311 2007 4 408 2 187 2 129 Angvik Investor AS 10.00 15 000 15 002 15 002 2008 2 036 470 150 Moldekraft AS 0.00 9 000 0 9 027 2009 1 838 550 Eksportfinans ASA 0.70 1 068 7 964 19 854 2010 3 243 250 Teller AS. (formerly Visa Norge AS) 5.01 401 6 025 6 025 2011 410 409 365 Såkorninvest Midt-Norge AS 13.51 81 749 8 584 5 989 2012 600 Trøndelag Vekst AS 12.78 84 354 7 801 5 587 2013 201 Real Estate Central Europe AS 8.22 3 000 10 500 5 500 2035 80 Bankenes Betalingssentral AS 4.69 309 609 5 189 5 189 Own holding -250 Petro Midt-Norge AS 3.82 51 180 5 118 5 118 Viking Venture II AS 6.94 50 000 5 000 5 000 Bond debt and other long term debt 15 756 8 138 5 874 Pertra AS 1.82 41 020 4 102 4 102 Marin Vekst ASA 1.87 25 000 2 500 2 500 Average interest rate 2.47% 2.22% 4.61% Moldetorget Eiendom 0.00 2 500 2 501 2 501 Average interest rate (EUR) 2.37% 2.60% 2.57% Sentrumsgården AS – Leksvik 35.28 2 115 2 115 2 115 Debt in foreign currencies 4 605 1 697 1 590 Bjørnsonhusets Venner AS 0.00 2 000 0 2 001 Own holding for trading 0 60 85 Nte-Allianse Adcom AS 0.00 150 000 1 500 1 500 Market value own holding for trading 0 62 81 Eurotunnel (GBP) 0.00 777 130 3 582 1 448 Tæl AS 14.29 1 000 1 030 1 030 The costs of the various issues are not capitalised. The borrowings are hedged by interest rate derivatives and investments in Såkorn Management AS 58.33 58 334 1 028 1 028 other bonds. For substantial amounts, premiums are taken to income and discounts are expensed systematically as an adjust- Støren Trelast AS 8.36 7 251 891 891 ment of the current interest expenses up to the bonds’ maturity date. The average interest rate on bond debt is calculated on Norway Royal Salmon AS 0.50 87 266 806 806 the basis of the interest expense in the period/average book value. Corresponding interest rate for negotiable certificates is Energivekst AS 0.77 24 314 681 681 2.13%. Annual Report 2005 Annual Report 2005 Offshore Union AS 9.49 775 775 388 Steinkjer Næringspark ASA 5.57 4 900 263 263 Maturity subordinated debt 2005 2004 2003 Kunnskapsparken Steinkjer AS 4.00 10 250 250 2009 3 month Nibor + margin (Call option 2004) 150 Tangen Næringsbygg AS 3.45 250 250 250 2010 fixed rate of interest 8% (Call option 2005) 200 200 Namsos Hotell AS 27.78 500 176 176 2010 3 month Nibor + margin (Call option 2005) 200 200 106 Langfjordtunnelen AS 0.00 511 0 125 2012 3 month Nibor + margin (Call option 2010) 100 107 Steinkjer Næringsselskap AS 6.14 1 066 93 93 2013 fixed rate of interest 7.2 (Call option 2008) 162 162 162 Various long-term shareholdings 2 890 2013 3 month Nibor + margin (Call option 2008) 189 189 189 Total parent bank 222 198 234 932 2014 3 month Nibor + margin (Call option 2007) 100 2015 3 month Nibor + margin (Call option 2009) 450 Perpentual 3 month Libor + margin (USD 25 mill.) 227 227 227 Change in long-term shareholdings in parent bank 2005 2004 2003 2002 Hybrid equity 30 years Libor + margin (USD 75 mill.) 527 527 527 – Premium, subordinated loan, NOK 7 Opening balance 01.01 272 580 170 471 156 236 210 301 – Discount perpentual subordinated debt -7 -10 -12 Additions in the year 1 242 205 115 390 39 864 32 018 – Perpentual subordinated debt currency agio -63 -72 -57 Disposals in the year 1 281 968 1 541 32 848 60 050 – Hybrid equity currency agio -38 -74 -25 Reversal 3 064 16 432 18 448 9 423 Write-down 949 4 693 11 229 16 609 Subordinated debt 1 653 1 347 1 559 Closing balance 31.12 234 932 272 580 170 471 156 236 Average interest rate NOK 4.43% 5.50% 6.16% Notes parent bank Average interest rate USD 5.59% 4.92% 3.53% Notes parent bank The capital with accrued interest in the above loans ranks behind all other debt of the bank except repayment of and return Our Our Original Market value/ on primary capital contributions. The interest rate is calculated on the basis of interest costs for the year and the average stake holding cost booked value holding through the year. Shares in subsidaries Headquarters (%) (number) (NOK 1 000) (NOK 1 000) Discount on the subordinated loan is the difference between nominal value and book value. This discount is accrued over Midt-Norge Fonds AS Trondheim 100.00 100 100 0 the lifetime of the loan. Currency agio is the market assessment of the exchange rate element on subordinated debt and SpareBank 1 Finans Midt-Norge AS Trondheim 100.00 5 500 55 000 85 918 hybrid capital in USD. Midt-Norge Regnskap AS Trondheim 100.00 20 1 000 2 022 Eiendomsmegler 1 Midt-Norge AS Trondheim 92.00 3 500 12 990 22 893 Gaden & Larsen Eiendom AS Trondheim 100.00 152 462 0 3 146 Note 22 Ongoing lawsuits Allegro Finans ASA Trondheim 90.10 5 406 7 476 27 995 Rofe Invest AS Molde 100.00 50 3 250 3 250 The Group is involved in legal disputes not considered to be of substantial significance for the Group’s financial position. Romsdal Invest AS Molde 100.00 1 000 2 595 2 643 Provision for loss has been made where necessary. Storgt. 42 AS Molde 100.00 1 000 10 141 10 088 Total parent bank's shares in subsidiaries 76 705 157 955 Note 23 Contractual obligations The book value in the bank's wholly-owned subsidiaries corresponds to the companies' equity capital according to the equity The bank has established leases for business premises, incl. In-Store Bank agreements, with entities other than subsidiaries at method. an overall annual cost of NOK 46.1 million based on the agreed price at 01.01.2006. The agreements are of varying duration, but the majority can be renegotiated in the period 2006–2007. Note 24 Primary capital certificate holders Members/alternates of the Supervisory Board No. of PCCs The bank holds PCC capital of NOK 1,262 million distributed on 50,489,085 PCCs with face value of NOK 25 per PCC. As at Anne Marie Møller 11 000 1 January 2006 the risk amount is provisionally estimated to NOK +2.39 per PCC. Market value at 31.12.2005 was NOK 78.25. Anne Torill Ramberg 4 060 Arne Lorentsen 180 000 Arnhild Bjørshol 5 000 The 20 largest PCC holders as at 31 December 2005 Number Share Asbjørn Jakobsen 3 705 Alf Erevik 500 FöreningsSparbanken 4 154 195 8.23% Birgit Stafne 2 000 Romern AS 2 059 870 4.08% Bjørn Thommesen 4 285 J P Morgan Chase Bank 1 253 979 2.48% Endre Lysø 45 State Street Bank & Trust Co. 1 278 885 2.53% Erik Solberg 23 866 Deutsche Bank AG 1 010 300 2.00% Finn Kløven 4 717 I.K. Lykke, T. Lykke and others 948 290 1.88% Gunn L Brenne 1 155 Frank Mohn AS 688 610 1.36% Hans Munkeby 8 000 Tveteraas Invest AS and others 522 315 1.03% Helge Ryvarden 5 259 HSBC Bank PLC 462 836 0.92% Inge Lindseth 13 800 Meieribrukets Pensjonskasse 447 260 0.89% Joar Grimsbu 11 000 Tonsenhagen Forretningssentrum AS 430 180 0.85% Johan Brobakke 8 035 DFA-INTL sml cap val 404 620 0.80% Kari Hanna Gunnes 3 130 Otto Morcken 369 640 0.73% Karl Ove Bjørnstad 22 970 Heglund Holding 353 500 0.70% Kjell Hagan 1 560 Trondheim Kommune 304 500 0.60% Knut Solberg 330 Terra Utbytte Verdipapirfond 301 750 0.60% Lars Forseth 4 100 Jow Invest AS 300 000 0.59% Lars Sjømo 224 120 Haugaland Kraft AS 294 070 0.58% Leif Singstad 24 105 Adresseavisens Pensjonskasse 291 765 0.58% Linda Iversen 2 250 Goldman Sachs International 281 453 0.56% Michael Momyr 330 The 20 largest PCC holders in total 16 158 018 32.00% Nils Sverre Bye 4 735 Annual Report 2005 Annual Report 2005 Others 34 331 067 68.00% Per Ivar Mohrsen 2 040 Per S. Solve 5 000 Total issued PCCs 50 489 085 100.00% Ragnhild Mørch 7 480 Randi Aune 1 375 PCCs owned by elected officers as at 31 December 2005 Rigmor Finland 3 250 108 Members/alternates of the Board of Directors No. of PCCs Rolf Bratlie 5 000 109 Anne-Brit Skjetne 1 560 Rolf Haukdal 125 570 Jan Gunnar Kvam 2 500 Sverre Petter Berg 2 250 Venche Johnsen 5 000 Terje Skjønhals 11 135 Terje Roll Danielsen 158 330 Thorbjørn Røsæg 2 355 Stig O. Jacobsen 15 000 incl. related parties Tone Valmot 3 605 John Mjøen *) 5 000 Tor E. Stigum 120 535 Olav Gjerland *) 37 500 Tor Helge Hansen 1 310 Per Gunnar Solemdal *) 5 000 Tore Foss 70 000 Tomm Bøyesen *) 2 000 Tore Hertzenberg-Nafstad 8 195 Arne Sverressønn Nypan *) 5 000 Vera Kommisar 2 290

*) Members in subsidiary companies

Notes parent bank Head Office Administration: Notes parent bank Finn Haugan 91 020 Kjell Fordal 79 315 incl. related parties Ståle Svenning 43 750 Marvin Wiseth 39 375 Tore Haarberg 53 905 Rune Haglund 42 250 Reidar Stokke 37 500 Note 25 Capital Company name Assets Depts Income Profit Share 2005 SpareBank 1 Gruppen, Group 7 402 7 023 1 550 95 18% Specification of basis measurement 2005 2004 2003 SpareBank 1 Utvikling DA 62 44 58 3 20% SpareBank 1 Boligkreditt 22 2 - - 20% Risk category 10% 14 13 11 Molde kunnskapspark 2 0 - - 20% Risk category 20% 643 460 563 Risk category 50% 13 099 9 681 8 773 7 488 7 069 1 608 98 Risk category 100% 21 048 15 589 15 537 Total assets off the trading portfolio 34 803 25 743 24 885 2004 Total off-trading-portfolio and off-balance-sheet 783 609 485 SpareBank 1 Gruppen, Group 5 540 5 240 1 183 23 15% Total measurement base, forex risk and items included in trading portfolio 344 302 234 SpareBank 1 Utvikling DA 48 41 48 - 20% – Less ineligible items: Capital in other financial institutions 402 363 257 5 588 5 281 1 231 23 Write downs 499 586 673 Basis of measurement of capital 35 028 25 705 24 674 Note 27 Tax calculations Eligible capital Subscribed capital and premium fund 1 262 771 617 POSITIVE TEMPORARY DIFFERENCES/ The bank's reserves 1 369 1 180 1 040 NEGATIVE TEMPORARY DIFFERENCES RELATED TO: 2005 2004 2003 Equalisation fund 491 400 482 Current assets/short-term debt -255 -35 -16 Other equity capital 466 454 438 Capital assets 38 28 41 Total core capital 3 588 2 806 2 578 Long-term debt 11853 – Deduction for intangible assets/deferred tax benefit 484 14 34 Pension commitments 171 39 44 Total core capital 3 104 2 792 2 544 Basis for deferred tax advantage -45 50 121 Subordinate debt 1 188 873 1 178 Assessed deferred tax advantage (28%) -13 14 34 – Reduction past 5 years 0 0 0 Annual Report 2005 Annual Report 2005 = Deferred tax advantage (balance sheet item) -13 14 34 Net supplementary capital 1 188 873 1 178 – Less ineligible share of capital in other financial institutions 402 363 257 TAXES FOR 2006: 2005 2004 2003 Net capital 3 889 3 302 3 465 Profit before tax, exc. income from Group/associated companies 648 502 281 Permanent differences -67 -26 -18 Capital adequacy in % 11.10 12.85 14.04 110 Change in temporary differences -7 -68 -46 111 Core capital adequacy in % 8.86 10.86 10.31 Tax base for the year 574 407 218 28% tax of the tax base 161 114 61 Note 26 Associated companies and joint ventures 0.3% tax on the net capital wealth 5 3 4 Dividend payment deduction 0 0 -1 SpareBank 1 Gruppen AS is owned jointly by SpareBank 1 SR-Bank, SpareBank 1 Midt-Norge, Sparebank 1 Nord-Norge and Payable tax 166 117 64 Samarbeidende Sparebanker AS, each with a 17.63% stake. Other owners are FöreningsSparbanken AB (19.%) and the Allocated previous years -1 -7 5 Norwegian Confederation of Trade Unions (10%). The stake in SpareBank 1 Gruppen AS is viewed a participation in jointly Change, deferred tax 22034 controlled activity, and is recognised using the equity method. Tax burden for the year 166 130 103 The jointly controlled activity consists of the parent company SpareBank 1 Gruppen AS, SpareBank 1 Livsforsikring AS, SpareBank 1 Skadeforsikring AS, SpareBank 1 Fondsforsikring AS, Bank 1 Oslo AS, Sparebankutvikling AS, ODIN Forvaltning AS SpareBank 1 Medlemskort AS. In addition, SpareBank 1 Gruppen AS owns 24.50% of the brokerage house First Securities Note 28 Equity capital Notes parent bank ASA and 20% of SpareBank 1 Utvikling DA. The subsidiaries operate in the banking, insurance and fund management seg- Notes parent bank Owners, Savings ments. All transactions between the bank and the subsidiaries in SpareBank 1 Gruppen are effected on business terms. Internal Total capital Premium Equalisation bank's Other funds considerations between the bank and SpareBank 1 Gruppen AS that are not related to sales and portfolio advice are based on equity contribution fund fund fund and gift fund the full cost principle. Recorded by the parent bank as of 31 Dec 2004 2 387 761 10 400 1 180 36 2005 2004 Equity changes due to IFRS, also affecting NGAAP, 01.01.2005 33 35 34 -36 At 01.01 309 266 Imputed wage cost of placing reflected in equity 29 17 12 Increase/Decline in equity participation 77 34 Issue costs -19 -19 Entries to equity -58 -14 Result for the year 632 0 0 632 0 Share of profit 95 23 Placing with PCC holders and employees 473 241 232 0 0 0 At 31.12 424 309 Bonus issue 0 252 -223 -29 0 0 Own PCCs sold 20 8 0 12 0 0 Correction of equity capital against associated companies *) -66 0 0 -33 -33 0 Transfer to equalisation fund - 0 0 90 -90 0 Allocated to dividend on PCCs -278 0 0 0 -278 0 Set aside for gift purposes -89 0 0 0 -89 0 Equity capital as of 31.12.05 3 122 1 262 0 491 1 369 0 *) Correction on the basis of equity capital in SpareBank 1 Gruppen Number Nominal Booked Own PCCs (no.) value value Premium value Own PCCs opening balance 75 229 8 4 11 Cash flow statement parent bank Purchase - 0 0 Sale 75 229 8 -4 Gain/loss against equalisation fund 0

Own PCCs closing balance - 0 0 0 (NOK million) 2005 2004 2003 Change 75 229 8 4 11 Profit before tax 799 559 301 Nominal value reduces the paid-in capital due to the bank’s holding of its own primary capital certificates, and premium -/+ Gains/Loss on sale of fixed assets 0 0 -2 reduces the equalisation fund. + Depreciations and write-downs on fixed assets 35 45 29 + Losses on loans and guarantees -38 80 219 PCC capital history - Payable tax -165 -110 -69 Change in Total PCC Net cash increase from ordinary opertions 631 574 479 Year Change PCC capital capital No. of PCCs Decrease/(increase) other receivables -1 840 110 30 1991 Placing 525 525 5 250 000 Increase/(decrease) short term debt 1 784 47 -170 1992 Placing 75 600 6 000 000 Increase/(decrease) pension cost commitments 109 -5 3 2000 Employee placing 5 605 6 053 099 Increase/(decrease) other debt 49 24 5 2001 Employee placing 5 610 6 099 432 2002 Employee placing 5 614 6 148 060 Net cash changes in profit and loss accounts 103 176 -132 2004 Bonus issue 154 768 7 685 075 2005 Placing 217 986 9 859 317 Decrease/(increase) loans to customers -4 324 -1 741 -1 802 2005 Employee placing 24 1 009 10 097 817 Decrease/(increase) loans credit institutions 1 -27 534 2005 Split 3 029 4 039 40 391 268 Increase/(decrease) deposits and debt to customers 2 045 848 835 2005 Bonus issue 1 010 5 049 50 489 085 Increase/(decrease) debt to credit institutions 977 -1 066 -1 017 Decrease/(increase) in short term investments -921 169 -139 A) Net cash flow from operations -1 489 -1 067 -1 242 Annual Report 2005 Annual Report 2005 Note 29 Other assets/liabilities Increase in tangible fixed assets -43 -34 -29 Reductions in tangible fixed assets 56 0 2 Other assets 2005 2004 2003 Takeover of Romsdals Fellesbank -711 Tenants' rentals 22 2 Paid-up capital, associated companies -77 112 Capital contributions, pension fund 14 14 14 Net investments in long-term shares and partnerships 40 -159 237 113 Receivables from subsidiaries 70 4 4 B) Net cash flow from investments -735 -192 210 Receivables from securities 954 28 0 Debtors 314 36 63 Increase/(decrease) in subordinated loan capital 107 -213 496 Increase/(decrease) in equity 474 -17 5 Total other assets 1 353 83 83 Adjustment of equity 46 Dividends and donations -278 -152 -109 Other liabilities Increase/(decrease) in other long term loans 2 555 1 804 583 Drawing debt 148 76 67 Payable and accrued tax 169 117 64 C) Net cash flow from financial activitites 2 903 1 422 975 Debt from securities 987 26 0 A) + B) + C) Net changes in cash and cash equivalents 680 163 -57 Group contributions 5 0 24 Dividend 278 153 109 Cash and cash equivalents at 01.01 989 827 884 Suppliers and other creditors 503 174 71 Cash and cash equivalents at 31.12 1 669 989 827 Net changes in cash and cash equivalents -680 -163 57

Notes parent bank Total other liabilities 2 089 546 335

2005 includes changes in Romsdals Fellesbank from 01.01 to 31.12 Cash flow statement parent bank Cash Note 30 PCC-based remuneration

All employees of SpareBank 1 Midt-Norge were given the opportunity to buy PCCs in connection with a placing with the bank’s employees. The issue price to PCC holders was set at NOK 200. The price to employees was set at NOK 160. A lock-in period of 2 years applied. For the Group management the lock-in period was 4 years. The market price employed for salary-reporting purpo- ses was reduced by an imputed option price in relation to lock-in. Price Value No. NOK NOKm Bought by employees 176 000 280 49 Bought by Group management 62 500 280 18 Total market value at allotment date 67 Cost price 238 500 160 38 Benefit on purchase of PCCs 29 The benefit upon purchase of PCCs was carried as an imputed wage cost through profit and an increase of the bank’s equity capital. Upon disposal the equity effect was set at zero. 1,450 calls daily [ Behind the figure: When being close at hand has nothing to do with distance. ]

One ring. Someone’s calling the bank. Two rings. Three rings. In the old days, i.e. in 1997 when the Customer Centre was established, it was primarily a payment and information service. Four rings. Five ri… “SpareBank 1 Customer Centre here, what can I do for you?”

For many customers the Customer Centre is the bank’s For us, as the local community’s own bank, being close public face, and the service level has to be high. 80% of at hand is important. Proximity in the sense of accessi- Annual Report 2005 calls must be answered within 20 seconds, or five rings. bility is not necessarily a matter of physical distance. The Customer Centre represents a substantial extension Since the start in 1997 there has been a large shift in the of the bank’s opening hours. The customer can have type of calls made – from account information to advice. personal contact with an adviser outside the bank’s 115 In addition, the Customer Centre is one of our chief ordinary opening hours, and can carry out banking tools for achieving our goal of accessibility. services him/herself 24 hours a day. Together with the Internet Bank, the Customer Centre is The question of whether the bank’s face is an impersonal the digital way of doing one’s banking. It meets the or a personal one is in other words impossible to customer’s need for personal advice without having to answer. Because the customer is free to choose. turn up in person. Although resources are still devoted to manual payment services, customers find that we are able to provide advice in all four business areas. Today about 5% of calls concern payment transmission, down from close to 50% in 2003. Annual Report 2005 Annual Report 2005

116 117 Auditor‘s report Report of the Control committee Report of the Control Financial summary 800 32 700 28 600 24 INCOME STATEMENT GROUP (NOK million) 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 500 20 Net profit 400 16 Interest income 1 916 1 596 2 249 2 707 2 617 2 261 1 912 1 591 1 268 1 379 (NOK million and as a percentage 300 12 Interest expenses 955 732 1 385 1 811 1 790 1 475 1 145 884 592 700 of average total assets) 200 8 Net interest and credit comission income 961 864 864 896 827 785 767 707 676 679 100 4 Net dividend and gain/loss on securities 147 67 75 -53 59 20 86 15 2 21 0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Income holdings in associated controlled comp. 119 23 -5 -168 -58 -98300 Other operating income 537 443 332 282 272 244 194 168 161 162 NOK million Return on equity Salaries, fees and other personnel costs 485 379 368 331 334 323 286 253 248 263 Other operating expenses 421 350 365 350 333 312 274 270 239 295 Operating profit before losses, gains and write-downs 858 667 534 277 434 406 495 369 352 304 Gains and write-downs on disposals of fixed assets 23 -12 6 30 23 69 50 0 13 48 1000 5 Losses on loans and guarantees -38 81 229 229 138 130 106 38 -1 34 800 4 Operating profit 919 574 311 77 319 344 438 331 366 318 Taxes 202 144 89 70 106 95 107 87 99 89 600 3 Net interest Profit of the year 717 430 222 7 213 249 331 244 267 229 (NOK million and as a percentage 400 2 Dividend 278 152 109 46 109 103 102 96 96 90 of average total assets) 200 1

Result as a percentage of average total assets 0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Interest income 4.01% 4.32% 6.10% 7.93% 8.24% 8.11% 7.97% 7.31% 6.42% 7.47% Interest expenses 2.00% 1.98% 3.76% 5.30% 5.64% 5.29% 4.78% 4.06% 3.00% 3.79% NOK million As a percentage of average total assets Net interest and credit comission income 2.01% 2.34% 2.34% 2.63% 2.61% 2.82% 3.20% 3.25% 3.42% 3.68% Other operating income 1.43% 1.38% 1.11% 0.67% 1.04% 0.92% 1.20% 0.85% 0.83% 0.99% Salaries, fees and other personnel costs 1.02% 1.03% 1.00% 0.97% 1.05% 1.16% 1.19% 1.16% 1.26% 1.43% Other operating expenses 0.88% 0.95% 0.99% 1.03% 1.05% 1.12% 1.14% 1.24% 1.21% 1.60% 1000 5 Operating profit before losses, gains and write-downs 1.80% 1.80% 1.45% 0.81% 1.37% 1.45% 2.06% 1.70% 1.78% 1.65% Annual Report 2005 Annual Report 2005 Gains and write-downs on disposals of fixed assets 0.05% -0.03% 0.02% 0.09% 0.07% 0.25% 0.21% 0.00% 0.07% 0.26% 800 4 Losses on loans and guarantees -0.08% 0.22% 0.62% 0.67% 0.44% 0.45% 0.44% 0.17% 0.00% 0.18% Operating expences 600 3 Operating profit 1.92% 1.55% 0.84% 0.23% 1.00% 1.23% 1.83% 1.52% 1.85% 1.72% (NOK million and as a percentage 400 2 Taxes 0.42% 0.39% 0.24% 0.21% 0.33% 0.34% 0.45% 0.40% 0.50% 0.48% of average total assets) Dividend 0.58% 0.41% 0.30% 0.13% 0.34% 0.37% 0.43% 0.44% 0.49% 0.49% 200 1 118 Net profit 1.50% 1.16% 0.60% 0.02% 0.67% 0.89% 0.96% 0.68% 0.87% 0.75% 0 0 119 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

BALANCE SHEET GROUP NOK million As a percentage of average total assets Cash and loans to and claims on credit institutions 2 123 1 541 1 417 2 033 1 021 1 857 1 272 585 453 528 CDs, bonds and other interest-bearing securities 4 133 2 566 2 481 2 342 1 868 1 796 1 752 1 612 1 255 1 441 Loans before loss provisions 45 280 34 226 32 553 31 089 29 278 26 611 22 957 20 144 18 558 16 859 - Specified loan loss provisions 236 290 380 531 417 434 448 509 545 633 - Unspecified loan loss provisions 278 314 318 364 388 353 302 256 229 204 15 Other assets 3 304 775 1 123 1 422 1 923 1 452 1 138 1 003 795 638 13 TOTAL ASSETS 54 327 38 505 36 876 35 991 33 286 30 929 26 369 22 579 20 287 18 629 11 9 Debt to credit institutions 1 029 48 1 114 2 131 2 093 1 453 1 378 1 257 933 1 727 Capital ratio 7 Deposits from and debt to customers 27 048 20 725 19 876 19 049 17 871 17 287 15 238 13 636 13 387 12 830 (as a percentage of risk-weighted volume) Debt created by issuance of securities 18 036 13 048 11 361 10 778 9 185 8 292 6 634 5 076 3 083 1 719 5 Other debt and accrued expences etc. 2 876 822 769 863 877 934 735 607 1 021 677 Subordinated debt 1 667 1 347 1 560 1 064 1 113 900 500 350 350 389 3 Financial summary Total equity 3 671 2 515 2 196 2 106 2 147 2 055 1 884 1 654 1 513 1 287 1 0 Financial summary group TOTAL LIABILITIES AND EQUITY 54 327 38 505 36 876 35 991 33 286 30 929 26 369 22 579 20 287 18 629 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 KEY FIGURES Core capital Suppordinated loan capital Total assets 54 327 38 505 36 876 35 991 33 286 30 929 26 369 22 579 20 287 18 629 Average total assets 47 753 36 965 36 862 34 140 31 763 27 883 23 976 21 775 19 750 18 450 Loans to and claims on customers (net) 44 780 33 622 31 855 30 194 28 473 25 824 22 206 19 379 17 789 16 021 Deposits from and debt to customers 27 048 20 725 19 876 19 049 17 871 17 287 15 238 13 636 13 387 12 830 Ordinary lending financed by ordinary deposits 60% 62% 62% 63% 63% 67% 69% 70% 75% 80% 50

Primary capital 3 073 2 773 2 474 2 049 2 079 1 920 1 867 1 634 1 476 1 287 40 Core capital 3 808 3 239 3 407 2 802 2 842 2 460 2 160 1 968 1 804 1 597 Risk weighted volume 34 873 25 562 24 483 25 223 23 554 23 019 19 736 17 462 15 223 13 008 30 Capital ratio 10.92% 12.67% 13.92% 11.11% 12.07% 10.69% 10.94% 11.27% 11.85% 12.28% Loans – deposits Of which core capital ratio 8.81% 10.85% 10.10% 8.12% 8.83% 8.34% 9.46% 9.36% 9.70% 9.89% (NOK billion) 20 Cost/income ratio 51% 52% 58% 71% 61% 61% 53% 59% 58% 65% Cost/income ratio ex capital gains 56% 55% 62% 67% 64% 62% 58% 60% 58% 66% 10 Losses on loans -0.1% 0.2% 0.7% 0.7% 0.5% 0.5% 0.5% 0.2% 0.0% 0.2% Return of equity after tax 24.1% 20.0% 10.2% 0.4% 10.1% 12.6% 18.2% 14.9% 18.8% 18.1% 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 PCC price (NOK 78.25 55.00 38.40 23.20 31.84 29.92 36.48 28.64 39.68 0.00 Deposits Loans Growth in lending (gross) 32.3% 5.1% 4.7% 6.2% 10.0% 16.0% 14.0% 8.5% 10.1% 10.2% Growth in deposits 30.5% 4.3% 4.3% 6.6% 3.4% 13.4% 11.7% 1.9% 4.3% 5.8% quarterly investor presentations, the bank’s website, press institutions. The bank sold its own holding of 75,229 PCCs releases and reports on the accounts sent to PCC holders. in 2005. After the rights issue, bonus issue and split in 2005, Presentations for international partners, lenders and inves- the number of PCCs are increased to 50,489,085 in 2005. tors are also arranged on a regular basis, mainly in London. During 2005 the number of owners increased by 2,067 to reach 7,762. Primary capital certificates (PCCs) Information on the internet PCCs owned by investors in South and North Trøndelag and Information for investors, the press and brokers is available Møre and Romsdal account for 31 (29) per cent of the total, on the internet. other investors account for 46 (53) per cent and foreign hol- SpareBank 1 Midt-Norge’s home page: ders for 23 (18) per cent. www.smn.no At end-2005 SpareBank 1 Midt-Norge’s PCC capital totalled was on the basis of 1 new PCC for 4 old ones (after the Other links to financial information: NOK 1,262 million distributed on 50,489,085 PCCs with a split), financed by a transfer from the PCC premium reserve. RISK regulation www.huginonline.no nominal value of NOK 25 each. The split and the bonus issue are designed to strengthen In order to avoid double taxation of the bank and PCC holders, the position of the PCC. Equity capital was unaffected since the tax-related value of Norwegian PCCs in Norwegian Issue only a redistribution between PCC holder owned categories Financial calendar for 2006 ownership is adjusted each year. This is done under the 1st quarter: 2 May 2006 In May/June 2005 a PCC rights issue was carried out in of equity capital was involved. The split and bonus issue RISK rules (RISK is the acronym for Adjustment of Opening 2nd quarter: 7 August 2006 favour of existing PCC holders along with a staff placing to both increased the number of the bank’s PCCs, and are Value by Taxed Capital). The RISK amount for 2005 is esti- 3rd quarter: 27 October 2006 partially finance the acquisition of Romsdals Fellesbank. The expected to promote the PCC’s liquidity. mated at NOK 2.39 compared with NOK 2.26 for 2004. 4th quarter: 1 February 2007 bank’s equity capital was accordingly strengthened by a total Application of the profit for the year of NOK 473 million. Market trend for the bank’s PCC in 2005 The parent bank’s accounts have been presented in confor- At year-end the market price of SpareBank 1 Midt-Norge’s Annual Report 2005 Annual Report 2005 mity with Norwegian GAAP. It is the parent bank’s accounts Ownership Rights issue PCC (MING) was NOK 78.25. At end-2004 the price was that underlie the application of profits. Of the profit of NOK SpareBank 1 Midt-Norge aims for good PCC liquidity and to The bank’s PCC capital was increased by NOK 217.4 million NOK 55. achieve a good spread across PCC holders representing by the issue of 2,174,241 new PCCs at a price of NOK 200 632 million for the year, NOK 278 million is allocated to customers, regional investors and Norwegian and foreign Direct return on the PCC was 7.0%. each. The gross issue proceeds amounted to NOK 434.8 dividends and NOK 90 million to the dividend equalisation 120 million. 3.5 subscription rights were required to be allotted fund. The remainder is distributed between the savings 121 1 new PCC. There was keen interest in the market, and the bank’s reserve (NOK 176 million) and non-profit causes issue was heavily oversubscribed. (NOK 89 million). Key figures and ratios 2005 2004 2003 2002 2001 Placing Dividend policy Quoted price 78.25 55.00 38.40 23.20 31.84 No. of PCCs issued (billion) 50.49 38.43 38.43 38.43 38.12 The Board of Directors consider it desirable and worthwhile The financial goal of SpareBank 1 Midt-Norge's operations PCC capital (NOKm) 1.262 769 607 603 605 that Group employees should purchase and own PCCs is to achieve results that yield a good, stable return on total Equalisation fund (NOKm) 586 400 482 472 489 issued by the bank. In accordance with a decision by the equity. PCC premium reserve (NOKm) 0 10 10 10 6 Supervisory Board, employees were entitled to a 20% dis- Profits are distributed between the PCC holders and the Dividend per PCC 5.50 4.00 2.88 1.20 2.88 count on the subscription price subject to a lock-in period reserves of the bank based on their respective shares of the Direct return 1) 7.0% 7.3% 7.5% 5.2% 9.1% of 2 years. The lock-in period for the bank’s Group manage- bank's equity capital. Any deficit is charged to the reserves Dividend yield 2) 52.3% 53.6% 66.9% -13.6% 15.5% ment is 4 years. PCCs worth NOK 38.2 million were sub- of the bank, the dividend equalisation fund and in the event Book value per PCC 3) 42.1 34.8 31.8 30.0 33.0

Primary capital certificates scribed in the employee placing. the gift fund, on a proportional basis. At end-2005 the PCC Primary capital certificates Profit per PCC 4) 8.5 5.8 3.1 0.9 4.2 holders share of the net profit was NOK 8.50 per PCC. Cash The costs of preparing and implementing the issues total- Price-Earnings Ratio 9.2 9.5 12.4 26.5 7.5 dividend was NOK 5.50. led NOK 19 million which is recognised in the bank’s PCC Price-Book Value Ratio 1.86 1.58 1.21 0.77 0.96 premium reserve, so that the net increase in PCC holder SpareBank 1 Midt-Norge attaches importance to paying a Payout ratio 5) 65% 69% 93% 137% 69% controlled equity capital came to NOK 454 million. Accor- competitive cash dividend. Variations may occur in the PCC fraction 6) 56.1% 49.8% 51.4% 53.0% 54.0% dingly NOK 241 million was added to the PCC capital and relative distribution between cash dividends and equalisation RISK amount 2.39 2.26 0.37 -0.52 2.09 NOK 213 million to the PCC premium reserve. fund if there is a need to prioritise the bank's equity capital Key figures (exc. PCC capital and equalisation fund) are adjusted for the effect of the bonus issue and split. As from 2005 the key figures are situation. consolidated figures under IFRS. Split and bonus issue A split and bonus issue were carried out in October 2005 in Investor policy line with a decision by the Supervisory Board of 31 October The bank also attaches much importance to correct, 1) Dividend as per cent of quoted price at year-end. 4) PCCs’ portion of the consolidated result (less own PCCs). 2) Price rise over the year plus paid dividend as per cent of quoted price 5) Dividend per PCC as per cent of profit per PCC. 2005. The practical consequence of the split was a reduction relevant and timely information on the bank’s progress and at start of year. 6) Book equity of PCC holders (after deduction of own PCCs) as per of nominal value from NOK 100 to NOK 25 per PCC and a performance as a means of instilling investor market 3) Book equity (after deduction of own PCCs) multiplied by the PCC cent of parent bank’s equity at year-end (after deduction of own fraction divided by the number of PCCs (less own PCCs) including PCCs and other equity). The rate applies as from 1 January the four-fold increase in the number of PCCs. The bonus issue confidence. Information is communicated to the market via cash dividend. following year. 250

220 Here when you need us.

190 Stock price 2004-2005 (relative price trend, 1.1.04 = 100) 160

130

100 01.01.04 30.06.04 31.12.04 30.06.05 31.12.05 Ming OSEBX

10 9 8 7 Dividend and profit per PCC 6 Leka 5 Bindal (NOK) 4 Vikna 3 Nærøy Namsskogan 2 1 Fosnes 0 Høylandet 1999 2000 2001 2002 2003 2004 2005 Flatanger Overhalla Dividend Profit per PCC Namsos Grong Osen Roan Namdalseid Snåsa Lierne Annual Report 2005 Annual Report 2005 5000 Verran Steinkjer 4000 Åfjord Inderøy Mosvik Trading statistics 2005 Frøya Rissa Verdal 3000 Hitra (number of PCCs) Levanger Frosta 122 2000 Agdenes Leksvik 123 TRONDHEIM Stjørdal Aure Malvik 1000 Orkdal Meråker Averøy Skaun 0 Melhus Dec-04Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec Fræna Gjemnes Eide Midtre Gauldal Holtålen Surnadal 30 Molde Rennebu Vestnes Sunndal 25 Rauma Røros Oppdal 20 Price/earning compared with peers*) 15

10

5 Here when you need us.

Primary capital certificates 0 1999 2000 2001 2002 2003 2004 2005 P/E peers P/E SpareBank 1 Midt-Norge

2,5

2,0

Price/book compared with peers*) 1,5

1,0

0,5

0,0 1999 2000 2001 2002 2003 2004 2005 P/B Peers P/B SpareBank 1 Midt-Norge

*) Peers are SpareBank 1 SR-Bank, SpareBank 1 Nord-Norge, Sandsvær Sparebank, Vestfold Sparebank, Sparebanken Møre and Sparebanken Vest. Domifile Number of PCC Domifile Number of PCC

Supervisory Board Asbjørn Jakobsen Stjørdal 3 705 Chair: Per Ivar Maudal Trondheim 0 Rigmor Finnland Holtålen 3 250 Deputy Chair: Åshild Vang Inderøy 0 Linda Iversen Rissa 2 250 Arnhild Bjørshol Trondheim 5 000 PCC holders Inge Lindseth Trondheim 13 800 Lars-Erik Kvist Stockholm Geir Tore Mathisen Trondheim 0 Per Gunnar Rymer Oslo 0 Jan Skogrand Trondheim 0 Gunnar Heglund Trondheim 0 Arnt Svensson Trondheim 0 Terje Vareberg Stavanger 0 Alf Erevik Hønefoss 500 CONTROL COMMITTEE Svein Garberg Oslo 0 Rolf Røkke Trondheim 0 Hans Olav Karde Tromsø 0 Åke Brandslett Malvik 0 Erik Sture Larre Oslo 0 Elbjørn Berg Skogn 0 Widar Slemdal Andersen Rællingen 2 290 Per Ivar Maudal Trondheim 0 BOARD OF DIRECTORS Arne Lorentsen Trondheim 180 000 Per Axel Koch Trondheim 0 Lars Sjømo Trondheim 224 120 Eli Arnstad Skatval 0 Tor E. Stigum Trondheim 120 535 Terje Roll Danielsen Trondheim 158 330 Leif Singstad Trondheim 24 105 Christel Borge Oslo 0 Rolf Haukdal Oppdal 125 570 Anne-Brit Skjetne Levanger 1 560 Trond Brekke Trondheim 0 Kjell Eriksen Trondheim 0 Sverre Petter Berg Oslo 2 250 Stig O. Jacobsen* Angvik 15 000 Harry Rishaug Trondheim 0 Egill Vatne jr. Salsnes 0 Johan Brobakke Trondheim 8 035 Venche Johnsen Trondheim 5 000 Tone Valmot Trondheim 3 605 Jan Gunnar Kvam Trondheim 2 500 Annual Report 2005 Annual Report 2005 Joar Grimsbu Trondheim 11 000 Finn Haugan Trondheim 91 020 Bjørn Thommesen Oslo 4 285 Alternates Depositors Kjell Flønes Trondheim 0 124 Behind from left: Executive Director Kjell Fordal, Executive Director Olav Gjerland, Nils Martin Williksen Rørvik 0 Liv Thun Trondheim 0 125 Legal Director Rune Haglund, Executive Director Marvin Wiseth og Executive Director Bjarne Håkon Hanssen (perm) Namsos 0 Berit Tiller Trondheim 215 Reidar Stokke. In front from left.: Deputy CEO Tore Haarberg and CEO Finn Haugan. Per Ivar Mohrsen Steinkjer 2 040 Randi Segtnan Verdal 0 Åshild Vang Inderøy 0 Jan Gunnar Kvam Trondheim 2 500 Alf Daniel Moen Stjørdal 0 Tore Haarberg Trondheim 53 905 Kari Hanna Gunnes Rennebu 3 130 Sissel Lie Trondheim 0 ELECTION COMMITTEE Anne-Kathrine Slungård Trondheim 0 Erik Sture Larre Oslo 0 Kari Messelt Ekker Trondheim 0 Liv Thun Steinkjer 0 Michael Momyr Trondheim 330 Arnhild Bjørshol Trondheim 5 000 Board of Directors Bjarne Håkon Hanssen (perm) Namsos 0 Public appointees CEO Endre Lysø Namsos 45 GROUP MANAGEMENT Finn Haugan Liv Thun Steinkjer 0 Finn Haugan Trondheim 91 020 bodies Covernies Group management Bjørn Arild Gram (perm) Vikna 0 Marvin Wiseth Trondheim 39 375 Internal Audit Else Hansvik Storsul Vikna 0 Rune Haglund Trondheim 42 250 Ernst & Young Hans Martin Storø Nærøy 0 Tore Haarberg Trondheim 53 905 Tore O. Sandvik Trondheim 0 Kjell Fordal* Trondheim 79 315 Legal Affairs Communications Hallgeir Grøntvedt Kråkvåg 0 Ståle Svenning Trondheim 43 750 Rune Haglund Marvin Wiseth Jon Bakken Flaknan 0 Olav Gjerland Molde 37 500 Geirmund Lykke Trondheim 0 Yngve Brox Trondheim 0 Economics/Finance/ Corporate Market Retail Market Business Division Operations/Development Division Division Operations Romsdals Fellesbank Kjell Fordal Reidar Stokke VAD Tore Haarberg Olav Gjerland Employees Irene Leirvik Nærøy 0 Sigvald Hatland Overhalla 0 Anne Torill Ramberg Steinkjer 4 060 Thorbjørn Røsæg Steinkjer 2 355 Gunn L. Brenne Levanger 1 155 Randi Aune Levanger 1 375 * Including related parties Market work 2005: Change, for the sake of stability

Continual change is a prerequisite for a stable, solid In addition to an extensive marketing campaign in The introduction of compulsory occupational pensions bank. In 2005 market work proceeded at a rapid pace connection with our acquisition of Romsdals Fellesbank, is a challenge both for us and the business sector. and numerous initiatives were made vis-à-vis our custo- the following were at centre stage in our market commu- It might have been tempting to offer a standardised mers. Customer meetings and regular marketing drives nication in 2005: Compulsory Occupational Pensions, solution that would solve the pension problem for in the product areas of payments, loans, savings and One Price – Unlimited Use, and Flexi-loan. customers in a simple manner. insurance are just some examples. In addition, we Annual Report 2005 Annual Report 2005 Instead we opted – in keeping with our strategy of launched a series of new products and services – all always offering the best solutions over time – to build based on a solid foundation. up competence in the bank, so that each individual The key to understanding the paradox of change for the customer did not merely have his problem solved, but 126 sake of stability is to be found in our promise of “best was also able to exploit the opportunities available in his Flexi-loan is a new product which rewards those who 127 finances over time”. Customer needs change through situation. have accumulated equity in their homes over a long the life course and technological progress offers new period. The product provides a simple way to access this opportunities both for us and our customers. Meeting equity. Its flexibility is a major point in its favour. new market needs at all times is synonymous with - The customer no longer needs to sign on the dotted line fulfilling our promise. each time he wishes to draw on the loan, and can make repayments as and when he wishes. Engaging in active and enterprising dialogue with custo- mers is the number one criterion for success. Advisers’ Flexi-loan represents a substantial business potential Marketing Marketing meetings with customers are therefore the most impor- for the bank, and is a good example of how we respond tant market work we carry out to identify needs and to to changes in customer needs, wishes and requirements tailor banking and insurance solutions geared to the with new, attractive products. Romsdals Fellesbank is a clear-cut example of changing individual’s needs. something without tearing it up by the roots. With our Market communication is the adviser’s extended arm in commitment to the local community, sense of belonging, the market – a contact maker. The mass media enable enthusiastic staff and respect for both the customer and us to promote our offerings, our line of thinking, and to the bank’s 80 year long history, we launched a series of provide a foretaste of our products. The messages we new products and services. Our marketing was targeted, At first glance One Price – Unlimited Use is a way of deliver are designed to show that we understand the comprising two phases. The first phase focused on what simplifying matters for the customer. At the same time, customer’s situation, needs or desires better than anyone would not be changed. The second focused on the new however, the product ensures a complete solution – by else. They constitute our invitation to the customer to get potentials that arose. bringing together the products needed by the customer in touch with one of our advisers. in his everyday life. The “complete offering” dimension has always been the very foundation of our offerings to the customer. Tel. 07300 www.smn.no [email protected]