ANNUAL REPORT 2001

closefriendlyhelpfulcompetent SPAREBANK 1 VEST ANNUAL REPORT 2001

Contents

General information about SpareBank 1 Vest/ Financial calendar 2002 3 Financial highlights 4 Main features of 2001 5 Knut Ravnå: Further steps to boost performance! 7 Senior management group 9 Directors’ report 10 Profit and loss account 16 Balance sheet 17 Statement of cash flows 18 General accounting policies 19 Notes to the accounts 23 Auditor’s report/Control Committee’s report 52 Key figures 53 ‘‘A bank for everyone’’ 59 Strong growth in estate agency activities 61 Closer corporate links 63 Primary capital certification with a historically good return 65 Major features in 2002 66 SpareBank 1 Group - facts and background 67 Elected officers, management and regions 68 Organisational structure 70

LARGEST IN THE RETAIL MARKET AND CLOSER TO THE CORPORATE MARKET: SpareBank 1 Vest is a major retail bank, but it has also experienced significant growth in the corporate market in the last few years.

In this annual report the bank has sought to portray part of the breadth which its corporate clients represent, in the form of brief passages in which the companies themselves tell why exactly they chose SpareBank 1 Vest as their banking partner.

We wish to thank the following businesses for their assistance: Selje Hotel, Bella Donna, Helgesen Tekniske-Bygg, Stord Boligbyggelag, FotoKnudsen and Ljones Gartneri.

Published by the Information Department, SpareBank 1 Vest www.spv.no

N-5020 Bergen - Tel.:+47 55 21 72 42 (Information Dept.) - Fax: +47 55 21 72 89 Project management: Jørn Lekve - Photos: Bent Synnevåg and Cathrine Dillner Hagen Design/Assistance: Anne Lise Urdal and LaserSats DTP AS Printing: Hannevik & Sundøy Grafisk AS

2 SPAREBANK 1 VEST ANNUAL REPORT 2001

SpareBank 1 Vest

SpareBank 1 Vest is Norway’s fourth-largest savings bank with total assets of NOK 32.4 billion and providing employment equivalent to 813 man-labour years.The head office is in Bergen.

The bank serves the retail market, trade and industry and the public sector in the counties of Hordaland and Sogn & Fjordane, with 63 branch offices. The bank’s market area comprises the regions Nordfjord, Sogn, Nordhordland Hardanger/Midthordland, West, Sunnhordland and Bergen.

SpareBank 1 Vest is the dominant retail bank in its market area, with 250 000 retail customers, 10 000 commercial customers and 50 000 online customers.The bank has recorded strong growth in the commercial sector in recent years.

SpareBank 1 Vest is Norway’s second-oldest bank. Its predecessor, Bergens Sparebank, was established in 1823. During the 179 years it has existed, the bank as contributed to growth and development in the West of Norway. The bank’s vision is "Focusing on Customers and Strength".

The bank’s core values, as expressed in the words "local, friendly, helpful and capable" shall help SpareBank 1 Vest to reinforce its position as the largest independent bank in the region, with strong local roots.

SpareBank 1 Vest is a part of the SpareBank 1 alliance, which is Norway’s fourth-largest financial services group, with aggregate total assets of roughly NOK 225 billion and 5 400 employees in a total of 360 branches.

Financial Calendar 2002

The quarterly accounting results for 2002 will be published on 25 April, 8 August and 31 October.

3 SPAREBANK 1 VEST ANNUAL REPORT 2001

Financial highlights – Sparebanken Vest Group

(NOKm) 2001 2000 1999 1998 1997

Profit and Loss Account

Net interest and credit commissions income 787 751 719 647 619 Net operating income 186 238 281 36 171 Operating expenses 684 641 591 550 543

Profit before losses and write-down 289 348 409 133 247 Losses on loans, guarantees etc. 86 43 59 8 8 (Write-downs)/reversal of write-downs and gain/ (loss) on long-term securities (3) 33 134 (5) 11 Profit before tax 200 338 484 120 250

Balance Sheet

Total assets 32 367 31 098 26 255 23 619 21 345

Loans to and receivable from customers 28 762 26 272 22 348 20 297 18 182 Securities 1 812 2 534 2 615 1 961 1 968

Deposits from and debt to customers 19 349 17 782 15 742 14 629 12 598 Subordinated loan capital and equity 2 571 2 768 2 267 1 959 1 891

Key rations (%)

Net interest and credit commission income as % of average total assets 2.50 2.70 2.91 2.86 2.99 Profit before tax as % of average total assets 0.63 1.22 1.96 0.54 1.21

Return on equity after tax 6.39 12.03 20.36 4.36 12.18

Loan loss ratio 0.29 0.16 0.26 0.04 0.04

Change in gross loans to receivable from customers 9.53 17.48 10.06 11.38 10.53 Change in deposits from and debt to customers 8.81 12.96 7.61 16.12 (2.72)

Net capital base (NOK) 2 192 2 370 1 948 1 774 1 812 Capital adequacy ratio 9.93 11.93 11.43 11.21 12.87 Core capital ratio 9.68 10.25 10.82 9.94 10.84

Dividend per primary capital certificate (NOK) 9.50 12 22 5 13 Primary capital certificate price at year-end (NOK) 118 130 213 134 229 Return on primary capital certificates 0.00 (28.64) 62.69 (35.81) 41.21 RISK amount at 1.1.2001 (NOK) 89.09 45.81 69.12 Further information appears in the summary of main figures and definitions on page 55

Total assets Net interest Profit after tax (NOK bn) Net interest and credit commission income (NOKm) (NOKm) 787 35 32,4 800 751 400 31,1 719 358 30 700 647 350 26,2 619 23,6 600 300 25 21,3 239 500 250 20 400 200 178 15 137 300 150 10 200 100 68 5 100 50

0 0 0 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001

4 SPAREBANK 1 VEST ANNUAL REPORT 2001

Main features of 2001

■ 2001 was far from a satisfactory year for SpareBank 1 Vest, in terms of accounting results.

■ The return on equity was 6.4%, while the target was 12%.

■ This resulted in a dividend of NOK 9.50 per primary capital certificate, the maximum dividend permitted under current regulations.

■ The pre-tax profit was NOK 200m, against NOK 338m in the previous year. NOK 15m of the profit for the year was allocated to gifts for the public benefit.

■ The poorer performance compared with 2000 was largely due to the downturn in the stockmarkets both before and after the terror attacks on the USA on 11 September 2001, as well as the negative contribution arising from the bank’s shareholding in SpareBank 1 Gruppen AS and higher loss provisions.

■ Total assets at year-end amounted to NOK 32.4bn, reflecting annual growth of 4%. Deposits and accounts payable to customers rose by 8% to NOK 19.3bn. Gross lendings and receivables from customers rose by 9% to NOK 29.1bn.The funding ratio was 67.1% at year-end, against 67.7% at the start of the year.

■ The bank’s core activities have performed well, with growth in both sales and the number of customers. The number of retail customers showed a net increase of 7 500, while the number of corporate clients rose by 1 000, and there were 18 000 new online customer.

■ At year-end the bank’s customer base totalled 260 000, of whom 210 000 had SpareBank 1 Vest as their main bank.

■ In 2001 SpareBank 1 Vest reinforced its position as the market leader in the counties of Hordaland and Sogn & Fjordane. But the long-term effect on profits was not enough to enable the bank to reach its target figures for the year.

■ The bank considers its prices to be competitive, and comparisons with other banks made by the media show that the public at large regard our terms and conditions as very good.

■ SpareBank 1 Vest is well placed to realise its goals in 2002.The bank has a large customer base, a sound capital base, a good reputation in the market, a broad range of products, a loyal and capable workforce, and strong local roots which will be utilised to an even greater extent to place the focus on increased sales to both existing and new customers. A number of initiatives will be developed and implemented to reinforce sales activities based on the bank’s core values, vision, goals and strate- gies.

■ SpareBank 1 Vest expects to reap the benefits of increased efficiency and lower costs as a result of the programme that has recently been started to improve efficiency.

■ With the groundwork that has been done, 2002 should be a far better year for SpareBank 1 Vest than 2001.

■ The bank’s target is a return on equity of 11.5% in 2002.

5 6 SPAREBANK 1 VEST ANNUAL REPORT 2001

KNUT RAVNÅ:

Further steps to boost performance!

In 2002 SpareBank 1 Vest will be employees who feel that their work is results. As a consequence of this, our control focusing on strengthening the sales challenging. In other words, we have sound system is designed to be more in line with the culture and reducing costs. In particular, foundations, says Knut Ravnå, adding that the strategic basis of our business, and to facilitate there will be a greater emphasis on key personnel of the future will need a high its implementation within the bank’s customer satisfaction and job satis- level of expertise and strong inter-personal operations. Measurement-based management faction within the bank, while ensuring qualities. provides a specific framework for strategy and that there is a permanent reduction in - Within SpareBank 1 Vest, expertise is a action plans, and gives us a unique overview cost levels. combination of sound banking skills and the and opportunity to make the right choices. In this interview managing director ability to establish good customer relation- However, the main benefit provided by the Knut Ravnå talks about important steps ships, but there is a need to raise the level of system is that it allows the employees to see being taken by the bank in 2002 to expertise further, says Ravnå. the effects of their work, so that they can increase the return on equity. make whatever changes are necessary in their Tomorrow’s customer adviser everyday work to enable the bank as a whole - There will be an intense focus on reducing In order to increase professional skills we have to achieve its objectives. costs in 2002.As well as being reflected in the a continuous focus on updating and developing bank’s performance this year, it will bring a expertise.The SpareBank 1 alliance has drawn Introduction of cost reduction permanent reduction in cost levels in the up a set of requirements that all our customer programme longer term. On the revenue side, we are very advisers will have to meet in the future and Clearly, many different initiatives are being well placed , considering the size of the which will provide a basis for the development launched by the bank this year to reduce customer base and the high level of staff of e-training and certification. costs. But why are the results posted by expertise. We have a good range of products SpareBank 1 Vest not just as good as the other and services, the bank is very accessible - Management has a key role to play in the SpareBank 1 banks? Is it not the bank’s aim to through the branch network, the call centre development of customer relationships, and be best? and our online banking service, says managing the development of good managers is - You are quite right in saying that the results director Knut Ravnå. therefore a matter of special attention for us. for 2001 were not satisfactory. As a Managers with the ability to train and bring consequence of this we have started an Customer satisfaction - important out the best in their colleagues, thereby extensive programme which will provide for profitability establishing a high level of inter-personal skills. benefits in the form of permanent cost Strong competition among many players is a Each employee of SpareBank 1 Vest has a reductions, but at the same time we are of prevailing feature of the financial market, giving development target which is agreed in the course highly focused on boosting the income the customers many options. annual Target and Development Talk. We side. Looking at the overall picture, I believe - There is no doubt that our large customer believe that by continually focusing on that a large step in the right direction will be base is one of our strongest competitive personal development it is possible to create taken this year, and I am certain that that we advantages.The challenge is to ensure that we an awareness of the need for change, also by succeed in reaching our target figure, which is are able to maintain and develop this base by establishing common goals for the bank as a a post-tax return on equity of 11.5% in 2002. increasing the level of customer satisfaction whole. It is also our view that the ability to Among other things, the cost reduction and loyalty. Customer satisfaction will be one adapt is strengthened by increasing the level of programme will be looking at our internal of the most important measurement parame- formal training, and we proud that so many of procedures, how we can make best use of our ters in the coming years, and it is an important our employees are involved in further skills, and what can be done to make the part of our new control system based on education courses outside office hours. Job organisation as streamlined as possible, but measurement-based management, says Ravnå. satisfaction is therefore an important without affecting the level of customer measurement parameter within the bank’s service. Skilled staff - a prerequisite control system. - At SpareBank 1 Vest we believe that a high Gifts for the public benefit and level of job satisfaction is a prerequisite for Introduction of measurement-based core values good customer satisfaction. This is why management In the media we often read about large sums surveys are carried out each year, and the Why have you introduced balanced scorecards of money donated by SpareBank 1 Vest for the results are followed up within each - is it no longer enough to focus on the public benefit. Why do you do this? Would it department. The survey carried out in accounting figures in combination with not be better to lower the interest rate? October 2001 showed that SpareBank 1 Vest features of macro-economic developments? - The allocation of gifts for the public benefit has a working environment characterised by a - No, we believe that the balanced scorecard gives SpareBank 1 Vest a competitive high level of job satisfaction, a strong affinity makes it easier for each employee to see the advantage. It helps to strengthen our brand with the organisation, a spirit of solidarity, and totality of what we are doing to achieve good name, our reputation and our profile, while at

7 the same time reinforcing the bank’s local institution. name, the confidence which we enjoy in the roots as an active partner and supporter of market and our "stamp of quality" we are very various initiatives within its market areas.The Independence, customer focus and well equipped to attract large parts of the Savings Bank Act permits us to be very strength savings market. Sales of savings and investment generous in allocating gifts, and remember that Managing director Knut Ravnå clearly relishes products are largely determined by the extent these gifts are not given at the expense of the talking about the bank’s strategic advantage in to which confidence can be sold. By dividend paid to the owners of the bank’s meeting the competition in the years to come: coordinating and developing our delivery primary capital certificates. Nor do they have - We are the largest bank with its head office systems we will be perceived as a bank that anything to do with our other terms and in our market area. Our headquarters are in can offer a wide range of options for our conditions in the marketplace! The interest Bergen and we have no need to go to the customers, says Knut Ravnå. rate is set on the basis of the general level of capital or travel abroad to take decisions. Our interest rates and taking account of the independence, strong capital base and local An increasing number of SpareBank 1 competitive situation in the market. Our gifts decision-making ability mean that we differ Vest customers give us the opportunity to return something from our main competitors in these respects. But the customers also have the option of to society, after tax has been paid, says Knut We are at complete liberty to adapt the bank’s leaving SpareBank 1 Vest. Are you not losing Ravnå. policies to our market areas. Thanks to our many customers to new competitors? decentralised structure, the customers get a - No, quite the contrary in fact.We are aware The bank – an important quicker and more flexible response to credit that a number of new players have entered the social institution applications than is the case with several of market, and that the press have been quick to This is why the bank has focused more on this our competitors. It is important that we present them in a positive light. But the fact is aspect of its activity in the last few years, exploit this advantage in the corporate that we are experiencing a net inflow of seeking to be generous in allocating gifts market. customers. This must mean that they where the bank’s results make this possible. appreciate us. 260 000 customers – that talks At the outset, the bank is able to allocate 10% Growth in corporate market for itself.That is a lot of people, and they are of its profits in the form of gifts for the public - Due to restructuring, acquisitions and ones who decide. When we say that we will benefit, provided that the bank’s target figures mergers, a number of our competitors in this be best at establishing relationships, this is have been met. The recipients of these gifts market have been in what may be described as exactly what we have in mind. Good customer shall be closely associated with the bank’s core a "vacuum" - and as a result we have attracted relationships can and should be experienced in values, and in making its allocations the bank a number of substantial new customers to the several ways. The bank’s core value should shall seek to strengthen its reputation, local Corporate Market section. Decision-making occupy a central position and should be roots and brand name. by our competitors with foreign owners has emphasised in all contact with both the - Even though we have not allocated 10% of become more protracted, and a number of market and customers, and within the the bank’s profits each year, we have none- local companies are now considering organisation itself. theless given a total of NOK 46.5m to good alternatives where a knowledge of local Our core values shall be experienced and causes over the last four years.And this year a conditions and the ability to take decisions recognised in all channels of communication, further NOK 15m will be allocated. There is quickly are important factors in deciding on whether they are our own channels or in the no doubt that this policy has helped which bank to use, says Knut Ravnå. general perception of us by customers and the strengthen the bank’s reputation, positive Ravnå sees this development as presenting public at large. profile and local roots. Naturally, the funds SpareBank 1 Vest with greater scope in the And when you get down to it, you only get a have been used to support many good causes, corporate market segment. It is also an area good press when the entire bank is perceived often the result of work done by dedicated where the bank is strengthening its focus. as creditable and actually living by its core souls in the districts. We believe that this values.A central focus on our core values will aspect of the bank’s activity is much Our "stamp of quality" shall result in enhance customer relationships, and good appreciated by the customers, since it is increased sales of savings products customer relationships are synonymous with apparent to everyone that part of our profits But is SpareBank 1 Vest not forgetting the strong customer loyalty.And strong customer is returned to the community that we are set retail customers – it has always been loyalty brings increased sales and profitability, to serve, says Knut Ravnå.The gifts are one of perceived as "the people’s bank"? says Knut Ravnå. many specific initiatives which show that - Not at all! Our cross sales will continue in SpareBank 1 Vest is an important social the retail market, and based on our brand

8 SPAREBANK 1 VEST ANNUAL REPORT 2001

SENIOR MANAGEMENT TEAM

Knut Ravnå Pål Pedersen Frank Johannesen Rune Bjørhovd Frode Høyland Jørn Lekve Terje Mjelde Arne Selle (Born 1948). (Born 1954) (Born 1959). (Born 1955) (Born 1966). (Born 1961). (Born 1947). Deputy (Born 1953). Managing director Head of legal depart- Director since 1994. Personnel director. Director, Controller Director of infor- managing director Director of operations since 1990. Joined the ment since 1994. Joined the bank in Joined the bank in since 2000. Joined the mation & PR since since 1985. Joined the since 1994. Joined the bank in 1973. Left for 2 Joined the bank in 1985. Graduated in law January 2002. bank in 1999. Business 1999. Joined the bank bank in 1971. bank in 1992. years to be assistant 1990. Previous experi- from University of Previously employed at economist from the as head of information Graduate from the Previously worked in general manager of ence as an assistant Bergen (1985). Haukeland Hospital Institute of services in 1996. Norwegian School of the Frank Mohn DnC in Haugesund. judge and as a lawyer and in the Norwegian Management (BI). State Formerly editor of Economics and Group in period 1979- Graduate from the in private practice. Armed Forces. authorised public Horda Tidende and Business 1992. Graduate civil Norwegian School of Graduate from the accountant from NHH commercial journalist Administration (NHH) engineer from Economics and Norwegian School of (1995) and authorised with Bergens Tidende. in 1971 and MBA from Norwegian University Business Economics and financial analyst from Master of science in NHH in 1999. of Science and Administration (NHH) Business NHH (1998). Business from the Technology in in Bergen. MBA from Administration (NHH) Norwegian School of Trondheim (NTH) in Michigan (1979). in Bergen. Economics and 1977. Business Administration (NHH) in Bergen (1989).

9 SPAREBANK 1 VEST ANNUAL REPORT 2001

Directors’ Report 2001

Pål W.Lorentzen, Bjørn Ove Børnes, Elna Lappegård Jan O.Yttredal, Terje Kvamme, Bergen Klokkarvik Bergen Husnes Bergen (born 1941) (born 1948) (Born 1933) (born 1943) (born 1946) Barrister. Joined the Board as chairman Managing director of HSD Buss AS. Accountant. Managing director of Sør-Norge Assistant General Manager of SpareBank in 2000. Board member since 1992. Board member since 2001 Aluminium. Board member since 1998. 1 Vest. Board member since 1991. Deputy chairman since 1998.

The accounting targets set by the in 2001, and the level of trading was unsatis- Sparebanker AS also became party to the SpareBank 1 Vest Group for 2001 were factory.The highest traded price in 2001 was SpareBank 1 alliance. Samarbeidende not realised.The pre-tax profit was NOK NOK 148 (on 9 January 2001) and the lowest Sparebanker currently consists of 16 savings 200m, against NOK 338m in 2000.After NOK 100 kroner (on 21 September 2001).At banks located in the eastern and northern tax, the profit was NOK 137m, present, the price stands at NOK 120. flanks of west Norway. In August 1998 an corresponding to a return on equity of agreement was entered into between the 6.4%, while the target figure was 12%. Bank activities Norwegian SpareBank 1 banks and The Board proposes a cash dividend SpareBank 1 Vest is an independent banking FöreningsSpar-banken AB (publ), Sweden. In of NOK 9.50 per primary capital Group based in Bergen and with branches in 1999 FöreningsSparbanken became a share- certificate. the counties of Hordaland and Sogn & holder of SpareBank 1 Gruppen AS. Following Fjordane.The Group is also engaged in estate the takeover of VÅR Bank og Forsikring in the The pre-tax profit was NOK 138m down on agency activities through EiendomsMegler 1 autumn of 2000, the Norwegian Federation the previous year. The reduction was mainly Vest AS and property companies. In addition Trade Unions (LO) acquired a shareholding in due to the decline in the stockmarket, both at to the parent bank, which accounts for 95% of SpareBank 1 Gruppen AS, whose shareholders home and internationally, as well as higher loss consolidated profits, the Group comprises the are now SpareBank 1 Nord-Norge, SpareBank provisions and the negative contribution subsidiary holding company Sparebanken Vest 1 Midt-Norge, SpareBank 1 Vest, SpareBank 1 arising from the bank’s shareholding in Holding AS,AS Filialbygg and Sparebankbygget SR-Bank and Samarbeidende Sparebanker AS SpareBank 1 Gruppen AS. Odda AS. with 13% each, while LO has 10% and The Board proposes a cash dividend of As part of the SpareBank 1 cooperation allian- FöreningsSparbanken 25%. NOK 9.50 per primary capital certificate, ce, SpareBank 1 Vest supplies a broad range of The overall objective of the SpareBank 1 corresponding to 17.3% of the profit recorded financial services from the subsidiaries of the alliance is to ensure that each bank maintains by the parent bank, and is the maximum which jointly owned financial services group, its independence and regional roots by having the bank is permitted to pay under current SpareBank 1 Gruppen AS. a strong competitive ability, sound profitability regulations. At the start of the year, primary and a robust capital base.At the same time, the capital certificates made up 12.7% of the The SpareBank 1 alliance SpareBank 1 alliance represents a fully parent bank’s equity, after adjusting for the The SpareBank 1 alliance is the result of a competitive alternative at both national and reserve for valuation variances. binding cooperation agreement entered into international level. There was a general decline in values of 14.7% in 1995 by Sparebanken Nord-Norge, All the banks are now using main systems on the Oslo Stock Exchange in 2001, and only Sparebanken Midt-Norge, Sparebanken Vest supplied by EDB Fellesdata, and the SpareBank once in modern stock exchange history has and Sparebanken Rogaland. The licence 1 alliance has recently signed a long-term there been a larger decline in the course of a needed to establish both the alliance and cooperation agreement with EDB Business single calendar year.The price of SpareBank 1 SpareBank 1 Gruppen AS was received in mid- Partner concerning the development of new Vest’s primary capital certificates fell by 9.2% 1996. In the same year, Samarbeidende solutions for electronic banking services. This

10 SPAREBANK 1 VEST ANNUAL REPORT 2001

DIRECTORS’ REPORT 2001

Eli Førde Aarskog, Anne Sissel Raunholm Engevik, Erik Bøckmann, Knut Ravnå, Anne Gine Hestetun, Nordfjordeid Stord Bergen Bergen Bergen (born 1955) (born 1962) (born 1955) (born 1948) (born 1962) Managing director of Eidatunet AS. Elected employee representative. Deputy managing director of Bergen Managing director of SpareBank 1 Vest Member of Bergen Municipal Executive Board member since 1999. Board member since 1992. Energi AS. Board member since 2000. since 1990. Board. Board member since 1998.

means that the SpareBank 1 alliance will have bank’s accounts applying the equity method of end 2001 the Group provided employment prioritised access to a development accounting. Accordingly, the bank’s accounts corresponding to 813 (749) man-labour years. environment which will ensure that the for 2001 include a 13% share of the results The increase is due to 67 employees taken SpareBank 1 banks are able to implement recorded by SpareBank 1 Gruppen AS. For over from the banking and insurance activities common systems and realise 2001 this share corresponded to a loss of of VÅR Bank og Forsikring ASA in Hordaland SpareBank 1’s multi-channel strategy. The NOK 56m. The bank’s shareholding is inclu- and Sogn & Fjordane. Of these, 45 were taken banks will be in a position to offer cost- ded in "Shareholdings and investments" in a over in 2001, and the others in the fourth efficient products and services at the level and sum corresponding to 13 % of the equity of quarter of 2000. using the channels preferred by the SpareBank 1 Gruppen AS. The Board considers the bank’s working customers. Through their cooperation with On 17 December FöreningsSparbanken gave environment to be good. Systems and FöreningsSparbanken the SpareBank 1 banks notice of termination of its cooperation procedures are in accordance with have developed and implemented a new online agreement with the SpareBank 1 alliance in Regulations relating to Health, Environment banking solution with enhanced functionality order to renegotiate the agreement. If these and Safety. The Working Environment which will also allow the customers to negotiations fail, the agreement will terminate Committee held four meetings in 2001. No monitor their insurance and investment fund with effect from 31 December 2002. IN such resources or production methods are used commitments with the bank. case, the Norwegian owners have the right, which impact negatively on the environment As the parent bank of a financial services but no obligation, to acquire the shareholding to any appreciable extent, and the bank’s group, SpareBank 1 Gruppen AS coordinates held by FöreningsSparbanken. From the same activities do not pollute the external common strategic projects and manages the date, FöreningsSparbanken will cease to be environment. SpareBank 1 brand name on behalf of the represented on the Board of Directors and in Sick leave is actively monitored, and in this Norwegian owner banks. the Council of Representatives. connection the company health service plays a At the end of 2001, the company owned 100% At the end of 2001, the SpareBank 1 alliance central role. The average incidence of sick of SpareBank 1 Livsforsikring AS, SpareBank 1 (excl. FöreningsSparbanken) had total assets of leave stood at 6.3%, against 6.1% in 2000. Skadeforsikring AS, SpareBank 1 approximately NOK 225 billion and about 370 The annual internal organisational survey was Fondsforsikring AS, Sparebankutvikling AS, branches throughout Norway. carried out in the autumn of 2001.The survey Odin Forvaltning AS,Bank 1 Oslo, SpareBank 1 applies motivation and stress theory to Finans AS, IDA AS and SpareBank 1 Aktiv Personnel, working environment and measure key areas affecting the level of job forvaltning ASA. SpareBank 1 Gruppen also safety satisfaction.The survey, which received replies owns 65% of EnterCard AS and 51% of First At 31 December 2001 the parent bank’s from 89% of the total workforce, showed that Securities ASA. operative workforce corresponded to 770 the bank has a good working environment. The bank’s shareholding in SpareBank 1 man-labour years, against 713 in the previous Areas with room for improvement have been Gruppen AS is deemed to be participation in a year. Of this, temporary hired employees identified, and appropriate action will be taken jointly controlled activity and is posted in the accounted for 52 man-labour years. At year- within the relevant departments.

11 SPAREBANK 1 VEST ANNUAL REPORT 2001

DIRECTORS’ REPORT 2001

Norwegian economy and with human resources at a premium in the Results and balance sheet local operating conditions labour market. Unemployment has been low developments – Group The uncertainty surrounding the international since 1998 and stood at 2.7% for the whole of The annual report and accounts are submitted economy increased in 2001 and was 2001. However, there are signs indicating that on the assumption that the bank will continue reinforced by the terror attacks on the USA the level of unemployment towards year-end as a going concern. This is based on on 11 September.For the first time since 1974 was slightly higher than the figure for the first operational forecasts for 2002, as well as there is economic recession in the USA, Japan half of the year. projections and strategic assessments with a and Europe at the same time. Several Although the price of oil fell by 12.4% in 2001, time horizon extending for a further three Norwegian companies, especially in the export with an average price of USD 24.4 per barrel, years. and travel and tourism sectors, have felt the it is still at a level which provides a basis for Net interest income and commissions effects of greater caution on the part of investment in oil and gas extraction and high receivable increased by NOK 36m to NOK households and in trade and industry through- expectations with regard to Norway’s future 787m. The ratio of net interest income to out the world. petroleum revenues. average total assets fell by 0.2 percentage The Norwegian economy has been characte- 2001 was a very turbulent year on the stock- points to 2.5%. The decline in relative net rised by moderate economic growth in the market. There was a global decline in share interest income should be considered taking last few years. The rate of growth in the prices, reflecting great uncertainty, indications account of the increasing competition in the mainland economy declined in 2001, while a of lower results and downward adjustments. marketplace. Relative net interest income has marked drop in both exports of traditional The all-share index on the Oslo Stock also been affected by the decline in the funding goods and gross mainland investment Exchange fell by 14.7% in 2001, ending up at ratio and the fact that full amount of the fee contributed to a decline in GNP estimated at 167.18 points on 31 December. Among the payable to the Savings Bank’s Guarantee Fund 1.3% in 2001. sub-indices on the Oslo Stock Exchange, the was paid in 2001. For the last few years, Norway has high a Primary Capital Certificate Index performed Profits before operating expenses totalled higher inflation rate than its trading partners. best, with a rise of 12%. NOK 973m, against NOK 989m in 2000. In The rate stood at 3% in 2001 and was greatly As regards commercial developments at considering the decline in profits, due account affected by changes in public taxes and regional level, 2001 was a record year for the should be taken of the downturn in the stock- charges, and by the rise in energy prices. fishery industry in terms of earnings and markets in 2001 and the poor results provided Inflation is expected to be slightly below 2% in profitability, reflecting the good fishing season by the bank’s equity investments, as well as the 2002. New guidelines on monetary policy and higher prices. Conversely, 2001 was a loss arising from the bank’s shareholding in were set out by the government at the start of difficult year for the fish farming industry, with SpareBank 1 Gruppen AS. 2001. Formerly, Norwegian monetary policy a reduction in market shares and low prices Income from sales of investment fund and was determined by developments in the resulting in lower earnings. There was strong insurance products increase by a creditable exchange rate for the Norwegian krone. The growth in parts of the industrial sector, but NOK 33m in 2001. Most of the increase came new policy is directed at maintaining a stable with large variations within the different from higher sales of non-life insurance in and low rate of inflation, with a target inflation industries. On a regional basis, major invest- connection with SpareBank 1 Vest’s takeover rate of 2.5%. ment is expected in the oil sector in 2002. of the insurance activities of VÅR Bank og The level of activity in Norway was Freight rates in the shipping sector fell in the Forsikring in the counties of Hordaland and considerably higher than that of its trading second half of the year in most segments, but a Sogn & Fjordane at the end of the first quarter partners in 2001, and as a result Norway has recovery is expected in the second half of of 2001.The negative focus and developments relatively high interest rates. On 12 December 2002. Record results were recorded by the in the stockmarket were factors which explain Norges Bank lowered its interest rate by 0.5 offshore shipping companies, and the outlook why bank failed to reach its target figures for percentage points to 6.5% for deposits from is generally good. So far, activities in the sales of fund and investment products. banks. Norwegian real estate market have been Nevertheless, at a time when the overall The Norwegian krone strengthened in 2001. maintained at a good level. In Bergen, the mar- market was in decline, the bank recorded The interest rate differential in relation to ket has been characterised by firm demand for marginally higher sales in this area. other countries was probably one reason for central office premises, and rental levels have The contribution from banking services fell by this development. been steadily rising for centrally located 9% in 2001.As expected, the establishment of The Norwegian economy continues to be commercial premises with a good standard. banks operating on a purely online basis has characterised by high utilisation of capacity, put pressure on our payment transfer charges.

Number of man-years Core capital ratio (percentage) Dividend per PCC (NOK)

1000 12 10,84 10,82 25 10,25 22 813 9,94 9,68 749 10 800 731 717 703 20 8 15 13 600 12 6 9,50 400 10 4 5 5 200 2

0 0 0 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001

12 SPAREBANK 1 VEST ANNUAL REPORT 2001

DIRECTORS’ REPORT 2001

However,the main reason for this reduction is in the accounts. The effect for 2001 was a insurance doing especially well, and well up on related to the change in customer behaviour negative contribution of NOK 56m. the target figure. Sales of fund products were due to an increase in the number of online The SpareBank 1 Vest Group posted profits of affected by the general situation in this customers and an increasing transaction NOK 200m before tax, while the profit after market, but sales of guaranteed savings volume through our own online bank. We tax was NOK 137m. The accounting results products were at a very satisfactory level. welcome this development as part of the were below the bank’s target figure for the In February 2001 SpareBank 1 Vest launched a process of establishing more cost-effective year. new online banking service. The new online operations. During the year the Group’s total assets rose bank is the product of cooperation with the Personnel costs rose by 10% to NOK 324m in by 4.1% to NOK 32 367m, and at year-end the other SpareBank 1 banks and 2001.The increase relates mainly to personnel capital ratio stood at 9.93% while the core FöreningsSparbanken AB in Sweden.As well as taken over in connection with the acquisition capital ratio was 9.68%. The bank’s target providing customers with traditional online of the banking and insurance activities of VÅR figure is a capital ratio of 12%. banking services, they can open accounts, Bank og Forsikring ASA in Hordaland and Sogn In the fourth quarter, SpareBank 1 Vest took engage in fund saving and share trading, & Fjordane. In order to improve operating up a subordinated loan of NOK 147m, while a acquire a bank card and apply for loans. The efficiency and ensure that the bank is better subordinated loan of USD 50m was repaid. bank abolished the annual fee for online placed to meet the increasing demands of the The bank plans to raise further subordinated services in the first quarter of 2001. The market, an extensive programme of initiatives loan capital in the first quarter of 2002. number of online customers rose by 67% will be implemented in 2002. A provision of during the year, with more than 45 000 NOK 20m has been made for restructuring Retail and corporate markets customers now using this channel of related to this programme. There were only SpareBank 1 Vest has maintained its leading distribution, in addition to their local branch marginal changes in other costs. The ratio of position in the retail market in Hordaland and and Customer Service.The use of bank cards costs to income stood at 70.3%, against 64.8% Sogn & Fjordane with a market share of 42%, increased in 2001, and by year-end 80% of they in 2000. In considering the rise in the cost measured by the number of customers. The were being used by 80% of the bank’s index, due account should be taken of the bank recorded more than 12 000 new customers. This has helped to reduce queues negative contribution from the securities customers in 2001, while 4 500 terminated in the branches and has made the bank market and SpareBank 1, as well as increased their customer relationship. generally more accessible. personnel costs and the provision for In the last few years SpareBank 1 Vest has The increasing degree of self-service and restructuring. strengthened its position as a bank for local automated functions has made it possible to At the end of 2001, gross lendings and trade and industry in its market area, partly as reallocate resources in the branches and receivables from customers totalled NOK a result of the bank’s strong local presence and improve and extend advisory services and 29 145m, reflecting annual growth of 9.5%.The proximity to the customers. Our aim is to be a sales at the seller’s initiative, which will retail segment, which accounts for 67% of the strong partner for the commercial sector and gradually be reflected in the performance of portfolio, showed 10% growth, while the to play an active role in regional development. the branch network. In 2001, the new branch corporate segment grew by 11%. In the corporate market the bank increased its concept, incorporating a higher degree of self- Deposits and accounts payable to customers market share in the course of the year, and service, was introduced in the branches at the amounted to NOK 19 349m at year-end, SpareBank 1 Vest is now the main bank for following locations: Lagunen, Straume, corresponding to annual growth of 8.8%. 37% of the companies in the bank’s market Vestkanten, Leirvik, Førde and Åsane. The retail segment accounts for 63% of area.The bank attracted 1 300 new corporate Increasing use was made of Customer Service deposits. clients in 2001 and lost around 300. Syndicated in 2001. Customer Service is a multi-channel The funding ratio (ratio of deposits to net financing and cooperation among the service centre, and currently one of the bank’s lendings) fell from 67.7% to 67.3%. and is still participants of the SpareBank 1 alliance best sales channels. Customer Service considered to be at an acceptable level. account for 24% of the bank’s loans to the received around one million calls in 2001. Losses charged in the accounts increased by corporate market. The bank is also in the process of imple- 100% to NOK 86m, equal to 0.29% of gross SpareBank 1 Vest is the main bank for 210 000 menting a new queue management system lendings, which the Board considers fairly customers, and for more than 50 000 which will provide a better way of dealing with moderate considering that 33% is attributable customers it their second bank. queues in the branches. The new system has to an increase in unspecified loss provisions. The bank’s sales culture has been been installed in all the branches in the Bergen Gross non-performing loans corresponded to strengthened.There is a greater focus on sales region. Measurements in December showed 0.75% of total loans.The loss ratio in the retail management, and all of the bank’s sales that in the busiest week before Christmas segment was 0.72% and 0.83% in the managers take part in a sales management (week 51), 22 625 customers were served corporate segment. The level of defaults in programme arranged by the bank in with at the 17 branches in the Bergen region. both segments is within the limit which the cooperation with the Administrative Research Of these, 66% were served within five minutes Board considers acceptable. Institute (AFF). and 86% within ten minutes. In the view of the Board, the specified and For the most part, the bank reached its target There were 63 branches at year-end. In August unspecified loss provisions at year-end, sales figures for 2001, excluding fund and a new branch was opened in Førde in amounting to NOK 195m (178) and NOK investment products. Sales of loan products Sunnfjord, while the branches in Modalen and 188m (160), respectively, were sufficient in were well ahead of the target figures for both at Nordnes were closed in 2001.At the end of relation to the assessed exposure which the the retain and the corporate markets, with January 2002 it was decided to closed the portfolio represents. housing loans doing exceptionally well. The branches in Øystese,Tysse in Hardanger and in SpareBank 1 Vest’s share of the results posted bank’s focus on insurance products is also Førde in Sunnhordland, with effect from by SpareBank 1 Gruppen AS are incorporated starting to show results, with sales of non-life spring/summer of 2002.

13 SPAREBANK 1 VEST ANNUAL REPORT 2001

DIRECTORS’ REPORT 2001

Risk and internal control eligible capital base. SpareBank 1 Vest has set The bank’s net losses in 2001 corresponded to The bank’s operations are exposed to a the limits at 20% and 10%, respectively, and the 0.3% of the loan portfolio, and only a number of risks, and an overall assessment of bank has a moderate foreign currency position moderate rise in net losses is expected in risk is carried out each year. Through annual which corresponded to NOK 31.3m at year- 2002. In a longer perspective, the loss ratio confirmation procedures related to the end. may rise to 0.5% of the portfolio. In the Board’s overall risk assessment the bank Stockmarket investments relate largely to corporate market, the losses are expected to ensures that internal controls aimed at major listed Norwegian companies. At the end of arise in areas with a medium to high risk, with areas of risk in the bank’s areas of activity are August 2001 the bank reduced its stockmarket a preponderance of high risk items. In the reviewed and confirmed. Major deviations are exposure. New investment limits have been retail market, only marginal losses are reported and remedial action is taken. set at a lower level than previously.The maxi- expected in the same categories. The bank focuses risk in relation to strategy, mum exposure has been set at NOK 250m, in Operational risk is defined as the risk of financial activities and operations.The financial terms of market value, plus a fluctuation value errors of commission or omission, as well as risk is made up of the liquidity risk, the market of 10%.The actual exposure at year-end 2001 the risk of losing key personnel. This risk is risk and the credit risk, while the market risk was NOK 15m, related mainly to investments covered through internal control, systems itself reflects the bank’s exposure to changes in primary capital certificates. This portfolio testing and audits, and by raising the level of in interest rates, foreign exchange rates and has been increased in 2001. expertise. The risk is considered to be at an share prices. The credit risk is monitored through default acceptable level. The strategic risk is determined by the bank’s reports, risk classification and branch analyses. In April 2001 SpareBank 1 Vest changed to a ability to maintain the correct operational The bank has extensive regulations for credit new provider of data processing functions, focus and by the expertise at Board level and assessment and the management of credit risk converting from EDB Novit AS to EDB in the everyday management of the bank’s based on an adopted credit policy which is Fellesdata ASA.The purpose of the conversion affairs. The risk is revealed through the reviewed annually. Great importance is was to establish a common technological ongoing process of discussion and deliberation attached to credit control and monitoring of platform for all the SpareBank 1 banks and within the Board and the management, and doubtful debts. Due account of the credit risk thus make the SpareBank 1 alliance more through periodic assessments. is taken in the pricing of loans and credit. effective. The project was one of the largest The bank’s financial risk is identified and The Board underlines the importance of ever undertaken by the bank, involving the managed through monthly reports based on keeping the credit risk at a moderate level. allocation of substantial resources. The actual limits set by the Board. The risk limits are Gross defaulted loans corresponded to 0.75% conversion of data processing systems was reviewed by the Board once a year, or more of gross lendings at year-end. In 2001 the bank successful, but this was followed by major often if required. amended the principles applied in reporting operating problems for the bank.This, in turn, SpareBank 1 Vest has moderate liquidity defaults. Previously, the bank reported defaults resulted in serious problems for the exposure.The funding ratio (ratio of customer older than 30 days but now reports defaults of customers, in the form of poor accessibility deposits to lendings) is around 67%, which is more than 90 days in order to bring the bank’s and long waiting times. The data processing regarded as satisfactory. As regards funding reporting practice more into line with functions have now stabilised, following sources other than customer deposits, a common practice within the industry. Defaults intense efforts by the supplier and the bank. maximum of NOK 1.5bn is permitted to have are at a level defined by the bank as The Board is of the view that the bank’s a maturity of 7 days or less, while volumes in acceptable. methods and management systems for dealing excess of NOK 3bn are required to have a The bank has a sound risk classification system with risk are appropriate. maturity of at least three months. for the retail and corporate markets. In the Since 1990, Norwegian banks have been Interest rate exposure relates mainly to the corporate market, 6% of the loan portfolio governed by capital adequacy regulations Group’s portfolio of interest-earning was considered to have a high risk at the end based on an international standard drawn up securities. Loans and deposits on fixed terms of 2001. This represents an increase of one by the Basel Committee for the Banking are of less significance for the interest rate percentage point in the course of the year. In Inspectorate. This same body has proposed risk.Throughout the year the bank was within the medium risk category there was a rise of changes in the international regulations for the the parameters set for interest rate exposure. one percentage point. Loss provisions have calculation of capital adequacy. The new These parameters are based on the maximum been made where considered necessary. Real regulations are intended to ensure that there effect on profits resulting from a parallel estate, shipping and the wholesale and retail is better correspondence between the capital change of one percentage point in the interest trade are the largest individual branches in the adequacy requirement and the actual risk to rate curve and relate mainly to defined corporate market. Commitments in excess of which the banks are exposed. SpareBank 1 securities portfolios. The maximum effect on NOK 20 million account for 47% of the total Vest is already in the process of preparing for profits has been set at NOK 50m. The net portfolio in the corporate market. the changes to come. Based on the time interest rate exposure at year-end 2001 was A moderate rise in the risk attaching to the schedule set up by the Basel Committee and NOK 21.5m. corporate is envisaged in 2002. This applies the EU, the new regulations will be adopted in Norges Bank’s foreign exchange regulations especially to shipping, fish farming and the the autumn of 2002 and come into force in set the parameters for the bank’s maximum fisheries, where the bank’s commitments at 2005. foreign exchange exposure. In kroner terms, year-end totalled NOK 2 623m. the bank’s aggregate foreign currency position The risk in the retail market is considered to Allocation of profits – Parent Bank (the aggregate of all currencies) cannot be moderate, with only a marginal rise After estimated taxes of NOK 53m, the exceed 30% of the bank’s eligible capital base. envisaged in 2002. Only 2% of the portfolio is parent bank’s profit for the year was NOK The corresponding amount in NOK in any one regarded as entailing a risk that is above 137m. The Board proposes allocating the currency cannot exceed 15% of the bank’s average. profit for the year and of a transfer of NOK

14 SPAREBANK 1 VEST ANNUAL REPORT 2001

DIRECTORS’ REPORT 2001

58m from the reserve for valuation variances, Prospects capital certificates ensure that their position is in total NOK 195m, as follows: The international economic recession has strengthened. It is the view of the Board that resulted in a downsizing of growth estimates SpareBank 1 Vest can best exercise its regional Dividend of NOK 9.5 per for 2002 in the USA, Japan and Europe. The functions as an independent bank by building PCC NOK 24 million American economy has been in recession on its present corporate form. Transfer to reserve for since March 2001, but a significant recovery is SpareBank 1 Vest is well placed to achieve its valuation variances NOK 8 million expected in the second half of 2002. goals in 2002. The bank has a large customer Transfer to Sparebanken’s Internationally, a number of central banks have base, a sound capital base, a good reputation in capital fund NOK 148 million recently reduced their reference rates. In the the market, a broad range of products, a loyal USA the real rate of interest stands at zero. and capable workforce, and strong local roots Transfer to gift fund NOK 15 million However, pricing in the money market which will be utilised to an even greater Total allocation NOK 195 million indicates that the players in this market expect extent to place the focus on increased sales to that international interest rates will soon both existing and new customers. A number The dividend for 2001 will be paid to the reach their lowest level. of initiatives will be developed and implemen- owners of primary capital certificates on 22 The introduction of a common monetary unit, ted to reinforce sales activities based on the March 2002, based on the number of primary the EURO, from the end of 2001 is likely to bank’s core values, vision, goals and strategies. capital certificates registered in the mean some decline in the bank’s sales of SpareBank 1 Vest expects to reap the benefits Norwegian Registry of Securities on 7 March foreign currency, but this will have only of increased efficiency and lower costs as a 2002. marginal consequences for fee income. result of the programme that has recently The dividend is consistent with the bank’s SpareBank 1 Vest expects to see further high been started by the bank to improve efficiency. dividend policy, which reads as follows: demand for loans, but somewhat less than The bank expects to achieve a post-tax return "The financial objective of Sparebanken Vest’s hitherto. Deposits are also expected to grow on equity of 11.5% in 2002. activities is to achieve results which provide a at a slightly lower pace.The bank is prepared satisfactory return on total capital employed. for the possibility of an increase in losses and Vote of thanks to business associates, The dividend on primary capital certificates defaulted loans, but specific assessments elected representatives and employees shall reflect the bank’s financial results. indicate that only a moderate increase in net 2001 was a challenging year for the bank, Payment of a competitive cash dividend is a losses is likely. calling for flexibility throughout the entire priority for Sparebanken Vest." Uncertainty about macroeconomic develop- organisation. The support and loyalty of the ments has been reflected in the pattern of bank’s customers and the untiring efforts of Elected officers and management saving among the public. The long-term trend employees at all levels within the organisation In the spring elections of 2001 Lillian Torsvik of recent years characterised by a marked were prevailing features of 2001.The Board is was elected chairman of the Control move away from traditional bank saving in grateful for the great patience and under- Committee. In November 2001 Helen favour of investment in unit trusts has slowed standing shown by the bank’s customers in the Nordeide Fløisand took up a new position and down to some extent. However there are face of problems which arose in connection in this connection she left the Board of grounds which support the view that the long- with the transfer of the bank’s main computer Directors. Deputy member Elna Lappegård term trend towards increased saving in unit systems to a new supplier. will attend Board meetings as a permanent trusts. The Board wishes to express its thanks to all member until new elections are held in the Further intensification of competition in the customers, business associates, elected spring of 2002. financial sector is likely. The Board expects representatives and employees for very good Gro Reppen stepped down as personnel that in 2002 general permission will be given cooperation in 2001. director in connection with leave of absence for savings banks to reorganise as limited For further information, please refer to the for study purposes. Rune Bjørnhovd has been companies. In this connection, it is important annual accounts and notes to the accounts. appointed personnel director. that the general conditions governing primary

Bergen, 31 December 2001 21 February 2002

DIRECTORS’ OF SPAREBANKEN VEST:

Pål W.Lorentzen Bjørn Ove Børnes Chairman Deputy Chairman

Erik Bøckmann Anne Gine Hestetun Jan O. Yttredal Anne Sissel Raunholm Engevik

Eli Førde Aarskog Elna Lappegård Terje Kvamme

Knut Ravnå Managing Director

15 SPAREBANK 1 VEST ANNUAL REPORT 2001

PROFIT AND LOSS ACCOUNT

P ARENT BANK NOTES GROUP 1999 2000 2001 NOK million 2001 2000 1999 1 951 2 085 2 569 Interest income etc. 1 2 560 2 080 1 946 1 228 1 333 1 780 Interest expenses etc. 2 1 773 1 329 1 227

723 752 789 Net interest and credit commission income 787 751 719 Dividends and other income on securities 26 20 (29) with a variable return 3 (52) (4) 23 200 227 270 Commissions receivable and income from banking services 4 270 227 200 67 64 77 Commissions payable and cost of banking services 5 77 64 67 Net change in value of and gain/(loss) 98 13 (21) on foreign exchange and short-term securities 6 (21) 13 98 541Other operating income 7 66 66 27 262 200 144 Net operating income 186 238 281

985 952 933 Profit before operating expenses 973 989 1 000 457 462 498 Salaries and general administration expenses 8 540 481 476 37 41 41 Depreciation of fixed and intangible assets 9 46 45 40 84 108 115 Other operating expenses 10 98 115 75 578 611 654 Operating expenses 684 641 591

407 341 279 Profit before losses and write-downs 289 348 409 59 43 86 Losses on loans and guarantees etc. 11 86 43 59 (Write-downs)/reversal of write-downs and gain/(loss) 134 32 (3) on long-term securities (3) 33 134

482 330 190 Profit before tax 200 338 484 124 91 53 Taxes 12,13 63 99 126

358 239 137 Profit for the year 137 239 358

Transfers and allocations

Transfers 158Transferred from reserve for valuation variances Transferred from other equity 58 1 158Total transfers 58 1

359 239 195 Profit for allocation 195 239 359

Allocation of profit (55) (30) (24) Dividend on primary capital certificates (24) (30) (55) (18) (8) Transferred to reserve for valuation variances (289) (176) (148) Transferred to Sparebanken capital fund (148) (176) (289) (15) (15) (15) Gifts for the public benefit (15) (15) (15) Transferred to other equity (8) (18) (359) (239) (195) Total allocations (195) (239) (359)

16 SPAREBANK 1 VEST ANNUAL REPORT 2001

BALANCE SHEET

P ARENT BANK NOTES GROUP 1999 2000 2001 NOK million 2001 2000 1999 ASSETS 651 310 332 Cash and deposits with central banks 332 310 651 144 1 359 920 Loans to and deposits with credit institutions 14 920 1 359 144 22 730 26 686 29 329 Total loans before specified and unspecified loss provisions 16,17 29 145 26 610 22 650 (177) (178) (195) Specified loss provisions 20 (195) (178) (177) (125) (160) (188) Unspecified loss provisions 20 (188) (160) (125) 22 428 26 348 28 946 Loans to and receivables from customers 15 28 762 26 272 22 348 42Assets acquired 25 2 4 Commercial paper, bonds and other interest-earning 2 153 2 021 1 312 securities with a fixed return 26 1 312 2 021 2 153 Shareholdings, investments and other securities 262 171 175 with a variable return 29 175 171 262 200 342 325 Shareholdings in jointly controlled companies 30 325 342 200 51 53 35 Shareholdings in subsidiaries 30 25 46 41 Intangible assets 35 36 39 23 182 193 141 Fixed assets 36 320 288 280 50 58 12 Other assets 19 61 47 146 230 182 Prepaid expenses and accrued income 39 164 231 147 26 292 31 135 32 423 Total assets 32 367 31 098 26 255

LIABILITIES AND EQUITY 3 392 3 616 2 963 Loans and deposits from credit institutions 40 2 963 3 616 3 392 15 788 17 828 19 411 Deposits from and debt to customers 41 19 349 17 782 15 742 4 117 6 045 6 856 Securitised debt 43 6 856 6 045 4 117 467 497 322 Other liabilities 44 327 506 476 223 349 243 Accrued expenses and prepaid income 245 349 224 37 32 57 Provisions for expenses and commitments 45 56 32 37 401 693 397 Subordinated loan capital 47 397 693 401 24 425 29 060 30 249 Total liabilities 30 193 29 023 24 389

250 250 250 Shares capital/primary capital certificates 48 250 250 250 222Share premium reserve 4 4 4 252 252 252 Paid-up equity 254 254 254

15 101 17 Reserve for valuation variances 1 600 1 722 1 905 Sparebanken capital fund 1 905 1 722 1 600 Other equity 15 99 12 1 615 1 823 1 922 Retained earnings 1 920 1 821 1 612

1 867 2 075 2 174 Total equity 49 2 174 2 075 1 866

26 292 31 135 32 423 Total liabilities and equity 32 367 31 098 26 255

1 160 1 677 2 542 Assets denominated in foreign currency 2 542 1 677 1 160 2 807 2 686 2 797 Liabilities denominated in foreign currency 2 797 2 686 2 807

OFF-BALANCE SHEET ITEMS Contingent liabilities 534 593 565 Guarantees 51 555 593 534 2 000 1 990 1 394 Mortgages 51 1 394 1 991 2 001 17 16 15 Joint and several liability 15 16 17

Commitments 2 998 2 108 3 039 Foreign currency purchase agreements 3 039 2 108 2 998 1 307 1 058 2 770 Foreign currency sale agreements 2 770 1 058 1 307

17 SPAREBANK 1 VEST ANNUAL REPORT 2001

STATEMENT OF CASH FLOWS

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 Cash flow from operations 358 239 137 Profit for the year 137 239 358 37 44 41 Ordinary depreciation 46 48 40 59 43 86 Loans on losses and guarantees etc. 86 43 59 (70) (45) (39) Provision for dividends and gifts for the public benefit (39) (45) (70) 384 281 225 Net cash flow from operations 230 285 387

Cash flow from investment activities 458 (1 216) 440 Net change in loans to and deposits with credit institutions 440 (1 223) 458 (1 985) (3 907) (2 247) Net change in instalment loans to customers (2 139) (3 912) (1 988) (82) (49) (396) Net change in credit facilities utilised (396) (49) (81) 19 36 45 Change in loss provisions 45 36 19 0 (3) 2 Change in repossessed assets 2 (3) 0 (59) (43) (86) Losses on loans and guarantees etc. (86) (43) (59) 222 91 (4) Net change in shareholdings and investments in other enterprises (4) 91 226 (834) 132 709 Net change in other short-term securities 709 132 (834) (40) (130) 35 Net change in securities 17 (128) (46) 1183 Disposal of fixed assets 5 9 1 (40) (56) (72) Purchase of fixed assets (83) (57) (41) (1) (113) 99 Change in other receivables 112 (113) 8 (2 341) (5 257) (1 392) Net cash flow from investments (1 378) (5 260) (2 337)

Cash flow from financing activities 1 123 2 040 1 583 Net change in customer deposits 1 567 2 040 1 112 1 792 224 (653) Net change in deposits from Norges Bank and other credit institutions (653) 224 1 792 21 292 (296) Net change in subordinated loan capital (296) 292 21 (757) 1 928 811 Net change in bond debt 811 1 928 (757) 176 151 (256) Change in other debt (259) 150 180 2 355 4 635 1 189 Net cash flow from financing activities 1 170 4 634 2 348

398 (341) 22 Net cash flow in period 22 (341) 398

398 (341) 22 Net change in cash and cash equivalents 22 (341) 398 253 651 310 Liquid assets at 1 January 310 651 253 651 310 332 Liquid assets at 31 December 332 310 651

18 SPAREBANK 1 VEST ANNUAL REPORT 2001

A CCOUNTING PRINCIPLES

GENERAL participants exercise joint control of the hedging instrument are specifically included as The accounts have been prepared in activity. No single participant has a deciding part of a hedging portfolio. Gains and losses accordance with current accounting influence. are recorded when hedging ends. legislation, relevant regulations and generally accepted accounting practice. The jointly controlled activities of the In making portfolio assessments for All amounts are stated in NOK million, Sparebank 1 Group are valued on the basis of accounting purposes, the bank’s assessment is unless stated otherwise.All information the equity method since the activities of the based on an overall degree of correlation contained in the notes relates to the Sparebank 1 Group are substantially different in values such that the total portfolio risk is Group, unless stated otherwise. from the bank’s other activities, and using the deemed to have been reduced.There is also a gross method would require accounting infor- presumption that the investment strategy in FULL CONSOLIDATION mation that is not readily available. force entails management of the risk and that The consolidated accounts comprise the ongoing management of investments of Sparebanken Vest and subsidiaries where the RECORDING OF this kind is carried out in such a way that the parent bank directly or indirectly owns 50 per INCOME AND EXPENSES risk is deemed to have been reduced. cent of the shares or more, or is able to Interest and commissions are included in Portfolios of this kind are valued at the control the company’s operations.A summary the profit and loss account when earned as lower of aggregate fair market value and the of consolidated companies is shown in note income or incurred as expenses. Fees that are aggregate acquisition cost of each portfolio. 33. Uniform accounting principles are applied direct payment for services rendered are to all companies included in the consolidated taken to income when paid.The entire amount SECURITIES accounts. All internal transactions and of loan establishment fees is taken to income Shares: intercompany accounts payable and receivable in the year of establishment when they are Shares and investments in joint stock are eliminated. considered to cover the loan establishment companies, general partnerships and limited costs. partnerships are divided as follows: On the acquisition of subsidiaries the *Trading portfolio cost price of the shareholding in the parent Prepaid income and accrued expenses payable * Long-term investments company is eliminated against the equity of at year-end are accrued and entered as a *Investments in general and limited the subsidiary at the date of acquisition. The liability, while accrued income receivable is partnerships difference between the cost price and the net recorded in the balance sheet under accounts *Investments in subsidiaries, associated book value at the date of acquisition is receivable. companies and jointly controlled activities. added to the assets to which the surplus value relates, within the market value of these Dividends are stated as income in the year Shareholdings and investments included in the assets. Any part of the cost price that cannot they are received, except for dividends from trading portfolio are valued at fair market be added to specific assets represents good- subsidiaries, associated companies and jointly value on the balance sheet date where will. Goodwill is amortised on a straight line controlled activities which are included in the they are traded on a stock exchange or in a basis over the period in which the benefits of share of the profit for the year in the regulated market and are broadly and easily goodwill are expected to accrue. accounts. traded. Shares and investments included in the trading portfolio but which are not eligible for In the case of new acquisitions, the subsidiary In calculating gains/losses on sales of shares, a market valuation, are valued at the lower of is consolidated from the time when a bonds and commercial paper the average cost cost and actual value. controlling interest is held. Subsidiaries sold method is used. are included up to the date of disposal. Long-term shareholdings are valued at RISK MANAGEMENT acquisition cost. If the real value of a share- SUBSIDIARIES Risk management relates to both hedging and holding is lower than cost, and the fall in value Subsidiaries and associated companies are portfolio assessment. Assessment for hedging is not deemed to be temporary, the share- valued on the basis of the equity method in purposes is applied to the bank’s holdings holding is written down to its real value. If the company accounts. The parent company’s of fixed interest lendings and fixed interest there is no longer a need to write down the share of profits is based on the subsidiaries’ deposits. This hedging portfolio also includes value of a shareholding, the write-down shall profits after tax and after deducting internal financial instruments in the balance sheet and be reversed. gains and any amortisation of goodwill arising financial derivatives. Portfolio assessment from the cost price of the shareholding being is used for parts of the bank’s holdings of Investments in limited and general higher than the acquired share of book equity. commercial paper and bonds. partnerships are incorporated on the basis of the cost method. JOINTLY CONTROLLED In assessing the hedging portfolio for ACTIVITIES accounting purposes, the bank’s assessment is The accounting treatment of investments in Jointly controlled activities are economic based on a high degree of overall correlation subsidiaries, associated companies and jointly activities which are regulated by agreement between the hedging instrument and the controlled companies is described above. between the bank and one or more identified items hedged. There is also a participants such that the bank and the presumption that the hedged objects and the

19 SPAREBANK 1 VEST ANNUAL REPORT 2001

A CCOUNTING PRINCIPLES

Commercial paper and bonds rate and foreign exchange exposure and to renounced the commitment or its share Commercial paper and bearer bonds are take positions in the interest rate and foreign thereof. divided as follows: exchange markets. There instruments relate *Trading portfolio to forward foreign exchange transactions, Specified loan loss provisions. The port- * Other short-term investments interest rate swaps, forward rate agreements folio of loans and guarantees is assessed * Hedging portfolio (FRAs) and quoted interest rate futures. continuously. The assessment considers the * Bearer bonds to be held until maturity Interest rate related and foreign exchange debtor’s debt-servicing ability and the value of transactions are classified either as hedging the loan security. If this shows that a loss may Commercial paper and bonds investments transactions or as trading transactions when be expected, the loss is entered in included in the trading portfolio are valued at they are made. the accounts and the amount is included in fair market value on the balance sheet date specified loan loss provisions. where they are traded on a stock exchange or Hedging transactions are entered into in in a regulated market and are broadly and order to guard against existing interest rate The amount of the loan loss provision takes easily traded. or foreign exchange exposure. There must account of the value of the security and the therefore be a high degree of negative debtor’s financial position. The security is Other short-term bearer bonds and correlation with regard to value changes assessed at market value less selling expenses commercial paper not included in the trading between the hedging instrument and the at the date of calculation. or hedging portfolio are valued collectively at hedged object. The hedging instrument is the lower of the portfolio’s aggregate market valued in connection with the item hedged. Unspecified loan loss provisions are value and cost. This portfolio also includes assessed in relation to the private market and securities which are linked to a re-purchase Trading transactions are transactions branches within the corporate market. agreement. entered into for own account in order to This assessment is made on the basis of make a profit by exploiting price differentials the composition of the portfolio, historical Bearer bonds and commercial paper and price changes. Open positions in this experience and general lines of development. classified as hedging transactions are valued in category are valued on the basis of the market The provisions are intended to cover possible connection with the underlying item. Income value principle. This means that we calculate losses. Due account is also taken of the low and expenses from securities of this kind are the profit or loss that would arise if we had risk premium attaching to the portfolios. posted in conformity with the underlying covered our foreign exchange and interest items hedged. rate exposure on all open positions at the Loan loss provisions are deducted from the date of assessment. The calculated profit bank’s total lendings, while loss provisions for Bearer bonds to be held until maturity are or loss on open positions can therefore be guarantees appear as a liability in the balance assessed at cost and adjusted to take account incorporated in the accounts on a continuous sheet. of any amortisation of premiums or discounts. basis, even if the position has not been finally The bonds are written down only to the closed. REPOSSESSED ASSETS extent that their redemption is a matter Repossessed assets are stated separately in of uncertainty. Any premium at the time of LOANS AND GUARANTEES the balance sheet and are assessed at the purchase is accrued over the residual maturity Loans and losses are assessed at nominal lower of cost and realisable value.Any changes of the bond as a correction of the current value, except for potential loan losses and in value are reflected in the figure for losses yield at year-end. non-performing loans. on a continuous basis.

FOREIGN EXCHANGE Non-performing loans. A loan or guaran- FIXED ASSETS Receivables and accounts payable denomina- tee is considered to be non-performing if In the balance sheet fixed assets are ted in foreign currency are translated at the the debtor has failed to service the debt as entered at cost less accumulated ordinary middle rate on the Oslo Stock Exchange planned, or if framework credits are not cove- depreciation. Ordinary depreciation is based at the balance sheet date. Income and red. Commitments which have been in default on the cost price and is calculated using the expenses denominated in foreign currency are for more than 90 days are, in any event, straight line method of depreciation based on translated into Norwegian kroner at the rates classified as non-performing. When a default the economic life of the assets. prevailing on the date of the transaction. arises, interest and commissions are no longer Foreign exchange items are mainly hedged by taken to income but are included in provisions Ordinary depreciation for the year is posted ensuring that there are corresponding items for losses. under operating expenses. on the other side of the balance sheet, or through off-balance sheet hedging items. Actual loan losses are charged in the If the actual market value is significantly lower accounts in the case of bankruptcy, confirmed than book value and the decrease in value is INTEREST RATE RELATED AND debt settlement proceedings, failure to receive not considered to be temporary, the asset is FOREIGN EXCHANGE INSTRUMENTS a court order for attachment of property, a written down to the actual market value. The bank uses different off-balance sheet court judgment, or if the bank has terminated Write-downs of this kind are posted in the financial instruments to manage its interest debt collection procedures or has otherwise profit and loss account under ”Write-downs

20 SPAREBANK 1 VEST ANNUAL REPORT 2001

A CCOUNTING PRINCIPLES and gains/losses on long-term securities”. If The tax charge in the profit and loss account the pension premium fund. The figure for there is no longer a need to write down the includes both the tax payable for the period net pension commitments corrected for item, the write-down shall be reversed. and the change in deferred tax. Deferred deviations from estimates and changes in tax/deferred tax assets are calculated at a pension assumptions appears in the balance LIABILITIES tax rate of 28% on the basis of temporary sheet. Deviations and changes of this kind are Bonds issued are stated in the balance sheet differences which can be presumed to arise in measured against the larger of gross pension at nominal value, adding any premium and the future between profits stated in the commitments and total pension funds. If the deducting any discount. Premiums are taken accounts and the profits computed for deviations/changes exceed 10% of the basis of to income and discounts are charged as an tax purposes, and taking account of any loss measurement, the difference is amortised adjustment of current interest expenses until carried forward with tax effect at the end of over the average remaining period for accrual the bond matures. Losses and gains arising the financial year.Temporary timing differences of pension rights. on the purchase or sale of bonds in the secon- which are reversed or can be reversed in the dary market are treated as premiums/- same period are netted against each other and The pension charge for the year is stated net discounts on issue. Subordinated loans entered net. in the profit and loss account under ”Salaries denominated in foreign currency are valued at and general administration expenses”. the higher of the drawdown rate and the rate PENSION COMMITMENTS at year-end. The bank’s net pension commitments are calculated and posted as a long-term liability in AREAS OF ACTIVITY TAXATION the accounts. Net pension commitments are Sparebanken Vest regards its banking activities Deferred tax and deferred tax assets are trea- the difference between gross pension commit- as a single area of activity. ted in accordance with the preliminary ments (the present value of future pensions) Norwegian standard for income tax. and the balance on the insurance fund and

21 ‘‘When the chemistry is there’’

Gerd Kjellaug Berge, director, Selje Hotel Ove Hoddevik, company adviser, SpareBank 1 Vest

– or the story of the bank that invested heavily in salt water

Gerd Kjellaug and Harald Berge in Selje is OK but the profitability on overnight what they call "active holidays", and the wanted to try something different. They guests is an uncertain factor, it might be bank believes in Selje Hotel. That is why travelled around Europe to learn – and came tempting to sit back and take it easy in the they said no to the large hotel chains, back to a bank that was prepared to support winter and just live off the lucrative summer preferring to invest in Selje and the them.The bank provided encouragement and tourist season. Maybe even consider joining attractions of the local community, with support, and showed a genuine interest in the one of the large hotel chains! But Gerd everything from middle age history to the Spa Thalasso project, a form of therapy based Kjellaug and Harald Berge said no, – they roaring North Sea at the doorstep.A unique on the use of salt water,algae and seaweed to wanted to create something themselves. location for a health and therapy centre – Spa treat a variety of conditions. Something unique. Something that people Thalasso has been a success beyond their would be prepared to travel far for, and pay greatest expectations, not least thanks to a When you have headed a well-run family well for. bank that talks the same language and hotel for 25 years, and the financial situation Gerd Kjellaug and Harald Berge believe in supports local initiatives.

22 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 1 Interest income etc.

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 38 40 40 Interest etc. on loans to and deposits with credit institutions 41 40 38 1 825 1 927 2 370 Interest etc. on loans to and receivables from customers 2 360 1 922 1 820 Interest etc. on commercial paper, bonds and 88 118 154 other interest-earning securities 154 118 88 5 Other interest income etc. 5 1 951 2 085 2 569 Total 2 560 2 080 1 946

Note 2 Interest expenses etc.

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 85 116 126 Interest etc. on loans from credit institutions 126 116 85 784 821 1 111 Interest etc. on deposits and loans from customers 1 104 817 782 315 354 463 Interest etc. on securities issued 463 354 315 23 35 47 Interest etc. on subordinated loans 47 35 23 12 7 10 Other interest and funding expenses 10 7 13 923Fee to Savings Banks’ Guarantee Fund 23 9 1 228 1 333 1 780 Total 1 773 1 329 1 227

Norwegian law requires all savings banks to be members of the Savings Banks’ Guarantee Fund.The Fund covers losses incurred by depositors who have deposits with the member institutions for up to NOK 2 m of total deposits per depositor. By deposit is meant any credit balance with the bank on an account registered by name, as well as commitments or certificates of deposit in respect of a named person.The fee payable to the Savings Banks’ Guarantee Fund is set in accordance with the provisions of the Bank Guarantee Act.

Note 3 Dividends and other income on securities with a variable return

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 13 6 4 Income from shares, investments and other securities with a variable return 4 6 15 8 (10) (56) Income from shareholdings in associated companies (56) (10) 8 52423Income from shareholdings in subsidiaries 26 20 (29) Total (52) (4) 23

Note 4 Commissions receivable and income from banking services

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 777Guarantee commissions 7 7 7 158 163 158 Payment transfer charges/interbank credit charge 158 163 158 35 57 105 Other commissions and fees receivable 105 57 35 200 227 270 Total 270 227 200

Note 5 Commissions payable and cost of banking services

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 47 44 58 Payment transfer charges/BBS/EFTPOS 58 44 47 16 16 14 Payment transfer charges/interbank debit charge 14 16 16 445Other charges and fees payable 5 4 4 67 64 77 Total 77 64 67

23 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 6 Net change in value of and gain/(loss) on foreign exchange and short-term securities

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 Net change in value and gain/(loss) on commercial paper, 1 (1) 7 bonds and other interest-earning securities 7 (1) 1 Net change in value and gain/(loss) on shares and other 84 8 (39) securities with a variable return (39) 8 84 Net change in value and gain/(loss) on foreign exchange 13 6 11 and financial derivatives 11 6 13 98 13 (21) Total (21) 13 98

Note 7 Other operating income

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 33 Real estate income 3 6 3 211Other operating income 63 60 24 541Total 66 66 27

Note 8 Salaries and general administration expenses

P ARENT BANK GROUP 1999 2000 2001 Note 2001 2000 1999 220 214 219 Salaries 238 229 230 20 20 Provision for restructuring 20 20 13 21 31 Pensions 46 32 21 14 38 41 51 Social security contributions 54 44 40 166 186 177 Administration expenses 196 187 172 457 462 498 Total 540 481 476

The average number of employees in 2001 was 803 for the parent bank and 847 for the Group. The salary to the managing director of the parent bank was NOK 1 253 488 (2000: NOK 1 075 447, 1999: NOK 977 431), and the calculated value of fringe benefits was NOK 108 659 (2000: NOK 100 056, 1999: NOK 102 416). Remuneration to the Board of Directors of the parent bank amounted to NOK 1 190 000 (2000: NOK 765 000, 1999: NOK 765 000). Remuneration to the Board of Governors of the parent bank amounted to NOK 179 500 (2000: NOK 84 000, 1999: NOK 79 000). Remuneration to the Control Committee of the parent bank amounted to NOK 353 333 (2000: NOK 240 000, 1999: NOK 240 000). The Group purchased advisory services from the external auditor for NOK 1 126 508 (2000: NOK 542 248, 1999: NOK 467 550)

The cost of interest rate subsidies on loans to the employees is not posted as an operating expense and affects the bank’s net interest income.

Note 9 Depreciation of fixed and intangible asset

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 37 39 41 Ordinary depreciation 46 43 40 2 Write-downs 2 37 41 41 Total 46 45 40

24 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 10 Other operating expenses

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 662Real estate operating expenses 25 11 10 41 42 77 Office rental and other running costs 25 32 28 11 10 10 Fixed assets charged against income 14 10 11 26 50 26 Other operating expenses 34 62 26 84 108 115 Total 98 115 75

The external audit fee for the parent bank for 2001 was NOK 725 000 (2000: NOK 480 000, 1999: NOK 480 000) and NOK 834 400 (2000: NOK 550 000, 1999: 550 000) for the Group.

Note 11 Losses on loans and guarantees etc.

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 59 43 85 Loan losses 85 43 59 1 Losses on guarantees etc. 1 59 43 86 Total 86 43 59

Total losses on loans and guarantees charged in the period Increase in loss provisions on commitments specifically 3145provided for previously 5 14 3 Loss provisions on commitments not specifically 42 44 72 provided for previously 72 44 42 (20) (39) (28) Reduction in previous years’ loss provisions (reversal) (28) (39) (20) 41 27 28 Increase in unspecified loss provisions 28 27 41 000Reduction in unspecified loss provisions 0 0 0 16 13 22 Realised losses on commitments not provided for previously 22 13 16 (23) (16) (13) Recoveries on losses realised previously (13) (16) (23) 59 43 86 Total 86 43 59

Realised losses 48 34 31 Realised losses on commitments specifically provided for previously 31 34 48 16 13 22 Realised losses on commitments not provided for previously 22 13 16 64 47 53 Total 53 47 64

25 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 12 Taxes

Tax charge for the year The difference between the pre-tax accounting profit, the basis of assessment for the year and the tax charge for the year is specified below:

P ARENT BANK 2001 2000 1999 Pre-tax profit 190 330 481 +/- permanent differences1) 32 6 (52) +/- change in timing differences as specified in note 13 18 44 (59) Tax base for the year / taxable income 240 380 371

Od which assessed tax at 28% 67 106 104 - Credit for dividends received (5) (8) (4) Capital tax at 0.3% 58 6 Tax provision in the balance sheet 67 106 107 (Excess)/insufficient tax provision (9) (3) 1 Taxes payable in profit and loss account 58 103 108 +/- Change in deferred tax (5) (12) 16 Tax charge for the year 53 91 124

1) Including RISK on securities sold, non-deductible costs and deductions for the share of results recorded by subsidiaries and jointly controlled companies (the share of results is deducted since it has already been taxed in the hands of the individual companies).

Why the tax charge does not correspond to 28% of the pre-tax profit P ARENT BANK 2001 2000 1999 28% tax on pre-tax profit 53 93 135 28% tax on permanent difference 91(14) (Excess)/insufficient tax provision in previous years (9) (3) 1 Capital tax 586 Credit for dividends received (5) (8) (4) Estimated tax charge 53 91 124

Note 13 Specification of timing differences

The deferred tax/tax asset is calculated on the basis of the timing differences between the accounting and taxation values at the end of the accounting year, and the tax-loss to be carried forward. Specification of the timing differences and the tax-loss carry forward, along with calculation of the deferred tax/tax asset at year-end is shown below.

P ARENT BANK GROUP Change 2000 2001 2001 2000 Change Timing differences 0 3 3 Investments in companies 3 3 (0) (14) 1 (13) Profit and loss account 18 21 (3) (10) (8) (18) Shareholdings, primary capital certificates and owner interests (18) (8) (10) 11 (13) (2) Commercial paper, bonds and other interest-earning securities (2) (13) 11 (25) (32) (57) Pension commitments (55) (31) (24) 25 (46) (21) Accounting provisions (21) (46) 25 16 (38) (22) Fixed assets (39) (35) (4) (21) 21 0 Change in opening balance for Buildings due to intra-group transfers (18) (112) (130) Total timing differences (114) (109) (5) 28 % 28 % Rate of tax 28% 28% (5) (31) (36) Deferred tax (tax asset) (32) (31) (1) Deferred tax in accounts

The deferred tax asset is posted in the balance sheet since income is expected in future years, or realistic tax adjustments should make it possible to utilise this asset. No provision has been made for deferred tax on the temporary difference between the proportion of equity and the RISK-regulated opening value for investments in subsidiaries and jointly controlled enterprises.

26 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 14 Loans to and deposits with credit institutions

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 Loans to and deposits with credit institutions 70 879 252 with no agreed term or period of notice 252 879 70 Loans to and deposits with credit institutions 74 480 668 with an agreed term or period of notice 668 480 74 144 1 359 920 Total 920 1 359 144

Geographical risk areas 13748Hordaland 48 37 1 35 20 Sogn & Fjordane 20 35 74 1 028 800 Other parts of Norway 800 1 028 74 69 259 52 Foreign 52 259 69 144 1 359 920 Total 920 1 359 144

Note 15 Loans to and receivables from customers

P ARENT BANK GROUP 1999 2000 2001 Notes 2001 2000 1999 975 990 1 409 Overdraft facilities 1 409 990 975 405 439 416 Building loans 416 439 405 21 350 25 257 27 504 Instalment loans 27 320 25 181 21 270 22 730 26 686 29 329 Total loans before specified and unspecified loss provisions 16, 17 29 145 26 610 22 650 (177) (178) (195) Specified loss provisions 20 (195) (178) (177) (125) (160) (188) Unspecified loss provisions 20 (188) (160) (125) 22 428 26 348 28 946 Net loans and receivables from customers 28 762 26 272 22 348

Loans and guarantees to senior employees (NOK 1 000), Parent Bank Loan Man. dir. Knut Ravnå 726 Dep. man. dir.Terje Mjelde 840 Loans are given on general terms. Loans and guarantees to elected officers (NOK 1 000), Parent Bank Chairman of Board of Directors Pål W.Lorentzen 0 Board members Bjørn Ove Børnes 0 Jan O.Yttredal 1 335 Anne Gine Hestetun 0 Elna Lappegård 0 Eli Førde Aarskog 717 Erik Bøckmann 0 Loans are given on ordinary customer terms. Employee representatives Terje Kvamme 250 Anne Sissel Raunholm Engevik 0 Loans are given on general terms. Chairman of Board of Governors Kjellaug Kvåle 0 Loans are given on ordinary customer terms. Total loans and guarantees given to employees and Board members (NOK 1 000) Parent Bank Employees 414 138 Board of Directors1) 2 052 Group Employees 432 035 Total loans and guarantees given to other members of Board of Governors and Control Committee (NOK 1 000) Board of Governors2) 5 346 Control Committee 206

1) Excluding managing director and employee representatives. 2) Excluding chairman of Board of Governors, Board members and employee representatives.

27 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 16 Distribution of gross loans and guarantees

2001 2000 Loans Guarantees Loans Guarantees NOK % NOK % Distribution of loans and guarantees by sector NOK % NOK % 1 0.00 0 0.00 Central government 0 0.00 0 0.00 36 0.12 0 0.00 Local government 36 0.13 1 0.17 199 0.68 53 9.70 Insurance and finance 337 1.27 204 34.40 8 968 30.77 481 88.10 Commercial activity 8 070 30.33 377 63.58 19 893 68.26 12 2.20 Wage earners 18 116 68.08 11 1.85 48 0.17 0 0.00 Foreign 51 0.19 0 0.00 29 145 100.00 546 100.00 Total 26 610 100.00 593 100.00

Commercial distribution 991 3.40 6 1.10 Primary industries 969 3.64 3 0.51 3 0.01 0 0.00 Oil and gas 2 0.01 0 0.00 653 2.24 93 17.03 Industry and mining 616 2.31 34 5.73 516 1.77 85 15.56 Building and construction, power and water supply 443 1.66 80 13.49 1 083 3.72 82 15.02 Wholesale/retail trade, hotels and restaurants 1 061 3.99 70 11.80 1 406 4.82 26 4.76 International shipping and pipe transportation 952 3.58 65 10.96 1 212 4.16 75 13.74 Other transportation, post and telecommunications 748 2.80 33 5.57 2 530 8.68 96 17.58 Real estate operations 2 770 10.41 77 12.99 199 0.68 53 9.71 Insurance and finance 337 1.28 204 34.40 587 2.01 18 3.30 Services 535 2.01 15 2.53 24 0.08 0 0.00 Central/local government 10 0.04 1 0.17 19 893 68.26 12 2.20 Wage earners 18 116 68.08 11 1.85 48 0.17 0 0.00 Foreign 51 0.19 0 0.00 29 145 100.00 546 100.00 Total 26 610 100.00 593 100.00

Geographical risk areas 22 792 78.20 458 83.88 Hordaland 22 081 82.98 504 85.00 2 466 8.46 31 5.68 Sogn & Fjordane 2 416 9.08 31 5.22 3 839 13.17 57 10.44 Other parts of Norway 2 062 7.75 58 9.78 29 097 99.83 546 100.00 Norway - total 26 559 99.81 593 100.00 48 0.17 0 0.00 Foreign 51 0.19 0 0.00 29 145 100.00 546 100.00 Total 26 610 100.00 593 100.00

28 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 17 Gross loans and guarantees distributed by main industries and retail market

2001 2000 Gross Guaran- Poten- Default Speci- Uspeci- Gross Guaran- Poten- Default Speci- Uspeci- loans tees tial and fied fied loans tees tial and fied fied expo- other loss loss expo- other loss loss sure poten- provi- provi- sure poten- provi- provi- (unapp- tial sions sions (unapp- tial sions sions lied debts for for lied debts for for credit loans loans credit loans loans and and and and and and guarantee guaran- guaran- guarantee guaran- guaran- limits) tees tees limits) tees tees 19 893 12 369 238 107 111 Retail clients 18 116 11 461 263 90 99 46 2 3 1 Foreign (retail clients) 49 2 2 1 19 939 12 371 241 108 111 Total retail clients 18 165 11 463 265 91 99 991 6 123 36 10 Primary industries 969 3 148 41 12 1 172 178 337 13 23 Industry, building and construction 1 061 114 245 44 16 1 083 82 334 34 25 Commerce, hotels and restaurants 1 061 70 371 65 27 Transportation, real estate 5 735 215 362 152 30 operations and services 5 005 190 352 80 32 ‘2 Foreign (other) 2 24 31 Municipal/public sector 10 1 65 199 53 15 Insurance / finance 337 204 138 77 Commercial sector 61 9 206 534 1 202 235 88 77 Total commercial sector 8 445 582 1 319 230 87 61 29 145 546 1 573 476 196 188 Total 26 610 593 1 782 495 178 160

Note 18 Non-performing, doubtful and non-accruing commitments ”Potential bad debts (defaults in excess of 90 days) where the balance in defaulted on one of the commitment accounts is more than NOK 1 000. Previously, the bank reported defaults older than 30 days, but has chosen to change this and report defaults of more than 90 days in order to facilitate comparison with the bank’s other corresponding reporting practice. The historical data has been re-stated accordingly.

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 Retail market 98 98 144 Gross non-performing commitments 144 98 98 (50) (51) (62) Specified loss provisions (62) (51) (50) 48 47 82 Net non-performing commitments 82 47 48 51% 52% 43% Retail market percentage provided for 43% 52% 51%

Commercial market 41 65 76 Gross non-performing commitments 76 65 41 (21) (26) (26) Specified loss provisions (26) (26) (21) 20 39 50 Net non-performing commitments 50 39 20 51% 40% 34% Commercial market percentage provided for 34% 40% 51%

Performing commitments provided for Retail market 80 90 97 Performing commitments provided for 97 90 80 (39) (40) (46) Specified loss provisions (46) (40) (39) 41 50 51 Net performing commitments provided for 51 50 41 49% 44% 47% Retail market percentage provided for 47% 44% 49%

Commercial market 125 146 159 Performing commitments provided for 159 146 125 (67) (61) (61) Specified loss provisions (61) (61) (67) 58 85 98 Net performing commitments provided for 98 85 58 54% 42% 38% Commercial market percentage provided for 38% 42% 54%

Non-accruing commitments 134 183 160 Non-performing commitments where interest is no longer posted 160 183 134 783Interest accrued but not posted 3 8 7

29 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 19 Total non-performing and other doubtful debts

2001 2000 1999 1998 1997 Gross non-performing loans 220 163 139 167 162 Specified loss provisions (88) (77) (71) (94) (100) Net non-performing loans 132 86 68 73 62

Other doubtful debts (gross) 256 236 205 174 246 Specified loss provisions (107) (101) (106) (105) (112) Other doubtful debts (net) 149 135 99 69 134

Note 20 Loss provisions Changes in specified/unspecified loss provisions during the year

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 200 177 178 Specified provisions to cover losses on loans and guarantees at 1 January 178 177 200 (48) (34) (31) Realised losses on loans specifically provided for previously (31) (34) (48) 3145Increase in provisions for loans specifically provided for previously 5 14 3 42 60 72 Provisions for loans not specifically provided for previously 72 60 42 (20) (39) (28) Reduction in previous years’ provisions (reversal) (28) (39) (20) Specified provisions to cover losses on loans 177 178 196 and guarantees at 31 December 196 178 177 84 125 160 Unspecified provisions to cover losses on loans and guarantees at 1 January 160 125 84 41 35 28 Unspecified provisions to cover osses on loans and guarantees in period 28 35 41 Unspecified provisions to cover losses on loans 125 160 188 and guarantees at 31 December 188 160 125

Specified loss provisions at 31 December 2001 include a provision of NOK 0.9m related to guarantees.

Note 21 Change in non-accued loan interest

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 36 28 26 Interest accrued but not posted on loans in the balance sheet at 1 January 26 28 36 (6) (3) (2) Interest on loans from previous periods (2) (3) (6) Interest accrued but not posted on loans (9) (7) (5) no longer recorded in the balance sheet (5) (7) (9) 783Interest accrued but not posted on loans identified as doubtful 3 8 7 Interest accrued but not posted on loans 28 26 22 in the balance sheet at 31 December 22 26 28

30 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 22 Loans and guarantees distributed by risk group

All commercial commitments in excess of NOK 250 000, except for commitments in the agricultural sector, shall be classified by risk.All retail commitments shall be classified by risk.

Structure of risk classification system: The risk classification systems for the corporate and retail markets have a common structure. Classification is based on a two-component system which gives a rating for the following:

Client’s debt-servicing ability: Rating A to E Collateral cover: Rating 1 to 5

The rating for debt-servicing ability gives overall expression to the the client’s ability to service the debt on an ongoing basis, while the rating for collateral cover expresses how well the debt is secured.The combined rating for debt-servising ability and collateral cover is shown below, with 25 classes of risk, which themselves are divided into 5 risk groups:

Debt-servicing ability ABCDE 1A1B1C1D1E1 Collateral cover 2A2B2C2D2E2 3A3B3C3D3E3 4A4B4C4D4E4 5A5B5C5D5E5

Risk groups No risk Low risk Medium risk Medium-to-high risk High risk

Commitments involving activities which are a part of central government with 100% government responsibility, as well as county and local authorities, are automatically accorded an A1 rating. Commitments which are fully secured by a bank deposit or a government, county authority or local authority guarantee are automatically accorded an A1 rating.

Recently established companies are automatically accorded a D rating for their debt-servicing ability until they have presented annual accounts, while the collateral cover is assessed in the normal way.

Risk classification of corporate clients is carried out at least once a year when the client’s annual accounts are received.A new classification is made when a new commitment is established with the same client.The doubtful part of the portfolio is continuously monitored. In the event of client-specific circumstances arising which increase the bank’s exposure, the commitment is immediately downgraded.

Risk classification of retail customers is carried out each month using the automatic rating system.

As well as providing an overview of risk exposure, the risk classification system is also used in connection with pricing of loans and guarantees.

31 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 23 Specification within risk groups

Corporate market Commitment Specified loss provisions 2000 2001 2001 2000 695 741 No risk 2 762 3 614 Low risk 3 565 3 623 Medium risk 8 9 1 247 1 605 Medium-to-high risk 25 23 461 613 High risk 44 41 280 336 Non-classified1) 38 9 010 10 532 Total 80 81 1)Commitments not classified at 31 December 2001, but which will be classified in the course of 2002.

Retail market Commitment Specified loss provisions 2000 2001 2001 2000 4 232 1 254 No risk 11 240 17 051 Low risk 1 450 1 513 Medium risk 216 292 Medium-to-high risk 1 129 143 High risk 67 59 17 267 20 253 Total 67 60

For distribution by risk groups, please refer to note 22 A commitment is defined as the total of loans and utilised credit facilities, plus unutilised credit facilities and guarantees. Unspecified loss provisions have not been allocated to individual risk groups. Risk classification excludes commitments related to SpareBank 1 Gruppen, totalling NOK 398.6m.

Note 24 Average expected annual losses per risk group

The credit risk is monitored through default reports, risk classification and branch analyses.There is a strong focus on credit control and monitoring of potential bad debts.

Based on the risk classification system, 41% of the loan portfolio in the corporate market is considered to carry no or a low risk, while 6% is considered to carry a high risk.The corresponding figures in the retail market are 90% and 0.7%.

A moderate rise in the risk attached to the corporate market is expected in 2002, while only a marginal increase in risk is expected in the retail market.

The bank’s net losses in 2001 corresponded to 0.29% of the loan portfolio.A slight increase in losses is expected in 2002. In a longer perspective, the level of losses could correspond to 0.5% of the portfolio.

Note 25 Assets acquired

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 1 Other properties 1 32Securities 2 3 42Total 24

32 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 26 Commercial paper, bonds and other interest-earning securities with a fixed return

Risk weight 2001 2000 1999 Commercial paper and bonds issued by public authorities 0 % 445 903 953 10 % 25 4293 20 % 71 23 149 Commercial paper and bonds issued by others 20 % 652 1 034 958 100 % 119 19 Total 1 312 2 021 2 153

Distribution of book values at 31 Dec. 2001 Portfolio Balance Cost Actual Real rateCurrency Listed sheet value value of return proportion Trading portfolio 165 165 165 6.63 NOK 100 Other short-term investments 750 754 750 7.06 NOK 100 Zero coupon bonds 388 375 388 5.79 NOK 100 Bonds to be held to maturity 9 10 9 5.82 NOK 100 Total 1 312 1 304 1 312

The average real rate of return is calculated by identifying the discount rate which gives a calculated value equal to the stated market value, as shown in the following equation:

where: t = the period up to maturity, calculated expressing the number of days as a fraction of 365 Ct = payment at date t MVi = market value for position i r = real rate of return

In summations, the real rate of return is calculated as a weighted total of the individual positions, weighted by the market value.

Note 27 Bonds to be held until maturity

Cost Part of Part of Book Discount Premium Nominal Market Gross discount premium value not posted not posted value value unrealised posted as posted as as income as an gain interest interest expense income expense 1999 139 7 4 142 7 2 147 148 6 2000 112 7 2 117 6 1 122 120 3 2001 10 1 9 9 9

Bonds with a value of NOK 13m were redeemed in 2001 based on drawing of lots.This resulted in a loss of NOK 0.1m. No bonds have been sold in contravention of guidelines governing bonds to be held until maturity.

Residual maturity 0 -1 year 1 - 5 years Total Nominal value 6 3 9

Note 28 Investments in subordinated loan

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 20 20 17 Subordinated loans posted under loans to and deposits with credit institutions 17 20 20 41919Subordinated loans posted under bonds and other interest-earning securities 19 19 4 24 39 36 Total 36 39 24

33 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 29 Shareholdings, investments and other securities with a variable return (NOK 1 000)

Company PCC / No. of Nominal Ownership % Cost Book Market share capital shares value value value (NOK m) Trading portfolio (Parent Bank)

Listed shares entered on the basis of the market value principle Acta holding ASA 13 157 800 28 0.22 1 578 978 978 Hardanger Sunnhordlandske ASA 17 2 300 46 0.27 70 241 241 Bergen Nordhordland Rutelag ASA 16 400 4 0.03 34 15 15 Sparebanken Nord-Norge 660 22 500 2 250 0.34 3 844 3 938 3 938 Sparebanken Rogaland 749 15 000 1 500 0.20 3 138 3 691 3 691 Sparebanken Midt-Norge 605 11 800 1 180 0.20 2 099 2 348 2 348 Odin Pengemarked 94 522 100 000 100 000 100 000 Listed shares - Total 5 008 110 763 111 211 111 211

Other short-term shareholdings

Unlisted shares entered at the lower of historical cost and market value Sunnhordland Sjøgard AS 0.90 300 30 3.33 675 300 300 Lexmed 3 22 000 1 0.03 330 0 0 Brann ASA 50 110 000 10 0.02 2 839 165 165 Data Invest AS 1 142 22 860 1 0.00 1 000 914 914 Active ISP AS 3 50 000 0 0.00 1 970 255 255 Port IT AS 10 30 000 2 0.02 1 756 72 72 Sospita AS 2 38 154 0 0.01 875 115 115 Axxessit ASA 3 2 000 10 0.33 2 500 2 000 2 000 Marine Farms ASA 8 10 000 10 0.13 501 100 100 Genomar AS 3 100 100 3.33 850 500 500 Total short-term shareholdings 164 13 296 4 421 4 421 Total short-term shareholdings (Parent Bank) 5 172 124 059 115 632 115 632

34 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 29 continue

Company PCC / No. of Nominal Ownership % Cost Book share capital shares value value (NOK m) Long-term shareholdings (Parent Bank)

Listed: FöreningsSparbanken AB 9 817 375 000 6 992 0.07 41 745

Unlisted: Bergen Industriutvikling AS 71 633 6 330 8.92 6 330 Meland Golfklubb 10 10 200 2.00 200 Høyteknologisenteret i Bergen AS 33 312 312 0.95 56 Nygårdstangen AS 4 185 185 4.63 118 Ressurssenteret AS Manger 10 5 50 0.50 51 Nordhordland Industriutvikling AS 1 100 50 5.00 50 Hardanger Vekst AS 1 100 100 10.00 100 Fjærlandsvegen AS 1 100 100 10.00 100 Åsane Invest AS 16 15 800 1 580 9.88 1 580 BBS/Bank-Aksept Holding AS 165 239 821 5 996 3.63 3 427 Visa-Norge AS 8 280 280 3.50 140 Sambygg AS 1 672 67 6.70 63 Sogndal Eigedomsselskap AS 12 520 260 2.17 35 Øyrane Eiendomsselskap 21 729 729 3.47 729 Vestkanten AS 26 3 112 311 1.20 228 Oslo Børs Holding ASA 50 12 581 126 0.25 1 672 Other unlisted companies 425 542 Total long-term holdings (Parent Bank) 24 093 57 166

Investments in general and limited partnerships etc. (Parent Bank) Kvernhuset ANS (joint and several liability for NOK 1.10 m) 8.30 21.44 279 Sambygg ANS (joint and several liability for NOK14.23 m) 15.00 15.46 2 045 K/S Tilflukten 14.48 174 Total investments in general and limited partnerships etc. (Parent Bank) 2 498 Total shareholdings, investments and securities with a variable return (Parent Bank) 175 296

Movements in long-term investments Opening balance at 1 January 2001 61 972 Bought 1 911 Sold Reversal of previous write-downs 1 239 Write-downs (7 956) Closing balance at 31 December 2001 57 166

The write-downs relate mainly to changes in the value of our shareholding in FöreningsSparbanken AB, which is listed on the stock exchange in Sweden.

35 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 30 Other owner interests (NOK 1 000)

Company PCC / share capital No. of Nominal Owner- Book (NOK 1 000) shares value ship% value Jointly controlled activities (Parent Bank) SpareBank 1 Gruppen AS 997.60 129 688 129 888 13.0 325 236 Total jointly controlled activities 325 236

Subsidiaries AS Filialbygg, (see note 31) 4.15 41 500 4 150 100.0 Sparebankbygget AS,Odda 0.24 126 126 52.5 Sparebanken Vest Holding AS 30.00 30 000 30 000 100.0 34 882 Total subsidiaries 34 882 Total owner interests (Parent Bank) 360 118

Subsidiaries (Group) Eliminated 34 882 Total subsidiaries (Group) 0 Total owner interests (Group) 325 236

None of the companies classified as jointly controlled activities have a stock exchange listing.

Note 31 Investments posted applying the equity method (NOK 1 000)

Jointly controlled activities: SpareBank 1 Gruppen AS. Jointly controlled activities are posted in the accounts of both the parent bank and the Group applying the equity method.

Subsidiaries: Sparebanken Vest Holding AS,AS Filialbygg, Sparebankbygget AS. Subsidiaries are entered in the accounts on the basis of the equity method and full consolidation in the group accounts.

SpareBank 1 Sparebanken AS Filialbygg Sparebank- Total Gruppen AS Vest bygget AS Holding AS Balance sheet value at 1 January 2001 342 427 36 296 16 713 22 395 458 +/- Additions in period (through share issue) 39 018 39 018 +/- Net unrealised gain on buildings/sites (34 391) (34 391) +/- Share of profits (56 209) 4 086 19 033 (22) (33 112) - Dividends (5 500) (11 200) (16 700) Balance sheet value at 31 Dec. 2001 325 236 34 882 (9 845) 0 350 273

Paid-in capital 296 808 30 000 6 565 126 333 499 Registered office Oslo Bergen Bergen Odda

In 2001 the parent company transferred its buildings to AS Filialbygg. Since the parent company applies the equity method of accounting to record holdings in subsidiaries, the internal gain on the transaction has been charged against the holding.At 31 December 2001 the book value of this holding, - NOK 9 845, is classified as deferred income under other liabilities in the balance sheet.

36 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 32 Intra-Group transactions (NOK 1 000)

P ARENT BANK 2001 2000 1999 Profit and Loss Account Interest/credit commissions received from subsidiaries 9 296 4 848 5 103 Interest paid on deposits from subsidiaries 7 132 3 954 2 025 Office rental expenses 51 927 10 689 13 609 Refund of operating expenses 24 468 Office rental income 831 801

Balance Sheet Loans to subsidiaries at 31 December 184 364 76 336 80 444 Deposits from subsidiaries 61 836 46 480 44 026 Dividends receivable 16 700 22 075 4 264

Note 33 Main figures - Subsidiaries (NOK 1 000)

Profit and Loss Account Sparebanken Vest EiendomsMegler AS Filialbygg Sparebank- Holding AS 1 Vest AS bygget AS Total interest income/(expenses) 2 387 2 062 (6 219) (172) Total other income/(expenses) 4 300 43 739 91 820 887 Total operating expenses 598 39 957 58 331 610 Operating profit before losses and write-downs 6 089 5 844 27 270 105 Operating profit 6 089 5 791 27 270 105

Balance Sheet Current assets 35 172 14 388 24 472 24 Fixed assets 1 200 5 820 213 107 1 672 Total assets 36 372 20 208 237 579 1 696 Current liabilities 6 039 14 092 20 758 53 Long-term liabilities 417 193 000 1 800 Equity 30 333 5 699 23 821 (157) Total liabilities and equity 36 372 20 208 237 579 1 696

Sparebanken Vest Holding AS Bergen Sparebanken Vest Holding AS owns EiendomsMegler 1 Vest.The company has no employees

EiendomsMegler1 Vest AS Bergen At the end of 2001 the company had 29 whole-time and 4 part-time employees. The company is engaged in estate agency activities in Bergen city, Åsane, Fana, and Sotra.

AS Filialbygg Bergen This company owns and manages the Group’s properties in the counties of Hordaland and Sogn & Fjordane.The company is funded by the parent bank on normal customer loan terms.At the end of 2001 the company had 10 whole-time and 1 part-time employees.

Sparebankbygget AS Odda This company owns the bank building in Odda. Sparebanken Vest has a 52.5% shareholding in the company.At the end of 2001 the company had 2 part-time employees.

37 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 34 Jointly controlled activities

SpareBank 1 Gruppen AS is owned by Sparebanken Nord-Norge, Sparebanken Midt-Norge, Sparebanken Rogaland, Sparebanken Vest and Samarbeidende Sparebanker AS, each with a 13% holding, as well as FöreningsSparbanken AB (publ) which has a 25% holding, while 10% is owned by the Norwegian Federation of Trade Unions and affiliated associations.The holding in SpareBank 1 Gruppen AS is regarded as participation in jointly controlled activity and is posted in the accounts on the basis of the equity method.

Share capital Share of Company (NOK m) Shareholding voting rights SpareBank 1 Gruppen AS 997 600 13 % 13 %

Sparebank1 Vest has given a subordinated loan of NOK 16.6m to SpareBank 1 Gruppen AS. The loan matures in 2006 and the rate of interest is based on 3 mth. NIBOR + 110 basis points.

In connection with the acquisition of VÅR Gruppen ASA, SpareBank 1 Vest has extended a loan of NOK 182m to SpareBank 1 Gruppen AS.The entire amount of the loan matures on 15 June 2005 and the interest rate is set at 6 mth. NIBOR + 0.5 percentage units p.a.

The jointly controlled activities consist 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 Aktiv Forvaltning ASA, SpareBank 1 Finans AS, IDA AS, Enter Card AS (65 %) og First Securities ASA (51%).The activities of the subsidiaries relate to banking, insurance, broking and fund management. All transactions between the bank and the subsidiaries of SpareBank 1 Gruppen are on commercial terms. Internal payments between the bank and SpareBank 1 Gruppen AS which do not relate to sales and portfolio advisory services are based on the full cost principle.

2001 2000 Profit and Loss Account (NOK m) 100 % 13 % 100 % 13% Profit/(loss) after tax (133.4) 197.5 Amortisation of goodwill and write-down of unrealised gains (258.0) (86.0) Profits from VÅR credited to equity (01.01. - 30.09) (187.8) Proportion attributable to minorities (51.9) (40.7) Loss for the year (443.3) (57.6) (117.0) (15.2)

38 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 35 Intangible assets

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 94Goodwill 4 9 25 37 37 Deferred tax assets 32 30 23 25 46 41 Intangible assets 36 39 23 15Amortisation of goodwill 2001 5 1 Goodwill relate to the acquisition of VÅR bank og forsikring’s activities in the counties of Hordaland and Sogn & Fjordane. The individual elements of goodwill are amortised on a straight-line basis over 2 and 5 years.

Note 36 Fixed assets

P ARENT BANK GROUP 1999 2000 2001 Notes 2001 2000 1999 86 105 139 Machinery, equipment and vehicles 37 143 108 89 96 88 2 Buildings and other real estate 37, 38 177 180 191 182 193 141 Fixed assets 320 288 280

Note 37 Investments and depreciation of fixed assets (NOK 1 000)

Parent Bank Machinery, Buildings Total equipment and other and vehicles real estate Cost at 1 Jan. 2001 324 169 155 055 479 224 Additions 71 644 520 72 164 Disposals at cost 3 444 152 460 155 904 Aggregate depreciation and write-downs 253 516 1 212 254 728 Book value at 31 Dec. 2001 138 853 1 903 140 756 Ordinary depreciation 2001 36 634 113 36 747 Write-downs 2001 Gain/(loss) on disposal 2001 197 197 Ordinary depreciation rates (straight-line method) 10 - 33% 0 - 8%

Group Machinery, Buildings Total equipment and other and vehicles real estate Cost at 1 Jan. 2001 332 318 286 191 618 509 Revaluation 1988 2 777 2 777 Additions 73 155 3 681 76 836 Disposals at cost 6 632 1 694 8 326 Aggregate depreciation and write-downs 255 893 113 985 369 878 Book value at 31 Dec. 2001 142 948 176 970 319 918 Undepreciated residual revaluation at 31 Dec. 2001 Ordinary depreciation 2001 37 781 3 507 41 288 Of which depreciation on revaluations 55 55 Write-downs 2001 Gain on disposal 2001 294 19 254 19 548 Ordinary depreciation rates (straight-line method) 10 - 33% 0 - 8%

39 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 38 Buildings and other real property (NOK 1 000)

Location Description Book Own Let Unlet M2 Remarks value use area area totalt Bergen, Nedre Korskirkealm. Bank building 36 335 5 795 0 0 5 795 Incl. sites Bergen, Kaigaten 4 Bank building 58 889 7 255 0 0 7 255 Incl. site Bremnes Bank building 524 927 167 0 1 094 Incl. site and facilities Dale Bank building 6 394 802 704 0 1 506 Incl. site Eid Sokn Bank building 1 185 573 0 0 573 Incl. site Fitjar Bank building 5 202 1 211 295 0 1 506 Incl. site and quay Lindås Bank building 1 293 591 574 0 1 165 Incl. site and facilities Lonevåg Comm. prop. 5 121 396 0 0 396 Incl. site Nordfjordeid Bank building 7 009 927 0 0 927 Incl. site Nordfjordeid Bank building 1 740 403 403 Incl. site and facilities Norheimsund Bank building 15 766 1 110 0 0 1 110 Incl. site Manger Bank building 3 406 600 461 0 1 061 Incl. site and facilities Skånevik Bank building 1 120 337 0 170 507 Incl. site and facilities Strandebarm Bank building 1 035 716 0 0 716 Incl. site Odda Bank building 1 504 500 730 0 1 230 Os Bank building 1 598 939 238 153 1 330 Incl. site Sogndal Bank building 13 491 1 050 749 280 2 079 Stord Bank building 14 005 1 800 600 0 2 400 Incl. site Spania Apartment 984 75 75 Sundry properties worth < NOK 1 000 000 369 951 450 0 1 401 Incl. sites Group - Total 176 970 26 958 4 968 603 32 529

Note 39 Prepaid expenses and accrued income

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 80 113 148 Accrued income 149 134 80 Overfunding of pension commitments 2 1 66 117 34 Other accruals 15 95 66 146 230 182 Total 164 231 147

Note 40 Loans and deposits from credit institutions

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 Loans and deposits from credit institutions 54 332 54 with no agreed term or period of notice 54 332 54 Loans and deposits from credit institutions 3 338 3 284 2 909 with an agreed term or period of notice 2 909 3 284 3 338 3 392 3 616 2 963 Total 2 963 3 616 3 392

Note 41 Deposits from and debt to customers

P ARENT BANK GROUP 1999 2000 2001 Note 2001 2000 1999 11 512 12 719 12 799 Deposits from and debt to customers with no agreed term 12 737 12 673 11 468 4 276 5 109 6 612 Deposits from and debt to customers with an agreed term 6 612 5 109 4 274 15 788 17 828 19 411 Total 42 19 349 17 782 15 742

40 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 42 Distribution of deposits from and debt to customers

2001 2000 NOK % Distribution by sector NOK % 137 0.71 Central government 82 0.46 948 4.90 Local government 687 3.86 417 2.16 Insurance and finance 747 4.20 5 217 26.96 Private enterprise 4 172 23.47 12 459 64.39 Wage earners 11 946 67.18 171 0.88 Foreign 148 0.83 19 349 100.00 Total 17 782 100.00

Commercial sectors 315 1.63 Primary industries 421 2.37 449 2.32 Industry and mining 310 1.74 358 1.85 Building and construction, power and water supply 415 2.33 859 4.44 Wholesale/retail trade, hotels and restaurants 796 4.48 134 0.69 International shipping and pipe transportation 74 0.42 1 444 7.46 Other transportation, post and telecommunications 293 1.65 578 2.99 Real estate operations 903 5.08 417 2.16 Insurance and finance 747 4.20 1 274 6.58 Service industries 1 058 5.95 891 4.60 Central/local government 671 3.77 12 459 64.39 Wage earners 11 946 67.18 171 0.88 Foreign 148 0.83 19 349 100.00 Total 17 782 100.00

Geographical distribution 16 501 85.28 Hordaland 15 001 84.36 1 867 9.65 Sogn & Fjordane 1 781 10.02 810 4.19 Other parts of Norway 852 4.79 19 178 99.12 Norway - Total 17 634 99.17 171 0.88 Foreign 148 0.83 19 349 100.00 Total 17 782 100.00

Note 43 Securitised debt

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 1 507 3 230 3 084 Commercial paper and short-term issues 3 084 3 230 1 507 2 610 2 815 3 841 Bond debt 3 841 2 815 2 610 (69) Own un-amortised bonds (69) 4 117 6 045 6 856 Total 6 856 6 045 4 117

Note 44 Other liabilities

P ARENT BANK GROUP 1999 2000 2001 Note 2001 2000 1999 107 107 67 Unassessed tax payable 12 72 110 109 210 260 142 Other current liabilities 142 263 214 Other long-term liabilities 3 3 95 100 89 Own pension premium fund 89 100 95 55 30 24 Other liabilities/provision for dividend on PCCs 24 30 55 467 497 322 Total 327 506 476

Note 45 Provisions for expenses and commitments

P ARENT BANK GROUP 1999 2000 2001 Note 2001 2000 1999 37 32 56 Pension commitments 46 55 32 37 1 Specified provisions for guarantee liabilities 1 37 32 57 Total 56 32 37

41 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 46 Pension commitments

Parent Bank Sparebanken Vest’s pension schemes consist of the following: 1A group pension scheme which provides all the bank employees with a pension equal to 70% of the final salary, but limited to 12G. At the end of 2001, the scheme covered 815 persons.A further 195 currently receive pensions under the scheme. 2. Contractual pension agreements (CPA) from 62 to 67 years of age, with an expected CPA acceptance rate of 50%. At year-end 2001, 39 persons were receiving pensions under the CPA scheme. 3A top-hat scheme covering 2 employees, with the option of a retirement pension at the age of 64 (managing director at 60). The pension corresponds to 70% of the final salary until the age of 67 at which pointthose involved are covered by the group scheme. 4. Early retirement schemes.At year-end 2001, 5 persons were receiving early retirement pensions.

Group Two of the subsidiaries have group pension schemes corresponding to the parent bank’s scheme. 1.The schemes established by AS Filialbygg cover 8 employees. No pensions were being paid under these schemes at the end of 2001. 2.The schemes established by EiendomsMegler 1 Vest cover 18 employees. No pensions were being paid under these schemes at the end of 2001.

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 Insu- Unin- Total Insu- Unin- Total Total Unin- Insu- Total Unin- Insu- red sured red sured sured red sured red

Profit and Loss Account 13 12 3 15 14 5 19 Present value of accumulated pension rights for the year 21 6 15 15 3 12 13 27 23 6 29 26 6 32 +Interest charge on accrued pension commitments 32 6 26 29 6 23 27 27 32 0 32 33 33 - Anticipated return on pension funds 34 34 32 32 27 +Diff. between expected and actual return, accrued employer’s Nat. Ins. contr. (1) (1) and changes in estimates (1) (1) 1 +Accounting effect of changes in accrued rights under CPA and extraord. withdrawals 10 10 (severance packages) 10 10 +Increased pension commitments on take-over of 4913 personnel from VÅR bank og forsikring 13 9 4 13 13 8 21 11 20 31 Net pension costs for the period 32 21 11 21 8 13 14

Balance Sheet Present value of accumulated pension rights, 324 276 70 346 320 81 401 excl. wage growth 405 82 323 350 71 279 326 75 73 15 88 87 18 105 +Effect of future wage growth 107 18 89 90 15 75 76 399 349 85 434 407 99 506 Gross pension commitments 512 100 412 440 86 354 402 364 415 0 415 423 423 - Pension funds 431 431 421 421 368 35 (66) 85 19 (16) 99 83 Net pension commitments 82 100 (18) 19 86 (67) 34 - Effect of changed estimates and diff. between (2) (7) (6) (13) 33 (6) 27 expected and actual return, not posted in the accounts 27 (6) 33 (13) (6) (7) (2) 37 (59) 91 32 (49) 105 56 Net pension commitments in the balance sheet 1) 55 106 (51) 32 92 (60) 36

1) The bank uses the special ”corridor” equalisation method for the accounting treatment of changes in estimates and the difference between the expected and the actual return on pension funds.

Assumptions 2001 2000 1999 Discount rate 7.0% 7.0% 7.0% Return on pension funds 8.0% 8.0% 8.0% Wage growth 3.3% 3.3% 3.3% G-regulation 2.5% 2.5% 2.5% Pension regulation 2.5% 2.5% 2.5% Voluntary withdrawals 1.0% 1.0% 1.0% Anticipated CPA acceptance rate 50.0% 50.0% 50.0%

The economic assumptions have a long-term perspective and are in accordance with assumptions recommended by the Oslo Stock Exchange Actuarial calculations have been used.

42 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 47 Subordinated loan capital

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 401 443 Subordinated loan of USD 50m raised in December 1996 443 401 147 Subordinated bond loan of NOK 147m raised in Desember 2001 147 250 250 Subordinated bond loan of NOK 250m raised in November 2000 250 250 401 693 397 Total 397 693 401

Subordinated bond loan 2000/2010 for NOK 250m: Floating 3-month rate with borrower’s right to repay the loan.

Subordinated bond loan 2001/2011 for NOK 147m: Floating 3-month rate and borrowers redemption right at 20/12-06.

In 2001, costs related to subordinated loan capital amounted to NOK 46.8m and comprised: Issue costs of NOK 1.3m Interest costs of NOK 45.5m

Note 48 Primary capital certificates, Sec. no. 6000900 (as at 31 December 2001)

20 largest owners No. of PCCs No. of PCC capital. % JP Morgan Chase Bank 249 500 9.98 Erik Otter Steen 69 900 2.80 Sparebanken Øst 60 000 2.40 Gjensidige NOR 53 900 2.16 Straen AS 39 000 1.56 Tonsenhagen Forretningssentrum AS 38 100 1.52 Nordås Invest AS 32 000 1.28 Jan H. Freuchen 29 000 1.16 Rieber & Co AS 27 650 1.11 Kaare Holmefjord AS 26 000 1.04 Tine Pensjonskasse 25 200 1.01 Einar Nistad Finans 25 000 1.00 Forsvarets personellservice 20 900 0.84 Solvang ASA 20 000 0.80 Modum Sparebank 17 000 0.68 Aske Finans AS 16 900 0.68 Agda Andrea Bonde Gjøstein 15 800 0.63 Allumgården 15 800 0.63 Aske Trykkeri AS 13 200 0.53 AHM Skips AS 13 000 0.52 Total 807 850 32.31

Primary capital certificates owned by the managing director, senior employees, members of the Board of Directors, Board of Governors and Control Committee, and closely related persons, as defined in section 7-26 of the Accounting Act and section 8-20 of the Supplementary Regulations pursuant to the Act. No. of PCCs Roald Korsøen 100 Ada Kjeseth 1 000 Einar Nistad 8 300 Arne Buanes 20 Kjell Sævdal 100 Inger Finne 100 Erling Vik 540 Alvhild Halleraker 50 Eva Braut 600 Karl G. Mæland 300 Nils K. Rødland 200 Erik Bøckmann 1 500 Terje Kvamme 100 Anne Sissel Raunholm Engevik 100 Knut Ravnå 200

43 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 48 continue

Distribution by number Distribution No. of PCCs Proportion % No.of owners Proportion % 1- 100 59 375 2.38 805 34.23 101- 1000 515 342 20.61 1 113 48.78 1001- 5000 717 733 28.71 314 14.21 5001- 10000 387 350 15.49 54 1.99 10001- 2500000 820 200 32.81 21 0.79 Total 2 500 000 100.00 2 307 100.00

Note 49 Equity (NOK 1 000)

Parent Bank Primary PCC Reserve for Sparebanken Total capital premium valuation capital certificates reserve variances fund Balance at 1 Jan. 2001 250 000 1 500 101 080 1 722 624 2 075 204 Unrealised gains from intra-group transfers (34 391) 34 391 0 Loss from SpareBank 1 Gruppen (57 623) (57 623) Profit from subsidiaries, excl. dividends 7 833 7 833 Allocations 148 067 148 067 Balance at 31/12 250 000 1 500 16 899 1 905 082 2 173 481

Group Primary PCC Other Sparebanken Total capital premium equity, capital certificates reserve group fund Balance at 1 Jan. 2001 250 000 3 500 99 149 1 722 624 2 075 27 Unrealised gains from intra-group transfers (34 391) 34 391 0 Loss from SpareBank 1 Gruppen (57 648) (57 648) Allocations 7 777 148 067 155 844 Balance at 31/12 250 000 3 500 14 887 1 905 082 2 173 469

Note 50 Capital adequacy

P ARENT BANK GROUP 1999 2000 2001 2001 2000 1999 NOK % NOK % NOK % NOK % NOK % NOK % 1 827 10.57 1 929 9.53 2 116 9.41 Core capital 2 137 9.68 2 036 10.25 1 843 10.82

325 693 397 Subordinated loan capital 397 693 325 325 1.88 693 3.42 397 1.77 Net supplementary capital 397 1.80 693 3.49 325 1.91

(3) (0.02) 0 0.00 0 0.00 Other deductions (342) (1.55) (359) (1.81) (220) (1.29) 2 149 2 622 2 513 Net capital base 2 192 2 370 1 948

17 289 20 250 22 475 Risk-weighted volume 22 076 19 861 17 039

12.43 12.95 11.18 Capital ratio 9.93 11.93 11.43

44 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 50 continue

Specification of risk-weighted volume (Group) Nominal amount Risk-weighted volume NOK m Risk weight: 0% 10% 20% 50% 100% 31/12-01 31/12-00 31/12-99 Banking portfolio Cash and ordinary bank deposits 332 0 920 0 0 184 272 29 Short-term investments in securities 436 0 608 0 194 316 238 229 Lendings 50 0 272 15 696 13 127 21 029 18 637 16 033 Other receivables 0 0 19 149 16 94 239 154 Fixed assets 10 0 2 0 705 705 698 539 Total assets 22 329 20 084 16 984 Off-balance sheet items 348 279 233 Total risk-weighted volume, banking portfolio 22 677 20 363 17 217

Trading portfolio Position risk related to own equity instruments 23 141 313 Position risk related to instruments of debt 36 22 9 Settlement risk 000 Counterparty risk and other risk 66 32 22 Foreign exchange risk 000 Total risk-weighted volume, trading portfolio 125 195 344 Total risk-weighted volume, banking and trading portfolio 22 802 20 558 17 561 Deductions: Subordinated loans to other financial institutions (342) (359) (220) Loss provisions (384) (338) (302) Basis for calculation of capital adequacy 22 076 19 861 17 039

Note 51 Guarantees and mortgages

Guarantees P ARENT BANK GROUP 1999 2000 2001 Note 2001 2000 1999 Guarantee specification 249 165 205 Payment guarantees 205 165 249 181 321 195 Contract guarantees 195 321 181 333Loan guarantees 3 3 3 238Guarantees for taxes 8 3 2 99 101 145 Other guarantee liabilities 135 101 99 534 593 556 Total customer guarantees 16 546 593 534 9 Guarantees on behalf of Savings Banks’ Guarantee Fund 9 534 593 565 Total guarantee liability 555 593 534

Mortgages Buildings - as loan security - valued at 1 Bonds and commercial paper - as security for overnight 2 000 1 990 1 394 loans from Norges Bank - valued at 1 394 1 991 2 000 2 000 1 990 1 394 Total mortgages 1 394 1 991 2 001

45 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 52 Main regional figures for 2001

Total assets Assets 2) Liabilities Deposits Gross and equity 2) loans Region Hardanger/ Midthordland 2 523 1 841 1 840 2 523 Region Nordfjord 1 836 1 358 1 357 1 826 Region Nordhordland 2 814 2 515 2 512 2 791 Region Sogn 695 546 545 687 Region Sunnhordland 3 726 2 307 2 300 3 703 Region Vest 2 792 1 475 1 473 2 766 Region Bergen 12 898 8 201 8 132 12 815 Total - all regions 27 284 18 243 18 159 27 111 Central activities 1) 5 139 14 180 1 252 2 218 Sparebanken Vest - Total 32 423 32 423 19 411 29 329

1) Including centrally managed equity 2) Excluding internal capital transfers

Note 53 Residual maturity and date of interest rate adjustment of balance sheet items

Residual maturity of balance 0 - 1 1 - 3 3 - 12 1 - 5 Over No residual Total sheet items at 31 December 2001 month months months years 5 years maturity ASSETS Cash and deposits with central banks NOK 148 172 320 Foreign currency 12 12 Loans to and deposits with credit institutions NOK 843 843 Foreign currency 77 77 Loans to and receivables from customers NOK 1 536 368 1 949 6 683 16 197 26 733 Foreign currency 748 229 1 429 6 2 412 Specified loss provisions NOK (194) (194) Foreign currency (1) (1) Unspecified loss provisions NOK (188) (188) Commercial paper, bonds and other interest- earning securities with a fixed return NOK 315 153 344 390 110 1 312 Other assets NOK 173 385 441 999 Foreign currency 42 42 Total assets 3 092 215 3 041 7 302 18 011 484 32 367 NOK 3 015 215 2 293 7 073 16 582 425 29 825 Foreign currency 77 748 229 1 429 59 2 542

46 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 53 continue

0 - 1 1 - 3 3 - 12 1 - 5 Over No residual Total month months months years 5 years maturity LIABILITIES AND EQUITY Loans and deposits from credit institutions NOK 274 274 Foreign currency 2 689 2 689 Deposits from and debt to customers NOK 19 155 68 24 19 247 Foreign currency 102 102 Securitised debt NOK 650 1 609 1 821 2 557 219 6 856 Foreign currency 0 Other liabilities NOK 303 319 622 Foreign currency 66 Subordinated loan capital NOK 397 397 Foreign currency 0 Equity NOK 2 174 2 174 Total liabilities and equity 23 173 1 609 1 889 2 581 616 2 499 32 367 NOK 20 382 1 609 1 889 2 581 616 2 493 29 570 Foreign currency 2 791 6 2 797 Net liquidity exposure gap on balance sheet items (20 081) (1 394) 1 152 4 721 17 395 (2 015) (222) NOK (17 367) (1 394) 404 4 492 15 966 (2 068) 33 Foreign currency (2 714) 748 229 1 429 53 (255) Net liquidity exposure gap on forward foreign currency transactions (8) 0 (29) 0 0 0 (37) Forward purchases of foreign currency NOK 679 412 704 1 795 Foreign currency 1 102 118 1 819 3 039 Forward sales of foreign currency NOK (127) (122) (1 852) (2 101) Foreign currency (1 662) (408) (700) (2 770) Net total - all items (20 089) (1 394) 1 123 4 721 17 395 (2 015) (259) NOK (16 815) (1 104) (744) 4 492 15 966 (2 068) (273) Foreign currency (3 274) (290) 1 867 229 1 429 53 14

Overdraft facilities are grouped under loans with a residual maturity of up to 1 month. Instalment loan repayments are apportioned in accordance with the loan structure

47 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 53 continue

Agreed/probable time for adjustment of balance sheet items and financial derivatives at 31 December 2001

0 - 1 1 - 3 3 - 12 1 - 5 Over No residual Total month months months years 5 years maturity ASSETS Cash and deposits with central banks NOK 148 172 320 Foreign currency 12 12 Loans to and deposits with credit institutions NOK 843 843 Foreign currency 77 77 Loans to and receivables from customers NOK 25 376 1 357 26 733 Foreign currency 476 1 546 384 6 2 412 Specified loss provisions NOK (194) (194) Foreign currency (1) (1) Unspecified loss provisions NOK (188) (188) Commercial paper, bonds and other interest- earning securities with a fixed return NOK 356 493 404 59 1 312 Other assets NOK 999 999 Foreign currency 42 42 Total assets 1 900 27 415 788 1 416 0 848 32 367 NOK 1 347 25 869 404 1 416 789 29 825 Foreign currency 553 1 546 384 59 2 542

LIABILITIES AND EQUITY Loans and deposits from credit institutions NOK 274 274 Foreign currency 2 689 2 689 Deposits from and debt to customers NOK 19 183 64 19 247 Foreign currency 102 102 Securitised debt NOK 2 027 1 885 1 821 1 089 34 6 856 Foreign currency Other liabilities NOK 622 622 Foreign currency 66 Subordinated loan capital NOK 397 397 Foreign currency Equity NOK 2 174 2 174 Total liabilities and equity 5 092 21 465 1 885 1 089 0 2 836 32 367 NOK 2 301 21 465 1 885 1 089 2 830 29 570 Foreign currency 2 791 6 2 797 Net interest rate exposure on balance sheet items (3 192) 5 950 (1 097) 327 0 (1 988) 0 NOK (954) 4 404 (1 481) 327 (2 041) 255 Foreign currency (2 238) 1 546 384 53 (255) Off-balance sheet financial derivatives which affect interest rate exposure (596) 3 080 (5 120) 3 064 (465) 0 (37) Purchase positions NOK 1 467 47 306 124 598 27 614 200 985 Foreign currency 1 102 795 1 819 3 716 Sale positions NOK (1 503) (44 613) (130 160) (24 550) (465) (201 291) Foreign currency (1 662) (408) (1 377) (3 447) Net interest rate exposure incl. off-balance sheet financial derivatives (3 788) 9 030 (6 217) 3 391 (465) (1 988) (37) NOK (990) 7 097 (7 043) 3 391 (465) (2 041) (51) Foreign currency (2 798) 1 933 826 53 14 Net interest rate exposure of average total assets (12.02) 28.65 (19.73) 10.76 (1.48) (6.31) (0.13) NOK (3.14) 22.52 (22.35) 10.76 (1.48) (6.48) (0.17) Foreign currency (8.88) 6.13 2.62 0.17 0.04

48 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 53 continue

INTEREST RATE SENSITIVITY Throughout 2001 Sparebanken Vest had substantial holdings of bonds and commercial paper, mainly for the purpose of meeting statutory requirements relating to liquidity reserves and deposits as required as security for loans from Norges Bank.

At year-end, the bank’s holdings of bonds and commercial paper amounted to NOK 1 312m, with an average duration of 0.36 years.Taken separately, the interest rate risk on these investments would result in a loss of value of NOK 4.9m kroner in the event of a parallel rise in the interest rate of 1 percentage point.The bank uses interest rate swaps, futures and future rate agreements (FRA) to manage the interest rate risk related to these securities.

Exposed interest rate positions at year-end 2001, with accounting effect, would have resulted in a loss of NOK 4.1m in the event of a parallel rise in the interest rate of 1 percentage point.The bank also has bonds for NOK 9.6m with an average duration of 0.8 years which are to be held until maturity. A rise in interest rates would have no immediate effect for this part of the portfolio.

In managing its interest rate exposure, the bank realises that different maturities can develop differently.The basic risk has been accounted for by ensuring that the bulk of the bank’s investments are in gilts.

Foreign exchange risk Assets and liabilities in foreign currency at 31 December 2001

Posted in Balance Sheet Not posted in Balance Sheet Currency Assets Liabilities Forward Forward Net- purchases sales positions

USD 933 1 381 2 407 1 929 30 JPY 938 958 53 38 (5) GBP 164 10 61 214 1 CHF 210 257 129 112 (30) SEK 43 44 32 30 1 DKK 3 2 1 EUR 247 143 358 447 15 Other 4 2 2

Total 2 542 2 797 3 040 2 770 15

Foreign currency items are secured through corresponding items in the balance sheet or through off-balance sheet hedging positions. The foreign exchange risk is therefore always limited.

49 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 54 Financial instruments and derivatives

Financial instruments Nominal Book Average Market Credit amount 1) value book value exposed value value 31/12-01 31/12-01 2001 31/12-01 2001

Trading portfolio Balance sheet instruments - Commercial paper, bonds etc. 165 165 170 165 - Shareholdings 5 16 82 16 - Money market investment funds 100 26 100 Off-balance sheet instruments 2) - Forward purchases/sales of foreign currency 4 743 4 743 1 839 47 - Interest rate contracts 195 102 195 102 156 231 1 Total 200 015 200 126 158 348 48

Ordinary banking activity Balance Sheet - Assets - Commercial paper, bonds etc. 1 146 1 138 1 648 1 138 - Bonds to be held until maturity 10 9 80 9 - Long-term shareholdings 24 57 58 Balance Sheet - Liabilities - Commercial paper and bond debt 6 859 6 856 6 545 Off-balance sheet instruments 2) - Forward purchases/sales of foreign currency 1 066 1 062 656 11 - Interest rate contracts 4 765 4 765 4 530 14 Options 1 112 1 112 685 33

1) The nominal amount is the underlying principal which is the basis of calculation of interest income, interest expenses and net gains in the profit and loss account.

2) Off-balance sheet instruments in the columns for ”Book value” and ”Average book value” are stated at the total of purchases and sales at year-end and at the average for the year.These amounts are included in order to show the bank’s activity in this area.

Financial derivatives are agreements entered into with financial institutions or customers in order to set interest rates, foreign exchange rates and the value of equity instruments for specific periods.

Sparebanken Vest has used the following derivatives in the course of the year:

Forward foreign exchange transactions These are agreements to purchase of sell a specific amount of foreign currency at a future date at an agreed exchange rate.

Interest rate contracts comprise: - Forward rate agreements (FRA) which stipulate a certain rate of interest on a nominal amount of foreign currency for a future period of time. - Interest rate swaps which are agreements to exchange interest rates (fixed for floating) for a specific amount over a given period of time. - Interest rate futures which are agreements relating to the future purchase or sale of an underlying bond at a predetermined rate.

Options The bank’s holdings of options relates to bank deposits with a stock exchange return and the issue of share index linked bonds to customers.All share options sold to customers are secured against corresponding holdings in the market, and the bank’s open positions related to these options is very limited.

Market risk The market risk attached to commercial activity is limited under the risk limits which are set by and regularly reported to the Board of Directors.The limits for foreign currency positions are largely in line with the limitations set by Norges Bank.The limits for interest rate risk are set at a level which limits the risk to a level which ensures that the bank’s core activities do not suffer.

Credit risk The credit risk is expressed by the risk-weighted volume calculated in accordance with capital adequacy regulations laid down by the Banking, Insurance and Securities Commission.The credit risk is the risk that contractual obligations are not met by the bank’s counterparty. Internal regulations regulate the maximum counterparty exposure.The above table shows that no major risk is attached to the above financial derivatives.

50 SPAREBANK 1 VEST ANNUAL REPORT 2001

NOTES TO THE ACCOUNTS

Note 55 Disputes

At year-end 2001 the bank was not involved in any litigation or legal disputes.The bank is otherwise subject to various claims related to its normal activities. The size and extent of these claims are such that they are of no material importance for the bank’s financial position. Loss provisions have been made where considered appropriate.At year-end 2001 the bank’s subsidiaries were not involved in any legal disputes of any material economic significance.

Note 56 Transactions with closely related companies

Sparebanken Vest has defined the following quoted companies as being closely related to the bank.The information is provided in accordance with the Preliminary Norwegian Accounting Standard for ”Information about closely related companies” in so far as this information does not cintravene current legislation related to the bank’s duty of confidentiality:

Subsidiaries The bank’s subsidiaries are listed in note 33. Intercompany balances are shown in note 32.All transaction between Group companies are conducted on the basis of normal commercial terms and principles.

Jointly controlled activities SpareBank 1 Gruppen AS (13% shareholding) with related companies.The company is the holding company of a financial group and these remarks embrace all the related companies of this financial group. (See note 34).

The bank’s commercial relationship with these companies is based on the standard commercial terms and conditions currently in force for each company.

51 SPAREBANK 1 VEST ANNUAL REPORT 2001

A UDITOR’S REPORT FOR 2001

We have audited the annual accounts of Sparebanken Vest for 2001 which accepted Norwegian auditing standards, we have reviewed the bank’s asset show a profit for the year of NOK 137 million for the parent company and a management and accounting and internal control systems.We consider that profit for the year of NOK 137 million for the Group.We have also audited our audit provides an appropriate basis for our audit report. the information in the annual report related to the annual accounts, the submission of the accounts on a going concern basis and the proposed We believe that allocation of the profit for the year.The annual accounts, which comprise the ● the annual report and accounts have been prepared in accordance with annual report, profit and loss account, balance sheet, statement of cash flows the relevant laws and regulations and present fairly the financial position of and notes to the accounts and consolidated accounts, are presented by the the bank at 31 December 2001 and the result of its operations and its cash company’s Board of Directors and its Managing Director. Our responsibility flows for the year in accordance with generally accepted Norwegian is to submit an audit report related to the annual report and accounts and accounting principles other matters in accordance with the requirements of the Auditors Act. ● the management have complied with their obligation to keep systematic We have conducted our audit in accordance with the Auditors Act and and clear records and documentation of accounting information as requi- generally accepted Norwegian auditing standards. This requires that we red by law and in accordance with generally accepted Norwegian accoun- plan and perform the audit procedures which we consider necessary ting practice to determine that the annual report and accounts are free of material misstatements. We have examined, on a test basis, the accounting material ● the information in the annual report related to the annual accounts, the supporting the accounts and assessed the accounting principles applied, submission of the accounts on a going concern basis and the proposed the accounting estimates made by management, and the content and presen- application of the profit for the year are in conformity with the annual tation of the annual report and accounts.To the extent required by generally accounts and in accordance with relevant laws and regulations.

Bergen. 21 February 2002 PricewaterhouseCoopers DA

Geir Inge Lunde Per Kåre Furnes State Authorised Public Accountant (Norway) State Authorised Public Accountant (Norway)

REPORT OF THE CONTROL COMMITTEE FOR 2001

The Committee held regular meetings in Bergen in 2001 and visited the monitored and considered the development of the bank’s loss position and Sunnhordland region and the Sentrum market area in the Bergen region. In risk exposure, as well as measures taken by the bank to meet this the performance of its work the Committee has conferred with the chairman development. of the Board of Directors, the managing director and with those responsible The Committee is of the view that the Board of Directors’ assessment of the for different areas of activity. bank’s financial position, as presented in the annual report, is adequate. The Committee has worked closely with the internal auditor, while The annual report and accounts for 2001 have been reviewed and discussed maintaining contact with the external auditor. with the external and internal auditors, and with representatives of the ban- k’s management. The Committee has carried out the checks considered necessary to comply with the guidelines and directives which the Committee is required to obser- In the view of the Committee, the annual report and accounts, including the ve under the Savings Banks Act and in accordance with the instructions issu- consolidated accounts, have been prepared in accordance with the Savings ed to the Control Committee. Bank Act and regulations laid down by the Banking, Insurance and Securities Commission. The Control Committee has not found the Bank’s activities to be in conflict The Control Committee has no criticism of the annual report and accounts with the provisions of the Savings Banks Act, the Financing Activity Act, the and recommends that the profit and loss account and the balance sheet for bank’s Articles of Association, resolutions of the Board of Governors or 2001, including the consolidated accounts, as submitted by the Board of other provisions governing the Bank’s activities. Directors, be adopted by the Board of Governors as the accounts of In cooperation with the internal auditor, the Committee has continuously Sparebanken Vest for 2001.

Bergen, 21 February 2002

Lillian Torsvik Kjell Steinsbø Nils Rødland

Knut Gramstad Anne Lise Noss

52 SPAREBANK 1 VEST ANNUAL REPORT 2001

GROUP KEY FIGURES

Group Key Figures 1997 - 2001

PROFIT AND LOSS ACCOUNT SUMMARY 2001 2000 1999 1998 1997 Interest income etc. 2 560 2 080 1 946 1 559 1 189 Interest expenses etc. 1 773 1 329 1 227 912 570

Net interest and credit commission income 787 751 719 647 619 Dividends and other income on securities with a variable return (52) (4) 23 12 17 Commissions receivable and income from banking services 270 227 200 180 166 Commissions payable and cost of banking services 77 64 67 62 68 Net change in value of and gain/(loss) on foreign exchange and short-term securities (21) 13 98 (125) 28 Other operating income 66 66 27 31 28 Net operating income 186 238 281 36 171

Profit before operating expenses 973 989 1 000 683 790 Salaries and general administration expenses 540 481 476 434 430 Depreciation of fixed and intangible assets 46 45 40 40 37 Other operating expenses 98 115 75 76 76 Total operating expenses 684 641 591 550 543

Profit before losses and write-downs 289 348 409 133 247 Losses on loans and guarantees etc. 86 43 59 8 8 (Write-downs)/reversal of write-downs and gain/(loss) on long-term securities (3) 33 134 (5) 11

Profit before tax 200 338 484 120 250 Taxes 63 99 126 52 72

Profit for the year 137 239 358 68 178

BALANCE SHEET SUMMARY Assets Cash and deposits with central banks 332 310 651 253 217 Loans to and deposits with credit institutions 920 1 359 144 602 511 Gross loans before specified and unspecified loss provisions 29 145 26 610 22 650 20 580 18 478 Specified loss provisions (195) (178) (177) (199) (212) Unspecified loss provisions (188) (160) (125) (84) (84) Net loans to and receivables from customers 28 762 26 272 22 348 20 297 18 182 Assets acpuired 2 4 Commercial paper, bonds and other interest-earning securities with a fixed return 1 312 2 021 2 153 1 319 1 318 Shareholdings, investments and other securities with a variable return 175 171 262 490 500 Shareholdings in jointly controlled companies 325 342 200 152 150 Intangible assets 36 39 23 39 25 Fixed assets 320 288 280 281 276 Other assets 19 61 47 26 52 Prepaid expenses and accrued income 164 231 147 160 114 Total assets 32 367 31 098 26 255 23 619 21 345

Liabilities and equity Loans and deposits from credit institutions 2 963 3 616 3 392 1 600 1 142 Deposits from and debt to customers 19 349 17 782 15 742 14 629 12 598 Securitised debt 6 856 6 045 4 117 4 875 5 101 Other liabilities 327 506 476 314 386 Accrued expenses and prepaid income 245 349 224 194 168 Provisions for commitments and expenses 56 32 37 48 59 Subordinated loan capital 397 693 401 380 366 Total liabilities 30 193 29 023 24 389 22 040 19 820 Primary capital certificates 250 250 250 250 250 PCC premium reserve 4 4444 Total paid-up equity 254 254 254 254 254

Sparebankens capital fund 1 905 1 722 1 600 1 311 1 254 Other equity 15 99 12 14 17 Total retained earnings 1 920 1 821 1 612 1 325 1 271 Total equity 2 174 2 075 1 866 1 579 1 525 Total liabilities and equity 32 367 31 098 26 255 23 619 21 345

AVERAGE TOTAL ASSETS 31 518 27 785 24 700 22 623 20 718

53 SPAREBANK 1 VEST ANNUAL REPORT 2001

GROUP KEY FIGURES

Group Key Figures 1997 - 2001 continue

RESULTS AS A PERCENTAGE OF AVERAGE TOTAL ASSETS 2001 2000 1999 1998 1997 Interest income etc. 8.12 7.48 7.88 6.89 5.74 Interest expenses etc. 5.63 4.78 4.97 4.03 2.75

Net interest and credit commission income 2.50 2.70 2.91 2.86 2.99 Dividends and other income on securities with a variable return (0.16) (0.01) 0.09 0.05 0.08 Commissions receivable and income from banking services 0.86 0.81 0.81 0.79 0.80 Commissions payable and cost of banking services 0.24 0.23 0.27 0.27 0.33 Net change in value of and gain/(loss) on foreign exchange and short-term securities (0.07) 0.05 0.40 (0.55) 0.14 Other operating income 0.21 0.24 0.11 0.14 0.14 Net operating income 0.59 0.86 1.14 0.16 0.84

Profit before operating expenses 3.09 3.56 4.05 3.02 3.82 Salaries and general administration expenses 1.71 1.74 1.93 1.91 2.08 Depreciation of fixed and intangible assets 0.15 0.16 0.16 0.18 0.18 Other operating expenses 0.31 0.41 0.30 0.34 0.37 Total operating expenses 2.17 2.31 2.39 2.43 2.62

Profit before losses and write-downs 0.92 1.25 1.66 0.59 1.20 Losses on loans and guarantees etc. 0.27 0.15 0.24 0.03 0.04 (Write-downs)/reversal of write-downs and gain/(loss) on long-term securities (0.01) 0.12 0.54 (0.02) 0.05

Profit before tax 0.63 1.22 1.96 0.54 1.21 Taxes 0.20 0.36 0.51 0.22 0.35 Profit for the year 0.43 0.86 1.45 0.32 0.86

Return on investment, earnings and capital structure (%) 1. Return on equity after tax 6.39 12.03 20.38 4.36 12.18 2. Return on total assets before losses and tax 0.92 1.25 1.66 0.59 1.20 3. Net return on total assets 0.43 0.86 1.45 0.32 0.86 4. Operating expenses as a percentage of profit before operating expenses 70.30 64.81 59.10 80.53 68.73 5. Funding ratio 67.27 67.68 70.44 72.07 69.29

Balance sheet development (%) 6. Change in gross loans to and receivables from customers 9.53 17.48 10.06 11.38 10.53 7. Change in commercial paper, bonds and other interest-earning securities (35.08) (6.13) 63.23 0.08 1.54 8. Change in deposits from and debt to customers 8.81 12.96 7.61 16.12 (2.72) 9. Change in total assets 4.08 18.45 11.16 10.65 9.92

Defaults, provisions and loan losses 10. Loan loss ratio 0.29 0.16 0.26 0.04 0.04 11. Gross default ratio 0.75 0.61 0.61 0.81 0.87 12. Net default ratio 0.45 0.32 0.30 0.35 0.34 13. Percentage of defaulted loans provided for 40.00 47.23 51.07 56.28 61.72 14. Unspecified provisions as percentage of gross loans (0.65) (0.60) (0.55) (0.41) (0.45)

Capital adequacy 15. Net capital base 2 192 2 370 1 948 1 774 1 812 16. Basis of calculation 22 076 19 861 17 039 15 828 14 074 17. Capital ratio 9.93 11.93 11.43 11.21 12.87 18. Core capital ratio 9.68 10.25 10.82 9.94 10.84

54 SPAREBANK 1 VEST ANNUAL REPORT 2001

GROUP KEY FIGURES

Group Key Figures 1997 - 2001 continue

Primary capital certificates (PCC) (Parent Bank) 2001 2000 1999 1998 1997 19. Primary capital certificates (NOK m) 250 250 250 250 250 20. Dividend per PCC (NOK) 9.50 12.00 22.00 5.00 13.00 21.Traded price at 31 December (NOK) 118.00 130.00 213.00 134.00 229.00 22. PCCs as a percentage of capital base 11.66 12.74 13.58 16.09 16.70 23. Book equity per PCC (NOK) 100.00 100.00 100.00 100.00 100.00 24. Profit (gross) per PCC (NOK) 54.80 95.60 143.20 27.20 71.20 25. Earnings per PCC (NOK) 6.98 12.98 23.04 4.54 13.17 26. RISK amount (NOK) 89.09 45.81 69.12 27. Real rate of return per PCC 0.00 (28.64) 62.69 (35.81) 41.21 28. Direct rate of return 8.05 9.23 10.33 3.73 5.68 29. Payout ratio 17.34 12.55 15.36 18.38 18.26 30. Provision for dividends as % of PCC’s share of profits 136.08 92.42 95.47 110.07 98.73

Personnel Number of employees 857 794 760 775 794 Number of man-years 813 749 703 717 731

Distribution network Sales outlets 63 64 64 67 70 Mobile banks 1223

Definitions: 1. Profit for the year as a percentage of opening equity + 50% of the profit for the year. 2. Operating profit before losses and write-downs as a percentage of average total assets. 3. Operating profit/(loss) after tax as a percentage of average total assets. 5. Deposits from and debt to customers as a percentage of loans to and receivables from customers. 6. Change in gross lendings at 31 December compared with the previous year-end volume. 7. Change in securities at 31 December compared with the previous year-end volume. 8. Change in customer deposits at 31 December compared with the previous year-end volume. 10. Losses on loans and guarantees as a percentage of loans to and receivables from customers at 31 December. 11. Gross defaults as a percentage of gross lendings. 12. Defaulted loans less specified loss provisions for such loans as a percentage of net lendings. 13. Specified loss provisions for defaulted loans as a percentage of the gross amount of such loans. 22. PCCs as a percentage of the parent bank’s equity at year-end, corrected for allocations to the reserve for valuation variances. 24. Profit for the year divided by the number of PCCs. 25. Proportion of the profit for the year attributable to PCCs, divided by the number of PCCs. 27. Dividend paid plus change in market price from 1 Jan. to 31 Dec., as a percentage of stock exchange price at 1 Jan. 28. Provision for dividends as a percentage of the stock exchange price at 1 January. 29. Dividend as a percentage of the operating profit per PCC.

55 SPAREBANK 1 VEST ANNUAL REPORT 2001

GROUP KEY FIGURES

Group Key Figures 2000 - 2001 (quarterly, cumulative)

PROFIT AND LOSS ACCOUNT SUMMARY 31/12-01 30/9-01 30/6-01 31/3-01 31/12-00 30/9-00 30/6-00 31/3-00 Interest income etc. 2 560 1 932 1 259 617 2 080 1 474 950 467 Interest expenses etc. 1 773 1 354 882 433 1 329 924 587 288

Net interest and credit commission income 787 578 377 184 751 550 363 179 Dividends and other income on securities with a variable return (52) (36) (15) (12) (4) 5 10 3 Commissions receivable and income from banking services 270 190 122 60 227 161 106 52 Commissions payable and cost of banking services 77 53 33 18 64 46 31 15 Net change in value of and gain/(loss) on foreign exchange and short-term securities (21) (24) (23) (21) 13 24 9 22 Other operating income 66 55 44 15 66 38 28 14 Net operating income 186 132 95 24 238 182 122 76

Profit before operating expenses 973 710 472 208 989 732 485 255 Salaries and general administration expenses 540 389 260 122 481 354 223 109 Depreciation of fixed and intangible assets 46 34 24 12 45 30 20 10 Other operating expenses 98 69 43 26 115 86 65 31 Total operating expenses 684 492 327 160 641 470 308 150

Profit before losses and write-downs 289 218 145 48 348 262 177 105 Losses on loans and guarantees etc. 86 35 20 (3) 43 41 19 4 (Write-downs)/reversal of write-downs and gain/ (loss) on long-term securities (3) (8) (4) (7) 33 32 3 (1)

Profit before tax 200 175 121 44 338 253 161 100 Taxes 63 57 40 18 99 65 46 29

Profit after tax 137 118 81 26 239 188 115 71

AVERAGE TOTAL ASSETS 31 518 31 222 31 053 30 675 27 785 27 214 26 898 26 726

RESULTS AS A PERCENTAGE OF AVERAGE TOTAL ASSETS Interest income etc. 8.12 8.27 8.18 8.16 7.48 7.23 7.06 6.99 Interest expenses etc. 5.63 5.80 5.73 5.72 4.78 4.53 4.36 4.31

Net interest and credit commission income 2.50 2.48 2.45 2.43 2.70 2.70 2.70 2.68 Dividends and other income on securities with a variable return (0.16) (0.15) (0.10) (0.16) (0.01) 0.02 0.07 0.04 Commissions receivable and income from banking services 0.86 0.81 0.79 0.79 0.81 0.79 0.79 0.78 Commissions payable and cost of banking services 0.24 0.23 0.21 0.24 0.23 0.23 0.23 0.22 Net change in value of and gain/(loss) on foreign exchange and short-term securities (0.07) (0.10) (0.15) (0.28) 0.05 0.12 0.07 0.33 Other operating income 0.21 0.24 0.29 0.20 0.24 0.19 0.21 0.21 Net operating income 0.59 0.57 0.62 0.32 0.86 0.89 0.91 1.14

Profit before operating expenses 3.09 3.04 3.07 2.75 3.56 3.59 3.61 3.82 Salaries and general administration expenses 1.71 1.67 1.69 1.61 1.74 1.74 1.66 1.63 Depreciation of fixed and intangible assets 0.15 0.15 0.16 0.16 0.16 0.15 0.15 0.15 Other operating expenses 0.31 0.30 0.28 0.34 0.41 0.42 0.48 0.46 Total operating expenses 2.17 2.11 2.12 2.12 2.31 2.31 2.29 2.24

Profit before losses and write-downs 0.92 0.93 0.94 0.63 1.25 1.28 1.32 1.57 Losses on loans and guarantees etc. 0.27 0.15 0.13 (0.04) 0.15 0.20 0.14 0.07 (Write-downs)/reversal of write-downs and gain/(loss) on long-term securities (0.01) (0.03) (0.03) (0.09) 0.12 0.16 0.02 (0.01)

Profit before tax 0.63 0.75 0.79 0.58 1.22 1.24 1.20 1.50 Taxes 0.20 0.24 0.26 0.24 0.36 0.32 0.34 0.43

Profit after tax 0.43 0.51 0.53 0.34 0.86 0.92 0.86 1.06

56 SPAREBANK 1 VEST ANNUAL REPORT 2001

GROUP KEY FIGURES

QUARTERLY RESULTS (non- cumulative) 4thQtr 3rdQtr 2ndQtr 1stQtr 4thQtr 3rdQtr 2ndQtr 1stQtr 2001 2001 2001 2001 2000 2000 2000 2000 Interest income etc. 628 673 642 617 606 524 483 467 Interest expenses etc. 419 472 449 433 405 337 299 288 Net interest and credit commission income 209 201 193 184 201 187 184 179 Dividends and other income on securities with a variable return (16) (21) (3) (12) (9) (5) 7 3 Commissions receivable and income from banking services 80 68 62 60 66 55 54 52 Commissions payable and cost of banking services 24 20 15 18 18 15 16 15 Net change in value of and gain/(loss) on foreign exchange and short-term securities 3 (1) (2) (21) (11) 15 (13) 22 Other operating income 11 11 29 15 28 10 14 14 Net operating income 54 37 71 24 56 60 46 76 Profit before operating expenses 263 238 264 208 257 247 230 255 Salaries and general administration expenses 151 129 138 122 127 131 114 109 Depreciation of fixed and intangible assets 12 10 12 12 15 10 10 10 Other operating expenses 29 26 17 26 29 21 34 31 Total operating expenses 192 165 167 160 171 162 158 150 Profit before losses and write-downs 71 73 97 48 86 85 72 105 Losses on loans and guarantees etc. 51 15 23 (3) 2 22 15 4 (Write-downs)/reversal of write-downs and gain/ (loss) on long-term securities 5 (4) 3 (7) 1 29 4 (1) Profit before tax 25 54 77 44 85 92 61 100 Taxes 6 17 22 18 34 19 17 29 Profit after tax 19 37 55 26 51 73 44 71 BALANCE SHEET DEVELOPMENT 31/12-01 30/9-01 30/6-01 31/3-01 31/12-00 30/9-00 30/6-00 31/3-00 Cash and deposits with central banks 332 269 251 222 310 617 324 166 Loans to and deposits with credit institutions 920 867 719 890 1 359 1 040 1 266 1 393 Gross loans before specified and unspecified loss provisions 29 145 28 338 27 650 27 098 26 610 24 924 23 937 23 273 Specified loss provisions (195) (183) (188) (169) (178) (174) (158) (162) Unspecified loss provisions (188) (166) (162) (160) (160) (148) (141) (137) Net loans to and receivables from customers 28 762 27 989 27 300 26 769 26 272 24 602 23 638 22 974 Assets acquired 2 4 4 4 4 3 3 Commercial paper, bonds and other interest-earning securities with a fixed return 1 312 1 828 2 213 1 970 2 021 1 271 1 759 2 360 Shareholdings, investments and other securities with a variable return 175 169 140 73 171 254 250 255 Shareholdings in jointly controlled companies 325 341 325 328 342 358 204 201 Intangible assets 36 36 37 38 39 23 23 23 Fixed assets 320 300 297 295 288 268 272 276 Other assets 19 159 212 174 61 100 29 79 Prepaid expenses and accrued income 164 239 289 215 231 243 256 295 Total assets 32 367 32 201 31 787 30 978 31 098 28 779 28 024 28 022 Loans and deposits from credit institutions 2 963 2 071 2 768 2 181 3 616 2 678 2 623 2 969 Deposits from and debt to customers 19 349 19 126 18 759 18 568 17 782 16 606 17 056 16 315 Securitised debt 6 856 6 671 6 280 6 125 6 045 5 823 5 042 5 492 Other liabilities 327 476 401 784 506 308 293 416 Accrued expenses and prepaid income 245 938 674 480 349 796 563 433 Provisions for commitments and expenses 56 32 32 32 32 37 37 37 Subordinated loan capital 397 694 717 707 693 456 429 423 Total liabilities 30 193 30 008 29 631 28 877 29 023 26 704 26 043 26 085 Paid-up equity 254 254 254 254 254 254 254 254 Retained earnings 1 920 1 821 1 821 1 821 1 821 1 633 1 612 1 612 Total equity 2 174 2 075 2 075 2 075 2 075 1 887 1 866 1 866 Interim profit 118 81 26 188 115 71 Total liabilities and equity 32 367 32 201 31 787 30 978 31 098 28 779 28 024 28 022 RETURN ON INVESTMENT,EARNINGS AND CAPITAL STRUCTURE (%) Return on equity after tax 6.39 7.39 7.72 5.05 12.03 12.79 11.96 14.94 Return on total assets before losses and taxes 0.92 0.93 0.94 0.63 1.25 1.28 1.32 1.57 Net return on total assets 0.43 0.51 0.53 0.34 0.86 0.92 0.86 1.06 SOLVENCY (%) Loan loss ratio 0.30 0.16 0.15 (0.04) 0.16 0.22 0.16 0.07 Capital ratio 9.93 11.16 11.81 11.93 11.93 9.52 10.72 10.82 PRIMARY CAPITAL CERTIFICATES (PARENT BANK) Profit per primary capital certificate (NOK) 6.98 6.01 4.13 1.32 12.98 10.21 6.25 3.86 PERSONNEL Number of employees (man-labour years) 813 808 801 795 749 725 729 714

For definitions, see page 55 57 Åse Strønen, company adviser, SpareBank 1 Vest Frode Sandvik, entrepreneur and founder of Bella Donna ‘‘We are a good match’’ – or the story of how Bella Donna and a bank found each other There once was a street seller from Hamar – Stavanger. Behind the scenes is a bank that –As long as things are functioning well, there is and that is where the story could have ended. has been there right from the start. Through no need to change.As long as I have a dialogue But Frode Sandvik had other plans. You see, the ups and downs in a branch where with the bank and get the answers when I need Sandvik is an entrepreneur to his fingertips.And competition is fierce and sales fluctuate in pace them, the bank is the partner that I am looking now the street sales of his own production of with the latest fashion trends. In other for, says Sandvik with a nod of satisfaction, jewellery has become Bella Donna – a words, the customer relationship has been showing that behind his careful words is a blossoming retail concept with shops in Bergen, stable since the start in the 1970s, and it is customer who has a great appreciation of his Oslo and Trondheim, and a franchise in easily explained: bank!

58 SPAREBANK 1 VEST ANNUAL REPORT 2001

RETAIL MARKET:

‘‘A bank for everyone’’

At the end of 2001 SpareBank 1 Vest had that the customers want a higher degree of alliance has been to establish a common 245,000 customers. The market area is "one-stop shopping" for financial services. technological platform, and in this connection made up of the counties of Hordaland The bank must therefore be able to provide SpareBank 1 Vest transferred its core systems and Sogn & Fjordane. In Sogn & a full range of products related to financing, to EDB Fellesdata at Easter 2001. The Fjordane the bank is represented in fund management, insurance, estate agency conversion was carried out as planned, but Nordfjord and Sogndal, and in Førde in activities and stockbroking, etc. considerable operating problems arose in the Sunnfjord where a new branch was following period – to the great consternation opened in August 2001.This shows that a Product breadth and channel accessibility of the bank’s customers and employees. The large proportion of population in these Within the bank itself and through the new version of the bank’s online service was two counties have some sort of SpareBank 1 alliance SpareBank 1 Vest has similarly affected by various operating relationship with SpareBank 1 Vest.The established a comprehensive product port- problems. breadth of the bank’s offers to the retail folio, providing a complete range of financial market can be described as follows, solutions from the traditional lending and For a bank which attaches great importance to based on facts for 2001: borrowing forms to more sophisticated good customer relations and safeguarding the products with fixed upper and lower interest content of its core values, this has been most • 63 branches – with 3 due to close early in rate limits. As one of the market leaders, the regrettable. Substantial resources were there- 2002 bank also offers a complete range of estate fore allocated to improve the situation and • 42% market share, measured by number of agency services through its subsidiary ensure that operating stability is maintained at customers Eiendoms Megler 1 Vest A/S. Through the a satisfactory level. Stability has now been • 30 – 35 000 customers visit our branches product companies of the SpareBank 1 alliance restored and the situation is good. It is likely every week SpareBank 1 Vest can offers customers its new that this has also affected the customers’ per- • 80 automatic teller machines (ATMs) alternative savings forms and a broad range of ceptions of the bank in other areas, and • 50 000 online customers insurance products. through action plans, both centrally and locally, • 18 000 new online customers SpareBank 1 Vest believes that it is for the considerable work is being done to meet • 600 000 incoming telephone calls to customers to decide on the choice of channel. these challenges. Customer Service The bank shall be accessible on all channels, • 400 000 incoming calls to switchboard and it is the customers’ use of the channels Customer differentiation • 40 000 e-mails received by Customer that determines the content and scope of the The activities of SpareBank 1 Vest have been Service various channels.This has resulted in consider- largely based on the view that all customers • 4.3 million incoming calls to the telephone able strengthening of the telephone bank shall be treated equally. At a time when bank service and the online service in the last few profitability is under pressure and new players • 9.1 million giro payments through the years.At the same time, it has also led to some in the financial markets are using the existing various bank channels reorganisation and downsizing of the branch infrastructure, the bank’s policy in this area • Balanced growth in lendings and deposits network. In 2001 SpareBank 1 Vest opened 6 needs to be reassessed. SpareBank 1 Vest takes "new" branches and closed 2. the view that "good customers deserve a bit The above statistics show that SpareBank 1 better". In 2002 our sights are set on Vest has a very strong position in the retail Value profile developing a customer follow-up programme market, and surveys show that its position as In 2001 there was a great emphasis on that is more in line with the above goal, and market leader is being maintained. This also reinforcing the bank’s value profile, both inter- where the customer’s contact with the bank shows that the bank has built up an extremely nally and externally, based on a philosophy leads to an enhanced perception of it. effective infrastructure. In a competitive which believes that the value profile shall be industry such as ours this is being constantly created from within the bank’s own This also means that the bank will be put to the test, by traditional participants organisation and among its own employees. reassessing its approach to customers of offering a strengthened and broader product Through internal communication and informa- other banks. Important factors in this connec- range and by newcomers with a different tion, training and development the bank’s core tion are price and the degree of service. market and positioning strategy. values occupy a central position in the overall product which SpareBank 1 Vest represents. SpareBank 1 Vest will continue to be "a bank Core values This is then "transferred" to the market and for everyone". Naturally, our goal is that as SpareBank 1 Vest has chosen differentiation as the customers on the basis of one-to-one many people as possible will find that it is in a competition strategy, but competitive communication and through market profiling. their best interests to be a customer of financial products and services are naturally The response from both the market and the SpareBank 1 Vest – a bank which emphasis the the core of the bank’s service concept. The customers has been positive, as shown in the importance of a local presence, with local bank’s products shall be identified with an above table.The challenge is ensuring that the roots, a broad range of products, high overall perception which equates our concept is constantly applied to create an even accessibility, and where personal relationships products with the essence of our core values, better basis for the bank’s activities. continue to have value and count for as expressed in the words close, friendly, something. Other who wish to have a more helpful and competent. Customer satisfaction peripheral commercial relationship with For example, in today’s financial markets The level of customer satisfaction was SpareBank 1 Vest must expect higher prices product breadth and channel access are exposed to challenges on many fronts in 2001. (on services carried our within the bank) and so-called hygiene factors, and surveys show One of the main goals of the SpareBank 1 a lower degree of service.

59 Henning Haldorsen, corporate market manager, SpareBank 1 Vest Willy Helgesen, managing director, Helgesen Tekniske-bygg ‘‘We are door-openers for each other’’ – or the story of the entrepreneur who became an ambassador for the bank Like most people in the construction Over the years, Helgesen has developed the But although Helgesen is positive to the industry,Willy Helgesen has experienced ups ability to build not just structures, but also bank, he knows what he wants. He expects and downs. But Helgesen Tekniske-bygg at relationships, and in this capacity he has his requirements to be met, whether this Valestrandsfossen survived the difficult 1990s become an important ambassador for relates to service, follow-up or conditions. – weathering the storm so that today the SpareBank 1 Vest through the many projects The bank must be accessible, receptive company is as sound as the steel structures in which he and his company are involved. and competitive to be worthy of that are its speciality. While recommending us as his banking Helgesen’s confidence. That is why, when he partner, he benefits from the broad network recommends us to others, we take it as a which the bank represents. strong declaration of confidence.

60 SPAREBANK 1 VEST ANNUAL REPORT 2001

EIENDOMSMEGLER 1:

Strong growth in estate agency activities

In 2001 SpareBank 1 Vest’s estate There is also strong competition for person- which are part of the SpareBank1 alliance. agency company - EiendomsMegler 1 nel with professional qualifications since this is The chain members collaborate in areas Vest AS - reinforced its position as one a scarce resource within the branch. where there is strength in numbers, specifically of the leading estate agencies in Bergen brandbuilding and the promotion of brand and Hordaland. Increased frontline expertise awareness, as well as IT and purchasing/ There is a clear trend showing that the users development. Almost 1 150 properties were sold, up 22% of estate agency services expect to be met In 2001, 10 788 properties in Norway were on the previous year, with sales totalling with an increasing level of professionalism and sold through the EiendomsMegler 1 chain, a NOK 1.4bn. expertise. In view of this, EiendomsMegler 1 rise of almost 15% compared with 2000. EiendomsMegler 1 Vest AS owns 50% of Vest AS reorganised its activities at the office EiendomsMegler 1 has thus strengthened its EiendomsMegler 1 Sunnhordland AS. The is in the centre of Bergen in 2001. Here, estate position as Norway’s largest chain of estate engaged in estate agency activities in agency services related to residential agencies, measured by the number of units Sunnhordland and is located in Stord. A total property, housing co-operatives and commer- sold. of 141 properties were sold through the com- cial/new properties were established as a Until 1999, the regional banks of the pany in 2001, with a total value of NOK 180m. separate unit. SpareBank 1 Gruppen ran their estate agency On an aggregate basis, EiendomsMegler1 chan- Increased frontline expertise has strengthened activities under different names and profiles. nelled the sale of almost 1 300 properties in our competitive position and resulted in Then all the companies changed their name to Bergen and Hordaland for a total of NOK increased turnover in 2001. EiendomsMegler 1, and within one year the 1.6bn, an impressive 30% increase on 2001. The company has also had success with group was the Norway’s largest chain of estate EiendomsMegler 1 has more than 22% of the smaller sales offices placed in strategic agencies. market in Bergen and Hordaland. locations in urban areas and districts with a In the course of three years’ collaboration the The company has a staff of 32 divided among high turnover of residential properties. number of residential properties sold has been four offices at locations in central Bergen, doubled, reflecting growth within the existing Åsane, Fana and Sotra. Vision estate agencies plus new growth through new EiendomsMegler 1’s vision is to be the offices throughout Norway. Strong brand name recommended and leading estate agency in its The real estate market experienced a general market area. Prospects for 2002 rise in both turnover and prices throughout EiendomsMegler 1 shall build on its success In view of the decline in interest rates at the 2001. and achieve further growth in the most end of 2001 and the likelihood of further cuts Despite negative media forecasts of a fall in important area of all - the number of satisfied in interest rates in 2002, the property market house prices and the terror attacks on New customers. is expected to change only marginally this year. York on 11 September, the property market We shall be the estate agent recommended by Prices are expected to rise by 4 – 5%, with a remained stable. the customer. stable inflow of houses for sale. The estate agency market is characterised by EiendomsMegler 1 Vest is planning for further fierce competition and is dominated by large EiendomsMegler 1 – largest in Norway growth in 2002.This will be achieved through amalgamated groups with strong brand names. The EiendomsMegler 1 Norge Association planned initiatives aimed at utilising the The competitive situation has put pressure on is a chain of collaborating estate agency competitive edge which a strong brand name agency margins. companies owned wholly or partly by banks and a leading position in market represents.

61 Arne Petter Andreassen, managing director, Stord Boligbyggelag Arve Havnerås, company adviser, SpareBank 1 Vest ‘‘Problems are there to be solved’’ – or the story of the bank that saved Christmas for a housing cooperative and 30 homeless families Imagine, it is almost Christmas. The new seller, and the money cannot be transferred. managing director of Stord Boligbyggelag, housing cooperative under Stord Boligbygge- The housing cooperative cannot take the contacted SpareBank 1 Vest. It was natural to lag has been completed, and the way is clear chance of paying the money on its own – contact a bank with both the experience and for 30 families to celebrate Christmas in their with borrowed money, it is too great a risk. the ability to resolve economic problems – new homes.All that remains is to collect the So the keys are not handed over by the seller, and we did just that, arriving at a solution that keys. an 30 families have a predicament. Justifiably was acceptable to all parties.And the families But first, the purchase price for the building enraged, they come to your office and refuse were able to spend Christmas in their new must be paid. It turns out that all the to leave before the keys are handed over. homes! formalities have not been completed by the What do you do? Arne Petter Andreassen,

62 SPAREBANK 1 VEST ANNUAL REPORT 2001

CORPORATE MARKET:

Closer corporate links

One of SpareBank 1 Vest’s objectives is Value creation in the west of Norway have an active presence in the above to increase its relative share of the loan Much of the value creation in Norway takes industries.They occupy central positions in the and credit portfolio in the corporate place in the west of Norway and in the two bank’s market area, and for a bank which market. Growth shall be controlled and counties where SpareBank 1 Vest is repre- wishes to be involved in the local commercial within the bank’s quality norms. The sented – Hordaland and Sogn & Fjordane. sector it is important that we are able to offer trend in loans to the corporate market Important industries in this region are the these industries swift quick decision-making, a has been very positive since 1995, as fisheries, fish farming (including the develop- local presence and the required expertise.The shown in the illustration on this page. ment of new marine species), offshore and ongoing process of development and shipping. Developments in each of these areas restructuring of the Norwegian finance Under the bank’s business strategy, SpareBank were fairly varied in 2001. industry adds another dimension to this 1 Vest shall be an active partner for trade and challenge. In this context, it is important for industry. The emphasis is on local roots and The fish farming industry is currently SpareBank 1 Vest to seize the opportunities swift decision-making, and a thorough struggling with low prices due to massive offered, ensuring that the bank has the knowledge of local markets and companies. imports of salmon from Chile to the European required expertise, and that it is actively market, while the salmon agreement with the focused on companies with sound foundations Active role in commercial development EU continues to impose strict framework and a long-term perspective. SpareBank 1 Vest wishes to play an active role conditions limiting the development of the in developing the local commercial sector. Norwegian fish farming industry.The fisheries The New Basel Capital Acccord Market surveys show that the bank has are in a good phase, the outlook is bright and "The New Basel Capital Accord" (BCA) will captured market shares in the last few years, an increasing proportion of the pelagic catch is take effect in 2005 and will provide clear indicating that the bank is achieving its goals. expected to be used for consumption at guidelines for future banking operations. BCA The relationship between the bank/company higher prices.The unit quota scheme has had a requires the banks use different models to adviser and the individual clients is an positive effect, contributing to restructuring of calculate capital coverage. The guidelines will important factor in the process of realising the the line fleet, and the trend towards larger and provide regulations relating to the banks’ cre- bank’s objectives in the corporate market.The more integrated units is continuing. dit framework/structure, credit strategies/ level of competence is rising all the time, Rates were in decline in most shipping policy, competence and organisation. among our customers and in the commercial segments in the second half of 2001, and when SpareBank 1 Vest will work actively with the sector in general.This presents challenges for they can be expected to recover is a matter of other SpareBank 1 banks to adapt to the BCA SpareBank 1 Vest. Surveys show that the bank great uncertainty. Naturally, in a cyclical requirements. scores lower on customer satisfaction. Much industry such as shipping, developments in the of this can be explained by the problems global economy are a decisive factor. The Closer links which arose on conversion to a new data shipping industry has been generally affected SpareBank 1 Vest’s aim is to establish closer processing centre in 2001 – but it does not by the concurrent recession in Europe, Asia links with the commercial sector in explain everything.The surveys also show that and the USA, but there is an expectation that Hordaland and Sogn & Fjordane.We will also the bank scores lower on both expertise and the situation will improve in the second half of be increasing the level of cooperation within specialised branch knowledge. 2002.The shipping companies operating in the the SpareBank 1 alliance targeted at the The bank has responded to this. Through offshore sector are expected to report very corporate sector, with the main aim of central and local activities work is in hand to good results for 2001, and the outlook for ensuring that we continue to maintain boost customer satisfaction, and thus establish 2002 is good. sufficient capacity, expertise and an inter- and develop good customer relationships. SpareBank 1 Vest believes it is important to national network.

Risk profile - Corporate Portfolio as at 31.12.01 Relative lending growth Corporate Market (CM) and Retail Market (RM) 40 35 40% 30 25 30% 20 centage r CM

Pe 15 20% 10 RM 5 10% 0 No class. Unclass Low Average Av.-to-High High 0% Risk Group 1996 1997 1998 1999 2000 2001

63 Erik Throndsen, general manager, SpareBank 1 Vest Ole Bjørn Knudsen, managing director, FotoKnudsen ‘‘Smile’’ – or the story of the Knudsen family from Bergen and a bank with a good sense of timing FotoKnudsen is a familiar name and a part of company where the customers are the SpareBank 1 Vest that has followed everyday life for most of us – countless snaps employer, and where this guides the way the FotoKnudsen through its various phases, have been processed at the company’s company is run. It is a perception that including the recent change of generations. Fyllingsdalen laboratory in Bergen. FotoKnudsen shares with its bank. If you ask Ole Bjørn Knudsen if he is satisfied with his bank, he will say that it is always ready, If you ask Ole Bjørn Knudsen, the second For the bank, it means being accessible. always service-minded, always accessible. Also generation and managing director, he will tell Providing competitive solutions and qualified adding that a good customer like FotoKnudsen you that FotoKnudsen is a people’s company.A advice, when needed. This is probably why it is should expect no less!

64 SPAREBANK 1 VEST ANNUAL REPORT 2001

PRIMARY CAPITAL CERTIFICATES (PCCS):

Primary capital certificates with a historically good return

Primary capital certificates (PCPs) have which it is difficult to sell in the international best exercise its regional functions as an provided a generally better return than capital markets, and in Gjensidige NOR independent bank by building on its present shares in five of the last six years. Only in Sparebank has reached such a size that the corporate form. the bank’s anniversary year, 1999, did Norwegian capital market is both insufficient shareholdings show a better return. In and too expensive as a source of equity. Unsatisfactory development for SVEG in 2001 2000 and 2001 the PCC index showed an The price development for SpareBank 1 Vest’s aggregate return of 44%, while shares on SpareBank 1 Vest - present PCCs (SVEG) failed to match the price deve- the Oslo Stock Exchange showed a organisational form best lopment on the PCC index in 2001. At the negative return of 13%. For medium-sized and smaller savings banks it start of the year the PCC price was NOK 130, may appear that the domestic PCC market is while the last traded price in 2001 was NOK The good return provided by PCCs compared not yet a sufficiently large source of equity. 118. After adjusting for the dividend paid in with shares is an expression of the savings Nevertheless, the general conditions gover- 2001 (NOK12 per PCC for financial year banks’ ability to post stable and sound ning PCCs should be strengthened to improve 2000) the return was 0% in 2001, while the earnings with no major fluctuations, which is their position, and the Association of PCC index rose by 12% in the same period. not uncommon among listed companies. Norwegian Savings Banks has proposed a SpareBank 1 Vest has declared a dividend of number of amendments.The necessary chang- NOK 9.50 per PCC for financial year 2001, General conditions in process of change es in the law will come into effect in the cur- and the "RISK" amount as at 1 January 2002 At the same time, the general conditions rent year, and they are expected to give the will be NOK 0 since no funds have been governing PCCs are being changed. In savings banks the choice of continuing to be allocated to the dividend adjustment reserve. connection with the application from the based on PCCs or to be reorganised as a savings bank Gjensidige NOR Sparebank to be limited company. So, the future PCC market Target return on equity: 11.5% in 2002 reorganised as a limited company there is a will tell us whether other banks looking for The bank expects to achieve a post-tax return focus on the savings bank sector and the new equity can continue as PCC-based banks on equity of 11.5% in 2002. Considering the primary capital certificate market as a possible in their present form, or whether they will be likely level of interest rates in 2002, this source of equity.The primary capital certificate forced to reorganise as limited companies. represents a stricter requirement than the is a special and peculiarly Norwegian product SpareBank 1 Vest takes the view that the bank required return for 2001.

SVEG COMPARED WITH OSLO STOCK EXCHANGE TOTAL INDEX IN 2001 This graph shows the price development for SpareBank 1 Vest’s primary capital certificates - SVEG - relative to the Oslo Stock Exchange Total Index - (OSEBX) - which shows stockmarket developments. The Total Index has been re-stated to match the SVEG price of NOK 130 at the start of the year. 2001 2001 150 SpareBank 1 Vest

140 Total Index

130

120

110

100 Index (01.01.2001 = 130)

90

80 jan feb mar apr may jun jul aug sep oct nov dec

65 SPAREBANK 1 VEST ANNUAL REPORT 2001

THE SPAREBANK 1 ALLIANCE:

SpareBank 1 Gruppen AS – main features of 2002

SpareBank 1 Gruppen AS is a holding company During the last five years, SpareBank 1 1 Gruppen AS also owns 65% of EnterCard AS owned by SpareBank 1 Nord-Norge, Gruppen AS has succeeded in making the and 51% of First Securities ASA. SpareBank 1 Midt-Norge, SpareBank 1 Vest, SpareBank 1 brand name one of the most The main activities of SpareBank 1 Gruppen SpareBank 1 SR-Bank, Samarbeidende well-known in the Norwegian financial sector. AS are in Oslo. EiendomsMegler 1 is part of Sparebanker AS, FöreningsSparbanken (publ) A broad focus on brandbuilding, based on a the SpareBank 1 alliance. AB and the Norwegian Federation of Trade strong local presence and advertising on Unions. national TV,has brought good results in a short IDA AS, which was acquired in 2001, space of time. In the coming years SpareBank 1 specialises in car management. The company Independent banks will be aiming to develop the brand name represents a new, independent business area SpareBank 1 stands for cooperation between further by creating a greater awareness of the and is an important addition to the banks’ independent banks which believe in having bank’s core values - "proximity to the market, offers to corporate clients. IDA supplements local roots and local management of financial local roots and cooperation". the activities carried out by the financing services. SpareBank 1 believes that a Integration of VÅR Gruppen was a key focus of companies in the alliance. knowledge of customers and the local attention for both SpareBank 1 Gruppen AS environment, along with local management, and the SpareBank 1 alliance in 2001. Facts and background will be an increasingly important competitive Following the acquisition of VÅR Gruppen The SpareBank 1 alliance is the result of a factor in the future. ASA, the SpareBank 1 alliance is one of the binding cooperation agreement entered into One of the aims of the SpareBank 1 alliance is four largest providers of financial products and in 1996 by Sparebanken Nord-Norge, to progress from primarily offering traditional services in the Norwegian market. In addition Sparebanken Midt-Norge, Sparebanken Vest savings and loan products to become a total to the activities related to the integration of and Sparebanken Rogaland. The licence supplier of financial services. By developing in VÅR Gruppen and restructuring of the Group, needed to establish both the alliance and this way, SpareBank 1 will reinforce its position the SpareBank 1 Gruppen AS has also acquired SpareBank 1 Gruppen AS was received in and thus make a reality of the alliance’s vision: the car management company IDA AS and November 1996. In the same year, entered into a cooperation agreement with Samarbeidende Sparebanker AS also became "SpareBank 1 shall meet each customer’s Jernbanepersonalets Bank og Forsikring. party to the SpareBank 1 alliance. Sam- expectations through proximity to the market, In December 2001 FöreningsSparbanken gave arbeidende Sparebanker currently consists of local roots and cooperation. " notice of termination of the cooperation 15 savings banks located in the eastern and agreement with SpareBank 1, with a view to northern flanks of west Norway. In August A means to an end closer cooperation through renegotiation of 1998 an agreement was entered into between The SpareBank 1 Gruppen AS is an important the agreement. the Norwegian SpareBank 1 banks and tool to help the SpareBank 1 alliance to FöreningsSparbanken AB (publ), Sweden achieve its strategic targets.As well as running Gunn Wærsted was appointed managing concerning the ownership of SpareBank 1 its business profitably, the SpareBank 1 director of SpareBank 1 Gruppen in 2001. Gruppen AS.In 2000 SpareBank 1 Gruppen AS Gruppen AS shall also received the licence needed to acquire VÅR Activities Gruppen ASA. In this connection, the •Provide competitive products and service SpareBank 1 Gruppen AS owns and develops Norwegian Federation of Trade Unions (LO) for distribution through the SpareBank 1 companies which provide financial services also acquired a shareholding in SpareBank 1 banks and products to the SpareBank 1 banks and Gruppen AS. • Manage the SpareBank 1 brand name their customers. Distribution of the products • manage the alliance’s development projects from these companies is mainly through the As at 31 December 2001 the owners of banks which make up the SpareBank 1 alliance. SpareBank 1 Gruppen AS were SpareBank 1 One of the major events of importance for SpareBank 1 Gruppen AS also carries out Nord-Norge, SpareBank 1 Midt-Norge, the SpareBank 1 alliance in 2001 was the esta- banking activities in the central part of eastern SpareBank 1 Vest, SpareBank 1 SR-Bank and blishment of a common technological platform Norway through Bank 1 Oslo AS. Samarbeidende Sparebanker AS with 13% for all the SpareBank 1 banks.A new version of each, while FöreningsSparbanken has 25% and SpareBank 1’s online bank was also introdu- At the end of 2001, SpareBank 1 Gruppen AS, LO 10%. ced. At 31 December 2001 the online bank - the parent bank of the financial services had 250 000 customers, corresponding to a group - owned 100% of SpareBank 1 Following the integration of VÅR Bank og net inflow of more than 1 500 customers Livsforsikring AS, SpareBank 1 Skadeforsikring Forsikring ASA, the SpareBank 1 alliance in each week in 2001. Familiarity with the AS, SpareBank 1 Fondsforsikring AS, Bank 1 Norway has total assets of NOK 225bn and SpareBank 1 brand name in increased greatly Oslo AS, SpareBank 1 Finans AS, SpareBank 1 360 branches, 5 400 employees, 2.1 million in the course of the year,especially in the Oslo Aktiv Forvaltning ASA, Odin Forvaltning AS, retail customers and 60.000 corporate region. IDA AS and Sparebankutvikling AS. SpareBank customers.

66 SPAREBANK 1 VEST ANNUAL REPORT 2001

THE SPAREBANK 1 GROUP - FACTS AND BACKGROUND

Banks At the end of 2001 the SpareBank 1 alliance consisted of the following banks: SpareBank 1 Nord-Norge SpareBank 1 Midt-Norge SpareBank 1 Vest SpareBank 1 SR-Bank

Members of banking cooperation group: Tromsø SpareBank 1 Ringerike SpareBank 1 Kongsberg SpareBank 1 SpareBank 1 Gran Total assets: NOK 225 billion SpareBank 1 Jevnaker Lunner No. of customers: 2 200 000 SpareBank 1 Hallingdal No. of employees (man-labour years): SpareBank 1 Gudbrandsdal 5 400 SpareBank 1 Nordvest No. of branches: 360 GS Banken Halden SpareBank 1 Bank 1 Oslo Lom og Skjåk SpareBank Life insurance Modum Sparebank 1 Non-life insurance Nøtterø Sparebank Odin Forvaltning SpareBank 1 Moss Fondsforsikring Sparebanken Grenland IDA SpareBank 1 Vestfold EnterCard (54%) First Securities (51%) EiendomsMegler 1 Financing companies

Trondheim

FöreningsSparbanken Total assets: SEK 960 billion No. of customers: 6.1 m No. of employees (man-labour years): 16 000 No. of branches: 864 Bergen Oslo Spintab (credit company) Robur (funds) FöreningsSparbanken Finans FöreningsSparbanken Kort Stavanger Swedbank Markets (stockbrokers) Swedbank (Luxembourg) S.A. SparLiv/SparFond FöreningsSparbanken Fastig.b. FSPA - branch, Oslo

In cooperation with: 85 independent savings banks 4 partly owned savings banks 450 local branches Total assets: SEK ?? billion

67 SPAREBANK 1 VEST ANNUAL REPORT 2001

ELECTED OFFICERS (AFTER ELECTIONS SPRING 2001), MANAGEMENT AND REGIONS (FROM 2002)

SUPERVISORY BOARD BOARD OF DIRECTORS REGION BERGEN Members elected by depositors Pål W.Lorentzen (chairman) Office address: Kaigaten 4, N-5016 Bergen Bjørn Kvamme Bjørn Ove Børnes (deputy chairman) Post address: P.O. Box 7999, N-5020 Bergen Ingri Geitrheim Waage Jan O.Yttredal Telephone: +47 815 22 002 - Fax: +47 55 2173 50 Roald Korsøen Anne Gine Hestetun Regional General Manager: Erik M.Throndsen Håkon Østgulen Eli Førde Aarskog Head of Major Accounts: Deputy General Ola T.Sekse Erik Bøckmann Manager Knut N.Wie Margunn Y.Samnøy Elna Lappegård Head of Corporate Market: General Manager Magne Reksnes Terje Kvamme Sigurd Tufte Einar Vatne jr. Anne Sissel R. Engevik Head of Small Companies: Deputy General Jan Tore Eresberg Knut Ravnå Manager Kjell Ivar Bruvik Terje Vidar Vestvik CONTROL COMMITTEE Jostein Valen Market area – Bergen Lillian Torsvik Lillian Torsvik (chairman) Head of Market Area: General Manager Kjell Steinsbø (deputy chairman) Jan-Tore Thunestvedt Members elected by local authorities Nils K. Rødland Branches: Kaigaten, Nedre Korskirkealmennin- Karl G. Mæland (deputy chairman) Anne-Lise Noss gen, Danmarksplass, Minde, Sletten,Tårnplass Erling Mjelde Knut Gramstad Inger Sjong External auditor Market area – Bergen North Bjørg Hoff Geir Inge Lunde, State Authorised Public Head of Market Area: Deputy General Manager Kristian Helland Accountant, PricewaterhouseCoopers DA Magne Lien Geir Lid Branches: Åsane, Indre Arna, Øyjorden Norvall Bolstad MANAGEMENT Margun Ervik Managing Director: Knut Ravnå Market area – Bergen West Bernt J. Flæsland Deputy managing Director:Terje Mjelde Head of Market Area: Deputy General Manager Gerd Kvile Office address: Kaigaten 4, N-5016 Bergen Bjørn T.Johannessen Åshild Bjelland Eriksen Post address: P.O. Box 7999, N-5020 Bergen Branches:Askøy,Vestkanten, Fyllingsdalen, Sigurd Toft Telephone: +47 815 22 002 - Fax: +47 55 2173 50 Laksevåg Internal Audit Department Employees Market area – Bergen South Internal auditor Bernt R. Petersen Stein Tore Davidsen Head of Market Area: Deputy General Manager Kjell Sævdal Controller/Finance Inger Johanne Aam Inger Finne Controller, Director Frode Høyland Branches: Lagunen, Nesttun, Sandsli, Os Oddvar Dahl Accounting, Head of Accounting Kari L. Sandal Mary Hovden Davidsen Finance, General Manager Egil Mokleiv REGION Bente Moore Equity, General Manager Karstein Lien HARDANGER/MIDTHORDLAND Bodil Langeland Grova 14, N-5600 Norheimsund Operations Ingvei Wolfe Telephone: +47 815 22 002 - Fax: +47 56 55 07 01 Erling Vik Director Arne Selle Regional General Manager: Oddvar Ystanes Alvhild Halleraker EDP/Systems, Stig Gunnar Røthe Branches: Norheimsund, Strandebarm, Øystese*, Eva Braut Service Centre,Ass. General Manager Bjørkheim,Tysse*,Vaksdal, Dale, Eikelandsosen, Godskalk Skåtun Rolf Titlestad Fusa, Odda, Røldal Procedures, Deputy General Manager *) Closure due in spring 2002 Members elected by owners of primary Svein T.Havre primary capital certificates Security, Head of Security Steinar Søraas REGION NORDFJORD Kjellaug Kvåle (chairman) Information / PR P. O. B o x 243 Tor Johannessen Director Jørn Lekve N-6771 Nordfjordeid Finn Haugan Information & PR, editor Christine Wigand Telephone: +47 815 22 002 - Fax: +47 57 88 56 01 Johan Fredrik Kroepelien Company Secretary Greta Tepstad Regional General Manager: Solveig Midtbø Erik Sture Larre Branches: Nordfjordeid, Måløy, Selje, Bryggja, Svein Garberg Legal Dept. Davik, Stadlandet Gunnar Dolven Lawyer Pål Pedersen Ada Kjeseth Personnel/Development REGION NORDHORDLAND Jan S. Johannessen Director Rune Bjørhovd P. O. Box 140, N-5903 Isdalstø Einar Nistad Development & Organisation, Telephone: +47 815 22 002 - Fax: +47 56 34 28 41 Arne Buanes Deputy General Manager Torunn Garlid Regional General Manager:Audun Rebnor Karen Blaauw Helle Personnel adm., Deputy General Manager Branches: Knarvik Senter, Frekhaug, Lindås, Annelise Drange Masfjorden, Mastrevik, Radøy, Fedje, Lonevåg, Haus,Valestrandsfossen Customers/Market Director Frank Johannesen REGION SOGN Market, Market Manager Jan Erik Kjerpeseth P. O. B o x 22 Customer Service, Deputy General Manager N-6851 Sogndal Trond Larsen Telephone: +47 815 22 002 - Fax: +47 57 67 67 95 Credit Support, Deputy General Manager Regional General Manager: Frank H. Bjørndal Eyvind Bagge Branches: Sogndal, Førde Insurance, General Manager Arne Bakke

68 REGION SUNNHORDLAND P. O. B o x 404 N-5403 Stord Stadlandlandendet Telephone: +47 815 22 002 - Fax: +47 53 45 68 90 Regional General Manager:Arnt Sortland Selje Branches: Leirvik, Bremnes, Mosterhamn, Region Nordfjorrd Mål y BrygBryggjay gja Sæbøvik, Husnes, Fitjar, Skånevik, Førde*, Sveio, Sagvåg DDavik Nordfjordeidfj d *) Closure due in summer 2002

REGION WEST P. O. Box 152/153 N-5352 Straume Telephone: +47 815 22 002 - Fax: +47 56 32 34 01 Regional General Manager:Trygve Wåge Branches: Straume, Rong, Skogsvåg, Storebø, Bekkjarvik, Ågotnes

EIENDOMSMEGLER 1 VEST AS Førde Head Office: EiendomsMegler 1 Vest AS Nedre Korskirkealmenningen 1 SpareBank 1 Vest P. O. Box 7999 N-5020 Bergen Bergen ReRRegion Sogn Telephone: +47 55 21 77 00 Nedre Korskirkeallmenningenorskirkeallmennskirkeallmenn Sogndal Fax: +47 55 21 77 14 Kaigatenaigatenigaten DanmarksplaDaanmarksplassmarksplas Åsane: MMinde Åsane Senter SSletten N-5116 Ulset Tårnplass Telephone: +47 55 19 74 50 Øyyjorden Fax: +47 55 19 74 51

Fana: MastrevikM reve ikk Masfjordenasfjorden Sandslihaugen 1 Fedjee N-5254 Sandsli LindLi ås Telephone: +47 55 11 47 20 Fax: +47 55 11 47 21 RadRaadøy Dale

Sotra: KnarvikKKnarvivik Loneeevåg Sartor Senter Rong Region Nordhordlandnd N-5353 Straume Valesttrrrandsfodsfossen Å Telephone: +47 56 32 34 80 ø HausHaausuus Vaksdal Fax: +47 56 32 34 81 Ågotness å AArnana Bjørkheim Øystesey Stord: Norheimsund Borggt. 8 Leirvik SandsSandan slsli Laguunennen P. O. B o x 404 åg StrandeStrandebarmnde N-5403 Stord Eikelandsosenandsosedsose Fusausa Telephone: +47 53 45 68 80 Region Veststt OOs Fax: +47 53 45 68 85 Storebø AS FILIALBYGG Odda Nedre Korskirkealmenningen 1 A Bekkjarvikrvik SpareBank 1 Vest danger/Midthorrdland N-5020 Bergen Fitjararr Telephone: +47 55 21 75 11 Fax: +47 55 21 76 80 LeiLeirirvik Husnese Managing Director: Magne Hellevang Røldal Bremnenes SagvSag åg Sæbøvikik Mosterhamnrharham Skånevik

Førdrrde Sveioo Region Sunnhordland

69 Information Secretary Company Secretariat Information/PR st, Files, Equipment Systems IT-Operations Collateral Security Systems Payment User Support Bank systems Po Project Coordination Project Purchases IT Service Centre Procedures Security Buildings Operations Market Customer Service Insurance SupportCredit RM CM Nordhordl. RM CM Sogn SpareBank 1 Alliance 1 SpareBank Deputy Managing Director RM CM Customer/Market Nordfjord RM CM Managing Director Board of Directors Board Sunnhordl. RM CM Midthordl. Hardanger/ Internal Audit RM CM est V Head Cashier Market area Bergen area Market .- Bergen North area Market West - Bergen area Market - Bergen South area Market Small Companies Companies Major Accounts RM CM Investments Overdrafts/Collection RM – Retail Market CM – Corporate Markey Bergen Legal Controller Accounting Finance Equity Controller/Finance ersonnel Development P Administration Reorganisation ersonnel/Development P Organisational structure

70 Harald Ljones, managing director, Ljones Gartneri Jorunn Mo Nilsen, company adviser, SpareBank 1 Vest ‘‘A blossoming relationship’’ – or the story of the bank that prepared the way for one of the largest nurseries in Norway

At Strandebarm, Ljones Nurseri and G3 customers of SpareBank 1 Vest in the really appreciates at a time when many banks Produksjon Tangen have together built up an Hardanger/Midthordland region. It is a large are dismantling their regional activities, says impressive nursery of 20,000 sq.m. But it is not company with extensive imports and customers company adviser Jorunn Mo Nilsen in SpareBank just the size that is impressive. Thanks to long- throughout Norway, so why did it choose a local 1 Vest. term planning and a broad knowledge of the bank? As a bank for the business sector, subject, this family business has built up a nurse- – Above all else it is a matter of closeness and a SpareBank 1 Vest has one special ry that serves as a model of how nursery opera- willingness to help, says Harald Ljones with con- advantage. It is both big and close by at tions should be run. viction, while talking warmly about the bank that the same time. It is a bank with local – It is a growing business, and part of the honour can take decisions quickly and which is located decision-making authority and quick must go to the bank that was willing to take a in the district where the customers are and follow-up. A bank located where the chance on us, says Harald Ljones, managing which understands how things are on a daily customers are – involved in the daily life of director of Ljones Gartneri. Over the years, basis. both retail and corporate customers.That Ljones Gartneri has become one of the largest –This is a vote of confidence which the bank is how strong relationships are created.

71 RETURN ADDRESS: P.O.Box 7999, N-5020 Bergen - Norway Telephone: +47 815 22 002 [email protected] - http://www.spv.no Telex: 42 249 - Swift: SPAVNOBB - F.nr.: 832554332