Annual Report SpareBank 1 Gruppen 2011

92
Annual Report 2011 SpareBank 1 Gruppen

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Transcript of Annual Report SpareBank 1 Gruppen 2011

Page 1: Annual Report SpareBank 1 Gruppen 2011

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Annual Report 2011SpareBank 1 Gruppen

Page 2: Annual Report SpareBank 1 Gruppen 2011

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Board of Directors' Report 3Income statement 18Statement of comprehensive income 18Balance Sheet 19Consolidated statement of cash flow 20Statement of changes in equity 21

Note 1 General information 23Note 2 Accounting policies 23Note 3 Financial risk management 29Note 4 Critical accounting estimates and judgements 35Note 5 Changes in Group structure 37Note 6 Segment information 41Note 7 Net insurance premium income 42Note 8 Net commissions 42Note 9 Gains and losses from financial assets and liabilities 43Note 10 Net income from investment properties 44Note 11 Other operating income 44Note 12 Operating costs 44Note 13 Shareholder structure 45Note 14 Goodwill 45Note 15 Other intangible assets 46Note 16 Investments in subsidiaries 47Note 17 Investments in associates and joint ventures 47Note 18 Property, plant and equipment 48Note 19 Other assets 49Note 20 Classification of financial assets and liabilities 50Note 21 Valuation hierarchy 51Note 22 Securities at fair value 53Note 23 Financial derivatives 54Note 24 Securities available for sale 55Note 25 Bonds at amortised cost 56Note 26 Fair value of securities stated at amortised cost 57Note 27 Investment properties 58

Note 28 Lending to and deposits with customers and financialinstitutions 59

Note 29 Net loan and guarantees loss provisions 61Note 30 Credit risk exposure for each internal risk class 62Note 31 Maximum credit risk exposure, not taking into

account pledged security 63Note 32 Contractual maturity of financial liabilities 63Note 33 Age distribution of overdue, but not impaired loans

and premium revenues 64Note 34 Market risk related to currency risk 65Note 35 Market risk related to interest rate risk 65Note 36 Deposits from and liabilities to customers and

financial institutions 66Note 37 Subordinated loan capital and hybrid tier 1 capital 67Note 38 Securities issued 67Note 39 Capital adequacy 68Note 40 Reinsurance receivables 68Note 41 Insurance receivables from policyholders 69Note 42 Insurance liabilities in life insurance 69Note 43 Insurance provisions in P&C insurance 71Note 44 Liabilities related to reinsurance 73Note 45 Insurance risk in life insurance 73Note 46 Insurance risk in P&C insurance 75Note 47 Salaries and other remuneration of CEO and senior

executives 77Note 48 Pensions 79Note 49 Number of employees and full-time equivalents 82Note 50 Taxes 83Note 51 Other liabilities 84Note 52 Material transactions with related parties 85Note 53 Events after the balance sheet date and legal disputes 88Note 54 Revised balance sheet for SpareBank 1 Gruppen

Group as of 31 December 2010 89Auditor's Report 90

Content

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Board of Directors’ Report for 2011SpareBank 1 Gruppen

OPERATIONS IN 2011

The weak development of the securities markets combined

with natural disasters and large claims resulted in reduced

earnings for SpareBank 1 Gruppen

SpareBank 1 Livsforsikring AS's record result was due in part

to a significantly improved administration result. The company

maintained good buffers throughout the year

A high proportion of large claims, floods and storms resulted

in a negative insurance result in SpareBank 1 Skadeforsikring

Group

The debt collection company Conecto AS merged with Actor

Fordringsforvaltning AS with effect from 1 January 2011

Aggressive focus on national capital markets segment via

SpareBank 1 Markets AS

SpareBank 1 Gruppen decided to establish its own card

company

SpareBank 1 Gruppen AS is a holding company that produces,

provides and distributes products in the fields of life and P&C

insurance, fund management, capital markets, factoring, debt

collection services and long-term monitoring.

SpareBank 1 Gruppen AS is owned by SpareBank 1 Nord-Norge

(19.5%), SpareBank 1 SMN (19.5%), SpareBank 1 SR-Bank

(19.5%), Samarbeidende Sparebanker AS (19.5%), Sparebanken

Hedmark (12%) and the Norwegian Confederation of Trade Unions

and affiliated trade unions (10%). SpareBank 1 Gruppen AS's

office address is in Tromsø, and the Group's primary market is

Norway.

In this Directors' Report, SpareBank 1 Gruppen AS refers to the

holding company and SpareBank 1 Gruppen refers to the Group.

SpareBank 1 Gruppen reported a pre-tax profit of NOK 387.3

million for 2011, compared to NOK 985.1 million in 2010. The net

profit for the period amounted to NOK 525.8 million, compared

to NOK 831.5 million in 2010. The result represents an annualised

return on equity of 11.1%, compared to 18.7% for 2010. 2011 was

a year of weak financial markets and high claims ratios. In

addition to this, some larger items totalling NOK 245 million

were recognised as income in 2010, including negative goodwill

of NOK 117.9 million in connection with the acquisition of

Unison Forsikring AS.

SpareBank 1 Gruppen's total assets amounted to NOK 42.0 billion

as of 31 December 2011. This represents growth of around 3%

since 2010.

SpareBank 1 Gruppen's capital adequacy ratio as of 31 December

2011 was 16.2%, compared to 16.1% at year-end 2010. Its core

capital adequacy ratio at year-end 2011 was 14.6%, compared to

12.5% in 2010. SpareBank 1 Gruppen's capital situation is

considered satisfactory and, in the opinion of the Board, the

Group is well capitalised with regard to meeting the expected

requirements of the Solvency II regulations.

SpareBank 1 Livsforsikring AS achieved its best result ever in 2011

despite falling equity markets. SpareBank 1 Livsforsikring AS

maintained good buffers throughout 2011, which helped ensure

the company was less affected by the market unrest during the

year. The company's financial performance shows a significantly

improved administration result in 2011. The company achieved

an investment result of NOK 368.5 million in 2011, which

represents an increase of NOK 51.2 million from 2010. SpareBank 1

Livsforsikring AS increased provisions for reserves due to longer

life expectancy by NOK 187.3 million. The company saw tax

income of NOK 97.8 million in 2011. This was due to the combined

effect of the tax exemption method and provisions to the securities

adjustment reserve now being subject to the Taxation Act's rule

concerning the right to make deductions for insurance provisions.

The Ministry of Finance has proposed that the tax exemption

method should not apply to equities, etc. included in the group life

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and investment choice portfolio of life insurance companies from

and including 1 January 2012. The expected effect of this is that

the tax cost will approach the general taxation rate of 28%.

SpareBank 1 Skadeforsikring Group experienced strong portfolio

growth in 2011 and strengthened its market shares within land-

based P&C insurance. Measured by premiums written, the growth

amounted to NOK 515 million or 11.0%. A high proportion of

natural disaster claims and a greater number of large claims resulted

in higher compensation costs than in 2010, meaning that the

gross claims ratio in 2011 was 80.9%, an increase of 3.6 percentage

points since 2010.

ODIN Forvaltning Group's total assets under management amounted

to NOK 23.4 billion as of 31 December 2011. This is a reduction

of NOK 8.9 billion, compared to 2010. ODIN Forvaltning Group

redeemed equity funds worth a net NOK 1.9 billion in 2011.

Management fees amounted to NOK 303.5 million in 2011, which

is NOK 14.4 million lower than in 2010.

SpareBank 1 Markets Group experienced a loss of NOK 154.8

million in 2011. It focused on investments during the year with the

aim of putting in place the required framework conditions for a

strong capital markets unit. All the business areas were significantly

strengthened by investments in human capital and infrastructure.

The result for the year was affected by the building up that took

place, while a challenging market situation affected the earnings

potential of all players in the industry.

SpareBank 1 Gruppen Finans Group, which operates in the factoring,

debt collection and long-term monitoring business areas, achieved

a pre-tax profit of NOK 27.9 million in 2011. The factoring business

area, organised in SpareBank 1 Gruppen Finans AS, was the

country's third largest with a market share of 14.1% in 2011,

compared to 11.6% in 2010. The pre-tax profit of the debt

collection business area, organised in Conecto AS, was NOK 24.7

million in 2011, compared to NOK 19.5 million in 2010. Despite

the reduced debt recovery fees and slightly lower number of

referrals, the debt collection business area maintained its turnover

through one-time income, higher recovery rates and a larger

proportion of business referrals. Actor Fordringsforvaltning AS and

Conecto AS were merged into an integrated debt collection

company with effect from 1 January 2011.

SpareBank 1 Gruppen has made strategic investments in important

product areas in recent years via a series of acquisitions and

structural changes, with debt collection, factoring and capital

markets being the most recent examples of these. The goal is

control of the product and value chain for the benefit of both

customers and owners. SpareBank 1 Gruppen also wishes to offer

products and services within the card and payment fields via a

separate company. It therefore decided in 2011 to establish a card

business area.

SPAREBANK 1-ALLIANCE

The SpareBank 1-alliance consists of a total of 15 independent

banks, SpareBank 1 Gruppen AS and its subsidiaries, Bank 1

Oslo Akershus AS and BN Bank ASA. The independent banks in

the alliance are:

Samarbeidende Sparebanker (SamSpar)

Sparebanken Hedmark

SpareBank 1 Nord-Norge

SpareBank 1 SMN

SpareBank 1 SR-Bank

SamSpar is a group of several smaller savings banks. These savings

banks are:

SpareBank 1 Buskerud-Vestfold

SpareBank 1 Gudbrandsdal

SpareBank 1 Hallingdal

SpareBank 1 Lom og Skjåk

SpareBank 1 Modum

SpareBank 1 Nordvest

SpareBank 1 Nøtterøy-Tønsberg

SpareBank 1 Ringerike Hadeland

SpareBank 1 Søre Sunnmøre

SpareBank 1 Telemark

SpareBank 1 Østfold Akershus

The alliance cooperates on banking services and products. As a

whole the alliance is one of the largest providers of financial

products and services in the Norwegian market. The member banks

in the SpareBank 1-alliance distribute the SpareBank 1 Gruppen’s

products and collaborate in key areas such as brands, work processes,

competence building, IT operations, systems development and

purchasing. The alliance has signed strategic cooperation agreements

with the Norwegian Confederation of Trade Unions (LO) and LO's

affiliated unions, and delivers products and services to LO's

members via the LOfavør advantage card scheme.

The SpareBank 1-alliance's main goal is to ensure each bank’s

independence and regional affiliation through strong competitive-

ness, profitability and financial soundness. At the same time, the

SpareBank 1-alliance represents a complete competitive banking

alternative at the national level. To achieve common goals, the

banks in the alliance have established a national marketing profile

and developed a common strategy for brand building and

communication. This strategic marketing platform also forms the

basis for joint development of products and concepts. The marketing

efforts are primarily aimed at the retail market, small and medium-

sized enterprises, and unions affiliated with LO.

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The product companies established under SpareBank 1 Gruppen AS

and the alliance banks have developed a common technology

platform. Sharing lessons learned and expertise within the alliance,

based on best practice, are key elements of the alliance's development.

As part of these efforts, resource centres have been established for

credit management in Stavanger, payments in Trondheim, and

training in Tromsø.

The SpareBank 1-alliance managed assets totalling around NOK 710

billion at year-end 2011, compared to around NOK 665 billion at

year-end 2010.

SpareBank 1 Gruppen's has two main functions in the SpareBank 1-

alliance:

Managing and developing the financial group with respect to

producing and delivering competitive products and services for

distribution via the alliance banks and other banks with a

distribution agreement with companies in SpareBank 1 Gruppen,

and LO. This work is performed by SpareBank 1 Gruppen AS.

Manage and develop the alliance cooperation with respect to

common management, development and execution of activities

that provide economies of scale and competitive advantages.

This work is performed by Alliansesamarbeidet SpareBank 1 DA.

Selskapet Alliansesamarbeidet SpareBank 1 DA represents the

administrative superstructure of the alliance. The company handles

the financing and ownership of applications, concepts, contracts and

brands on behalf of the alliance partners.

Alliansesamarbeidet SpareBank 1 DA is owned by:

SpareBank 1 SR-Bank (17.74%)

SpareBank 1 SMN (17.74%)

SpareBank 1 Nord-Norge (17.74%)

Samarbeidende Sparebanker Utvikling DA (17.74%)

Sparebanken Hedmark (11.3%)

SpareBank 1 Gruppen AS (10.0%)

Bank 1 Oslo Akershus AS (7.74%)

CORPORATE GOVERNANCE

Shares in SpareBank 1 Gruppen AS are not publicly traded, but

as of 31 December 2011 the company did have a bond issue listed

on Oslo ABM. The company has, as shown in the section on

«Operations in 2011», a concentrated shareholder structure. All

shareholders and groupings of shareholders are represented on the

Board, either directly or indirectly. There is continuous, good

contact with all shareholders and groupings of shareholders in the

company. The Board of SpareBank 1 Gruppen AS has discussed

the «Norwegian Code of Practice for Corporate Governance»

and has determined to comply with those sections that are

relevant to a company whose shares are not listed on a stock

exchange.

The Board's overall report on the company's corporate governance

has been incorporated into the Norwegian version of 2011 annual

report.

Executive management teams

SpareBank 1 Gruppen has two executive management teams the

group executive management team and the alliance executive

management team. The group executive management team is

responsible for operating and developing the financial group,

and focuses on the results and operations of the companies in the

Group. The alliance executive management team is responsible for

the operational cooperation between SpareBank 1 Gruppen and the

SpareBank 1-banks. The head of the alliance executive management

team is represented in the group executive management team.

Information about remuneration

Information about the remuneration of the CEO, group executive

management team, Board, Supervisory Board and Control

Committee is provided in the financial statements' note 47, and

information about the auditor's remuneration is described in note 12.

Dividend policy

SpareBank 1 Gruppen AS's long-term goal is to pay out 30–50%

of its profits, at a consolidated level, as a net dividend to its

owners. When fixing the net dividend for SpareBank 1 Gruppen,

the focus is on maintaining satisfactory core and total capital

adequacy in relation to planned growth, as well as maintaining a

satisfactory overall financial position in relation to internal ICAAP

calculations and the Group's liquidity. The target for the core

capital ratio, including hybrid tier 1 capital, is a minimum of

11% and for the total capital adequacy ratio it is a minimum of

13%. SpareBank 1 Gruppen should achieve the capital adequacy

goals established by the Solvency II regulations by a good margin.

SPAREBANK 1 GRUPPEN – RESULTS AND KEY FIGURES

SpareBank 1 Gruppen AS and the Group prepare their financial

statements in accordance with the EU approved International

Financial Reporting Standards (IFRS).

SpareBank 1 Gruppen reported a pre-tax profit of NOK 387.3

million in 2011, compared to NOK 985.1 million in 2010.

Uncertainty and turbulence in the financial markets affected the

development of the financial results, which constitutes a

substantial part of the Group's value creation. Natural disasters and

large claims also affected the result in 2011.

The net profit for the period was NOK 525.8 million, which

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provided a annualised return on equity of 11.1%. The Group

saw tax income of NOK 138.5 million in 2011, compared to a taxes

of NOK 153.6 million in 2010. The high level of tax income was

due in part to the calculated effect of the tax exemption method.

Financial performance:

NOK million 2011 2010

Profit before tax in subsidiaries:SpareBank 1 Livsforsikring AS 414.1 350.4SpareBank 1 Skadeforsikring Group1) 185.3 641.1ODIN Forvaltning AS 21.8 64.6SpareBank 1 Markets Group -154.8 -57.6SpareBank 1 Medlemskort AS 12.1 11.1SpareBank 1 Gruppen Finans Group2) 27.9 8.6Group adjustments 28.7 17.8Total profit before tax in subsidiaries: 535.1 1 036.0

1) Unison Forsikring AS was consolidated into SpareBank 1 Skadeforsikring witheffect from 1 July 2010.

2) Conecto AS became 100% owned by SpareBank 1 Gruppen Finans AS withfinancial effect from 10 September 2010. Profit before this is recognised directlyin equity.

SpareBank 1 Livsforsikring AS

SpareBank 1 Livsforsikring AS's products are primarily distributed

through the banks in the SpareBank 1-alliance and the Norwegian

Confederation of Trade Unions (LO).

Financial performance:

NOK million 2011 2010

Risk result after technical provisions 241.4 325.4Administration result -65.9 -186.9Interest result 368.5 317.3Provisions -187.3 -45.3Remuneration for interest guarantee 22.7 29.9Total result for supplementary provisions 379.4 440.4Allocation to supplementary provisions - -125.3Profit to customers -61.5 -36.3Return on the company's funds 96.2 71.6Profit to customers before tax 414.1 350.4Tax charge 97.8 -60.2Profit to customers after tax 511.9 290.2

SpareBank 1 Livsforsikring AS achieved its best result ever in

2011 despite falling equity markets. This was in part due to the

company having built up and sustained good buffers throughout the

year. The net profit to owner before tax amounted to NOK 414.1

million in 2011, compared to NOK 350.4 million in 2010. The

total net profit for the period amounted to NOK 511.9 million,

which is an improvement of NOK 221.7 million on 2010. The

company saw tax income of NOK 97.8 million in 2011, compared

to taxes of NOK 60.2 million in 2010. Part of the reason for the high

level of tax income was the calculated effect of the tax exemption

method for equity related investments.

Risk result

The net risk result decreased by NOK 84.0 million compared to 2010

and amounted to NOK 241.4 million in 2011. This was primarily

due to a strong increase in provisions for compensation for disability

within individual interest insurance and increased disability

compensation within group life insurance and group pension

insurance. The risk result improved within individual endowment

insurance and individual life insurance.

Administration result

The administration result amounted to a loss of NOK 65.9 million

in 2011, which represents an improvement of NOK 121.0 million,

compared to 2010. The improvement was due in part to the

profitability programme implemented in 2010, which identified

possible cost savings and income increasing measures. Most of

the administration loss in 2011 occurred within the operation of

group pension insurance.

Investment result

NOK 187.3 million of the return profit in 2011 was used to strengthen

the premium reserve due to expected longer life expectancy. The

corresponding provision in 2010 was NOK 45.3 million. The reserves

were built up gradually instead of strengthening supplementary

provisions at year-end. The company had supplementary provisions

of NOK 344.1 million at year-end 2011.

The value-adjusted capital yield in the group portfolio as a whole

was 2.5% in 2011. The booked return on assets was 5.4%. The

corresponding returns in 2010 were 7.1% and 5.2%, respectively.

The capital yield in the company portfolio was 4.3% in 2011,

compared to 4.5% in 2010.

Asset allocation per portfolio as of 31 December 2011:

Group portfolio2011 2010

Shares 13.8 % 14.8 %Other -0.2 % 7.1 %Property 21.0 % 21.5 %Bonds-Amortised costs 28.0 % 21.8 %Bonds-Market value 37.4 % 34.8 %Total value (NOK million) 15 707 16 030

Company portfolio2011 2010

Shares 0.0 % 0.1 %Other -4.5 % 17.0 %Property 18.8 % 21.7 %Bonds-Amortised costs 24.8 % 11.1 %Bonds-Market value 60.9 % 50.1 %Total value (NOK million) 2 862 2 844

Investment choice portfolio2011 2010

Shares 54.2 % 61.0 %Other -0.1 % 0.0 %Bonds 45.9 % 39.0 %Total value (NOK million) 6 896 6 701

Solvency and capital situation

The company's total assets amounted to NOK 26.6 billion as of 31

December 2011. This represents an increase of 0.5% since 2010.

Page 7: Annual Report SpareBank 1 Gruppen 2011

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The buffer capital, after the proposed application of the year's profit,

amounted to NOK 1.7 billion, equivalent to 11.0% of insurance

provisions. By way of comparison, the buffer capital at year-end

2010 amounted to NOK 2.3 billion, equivalent to 14.6% of

insurance provisions. The main reason for the change was a fall

in the securities adjustment reserve from NOK 616.9 million in

2010 to NOK 184.9 million in 2011.

The company's capital adequacy was 18.5% at year-end 2011,

compared to 19.3% at year-end 2010. The entire subordinated loan

comprises core capital. A time limited subordinated loan amounting

to NOK 200 million with a due date of 15 June 2016 was, with the

Norwegian Financial Supervisory Authority's approval, redeemed

(call option) on 15 June 2011. In 2011, the company received

NOK 223.0 million in equity through group contributions.

The company’s solvency margin capital ratio was 303.5% as of 31

December 2011, compared to 290.1% for 2010. The minimum

requirement for the solvency margin capital is 100%. At year-end

2011, the solvency margin requirement was NOK 794.6 million,

compared to NOK 859.0 million in 2010.

The company is continuously assessing the consequences of, and

adapting to, the coming Solvency II regulations.

SpareBank 1 Skadeforsikring Group

SpareBank 1 Skadeforsikring Group is the leading Norwegian seller

of insurance via banks, but also sells directly to retail customers

and via broker channels to corporate market customers.

Financial performance:

NOK million 2011 2010

Gross overdue premiums 5 358.2 4 731.8Accrued premiums for own account 4 695.9 4 184.4Accrued compensation for own account -3 784.0 -3 208.5Insurance-related operating costs for own account -1 074.2 -880.6Other insurance-related income/costs 31.8 132.0Other technical provisions 93.2 39.6Insurance result: -37.3 266.9Net financial income 260.3 432.7Other costs - -2.7Operating result 223.0 696.9Change in security provisions -37.7 -55.8Pre-tax profit 185.3 641.1Tax charge -94.6 -60.1Net profit for the period 90.7 581.1

SpareBank 1 Skadeforsikring Group achieved a pre-tax profit of

NOK 185.3 million for 2011, compared to NOK 614.1 million for

2010. The portfolio grew strongly and, measured by premiums

written, the growth amounted to NOK 515 million, equivalent to

11.0%. The growth via bank distribution, the Norwegian

Confederation of Trade Unions (LO) and the subsidiary Unison

Forsikring AS was solid. The Group strengthened its market

shares within land-based P&C insurance in 2011.

Compensation costs

The result for 2011 was strongly affected by natural disasters

caused by extreme weather in the fourth quarter and floods

earlier in the year. Total gross compensation for natural disasters

amounted to NOK 184.3 million in 2011. This is a significant

increase on previous years, and NOK 155.6 million higher than in

2010. Compensation linked to natural disasters accounted for 3.6

percentage points of the Group's gross claims ratio in 2011.

Gross compensation, natural disasters (NOK million):

SpareBank 1 Skadeforsikring Group was also affected by an

unusually high proportion of large claims in 2011. There were 6

large claims involving total compensation of more than NOK 10

million within the fire combined corporate market. Total

compensation for larger claims amounted to NOK 144 million and

accounted for 2.8 percentage points of the Group's gross claims

ratio in 2011. Claims submitted in connection with the 22 July

terrorist attack amounted to NOK 63.4 million.

Investment choice portfolioTotal value: NOK 6.9 billionTotal value: NOK 15.7 billion Total value: NOK 2.9 billion

Group portfolio

Bonds - Market value

Bonds - Amortised costs

Real estate

Shares

Bonds - Market value

Bonds - Amortised costs

Real estate

Bonds

Shares

Company portfolio

37.4%

28.0%

21.0%

13.8%

60.9%

24.8%

45.9%

54.2%

18.8%

0

50

100

150

200

20112010200920082007

32.5

59.743.1

28.7

184.3

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8 SpareBank 1 Gruppen

The Group's gross claims ratio was 80.9% in 2011, representing

an increase of 3.6 percentage points from 2010.

Operating costs

The gross cost ratio was 22.5% in 2011, representing an increase

of 1.7 percentage points since 2010. Last year's cost ratio was

affected by a positive one-time effect on pensions of NOK 42.5 million,

as well as the absence of profit commissions to distributors.

Development of combined ratio for own account (%):

The combined ratio for own account, including natural disasters,

was 103.4% in 2011, which was 5.7 percentage points higher

than in 2010.

Financial result

2011 was affected by turbulent financial markets, which is reflected

in the lower financial income compared to 2010. SpareBank 1

Skadeforsikring Group's financial income totalled NOK 260.3

million in 2011, compared to NOK 432.7 million in 2010. The

financial return on the Group's portfolio was 2.8%. The Group

achieved a positive return of 3.7% in the fixed income portfolio,

but a negative return of minus 7.8% on the equity portfolio.

Capital situation

At year-end 2011, SpareBank 1 Skadeforsikring Group's total

assets amounted to NOK 13.3 billion. This represents growth of

9.5% since 2010. The capital adequacy ratio was 32.8% at year-

end 2011, which corresponds to excess coverage of NOK 1,397

million in relation to the authorities' minimum requirements.

The capital adequacy ratio was 0.3 percentage points stronger

compared to year-end 2010.

Unison Forsikring AS

Unison Forsikring AS is a wholly owned subsidiary of SpareBank

1 Skadeforsikring AS. The company is a specialised partner for

organisations and their members, and offers a broad spectrum of

P&C insurance. Unison Forsikring AS saw a pre-tax loss of NOK

197.2 million in 2011, and a net loss for the period of NOK 158.0

million in 2011. The result both before and after tax was a loss of

NOK 49.9 million in 2010. During 2011, Unison Forsikring AS

achieved strong growth in premium volumes and helped

SpareBank 1 Skadeforsikring Group achieve a higher market share

for land-based P&C insurance.

ODIN Forvaltning Group

ODIN Forvaltning Group is one of Norway's largest managers of

equity funds. ODIN Forvaltning Group is a value-oriented equity

fund manager, which on behalf of its unit holders invests in

undervalued companies with good products, a strong cash flow,

solid balances and a high dividend capacity.

Financial performance:

NOK million 2011 2010

Management fees 303.5 317.9Total operating income 303.5 317.9Payroll costs -108.5 -104.2Amortisation -23.5 -14.8Other operating expenses -151.2 -137.8Total operating costs -283.2 -256.8Operating result 20.3 61.1Net financial income 1.5 3.5Pre-tax profit 21.8 64.6Tax charge -7.0 -19.3Net profit for the period 14.8 45.3

ODIN Forvaltning Group achieved a pre-tax profit of NOK 21.8

million in 2011, compared to NOK 64.6 million in 2010. 2011 was

a year characterised by a great deal of uncertainty and

turbulence in the financial markets. This led to a decrease in total

assets throughout the year and a fall in management fees. One-time

costs were also incurred from investments aimed at better equipping

ODIN Forvaltning Group to deliver high quality services. During

2011, the Group took important steps to strength the management

team, expand the fund portfolio to include one bond fund and

three attractive combination funds, and further develop its invest-

ment processes.

All self-managed equity funds produced weaker returns than their

respective benchmarks in 2011. This was largely due to «value

companies» developing more weakly than «growth companies» in

2011 as well.

Total assets

At year-end 2011, ODIN Forvaltning Group was managing a total of

NOK 23.4 billion, NOK 22 billion of which was in equity funds.

ODIN Forvaltning Group redeemed equity funds worth a net NOK

1.9 billion in 2011.

The SpareBank 1-banks' broad distribution network, distribution

through other banks and distributors in Norway, Sweden and

0

20

40

60

80

100

120

Cost ratio Claims ratio

201120102009200820072006

20.6

69.3

89.994.6 94.0 96.2 97.7

103.4

20.7

73.9

21.9

72.1

22.5

73.7

21.0

76.7

22.9

80.5

Page 9: Annual Report SpareBank 1 Gruppen 2011

9

Finland, together with the measures implemented in 2011, provide

a good starting point for 2012.

SpareBank 1 Markets Group

SpareBank 1 Markets Group is an analysis based capital markets

unit that is active within corporate finance, foreign capital and

stockbroking. SpareBank 1 Gruppen AS owned 97.2% of the

shares in SpareBank 1 Markets AS at year-end 2011. The remainder

of the shares were owned by employees.

Financial performance:

NOK million 2011 2010

Total operating income 77.6 77.9Other income 8.6 5.3Payroll, bonus and other staff costs -159.6 -89.7Amortisation -8.0 -6.9Other operating expenses -71.2 -43.2Operating result -152.6 -56.6Net financial income -2.2 -1.0Pre-tax profit -154.8 -57.6Tax charge 41.7 16.8Net profit for the period -113.1 -40.8

The result for 2011 was a loss of NOK 154.8 million. Total turnover

in 2011 amounted to NOK 86.2 million, compared to NOK 83.2

million in 2010. NOK 35.9 million of the turnover in 2011 came from

brokerage from equity and derivatives trading, NOK 29.6 million

from corporate finance fees, NOK 15.1 million from foreign capital,

and NOK 5.6 million from other operating income.

SpareBank 1 Markets Group carried out restructuring approved by

the company's board and SpareBank 1 Gruppen AS in 2011. 2011

was primarily spent putting in place the necessary framework for a

strong capital markets unit. All the business areas were significantly

strengthened by investments in human capital and infrastructure.

The result for the year was affected by this, as well as a challenging

market situation that affected the earnings potential of all players in

the industry.

Its competitiveness after the phasing in of new resources indicates

that the company will start 2012 at full market power.

SpareBank 1 Gruppen Finans Group

SpareBank 1 Gruppen Finans AS produces, delivers and distributes

services within factoring, portfolio acquisition and portfolio

management. The company's registered address is in Oslo and it runs

its factoring operations in Ålesund and Tromsø. SpareBank 1 Gruppen

Finans AS owns 100% of the shares in Conecto AS, which works

within out of court and judicial debt collection. Both companies are

organised in a sub-group of SpareBank 1 Gruppen AS in which the

ownership and management lies in SpareBank 1 Gruppen Finans AS.

Financial performance:

NOK million 2011 2010

SpareBank 1 Gruppen Finans AS 12.2 -5.6Management -5.9 -9.3Factoring 14.6 2.0Portfolio 3.5 1.7

Conecto AS1) 24.7 19.5Total profit before tax in subsidiaries 36.9 13.9Excess value amortisation -9.0 -5.3Pre-tax profit 27.9 8.6Tax charge -8.8 -4.3Net profit for the period 19.1 4.3

1) Conecto and Actor Fordringsforvaltning were merged with effect from 1 January2011. Conecto was purchased with financial effect from 10 September 2010.

SpareBank 1 Gruppen Finans Group achieved a pre-tax profit of

NOK 27.9 million, which is NOK 19.3 million better than in

2010.

SpareBank 1 Gruppen Finans AS

SpareBank 1 Gruppen Finans AS's operations in 2011 were

characterised by consolidation and a focus on growth in order to

strengthen the company's market position. The company's total

income in 2011 amounted to NOK 74.5 million, compared to

NOK 94.4 million in 2010. The 2010 income includes a group

contribution of NOK 26.0 million in 2010. The pre-tax profit

amounted to NOK 12.2 million, compared to a loss of NOK 5.7

million in 2010.

Factoring

The factoring business area is involved in funding within the

areas of factoring and guarantees. Its pre-tax profit amounted to

NOK 14.6 million in 2011, compared to NOK 2.0 million in 2010.

The improvement in the result was due in part to lower lending

losses. Losses on lending amounted to NOK 0.4 million in 2011,

compared to NOK 10.4 million in 2010.

Factoring achieved net operating income of NOK 58.1 million in

2011, which represents an increase of NOK 5.7 million since

2010. The business area is noticing pressure on margins both in

its lending and factoring operations. Client turnover experienced

a good increase of 29.9%.

Portfolio

The portfolio business area is involved in the acquisition of

portfolios of monetary claims that are then recovered by the

Group's debt collection company. The pre-tax profit for 2011 was

NOK 3.5 million, compared to NOK 1.7 million in 2010, representing

an improvement of NOK 1.9 million. The turnover in 2011 increased

by NOK 4.3 million in relation to 2010. The portfolio volume

increased by 86% and was NOK 1,152 million as of 31 December

2011. The book value at year-end 2011 was NOK 78.3 million,

which is an increase of NOK 43.8 million from 2010.

Page 10: Annual Report SpareBank 1 Gruppen 2011

10 SpareBank 1 Gruppen

Conecto AS

Conecto AS is primarily involved in the collection of invoiced

claims. The company also provides fund management, legal debt

collection services and legal advice.

Its pre-tax profit amounted to NOK 24.7 million in 2011, compared

to NOK 19.5 million in 2010. Despite the reduced debt collection

fees and slightly lower number of referrals, the company maintained

its turnover through one-time income, higher recovery rates and

a larger proportion of business referrals.

SpareBank 1 Medlemskort AS

SpareBank 1 Medlemskort AS is tasked with operating the joint

membership database of the unions affiliated to the Norwegian

Confederation of Trade Unions (LO) that is used to administer

membership card deliveries, collect premiums for group insurance,

and run and administer the LOfavør advantage card scheme for

around 877,000 members. The company works closely with LO

and the unions, and delivers the advantage card concept, LOfavør,

to members on behalf of the unions and LO. The company has

three business areas: membership card administration, the

LOfavør advantage card scheme, and systems and subsidiary

ledger operations.

Financial performance:

NOK million 2011 2010

Operating income 58.5 62.2Payroll costs -6.6 -6.1Operating costs Medlemskort -2.0 -2.8Operating costs LOfavør -32.6 -36.4Operating costs Reskontro -6.1 -6.5Total operating costs -47.3 -51.8Operating result 11.2 10.4Net financial income 0.9 0.7Pre-tax profit 12.1 11.1Tax charge -3.6 -3.1Net profit for the period 8.5 8.0

The pre-tax profit for the year amounted to NOK 12.1 million,

compared to NOK 11.1 million for 2010. The net profit for the

period was NOK 8.5 million, which is NOK 0.5 million better than

in 2010.

SpareBank 1 Gruppen AS

In addition to shares in subsidiaries, SpareBank 1 Gruppen AS's

assets consist of bank deposits and minor assets. The company had

liquidity reserves of NOK 414 million as of 31 December 2011.

Unused credit facilities accounted for NOK 200 million of this

amount. The liquidity reserves increased by around NOK 120

million, compared with 2010.

The equity consists of share capital, a share premium reserve

and retained earnings. The share capital in SpareBank 1 Gruppen

AS amounted to NOK 1,870 million as of 31 December 2011,

while the total equity amounted to NOK 3,172 million. The

company had distributable equity amounting to NOK 1,202

million at year-end 2011.

Capital adequacy in 2011 was 40.0%, compared to 53.7% in

2010. The company's core capital adequacy ratio was 35.4% in

2011 and 44.9% in 2010.

SpareBank 1 Gruppen

The Group's cash and cash equivalents increased by NOK 185.0

million in 2011 to NOK 1,276 million. The increase was due to net

cash flows from operating activities and financing activities of

NOK 1,048 million and NOK 162,8 million, respectively, exceeding

the cash flow of NOK 1,025 million from investing activities.

Investing activities in 2011 were mainly financed by operating

activities.

The largest changes between the operating result and cash flow

from operating activities in 2011 were due to an increase in

technical insurance provisions of NOK 677.2 million. Security

holdings were reduced by a net NOK 1,006 million to NOK 30,077

million as of 31 December 2011. The portfolio of investment

properties reduced by a net NOK 36.2 million to NOK 4,154

million. Liabilities arising from the issuance of securities increased

by a net NOK 528.1 million to NOK 1,905 million. The dividend

paid to owners amounted to NOK 440 million in 2011.

SpareBank 1 Gruppen's total equity at year-end 2011 amounted to

NOK 4,942 million, compared to NOK 4,628 million at year-end

2010. Recognised goodwill in the Group totalled NOK 861.1

million as of 31 December 2011, compared to NOK 850.8 million

at year-end 2010.

The Group's capital adequacy ratio was 16.2% as of 31 December

2011, compared to 16.1% in 2010. The Group's core capital

adequacy ratio was 14.6% as of 31 December 2011, compared to

12.5% as of year-end 2010.

The annual accounts have been presented on the assumption

that the company will continue as a going concern. The Board

finds that the prerequisites for such a going concern assumption

are met by the financial statements for 2011 and the earnings

forecast for 2012. Beyond matters mentioned in this report, no

circumstances have arisen after the end of the accounting year that

would be of material significance to the company's position and

results.

DIVIDENDS

The Board proposes that SpareBank 1 Gruppen AS distribute a

dividend of NOK 433.9 million for 2011. At the same time, a

Page 11: Annual Report SpareBank 1 Gruppen 2011

11

NOK 430.0 million share issue will be carried out aimed at share-

holders in order to maintain the company's solvency.

RISK FACTORS

The operations of SpareBank 1 Gruppen are organised into different

business areas through subsidiaries. There are major differences

in the risk structure of the individual subsidiaries. The most

important risk categories to which the Group is exposed are market

risk, insurance risk, ownership risk, operational risk, credit risk,

liquidity risk, concentration risk, and strategic and commercial risk.

2011 presented challenges in a number of areas for SpareBank 1

Gruppen. Given its substantial investment portfolio, the results

were negatively affected by weak equity markets and a challenging

interest rate market with widening credit spreads. The financial

result for 2011 was therefore far lower than the financial result for

2010. The results were also affected by SpareBank 1 Markets AS

undergoing a substantial strengthening process aimed at securing

a position as a leading capital markets unit. The company is now

considered well equipped to establish itself as a strong player within

the capital markets segment. 2011 was characterised by high claim

ratios for SpareBank 1 Skadeforsikring AS, both due to a large

number of large claims in the corporate segment and extra costs

due to the development of the subsidiary Unison Forsikring AS.

Responsibility for risk management, compliance and control

The Group's Board is responsible for risk management and

compliance in the Group. The company boards are responsible for

their own company's risk management and compliance.

Responsibility for the overall risk management within the

organisation lies with the Director responsible for strategy, risk

management and analysis in the parent company. This position

reports directly to the CEO of SpareBank 1 Gruppen AS.

Risk management in SpareBank 1 Gruppen should support the

Group's strategic development and achievement of its objectives,

and ensure the fulfilment of statutory capital requirements. Risk

management should ensure financial stability and sound asset

management. This is to be achieved by:

A moderate risk profile

A strong risk culture characterised by a high level of risk

management awareness

Striving for an optimum application of capital within the

adopted business strategy

Exploiting synergy and diversification effects

Adequate core capital in accordance with the chosen risk

profile

Ensuring compliance with all regulatory capital and solvency

margin requirements

Internal control in the Group is regulated by key mandatory guide-

lines, but are primarily defined as a line management responsibility.

In accordance with the «Regulations on Risk Management and

Internal Control» and the Group's own guidelines, risk factors in

the operations are reviewed annually and action plans are prepared

in all units, which are reported to the respective company boards.

In addition, the Group also conducts surveys across the group with

regard to internal control, Personal Data Act, and security matters.

SpareBank 1 Gruppen has outsourced internal auditing to Ernst &

Young AS. This has supplied added expertise to the Group. The

internal auditing operations also encompass the subsidiaries.

Performance of risk management in 2011

As a financial group, SpareBank 1 Gruppen is subject to extensive

regulations which are under continuous development. New

regulations for calculating capital requirements, Solvency II, are

being developed.

Even though Solvency II is first expected to come into effect on 1

January 2014, SpareBank 1 Gruppen's goal is to meet all off

Solvency II's requirements from 2013 onwards. In the same way

as the Basel II regulations have been of major importance for the

development of banks' risk management, Solvency II will have as

least as large an effect on the calculation of capital requirements,

as well as the need to develop new models for managing risk in

insurance companies. Substantial work is being done on developing

insurance companies in order to improve on new regulations,

including participation in regulatory trial projects.

The parent company will also be covered by the coming regulations.

This has resulted in a need to establish far stronger interaction

between the risk environments in the companies. This is necessary

to ensure more consistent and uniform risk management. It is also

a means of trying to ensure there is better expertise throughout the

Group.

Risk categories

The Group's risk exposure is primarily related to market risk,

insurance risk, ownership risk, credit risk and concentration risk,

as well as operation risk (including compliance risk), liquidity risk

and strategic and commercial risk. Please refer to the financial

statements' note 3, financial risk management, for an explanation

of the individual risk categories.

Market risk

The Group’s consolidated market risk is measured and reported

quarterly to the Board of SpareBank 1 Gruppen AS. The calculations

are based on a VaR model. A corresponding model is used for the

follow-up of each individual company. The subsidiaries in the

Group manage and also monitor their own risk exposure in

accordance with their own models and routines.

Page 12: Annual Report SpareBank 1 Gruppen 2011

12 SpareBank 1 Gruppen

The value-adjusted return in SpareBank 1 Livsforsikring AS's

customer portfolios was 2.5%, while the booked return in the

customer portfolios was 5.4%. SpareBank 1 Livsforsikring AS's

securities adjustment reserve was reduced from NOK 616.9

million to NOK 184.9 million during 2011. The supplementary

provisions as of 31 December 2011 amounted to NOK 344.1

million, compared to NOK 379.3 million at year-end 2010. The

company made no significant changes to the equity portfolio,

but the proportion of equity investments decreased due to a fall

in value over the year. The buffer capital in the life insurance

company as of 31 December 2011 amounted to 11.0% of the

insurance provisions, compared to 14.6% as of 31 December

2010. The buffer capital was primarily reduced due to a reduction

in the securities adjustment reserve. Despite this, the life insurance

company's buffer capital situation is considered satisfactory.

SpareBank 1 Skadeforsikring AS's investment portfolio has a

conservative investment profile and achieved a financial return of

2.8% in 2011, compared to 5.0% in 2010. At year-end 2011, the

company had an equity portfolio of 7.9%. The equity portfolio was

9.4% in 2010. The company's fixed income investments have a

very short maturity. 12.7% of the company's investment portfolio

was placed in property, compared to 13.6% in 2010. The market

risk in the P&C insurance company is considered medium high.

Ownership risk

SpareBank 1 Gruppen AS's financial position is regarded as

satisfactory overall, given the current risk exposure. Financially,

the parent company is deemed to have sufficient financial

capacity to support the subsidiaries' adopted strategies.

Credit risk

The credit risk in SpareBank 1 Livsforsikring AS and SpareBank

1 Skadeforsikring AS is related to investments in money market

instruments and bonds. Investments in this area are generally

made in high rated papers. The exposure to the so-called PIGS

countries is very limited. As of 31 December 2011, the life

insurance company's exposure to Spain amounted to 1.2% of

the total financial assets in the company and group life portfolios.

The exposure is to the Spanish state and Spanish covered bonds.

Despite the very turbulent credit markets, SpareBank 1 Gruppen

achieved a satisfactory return on its fixed income portfolio and has

not experienced credit losses associated with the money market

instruments and bonds.

The risk related to the other fixed income investments is limited

to companies that have a high credit rating. The credit risk in this

portion of the portfolio is considered to be low to moderate. The

insurance companies are also exposed to a credit risk associated

with various reinsurers. Their rating is monitored closely and

the risk is considered to be low. In the real estate portfolio there

is risk associated with the servicing of rental agreements. The risk

in this category is also considered to be limited.

The credit risk in SpareBank 1 Gruppen Finans AS is related to the

factoring activities. Overall the credit risk in this portfolio is

considered limited.

Concentration risk

Both SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring

AS are assumed to have some exposure to concentration risk on

the investment side, particularly related to investments in bonds

issued by financial institutions. SpareBank 1 Skadeforsikring AS

is exposed to a certain level of concentration risk associated with

reinsurers. The capital needs for this risk have not been calculated

as of 31 December 2011.

Insurance risk

Insurance risk is an inherent part of the business of both SpareBank

1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS. Losses

in SpareBank 1 Skadeforsikring AS can arise as a result of

fluctuations in the year's claims ratio and prior-year losses.

SpareBank 1 Livsforsikring AS's insurance risk is mainly associated

with risk products without profit sharing.

Both SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring

AS reduce risk through reinsurance, partly by the reinsurers

assuming portions of the risk within individual business

segments and partly by limiting the own account share for

individual claims through reinsurance. The reinsurance also

covers cumulative claims and disasters. The risk associated with

the reinsurers’ creditworthiness is placed under credit risk.

Insurance risk is deemed to be subject to satisfactory control

in both SpareBank 1 Skadeforsikring AS and SpareBank 1

Livsforsikring AS.

Operational risk

Operational risk in the subsidiaries is documented in connection

with work relating to compliance with the «Regulations on Risk

Management and Internal Control». This work normally requires

the management group of a particular subsidiary and staff area in

the holding company to identify operational risk both before and

after the implementation of measures. This work did not identify

any serious risk factors in the Group in 2011.

In connection with the implementation of the Group's ICAAP

calculations, models were put in place for calculating necessary

capital needs for operational risk. Reference is made to the Pillar

3 report for a more detailed description of these calculations.

All mandatory guidelines in the Group were updated in 2011.

Page 13: Annual Report SpareBank 1 Gruppen 2011

13

There is a dedicated compliance function in the Group, which

continuously works to ensure compliance with the law, regulations,

industry standards and so on, including through following up

internal guidelines. Compliance with statutory risk processes

and an efficient implementation of these are ensured through

this work. At a group level, compliance risk is primarily followed up

in the form of regular qualitative analyses, as well as continuously

in day-to-day operations. At a company level, compliance reports

are also produced in connection with the management of the

investment portfolios. Compliance reports are submitted to the

Audit Committee, the board of the parent company, and the

various subsidiaries on a quarterly basis.

Liquidity risk

Management of the Group's financial structure is based on an

overall liquidity strategy that is assessed and approved by the

Board at least annually. The liquidity risk is reduced by the

diversification of loans in different markets, funding sources,

instruments and maturity periods. The liquidity risk in SpareBank

1 Gruppen in 2011 was primarily linked to the parent company

and is judged to be low. A group account scheme was established

in 2011, which overall reduces liquidity risk. The larger SpareBank

1-banks work together closely in the area of funding.

Strategic and commercial risk

SpareBank 1 Gruppen has established a contingency plan for

handling sensitive public relations issues. Part of this is a list of

relevant issues, which is reviewed and updated every quarter.

Work on a concrete issue is initiated and led by the Director for

communication.

Together with the alliance's risk management forum, the Group

will continue to focus on the establishment of quantitative models

with a view to estimating the capital needs for the strategic and

commercial risk in the Group.

Changes in the regulations

Following the spin-off of Bank 1 Oslo Akershus AS, SpareBank 1

Gruppen AS is not duty bound to prepare ICAAP documentation

pursuant to the Basel II regulations. Nonetheless, some of

SpareBank 1 Gruppen's subsidiaries are duty bound to prepare

ICAAP documentation. SpareBank 1 Gruppen prepared ICAAP

documentation pursuant to the applicable Basel II regulations

in both 2011 and 2010. The consequence of this is that the

requirements for equivalent reporting in relevant subsidiaries

lapses, and that ICAAP documentation is only reported to

Finanstilsynet at a Group level.

SpareBank 1 Gruppen is regarded as an insurance dominated

mixed financial group. The Group will thus, as mentioned, be

covered by the future Solvency II regulations.

Third Pillar

Please refer to the separate Pillar 3 report for a more detailed

review of the Group's capital and risk situation. The report is

produced in accordance with the requirements stipulated in part

IX, chapters 45 and 46, of the Capital Requirements Regulations,

as well as to satisfy the market's stricter requirements concerning

transparency and openness concerning risk issues in generally. The

Pillar 3 report is published on: http://investor.sparebank1.no.

ORGANISATION AND WORKING ENVIRONMENT

Organisation

SpareBank 1 Gruppen had a total of 1,272 employees and 1,237

full-time equivalents at year-end 2011. The corresponding figures

for 2010 were 1,195 and 1,162 respectively. SpareBank 1 Gruppen

AS had 234 employees and 229 full-time equivalents as of 31

December 2011. The number of full-time equivalents in SpareBank 1

Skadeforsikring Group increased by 34, largely due to the claims

settlement unit. SpareBank 1 Markets Group increased its full-time

equivalents by 22 during 2011.

Total turnover for the Group was 6.4% in 2011. The equivalent

figure for 2010 was 9.9%,and was influenced by a major

profitability programme. Corrected for statutory early retirement

pensions, retirement pensions and disability pensions the Group's

turnover for 2011 was 4.9%, compared to 7.6% in 2010.

HR strategy

SpareBank 1 Gruppen's HR strategy is based on the Group's

vision and values. The main goal is to ensure that SpareBank 1

Gruppen:

Attracts the right employees by focusing on the values «experts

and close to you»

Retains the best employees by giving them responsibilities,

communicating with them and rewarding them for good

performance

Develops employees by involving them, giving them clear

objectives and following them up

The HR strategy follows the employment cycle of an employee and

contains frameworks and guidelines for how SpareBank 1 Gruppen

as an employer should administer and develop its most important

resources, its employees.

The HR strategy contains guidelines intended to help SpareBank

1 Gruppen remain an attractive and inclusive workplace without

any form of discrimination.

Key elements of SpareBank 1 Gruppen's HR strategy are: the

Page 14: Annual Report SpareBank 1 Gruppen 2011

14 SpareBank 1 Gruppen

trainee scheme, pay and remuneration, HSE, skills development,

career opportunities, life phase policy and equality.

Trainee scheme

The trainee scheme was introduced in 2006 and has been active

ever since. A total of 20 trainees have concluded their trainee

period since the start of the scheme. Several of these now work in key

positions in the Group. SpareBank 1 Gruppen had eight trainees

in 2011 and will recruit a new group of trainees in 2012. The

purpose of the trainee programme is to recruit future managers and

technical specialists who, during a two year trainee period, will

acquire wide-ranging expertise in the Group's various business

areas.

Pay and remuneration

Regular analyses are conducted to ensure that the Group offers

competitive terms without being a leader. The incentive scheme

and profit sharing at the group level and bonus scheme at the

company level was continued in 2011.

SpareBank 1 Gruppen has implemented changes in the Group's

remuneration scheme pursuant to the Ministry of Finance's

regulations relating to remuneration schemes in financial

institutions, which came into force on 1 January 2011. The

remuneration policy in SpareBank 1 Gruppen was adopted by the

Board. The most important changes in relation to previous

remuneration practices are:

The measurement period/earnings period for financial bonus

criteria has been changed from one year to two years for managers

A model for deferred payment has been introduced in which

half earned bonuses are given in the form of synthetic equity

certificates (a curve of equity certificates)

A written report will be prepared each year on how the remuneration

scheme in SpareBank 1 Gruppen AS is practised. The report is

presented to the Compensation Committee and the company's

Board.

Working environment and sickness absence

The Group’s working environment is generally considered to be

very good. Annual work organisation surveys are conducted in the

Group, with further follow-up through systematic activities in the

organisation to remedy any weaknesses identified in the

surveys. The organisation survey is meant to provide a measure

of the performance culture in order to support the culture the

Group wants to cultivate.

SpareBank 1 Gruppen has separate working environment

committees in each company. The safety service in the companies

works actively, and a Workplace Anti-Alcoholism and Drug

Addiction Dependency Committee has also been appointed.

SpareBank 1 Gruppen continued its 'Inclusive Workplace'

agreements for the companies in the Group in 2011. The sick

leave rate in 2011 was 3.8%, which is low compared to the rest of

the industry. Training in various HSE disciplines was provided for

managers and safety coordinators, respectively, in 2011. This was

carried out in consultation with the individual working environment

committees.

One occupational accident and injury was recorded in 2011.

Damage to buildings was reported in connection with the terrorist

attack in Oslo on 22 July 2011. The damage largely involved

damaged glass in facades. Apart from this, no further damage to

the company's buildings was reported in 2011.

The SpareBank 1 Gruppen ethical guidelines specify rules for how

the employees and representatives shall give notice if they

become aware of matters that are in violation of laws, regulations

or the Group's internal rules. A separate notification routine has

also been established.

Skills development

Joint HR and skills work in the alliance is organised via an HR

Committee. The mandate of the HR Committee is to develop a

shared general HR strategy that includes attracting the right

employees and developing employees.

SpareBank 1 Gruppen has its own overarching skills strategy.

Technical and professional training and other skills-enhancement

measures are initiated and run primarily in the individual

subsidiary as needed. Management development programmes

have also been established at different levels, and these are

managed jointly by SpareBank 1 Gruppen AS on behalf of the

companies. Similarly, SpareBank 1 Gruppen has a programme for

key resources. SpareBank 1 Gruppen also has a mentor programme

in which key managers act as mentors for talented employees.

Life phase and equality

The Group has a life phase committee that, among other things,

ensures compliance with the Gender Equality Act in the

organisation. The committee also focuses on how SpareBank 1

Gruppen can be an attractive employer for employees in various

life phases.

A life phase policy has been adopted for the Group in which one

of the goals is to increase the actual retirement age in the Group.

The aim is to reduce the need for recruitment and at the same time

take advantage of valuable expertise.

Of the Group's employees, 46% were women and 54% were

men as of 31 December 2011. 6.2% of female and 1.4% of male

employees work part-time. Two of the nine members of the group

Page 15: Annual Report SpareBank 1 Gruppen 2011

15

executive management team are women and three of the nine

members of the alliance executive management team are women.

The key management groups in the holding company and

subsidiaries have 23% female representation. The Group wants to

increase the proportion of women in senior positions and has

initiated measures to achieve this. There was one woman among

the eight members of the Group's Board at the end of the year,

while female representation on the subsidiary boards was on

average 36%.

SpareBank 1 Gruppen applies a method of assessing roles and

positions in order to ensure it fixes pay levels objectively. Equal

pay in relation to work of equal worth is also a topic in annual

salary reviews. The main reason that the pay level of men is

slightly higher than for women in the Group is that there

are more men in both senior positions and highly technical

positions.

As a member of the Norwegian Financial Services Association

(FNH), SpareBank 1 Gruppen AS continued to participate in the

FUTURA programme in 2011. This is a development programme

that aims to increase the share of women in the recruitment base

for leading positions.

Attractive employer

SpareBank 1 Gruppen is experiencing greater interest from young

employees. The Group regards this as a result of SpareBank 1's

strong branding combined with the targeted marketing of

SpareBank 1 Gruppen as an attractive employer at universities and

university colleges. 161 new employees were recruited in 2011,

of whom 59 were women and 102 were men. The majority of

those who were recruited have at least tree years' education after

upper secondary school. Most of the new employees are in the

26–35 age group, but the Group also recruited employees in all age

groups in 2011. The average age of employees in SpareBank 1

Gruppen was 42.5 in 2011.

Efforts to promote the Group as an attractive employer with

exciting career opportunities and competitive terms will continue

in 2012.

CORPORATE RESPONSIBILITY

SpareBank 1 Gruppen undertakes to take into consideration how

the Group's behaviour impacts people, society and the environment.

This responsibility entails setting targets that exceed those in the

legislation to which the financial markets are subject. Corporate

responsibility covers everything from asset management and

investments in inclusive workplaces and employee rights.

Corporate responsibility is also about fraud and loss prevention

measures, safeguarding life, health and property, good products for

customers, business ethics, environmental impact, credit policy,

awareness campaigns and local commitment.

The environment, climate accounts and the Eco-Lighthouse

SpareBank 1 Gruppen's impact on the external environment, both

direct and indirect, is limited. This includes through waste,

energy use, travel, transport, material choices, purchasing and

water consumption.

SpareBank 1 Gruppen will, for the fourth year in a row, prepare

climate accounts based on the total energy consumed by the

organisation's daily operations. A process to secure SpareBank 1

Gruppen Eco-Lighthouse certification from 2012 has also started.

Eco-Lighthouse certification is a Norwegian, official certification

scheme. The scheme is supported and recommended by the

Ministry of the Environment. The climate accounts are published

on: http://investor.sparebank1.no.

Social engagement

SpareBank 1 Gruppen has involved itself in a microcredit

company, Kolibri Kapital. Microcredit involves providing small

loans to poor, enterprising people in developing countries that can

be used to develop a business or improve living conditions.

Kolibri Kapital raises money in Norway by continuously

expanding its share capital. All the loans are made to microbanks

in South Africa, Asia and South America. SpareBank 1 Gruppen

contributes share capital.

In 2011, SpareBank 1 Gruppen was the main sponsor of the

Norwegian Heart and Lung Patient Organisation's «A hearty

welcome» campaign which was aimed at women. The goal of the

campaign was to raise women's awareness about heart disease, and

raise money for research into heart disease in women.

The banks in the SpareBank 1-alliance returned a total of NOK 416

million in 2011 to local communities through sponsorships and

donation funds.

CHANGES TO THE BOARD AND THE GROUP EXECUTIVE

MANAGEMENT TEAM

On 26 January 2011, Tor-Arne Solbakken, Vice President of the

Norwegian Confederation of Trade Unions (LO), replaced Bente N.

Halvorsen as a board member. Terje Vareberg retired from the

Board at the same time. Arne Austreid, CEO of SpareBank 1

SR-Bank from 1 January 2011, was at the same time elected to the

Board as the vice chairman. Arne Austreid was elected

Chairman of the Board in April 2011. He succeeded Hans Olav

Karde, CEO of SpareBank 1 Nord-Norge, who had been the

chairman since April 2010.

Page 16: Annual Report SpareBank 1 Gruppen 2011

16 SpareBank 1 Gruppen

OUTLOOK

The outlook for the Norwegian economy was uncertain at the

start of 2012. Nonetheless, there is reason to believe that 2012 will

also be a relatively good year for Norway with continued low

unemployment, low interest rates and low price inflation.

Therefore, the macroeconomic conditions for profitable growth

should be relatively good in 2012. On the other hand, volatile

financial markets are resulting in uncertainty about financial

results, which constitute a significant portion of value creation in

SpareBank 1 Gruppen.

The Group will continue its work on cooperation right across

the companies to extract efficiency gains within costs, income and

skills in 2012.

The breadth of SpareBank 1 Gruppen's product range, combined

with its partnership with the Norwegian Confederation of Trade

Unions (LO) and the SpareBank 1-banks' distribution network,

means the Board believes that SpareBank 1 Gruppen is well

positioned to increase its volume of business within life insurance.

Defined benefit pensions and paid-up policies currently face

challenging regulations. These products have high annual

guaranteed returns and will thus be capital-demanding pursuant

to the Solvency II regulations. The authorities are working on

changes to the regulations that could potentially result in better

profitability and reduced capital requirements.

The Board believes the outlook for 2012 is also good for profitable

growth within P&C insurance. SpareBank 1 Skadeforsikring Group

is systematically working on various measures aimed at improving

both the claims ratio and the cost ratio, and these are expected to

have a positive effect on the P&C insurance group's combined ratio

going forward.

SpareBank 1 Markets AS is undergoing a building up process. The

Board is expecting a substantial improvement in the result in

2012. Its competitiveness after the phasing in of new resources

indicates that the company will start 2012 at full market power. The

market situation is excepted to remain challenging in the

short-term, but it is assumed that the level of activity will

gradually increase in 2012. The Board believes the conditions are

now right for SpareBank 1 Markets AS to establish itself as a

leading capital markets unit in Norway, which is regarded as

strategically important for the SpareBank 1-alliance.

In the opinion of the Board, SpareBank 1 Gruppen will be able to

cope well with continued volatility in the financial markets in

2012 as well. SpareBank 1 Gruppen is exposed to the securities

market through its various subsidiaries, and the development of

equity prices and interest rates have a major effect on the Group's

earnings. Given a normal return in the securities market, the

Board expects a substantially improved result in 2012.

In the opinion of the Board, SpareBank 1 Gruppen is well

capitalised and in a good position to satisfy the new, stricter

capital requirements due to the introduction of the Solvency II

regulations.

A WORD OF GRATITUDE

The employees displayed great drive in 2011, which was a

demanding year for many of the business areas. Collaboration with

the employee organisations has been close and productive. The

Board would like to thank all of SpareBank 1 Gruppen's employees

for their contributions in 2011.

Oslo, 16 March 2012

Arne Austereid Hans Olav Karde Bjørn Engaas CHAIRMAN OF THE BOARD

Finn Haugan Knut Bekkevold Richard Heiberg

Tor-Arne Solbakken Sally Lund-Andersen Kirsten IdebøenCHIEF EXECUTIVE OFFICER

NOTE: This translation from Norwegian has been prepared for information purposes only.

Page 17: Annual Report SpareBank 1 Gruppen 2011

Financial statements 2011SpareBank 1 Gruppen

Page 18: Annual Report SpareBank 1 Gruppen 2011

SPAREBANK 1 GRUPPEN – INCOME STATEMENT

Parent company Group

2011 2010 NOK 1,000 Note 2011 2010

- - Gross insurance premium income 9 126 299 8 213 841- - - reinsurers' share -604 478 535 217- - Net insurance premium income 7 8 521 821 7 678 624

23 856 15 920 Interest income 138 293 98 44786 758 61 422 Interest expense 111 643 85 196-62 902 -45 502 Net interest income 9 26 650 13 251

- - Commissions 699 780 715 505- - Commission costs -924 856 846 205- - Net commissions 8 -225 076 -130 700

640 -1 310 Net income from financial instruments at fair value through the profit or loss 9 -250 111 1 547 267- 3 641 Net income from financial assets available for sale 9 622 30 596- - Net income from bonds at amortised cost 9 47 046 75 049- - Net income from bonds held to maturity 9 242 977 259 255- - Net income from investment properties 10 263 003 399 410

629 293 606 274 Share of profit and group contribution from subsidiaries 2 932 - - 4 Other operating income 11 340 974 384 321

567 031 563 107 Total net income 8 970 838 10 257 073

- - Insurance benefits and claims 7 238 159 7 496 694- - Insurance claims recovered from reinsurers -406 294 -488 154- - Securities adjustment reserve for life insurance -431 997 289 732- - Transferred to policyholders - life insurance 31 104 142 363- - Allocation to supplementary provisions - - - - Net loan loss provisions 29 326 10 405

61 554 -25 957 Operating costs 12, 47 2 001 689 1 674 17326 337 33 325 Depreciation and amortisation 14, 15, 18 90 251 91 300714 276 Other costs 60 461 55 427

88 606 7 644 Total costs 8 583 699 9 271 940478 425 555 463 Operating result 387 139 985 133

Share of profit of associated companies and joint - - ventures accounted for by the equity method 17 150 -

478 425 555 463 Pre-tax profit 387 289 985 13343 132 109 008 Tax charge 50 -138 506 153 586435 293 446 455 Net profit for the year 525 795 831 547

Allocation of profit for the year:Shareholders of the parent company 529 905 841 025Minority interests -4 110 -9 478

SpareBank 1 Gruppen18

SPAREBANK 1 GRUPPEN – STATEMENT OF COMPREHENSIVE INCOME

Consolidated income statement, costs and value changes

Parent company Group

2011 2010 NOK 1,000 Note 2011 2010

435 293 446 455 Profit for the year 525 795 831 547-29 774 -1 057 Actuarial gains/losses on pensions 48 -113 099 -76 215

- - Revaluation of properties 18 -2 700 -12 656- - Adjustment of insurance liabilities - 3 228- - Change in available for sale financial assets 20,24 -301 -814- - Translation differences 2 450 -

8 337 296 Taxes 50 32 424 23 980413 856 445 694 Total comprehensive income for the year 442 569 769 070

Shareholders' of the parent company 446 679 778 548Minority interests -4 110 -9 478

Page 19: Annual Report SpareBank 1 Gruppen 2011

19

SPAREBANK 1 GRUPPEN – CONSOLIDATET BALANCE SHEET

Parent company Group

31.12.11 31.12.10 NOK 1,000 Note 31.12.11 31.12.101)

ASSETS 121 325 93 664 Deferred tax asset 50 8 026 -

- - Goodwill 5, 14 861 140 850 819- - Other intangible assets 15 233 984 146 883

4 985 194 4 469 691 Investments in subsidiaries 16 - - 10 147 10 147 Investments in associated companies and joint ventures 17 10 147 9 010160 863 127 501 Property, plant and equipment 18 1 016 143 1 158 617

- - Reinsurance receivables 40 1 411 156 1 494 338202 067 243 351 Other assets 19, 31 698 476 609 877

- - Investment properties 27 4 153 878 4 190 037- - Bonds held to maturity 20, 25, 26, 31 4 522 630 4 679 131- - Bonds at amortised cost 20, 25, 26, 31 1 368 467 1 249 291

17 583 17 583 Securities available for sale 20, 21, 24, 31 19 193 20 216Lending to customers and deposits

152 580 122 580 with financial institutions 20, 26, 28, 31, 33 675 008 584 566- - Securities at fair value 20, 21, 22, 31 24 155 423 22 991 554

2 003 692 Financial derivatives 20, 21, 23, 31 11 317 130 605- - Insurance receivables from policyholders 41 1 568 003 1 394 441

213 717 93 520 Cash and cash equivalents 20, 26, 31 1 276 149 1 091 1595 865 479 5 178 729 TOTAL ASSETS 41 989 140 40 600 545

EQUITY AND LIABILITIES1 970 277 2 030 277 Shareholders equity 13 1 970 277 2 030 2771 201 715 727 859 Retained earnings 2 974 364 2 510 676

- - Other equity - not recognised in the profit and loss account - 71 454- - Minority interests -2 280 15 446

3 171 992 2 758 136 Total equity 4 942 361 4 627 853

283 568 433 846 Subordinated loan capital and hybrid tier 1 capital 20, 32, 37 483 568 848 846- - Securities adjustment reserve 184 872 616 870- - Insurance provisions in life insurance 42 22 620 517 22 325 986- - Premium and claims provisions in P&C Insurance 43 9 120 199 8 305 494

99 419 74 966 Net pension liabilities 48 393 347 325 355- - Deferred tax liability 50 - 172 515- - Payable tax 50 168 744 98 447

1 905 025 1 376 914 Securities issued 20, 21, 32, 38 1 905 025 1 376 914- - Liabilities related to reinsurance 44 74 017 77 706- - Financial derivatives 20, 21, 23 244 800 160 265

405 475 534 867 Other liabilities 51 1 256 094 1 129 898- - Deposits from and liabilities to customers and financial institutions20, 32, 36 595 596 534 396

5 865 479 5 178 729 TOTAL EQUITY AND LIABILITIES 41 989 140 40 600 545

1) The balance sheet as of 31.12.10 has been revised to show comparable figures. A detailed description of the change booked directlyagainst equity can be found in note 2 «Accounting policies», in the section on «Changes in the policies for determining claim provisions».Please also refer to the description of changes in note 54.

NOTE: This translation from Norwegian has been prepared for information purposes only.

Oslo, 16 March 2012

Arne Austereid Hans Olav Karde Bjørn Engaas CHAIRMAN OF THE BOARD

Finn Haugan Knut Bekkevold Richard Heiberg

Tor-Arne Solbakken Sally Lund-Andersen Kirsten IdebøenCHIEF EXECUTIVE OFFICER

Page 20: Annual Report SpareBank 1 Gruppen 2011

CONSOLIDATED STATEMENT OF CASH FLOW

Parent company Group

2011 2010 NOK 1,000 Note 2011 20102)3)

CASH FLOWS FROM OPERATING ACTIVITIES

435 293 446 455 Net profit for the year 525 795 831 547Share of profit of associated companies and joint

- - ventures accounted for by the equity method 17 150 - 26 337 33 325 Depreciation and amortisation 15, 18 90 251 91 300

- - Revision and depreciation of investment property values 27 13 154 -148 187- - Net loan loss provisions 29 326 10 388

Difference between costs recognised pensions and -8 110 -4 250 receipts/payments in pension schemes 48 -47 501 -116 015

- - Increase in reinsurance receivables 40 - -343 496- - Reduction in reinsurance receivables 40 83 182 -

-30 000 - Increase in lending to customers 28 -90 768 - - 127 420 Reduction in lending to customers 28 - 20 685 974- - Change in technical insurance provisions 42, 43 677 239 3 255 812

-93 924 -148 685 Change in accrued expenses and prepaid revenues -265 470 -667 403Increase in deposits from and liabilities to

- - customers and financial institutions 36 61 200 - Reduction in deposits from and liabilities to

- -501 700 customers and financial institutions 36 - -16 924 534329 596 -47 435 Net cash flow generated from operating activities 1 047 558 6 675 386

CASH FLOWS FROM INVESTING ACTIVITIES

-1 311 -692 Increase in securities at fair value 22, 23 -1 044 582 - - - Reduction in securities at fair value 22, 23 - 1 125 580- - Increase in securities at held to maturity 25 - -143 414- - Reduction in securities at held to maturity 25 37 324 - - -2 248 Increase in securities available for sale 24 - - - - Reduction in securities available for sale 24 1 023 22 728

-525 608 -413 094 Payment of group contributions 1) - - - - Additions intangible assets 15 -123 586 -119 920- - Reduction/(Increase) investment properties 27 18 799 778 659

-60 312 -50 546 Reduction/(Increase) property, plant and equipment 18 85 621 -868 295-587 231 -466 580 Net cash flow used in investing activities -1 025 401 795 338

CASH FLOWS FROM FINANCING ACTIVITIES

- - Receipts - subordinated loan capital - - -150 278 -250 046 Payments - redemption of subordinated loan capital 37 -365 278 -920 722440 000 - Receipts - new equity 440 000 -

- - Liquidity effect of demerged Bank 1 Oslo Akershus AS - -1 129 932-440 000 -120 000 Payments - dividends -440 000 -120 000528 111 876 383 Increase in securities issued 38 528 111 -

- - Reduction in securities issued 38 - -5 503 564377 833 506 337 Net cash flow from financing activities 162 833 -7 674 218

120 197 -7 678 Net receipts/payments of cash 184 990 -203 494

93 520 101 198 Cash and cash equivalents as of 1.1 1 091 159 1 294 653

213 717 93 520 Cash and cash equivalents as of 31.12 1 276 149 1 091 159

1) Group contribution payments are recognised as increases in investments in subsidiaries. Group contribution received by SpareBank 1Gruppen are recognised through profit and loss

2) The balance sheet as of 31.12.10 has been revised to show comparable figures. A detailed description of the change booked directlyagainst equity can be found in note 2 «Accounting policies», in the section on «Changes in the policies for determining claim provisions».Other changes are described in note 54.

3) Cash flow for the period ending 31.12.10 contains effects linked to sale of Bank 1 Oslo Akershus AS.

SpareBank 1 Gruppen20

Page 21: Annual Report SpareBank 1 Gruppen 2011

21

STATEMENT OF CHANGES IN EQUITY

Parent companyShare

Share premium Retained Total NOK 1,000 Note capital reserve earnings equity

Equity as of 31 December 2009 1 782 400 827 096 822 945 3 432 441

Profit for the year - - 446 455 446 455

Year's comprehensive income - - -761 -761

Year's total comprehensive income - - 445 694 445 694

Capital increase - - - -

Capital reduction/demerger of Bank 1 Oslo AS - -579 219 -420 781 -1 000 000

Dividend paid - - -120 000 -120 000

Total transactions with shareholders - -579 219 -540 781 -1 120 000

Other items booked directly against equity - - - -

Corrections from previous years - - - -

Other items booked directly against equity - - - -

Equity as of 31 December 2010 1 782 400 247 877 727 859 2 758 136

Profit for the year - - 435 293 435 293

Year's comprehensive income - - -21 437 -21 437

Year's total comprehensive income - - 413 856 413 856

Capital increase 88 000 352 000 - 440 000

Capital reduction - -500 000 500 000 -

Dividend paid - - -440 000 -440 000

Total transactions with shareholders 88 000 -148 000 60 000 -

Other items booked directly against equity - - - -

Corrections from previous years - - - -

Other items booked directly against equity - - - -

Equity as of 31 December 2011 1 870 400 99 877 1 201 715 3 171 992

Page 22: Annual Report SpareBank 1 Gruppen 2011

SpareBank 1 Gruppen22

GroupShare premium Retained Revaluation Minority Total

NOK 1,000 Note Share capital reserve earnings reserve interests equity

Equity as of 31 December 2009 1 782 400 827 096 2 588 291 65 221 30 300 5 293 308

Profit for the year - - 841 025 - -9 478 831 547

Year's comprehensive income - - -55 689 -9 112 - -64 801

Year's total comprehensive income - - 785 336 -9 112 -9 478 766 746

Capital increase - - - - - -

Capital reduction/demerger of Bank 1 Oslo Akershus AS - -579 219 -550 713 - - -1 129 932

Dividend paid - - -120 000 - - -120 000

Disposals minority interests - - - - -5 377 -5 377

Total transactions with shareholders - -579 219 -670 713 - -5 377 -1 255 309

Other items booked directly against equity - - 4 068 - - 4 068

Corrections from previous years - - -15 345 15 345 - -

Other items booked directly against equity - - -11 277 15 345 - 4 068

Equity as of 31 December 2010 1 782 400 247 877 2 691 636 71 454 15 446 4 808 813

Changes booked directly against equity 1) - - -180 960 - - -180 960

Revised equity as of 31 December 2010 1 782 400 247 877 2 510 675 71 454 15 446 4 627 853

Profit for the year - - 529 905 - -4 110 525 795

Year's comprehensive income - - -11 772 -71 454 - -83 226

Year's total comprehensive income - - 518 134 -71 454 -4 110 442 569

Capital increase 88 000 352 000 - - - 440 000

Capital reduction - -500 000 500 000 - - -

Dividend paid - - -440 000 - - -440 000

Received group contributions - - - - - -

Disposals minority interests - - - - -13 616 -13 616

Total transactions with shareholders 88 000 -148 000 60 000 - -13 616 -13 616

Other items booked directly against equity 2) - - -114 446 - - -114 446

Corrections from previous years - - - - - -

Other items booked directly against equity - - -114 446 - - -114 446

Equity as of 31 Desember 2011 1 870 400 99 877 2 974 364 - -2 280 4 942 361

1) Equity as of 31.12.10 has been revised to show comparable figures. A detailed description of the change booked directly against equity canbe found in note 2 «Accounting policies», in the section on «Changes in the policies for determining claim provisions». Please also refer tothe description of changes in note 54.

2) Other items booked against equity primarily concern changes in provisions for insurance (natural disaster claims, guarantees) and businessmergers.

Page 23: Annual Report SpareBank 1 Gruppen 2011

NOTE 1 – GENERAL INFORMATION

As of 31 December 2011, the SpareBank 1 Gruppen Group consisted of the parent company SpareBank 1 Gruppen AS and its whollyowned subsidiaries, SpareBank 1 Livsforsikring AS, SpareBank 1Skadeforsikring AS, ODIN Forvaltning AS, SpareBank 1 MedlemskortAS, Sparebankutvikling AS and SpareBank 1 Gruppen Finans AS, aswell as SpareBank 1 Markets AS (formerly Argo Securities AS) withan ownership interest of 97.22%.

Alliansesamarbeidet SpareBank 1 DA is recognised according to theequity method, and the Group's ownership interest is 10%.

SpareBank 1 Gruppen AS's registered office is in Tromsø.

SpareBank 1 Gruppen AS is a holding company that produces, provides and distributes products in the fields of life and P&C insurance, fund management, capital markets, factoring, debt collectionservices and long-term monitoring. The Group's primary market is Norway.

The consolidated financial statements were authorised for issue by theAnnual General Meeting and Supervisory Board on 11 April 2012. TheAnnual General Meeting is the Group's supreme authority.

NOTE 2 – ACCOUNTING POLICIES

Statement of complianceThe consolidated financial statements for SpareBank 1 Gruppen andthe financial statement for the parent company for the fiscal year2011 have been prepared in accordance with International FinancialReporting Standards (IFRS) and appurtenant interpretations from theInternational Financial Reporting Interpretations Committee (IFRIC),as adopted by the European Union (EU), as well as in accordance withexisting additional Norwegian regulations.

The consolidated financial statements have been prepared under thehistorical cost principle, except for financial derivatives, financialassets and financial liabilities recognised at fair value with valuechanges through the profit and loss and financial assets classified asavailable for sale, as well as properties owned for the purpose of earning rental income or appreciating in value that are classified asinvestment properties and are recorded at fair value in accordance withIAS 40.

Preparation of accounts in accordance with IFRS requires the use ofestimates. Moreover, management is required to exercise judgement inapplying the Group's accounting policies. Areas in which critical judgements and estimates are required, containing high complexity, or areas in which judgements and estimates are material to the consolidated financial statements, are described in note 4.

The consolidated financial statements have been presented on theassumption that the company will continue as a going concern.

New and revised standards applied by the GroupThere have been no new or revised IFRSs or IFRIC interpretations thathave come into force in the 2011 financial year that are considered oranticipated to have a material effect on the Group.

SpareBank 1 Gruppen AS and SpareBank 1 Gruppen Group havechosen to present items in the total comprehensive income in a linein the statement of changes in equity for the year and the previous year,cf. IAS 1.106 (d).

The revised version of IAS 24 on related party disclosures has beenincorporated into the annual financial statements and comparablefigures are shown for the previous year.

Standards, revisions and interpretations of current standards thathave not come into effect and where the Group has not chosen early adoptionThe Group has not early adopted any new or revised IFRSs or IFRICinterpretations.

IAS 19 Employee Benefits was revised in June 2011. The revisionmeans that all actuarial gains and losses are reported in the total comprehensive income as they arise (no corridor), an immediateinclusion in the profit or loss of all costs relating to previous periods'accrued pension entitlements and forecast returns on pension planassets with a net interest amount calculated using the discount rate onnet pension obligations (asset). SpareBank 1 Gruppen AS and SpareBank 1 Gruppen Group currently report actuarial gains and lossesin the total comprehensive income. Other than this, the Group has notyet completed its analysis of the consequences of the changes in IAS 19.

IFRS 9 Financial Instruments regulates the classification, measurementand recognition of financial assets and financial liabilities. IFRS 9 wasissued in November 2009 and October 2010, and replaces the parts ofIAS 39 that relate to the recognition, classification and measurementof financial instruments. Under IFRS 9 financial assets shall be divided into two categories based on the measurement methodology:those measured at fair value and those measured at amortised cost. Theclassification assessment is undertaken on initial recognition. Classification will depend upon the company's business model formanaging its financial instruments and the characteristics of the contractual cash flows from the instrument. The requirements forfinancial liabilities are largely similar to IAS 39. The main changes, inthose instances where fair value measurement has been chosen forfinancial liabilities, are that the part of the change in fair value that isdue to changes in the company's own credit risk is reported in the totalcomprehensive income rather than the profit or loss, if this does notcause an accrual error in measuring the result. The Group is planningto apply IFRS 9 once the standard comes into force and is approvedby the EU. The mandatory effective date for the standard applies toaccounting periods commencing on 1 January 2013 or later, howeverIASB has released a staff paper discussing the proposal to extend themandatory start date to accounting periods beginning on 1 January 2015or later.

IFRS 10 Consolidated Financial Statements is based on the current policy of using control as the decisive criteria for determining whether a company is to be included in the consolidated financial statements. The standard provides additional guidance in assessingwhether an entity controls one or more other entities in instances whereit is unclear. The Group has not considered all the possible consequencesof IFRS 10. The Group is planning to apply the standard to accountingperiods beginning on 1 January 2013 or later.

IFRS 12 Disclosure of Interests in Other Entities contains disclosurerequirements for an entity's involvement in subsidiaries, joint arrangements, associated companies, unconsolidated SPEs/structuredentities. The Group has not considered the full extent of the effects ofIFRS 12. The Group is planning to apply the standard to accountingperiods beginning on 1 January 2013 or later.

IFRS 13 Fair value Measurement defines the term «fair value» in thecontext of IFRS, provides a consistent description of how fair value isdetermined in the IFRS and specifies what additional information isto be disclosed when fair value is used. The standard does not expandthe scope of fair value accounting but provides guidance on the measurement of fair value when its use is already required or permittedunder other IFRSs. The Group measures certain assets and liabilitiesat fair value. The Group has not considered the full extent of theeffects of IFRS 13. The Group is planning to apply IFRS 13 to accounting periods beginning on 1 January 2012 or later.

Notes

23

Page 24: Annual Report SpareBank 1 Gruppen 2011

Besides these, there are no other IFRSs or IFRIC interpretations whichare not currently in effect and would be expected to have a materialeffect on the accounts.

Foreign currency translationFunctional currency and presentation currencyThe accounts for each unit in the Group are measured in the currencyused where the unit primarily operates (functional currency). Transactions in foreign currencies are translated into the functional currency using the exchange rate at the time of the transaction. The consolidated financial statements are presented in Norwegian kroner(NOK) which is the parent company's functional currency and the presentation currency of the Group. Foreign companies that are included in the Group and which use a different functional currencyare translated into Norwegian kroner using an average exchange ratefor the year for the profit and loss account and the prevailing exchangerate on the reporting date for the balance sheet. Any translation differences are reported in the total comprehensive income for the period and are disclosed separately under equity. All figures are presented in NOK thousand unless otherwise specified.

Transactions and balance sheet itemsTransactions in foreign currencies are translated into the functional currency using the exchange rate at the time of the transaction. Realised currency gains and losses on settlements and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. If the currency position is considered to be a cash flowhedge or regarded as hedging the net investment in a foreign business,the appurtenant gains or losses are reported in the total comprehensiveincome.

Currency gains and losses in conjunction with loans, cash and cashequivalents are presented (net) as interest income or interest expense.Changes in the fair value of bonds and certificates in foreign currenciesclassified as available for sale are split between the effect of the currencytranslation of the amortised cost in the foreign currency and otherchanges in the carrying amount. Currency translation of the amortisedcost is recognised in the profit and loss while other changes in the carrying amount are reported in the total comprehensive income. Theeffects of changes in foreign exchange rates on non-monetary items(both assets and liabilities) are incorporated into the assessment of fairvalue. Exchange differences on non-monetary items, such as shares atfair value through profit or loss, are recognised in the profit or loss aspart of total gains and losses. Exchange differences on shares classifiedas available for sale are included in changes in value reported in thetotal comprehensive income.

ConsolidationSubsidiariesThe consolidated financial statements include SpareBank 1 GruppenAS and all its subsidiaries. Subsidiaries are all the units where SpareBank 1 Gruppen Group has the power to govern the financial andoperating policies of the entity, normally through ownership of morethan half the voting rights. Subsidiaries are consolidated from the dateat which control is ceded to the Group and unconsolidated when thecontrol is lost.

The acquisition method is used when accounting for acquisitions ofsubsidiaries. Acquisition cost is measured as the fair value of assetstransferred as consideration. Identified assets, assumed liabilities andassumed or incurred contingent liabilities are recognised at fair valueat the acquisition date, irrespective of any minority interests. Costs ofacquisition that exceed the fair value of identifiable net assets in thesubsidiary are recognised in the balance sheet as goodwill. If theacquisition cost is less than the fair value of net assets in the subsidiary,the difference is recognised in the profit or loss.

Material intragroup transactions, receivables and payables are eliminated.

Transactions with minority interests are treated as transactions withthird parties. The effect of all transactions with minority owners isreported in equity where there is not a change in control. Such transactions will not result in goodwill or gains or losses. When control ceases, the remaining ownership interests are to be measured

at fair value, and gains and losses are recognised in the profit or loss.

Associated companiesAssociated firms are firms where companies in SpareBank 1 GruppenGroup have significant influence, but not control. Significant influencenormally exists for investments where the Group has between 20 and50 per cent of the voting rights. Investments in associated companiesare initially recognised at acquisition cost and subsequently measuredusing the equity method. Investments in associated companies include goodwill identified at the date of acquisition, reduced there-after by any write-downs.

The Group's share of profits or losses in associated companies isrecognised in profit or loss and added to the carrying value of theinvestments, in addition to the share of the total comprehensive incomein the associated company and the effect of any errors or policy changes.The Group does not recognise the share of losses if this would causethe carrying value of the investment to become negative.

Joint venturesInterests in joint ventures may consist of joint operations, joint ventureassets and joint venture activities. Joint control means that SpareBank 1 Gruppen through contractual agreements exercises shared control over economic activity with other participants. Joint ventures are accounted for using the equity method.

Investments in subsidiaries and associated companies recorded inthe parent company accountsInvestments in subsidiaries and associated companies are valued inaccordance with the cost method.

If there is objective evidence of an impairment loss that is not temporary, the shares are then written down. A previously recognisedimpairment loss is reversed if the reason for the impairment no longer exists.

Segment informationOperating segments are reported differently in the note than in theBoard of Directors' Report. In the Board of Directors' Report the segments are reported in the same way as for internal reports to theGroup's Board.

The Group's business areas are divided into life insurance, P&C insurance, fund management, brokering activities, debt collectionand factoring activities and other activities. The Group has no secondary segment reporting. These segments are reported in the notein the same way that they are accounted for under IFRS.

Loans and receivablesAcquired portfolios Acquired portfolios are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. These are accounted for at amortised cost using the effective interestmethod.

Trade receivables from factoring activitiesTrade receivables from factoring activities are evaluated in two ways. In those instances where the factoring business has not taken over thecredit risk (risk associated with debtors' inability to service and repaytheir outstanding loans) only the prepayment that has been paid onreceivables that have been transferred to the factoring company arerecorded on the balance sheet, under «Lending to customers anddeposits with financial institutions». When the factoring businesstakes over the credit risk, the gross receivables are recorded and included in the balance sheet under «Other assets». The portion of these trade receivables that is not financed is included in the balance sheet under «Other liabilities».

ProvisionsProvisions on loans and guarantees (debtors) are included under «net loan loss provisions».

Other receivables Other receivables are recognised in the balance sheet at nominalvalue less provisions for expected losses.

SpareBank 1 Gruppen24

Page 25: Annual Report SpareBank 1 Gruppen 2011

Provisions for losses are made on the basis of individual evaluationsof each receivable.

Securities and derivatives The Group has financial assets in the trading portfolio, voluntarily categorised at fair value through profit or loss, loans and receivables,investments held to maturity and securities available for sale. The principal rule is to classify investments at fair value through the profit or loss, either through the trading portfolio or voluntary classification. This corresponds with how the investments are followed up. Certain investments in bonds/certificates are nonethelessclassified into loans and receivables or held to maturity. This is under-taken in conjunction with the transaction.

Regular purchases and sales of investments are recognised on the tradedate, which is the date on which the Group commits to purchase or sellthe asset. All financial assets which are not recognised at fair value overthe profit or loss, are initially recognised at fair value, with the additionof appurtenant transaction costs. Financial assets carried at fair valuethrough profit or loss are initially recognised at fair value, and transaction costs are expensed in the profit or loss. Investments areremoved from the balance sheet when the right to receive cash flowsfrom the investment ceases or when the right has been transferred andthe Group has transferred substantially all the risks and rewards incidental to ownership of the asset. Financial assets available forsale and financial assets recognised at fair value through profit orloss are valued at fair value following initial recognition. Investmentsheld to maturity are recognised at amortised cost using the effectiveinterest rate method. Bonds which the Group intends to hold to maturity, but which for various reasons including not being traded inan active market do not fulfil the criteria for held-to-maturity portfolios under IAS 39, are classified as a separate line item in thebalance sheet, «bonds at amortised cost».

The fair value of listed investments is based on the current bid price.If the securities market is not active (or if this applies to a security thatis not listed) then the Group uses valuation techniques to determinethe fair value. These include recently performed transactions at market rates, reference to other instruments that are substantiallyidentical, and the use of discounted cash flow analysis and optionmodels. The techniques emphasize market information wherever possible and only use company-specific information where necessary.

Securities and derivatives at fair value through the profit or loss Securities and derivatives at fair value through the profit or loss are presented under «securities at fair value» and «financial derivatives» onthe balance sheet, and changes in value are presented under «netrevenues from financial instruments to fair value through the profit orloss» in the ordinary profit or loss.

This category has two subcategories: financial assets held for trading,and financial assets that management has classified at fair valuethrough the profit or loss. A financial asset is classified in this categoryif it has been acquired primarily for the purpose of generating a profit from short-term fluctuations in price, or if management electsto classify it in this category when this is permitted by the regulations.Classification of assets to their fair value – fair value option (FVO) –applies to all financial assets that are acquired unless an alternativeclassification has been made at the date on which the investmentwas made. Derivatives that have not been designated as hedginginstruments are classified as held for trading.

Gains or losses from fair value changes of assets classified as «financialassets to fair value through the profit or loss», including dividends, areincluded in the profit or loss under «net revenues from financialinstruments to fair value through the profit or loss» in the period inwhich they arise.

Securities available for sale Securities available for sale are presented under the line item «securities – available for sale» in the balance sheet, and value changes are shown under «net income from financial assets held forsale» in the total comprehensive income and any write-downs areincluded in «depreciation and amortisation» in the ordinary profit or loss. Securities available for sale are non-derivative financial

assets that have been selected for inclusion in this category or whichhave not been classified in any other category. Securities which havebeen classified in this category are also measured at fair value, whilechanges in value from the initial recognition are reported in the totalcomprehensive income. Shares classified as available for sale in theGroup are not actively traded in the market.

Investments held to maturity Investments held to maturity are presented under «bonds held tomaturity» in the balance sheet, gains/losses on sale are shown under«net income from bonds held to maturity» in the ordinary profit or loss and any write-downs are included in «depreciation and amortisation» in the ordinary profit or loss. Investments held to matu-rity are non-derivative financial assets quoted in an active market, with fixed or determinable payments and a fixed maturitywhich Group management positively intends to hold until maturity.These certificates and bonds are measured at amortised cost using theeffective interest rate method.

Impairment of financial assetsAssets recognised at amortised costThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset, or a group of financial assets,is impaired. Impairment losses on financial assets or a group of financial assets are recognised in profit or loss only if there is objective evidence of an impairment in value as a result of one or moreevents that occurred after the initial recognition of the asset (a «lossevent») and this loss event (or events) has an impact on the estimatedfuture cash flows that can be reliably estimated. For acquired portfolios and investments in bonds held to maturity the amount of theloss is measured as the difference between the asset's carrying amountand the present value of estimated future cash flows discounted at thefinancial asset's original effective interest rate. The carrying amount ofthe asset is reduced and the amount of the loss is recognised in profit or loss. If the impairment loss is subsequently reduced, and thereduction can be objectively connected to an event that took place after the impairment loss was recognised, the previously recognisedimpairment loss is reversed in the profit or loss.

Assets classified as available for saleThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset, or a group of financial assets,is impaired. For debt instruments the Group uses the criteria referredto in the section above. For equity instruments classified as availablefor sale, a substantial or long-term reduction in the fair value of theinstrument below acquisition cost will also be an indication that thevalue of the asset has become impaired. The Group regards a reduction in value of 20 per cent as being substantial and a reductionin value that has persisted for more than six months as being long-term.If these indications exist, and impairment losses have previouslybeen reported in the total comprehensive income, the accumulated losses that have been recognised in the total comprehensive incomeshall be reclassified to the profit or loss. The amount is measured asthe difference between the acquisition cost and the current fair value,less impairment losses previously recognised in the profit or loss.Impairment losses recognised in the profit or loss for an investment inan equity instrument shall not be reversed through the profit or loss.If the fair value of the debt instrument classified as available for salein a subsequent period increases, and the increase can be objectivelylinked to an event that took place after the impairment loss was recognised in the profit or loss, the impairment loss shall be reversedin the profit or loss.

Derivatives The derivatives consist of currency and interest rate instruments, andinstruments connected with structured products. Derivatives arerecorded at fair value through the profit or loss on the date at whichthe derivatives are purchased. Subsequent changes in fair value arerecorded through the profit or loss.

Intangible assetsGoodwillGoodwill is the difference between the acquisition cost of a businessand the fair value of the Group's share of net identifiable assets in thebusiness at the date of acquisition. Goodwill arising from the

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acquisition of subsidiaries is classified as an intangible asset. Goodwillis tested annually for impairment, and carried at acquisition cost lessa deduction for write-downs. Impairment losses on goodwill are notreversed. Gains or losses on the sale of a business include the carrying amount of goodwill appurtenant to the business divestiture.For subsequent impairment testing, goodwill is allocated to the cash-generating units or groups of cash-generating units that areexpected to benefit from the synergies of the combination which gaverise to the goodwill.

Research and developmentExpenses relating to research activities conducted with the expectationof yielding new scientific or technical knowledge and understandingare expensed to the profit or loss in the period in which they arise.Development costs, where the research results are used in a plan ormodel to produce new or substantially improved products or processes,are capitalised to the extent that the product or process is technically andcommercially feasible. Costs which are capitalised include the costsof materials, direct salaries and a proportion of the overheads. Otherdevelopment costs are expensed to the profit or loss in the period inwhich they are incurred. Capitalised development costs are recorded atcost less accumulated write-downs and impairment losses.

LicencesLicences have a limited useful economic life and are recognised on thebalance sheet at acquisition cost less accumulated depreciation. Licen-ces are depreciated using the straight line method over their expecteduseful economic lives.

Edb programmesStandard edb software that fulfils the criteria for recognition in thebalance sheet is recorded at acquisition cost (including expenses in conjunction with making the programme operative), and is depreciatedon a straight-line basis over its expected useful economic life. Softwaredeveloped in-house principally follows the same policies as describedfor research and development.

Expenses for maintaining the software are expensed as they are incurred. Expenses directly connected to developing identifiable andunique software that is owned by the Group is recognised in thebalance sheet as an intangible asset when the following criteria are met:

it is technically possible to complete the software so that it willbe available for use management intends to complete the software and use or sell it it can be demonstrated how the software will generate probablefuture economic benefitssufficient technical, financial or other resources are available tocomplete and use or sell the softwarethe costs can be reliably measured.

Direct costs include personnel costs for software development personnel and a portion of directly attributable overheads. Otherdevelopment costs that do not fulfil these criteria are expensed as incurred. Development costs that are expensed may not be recognisedin the balance sheet as an asset in subsequent periods. The carryingamount of software developed in-house is depreciated on a straight-line basis over its expected useful economic life.

Other intangible assetsIn conjunction with the acquisition of a business an analysis of excessvalue is undertaken, and intangible assets that are identified are recognised in the Group balance sheet. The Group has identifiedexcess value linked to brands, customer relationships and softwaretechnology. The excess values are calculated using historical datathat has been extrapolated, adjusted for uncertainty and subsequentlydiscounted. Customer relationships and software technology aredepreciated on a straight-line basis over their useful economic lives.

Subsequent costsSubsequent costs relating to the carrying value of intangible assets arecapitalised only when they increase the future economic benefits flowing from the asset. All other costs are expensed in the period inwhich they are incurred.

AmortisationAmortisation is calculated and expensed on a straight-line basis overthe estimated useful economic life of the intangible asset, unless its life-time is unlimited. Intangible assets are amortised from the date onwhich they are available for use.

Intangible assets with the exception of goodwill and intangible assetswith indefinite lives have estimated lifetimes of between two and 10years.

Intangible assets with the exception of goodwill and intangible assetswith indefinite lives are subject to impairment testing in accordancewith IAS 36 when the circumstances warrant it.

Tangible fixed assetsThe Group's tangible fixed assets consist of machinery, fixtures and fittings, vehicles and buildings used by the Group for its own activities. Buildings are revalued to fair value annually. The assessmentof value is based on an internal valuation model described underinvestment properties. Buildings are depreciated following valuation.Other tangible fixed assets are recognised at acquisition cost, lessdepreciation. Acquisition cost includes costs directly linked to acquiring the fixed asset.

Subsequent costs are added to the carrying value of the fixed asset orare recognised separately when it is probable that future economicbenefits linked to the cost will flow to the Group, and the costs can bereliably measured. The carrying amount relating to replaced parts isexpensed. Other repairs and maintenance costs are recorded throughprofit or loss in the period in which the costs are incurred.

An increase in the carrying value resulting from a revaluation of thebuildings is reported in the total comprehensive income and underrevaluation reserve. Decreases that offset previous fair value increaseson the same asset are treated for accounting purposes correspondingly.Each year the difference between depreciation based on the revaluedasset value (depreciation through profit or loss) and depreciationbased on the tangible fixed assets acquisition cost is transferred fromthe revaluation reserve to retained earnings.

Fixed assets are depreciated on a straight-line basis, with the tangiblefixed assets acquisition cost, or revalued asset value being written downto the residual value over its expected useful economic life, which is:

Buildings 50 yearsMachinery, fixtures and fittings, and vehicles 3-10 years

Tangible fixed assets which are depreciated are tested for impairmentwhen there are indications that future earnings can not justify the carrying value of the asset. The difference between the carryingamount and the recoverable value is expensed as an impairment loss.The recoverable value is the higher of an asset's fair value less costs tosell and its value in use. At each reporting date, an assessment is madeas to whether there is an indication that previous impairment losseson non-financial assets should be decreased.

Investment propertyProperties that are leased to tenants outside the Group are classifiedas investment properties. Investment properties are measured at fairvalue. Changes in value are reported through profit or loss under theline item «net income from investment properties». The properties areevaluated individually on the basis of discounted cash flow projections.The required rate of return takes into account interest rates, the general risk in the property market and the specific risk for the individual property. The fair value measurement is updated every sixmonths. Rental income, operating costs and the effect of value changes linked to investment properties are presented separately innotes 10 and 27.

Impairment of non-financial assetsIntangible assets with indeterminable useful economic lives and goodwill are not amortised, but tested annually for impairment. Tangible fixed assets and intangible assets which are depreciated aretested for impairment when there are indications that future earningscan not justify the carrying value of the asset. The difference

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between the carrying amount and the recoverable value is expensedas an impairment loss. The recoverable value is the higher of an asset's fair value less costs to sell and its value in use. When testing forimpairment, the fixed assets are placed into the smallest identifiablegroup of assets that generates cash inflows that are largely independentfrom the cash inflows from other groups of assets (cash-generatingunits). At each reporting date, an assessment is made as to whetherthere is an indication that previous impairment losses on non-financial assets (except goodwill) should be reversed.

Cash and cash equivalentsCash and cash equivalents include cash and bank deposits, othershort-term, highly liquid investments with original maturities of threemonths or less and bank overdrafts. Bank overdrafts are presented inthe line «deposits from and liabilities to customers and financialinstitutions».

Taxes payable and deferred taxesThe tax expense comprises current and deferred tax. Tax is recognisedin the profit or loss, except to the extent that it relates to items reportedin the total comprehensive income or recognised directly in equity. Inthese instances, tax is also reported in the total comprehensive income or recognised directly in equity.

Current tax for the period is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date.

Deferred tax is accounted for using the liability method. Deferred taxis recognised on all temporary differences between the tax bases ofassets and liabilities and their carrying amounts. If deferred tax ariseson initial recognition of a liability or an asset in a transaction, whichis not a business combination, and at the date of the transaction doesnot affect either the financial result or the tax result then it is not recorded in the balance sheet. Deferred tax is determined using tax ratesand laws that have been enacted or substantively enacted by thebalance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it isprobable that future taxable profit will be available against which thetemporary differences can be utilised.

When assessing the likelihood, historical earnings and estimated future margins are included in the evaluation.

Deferred income tax is provided on temporary differences arising oninvestments in subsidiaries and associated companies, except wherethe timing of the reversal of the temporary differences is controlled bythe Group and it is probable that the temporary differences will notreverse in the foreseeable future.

Defended tax arising on changes in value of properties owned by Special Purpose Entities (SPE) is not calculated. Realisation of the properties in practice will be through the sale of shares or interests. Anygains or losses on realising shares or interests will not be taxable dueto the tax exemption method (with the exception of recognising 3 percent of the net gain), and in the opinion of the Group the financial statements provide the most fair representation of the information whenthe deferred tax is not recognised on these types of value changes.

Deferred tax assets and deferred tax shall be set off if there is a legalright to set off deferred tax assets against deferred tax, and deferred taxassets and deferred tax apply to income taxes imposed by the same taxauthority for either a taxable firm or different taxable firms that intendto settle tax liabilities and tax assets on a net basis.

Long-term fundingLoans are initially recognised at cost, which is the fair value of the consideration less transaction costs. Fixed interest rate loans are measured at fair value through the profit or loss, while variable interest rate loans are measured at amortised cost. Any differences between the cost and the settlement amount at maturity are thusaccrued over the term of the loan by applying the effective interest rateon the loan.

PensionsThe Group has both defined contribution pension plans and definedbenefit pension schemes. The pension schemes are funded by payments to SpareBank 1 Livsforsikring AS.

A defined contribution plan is a pension scheme in which the Groupmakes a fixed payment to the insurance company. The Group does nothave any legal or other obligation to make additional payments if theinsurance company does not have sufficient funds to pay all theemployees the benefits that have accrued during current and prior periods. The contributions are accounted for as payroll expense as theyfall due for payment.

A defined benefit plan is a pension scheme defining a pension benefitthat an employee will receive upon retirement. The Group's definedbenefit scheme ensures that the members receive a pension of 70 percent of final salary up to an amount of 12 G (where G is the NationalInsurance Scheme's basic amount). Salary payments exceeding 12 G aresecured by a defined contribution-based arrangement. The definedbenefit scheme was closed to new employees from 1 May 2005 onwards.

In addition, there are obligations in conjunction with contractualpensions (AFPs) and certain special agreements relating to early retirees and supplementary pensions. The old AFP provision containssimply a provision for former employees aged between 63 and 67years old who are currently AFP retirees.

The liability recorded in the balance sheet linked to defined benefitschemes is the present value of defined benefits at the balance sheetdate less the fair value of pension plan assets. The pension liability iscalculated annually by an independent actuary using a straight line earnings method. The present value of the defined benefit obligationsis determined by discounting the estimated future cash outflows usinginterest rates corresponding to a 10-year Norwegian government bond,at the reporting date, extended in duration to provide a term to maturity approximating the terms of the relevant pension liability.

Actuarial gains or losses (estimate discrepancies) due to new informationor changes in the actuarial assumptions are recognised in the total comprehensive income in the period in which they arise.

Amendments to the pension plan's benefits are recognised through theincome statement profit or loss or recognised in income on an ongoingbasis, unless the rights under the new pension scheme are conditionalupon the employee remaining in service for a specific period of time (thevesting period). In this case, the cost linked to the change in benefitsis amortised on a straight-line basis over the vesting period.

A law on state subsidies to employees who take out contractual pensions in the private sector (AFP-tilskuddsloven) came into force on19 February 2010. Employees who take early retirement under the AFPscheme with effect from 2011 or later, will be given benefits under thenew scheme. The new AFP scheme constitutes a lifelong entitlementin addition to the National Insurance Scheme and can be taken out fromthe age of 62. In the new AFP scheme the plan is for the company topay a total premium based on the annual salary of the employee. Thepremium is calculated based on a fixed percentage of annual salary between 1 and 7.1 times the average National Insurance Scheme baseamount. The annual premium rate for 2011 represents 1.4 per cent. Premiums shall not be paid for employees after the year in which theybecome 61 years old. The accrued entitlements in the new scheme arecalculated based on the employee's lifetime income, which includesall prior work years in the basis for the pension entitlement. The newscheme is funded by the Government covering 1/3 of the pensionexpenses and the employer covering 2/3.

The new AFP scheme is treated for accounting purposes as a definedbenefit multi-employer scheme. This means that each company shallrecognise its proportional share of the scheme's pension obligations,pension plan assets and pension costs. If there are no calculations relating to the individual components of the scheme and there is nota consistent and reliable basis for making an allocation, the new AFPscheme is accounted for as if it were a defined contribution plan. Thisis the present situation and the new AFP scheme has therefore beenexpensed as a defined contribution plan.

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Termination benefitsTermination benefits are paid when employment is terminated bythe Group prior to the normal date of retirement or when an employeeaccepts voluntary retirement in return for these benefits. The Grouprecognises termination benefits when it has demonstrably committedto either terminate the employment of current employees in accordancewith a formal, detailed plan which the Group is irrevocably committedto, or to provide termination benefits as a result of an offer that wasmade to encourage early retirement. Termination benefits which aredue more than 12 months after the balance sheet date are discountedto their net present value.

Subordinated loans and hybrid tier 1 capital Subordinated loans have a lower priority than all other types of debt.A time limited subordinated loan can account for 50 per cent of thecore capital in the capital adequacy ratio, while perpetual subordinatedloans may account for up to 100 per cent of the core capital. Subor-dinated loans are classified as a liability on the balance sheet and aremeasured at amortised cost.

Hybrid tier 1 capital is a bond with a nominal interest rate, where SpareBank 1 Gruppen is not under a duty to pay interest during periods when dividends can not be disbursed, and neither is theinvestor entitled to interest payments that have not been made, i.e. theinterest does not accrue. Hybrid tier 1 capital is approved as a constituent of core capital, up to a limit of 15 per cent of total core capital. The Financial Supervisory Authority of Norway may requirethat the hybrid tier 1 capital be written down proportionally with equity if SpareBank 1 Gruppen's core capital adequacy falls below 5 percent or total capital adequacy is under 6 per cent. The written downamount relating to the hybrid tier 1 capital shall be written up beforedividends can be disbursed to shareholders or the equity written up.Hybrid tier 1 capital is recognised at amortised cost.

Insurance provisions in life insuranceAll the products in SpareBank 1 Livsforsikring AS are classified asinsurance contracts.

Insurance contracts shall be evaluated in accordance with IFRS 4. Thestandard does not contain specific valuation principles beyond certainlimited conditions. Accounting policies applied by the accounting entity in the preparation of prior financial statements are permitted onthe condition that the insurance provisions are sufficient under Norwegian regulations. In order to document this, the company mustcarry out an adequacy test. SpareBank 1 Livsforsikring AS carriesout such a test annually. This shows that previously applied policiesrelating to technical insurance provisions for life insurance may beapplied.

The technical insurance provisions for life insurance consist of an insurance fund and security fund. The insurance fund includes apremium reserve, supplementary provisions, a premium and pensionregulation fund, claim provisions and other technical provisions.

Critical assumptions and changes in technical insurance conditions:The guaranteed interest rate follows the regulations established by theFinancial Supervisory Authority of Norway. From 1 January 2011 theguaranteed interest rate is 2.5 per cent for new agreements, while theguaranteed interest rate on new accrued entitlements for group pensions will be 2.5 per cent from 1 January 2012. Moreover, new earnings and accrued entitlements follow the maximum permitted guaranteed rate of interest that applied at the time the entitlements wereearned.

The mortality assumptions are largely based on common surveys byFinance Norway (FNO), while the estimates for disability are chieflybased on the company's own experience. The mortality assumptionsfor the disabled have taken account of the correlation between disabilityand mortality. A new industry tariff K2005 with security marginsthat take into account higher life expectancy has been introducedfrom 2008 for group defined benefit pensions and paid-up policies fromgroup defined benefit pensions.

The reserve provisions and premiums are established based on a policy

that there should be a security margin in the reserves and the premiums.The security margins in the premiums and reserves are not quantified,but assessed by considering the levels of uncertainty and the maturitiesof the liabilities.

The ordinary premium reserve in the company is calculated using prospective policies on the same tariff basis as the premium tariff. IBNRand RBNS provisions have been made, using statistical methods basedon SpareBank 1 Livsforsikring AS's own experience.

The securities adjustment reserve Provisions for the securities adjustment reserve correspond to the netunrealised excess value of financial assets, with the exception ofinvestments in property, measured at fair value and included in theGroup portfolio of SpareBank 1 Livsforsikring AS. The net unrealisedvalue is determined by undertaking a total assessment of the portfolio.

Insurance provisions in P&C insuranceInsurance contracts shall be evaluated in accordance with IFRS 4. Thestandard does not contain specific valuation principles beyond certainlimited conditions. It permits the use of accounting policies which theentity has applied when preparing prior annual financial statementsunder the condition that the insurance provisions are evaluated asbeing sufficient according to Norwegian regulations, and not intendedto cover future claims payments under future contracts. This shows thatpreviously applied policies relating to insurance provisions for P&Cinsurance may be applied.

The Financial Supervisory Authority of Norway has established minimumrequirements for the various types of provisions, and provisions havebeen made for unearned premiums, claim provisions, security provisionsand reinsurance provisions. The minimum requirements for premiumprovisions and claim provisions have also been met for each industry,and for security provisions in each industry group.

Changes in the policies for determining claim provisions During the course of 2011 there have been revisions in the regulationsof the Act on insurance activity to insurance provisions in P&C and lifeinsurance. The regulation on claim provisions has been defined moreprecisely to also include expected indirect costs of claims in connectionwith incidents of harm which have occurred at a certain date buthave not yet been settled (IBNS losses). In addition, the regulations ontechnical insurance provisions no longer include the requirement foradministrative provisions. The transition to new regulations is regarded as a change in policy and the effect of the policy change hasbeen recognised directly in equity. Equity as of 31 December 2010 wasreduced by NOK 181 million due to this change in policy. Comparablefigures have been prepared for the balance sheet as at 31 December2010, changes in equity as at 31 December 2010, note 42 «Insuranceliabilities in life insurance» and note 43 «Insurance provisions in P&Cinsurance».

The new provision for expenses that are expected to be incurred butthat are not allocated directly to the cost of a claim (ULAE – unallocatedloss adjustment expenses) is presented in the balance sheet under theline item «premium and claim provisions in P&C insurance» and«Insurance provisons in life insurance». The changes are recogniseddirectly in equity.

Administrative provisions have been disclosed under equity in previous years and the end of the provision does not require anychanges to be made in equity.

Natural disaster provisions and guarantee provisions are not regardedas technical insurance provisions under IFRS 4. These provisions aredisclosed under retained earnings.

The reinsured's portion of technical insurance provisions is presentedas a receivable in the consolidated financial statements under IFRS.

ProvisionsThe Group recognises a provision when there is a present legal or constructive obligation that has arisen as a result of a past event, payment is probable and the amount can be estimated with sufficient

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reliability. Provisions are assessed at each balance sheet date andadjusted to reflect the latest best estimates.

In instances where there are several liabilities of the same type, the like-lihood that the liabilities will be settled is determined by evaluatingsuch liabilities as a whole. Therefore a provision is made even thoughthe likelihood of a settlement associated with certain individual cir-cumstances may be low.

Provisions are measured at the discounted present value of the expected stream of payments to fulfil the obligation. An estimated risk-free interest rate is used as the discount rate before tax whichreflects the current market situation and the specific risk linked to theliability.

Trade payables and other current liabilitiesTrade payables are measured at fair value on initial recognition. Subsequent measurements of trade payables are made at amortised cost,determined using the effective interest method.

Deposits from and liabilities to customers and financial institutionsDeposits from and liabilities to customers and financial institutions arelargely valued at amortised cost. Certain smaller fixed rate deposits andloans are measured at fair value through the profit or loss.

Interest income and interest expenseInterest income and interest expense linked to assets and liabilitiesmeasured at amortised cost are recognised in profit or loss on an ongoing basis based on the effective interest method. For deposits fromcustomers and financial institutions and liabilities to financial institutions carried at fair value, the interest portion is expensed as interest expense, while other value changes are classified as incomefrom financial instruments. All fees in conjunction with interest-bearing deposits and loans are included in the calculation of effectiveinterest rates and are thus amortised over the expected maturities.

Commission income and expensesCommission income and expenses are generally recognised on anaccrual basis as the services are provided. Fees in conjunction withinterest-bearing instruments are not recorded as commissions, butare included in calculating the effective interest rate and recognisedin the profit and loss accordingly. Fees from counselling are earned inaccordance with counselling agreements, generally as the servicesare rendered. The same applies to ongoing management services.Fees in conjunction with selling or acting as an intermediary forfinancial instruments, property or other investments which do notgenerate balance sheet items in the SpareBank 1 Gruppen accounts, arerecognised in profit or loss when the transactions are completed.

Revenues from debt collection operationsUnresolved debt collection cases are evaluated in accordance with thepercentage-of-completion method. This method requires revenues tobe recognised in the accounting period in which the debt collection services are rendered, in line with progress in the debt collectioncase. The evaluation of earned income at the balance sheet date is determined on the basis of an assessment of the debt collection cases'turnover rate, estimated degree of completion and actual fee incomeduring the last six months.

Fee income is recognised when payments from the debt collection casesare received. Changes in the carrying value of unresolved debt collection cases are presented in the profit or loss under the line item«other operating income». Book value is recognised as current assetsunder the line item «other assets».

Dividend income Dividends are recognised as income in profit or loss when the right toreceive payment is established.

Events after the balance sheet dateThe financial statements are regarded as having been approved forpublication once they have been considered by the Board. The AnnualGeneral Meeting, the Supervisory Board and regulating authorities maysubsequently decide not to authorise the financial statements, butmay not change them.

Events that take place until the date on which the accounts havebeen authorised for publication, and which affect conditions thatwere already known at the balance sheet date, will be incorporated intothe pool of information that is used when making accounting estimatesand are thereby fully reflected in the financial statements. Eventsthat affect conditions which were not known about at the balance sheet date are disclosed if they are material.

The financial statements have been presented on the assumption thatthe company will continue as a going concern. In the opinion of theBoard, this prerequisite exists at the time when the financial statementswere approved for presentation.

Share capital and share premiumOrdinary shares are classified as equity. Expenses which directly relate to the issuance of new shares or options with tax deductions arerecognised as a reduction of compensation received in equity.

DividendsThe Board's proposed dividend distribution is included in the Directors' Report and the statement of changes in equity. Proposed dividends to the parent company's shareholders are classified as equity until finally approved at the Annual General Meeting. From thedate on which the dividends are approved, they are classified as liabilities.

Group contributionGroup contributions to subsidiaries are recorded as an increase ininvestments in subsidiaries given that the transfer increases the valueof the parent company's shares in the subsidiary. Proposed groupcontributions rendered are classified as equity until finally approvedat the Annual General Meeting. From the date on which the group contributions are approved, they are classified as liabilities.

NOTE 3 – FINANCIAL RISK MANAGEMENT

Reporting financial risk factorsThe note provides a description of the risk management work in SpareBank 1 Gruppen Group. This note provides a description of:

Overarching goalsOrganisation of the risk management function, and establishedpolicy documentsDescription of SpareBank1 Gruppen Group's material risk exposu-resFollowing up and managing risk factorsPlans for further developing the risk management function

Overarching goalsRisk management in SpareBank 1 Gruppen Group shall support theGroup's strategic development and achievement of objectives, andensure the fulfilment of statutory capital requirements. Risk manage-ment shall ensure financial stability and sound asset management. Thisis to be achieved by:

A moderate risk profileA strong risk culture characterised by a high level of risk manage-ment awareness.Striving for an optimal application of capital within the adoptedbusiness strategyExploiting synergy and diversification effectsAdequate core capital in accordance with the chosen risk profileFulfilling the capital and solvency requirements established bythe authorities at all times

Organising the risk management functionThe responsibility for risk management and compliance in the Groupis divided between the boards of the individual companies, the GroupBoard and the line management. A risk management function hasbeen established at the Group level, which ensures for the consistentimplementation of risk management in SpareBank 1 Gruppen Group,and focuses on specific risk exposures at the Group level. The subsidiary company boards are responsible for overall risk management

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in their own companies, where separate functions for risk and compliance management have been established. The duties andresponsibilities of the risk management and compliance functionsare regulated by the governing documents prepared at the Grouplevel, and for the individual company. Responsibility for the overallrisk management within the Group lies with the Group Director of strategy, risk management and analysis in the parent company. Thisposition reports directly to the Chief Executive of SpareBank 1 Gruppen AS.

The organisation of the risk management function in SpareBank 1Gruppen Group

The control committeeThe committee shall supervise that the company's activities are conductedin an appropriate and reasonable manner in accordance with laws andregulations, the articles of association, guidelines established by theSupervisory Board and the Annual General Meeting, and directivesissued by the Financial Supervisory Authority of Norway.

The audit committeeThe purpose of the audit committee is to function as a preparatoryorgan for the Group Board in matters which relate to monitoring financial information and the Group's internal control and risk management.

Policy provisionsPolicy documents that have been approved by the Board at the Grouplevel form the basis for the structure and risk management limits for subsidiaries. Currently policy provisions have been established at theGroup level in the following areas:

Policy for internal controlPolicy for compliancePolicy for capital managementPolicy for ICAAPContingency plan for liquidity and capital management

Further policy documents will be prepared in order to meet the requirements laid down in the Solvency II regulations. This particularlyapplies to more detailed governing documents for insurance risk. The aimis for the Group to have fully established overarching governing documents by the first quarter of 2013, in accordance with Solvency II.The risk management function in SpareBank 1 Gruppen AS ensures forcompliance and control of the policy provisions designed in the subsidiaries.

Risk exposure in SpareBank 1 Gruppen GroupSpareBank 1 Gruppen Group is chiefly an insurance Group. Financial riskarises as a result of uncertainty in connection with the achievement ofobjectives during the ordinary activities of the Group's companies. Naturally enough, the Group's greatest exposure is related to life and P&C insurance activities. The risk associated with insurance operationsarises as a result of the uncertainty concerning the frequency and amountof the payments in comparison with the companies' revenues. The insurance premium is invested in order to produce a return, and there-fore also creates financial exposure to market risk. At the same time,events connected to operational and strategic risks, involving the possibility of negative consequences for the Group's reputation, willpotentially be risks inherent in the Group's activities.

The risk exposures that SpareBank 1 Gruppen Group regards as being

material, and which are encompassed by the Group's risk managementsystems, are described below.

Market riskThe risk of losses caused by changes in observable market variables, themost important of which are interest rates, currency exchange rates, security prices and property.

Ownership riskOwnership risk is defined as the risk that arises as a result of being anowner of a company, for example relating to the risk that the product companies assume in their operations, as well as the risk of a need forthe injection of new equity into one or more of these companies.

Credit riskThe risk that the company’s borrowers, intermediaries and reinsurers areunable to fulfil their obligations to SpareBank 1 Gruppen Group. Creditrisk also includes the risk of changes in general credit prices, the so-called spread risk, and reinsurance risk in the insurance companies.

Concentration riskThe risk associated with major commitments, industry concentration andgeographic concentration in credit or investment portfolios.

Insurance riskPremium risk is the uncertainty concerning the frequency and cost of futu-re insurance claims, and the risk of extreme events (disasters), in com-parison with the premium income from the insurance business. Reser-ve risk is the uncertainty linked to reserves which have already beenallocated for insurance events that have arisen.

Operational riskRisk that is due to inadequate or failing internal processes, failures byhumans, or failures in systems or external events. The definition alsoencompasses legal risk.

Liquidity riskThe risk of not managing to refinance obligations or to finance anyincreased funding needs without substantial added cost.

Strategic and commercial risk Strategic and commercial risk is the risk of losses resulting fromchanges in external circumstances beyond the control of the company,such as regulatory matters, or inadequate earnings or supply of capitaldue to an erosion of confidence and the company’s reputation in themarket, i.e. with customers, counterparties, shareholders and the authorities (reputation risk). Strategic risk also includes the risk oferrors of judgement in connection with company acquisitions or large IT investments for example.

Strategy connected to the use of financial instrumentsThe Group actively uses financial instruments to take positions in themarket and to reduce risk. The use of financial instruments is limited tothose instruments for which the risk and market value can be measuredand monitored by the Group's risk management and profitability measurement systems. Derivatives which are not traded in an active market are used solely for hedging purposes or if the Group seeks physical settlement of the underlying asset/liability. The contracts are notrecorded using hedge accounting.

Capital managementThe Board of SpareBank 1 Gruppen AS has adopted a common risk management policy for the group, which is subject to an annual review.A strategy, policies and limits have been established in connection witheach of the risk factors in the individual legal entities. Strategic decisions are also made in relation to asset allocations within eachcompany. Also refer to note 39 on capital adequacy.

Risk-adjusted capitalSpareBank 1 Gruppen AS determines its capital requirements basedon the different risk categories. The risk-adjusted capital requirementsare calculated for each subsidiary and for the group overall. Statisticalmethods and expert assessments and judgements are used as a basis whenperforming these calculations. It is not very likely that all the loss eventswould occur simultaneously, and there is therefore a diversification

SpareBank 1 Gruppen30

SpareBank 1 Gruppen AS

Risikostyring/compliance

SpareBank 1Livsforsikring AS

100 %

SpareBank 1Skadeforsikringkonsern 100 %

SpareBank 1Markets AS

97,2 %

SpareBank 1Gruppen Finanskonsern 100 %

ODIN Forvaltning AS

100 %

Risikostyring/compliance

Risikostyring/compliance

Risikostyring/compliance

Risikostyring/compliance

Risikostyring/compliance

Page 31: Annual Report SpareBank 1 Gruppen 2011

effect when considering all the risk categories as a whole. Risk capitalshall cover the unexpected losses and correspond to 99.5 per cent of possible losses in all risk categories for a time horizon of one year.

Capital requirementsSpareBank 1 Gruppen AS must have sufficient capital to cover unexpected losses. The Group is subject to the regulations for minimumlevels of capital adequacy and solvency. The Capital RequirementsRegulations also stipulate that the capital requirements must be assessedin relation to both the risk profile and the quality of risk management andcontrol systems. The capital management policy is subject to annualupdates and Board approval, and was most recently updated and approved by the Board in May 2011. The capital management policy shallensure that SpareBank 1 Gruppen Group has an optimal level of equityin relation to the defined risk tolerance, risk profile and scope of the business.

SpareBank 1 Gruppen Group uses risk-adjusted return as one of severalfinancial management parameters. The risk-adjusted return for theGroup as a whole and for each subsidiary is noted in the quarterly riskreports. The use of risk-adjusted returns will become increasingly important under the introduction of the Solvency II regulations.

Monitoring and managing risk factorsMarket riskThe Group’s consolidated market risk is measured and reported quarterlyto the Board of SpareBank 1 Gruppen AS. The calculation is based on aVaR model. A corresponding model is used for the follow-up of each subsidiary, and each company in the Group also follows up and manages its own risk exposure in accordance with its own models androutines. Below figure 1 is a description of the model (VaR model) anddefinitions for calculating the Group's overarching risk, as well as theactual exposure at year-end.

Estimates and assumptions in the VaR modelThe Board has decided that risks are to be reported at a 99.5% confidencelevel. The holding period is 12 months. Correlations are also calculatedusing a similar method to last year's. The securities adjustment reserve,additional provisions, investment returns and interest rate guaranteeshave not been taken into account.

Market risk is calculated using the following formula:VaR = Value * σ * √T * nc.

σ = Standard deviation, assetT = Duration/ownership nc = Standard deviation given confidence level

(99.5 % single tailed standard deviation = 2.58)

Interest rate riskInterest rate risk is the risk of loss incurred due to changes in interestrates. The risk primarily arises as a result of investments in fixedincome securities, from fixed rate loans, financing using fixed incomesecurities, and from using derivatives.

Value at Risk is given as the value of an asset multiplied by the asset's sensitivity to changes in interest rates multiplied by the maximum negative change in interest rates for a given holding periodand confidence level.

The bond portfolio is weighted by duration in the following timeintervals: (1–3 months), (3–12 months), (1–3 years), (3–5 years) and(over 5 years). The duration expresses each interval's price sensitivityin relation to a change in interest rates. Based on time series data ofmonthly historical interest rates dating back to 1994, the standard deviation of the complete interest rate time series is calculated, and average interest rates are calculated to match the intervals.

Based on the duration-weighted exposure, historical interest rate fluctuations, the holding period and confidence level, VaR is calculatedfor each time interval, and subsequently aggregated to a total VaR onfixed income securities.

Sensitivity analysis of market risk linked to interest rate riskSpareBank 1 Gruppen Group is exposed to market risk linked to interest rate risk. Interest rate risk is primarily linked to the investmentportfolios in SpareBank 1 Livsforsikring AS and SpareBank 1 Skade-forsikring Group. Shown below is a sensitivity analysis of interest raterisk associated with each entity.

The table below figure 2 shows an estimate of the expected effect onthe income statement of an immediate change in interest rates. Thetable has been prepared in connection with internal risk monitoringin SpareBank 1 Gruppen AS. The calculations are based on changesin value and changes in cash flows 12 months ahead on money marketand bond portfolios in SpareBank 1 Livsforsikring AS, SpareBank 1Skadeforsikring Group and SpareBank 1 Markets AS. For SpareBank 1Gruppen AS and SpareBank 1 Gruppen Finans Group the effect on theincome statement is linked to net interest-bearing liabilities.

Spread riskSpread risk is the risk of changes in the market value of bonds and commitments as a result of general changes in credit spreads. Spreadrisk has been incorporated into SpareBank 1 Gruppen Group's VaRmodel since 2010, and is included in calculations in accordance withthe Capital Requirement Regulations. Refer to the Pillar 3 report for further information about spread risk.

Figure 1The table below shows gross market risk (i.e. before making deductions for the securities adjustment reserve and additional provisions) based on the VaR model:

Market risk 99,5% SpareBank 1 Gruppen Group

Amount in NOK million 2011 2010Interest rate risk 1 601 1 656 Equity risk 1 451 1 432 Currency risk 48 65 Risk linked to property 914 995 Diversification -540 -570Total market risk 3 475 3 578 Diversification as a percentage 13.5 % 13.7%

31

Figure 2SpareBank 1 SpareBank 1 SpareBank 1

SpareBank 1 Skade- Livs- SpareBank 1 Gruppen Gruppen forsikring forsikring Markets Finans

Parameter AS Group AS AS Group Total

Change in result in NOK million before tax1 % increase in interest rate -22 27 -157 3 -2 -1511 % reduction in interest rate 22 -27 157 -3 2 151

Page 32: Annual Report SpareBank 1 Gruppen 2011

Equity riskThe equity risk of securities is the risk of loss that arises from changesin the value of shares and other equity instruments in which theGroup has invested. For the purposes of calculating risk, the shares aredivided into Norwegian and international shares.

Historical returns for Norwegian and foreign shares are calculatedseparately dating back to 1994 based on a Norwegian index and a worldindex. The returns are used to determine a standard deviation, whichis adjusted for the holding period and confidence level and subsequently multiplied by the exposure in the various classes ofequity. The exposure corresponds to the market value of the share portfolio at the balance sheet date.

In order to be based on the volatility of the indices, SpareBank 1Gruppen Group assumes a well-diversified portfolio of equity instruments within the classes of equity, equivalent to ß=1. SpareBank 1Gruppen Group considers it to be a reasonable assumption that theportfolios in SpareBank 1 Livsforsikring AS and SpareBank 1 Skade-forsikring Group are well-diversified.

Currency riskCurrency risk is the risk of loss arising from changes in exchangerates. The Group measures currency risk on the basis of net positionsin the different currencies.

Historical foreign exchange rates are used to determine the volatilityof the pertinent currencies, which forms a basis for calculating the riskexposure, for a given level of confidence.

Risk linked to propertySpareBank 1 Group has substantial property exposure in both SpareBank 1 livsforsikring AS and SpareBank 1 SkadeforsikringGroup. The property portfolio is part of the ongoing allocation ofassets in the companies, which aims to achieve the highest possiblereturn for the exposure. In SpareBank 1 Livsforsikring AS responsibilityfor the management is assigned to a separate property department withseven employees. For SpareBank 1 Skadeforsikring Group, managementof the properties has been outsourced in its entirety to external managers.

The Group's properties are exposed to risk from changes in the propertymarket. The value of the property portfolio is affected by a number offactors, including local economic development, the properties' locations, maintenance and competition in the local property market.

Property volatility is calculated based on the historical performanceof property prices for offices and commercial properties respectivelydrawn from price indices published by Statistics Norway. The risk linked to property is treated separately when preparing SpareBank 1Gruppen's ICAAP.

Also refer to note 4 for information about the sensitivity of these figures and note 27 for information on exposure.

Hedge fundsThe risk associated with hedge funds is determined on the basis of thevolatility in an international hedge fund index. The risk is calculatedin accordance with a similar method to that used for securities. Expo-sure to hedge funds has been significantly reduced in recent years.

Correlation – Portfolio risk market riskBased on the time series, a correlation matrix is calculated between thedifferent asset classes in market risk. The correlations are determinedby analysing historical data going back to 1994, or as far back as datais available, based on a 12 month moving average. In order to make thecalculations more conservative, an average of the average correlationsand the highest correlation in the period is used. Based on the corre-lation matrix, a covariance matrix is calculated which is used todetermine the Value at Risk (standard deviation) of the total portfolio.

Also refer to notes 34 and 35 for further information on market risk inSpareBank 1 Gruppen Group.

Ownership riskOwnership risk is defined as the risk that arises as a result of being anowner of a company. SpareBank 1 Gruppen AS’s ownership risk in sub-sidiaries is related to the risk that the individual product companiesassume in their operations, as well as the risk of a need for the injec-tion of fresh capital into one or more of these companies. Policies forcapital management at the Group level have been established to ensurethat the companies operate in accordance with the owner's capacity andappetite for risk.

Credit riskThe Group's credit risk is primarily linked to SpareBank 1 LivsforsikringAS and SpareBank 1 Skadeforsikring Group, and the business activitiesin SpareBank1 Gruppen Finans AS.

The credit risk in SpareBank 1 Skadeforsikring Group and SpareBank 1Livsforsikring AS is related to money market investments (bonds andcertificates), and reinsurance. The Boards of these companies haveadopted limits for the various securities issuers. In addition, a minimumlevel for the credit ratings within the different issuing groups hasbeen stipulated. Detailed regulations regarding the permitted levels ofrisk on investments have been issued in a separate mandate to externalmanagers.

Shown is an overview of the 10 largest exposures to issuers.

Market value NOK million as at 31.12.11SpareBank 1 SpareBank 1

Livs- Skade- Share forsikring forsikring Total of total

Issuer AS Group value portfolio

Den norske stat 834,7 834,7 4,5 %DNB Bank ASA 315,7 184,8 500,5 2,7 %DNB Boligkreditt AS 351,6 351,6 1,9 %Nordea Eiendomskreditt AS 304,8 304,8 1,6 %Kreditanstalt Fuer Wiederaufbau 263,6 263,6 1,4 %SpareBank 1 SR-Bank 255,2 255,2 1,4 %Sparebanken Sør 248,5 248,5 1,3 %Sparebanken Møre 235,9 235,9 1,3 %Sparebanken Øst 222,7 222,7 1,2 %Swedbank Hypotek AB 220,5 220,5 1,2 %Sparebanken Vest 213,3 213,3 1,2 %Helgeland Sparebank 212,5 212,5 1,1 %KLP Kommunekreditt AS 201,1 201,1 1,1 %Landshypotek AB 201,0 201,0 1,1 %SpareBank 1 SMN 194,4 194,4 1,1 %General Electric Capital Corp 175,6 175,6 0,9 %Totens Sparebank 169,1 169,1 0,9 %Møre Boligkreditt AS 167,5 167,5 0,9 %SpareBank 1 Boligkreditt AS 165,0 165,0 0,9 %

Refer to notes 30, 31 and 33 for further information about the credit riskin SpareBank 1 Gruppen Group.

Concentration riskThe Group is considered to have a low level of concentration risk. Theinsurance portfolio in SpareBank 1 Skadeforsikring Group is deemedto be relatively well diversified through a large number of customers,and the insurance contracts relate to different geographic areas and anumber of different products. A concentration risk in P&C insurance isthe exposure to natural disasters, but in Norway this is very limited viaparticipation in the Norwegian Natural Perils Pool. The insuranceportfolio in SpareBank 1 Livsforsikring AS is well-diversified asregards insurance risk. It is largely comprised of individual insurancesand group insurances where the insurance risk is not concentrated.There is some concentration risk linked to the life insurance company'sinvestment portfolio, largely to the finance industry. From the view-point of the Group, other companies have only a modest exposure toconcentration risk.

Liquidity risk and counterparty riskManagement of the Group's financial structure is based on an overallliquidity strategy that is assessed and approved by the Board at leastannually. Each subsidiary has a corresponding liquidity strategy, with

SpareBank 1 Gruppen32

Page 33: Annual Report SpareBank 1 Gruppen 2011

the associated Board approval. The liquidity risk is reduced by thediversification of funding sources, instruments and maturity periods.A Group account scheme in SpareBank 1 Gruppen Group has been established in order to reduce liquidity risk. This scheme was set upin the fourth quarter of 2011.

The liquidity risk in SpareBank 1 Gruppen Group is mainly linked tothe parent company, and is considered to be low to moderate.

The guidelines for liquidity management are subject to annual review,and are updated and approved by the Board in February 2012 at thelatest. The contingency plan for capital adequacy and liquidity management seeks to highlight the overarching liquidity managementin the Group, as well as identify and explain events that can occur and prepare plans to meet these events. The contingency plan also provides a clear description of the division of responsibilities. Eventsthat may affect liquidity levels include:

Identified losses in subsidiaries that require an injection of capitalLiquidity buffers under target levelsCancellation of uncommitted lines of credit

The guidelines for SpareBank 1 Gruppen Group are based on thegroup having sufficient liquidity buffers to cover one year of ordinaryoperating costs and interest expenses.

The daily liquidity management requirements specify that the parentcompany must have a liquidity buffer of NOK 150 million at all times(the requirement as at 31 December 2011 was for NOK 400 million,reduced to NOK 150 million in January 2012). The liquidity buffer shallconsist of bank deposits and marketable securities which are subjectto continuous trade. In addition, the liquidity buffer may comprisecommitted credit facilities. The liquidity buffer exceeded NOK 400 million as at 31 December 2012.

The Chief Financial Officer is responsible for monitoring that theliquidity buffer is within target levels. If the liquidity buffer is morethan 20 per cent under the target level, it must be reported to the CEOin SpareBank 1 Gruppen AS. A plan must be drawn up which specifies how the liquidity buffer can be restored to its target level asquickly as possible. The plan must be delivered to the Group executivemanagement. The requirements as set out in the guidelines have beenfulfilled during the period, and the liquidity situation in the parentcompany is considered to be good.

SpareBank 1 Gruppen Group has established a close collaboration withthe SpareBank 1 banks for funding purposes. Through this type of close collaboration, the chance of resolving any liquidity challengesis substantially improved. The collaboration agreement with the SpareBank 1 banks has been taken into account when establishing theliquidity buffer and is the reason that it has been reduced from NOK400 million to NOK 150 million, with effect from January 2012.

Refer to note 32 for further information on liquidity risk and settlementrisk in SpareBank 1 Gruppen Group.

The Group's insurance activitiesAs the Group is largely an insurance-based entity, this section will provide further information about the Group's risk management activities in life and P&C insurance.

SpareBank 1 Skadeforsikring GroupThe company's Solvency II activities during the course of 2011 havebeen related to work on further developing and implementing solutions in a number of areas including regulatory risk modelling,Own Risk and Solvency Assessment (ORSA) and reporting. SpareBank1 Skadeforsikring Group has also started a dialogue with the FinancialSupervisory Authority of Norway about the use of internal models forcalculating capital requirements under Solvency II. The Group aimsto be granted early approval for its partly internal model, and to fulfilthe requirements under Solvency II. As a result of the transitional scheme for regulatory capital requirements that has been announcedby the authorities, the bulk of the approval process for internal modelswill be completed during 2013.

Insurance riskThe risk in an individual insurance contract is the probability that anevent takes place and the uncertainty in relation to the amount of thecompensation. Part of the nature of insurance contracts is that risk israndom and therefore has to be estimated. For a portfolio of insurancecontracts where probability theory has been used in determining theprice and technical insurance provisions, the largest risk the companyfaces in relation to insurance contracts is that the actual claim payoutsexceed the provisions that have been made. The risk relating to insurancecontracts depends upon how the contract has been written. There isgreater uncertainty associated with so-called long-tailed productswith long claims settlement times, than short-tailed products where thefinal compensation amount is more quickly determined. The insurancecompany is also exposed to large claims, but these are covered by reinsurance contracts for the most part.

The results from the insurance business in 2011 were negativelyimpacted by a number of factors including a high proportion of largeclaims within the fire combined corporate market, the 22 July incident,and a weaker natural perils result due to floods. Within the mainproducts of houses and cars, the claims ratio is lower compared withthe previous year, and a series of measures have been introduced aimedat further improving the claims ratio. The financial performance of thecorporate market has weakened compared to 2010. In addition, theclaims ratio in Unison forsikring AS is at a high level. Through the rein-surance programme SpareBank 1 Skadeforsikring Group will continue to reduce the uncertainty relating to portfolio growth, stabilise the technical insurance results and reduce the uncertainty inindustries with high standard deviations. During 2011 there have notbeen any major changes in the Group's reinsurance programme, andportfolio growth has been moderate. SpareBank 1 SkadeforsikringGroup is adequately protected against catastrophes and large claimsthrough the reinsurance programme.

Market riskThe investment strategy describes the target risk profile, and defineslimits that are tailored to the Group's risk tolerance. Market risk is therefore continually assessed in relation to the Group's risk capital,and is monitored by stress tests that are based on provisions of the assetmanagement regulation in addition to the Group's own risk models.SpareBank 1 Skadeforsikring Group does not use currency instrumentsas a general rule, but makes an exception when hedging underlyinginvestments. Foreign investments are hedged against currency risk tothe maximum extent possible. The Group's allocation of investmentsbetween different instruments has been stable during the year. SpareBank 1 Skadeforsikring Group's exposure in shares is limited inrelation to the Group's solvency. The Group's total exposure to marketrisk is considered to be moderate.

Liquidity riskThe majority of the Group's investment portfolio is invested in moneymarket instruments with good liquidity. The Group's liquidity risk istherefore low. The Boards have prepared guidelines for what propor-tion of the investment portfolio should comprise liquid investmentsat any time.

Credit risk and counterparty riskSpareBank 1 Skadeforsikring Group is primarily exposed to counter-party risk through fixed income securities in the investment portfolio,the reinsurance portion of technical insurance provisions and actualclaims against reinsurers. The reinsurance programme aims to reducecounterparty risk through a recommended minimum rating of A(-) fromS&P, at the same time as exposure to certain entities is evaluated. Asa result of the turbulent times in recent years, counterparty risk is closely monitored. Investments are undertaken with financially soundcounterparties. The reinsurance market has been stable in 2011, without any major changes in the reinsurance programme or in the credit evaluation statuses of SpareBank 1 Skadeforsikring Group'smost important counterparties. There have not been any losses in thecredit portfolio in 2011, and the risk is presently considered to be low.The specified investment limits are involved in determining counter-party risk, and the portfolio is regarded as being well diversified.Moreover, there have not been any material breaches of the investmentlimits in 2011.

33

Page 34: Annual Report SpareBank 1 Gruppen 2011

34

Concentration of insurance riskSpareBank 1 Skadeforsikring Group has prepared contractual regulations that stipulate which insurance items the companies acceptin their portfolios. Checks are performed to ensure that these contractual regulations are complied with. In addition, the insurance system incorporates automatic checks on accumulated balances whensigning a new portfolio. Reinsurance coverage is adjusted in relationto the risk exposure in the insurance portfolio.

SpareBank 1 Livsforsikring ASSpareBank 1 Livsforsikring AS provides pension products that containinterest rate guarantees, i.e. the customers are guaranteed a minimumreturn each year. The company's average yearly guaranteed interest rateis 3.13%. The investment strategy and thus the market risk for the various portfolios in SpareBank 1 Livsforsikring AS is adjusted to thecompany's risk tolerances for various products, contracts and primarycapital. Active risk management in the customer portfolios reduces the likelihood of failing to reach the interest rate guarantee. TheDepartment for Risk Management monitors market risk in the companyand follows up the limits and guidelines that apply to the company.

The company's investment strategy contains limits for how the company shall invest and manage its assets, including permitted markets, asset classes and financial instruments. The investment strategy also contains guidelines and limits for credit exposure, counterparty exposure, currency risk and the use of derivatives in hedging strategies. The company's investment strategy is adopted bythe Board.

The risk management in SpareBank 1 Livsforsikring AS is taskedwith contributing to the highest possible returns for customers andowners within an acceptable level of risk, by securing good managementand control of the risk that the company is exposed to. The risk levelshall correspond with the Board's appetite for risk. Risk managementshould support the company's strategic development and achievementof its objectives, secure financial stability and sound capital manage-ment.

The company's strategy for risk management has been adopted by theBoard and includes processes, limits and trading rules that the company must adhere to when the risk exposure in the companyexceeds specific levels. The risk management function is handled bythe Department for Risk Management, with responsibility for monitoring and following up financial risk, reporting and compliance.The Department is organised in the section for Finance and RiskManagement and is independent from operational functions. Thecompany's total risk exposure is described in the company's riskreport which is considered by the Board. SpareBank 1 Gruppen AS hasthe overarching responsibility for risk management in the Group.

Market riskSpareBank 1 Livsforsikring AS continuously assesses the market riskin the company through the use of stress tests. The company also usesother statistical tools and methods to assess market risk. The companyis working on developing models to measure and monitor risk. Thecompany also manages market risk through a minimum required rateof return which will contribute to the company achieving predefined

revenue targets. The company has defined trading rules for measuresto reduce risk if the return falls short of the minimum requirements orthe buffer capital utilisation reaches predefined levels.

Interest rate riskThe company's financial risk mainly relates to whether the companyis able to fulfil its annual interest rate guarantee. The company has assumed a substantial interest rate risk in its interest rate and pensioninsurance. The company's average annual interest rate guarantee is for3.13 per cent, calculated using an average insurance fund. New contracts in 2011 are offered with a guaranteed interest rate of 2.5 percent. Persistent low interest rates will increase the risk connected tothe interest rate guarantee. If the annual return looks to be less than theinterest rate guarantee, financial measures are enacted to ensure thatthe return is at the same level as the interest rate guarantee. The securities adjustment reserve will act as a buffer. If this is insufficient,funds will be taken from the supplementary provisions to cover theguarantee. Any negative returns must be covered by the company'sequity. In good financial years, part of the profits are allocated tosupplementary provisions. This is regulated to a maximum of 12% ofthe contract's premium reserve.

Average interest rate guarantee 2011

Individual endowment insurance 2.36%Individual annuity and pension insurance 3.64%Group pension insurance 2.91%Group life insurance 0.00%Accident insurance 0.00%Total 3.13%

The table above shows the average interest rate guarantee per productgroup for 2011.

Insurance riskFor the majority of product groups, the company offers disabilitycover, either through a disability pension, premium exemption ordisability capital. Whole life insurance is offered within individual contracts and group life insurance. In group pensions the companyoffers survivor pension benefits that come into effect in the event ofthe insured party's death. Changes in the payment regulations in theNational Insurance Scheme for disability payments etc. will have a substantial effect on disability numbers and provisions. In relation tothe change in the risk of mortality, the steadily increasing longevityaffects whether the date on which payments actually commence matches the forecasts. With a continuously increasing lifespan, thecompany's future old age pension payments will be rising, comparedwith prior years.

Managing insurance riskRisk manuals have been prepared which contain guidelines for risk assessments including health and contractual regulations whenacquiring potential customers. A health assessment of the insuredparty is carried out when signing individual risk products. The resultof this assessment is reflected in the level of the risk premium required.When signing group agreements with risk cover, an assessment iscarried out of the firm's risk (underwriting). When underwriting, the

SpareBank 1 Gruppen

Gross overdue premiums per P&C insurance product

Figures in NOK 1,000

Onshore property 1 804 979 Industrial fire insurance 10 410 Marine 244Motor 1 790 602 Onshore property Commercial 377 520 Energy/Oil -Yacht 75 934 Motor commercial 280 564 Total in. Reass. 59Accident insurance 164 079 Liability 54 863 Total marine, energy, reass 303Travel insurance 336 029 Workman's compensation 167 342Other retail insurance 23 683 Safety 89 606 Natural perils / Pool 120 957

Other 61 306Total retail lines 4 195 307 Total commercial lines 1 041 612 Total gross overdue premimums 5 358 180

Refer to note 46 for further information on insurance risk in P&C insurance.

Page 35: Annual Report SpareBank 1 Gruppen 2011

company's financial position, industry and sickness and disability history are evaluated.

In the company's existing portfolio, the insurance risk is monitored foreach product group. The risk result from each product group is divided into mortality, disability and survival elements. Risk result performances are monitored throughout the year. For each type of riskthe ordinary risk result for a period is the difference between the riskpremiums that the company has received for the period and the compensation paid relating to the period. Insurance incidents whichthe company has not been notified about, but which are likely tohave occurred based on experience, are included in this assessment.In connection with risk-based supervision, the company has prepareda framework for managing and controlling insurance risk.

ReinsuranceThe company has a reinsurance strategy that is considered annuallyby the Board. The strategy includes targets for the company's reinsuranceprogramme and specifies how the reinsurance programme is to bemonitored.

The company has signed reinsurance cover on quotas, reinsuredamounts, and excess of loss/catastrophic risk.

Concentration riskThe insurance portfolio is well-diversified as regards insurance risk.It is largely comprised of individual insurances and group insuranceswhere the insurance risk is not concentrated.

Refer to note 40 for further information on receivables from reinsurers,and notes 45 and 46 on insurance risks for life and P&C insurancerespectively.

Operational riskOperational risk is defined as the risk of losses resulting from inadequate or failed internal processes or systems, human error orexternal events. In SpareBank1 Gruppen Group legal risk is includedin operational risk. All companies in the Group are exposed to operational risk.

Operational risk in the subsidiaries is currently documented in connection with work relating to compliance with the regulations onrisk management and internal control. The work undertaken in connection with risk reporting is primarily documented through theannual ICAAP report, and at the same time an annual internal controlreport which is approved by management is also presented. Databasesfor managing and following up measures in connection with reportsfrom the Financial Supervisory Authority of Norway, internal audit andinternal control have been implemented.

In addition, SpareBank 1 Gruppen Group has a separate compliancefunction in the parent company, while the subsidiaries also have a compliance function. The compliance forum meets regularly at theGroup level, and is attended by the compliance manager in each of thecompanies. The work on compliance shall ensure that SpareBank 1Gruppen Group complies with and adheres to the relevant laws andregulations, industry standards and internal guidelines. The workalso encompasses the task of monitoring developments in the areas, andexplaining the potential consequences of failing to follow up changesin these areas. Compliance risk is the risk that the Group incurs publicsanctions, financial loss or its reputation becomes tarnished as aresult of failing to comply with and adhere to the relevant laws andregulations, industry standards and internal guidelines. Compliancerisk is regarded as part of operational risk. Compliance is reported quarterly to the Board of SpareBank 1 Gruppen AS, in accordance withcompliance templates for the Group.

Strategic and commercial riskStrategic and commercial risk in capital requirement calculations has been determined on a discretionary basis to date. A process forquantifying the risk associated with this has not yet been established.SpareBank 1 Gruppen Group is working on finding parameters inorder to calculate strategic and commercial risk in a quantitative manner.

SpareBank 1 Gruppen Group will, in conjunction with the alliance'sforum for risk management, continue to focus on establishing quantitative models with a view to estimating capital requirements forthe strategic and commercial risk in the Group.

Correlation - Portfolio riskNot all events are expected to take place at the same point in time. Therefore it is reasonable to take into account the diversificationeffects between different classes of assets. A correlation matrix betweenthe asset classes is used, in which correlations between market risk,credit risk, insurance risk and property are calculated.

Further developmentTowards the end of 2011 SpareBank 1 Gruppen Group launched a project to further integrate and coordinate risk management in theGroup. This work will focus on improving effectiveness and optimisingthe risk management processes in the Group and the companies. It isalso an overarching goal for SpareBank 1 Gruppen Group to fulfil allthe requirements at a Group level that are expected under Solvency IIby the end of 2013, even though they will not be introduced before 1January 2014.

NOTE 4 – CRITICAL ACCOUNTING ESTIMATES ANDJUDGEMENTS

The Group prepares estimates and makes assumptions concerning thefuture. These estimates and judgements are continually re-evaluatedand are based on historical experience and a number of other factors such as future expectations believed reasonable given the current circumstances. Yet, as per definition, these accounting estimates will seldom fully match the actual results. Estimates and assumptions thatrepresent a significant risk of material adjustments to the carryingamounts of assets and liabilities for the next financial year are discussedbelow.

Fair value of derivatives and other financial instrumentsThe fair values of financial instruments that are not traded in an activemarket are determined using varying valuation techniques. The Groupconsiders, and chooses, techniques and assumptions reflecting marketconditions on the balance sheet date as closely as possible. For a number of financial assets classified as available for sale yet not tradedin an active market, the Group has used discounted future cash flows forvaluation. The valuations require a high degree of judgement. When assessing whether fair value is lower than cost, the Group takes into consideration, among other factors, the future prospects in the relevantindustry, the company’s financial position and technological develop-ment.

Investment propertiesThe insurance companies in SpareBank 1 have large property investmentportfolios. Most of the properties are organised as their own limited companies. Properties in subsidiaries and associated companies areassessed individually using the company's internal valuation model by discounting estimated future net cash flows by the required rate ofreturn for the individual investment. The required rate of return takesaccount of the level of interest rates, general risk in the property marketand risk specific to the individual property. The fair value calculation isupdated at the close of each financial year. For control purposes, external valuations are carried out for a sample of properties in the portfolio in parallel with the internal valuation. The sample consistsof a randomly selected, predefined number of properties. The samplesubject to external valuation is rolled over for a period of 3 years.

Deferred tax has not been calculated for unrealised changes in valuebecause the properties are owned through limited companies subjectto the tax exemption method. However, the effect of latent tax in the limited companies is calculated outside the valuation model in connection with the valuation of shares. The latent tax in the companiesoften results in a discount in relation to the property value when trading such companies. Latent tax is calculated at 7% of the differencebetween fair value and taxable value, reduced by booked deferred tax

35

Page 36: Annual Report SpareBank 1 Gruppen 2011

36

in the company financial statements for the properties. This is in linewith normal industry practice. The net effect is treated as a write-downof the value of shares in property companies.

Property used by the owner is revalued at fair value every year usingthe company's internal valuation model. Annual depreciation is calculated for owner-used property. An increase in carrying amountdue to revaluation is recognised through other comprehensive incomeand the company portfolio's share is added to the fund for valuationdifferences. Downwards adjustments of previous increases in value inthe balance sheet for the same property are recognised in the same way.

Please also refer to note 27 Investment properties.

Sensitivity of propertiesProperties are especially sensitive to the discount rate. If no other parameters change, a raise of 0.25% will reduce the values by approximately NOK 132 million, or approximately 3.5%. After anexisting tenancy expires, premises are leased out again on the currentmarket terms. If cash flow after expiry is reduced by 1%, the marketvalue is reduced by approximately 0.75%.

PensionsThe net present value of pension liabilities depends on several factorsas determined by actuarial assumptions. The assumptions used in calculating net pension cost (income) include among other things, thediscount rate. Changes in these assumptions affect the value of the pension liabilities in the balance sheet.

The Group determines a suitable discount rate at the end of eachyear. This discount rate is used to calculate the net present value offuture estimated cash out-flows needed to settle the pension liabilities.The suitable discount rate is determined in reference to 10-year Norwegian government bonds adjusted for the average remainingperiod of service.

Other pension assumptions are partly based on market conditions.More detailed information is given in note 48.

Potential changes regarding expected annual increases in salaries,discount rates and so on, can have a significant impact on the calculated employee pension liabilities. The guidance note issued bythe Norwegian Accounting Standards Board specifies that changes of+/- 1 % in the discount rate represent a change of 15 – 20 % in totalpension liabilities.

Estimated impairment of goodwill The Group performs annual impairment tests to identify any possible impairment of goodwill (as described in note 14). The recoverable amount of cash generating units is determined by calculating discounted future cash flows. These calculations requireestimates consistent with the Group's market valuation.

Insurance provision estimates in life insuranceInsurance provisions in life insurance are based on factors such as lifeexpectancy, expectations of mortality rate, disability rate, and interestrates. Changes in such assumptions affect the size of the insurance provisions. The premium provision is calculated as the cash value ofthe company’s liabilities less the cash value of future premiums. The basic interest rate used in the calculation that valid for the

individual insurance contract, and the calculation is done accordingto the Act on premiums and insurance funds in life insurance. Themaximum accepted basic interest rate is reviewed by the authoritiesconsidering the interest on long term government bonds. Potentialchanges in the basic interest rate will affect the size of the liabilities.

The mortality assumptions are largely based on common surveys byFinance Norway (FNO), while the estimates for disability are chieflybased on the company's own experience.

There are claim provisions for all products, including both reportedbut not settled (RBNS) and incurred but not reported (IBNR) losses.IBNR provisions and RBNS provisions are calculated using statisticalmethods based on the company’s own experience.

Insurance provision estimates in P&C insuranceThe use of estimates in the calculation of insurance provisions for P&Cinsurance is primarily related to claim provisions. Insurance products are classified in two main groups: short-tailed business andlong-tailed business. The classification is based on the time spanfrom when a loss or damage occurs until the loss or damage is reported and finally settled. Long-tailed business primarily involvesinsurance related to personal injuries.

The basis for the claim provisions in SpareBank 1 Skadeforsikring ASis the expected loss from claims incurred or future claims based onreported damages. In addition to ongoing follow-up related to currentclaims, an assessment of all unsettled claims shall be performed annually. Provisions for IBNR and potential additional provisionsrelated to long-tailed businesses are measured using models. Regression models are used as a starting point for vehicle or bodily injury, occupational injury and safety. An assessment of potentialissues related to changes in the portfolio is also performed. For short-tailed businesses, the IBNR is determined based on reviews ofthe experience data pertaining to the lag in the risk group during previous years, in addition to changes in the portfolio, the frequencyof claims, major injuries and so on. A retrospective measurement is alsomade to assess the estimates for the claims provision against the development of the factors involved in the calculation: paid claims,individual provisions for reported claims and IBNR.

Provisions for losses related to a reinsurer's bankruptcy are measuredat net present value. The parameters in the basis of the calculation arefuture expected dividends, inflation and the payment status of theclaim.

Sensitivity analysis of the asset side in the life insurance companyThe asset side of SpareBank 1 Livsforsikring AS is stress tested to indicate what the effect on the owner's profit would be if the followingscenarios were to occur: 20% fall in equity markets, 1.5% increase ininterest rates and 12% fall in property market. These stress factorsmatch the stress factors in Stress Test II for equivalent risks. Thestress test scenarios were calculated as of 31 December 2011.

Scenario Impairment NOK million

Fall in equity markets (-20%) 423Climbing interest rates (+1.5%) 233Fall in property values (-12%) 450

SpareBank 1 Gruppen

Page 37: Annual Report SpareBank 1 Gruppen 2011

37

NOTE 5 – CHANGES IN GROUP STRUCTURE

2011

Skandia HelseforsikringIn January 2010, SpareBank 1 Skadeforsikring AS acquired Skandia Lifeline Norway's entire health insurance business from Skandia InsuranceCompany Ltd. The agreement was contingent upon the necessary approvals being granted by the Norwegian and Swedish authorities. These approvals were granted in October 2010. For practical purposes, the takeover date was set as 1 November 2010. The acquisition analysis had notbeen completed as of 31 December 2010 and Skandia was included in the financial statements of SpareBank 1 Skadeforsikring AS for 2010 withpreliminary figures. At year-end 2010, the taken over health insurance business had been integrated into SpareBank 1 Skadeforsikring AS's existing portfolio.

The taken over business sells health insurance to corporate customers and retail customers. The health insurance guarantees treatment withina given timeframe for specified illnesses and injuries.

SpareBank 1 Skadeforsikring AS bought the business because it wants to focus on a growing segment in the Norwegian insurance market. Theacquisition provides SpareBank 1 Skadeforsikring AS with a share of the health insurance market, and SpareBank 1 Skadeforsikring AS's distributors will be able to offer health insurance on a equal footing with SpareBank 1 Skadeforsikring AS's other insurance cover.

The acquisition was finally completed in April 2011. The acquisition is a transfer of business regulated by IFRS 3R. The acquisition cost is statedat the fair value of the assets transferred as remuneration. Identified assets and liabilities are recognised at their fair value on the acquisition date.The final acquisition analyses indicated the following fair values for identified assets and liabilities:

Book valueBook value reclassified Fair value Fair value

NOK 1,000 01.11.10 01.01.11 01.01.11 adjustments

Statistics and products - - 3,318.0 3,318.0Goodwill - - -10,476.3 -10,476.3Trade receivables 1,247.3 1,247.3 1,247.3 -IT 21.0 - - -Art 20.8 - - -Cash and cash equivalents 29,502.2 29,502.2 29,502.2 -Total assets 30,791.3 30,749.5 23,591.2 -7,158.3

Premium reserve additions - 5,000.0 - -5,000.0Claim processing costs - 3,200.0 - -3,200.0Other equity - -41.7 - 41.7Cost price - - 1,000.0 1,000.0Total equity - 8,158.3 1,000.0 -7,158.3Provisions - personnel 509.8 509.8 509.8 -Other liabilities 218.9 218.9 218.9 -Premium reserve 13,687.3 8,687.3 8,687.3 -Claim provisions 16,375.2 13,175.2 13,175.2 -Total equity and liabilities 30,791.2 30,749.5 23,591.2 -7,158.3

The negative goodwill is primarily a result of a favourable acquisition, i.e. the value of the identifiable assets and liabilities exceeds the total remuneration. According to the revised IFRS 3.34, negative goodwill should be recognised as income on the day of the takeover. The final acquisition analysis was completed in April 2011 and negative goodwill of NOK 10.5 million was recognised as income in the consolidated financial statements under «Other operating income».

The health insurance business contributed the following figures in the consolidated financial statements:

NOK 1,000 2011

Gross premiums 33,517Premiums earned for own account 32,853Pre-tax profit -3,363Total profit -2,421

Costs totalling NOK 1.55 million associated with the takeover were recognised as costs. Of this, NOK 1.26 million was recognised as costs in 2010.

Acquisition of SB Securities LLPSB Securities LLP was acquired by SpareBank 1 Markets AS in 2011. The acquisition method is used when accounting for acquisitions of subsidiaries in the consolidated financial statements. The acquisition cost is stated at the fair value of the assets transferred as remuneration. Identified assets and liabilities are recognised at their fair value on the acquisition date. The company was consolidated with effect from 3 June 2011.

The company's offices are at 1 Bow Churchyard in London, and it is a securities company that primarily focuses on Nordic equities. The company was established in July 2008 under the name US Securities London LLP. As a result of the acquisition its name was changed to SB Securities LLP on 16 August 2011. The company had 4 employees as off 31 December 2011, and 2 new employees joined on 1 January 2012. Thevalue in the company lies in its established organisation and human capital, as well as the network of customer relationships it has built up within the institution segment in London. There are no identifiable assets pursuant to IFRS 3R, and the entire difference between identifiableassets and the purchase price is therefore recognised as goodwill.

Page 38: Annual Report SpareBank 1 Gruppen 2011

38 SpareBank 1 Gruppen

Ownership Currency 1,000 Date NOK GBP interest Price

Cost price on acquisition date 03.06.2011 9,000 1,024 99.9% 8.7848Identifiable assets (99.9%) 03.06.2011 179 20 99.9% 8.7848Goodwill on acquisition date 1,004Goodwill 31.12.2011 9,321 1,004 9.2829

SpareBank 1 Markets AS holds the following book value of shares in SB Securities LLP as of 31 December 2011.

Ownership Currency 1,000 Date NOK GBP interest Price

Cost price of shares 03.06.2011 9,000 1,024 99.9% 8.7848Share issue 12.12.2011 2,711 300 99.9% 9.0372Book value of shares 31.12.2011 11,711 1,324

2010

Unison Forsikring ASSpareBank 1 Skadeforsikring AS acquired all the shares in Unison Forsikring AS in 2010. On 9 june 2010, SpareBank 1 Skadeforsikring AS submitted a bid for all the shares and by the end of the month it had received the advance acceptance of more than 95% of the then current shareholders. In July 2010, a private placement was carried out by Unison Forsikring AS towards SpareBank 1 Skadeforsikring AS worth NOK 150million. Unison Forsikring AS was consolidated from 1 July 2010, despite the transaction date being 19 July 2010.

Unison Forsikring AS is a Norwegian P&C insurance company that offers cover to retail customers, organisations and companies. The companydevelops bespoke solutions for organisations and associations, and, via them, their members. SpareBank 1 Skadeforsikring AS's expressed strategy is to strengthen its presence in new distribution channels and it therefore wants Unison Forsikring AS to act as the company's extendedarm into the market outside the bank and Norwegian Confederation of Trade Unions (LO). Unison Forsikring AS shall also, as a subsidiary of SpareBank 1 Skadeforsikring AS, operate as an independent unit in the market.

The acquisition is a transfer of business regulated by IFRS 3R. The acquisition method is used when accounting for acquisitions of subsidiariesin the consolidated financial statements. The acquisition cost is stated at the fair value of the assets transferred as remuneration. Identified assetsand liabilities are recognised at their fair value on the acquisition date. The acquisition costs of the shares in Unison Forsikring AS was NOK 56.4million. The final acquisition analyses indicated the following fair values for identified assets and liabilities:

Book value Fair value Fair valueMillion NOK 30.06.10 30.06.10 adjustments

Customer relationships - 14.0 14.0Goodwill - -117.9 -117.9Intangible assets 8.6 8.6 -Financial assets 283.2 283.2 -Reinsurer's share of gross unearned premium 33.0 33.0 -Reinsurer's share of gross claim provisions 366.6 366.6 -Receivables policyholders 79.1 79.1 -Receivables in connection with reinsurance 44.7 44.7 -Other receivables 1.1 1.1 -Other assets 78.4 78.4 -Deferred tax asset 16.9 130.0 113.1Total assets 911.6 920.8 9.2

Share capital 56.4 - -Administrative provisions 10.9 - -Provisions for natural disaster fund 5.6 - -Provisions for guarantees 8.2 - -Security provisions 40.3 - -Other retained earnings -53.8 - -Total equity 67.7 56.4 -11.3Deferred tax 25.4 22.8 -2.6Provisions for unearned premiums 122.7 122.7 -Gross claim provisions 635.2 635.2 -Pension liabilities 13.2 15.0 1.8Liabilities in connection with reinsurance 30.8 30.8 -Administrative provisions for run-off portfolio - 6.3 6.3Liability reinsurance contract (MYML) - 15.0 15.0Other liabilities 16.6 16.6 -Total equity and liabilities 911.6 920.8 9.2

The negative goodwill is primarily a result of tax losses carried forward in Unison Forsikring AS amounting to approximately NOK 400 million. According to the revised IFRS 3.34, negative goodwill should be recognised as income on the day of the takeover. The final acquisition analysis wascompleted in November 2010 and negative goodwill of NOK 117.9 million was at that time recognised as income in the consolidated financial statements under «Other operating income».

Page 39: Annual Report SpareBank 1 Gruppen 2011

39

The following figures were included from Unison Forsikring AS in the consolidated financial statements for 2010 after the acquisition on 1 July:

NOK 1,000 2010

Gross premiums 116,765Premiums earned for own account 105,771Pre-tax profit -19,489Other comprehensive income -1,876Total profit -21,365

If the takeover date had been 1 January 2010, SpareBank 1 Gruppen's consolidated financial statements would have shown the following figures:

NOK 1,000 2010

Gross premiums 4,899,795Premiums earned for own account 39,546Pre-tax profit 620,936Other comprehensive income -63,377Total profit 502,002

A total of NOK 13.5 million was recognised as costs in the Group in 2010 in connection with the takeover: NOK 6.2 million in SpareBank 1 Skadeforsikring AS and NOK 7.3 million in Unison Forsikring AS. Of the NOK 7.3 million in Unison Forsikring AS, NOK 2.5 million concerned the private placement towards SpareBank 1 Skadeforsikring AS, which could not be activated pursuant to IAS 39 because of negotiations concerning the size of the amount.

Skandia HelseforsikringIn January 2010, SpareBank 1 Skadeforsikring AS announced it had acquired Skandia Lifeline Norway's entire health insurance business fromSkandia Insurance Company Ltd. The agreement was contingent upon the necessary approvals being granted by the Norwegian and Swedish supervisory authorities. Approval of the transaction was granted in November 2010.The taken over health insurance business was integrated into SpareBank 1 Skadeforsikring AS's existing portfolio in 2010. The acquisition analysis had not been completed as of 31 December 2010. Therefore, Skandia was included in the financial statements of SpareBank 1 Skadeforsikring AS for 2010 with preliminary figures. The acquisition cost of the business was NOK 1 million.

Conecto ASSpareBank 1 Factoring AS, Actor Portefølje AS and SpareBank 1 Gruppen Finans Holding AS merged with effect from 1 January 2010. The newcompany took the name SpareBank 1 Gruppen Finans AS.

SpareBank 1 Gruppen Finans AS entered into an agreement to purchase the company Conecto AS in June 2010. The payment for the companyincluded a combination of cash and an earn-out agreement on with the sellers. Earn-outs are mainly related to the company's future earnings performance. The aim of the acquisition was to create an operator that is among the three largest in Norway’s debt market. Conecto AS was takenover on 9 September 2010 with effective consolidation into SpareBank 1 Gruppen group from that date.

A preliminary acquisition analysis in accordance with IFRS 3R has been made as a basis for the annual accounts for 31 December 2010. A review would be conducted within Q3 2011, which is within the 12 month period after the acquisition date pursuant to IFRS 3R. Identified assetsand liabilities are recognised at their fair value on the acquisition date. The cost of the shares, with the assumptions concerning future earn-out,is estimated to be NOK 154.8 million.

In addition to the identified value, the company also acquired human capital. A business organisation is a non-identifiable asset under IAS 38and may therefore not be recorded as such. This is clearly evident in the comments about start-up costs in IAS 38 paragraph 69. There is a long-standing and clear practice that the values inherent in an established organisation are mainly regarded as goodwill in a business combination.Please refer to the identified value in the table below for our preliminary acquisition analysis.

Calculations based on fair values

NOK 1,000 2010

Acquisition cost 130 000Correction based on uncertainty at acquisition date -7 391Interest until payment date 690Estimation on earn out 31 535Estimated total acquisition cost per 31.12.2010 154 834

Equity on acquisition time 17 859SpareBank 1 Gruppen Finans shares on 100% basis -17 859Excess value:Brand 5 629Customer relationships 32 096Technology, processes and routines 4 808 -42 173

Deferred taxes 11 808Acquisition goodwill 106 611-which «Assembled Workforce» 13 607

Identified Excess Value 42 173Total Goodwill and Excess Value 148 784

Page 40: Annual Report SpareBank 1 Gruppen 2011

40 SpareBank 1 Gruppen

The final acquisition analyses indicated the following fair values for identified assets and liabilities:

Oversikt over virkelig verdi justeringerBook Fair Fair Fair Value Value Value verdi incl.

NOK 1,000 09.09.10 09.09.10 adjustment Def. tax

Research & Development 1) 8 264 - -8 264 -Deferred tax asset 230 230 - 230Brand 1) - 5 269 5 269 5 269Technology, process and routines 1) - 13 072 13 072 13 072Customer relationships 1) - 32 096 32 096 32 096Goodwill 2) - 81 196 93 004 93 004Assembled workforce (part of goodwill) 2) - 13 607 13 607 13 607Furniture and fixtures 2 395 2 395 - 2 395Account receivables 9 536 9 536 - 9 536Other receivables 2 493 2 493 - 2 493Cash part of working capital 13 444 13 444 - 13 444Excess cash 6 430 6 430 - 6 430Total Assets 42 792 179 768 148 784 191 576

Equity 3) 17 858 154 834 136 976 154 834Debt to financial institutions 8 096 8 096 - 8 096Account payable 3 704 3 704 - 3 704Payable tax 4 292 4 292 - 4 292Public debt 5 514 5 514 - 5 514Deferred tax liability - - 11 808 11808Other short term liabilities 3 328 3 328 - 3 328Total shareholders equity and libabilities 42 792 179 768 148 784 191 576

1) Total Excess values er NOK 42,173 thousand.2) Goodwill is NOK 106,611 thousand.3) NOK 154,834 thousand under the Fair Value column is the acquisition cost for Conecto AS.

SpareBank 1 Gruppen Group has consolidated Conecto AS's results from and including 9 September 2010. The result from 9 September 2010to 31 December 2010 was a loss of NOK 3.7 million before tax.

If the takeover date had been 1 January 2010, the consolidated financial statements would have shown the following figures:

NOK 1,000 2010

Total income 86 636Total expenses -78 156Net operating income 8 481Profit before tax 8 487Tax -2 238Profit after tax 6 249

Page 41: Annual Report SpareBank 1 Gruppen 2011

41

NOTE 6

–SEGMENT INFO

RMATION

Debt collections of old

claims and factoring

Life insurance

P&C insurance

Fund management

Brokering business

business

Other operations

Eliminations

Total

NOK 1,000

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

Total income 1)

3 735 761

5 240 876

4 629 528

4 437 243

295 722

307 431

86 271

84 264

225 584

172 207

626 426

626 109

-628 455

-611 057

8 970 838

10 257 073

Segment result

442 537

363 002

185 321

641 144

21 842

64 628

-154 793

-57 562

27 875

8 600

490 520

566 598

-626 163

-601 277

387 139

985 133

Net profit for the period

531 041

299 159

90 699

581 054

14 782

45 325

-113 117

-40 765

19 076

4 311

443 851

454 275

-460 537

-511 813

525 795

831 547

Minority interests share of the profit

- -

- -

- -

-4 110

-9 478

- -

- -

- -

-4 110

-9 478

Assets per segment

26 607 066

26 482 903

13 265 200

12 096 732

223 200

299 213

507 089

301 923

997 598

911 153

5 894 272

5 315 966

-5 505 285

-4 807 345

41 989 140

40 600 545

Total liabilities

23 970 633

24 219 954

9 889 606

8 691 961

74 139

103 426

360 046

212 321

604 109

501 482

2 707 727

2 543 527

-559 481

-480 939

37 046 779

35 791 732

1)Costs directly related to income are included.

Operating segments are reported differently in the note than in the Board of Directors' Report. In the Board of Directors' Report the segments are reported in the same way as for internal reports to the Group's Board.

These segments are reported in the note in the same way that they are accounted for under IFRS.

Page 42: Annual Report SpareBank 1 Gruppen 2011

42 SpareBank 1 Gruppen

NOTE 7 – NET INSURANCE PREMIUM REVENUE

SpareBank 1 SpareBank 1 Livforsikring AS Skadeforsikring Group Group

NOK 1,000 2011 2010 2011 2010 2011 2010

Gross premium income 3 986 259 3 646 233 5 140 040 4 567 608 9 126 299 8 213 841- reinsurers' share 160 365 152 037 444 113 383 179 604 478 535 217Total net premium income for own account 3 825 894 3 494 196 4 695 927 4 184 429 8 521 821 7 678 624

LIFE INSURANCE

The distribution of SpareBank 1 Livsforsikring AS's earned premium income from different business is as follows:

Ind. Annuity Individual Group Individual GroupNOK 1,000 and pension endowment pension life life Total

Gross premium income 2011 375 589 776 182 2 030 465 199 576 604 446 3 986 258of which new subscriptions: 89 613 126 473 74 388 31 418 13 284 335 176

Gross premium income 2010 388 633 760 182 1 725 561 184 145 587 710 3 646 233of which new subscriptions: 86 668 150 209 47 353 29 940 7 589 321 759

P&C INSURANCE

The distribution of SpareBank 1 Skadeforsikring Group's earned premium income from different product categories is as follows:

Retail linesof which Total

Onshore third party Travel PersonalNOK 1,000 property Motor liability Yacht Accident insurance Other Lines

Earned premium 2011 1 728 618 1 689 545 722 845 73 383 161 269 327 344 21 979 4 002 139Earned premium 2010 1 579 951 1 500 805 627 641 66 572 155 053 294 957 21 611 3 618 949

Corporate linesOnshore Onshore of which Workmen's Totalproperty property third party compen- Commercial

NOK 1,000 insdustrial commercial Motor liability Liability sation Safety Other Lines

Earned premium 2011 10 766 368 459 272 380 89 179 51 256 162 177 89 040 60 413 1 014 491Earned premium 2010 11 180 329 163 227 627 68 679 24 969 126 620 68 054 30 650 818 263

Other LinesTotal

Total Energy/ Re- Natural OtherNOK 1,000 Marine oil insurance perils tool Lines

Earned premium 2011 - - 59 123 350 123 410Earned premium 2010 1 068 -7 52 129 283 130 396

NOTE 8 – NET COMMISSIONSGroup

NOK 1,000 2011 2010

CommissionsManagement fees 540 905 566 418Guarantee commissions 13 545 15 060Other commissions 145 330 134 027Total commissions 699 780 715 505

Commission costsDistributor commissions paid 921 900 845 299Other commission costs 2 956 906Total commission costs 924 856 846 205

Total net commissions -225 075 -130 700

Page 43: Annual Report SpareBank 1 Gruppen 2011

43

NOTE 9 – GAINS AND LOSSES FROM FINANCIAL ASSETS AND LIABILITIES

Parent company Group

2011 2010 NOK 1,000 2011 2010

Net income from financial instruments at fair value through the profit or loss Equities and units

- - Dividends from equities and units 35 349 13 289- - Net gains from realisation of equities 170 408 151 972- - Net unrealised gains/losses from equities and units -1 056 847 909 494- - Total net gains/losses from equities and units -851 090 1 074 754

Bonds and commercial paper - - Interest received and earned 380 378 248 515- - Net gains/losses from realisation of fixed income securities 138 510 217 949- - Net unrealised gains/losses from fixed income securities -11 627 31 066

Total net income from bonds, commercial paper, interest - - funds and other fixed income securities 507 262 497 530

Other financial instruments- - Interest received and earned 124 384 1 348

640 -1 310 Net gains/losses from realisation of derivatives and other financial assets 61 256 -36 600- - Net unrealised gains/losses from derivatives and other financial assets -91 923 10 234

640 -1 310 Total derivatives and other financial assets 93 717 -25 018

Net income and gains/losses from financial instruments at fair 640 -1 310 value through the profit or loss -250 111 1 547 267

Net income from bonds stated at amortised cost- - Interest received and earned from bonds held to maturity 236 612 252 498- - Net gains/losses from realisation of bonds held to maturity 6 365 6 757- - Net income from bonds held to maturity 242 977 259 255

- - Interest received and earned from other bonds at amortised cost 52 427 38 310- - Net unrealised gains/losses from other bonds at amortised cost -1 178 35 327- - Net gains/losses from realisation of other bonds at amortised cost -4 202 1 412- - Net income and gains/losses from bonds at amortised cost 47 046 75 049

Net income from securities available for sale- 3 641 Dividends from equities 622 12 993- - Net gains from realisation of equities - 17 603- 3 641 Net income and gains/losses from securities available for sale 622 30 596

Income from lending and receivables Interest income from lending to customers and deposits

1 951 1 881 with financial institutions 58 941 58 40816 001 4 709 Interest income from bank deposits 77 109 40 052

- - Interest income from other receivables 2 243 -145 903 9 330 Interest income from internal loans - - 23 856 15 920 Total interest income from lending and receivables 138 293 98 447

Costs from financial liabilitiesInterest costs from deposits from customers and liabilities

-16 370 -9 509 to financial institutions -30 170 -17 748-48 103 -24 624 Interest costs from securities issued -48 103 -24 624-22 285 -27 289 Interest costs from subordinated loans -32 919 -37 864

- - Interest costs from other financial liabilities -451 -4 961-86 758 -61 422 Total interest costs from financial liabilities -111 643 -85 196

Page 44: Annual Report SpareBank 1 Gruppen 2011

44 SpareBank 1 Gruppen

NOTE 10 – NET INVESTMENT PROPERTIES INCOMEGroup

NOK 1,000 2011 2010

Lease income from investment properties 323 309 320 724Revision of investment property values -29 352 148 187Costs from investment properties1) -30 953 -69 501Total net income from investment properties1) 263 003 399 410

Also see Note 27 «Investment properties» for further information.

1) Direct operating costs (incl. maintenance costs) that stem from investment properties that do not generate lease income amounted toNOK 6.4 million in 2011.

NOTE 11 – OTHER OPERATING INCOME

Parent company Group

2011 2010 NOK 1,000 2011 2010

- - Management of LOfavør concept 58 480 62 227- - Brokerage fee 36 038 37 384- - Income from debt capital 14 969 16 644- - Remuneration Corporate Finance 29 588 18 184- - Sundry income life insurance 23 589 24 405- - Income from debt collection business 146 621 96 788- - Actuarial calculations - 4- - Acquisition of Unison Forsikring AS resulted in negative goodwill - 117 900- - Late payment charges 1 747 2 040- 4 Other 29 942 8 745- 4 Total other operating income 340 974 384 321

NOTE 12 – OPERATING EXPENSES

Parent company Group

2011 2010 NOK 1,000 2011 2010

44 047 52 481 Employee compensation and benefit expenses 988 670 831 543-1 391 -429 IT costs 258 582 286 1322 929 640 Marketing 153 059 144 48515 969 -78 649 Other operating costs1) 601 379 412 01361 554 -25 957 Total operating costs 2 001 689 1 674 173

Remuneration to auditor523 511 Statutory auditing 3 261 3 791154 28 Other certification services 469 468272 16 Tax advice 1 084 276- 346 Other services 295 863

Remuneration to auditor includes VAT

Personnel costs158 029 166 980 Salaries 664 077 645 09227 518 25 699 Employer's NI contributions 146 049 122 16022 597 -1 475 Pension costs 82 301 -9 159

-178 006 -151 588 Refund salaries, pensions subsidiaries - - 3 225 2 805 Social costs 44 823 46 46710 684 10 060 Other personnel costs 51 420 26 98344 047 52 481 Total personnel costs 988 670 831 543

Specification of pension costs8 631 8 499 Defined contribution plans 37 106 31 36513 966 -9 974 Defined benefit plans 45 195 -40 52422 597 -1 475 Total pension costs 82 301 -9 159

1) In 2010 SpareBank 1 Gruppen AS also entered as income a repayment of NOK 43,664 thoousand related to payroll tax which were earliercovered by the company on behalf of First Securities AS.

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45

NOTE 13 – SHAREHOLDER STRUCTURE

Shareholder structure in SpareBank 1 Gruppen AS as of 31 December 2011: Number Ownership of shares interest

SpareBank 1 Nord-Norge 364 728 19.50 %SpareBank 1 SMN 364 728 19.50 %SpareBank 1 SR-Bank 364 728 19.50 %Samarbeidende Sparebanker AS 364 728 19.50 %Sparebanken Hedmark 224 448 12.00 %Norwegian Confederation of Trade Unions (LO)/affiliated unions 187 040 10.00 %Total number of shares 1 870 400 100 %The nominal value of the share is NOK 1,000. Voting rights match ownership interest.

Shareholder structure in SpareBank 1 Gruppen AS as of 31 December 2010: Number Ownership of shares interest

SpareBank 1 Nord-Norge 347 568 19.50 %SpareBank 1 SMN 347 568 19.50 %SpareBank 1 SR-Bank 347 568 19.50 %Samarbeidende Sparebanker AS 347 568 19.50 %Sparebanken Hedmark 213 888 12.00 %Norwegian Confederation of Trade Unions (LO)/affiliated unions 178 240 10.00 %Total number of shares 1 782 400 100 %The nominal value of the share is NOK 1,000. Voting rights match ownership interest.

2011 2010

Dividend paid per share 232 247

NOTE 14 – GOODWILL2011 2011 2011 2010

NOK 1,000 Cost Additions Impairment Book Value Book value

Goodwill from acquisition of SpareBank 1 Livsforsikring AS 378 656 - - 199 953 199 953 Goodwill from acquisition of 49% of ODIN Forvaltning AS 158 263 - - 79 131 79 131 Goodwill ODIN from acquisition of Rahastotori/Fondex 50 060 - - 49 896 49 896 Goodwill from acquisition of SpareBank 1 Skadeforsikring AS 553 616 - - 264 003 264 003 Goodwill from acquisition of SpareBank 1 Gruppen Finans AS 10 245 - - 10 245 10 245 Goodwill from acquisition of SpareBank 1 Markets AS 42 709 - - 42 709 42 709 Goodwill from acquisition of SB Securities LLP - 9 321 - 9 321 - Goodwill from acquisition of Conecto AS 204 882 1 000 - 205 882 204 882 Total goodwill 1 398 431 10 321 - 861 140 850 819

Conecto AS and Actor Fordringsforvaltning AS merged as of 1 January 2011. The additions in 2011 to Conecto AS of NOK 1 million are linkedto paid earn-out in 2011.

When acquiring control in a business (business merger) all identifiable assets and liabilities are recorded at fair value in accordance with IFRS3R. A positive difference between the fair value of the acquisition price and fair value of net identifiable assets and liabilities is recorded as goodwill, while a negative difference would be recorded as income at the time of the acquisition. Goodwill is acquired when there is a differencebetween the fair value of the acquisition price when acquiring a business and the fair value of net identifiable assets and liabilities. Goodwill isassumed to have an indefinite useful life. Company acquisitions are, in part, based on factors such as strategic adaptation and expected economicprofitability over a long time period. Goodwill is allocated to cash generating units. Goodwill is not subject to amortisation, but is subject to annualimpairment testing with the purpose of identifying any indications that impairment may have occurred, in accordance with IAS 36.

Determination of recoverable amount:Cash flow forecasts (before tax) based on 5 year projections are used. The recoverable amount on the balance sheet date is assessed annually forgoodwill with an indefinite useful life. The value of each of the cash generating units was assessed as of 31 December 2011. In determining therecoverable amount of cash generating units, SpareBank 1 Gruppen takes into account the pricing of comparable financial institutions (takinginto consideration companies that have performed better than market expectations for the past few years), dividend policies, SpareBank 1 Gruppen'sownership structure, and the distributors of insurance products.

For SpareBank 1 Gruppen, there will be a considerable variation in the values depending on whether the value assessments are based on a goingconcern assumption or as part of a transaction of structure. The value assessments results in three scenarios; a pessimistic value, an expectedvalue and an optimistic value.

The calculated value is significantly higher than the book value, and the analysis indicates no sign of impairment.

For SpareBank 1 Markets AS, a valuation has been performed based on expected cash flows for the company in the period 2012 - 2015, with acalculated residual value of the company at the end of the period. The calculation is sensitive with regard to the level of expected cash flowsand the hurdle rate. The calculation uses a hurdle rate of 12%. Based on these assumptions, the calculated value of the company is NOK 360million. The sensitivity related to the given assumptions are as follows:+/- 10% change in net cash flow = +/- NOK 50 million in value+/- 1% change in required rate of return = +/- NOK 166 million in value

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NOTE 15 – OTHER INTANGIBLE ASSETS

IT Self-developed Insurance systems insurance systems under

NOK 1,000 in use Licences systems development Group1) Total

Acquisition cost as of 1.1.20112) 99 254 45 101 13 848 15 927 81 173 255 303Correction acquisition cost OB 1.1.2011 537 -1 - 8 525 - 9 061Revised acquisition cost 1.1.2011 99 791 45 100 13 848 24 452 81 173 264 364Additions 20 087 27 051 21 366 51 364 3 718 123 586Of which developed internally 257 - 21 366 - - 21 623 Of which bought separately 19 830 27 051 - 51 364 - 98 245 Of which intangible assets upon acquisition - - - - 3 718 3 718 Disposals - - - -Acquisition cost as of 31.12.2011 119 878 72 151 35 214 75 816 84 891 387 950

Accumulated depreciation and amortisation as of 1.1.2011 66 099 21 184 - - 21 136 108 419Correction OB depreciation and amortisation as of 1.1.2011 8 069 1 - 993 - 9 063Revised depreciation and amortisation as of 1.1.2011 74 168 21 185 - 993 21 136 117 482Year's depreciation 11 182 11 243 - 1 568 12 368 36 361Year's amortisation - - - - - -Disposals depreciation and amortisation - 123 - - - 123Accumulated depreciation and amortisation as of 31.12.2011 85 350 32 551 - 2 561 33 504 153 966Translation differences - - - - -Carrying amount as of 31.12.2011 34 528 39 600 35 214 73 255 51 387 233 984

Useful life and straight line depreciation method 3 - 5 years 5-7 years 10 years 5 years

1) Concerns goodwill in the consolidated financial statements in connection with the acquisition of Actor Fordringsforvaltning AS andConecto AS linked to brands, software and customer relationships. SpareBank 1 Skadeforsikring AS also has goodwill linked to customerrelationships.

2) Adjusted OB for acquisition cost and accumulated depreciation in SpareBank 1 Skadeforsikring AS and SpareBank 1 Livsforsikring AS.OB is corrected by NOK 3,950 thousand from the note for 2010, cf. note 54.

IT Self-developed Insurance systems insurance systems under

NOK 1,000 in use Licences systems development Group1) Total

Acquisition cost as of 1.1.2010 147 091 26 316 - - 42 985 216 392Additions 15 174 18 798 13 848 15 927 56 173 119 920Of which developed internally - - - - - -Of which bought separately - - - - - -Of which intangible assets upon acquisition 8 600 - - - 14 000 22 600Disposals -63 011 - - - -17 985 -80 996Translation differences - -13 - - - -13Acquisition cost as of 31.12.2010 99 254 45 101 13 848 15 927 81 173 255 303

Accumulated depreciation and amortisation as of 1.1.2010 109 175 15 332 - - 27 993 152 500Year's depreciation 9 143 5 855 - - 6 663 21 661Year's amortisation 10 792 - - - - 10 792Disposals depreciation and amortisation -63 011 - - - -13 520 -76 531Accumulated depreciation and amortisation as of 31.12.2010 66 099 21 184 - - 21 136 108 419Translation differences - -3 - - - -3Carrying amount as of 31.12.2010 33 155 23 917 13 848 15 927 60 037 146 883

Useful life and straight line depreciation method 3 - 5 years 5-7 years 10 years 5 years

1) Concerns goodwill in the consolidated financial statements in connection with the acquisition of Actor Fordringsforvaltning AS andConecto AS linked to brands, software and customer relationships. SpareBank 1 Skadeforsikring AS also has goodwill linked to customerrelationships.

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NOTE 16 – INVESTMENTS IN SUBSIDIARIES

2011

NOK 1,000 Business Ownership Nominal value Book Companies office share (%) Share capital per share value

SpareBank 1 Livsforsikring AS Oslo 100 348 400 200 2 797 997SpareBank 1 Skadeforsikring AS Oslo 100 132 000 100 1 266 034SpareBank 1 Medlemskort AS Oslo 100 150 50 1 600Sparebankutvikling AS Oslo 100 100 1 000 100Odin Forvaltning AS Oslo 100 9 238 1 000 176 045SpareBank 1 Gruppen Finans AS Oslo 100 212 200 1 000 389 699SpareBank 1 Markets AS (formerly Argo Securities AS)1) Oslo 97,22 60 000 1 000 353 719Total investments in subsidiaries 4 985 194

SpareBank 1 Gruppen AS increased its ownership interest in SpareBank 1 Markets AS in 2011 from 76.75% to 97.22%.

2010

NOK 1,000 Business Ownership Nominal value Book Companies office share (%) Share capital per share value

SpareBank 1 Livsforsikring AS Oslo 100 348 400 200 2 637 396SpareBank 1 Skadeforsikring AS Oslo 100 132 000 100 1 100 000SpareBank 1 Medlemskort AS Oslo 100 150 50 1 600Sparebankutvikling AS Oslo 100 100 1 000 100Odin Forvaltning AS Oslo 100 9 238 1 000 176 045SpareBank 1 Gruppen Finans AS Oslo 100 212 200 1 000 389 699SpareBank 1 Markets AS (formerly Argo Securities AS)1) Oslo 76,75 20 000 1 000 164 851Total investments in subsidiaries 4 469 691

SpareBank 1 Gruppen Finans Holding AS was the parent company of SpareBank 1 Factoring AS, Actor Portefølje AS and Actor Fordringsforvaltning AS. Actor Portefølje AS owned in turn Actor Verdigjenvinning AS. In 2010, SpareBank 1 Gruppen Finans Holding ASand Actor Portefølje AS merged with SpareBank 1 Factoring AS. SpareBank 1 Factoring AS was the acquiring company. The acquiring company changed its name to SpareBank 1 Gruppen Finans AS at the same time. Actor Verdigjenvinning AS merged with Actor Fordringsforvaltning AS by transferring all of its assets, rights and obligations to the latter.

1) A shareholder agreement exists between SpareBank 1 Gruppen AS and employee shareholders. The shareholders in the company have pre-emptive rights when capital increases are carried out in line with the principles in the Limited Liability Companies Act.

NOTE 17 – INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

Allianse-samarbeidet Total owner-

2011 SpareBank 1 ship interestDA in joint

NOK 1,000 10,00 % ventures

As of 1.1 9 010 9 010Correction of OB 987 987Share of profit/loss 150 150As of 31.12 10 147 10 147

Voting rights match ownership interest. The Alliansesamarbeidet SpareBank 1 DA's registered office is in Oslo.

Allianse-samarbeidet SpareBank 1 Total owner-

2010 SpareBank 1 Boligkreditt ship interestDA AS in joint

NOK 1,000 10,00 % 2,81 % ventures

As of 1.1 16 862 103 692 120 554Increase/reduction in ownership interest -7 853 -103 692 -111 545Correction of OB 1 137 - 1 137Share of profit/loss previous years -1 137 - -1 137As of 31.12 9 010 - 9 010

SpareBank 1 Boligkreditt AS is no longer a SpareBank 1 Gruppen joint venture since it was Bank 1 Oslo AS that had the ownership interest in thecompany.

Voting rights match ownership interest. Alliansesamarbeidet SpareBank 1 DA's registered office is in Oslo.

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48 SpareBank 1 Gruppen

Financial information about joint venturesAllianse-

2011 samarbeidetSpareBank 1

NOK 1,000 DA

Assets 547 584Liabilities 442 118Income 577 341Net profit for the period 1 501Ownership interest 10.00%

Allianse-2010 samarbeidet

SpareBank 1NOK 1,000 DA

Assets 380 791Liabilities 276 825Income 418 517Net profit for the period 1 500Ownership interest 10.00%

The parent company has the following receivables and liabilities with joint ventures

NOK 1,000 2011 2010

Receivables Alliansesamarbeidet SpareBank 1 DA 110 165 95 454 Total receivables from joint ventures 110 165 95 454

Investments in joint ventures in the parent company SpareBank 1 Gruppen AS

NOK 1,000 2011 2010

Units in Alliansesamarbeidet SpareBank 1 DA 10 147 10 147 Total equities and units in joint ventures 10 147 10 147

Units in Alliansesamarbeidet SpareBank 1 DA's are, following the changeover to IFRS, recognised at original cost and tested for impairmentin the parent company's financial statements. No basis impairment was found at year-end 2011, or year-end 2010.

NOTE 18 – PROPERTY, PLANT AND EQUIPMENT

2011

Parent company Group

Machinery, Machinery, Buildings equipment equipment and other

and vehicles NOK 1,000 and vehicles properties Total

335 632 Acquisition cost or valuation as of 1.1.2011 482 974 998 818 1 481 792- Reclassified to investment properties - -187 041 -187 041- Reclassified from investment properties - 1 244 1 244

107 594 Additions 139 800 519 140 319-167 723 Disposals -178 052 -2 400 -180 452

- Year's revision of property value - -2 700 -2 700- Translation differences 2 138 - 2 138

275 503 Acquisition cost or valuation as of 31.12.2011 446 858 808 440 1 255 298

-208 131 Accumulated depreciation and amortisation as of 1.1.2011 -303 870 -19 305 -323 175-26 337 Year's depreciation -53 709 -182 -53 891119 828 Year's disposals 124 477 13 426 137 903

- Year's amortisation - - - - Translation differences 8 - 8

-114 640 Accumulated depreciation and amortisation as of 31.12.2011 -233 094 -6 061 -239 155

160 863 Carrying amount as of 31.12.2011 213 764 802 379 1 016 143

Value adjustment reserve as of 31.12.2011 -Value adjustment fund -

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49

CollateralThe company has not pledged any fixed assets as security or guarantees.

Unused buildings and other real estateAll the space in activated buildings is in use.

2010

Parent company Group

Machinery, Machinery, Buildings equipment equipment and other

and vehicles NOK 1,000 and vehicles properties Total

252 457 Acquisition cost or valuation as of 1.1.2010 519 707 414 467 934 17487 001 Additions 102 466 808 144 910 610-3 826 Disposals -139 558 -211 137 -350 695

- Year's revision of property value - -12 656 -12 656- Translation differences 358 - 358

335 632 Acquisition cost or valuation as of 31.12.2010 482 973 998 818 1 481 792

175 502 Accumulated depreciation and amortisation as of 1.1.2010 383 083 16 865 399 94833 325 Year's depreciation 54 466 4 381 58 847-695 Year's disposals -133 926 -1 942 -135 868

- Year's amortisation - - - - Translation differences 248 - 248

208 132 Accumulated depreciation and amortisation as of 31.12.2010 303 871 19 304 323 175

127 501 Carrying amount as of 31.12.2010 179 102 979 514 1 158 617

Value adjustment reserve as of 31.12.2010 80 618Value adjustment fund 71 454

CollateralThe company has not pledged any fixed assets as security or guarantees.

Unused buildings and other real estate1% of the space in activated buildings was not in use.

NOTE 19 – OTHER ASSETS

Parent company Group

2011 2010 NOK 1,000 2011 2010

66 57 Accrued income 45 673 71 515- - Prepaid costs 80 980 21 866- - Prepaid claims SOS travel 13 186 17 035- - Receivables management companies 118 168 -

113 471 - Receivables Alliansesamarbeidet SpareBank 1 DA 113 471 - - - Receivables linked to financial instruments1) 215 917 170 415

5 212 2 398 Trade receivables 32 664 12 80179 102 239 922 Other receivables 72 500 307 9334 216 974 Other 5 917 8 313

202 067 243 351 Total other assets 698 476 609 877

1) Receivables linked to securities trading in SpareBank 1 Markets AS.

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NOTE 20 – CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

Group 2011Loans and Held to Fair value Fair value Available Amortised

NOK 1,000 Note receivables maturity trading FVO for sale cost Total

Financial assetsCash and cash equivalents 26, 31 1 276 149 - - - - - 1 276 149Equities and units 21, 22, 24, 31 - - 1 925 682 4 812 847 19 193 - 6 757 722Bonds and commercial paper 21, 22, 25, 26, 31 1 368 467 4 522 630 1 037 309 16 350 251 - - 23 278 657Other financial assets 21, 22, 31 - - 32 530 -3 196 - - 29 334Lending to financial institutions 21, 26, 28, 31, 33 64 233 - - - - - 64 233Lending to customers 21, 26, 28, 31, 33 610 775 - - - - - 610 775Financial derivatives 21, 23, 31 - - 11 317 - - - 11 317Total financial assets 3 319 624 4 522 630 3 006 838 21 159 902 19 193 - 32 028 187

Financial liabilitiesSubordinated loans and hybrid tier 1 capital 26, 32, 37 - - - - - 483 568 483 568Liabilities to financial institutions 21, 26, 32, 36 - - - - - 344 392 344 392Deposits from and liabilities to customers 21, 26, 32, 36 - - - - - 251 204 251 204Securities issued 21, 22, 26, 32, 38 - - - 133 204 - 1 771 820 1 905 025Financial derivatives 21, 23 - - 163 949 80 851 - - 244 800Total financial liabilities - - 163 949 214 055 - 2 850 984 3 228 989

Group 2010Loans and Held to Fair value Fair value Available Amortised

NOK 1,000 Note receivables maturity trading FVO for sale cost Total

Financial assetsCash and cash equivalents 26, 31 1 091 159 - - - - - 1 091 159Equities and units 21, 22, 24, 31 - - 3 055 697 4 365 815 20 216 - 7 441 728Bonds and commercial paper 21, 22, 25, 26, 31 1 249 291 4 679 131 1 123 184 14 385 756 - - 21 437 362Other financial assets 21, 22, 31 - - 38 158 22 945 - - 61 103Lending to financial institutions 21, 26, 28, 31, 33 95 246 - - - - - 95 246Lending to customers 21, 26, 28, 31, 33 489 320 - - - - - 489 320Financial derivatives 21, 23, 31 - - 130 605 - - - 130 605Total financial assets 2 925 016 4 679 131 4 347 644 18 774 516 20 216 - 30 746 523

Financial liabilitiesSubordinated loans and hybrid tier 1 capital 26, 32, 37 - - - - - 848 846 848 846Liabilities to financial institutions 21, 26, 32, 36 - - - - - 185 641 185 641Deposits from and liabilities to customers 21, 26, 32, 36 - - - - - 348 755 348 755Securities issued 21, 22, 26, 32, 38 - - - 134 654 - 1 242 260 1 376 914Financial derivatives 21, 23 - - 160 265 - - - 160 265Total financial liabilities - - 160 265 134 654 - 2 625 502 2 920 421

Parent company 2011Loans and Held to Fair value Fair value Available Amortised

NOK 1,000 Note receivables maturity trading FVO for sale cost Total

Financial assetsCash and cash equivalents 26, 31 213 717 - - - - - 213 717Equities and units 21, 22, 24, 31 - - - - 17 583 - 17 583Lending to financial institutions21, 26, 28, 31 152 580 - - - - - 152 580Financial derivatives 21, 23, 31 - - 2 003 - - - 2 003Total financial assets 366 297 - 2 003 - 17 583 - 385 883

Financial liabilitiesSubordinated loans 26, 32, 37 - - - - - 283 568 283 568Securities issued 21, 22, 26, 32, 38 - - - 133 204 - 1 771 820 1 905 025Financial derivatives 21, 23 - - - - - - - Total financial liabilities - - - 133 204 - 2 055 388 2 188 593

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51

Parent company 2010Loans and Held to Fair value Fair value Available Amortised

NOK 1,000 Note receivables maturity trading FVO for sale cost Total

Financial assetsCash and cash equivalents 26, 31 93 520 - - - - - 93 520Equities and units 21, 22, 24, 31 - - - - 17 583 - 17 583Lending to financial institutions 21, 26, 28, 31 122 580 - - - - - 122 580Financial derivatives 21, 23, 31 - - 692 - - - 692Total financial assets 216 100 - 692 - 17 583 - 234 375

Financial liabilitiesSubordinated loans 26, 32, 37 - - - - - 433 846 433 846Securities issued 21, 22, 26, 32, 38 - - - 134 654 - 1 242 260 1 376 914Financial derivatives 21, 23 - - - - - - - Total financial liabilities - - - 134 654 - 1 676 106 1 810 760

NOTE 21 – VALUATION HIERARCHY

Group 2011 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation

in active on observable based on non-

markets market observable market

NOK 1,000 information information Total

Securities available for sale - 591 18 602 19 193Securities held for trading 2 961 534 11 752 22 253 2 995 538Securities stated at fair value through profit or loss (FVO) 20 682 008 477 876 - 21 159 885Financial derivatives 7 154 4 163 - 11 317Total assets 23 650 696 494 382 40 855 24 185 933

Securities issued - 133 204 - 133 204 Financial derivatives 80 851 163 949 - 244 800Total liabilities 80 851 297 153 - 378 004

Reconciliation of level 3Investment Securities Secruities stated

in securities held for at fair value

available for trading throug profit

NOK 1,000 sale information or loss (FVO)

Financial instruments at fair valueOpening balance 19 822 19 823 - Net gains/losses on financial instruments recognised in profit or loss -1 210 2 430 - Net change in value recognised in comprehensive income against equity (see change in equity) -10 - - Additions/acquisitions - - - Disposals - - - Closing balance 18 602 22 253 -

Group 2010 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation

in active on observable based on non-

markets market observable market

NOK 1,000 information information Total

Securities available for sale - 394 19 822 20 216Securities held for trading 4 143 389 53 827 19 823 4 217 039Securities stated at fair value through profit or loss (FVO) 17 067 315 1 707 200 - 18 774 515Financial derivatives 126 048 4 557 - 130 605Total assets 21 336 752 1 765 978 39 645 23 142 375

Securities issued - 134 654 - 134 654Financial derivatives - 160 265 - 160 265Total liabilities - 294 919 - 294 919

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52 SpareBank 1 Gruppen

Reconciliation of level 3Investment Securities Secruities stated

in securities held for at fair value

available for trading throug profit

NOK 1,000 sale information or loss (FVO)

Financial instruments at fair valueOpening balance 23 844 17 876 - Net gains/losses on financial instruments recognised in profit or loss - 22 837 - Net change in value recognised in comprehensive income against equity (see change in equity) -814 - - Additions/acquisitions 2 248 - - Disposals -5 456 -20 889 - Closing balance 19 822 19 823 -

Parent company 2011 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation

in active on observable based on non-

markets market observable market

NOK 1,000 information information Total

Securities available for sale - - 17 583 17 583Financial derivatives - 2 003 - 2 003Total assets - 2 003 17 583 19 585

Securities issued - 133 204 - 133 204Total liabilities - 133 204 - 133 204

Reconciliation of level 3Investment

in securities

NOK 1,000 available for sale

Financial instruments at fair valueOpening balance 17 583Net change in value recognised in comprehensive income against equity (see change in equity) - Additions/acquisitions - Disposals - Closing balance 17 583

Parent company 2010 LEVEL 1 LEVEL 2 LEVEL 3Quoted prices Valuation based Valuation

in active on observable based on non-

markets market observable market

NOK 1,000 information information Total

Securities available for sale - - 17 583 17 583Financial derivatives - 692 - 692Total assets - 692 17 583 18 275

Securities issued - 134 654 - 134 654Total liabilities - 134 654 - 134 654

Reconciliation of level 3Investment

in securities

NOK 1,000 available for sale

Financial instruments at fair valueOpening balance 15 335Net change in value recognised in comprehensive income against equity (see change in equity) - Additions/acquisitions 2 248Disposals - Closing balance 17 583

Definition of levels used to measure financial instruments at fair valueLevel 1 - Valuations are arrived at based on using quoted prices in an active market for identical assets/liabilities. A financial instrument isconsidered quoted in an active market if the price is easily accessible from a stock exchange, trading agency, broker, industrial classificationagency, valuation service or governmental institution, and these prices also represent reliable and frequent market transactions based on thearm's length principle. The category includes listed equities, bonds, commercial papers, etc.

Level 2 - Valuations are arrived at based on information for the asset/liability that can be directly or indirectly observed and that is not covered by level 1 (derived prices). Where there is no accessible quoted price for active markets, the instruments are primarily measuredusing valuation methods based on observable input and/or similar instruments/products. The pricing of commercial paper and bonds, including fixed-rate loans are based on interest rate curves published in active markets.

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Level 3 - Valuations are arrived at based on data that is not observable market information. If a valuation cannot be arrived at based on level 1and level 2, then valuation methods based on non-observable market data are used.

Securities available for sale (levels 2 and 3)Securities available for sale consist of equities and valuations are based on non-observable information. Valuations are based on expectedfuture cash flows.

Securities held for trading (levels 2 and 3)

This category encompasses equities, bonds and commercial papers. The securities are primarily valued using valuation methods based oninformation that can be observed and/or similar instruments/products. The pricing of commercial paper and bonds is based on interest ratecurves published in active markets. Securities classified as level 3 consist of equities where the valuation is based on expected future earnings.

Securities stated at fair value through profit or loss (FVO) (levels 2 and 3)Securities classified as level 2 are mainly bonds. The pricing of interest-bearing papers is based on interest rate curves published in activemarkets. Securities classified as level 3 consist of equities where the valuation is based on expected future earnings.

Financial derivatives (level 2)The financial derivatives mainly consist of currency futures, interest rate swaps and currency swaps. The valuation is based on observablemarket data and/or prices for similar instruments/products.

Securities issued (level 2)Valuations are based on interest rate curves published in active markets.

NOTE 22 – SECURITIES AT FAIR VALUE

Group

EQUITIES AND UNITS

2011 2010Acquisition Book value/ Acquisition Book value/

NOK 1,000 cost fair value cost fair value

Norwegian equities 371 128 339 286 442 006 470 547Norwegian unit trusts 1 143 279 1 279 817 1 095 987 1 659 472Foreign equities 521 778 531 482 456 804 470 987Foreign unit trusts 4 360 904 4 587 943 4 019 710 4 820 506Total equities and units at fair value 6 397 089 6 738 529 6 014 507 7 421 512

BONDS AND COMMERCIAL PAPER

2011 2010Acquisition Book value/ Acquisition Book value/

NOK 1,000 cost fair value cost fair value

Norwegian Government and government guaranteed 0 % 1 101 627 1 110 434 1 427 175 1 440 699Government enterprises 10 % - - 35 466 35 576Financial institutions and banks 10 % 222 378 223 963 - - Norwegian guaranteed bonds 10 % 1 494 838 1 512 557 1 171 482 1 178 296Municipalities and counties 20 % 128 762 133 803 433 740 438 684Financial institutions and banks 20 % 4 755 469 4 796 781 4 546 609 4 615 643Bond funds 20 % 2 226 829 2 237 473 2 160 278 2 153 856Money market funds 20 % 2 486 505 2 485 441 1 869 970 1 863 350Bond funds 50 % 640 388 714 253 596 258 611 526Financial institutions and banks 100 % 298 015 303 707 143 086 151 979Bond funds 100 % 102 994 102 638 - - Money market funds 100 % 398 800 397 771 426 333 427 498Corporate 100 % 770 256 783 916 479 371 493 598Total Norwegian bonds and commercial papers 14 626 860 14 802 738 13 289 768 13 410 705

ForeignGovernment and government guaranteed 0 % 878 086 895 359 711 350 712 022Foreign guaranteed bonds 10 % 503 186 519 135 545 274 556 834Municipalities and counties 20 % 83 002 83 303 2 391 2 344Financial institutions and banks 20 % 417 984 398 724 512 510 497 087Bond funds 20 % 178 897 211 060 143 288 157 409Bond funds 100 % 240 000 257 164 - - Corporate 100 % 222 080 220 078 167 963 172 538Total foreign bonds and commercial papers 2 523 235 2 584 823 2 082 776 2 098 234

Total bonds and commercial papers at fair value 17 150 095 17 387 560 15 372 544 15 508 939

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Group

OTHER FINANCIAL INSTRUMENTS

2011 2010Acquisition Book value/ Acquisition Book value/

NOK 1,000 cost fair value cost fair value

Hedge funds 6 565 4 300 19 875 16 642Deposits and other receivables -6 203 -6 203 25 143 24 638Bank fund investment choice portfolio 20 100 22 253 20 100 19 823Other financial assets 9 280 8 985 - - Total other financial securities at fair value 29 742 29 334 65 118 61 103

Total financial assets at fair value 23 576 927 24 155 423 21 452 169 22 991 554

Group

LOANS

2011 2010Acquisition Book value/ Acquisition Book value/

NOK 1,000 cost fair value cost fair value

Securities issued 125 500 133 204 125 500 134 654Total financial liabilities at fair value 125 500 133 204 125 500 134 654

Parent company

LOANS

2011 2010Acquisition Book value/ Acquisition Book value/

NOK 1,000 cost fair value cost fair value

Securities issued 125 500 133 204 125 500 134 654Total financial liabilities at fair value 125 500 133 204 125 500 134 654

NOTE 23 – FINANCIAL DERIVATIVES

General descriptionCurrency futures: Contracts to buy or sell a specific amount in foreign currency on a specified future date at a fixed price.Interest rate swaps: An agreement regarding the swapping of interest rate conditions over an agreed period and on a fixed amount.Options: Contracts where the seller gives the buyer the right, but not the obligation to buy (call option) or sell (put option) a financial instrument or currency before or on a specified date at a predetermined and fixed price.All derivatives are stated at fair value through profit or loss. Gains are recorded as assets and losses are recorded as liabilities for all interestrate derivatives.

Group 2011Fair value Fair value

NOK 1,000 Contract total assets liabilities

Equity instrumentsDerivative underlying CDOs 370 000 - 162 400Options 27 756 2 161 1 549Total equity instruments 397 756 2 161 163 949

Foreign exchange instrumentsCurrency futures (forwards) 4 087 547 3 973 74 224 Total foreign exchange instruments 4 087 547 3 973 74 224

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 5 158 815 5 183 6 627 Total interest rate instruments 5 158 815 5 183 6 627

Total financial derivatives 9 644 118 11 317 244 800

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Group 2010Fair value Fair value

NOK 1,000 Contract total assets liabilities

Equity instrumentsDerivative underlying CDOs 370 000 - 157 600Options 10 651 3 865 2 665Total equity instruments 380 651 3 865 160 265

Foreign exchange instrumentsCurrency futures (forwards) 4 560 727 120 897 - Total foreign exchange instruments 4 560 727 120 897 -

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 2 057 500 5 843 - Total interest rate instruments 2 057 500 5 843 -

Total financial derivatives 6 998 879 130 605 160 265

Parent company 2011Fair value Fair value

NOK 1,000 Contract total assets liabilities

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 65 000 2 003 - Total interest rate instruments 65 000 2 003 -

Total financial derivatives 65 000 2 003 -

Parent company 2010Fair value Fair value

NOK 1,000 Contract total assets liabilities

Interest rate instrumentsInterest rate swaps, incl. cross-currency swaps 65 000 692 - Total interest rate instruments 65 000 692 -

Total financial derivatives 65 000 692 -

NOTE 24 – SECURITIES AVAILABLE FOR SALE

2011Parent company Group

Acquisition Book value/ Acquisition Book value/cost fair value NOK 1,000 cost fair value

- - Norsk Pensjon AS 1 600 99416 530 16 530 Eiendomsverdi AS 16 530 16 5301 053 1 053 Other 1 978 1 66917 583 17 583 Securities available for sale 20 108 19 193

2010Parent company Group

Acquisition Book value/ Acquisition Book value/cost fair value NOK 1,000 cost fair value

- - Norsk Tillitsmann 919 1 210- - Norsk Pensjon AS 1 600 945

16 530 16 530 Eiendomsverdi AS 16 530 16 5301 053 1 053 Other 1 781 1 53117 583 17 583 Securities available for sale 20 830 20 216

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NOTE 25 – BONDS AT AMORTISED COST

Group2011 2010

Acquisition Book Fair Acquisition Book FairNOK 1,000 cost value value cost value value

Bonds held to maturity 4 377 291 4 398 085 4 603 016 4 527 549 4 545 378 4 676 404Accrued interests on bonds held to maturity - 124 545 - - 133 753 - Total bonds held to maturity 4 377 291 4 522 630 4 603 016 4 527 549 4 679 131 4 676 404

Other bonds at amortised cost 1 343 889 1 342 386 1 369 567 1 230 663 1 229 840 1 222 471Accrued interests on bonds at amortised cost - 26 081 - - 19 451 - Total other bonds at amortised cost 1 343 889 1 368 467 1 369 567 1 230 663 1 249 291 1 222 471

Total bonds at amortised cost 5 721 180 5 891 097 5 972 582 5 758 212 5 928 422 5 898 875

2011 2010Risk Acquisition Book Fair Acquisition Book Fair

NOK 1,000 weight cost value value cost value value

Government and government guaranteed 0 % 333 364 340 531 353 902 294 550 301 771 297 901Norwegian and foreign bonds with collateral 10 % 1 333 349 1 365 008 1 394 504 1 002 434 1 023 319 1 021 839Municipalities and counties 20 % 289 885 298 198 313 477 374 972 383 761 383 898Financial institutions and banks 20 % 2 268 946 2 351 358 2 345 308 2 616 317 2 711 259 2 693 595Manufacturing loans 100 % 1 496 636 1 536 002 1 565 391 1 469 938 1 508 312 1 501 641Total bonds and commercial papers 5 722 180 5 891 097 5 972 582 5 758 212 5 928 422 5 898 875Of which listed instruments 4 466 002 4 606 202 4 657 544 3 991 154 4 122 124 4 096 992

Changes in holdings during the year 2011 2010

Opening balance as of 1.1 5 928 422 5 785 006Additions 316 060 617 238Disposals -357 574 -483 663Year's accrued premium/discount (amortisation) 4 190 9 841Closing balance as of 31.12 5 891 097 5 928 422

2011 2010P&C Life P&C Life

Insurance Insurance Insurance Insurance business business business business

Duration 3.4 5.3 3.0 5.5Average effective interest rate 4.1 3.9 4.4 4.6

Parent companyThe parent company had no bonds at amortised cost in 2011 or 2010.

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NOTE 26 – FAIR VALUE OF SECURITIES STATED AT AMORTISED COST

Parent company Group

2011 2010 2011 2010Book Fair Book Fair Book Fair Book Fair value value value value NOK 1,000 value value value value

AssetsLoans and deposits with

152 580 152 580 122 580 122 580 financial institutions 64 233 64 233 95 246 95 246Loans to and receivables

- - - - from customers 610 775 610 775 489 320 489 320- - - - Bonds at amortised cost 5 891 097 5 907 053 5 928 422 5 898 875

213 717 213 717 93 520 93 520 Cash and cash equivalents 1 276 149 1 276 149 1 091 159 1 091 159366 297 366 297 216 100 216 100 Total financial assets 7 842 254 7 858 210 7 604 147 7 574 600

Liabilities- - - - Liabilities to financial institutions 344 392 344 392 185 641 185 641

Deposits from and liabilities - - - - to customers 251 204 251 204 348 755 348 755

1 771 820 1 764 242 1 242 260 1 244 072 Securities issued 1 771 820 1 764 242 1 242 259 1 244 072Subordinated loan capital

283 568 281 374 433 846 431 929 at amortised cost 483 568 454 674 848 846 803 5432 055 388 2 045 617 1 676 106 1 676 002 Total financial liabilities 2 850 984 2 814 512 2 625 501 2 582 011

Off balance sheet liabilities and 387 253 133 000 guarantee commitments 359 838 318 318750 000 200 000 Unused drawing rights 988 892 613 927

Assets pledged as security 713 473 628 634

Amortised cost is the measurement of a financial asset or liability by cumulative amortisation of cash flows estimated at initial recognitionadjusted for depreciation. These measurements are not always consistent with market participant's measurements of the same instruments.Different views on macroeconomic development, market conditions, risk, expected rate of return and access to information might lead to suchdifferences.

The table above displays an overview over calculated fair value of line items stated at amortised cost. The value is calculated by using internal models that are calculated based on either a theoretical value in absence of an active market or on a comparison of the instrument'slast traded prices in the market against the value registered in the portfolio. An estimate based on judgement is made where no relevant priceinformation is available. High uncertainty is connected to fair value measurements.

Bonds at amortised costBonds at amortised cost mainly consist of CDOs. The CDOs are divided into a principal and a derivative. The principal is recognised as abond stated at amortised cost, while the derivatives part is recognised as a financial asset stated at fair value. The CDOs fair value adjustmentsare based on probability of default published by established rating agencies.

Liabilities to financial institutions and deposits from customersLiabilities to financial institutions and deposits from customers are stated at amortised cost. Minor deposits with index-linked returns (BMB)are stated at fair value. The fair value of currently priced deposits equals amortised cost.

Securities issued and subordinated loan capitalSecurities issued with fixed interests rates are designated at fair value, while securities issued with a floating interest rate and subordinatedloan capital are stated at amortised cost. The valuation of debt measured at amortised cost is either based on broker quotes or calculated onthe basis of swap curves published by Reuters. Similar to lending, the value of assumed new issuance is used.

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NOTE 27 – INVESTMENT PROPERTIES

GroupSpareBank 1 Gruppen's total property portfolio consisted of 237,168 m2 in 21 buildings as of 31.12.2011. Of this SpareBank 1 Gruppen uses31,664 m2 for its own business. The total vacancy rate is 5.7%.The weighted remaining tenancy period for the entire portfolio is 5.3 years. Note 4 «Critical accounting estimates and judgements» discussessensitivity in more detail.

NOK 1,000 2011 20101)

Additions/disposals and value adjustmentsAcquisition cost as of 1.1 3 472 146 4 315 004Year's additions 185 621 7 171Year's disposals -208 626 -850 029Acquisition cost as of 31.12 3 449 141 3 472 146Accumulated depreciation as of 1.1 -7 849 - Year's ordinary depreciation -7 849 -7 949Accumulated depreciation as of 31.12 -15 798 -7 949Accumulated value adjustments as of 1.1 725 840 578 641Year's revision of property value -5 305 147 203Accumulated value adjustments as of 31.12 720 535 725 844Book value as of 31.12 4 153 878 4 190 037

1) Aberdeen real estate fund was classified as equities in 2011. The figures for 2010 take into account the reclassification.Note 54 provides a more detailed description of the reclassification.

2011 Average Book Lease Area end

NOK 1,000 City/area Cost price value income in m2 of lease

Type of buildingOffice building Oslo City Centre 1 097 502 1 250 216 19 623 55 956 2014Office building Skøyen 368 406 549 542 80 574 23 559 2014Office building Rest of Oslo 217 522 261 071 19 307 9 296 2022Office building Tønsberg 12 233 25 481 1 476 2 503 2013Office building/shops Oslo City Centre 573 245 635 217 39 049 37 141 2015Office building/shops Skøyen 700 236 953 619 92 383 52 318 2016Shopping centre Rest of Oslo 282 046 288 726 24 288 19 054 2017Office building/shops Akershus 111 828 145 922 14 414 16 560 2017Other Oslo 41 190 44 084 2 622 - 2096Total 3 404 208 4 153 878 293 736 216 387

2010 Average Book Lease Area end

NOK 1,000 City/area Cost price value income in m2 of lease

Type of buildingOffice building Oslo City Centre 645 818 846 516 85 365 32 672 2016Office building Skøyen 1 068 642 1 460 668 102 363 75 877 2015Office building Rest of Oslo 397 528 472 570 33 600 18 013 2023Office building Tønsberg 12 233 25 427 2 389 2 503 2011Shopping centre Rest of Oslo 282 046 289 919 24 570 19 054 2016Office building/shops Oslo City Centre 482 676 731 812 48 163 31 090 2013Office building/shops Akershus 111 828 141 271 14 946 16 362 2015Other Oslo 124 658 126 628 9 328 60 2096Total 3 125 429 4 094 812 320 724 195 631

The company utilises an internal cash flow model to calculate fair value for the properties. In the model, a 30-year cash flow is estimated onthe basis of expected future costs and income for each property. After the end of the 30th year of the cash flow, a terminal value is calculate.The cash flow and terminal value are then inflated to correct for expected increase in prices and discounted with a required rate of returnconsisting of risk free interest and a risk premium. The risk premium is set separately for each property.

More about the most important assumptions:Lease incomeThe company uses a special model for office space, which accounts for the largest category of floor space in the portfolio, to estimate theexpected long-term cash flow after expiry of the current leases. The basic data contains both the individual property's price history from real,signed contracts and market statistics for the same geographic area, and this is used to estimate the expected future rent for the space. The expected rent per square metre in the area is estimated by calculating the average market rent per square meter over the last 10 years,adjusted for the present value of the NOK. The area's expected rent is then adjusted for the individual property. The adjustment is based onrents from real, signed contracts, which are compared with the historic market rent for the same area. This results in an expected cash flowper office space based on the real trends for the prevailing willingness to pay and cash flow for space in the area. The company's own assessments are used to determine future income for categories of space not covered by rent statistics.

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CostsExpected costs are estimated on the basis of the average historic operating costs and the company's expectations per property. OPAK's estimates are used o estimate representative market expectations if the historic costs have been lower or higher than OPAK's limits for normalowner costs.

Owner costs are assumed to climb with a property's age and grow linearly to OPAK's limit for high owner costs over the duration of the cashflow.

Required rate of returnThe required rate of return, hurdle rate, consists of the risk free interest rate, which changes over the duration of the cash flow, and the riskpremium, which is individual to each property.

Risk free interest rate Observations from the transactions market indicate that property is relatively insensitive to changes in market interest rates. Instead, it is thelong-term expectations concerning interest rate levels that appear to provide the basis for any price changes for properties. The reason for thiscould be that even the longest market interest rates are relatively short in relation to the expected duration of a commercial property. Thecompany has chosen to use a 10 year swap rate for the first 10 years of the cash flow, and an estimated long-term normal rate of 5% for thelast 10 years and for the final value. Interpolation between the two rates is used for the years in-between, i.e. from year 10 to year 20.

Risk premium The company uses a categorisation tool to estimate the risk premium per property. Location, contract length, and the assumed degree of thecyclical nature of the cash flow for the individual property are all elements used to place a property's weighted risk properties on a pointsscale. A property's placement on the points scale is then used to find the property's specific risk premium within a range between an estimated high and low risk premium in the market. This range is calibrated against observed key figures from the transactions market. Categorisation and calibration must together contribute to market-related and consistent value assessments at fair value, both across properties and over time.

Parent companyThe parent company had no investment propeties in 2011 and 2010.

NOTE 28 – LENDING TO AND DEPOSITS WITH CUSTOMERS AND FINANCIAL INSTITUTIONS

Lending to and deposits with financial institutions

NOK 1,000 2011 2010

Lending to and deposits with financial institutions without agreed maturity 64 233 95 246Lending to and deposits with financial institutions with agreed maturity - - Total lending to and deposits with financial institutions 64 233 95 246

Specification of lending and deposits by most important currenciesNOK 57 740 94 299SEK 2 190 813GBP 293 170EUR 3 557 -48CAD - 2Other currency 452 11Total 64 233 95 246

Lending to customers

NOK 1,000 2011 2010

Lending specifiedCash advances and bank overdrafts 532 840 468 570 Other lending 256 98 Portfolio of outstanding receivables 78 368 34 252 Gross lending to and deposits from customers 611 465 502 920

Write-downs/loss provisions -690 -13 600Net lending to and deposits from customers 610 775 489 320

Total lending to customers and financial institutions 675 008 584 566

Lending to and deposits from customers by market 2011 2010

Employees 78 368 34 252 Divided by industry 533 096 468 667 Gross lending to and deposits from customers 611 465 502 920

Write-downs/loss provisions -690 -13 600Net lending to and deposits from customers 610 775 489 320

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Gross lending by geographic area 2011 2010

Akershus 15 493 7 021 Oslo 6 209 8 565 Møre og Romsdal 221 770 192 183 Other 367 993 295 152 Total gross lending by geographic area 611 465 502 920

Gross lending by sector and industry 2011 2010

No industry affiliation 86 214 43 868 Agriculture 2 082 762 Fishing and fish processing 6 106 1 365 Services related to extraction of crude oil and natural gas 7 767 - Manufacturing 278 145 258 594 Building and construction, power and water supply 17 160 24 673 Wholesale and retail trade 79 920 40 533 Hotel and restaurant - 925 Transport and storage 106 421 93 372 Business services 7 399 13 906 Property management 19 1 Information and technology 7 905 10 258 Finans 7 864 11 085 Other sectors 4 462 3 579 Total gross lending by sector and industry 611 465 502 920

Individual write-downs/loss provisions by sector and industry 2011 2010

Employees, etc - - Manufacturing - - Building and construction - - Wholesale and retail trade - - Hotel and restaurant - - Transport and storage - - Business services - - Property management - - Information and technology - - Other sectors - - Specific loss provisions SpareBank 1 Gruppen Finans AS 690 13 600 Total individual write-downs/loss provisions by sector and industry 690 13 600

SpareBank 1 Gruppen's lending portfolio was in its subsidiary SpareBank 1 Gruppen Finans AS in 2011 and 2010.

Parent company

NOK 1,000 2011 2010

Subordinated loan to First Securities AS 32 580 32 580 Credit line for SpareBank 1 Markets AS 120 000 90 000 Total lending 152 580 122 580

Loans are recognised at amortised cost.

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NOTE 29 – NET LOAN AND GUARANTEES LOSS PROVISIONS

Group

NOK 1,000 2011 2010

Incurred losses and provisions for calculated losses Debtors:Incurred losses on loans with previous write-offs - specified loss provisions - - Incurred losses on loans with previous write-offs - unspecified loss provisions - - Incurred losses on loans with no previous write-offs 39 16Incurred losses 39 16

Specified provisions 1.1 50 15- Reversed previous write-offs specified losses -50 -15+ Period's specified losses 326 50Specified provisions 31.12 326 50

Unspecified provisions 1.1 - - - Incurred losses - - + Period's unspecified provisions - - Unspecified provisions 31.12 - -

NOK 1,000 2011 2010

Clients:Incurred losses on loans with previous write-offs - specified loss provisions 13 016 505Incurred losses on loans with previous write-offs - unspecified loss provisions - - Incurred losses on loans with no previous write-offs - - Incurred losses 13 016 505

Fixed income recognised as income - -

Specified provisions losses clients 1.1 13 600 3 619- Reversed previous write-offs specified losses -13 600 -619+ Period's specified losses 690 10 600Specified provisions losses clients 31.12 1) 690 13 600

- Reversed previous write-offs group write-downs clients - - - Included in previously incurred losses -94 -133Income/losses in profit or loss 326 10 405

1) Specified provisions in 2010 are primarily due to a single standing event in 2010.

Gross net loan and guarantees loss provisions by sector and industry

NOK 1,000 2011 2010

Agriculture, forestry, fishing and hunting at sea 106 - Manufacturing and mining -94 -233Building and construction, power and water supply - 100Wholesale and retail trade, hotel and restaurant trade - 10 486Transport and other services - - Financing, property management and other business services - - Other countries 314 51 Retail market - - Group write-downs corporate - - Group write-downs retail - - Gross net loan and guarantees loss provisions to customers 326 10 405

Non-performing and impaired loans2011 2010 2009 2008 2007

Non-performing loans (more than 90 days overdue) 78 3681) 34 2521) 416 568 268 741 112 378Other impaired loans - - 23 038 131 855 53 444Total impaired loans 78 3681) 34 2521) 439 606 400 596 165 822Individual write-downs - - 149 485 88 323 42 004Net impaired loans 78 3681) 34 2521) 589 091 312 273 123 818

1) The portfolio consists of acquired non-performing demands (all demands over 90 days) in SpareBank 1 Gruppen Finans AS's business areaPortfolio in 2011, and the same is true for 2010. Fulfilment of the claims in the portfolios depend on the debtors ability to fulfil.

Parent companyThe parent company has no net loan and guarantees loss provisions.

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NOTE 30 – CREDIT RISK EXPOSURE FOR EACH INTERNAL RISK CLASS

The credit risk in SpareBank 1 Gruppen is mainly related to the operations of the business area factoring.

Work is being performed to prepare quantitative risk analyses for factoring. The credit risk in factoring is related to financing/lending risk andrisk related to domestic and foreign customer credit guarantees.

In connection with ICAAP, SpareBank 1 Gruppen uses the standard method for calculating credit risk. The internal credit model is a combination of a risk model and effectiveness model (how well adapted is factoring and how efficiently can SpareBank 1 Gruppen run theagreement). Thus the model is not directly transferable to a risk model with two dimensions/axes: rating on client/customer and securitycoverage.

Risk matrix Taking factoring's system for risk classification as a starting point, the following risk matrix is used as a basis for delegating credit authorisations. Objective scores from Lindorff Decision and SpareBank 1 Gruppen Finans AS's internal rules of procedures, determines inwhich risk class limited companies, sole proprietorships and personal businesses registered in the Register of Business Enterprises are placed.

Client rating /structure rating [4 - 5] [3,5 - 4> [3 - 3,5> [2 - 3> [1 - 2>

5 Low risk Low risk Low risk Medium risk High risk 4 Low risk Low risk Medium risk Medium risk High risk 3 Low risk Low risk Medium risk High risk High risk 2 Low risk Medium risk Medium risk High risk High risk 1 Medium risk High risk High risk High risk High risk Non-performing High risk High risk High risk High risk High risk Losses High risk High risk High risk High risk High risk

Description of the model:On one axis the client rating based on the Lindorff Decision Score is used, where 1 is the worst and 5 is the best.On the other axis, the structure is given a rating between 1 and 5, with 5 being the best. The structure rating means the factorability both in connection with the efficient operation of the agreement and whether SpareBank 1 Gruppen has good collateral in the receivable. A model has therefore been developed in which different parameters indicate whether or not the factorability is assessed and given a score.

The parameters considered are:1. Debtor's credit worthiness2. Repurchase rate3. Credit note turnover rate4. Age distribution5. Business sector

The client and structure rating model results in a matrix, that determines whether something is low risk, medium risk or high risk, based on the combination between client rating and structure rating.

Lending specified by risk classes:

Business area factoringClient rating vs. Structure rating [4 - 5] [3,5 - 4> [3 - 3,5> [2 - 3> [1 - 2> Total Summarised

5 Low riskLending 2.0 % 5. 8 % 19.8 % 0.8 % 0.1 % 28.4 % 47.7 %4 Low riskLending 3.4 % 6.5 % 28.1 % 0.7 % 0.0 % 38.7 % 47.7 %3 Medium riskLending 1.5 % 7.9 % 5.6 % 0.9 % 0.1 % 16.0 % 44.7 %2 High riskLending 0.8 % 2.8 % 6.4 % 2.1 % 0.0 % 12.1 % 6.6 %1 High riskLending 0.3 % 2.0 % 0.6 % 0.9 % 0.0 % 3.8 % 6.6 %Non-performing/exposed Non-performing/exposedLending 0.7 % 0.7 %Losses LossesLending 0.1 % 0.1 %

The model divides the portfolio into the risk classes low, medium and high risk, as well as non-performing/exposed and losses in 2011.

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NOTE 31 – MAXIMUM CREDIT RISK EXPOSURE, NOT TAKING INTO ACCOUNT PLEDGED SECURITY

The below table displays maximum credit risk exposure for the different balance sheet items, derivatives included.The exposure is before assets pledged as security and allowed offsetting.

Parent company GroupGross exposure Gross exposure

2011 2010 NOK 1,000 2011 2010

ASSETS

213 717 93 520 Cash and cash equivalents 1 276 149 1 091 159 - - Loans and deposits with financial institutions 64 233 95 246

152 580 122 580 Loans to and receivables from customers 610 775 489 320 - - Securities stated at fair value through profit or loss (FVO) 21 159 902 18 774 516 - - Securities held for trading 2 995 521 4 217 039

2 003 692 Derivatives 11 317 130 605 - - Securities held to maturity 4 522 630 4 679 131 - - Securities at amortised cost 1 368 467 1 249 291

17 583 17 583 Securities available for sale 19 193 20 216 202 066 243 351 Other assets 698 476 609 877 587 949 477 726 Total financial assets 32 726 663 31 356 400

LIABILITIES

- - Financial guarantee contracts 74 008 111 953 - - Unused credit lines - - - - Loan commitments 285 831 206 360 - - Total financial guarantees 359 839 318 313

587 949 477 726 Total credit risk exposure 33 086 502 31 674 713

NOTE 32 – CONTRACTUAL MATURITY OF FINANCIAL LIABILITIES

Group 2011On Less than 3 3–12 More than Without

NOK 1,000 demand months months 1–5 years 5 years maturity Total

Deposits from and liabilities to customers and financial institutions - 631 117 - - - - 631 117 Securities issued 14 525 595 545 430 784 960 764 - - 2 001 618 Derivatives - 51 305 - 169 810 -783 - 220 332 Other liabilities - 132 154 13 926 - 6 010 - 152 090 Subordinated loan capital and hybrid tier 1 capital 283 568 - - - - 200 000 483 568 Loan commitments 285 831 - - - - - 285 831 Total financial liabilities 583 924 1 410 121 444 710 1 130 574 5 227 200 000 3 774 556

Interest rate as of year-end 2011 is used to calculate the cash flow for the subordinated loan capital.Cash flow for perpetual subordinated loan capital is calculated from 1 to 5 years. The total amount is added without maturity.

Group 2010On Less than 3 3–12 More than Without

NOK 1,000 demand months months 1–5 years 5 years maturity Total

Deposits from and liabilities to customers and financial institutions 6 473 59 215 - - - - 65 688 Securities issued 11 413 185 896 476 626 817 359 - - 1 491 294 Derivatives 2 664 - - 131 200 26 400 - 160 264 Other liabilities - 21 578 5 616 - - - 27 194 Subordinated loan capital and hybrid tier 1 capital 283 846 4 603 13 657 222 780 212 747 200 000 937 633 Loan commitments 206 360 - - - - - 206 360 Total financial liabilities 510 756 271 292 495 899 1 171 339 239 147 200 000 2 888 433

Interest rate as of year-end 2010 is used to calculate the cash flow for the subordinated loan capital.Cash flow for perpetual subordinated loan capital is calculated from 1 to 5 years. The total amount is added without maturity.

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Parent company 2011On Less than 3 3–12 More than Without

NOK 1,000 demand months months 1–5 years 5 years maturity Total

Deposits from and liabilities to customers and financial institutions - - - - - - -Securities issued 14 525 595 545 430 784 960 764 - - 2 001 618Derivatives - - - - - - -Subordinated loan capital 283 568 - - - - - 283 568Loan commitments - - - - - - - Total financial liabilities 298 093 595 545 430 784 960 764 - - 2 285 186

Interest rate as of year-end 2011 is used to calculate the cash flow for the subordinated loan capital.

Parent company 2010On Less than 3 3–12 More than Without

NOK 1,000 demand months months 1–5 years 5 years maturity Total

Deposits from and liabilities to customers and financial institutions - - - - - - -Securities issued 11 413 159 334 476 626 817 359 - - 1 464 732Derivatives - - - - - - -Subordinated loan capital 283 846 1 195 3 545 168 700 - - 457 286Loan commitments - - - - - - - Total financial liabilities 295 259 160 529 480 172 986 059 - - 1 922 018

Interest rate as of year-end 2010 is used to calculate the cash flow for the subordinated loan capital.

NOTE 33 – AGE DISTRIBUTION OF OVERDUE, BUT NOT IMPAIRED LOANS AND PREMIUM REVENUES

The table below shows overdue amounts on loans, overdrafts on credits/deposits and premium revenues broken down on number of daysafter the due date that are not due to delays in payments transfers.

Group 2011

NOK 1,000 Upon request Up to 30 days 31–60 days 61–90 days Over 91 days Total

Loans to and receivables from customersRetail market 1) - - - - 78 368 78 368 Corporate market - - - - - -

Overdue but not paid insurance premiums 30 954 110 554 3 451 1 007 9 069 155 035 Total 30 954 110 554 3 451 1 007 9 069 233 403

1) The portfolio consists of acquired non-performing demands (all demands over 90 days) in SpareBank 1 Gruppen Finans AS's business areaPortfolio. Payment depends on the debtor's ability to redeem the claim.

Group 2010

NOK 1,000 Upon request Up to 30 days 31–60 days 61–90 days Over 91 days Total

Loans to and receivables from customersRetail market 1) - - - - 34 252 34 252 Corporate market - - - - - -

Overdue but not paid insurance premiums - 26 147 1 716 - - 27 863 Total 34 252 26 147 1 716 - - 62 115

1) The portfolio consists of acquired non-performing demands (all demands over 90 days) in SpareBank 1 Gruppen Finans AS's business areaPortfolio. Payment depends on the debtor's ability to redeem the claim.

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NOTE 34 – MARKET RISK RELATED TO CURRENCY RISK

It is primarily SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring Group in SpareBank 1 Gruppen Group who are exposed to currencyrisk. This risk primarily relates to the investment portfolios in the companies concerned. As part of the companies' risk management strategy, they tryto neutralise the currency risk in the underlying portfolios through currency futures. Since the currency exposure in Skadeforsikring AS is absolutelymarginal, the currency exposure shown here is only that of SpareBank 1 Livsforsikring AS.

The exposure is as follows:

2011 2010Net Change in Net Change in

currency result by a currency result by apositions 3% change positions 3% changein NOK in exposure NOK 1,000 in NOK in exposure

Currency85 181 2 555 EUR 72 222 2 167175 740 5 272 USD 139 648 4 18940 718 1 222 Other 49 569 1 487301 639 9 049 Total 261 439 7 843

The table above shows an estimate of the expected effect on the income statement of an immediate change in exchange rates. The table hasbeen prepared in connection with internal risk monitoring in SpareBank 1 Gruppen Group. The calculations are based on money marketinstrument and bond portfolios in SpareBank 1 Livsforsikring AS which actually have some exposure.

NOTE 35 – MARKET RISK RELATED TO INTEREST RATE RISK

SpareBank 1 Gruppen Group is exposed to market risk linked to interest rate risk. The main part of the interest rate risk in SpareBank 1 Gruppenis linked to the investment portfolios in SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring Group. Below we show a sensitivityanalysis per unit related to interest rate risk.

SpareBank 1 SpareBank 1 SpareBank 1SpareBank 1 Skade- Livs- SpareBank 1 Gruppen

Gruppen forsikring forsikring Markets FinansParameter AS Group AS AS Group Total

Change in result in NOK million before tax1% increase in interest rate -22 27 -157 3 -2 -1511% reduction in interest rate 22 -27 157 -3 2 151

The table above is an estimate of the expected profit and loss impact in the event of an immediate change in interest rates. The table is prepared in connection with monitoring risk in SpareBank 1 Gruppen AS. The calculations are based on changes in value and changes incash flow 12 months into the future in money market instrument and bond portfolios in SpareBank 1 Livsforsikring AS, SpareBank 1 Skadefor-sikring Group and SpareBank 1 Markets AS. For SpareBank 1 Gruppen AS and SpareBank 1 Gruppen Finans Group the profit and loss effectsis related to net interest bearing debt.

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NOTE 36 – DEPOSITS FROM AND LIABILITIES TO CUSTOMERS AND FINANCIAL INSTITUTIONS

Parent company Group

2011 2010 NOK 1,000 2011 2010

- - Loans and deposits from financial institutions without agreed maturity date 344 392 149 559 - - Loans and deposits from financial institutions with agreed maturity date - 36 082 - - Bank deposits from and liabilities to customers without agreed maturity 118 220 115 289 - - Bank deposits from and liabilities to customers with agreed maturity - - - - Liabilities to policyholders 132 984 233 466 - - Total deposits from and liabilities to customers and financial institutions 595 596 534 396

2011 2010 2011 2010Deposits Deposits NOK 1,000 Deposits Deposits

- - Deposits from and liabilities to customers without agreed maturity 118 220 115 289 - - Deposits from and liabilities to customers with agreed maturity - - - - Total deposits from customers 118 220 115 289

- - Employees, etc 1 358 1 370 - - Agriculture - - - - Fishing and fish processing 7 824 17 677 - - Oil related industry - - - - Manufacturing 44 706 60 763 - - Power and water supply 331 - - - Building and construction, power and water supply 29 990 6 094 - - Wholesale and retail trade 14 163 7 251 - - Hotel and restaurant 128 4 - - Transport and storage 3 791 643 - - Business services 5 822 4 041 - - Property management 21 - - - Public sector - - - - Shipping - - - - Shipbuilding industry - - - - Information and technology 5 462 9 863 - - Finans 4 468 7 167 - - Other sectors 156 416 - - Total deposits by sector and industry 118 220 115 289

Deposits by geographic area- - Akershus 9 760 4 930 - - Oslo 2 952 2 080 - - Hedmark 1 538 725 - - Buskerud 218 - - - Oppland 1 809 428 - - Østfold 1 989 8 159 - - Vestfold 7 089 117 - - Telemark 172 - - - Øst-Agder 16 - - - Vest-Agder 86 487 - - Rogaland 838 54 - Hordaland 6 504 7 199 - - Sogn og Fjordane 17 351 28 261 - - Møre og Romsdal 30 119 38 160 - - Sør Trøndelag 5 969 5 012 - - Nord Trøndelag - - - - Nordland 16 942 1 269 - - Troms 11 315 6 176 - - Finnmark 3 098 11 703 - - Other 455 529 - - Total deposits by geographic area 118 220 115 289

Page 67: Annual Report SpareBank 1 Gruppen 2011

67

NOTE 37 – SUBORDINATED LOAN CAPITAL AND HYBRID TIER 1 CAPITAL

Parent company Group

2011 2010 NOK 1,000 Interest rate Call date Maturity 2011 2010

Term subordinated loan capital

- 150 145 21.12.2006 - Norsk Tillitsmann ASA NIBOR plus 0.53% 21-12-11 21-12-16 - 150 145

- - 28.06.2006 - BN Bank ASA NIBOR plus 0.60% 28-06-11 28-06-16 - 15 000

- - 15.02.2006 - Norsk Tillitsmann ASA NIBOR plus 0.45% 15-06-11 15-06-16 - 200 000

- 150 145 Total time-limited - 365 145

Perpetual

83 230 83 197 Owner bank and Sparebanken Vest NIBOR plus 2.25% perpetual 83 230 83 197

200 338 200 504 Owner bank, Sparebanken Vest and Swedbank NIBOR plus 3.00% perpetual 200 338 200 504

283 568 283 701 Total perpetual 283 568 283 701

Hybrid tier 1 capital

15.06.2006 - Hybrid tier 1 capital

- - Norsk Tillitsmann ASA NIBOR plus 1.17% perpetual 200 000 200 000

- - Total hybrid tier 1 capital 200 000 200 000

283 568 433 846 Total subordinated loan capital and hybrid tier 1 capital 483 568 848 846

NOTE 38 – SECURITIES ISSUED

Parent company GroupAverage Average Average Averageinterest interest interest interest

2011 2011 2010 2010 NOK 1,000 2011 2011 2010 2010

Commercial papers and 635 000 3.39% 605 000 3.08% other short-term loans 635 000 3.39% 605 000 3.08%

1 255 500 4.04% 760 500 3.60% Bond debt 1 255 500 4.04% 760 500 3.60%2 673 - 2 002 - Value adjustments 2 673 - 2 002 - 11 852 - 9 412 - Accrued interest 11 852 - 9 412 -

1 905 025 - 1 376 914 - Total securities issued 1 905 025 - 1 376 914 -

Liabilities by maturity date- 605 000 2011 - 605 000

980 000 350 000 2012 980 000 350 000100 000 - 2013 100 000 - 525 500 125 500 2014 525 500 125 500285 000 285 000 2015 285 000 285 000

- - 2016 - - - - 2017 - -

2 673 2 002 Value adjustments 2 673 2 00211 852 9 412 Accrued interest 11 852 9 412

1 905 025 1 376 914 Bond debt and other loans 1 905 025 1 376 914

Page 68: Annual Report SpareBank 1 Gruppen 2011

68 SpareBank 1 Gruppen

NOTE 39 – CAPITAL ADEQUACY

SpareBank 1 Gruppen Group is subject to the same capital requirements rules as insurance companies and other financial institutions.The requirement is 8% regulatory capital in relation to a risk weighted assets.

Parent company Group

2011 2010 NOK 1,000 Weighting 2011 2010

Risk weighted assets- - Government, central banks, etc 0 % - - - - Securities 10 % 354 185 253 434

56 799 43 220 Financial institutions 20 % 2 302 693 2 385 947- - Secured loans, etc 50 % 357 362 314 518

5 710 999 4 869 048 Fixed assets 100 % 13 528 894 12 722 948- - Other assets 150 % 47 223 66 524

233 325 93 664 Goodwill and other intangible assets - - - - Assets related to investment choices 20 % 1 379 172 1 340 103

6 001 123 5 005 932 Total risk weighted assets 17 969 529 17 083 473

-233 325 -93 664 Excluding goodwill and other intangible assets - - 77 916 40 203 Posting outside the balance sheet 4 353 50 516

Net basis for calculation for institutions reporting - - in accordance with Basel II 2 001 138 1 593 587- - Unrealised gains on financial investments -218 338 -

-27 136 - Deduction for regulatory capital in other financial institutions -27 136 -9 228Total recorded assets and postings outside the

5 818 578 4 952 471 balance sheet and weighted assets 19 729 546 18 718 3485 865 479 5 178 728 Total recorded assets 41 989 140 40 600 545

2 736 698 2 758 135 Equity 4 379 939 3 701 048- - Hybrid tier 1 capital 200 000 200 000

-13 568 - - 50% deduction for regulatory capital in other financial institutions -13 568 -4 614- - - Minimum requirement for reassurance coverage -37 306 -34 341

-433 900 -440 000 - Deduction for suggested dividends -433 900 -440 000- - - Deduction for unrealised gains on investment properties/tangible fixed assets -128 978 -71 454

-233 325 -93 664 - Deduction for deferred tax asset - - - - - Intangible assets and goodwill -1 092 658 -993 752

2 055 905 2 224 471 Total Tier I capital 2 873 529 2 356 887

283 000 283 000 Perpetual subordinated loans 283 000 283 000- 150 000 Time limited subordinated loans - 350 845- - 45% of unrealised value of properties 56 326 32 154- - 45% of unrealised gain on equities - -

-13 568 - - 50% deduction for regulatory capital in other financial institutions -13 568 -4 614269 432 433 000 Total supplementary capital 325 758 661 385

2 325 337 2 657 471 Net regulatory capital 3 199 287 3 018 272

40.0 % 53.7 % Capital adequacy ratio 16.2 % 16.1 %

1 859 851 2 261 273 Surplus of regulatory capital 1 620 923 1 520 804

NOTE 40 – REINSURANCE RECEIVABLESGroup

NOK 1,000 2011 2010

Reinsurance receivables in P&C Insurance 107 204 294 855Reinsurance receivables in life insurance 152 459 148 801Reinsurer's share gross claims provisions 985 268 1 034 542Reinsurer's share gross unearned premium 168 328 179 531Reclassified reinsurance provisions -2 103 -163 391Total reinsurance receivables 1 411 156 1 494 338

Page 69: Annual Report SpareBank 1 Gruppen 2011

69

NOTE 41 – INSURANCE RECEIVABLES FROM POLICYHOLDERS

Group

NOK 1,000 2011 2010

Due invoiced receivables P&C Insurance 472 871 370 607Due unbilled receivables P&C Insurance 990 859 902 205Accounts receivable life insurance 104 273 121 629Total insurance receivables from policyholders 1 568 003 1 394 441

NOTE 42 – INSURANCE LIABILTES IN LIFE INSURANCE

Group 2011

Premium fund,Gross contribution fund

premium Additional and pensioners' Claims SecurityNOK 1,000 reserve provisions profit fund provision provision Total

Individual annuity and pension 5 929 666 93 752 1 172 355 200 - 6 379 790 - Profit model pursuant to section 9-9 of the Insurance Activity Act 64 686 319 - - -

- Profit model pursuant to previously applicable provisions of the Act of 10 June 1988 relating to insurance activity, section 8-1, and relevant regulations. 4 169 087 93 432 1 172 22 458 -

- Contracts without right to profit sharing 175 940 - - 332 742 - - Investment choice 1 519 953 - - - -

Individual endowment 2 096 684 8 307 - 186 123 540 2 291 654- Profit model pursuant to section 9-9 of the Insurance Activity Act 321 254 - - - -

- Profit model pursuant to previously applicable provisions of the Act of 10 June 1988 relating to insurance activity, section 8-1, and relevant regulations. 590 389 8 307 - 68 846 540

- Contracts without right to profit sharing - - - 117 092 - - Investment choice 1 185 041 - - 185 -

Group pension 11 463 703 242 063 485 606 322 472 - 12 513 844 - Defined benefit-based pension schemes without investment choice 3 118 807 167 414 264 466 107 567 -

- Paid-up policies 3 696 710 74 649 - 34 500 - - Defined contribution-based pension schemes (incl. pension capital certificates without investment choice 440 660 - 23 985 10 971 -

- Defined contribution-based pension schemes (incl. pension capital certificates with investment choice 4 074 660 - 197 155 89 028 -

- Contracts without right to profit sharing 132 866 - - 80 407 -

Group life 398 235 - - 720 479 - 1 118 714

Accident insurance - - - 258 777 57 738 316 515- Contracts without right to profit sharing - - - 258 777 57 738

Total all industries 19 888 288 344 121 486 778 1 843 051 58 279 22 620 517

Page 70: Annual Report SpareBank 1 Gruppen 2011

70 SpareBank 1 Gruppen

Group 2010

Premium fund,Gross contribution fund

premium Additional and pensioners' Claims SecurityNOK 1,000 reserve provisions profit fund provision provision Total

Individual annuity and pension 6 430 913 104 084 1 764 214 906 - 6 751 668 - Profit model pursuant to section 9-9 of the Insurance Activity Act 51 816 321 - - -

- Profit model pursuant to previously applicable provisions of the Act of 10 June 1988 relating to insurance activity, section 8-1, and relevant regulations. 4 386 797 103 763 1 764 22 450 -

- Contracts without right to profit sharing 131 717 - - 192 456 - - Investment choice 1 860 583 - - - -

Individual endowment 2 338 902 9 490 - 185 421 679 2 534 492- Profit model pursuant to section 9-9 of the Insurance Activity Act 353 666 - - - -

- Profit model pursuant to previously applicable provisions of the Act of 10 June 1988 relating to insurance activity, section 8-1, and relevant regulations. 621 726 9 490 - 80 364 679

- Contracts without right to profit sharing 68 - - 104 872 - - Investment choice 1 363 442 - - 185 -

Group pension 10 625 774 265 680 416 373 344 617 - 11 652 445 - Defined benefit-based pension schemes without investment choice 3 548 018 192 602 268 975 107 567 -

- Paid-up policies 3 254 126 73 078 - 34 500 - - Defined contribution-based pension schemes (incl. pension capital certificates without investment choice 344 175 - 14 484 10 422 -

- Defined contribution-based pension schemes (incl. pension capital certificates with investment choice 3 386 947 - 117 709 103 157 -

- Contracts without right to profit sharing 92 508 - 15 205 88 972 -

Group life 393 386 - - 695 561 - 1 088 947

Accident insurance - - - 244 117 54 317 298 434- Contracts without right to profit sharing - - - 244 117 54 317

Total all industries 19 788 975 379 255 418 137 1 684 623 54 996 22 325 986

Page 71: Annual Report SpareBank 1 Gruppen 2011

71

NOTE 43 –INSURANCE PROVISIONS IN P&C INSURANCE

Group

2011

1 PERSON

AL LINES

2 CO

MMERCIAL LINES

Of which

TOTAL

Onshore

Onshore

Of which

Workm

en's

TOTAL

34

5Natural

Onshore

third party

Travel

PERSON

ALproperty

property

third party

compen-

COMMERCIAL

Total

Energy/

Total

Perils

NOK 1,000

property

Motor

liability

Yacht

Accident insurance

Others

LINES

industrialcom

mercial

Motor

liability

Liability

sation

Safety

Other

LINES

Marine

oil reinsurance

pool

TOTAL

Gross unearned

premium provisions

as of 1.1.11

556 389

793 219

325 971

32 802

37 279

120 582

12 854

1 553 125

4 818

156 545

118 597

32 448

7 398

62 762

4 553

14 728

369 402

- -

- 39 293

1 961 820

Gross unearned

premium provisions

as of 31.12.11

632 750

893 770

385 771

36 818

40 090

131 344

11 016

1 745 788

4 462

165 579

127 531

41 110

11 005

67 928

6 552

12 676

395 734

- -

- 38 440

2 179 962

Gross claims

provisions

as of 1.1.11

944 084

1 477 788

1 116 074

20 037

325 967

132 095

10 354

2 910 324

12 982

345 564

232 471

156 276

88 302

913 243

250 353

48 051

1 890 966

157 823

68 242

47 769

48 818

5 123 942

Gross claims

provisions

as of 31.12.2011

1 110 124

1 650 686

1 248 813

32 479

359 156

162 109

12 300

3 326 852

10 637

422 895

292 421

207 026

78 759

976 912

295 274

30 602

2 107 500

102 529

55 815

43 312

159 240

5 795 249

Security provisions

as of 1.1.11

500 480

251 285

1 224

- 14 208

- 767 198

Statutory minimum

requirements

as of 1.1.11

500 480

251 285

1 224

- 14 208

- 767 198

Security provisions

as of 31.12.11

582 824

211 578

2 273

- 8 222

- 804 897

Statutory minimum

requirements

as of 31.12.11

560 021

208 642

2 273

- 8 222

- 779 158

Other technical

provisions

as of 1.1.11

452 531

452 531

Other technical

provisions

as of 31.12.11

340 091

340 091

Total as of 1.1.11

8 305 494

Total as of 31.12.11

9 120 199

Page 72: Annual Report SpareBank 1 Gruppen 2011

72 SpareBank 1 Gruppen

Group

2010

1 PERSON

AL LINES

2 CO

MMERCIAL LINES

Of which

TOTAL

Onshore

Onshore

Of which

Workm

en's

TOTAL

34

5Natural

Onshore

third party

Travel

PERSON

ALproperty

property

third party

compen-

COMMERCIAL

Total

Energy/

Total

Perils

NOK 1,000

property

Motor

liability

Yacht

Accident insurance

Others

LINES

industrialcom

mercial

Motor

liability

Liability

sation

Safety

Other

LINES

Marine

oil reinsurance

pool

TOTAL

Gross unearned

premium provisions

as of 1.1.10

495 302

686 310

294 824

30 477

36 284

112 142

8 147

1 368 662

4 847

125 520

88 886

28 520

4 647

34 778

3 924

2 405

265 009

- -

- 41 235

1 674 906

Gross unearned

premium provisions

as of 31.12.10

556 389

793 219

325 971

32 802

37 279

120 582

12 854

1 553 125

4 818

156 545

118 597

32 448

7 398

62 762

4 553

14 728

369 402

- -

- 39 293

1 961 820

Gross claims

provisions

as of 1.1.10

725 412

1 253 902

998 037

19 783

256 023

97 531

4 567

2 357 218

5 719

336 874

187 755

139 007

24 421

644 081

230 160

3 573

1 432 583

340

52 296

40 732

55 126

3 938 296

Gross claims

provisions

as of 31.12.10

944 084

1 477 788

1 116 074

20 037

325 967

132 095

10 354

2 910 324

12 983

345 564

232 471

156 276

88 302

913 243

250 353

48 051

1 890 967

157 823

68 242

47 769

48 818

5 123 943

Security

provisions

as of 1.1.10

469 225

231 474

- -

10 721

711 421

Statutory minimum

requirements

as of 1.1.10

469 225

231 474

- -

10 721

711 421

Security provisions

as of 31.12.10

500 480

251 285

1 224

- 14 208

767 198

Statutory minimum

requirements

as of 31.12.10

500 480

251 285

1 224

- 14 208

767 198

Other technical

provisions as of 1.1.10

497 337

497 337

Other technical

provisions as of 31.12.10

452 531

452 531

Total as of 1.1.10

6 821 959

Total as of 31.12.10

8 305 494

Page 73: Annual Report SpareBank 1 Gruppen 2011

73

NOTE 44 – LIABILITIES RELATED TO REINSURANCE

Group

NOK 1,000 2011 2010

Reinsurance liabilities in life insurance 30 356 33 301Reinsurance liabilities in P&C insurance 43 661 44 405Total liabilities related to reinsurance 74 017 77 706

NOTE 45 – INSURANCE RISK IN LIFE INSURANCE

Important assumptions and changes in assumptionsThe guaranteed interest rate complies with rules laid down by the Financial Supervisory Authority of Norway From 1 January 2011 the guaranteed interest rate was 2.5% for new agreements, while the guaranteed interest rate on new accrued entitlements for group pensions willbe 2.5% from 1 January 2012. Moreover, new earnings and accrued entitlements follow the maximum permitted guaranteed rate of interest thatapplied at the time the entitlements were earned.

The mortality assumptions are largely based on common surveys by the FNO, while the estimates for disability are chiefly based on the company's own experience. The mortality assumptions for the disabled have taken account of the correlation between disability and mortality.

As of 2008, group defined benefit pension and paid up policies term group defined pensions, follow the new industry tariff K2005 with securitymargins that take info increased expectancy. A new mortality basis for group life pension, K2013, is being developed under the auspices of theFNO. As a consequence of this, a process has begun to build up provisions for defined benefit pensions and paid-up policies.

A new mortality basis for individual annuity and pension that takes account of greater life expectancy is also being developed under the auspices of the FNO. As a consequence of this, a process has begun to build up provisions for this business.

The reserve provisions and premiums are established based on a policy that there should be a security margin in the reserves and the premiums.The security margins in the premiums and reserves are not quantified, but assessed by considering the levels of uncertainty and the maturitiesof the liabilities.

The company's ordinary premium provisions are calculated according to prospective principles based on the same tariff terms as the premiumtariff. IBNR- and RBNS-provisions have been made, using statistical methods based on the company's own experience.

Management of risk due to insurance contractsAssessment of insurance riskRisk manuals have been prepared which contain guidelines for risk assessments including health and contractual regulations when acquiringpotential customers. A health assessment of the insured party is carried out when signing individual risk products. The result of this assessmentis reflected in the level of the risk premium required. When signing group agreements with risk cover, an assessment is carried out of the firm'srisk (underwriting). When underwriting, the company's financial position, industry and sickness and disability history are evaluated.

Controlling insurance riskIn the company's existing portfolio, the insurance risk is monitored for each product group. The risk result from each product group is dividedinto mortality, disability and survival elements. Risk result performances are monitored throughout the year. For each type of risk the ordinaryrisk result for a period is the difference between the risk premiums that the company has received for the period and the compensation paidrelating to the period. Insurance incidents which the company has not been notified about, but which are likely to have occurred based on experience, are included in this assessment. In connection with risk-based supervision, the company has prepared a framework for managingand controlling insurance risk.

Risk result in 2011Individual Individualannuity and endow- Group Group

NOK million pension ment pension Accident life Total

Risk of death (incl. accident risk) -14.866 -171.626 4.949 - 63.328 225.037 Disability -72.314 -8.233 -3.534 - 78.434 -5.637 Individual life - - - 57.640 57.640 Risk result before technical provisions -87.180 163.403 1.414 57.640 141.762 277.040

The table below shows the total risk result for 2011 with a reduction in mortality of 10% and 20%, respectively, or an increase in disability of10% or 20%, respectively.

Individual Individualannuity and endow- Group Group

NOK million pension ment pension Accident life Total

10% reduction in mortality -87.598 177.556 5.762 57.640 165.719 319.079 20% reduction in mortality -88.016 191.709 10.109 57.640 189.677 361.119 10% increase in disability -110.673 157.099 15.189 57.640 127.942 216.820 20% increase in disability -134.166 150.795 -31.792 57.640 114.123 156.600

The effect that the risk result has on the result to the shareholders depends on which profit model is applied for the various products.

Page 74: Annual Report SpareBank 1 Gruppen 2011

74 SpareBank 1 Gruppen

ReinsuranceThe company has a reinsurance strategy that is considered annually by the Board. The strategy includes targets for the company's reinsurance programme and specifies how the reinsurance programme is to be monitored.

The company has the following type of reinsurance cover:

Quota reinsuranceIn quota reinsurance the risk is divided between two parties, meaning that an agreement-specific proportion of the risk is transferred to areinsurer.

Surplus reinsuranceAn excess is fixed in contracts according to the type of risk. All risk that exceeds the excess is reinsured. Surplus reinsurance is, like quota reinsurance, a proportional arrangement, but differs because the percentage varies in the different contracts. Surplus reinsurance is particularly used for individual contracts.

Excess of loss/catastrophe reinsuranceThrough excess of loss, the reinsurer covers the amount that exceeds the company's risk amount, often limited to a specified maximumlevel. A claim can be defined per risk or per event. An example of an excess of loss is a catastrophe reinsurance. In those circumstanceswhere the claim is defined per risk, excess of loss can be very similar to surplus reinsurance.

Sufficiency testIFRS 4 requires the company to carry out a sufficiency test of the company's reserves. This test has been performed using the same principles since 2004. The calculations are based on forecasts from the company's finance model, where both assets and liabilities areincluded. This model is extrapolated to 2015. The administration result and the risk result is assumed to be on the average level of theperiod 2011-2015, and the financial return is assumed to be 5.2%.

As life expectancy increases, the reserves for retirement pensions are expected to be too low for both individual and group pensions. Theprovisions for long life have been built up for individual pensions, but the final calculations for incorporated in the system remain to bemay, so there may be adjustments. 2% of the premium reserve has been set aside in 2011 to build up provisions, both for group definedbenefit pensions and paid-up policies group defined pensions. It is estimated that around 4% needs to be built up for each of these typesof business over 2 years.

The sufficiency test indicates that the premium reserve is sufficient based on the assumed assumptions.

Conditions and terms in insurance contractsInsurance riskFor the majority of product groups, the company offers disability cover, either through a disability pension, premium exemption or disability capital. Whole life insurance is offered within individual contracts and group life insurance. In group pensions the company offers survivor pension benefits that come into effect in the event of the insured party's death. Changes inthe payment regulations in the National Insurance Scheme for disability payments etc. will have a substantial effect on disability numbersand provisions. In relation to the change in the risk of mortality, the steadily increasing longevity affects whether the date on which payments actually commence matches the forecasts. With a continuously increasing lifespan, the company's future old age pension payments will be rising, compared with prior years.

Interest rate riskThe company has assumed a substantial interest rate risk in its interest rate and pension insurance. The company's average annual interest rate guarantee is for 3.13 %, calculated using an average insurance fund. New contracts in 2011 are offered with a guaranteed interest rate of 2.5 %. Persistent low interest rates will increase the risk connected to the interest rate guarantee. If the annual return looksto be less than the interest rate guarantee, financial measures are enacted to ensure that the return is at the same level as the interest rateguarantee. If this is insufficient, funds will be taken from the supplementary provisions to cover the guarantee. Any negative returns mustbe covered by the company's equity. In good financial years, part of the profits are allocated to supplementary provisions. This is regulated to a maximum of 12 % of the contract's premium reserve.

Average interest rate guarantee 2011

Individual endowment insurance 2.63 %Individual annuity and pension insurance 3.64 %Group pension insurance 2.91 %Group life insurance 0.00 %Accident insurance 0.00 %Total 3.13 %

• Profit modelsThe company has models with and without rights to profits according to the rules in the Insurance Act.

- New profit model: group pension, defined contribution pension with return guarantee, guarantee account, Individual saving productsentered into from 2008 and group life with profit fund.

- Modified profit model: paid-up policies terminated from group pension.- Profit sharing according to previous rules: individual endowment and Individual pension with profit sharing entered into prior to 2008.- Without right to profits: group life (without group life with profit fund), group risk pension insurance without paid-up policy, individual

annuity, individual endowment and life insurance.- With investment choice: defined contribution schemes with investment choice, individual endowment and Individual annuity.

Page 75: Annual Report SpareBank 1 Gruppen 2011

75

• Profit allocationThe allocation of profit to each customer is determined by which product group the contract belongs to.

For individual endowment insurance, the profits will be accumulated on the different contracts and paid out with the amount insured.For individual annuity and pension insurance, the secured contribution is written up with the profit. Individual contracts terminatedfrom group pension treated in the same way.

For group pension, the profits are allocated to the scheme's premium reserve and the pensioner's profit reserve in accordance with theregulations set in the Company Pension Scheme Act. For schemes without these regulations the profits are allocated to the premium fund.

• For products without profit rights the company will be exposed for the product's cost risk and insurance risk.

• The right to transfer insurance between companies, where the time limit for settlement is only two months after the delay of cancellationfor contracts where the transaction value is above NOK 300 million, can represent a liquidity risk if one or more of the greater contractsare transferred within a short amount of time. Transaction fee has an upper limit of NOK 5,000. Bigger outward transactions than inwardtransactions over a defined time period will affect the future cash flow.

• In general, changes in framework conditions for the industry can influence future cash flows. For instance, changes in the Pensions Actresult in the termination of defined benefit-based pensions or in transfers to the defined contribution-based pension.

• Maturity analysisThe best estimate for when the liabilities for savings products are due for payment. In the estimate disposals have been taken intoaccount. New accrued entitlements are not taken into account in group defined benefit pensions.

2011Book

NOK million value 0-5 years 5-10 years 10-15 years 15-20 years >20 years

Payments (not discounted) 4 894 2 979 2 185 1 652 3 144Total net premium reserves (discounted) 12 392

Insurance risk concentration• The insurance portfolio is well diversified with respect to insurance risk. It is largely comprised of individual insurances and group

insurances where the insurance risk is not concentrated.

NOTE 46 – INSURANCE RISK IN P&C INSURANCE

The insurance risk in each contract is the probability that the insured event will occur and the uncertainty surrounding the resulting claim.The nature of the insurance contract is such that the risk is random and therefore must be estimated.

For insurance contracts portfolios utilising probability theory to calculate price and technical provisions, the biggest risk facing the companyin connection with insurance contracts is that the actual compensation will exceed the amount set aside to cover claims. Insurance eventsstrike randomly and the observed number of events and degree of compensation will naturally vary from year to year in relation to that estimated using statistical techniques.

Empirically, a larger portfolio of standard insurance contracts will have expected results that vary less. A more diversified portfolio will have less chance of interference from changes in a sub-portfolio. The Group's subscription strategy is designed to reduce variability in theexpected result by increasing the spread between different types of insurance risk through a sufficiently large insurance stock within eachsector. The Group's reinsurance cover is intended to protect it against large claims/events. Quota reinsurance is also used to stabilise product dimensions.

Sensitivity to insurance riskThe table below shows the impact on earnings and equity (before tax) of a 1% change in gross premiums earned and 1% change in the Combined Ratio for own account. Combined Ratio is the most widely used criterion for measuring profitability in P&C insurance. A change in the Combined Ratio can result of a change in the injury frequency, compensation level and / or administrative costs.

Sensitivity analysis – P&C insuranceEffect in

Profit effect before tax (for own account) NOK million

1 percentage point change in combined ratio Private +/- 39.61 percentage point change in combined ratio Corporate +/- 6.41 % change in premium level +/- 46.1

Concentration of insurance riskThe Group has prepared contractual regulations that stipulate which insurance items the companies accept in their portfolios. Checks areperformed to ensure that these contractual regulations are complied with. In addition, the insurance system incorporates automatic checkson accumulated balances when signing a new portfolio. Reinsurance coverage is adjusted in relation to the risk exposure in the insuranceportfolio.

Page 76: Annual Report SpareBank 1 Gruppen 2011

76 SpareBank 1 Gruppen

Gross premiums written per insurance product

NOK 1,000

Onshore property 1 804 979 Industrial fire insurance 10 410 Marine 244Motor 1 790 602 Onshore property commercial 377 520 Energy/oil -Yacht 75 934 Motor commercial 280 564 Total opening reass. 59Accident insurance 164 079 Liability 54 863 Total marine, energy, reass 303Travel insurance 336 029 Workman's compensation 167 342Other retail insurance 23 683 Safety 89 606 Natural perils pool 120 957

Other 61 306Total gross overdue

Total retail lines 4 195 307 Total commercial lines 1 041 612 premiums 5 358 180

Claims provisionsClaim provisions are measured at an unbiased level, such that no security buffer is included in the provisions. Based on the Financial Supervisory Authority of Norway's rules for technical insurance provisions, the Group must at all times have provisions that fully cover theGroup's technical insurance liability and other risk derived from the insurance business. The Group must at all times have provisions that, as a minimum, correspond to the minimum requirements for the premium reserve and claim provisions for own account (after deductions forreinsurance) stipulated by the Financial Supervisory Authority of Norway, within all product lines. The premium reserve must cover therisk, that has not been run-off, of losses that have not yet occurred in existing insurance contracts on the balance sheet date.

Claim provisions have not been discounted, except within marine insurance.

The security provisions must cover extraordinary fluctuations and shall together with the actual claim provisions cover the company’s technical insurance liabilities with a likelihood of 99 %.

Analysis of claims trends

NOK million 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total

GROSS CALCULATED COMPENSATION COSTS

At start of claim year 2,319.7 2,303.4 2,312.0 2,525.3 2,786.8 2,844.2 3,061.3 3,505.3 4,070.2One year later 2,258.1 2,254.0 2,324.6 2,518.3 2,787.2 2,905.4 3,167.4 3,657.4 -Two years later 2,250.7 2,170.2 2,257.2 2,456.8 2,740.5 2,990.3 3,090.9 - -Three years later 2,229.9 2,145.5 2,224.6 2,431.5 2,813.3 2,955.1 - - -Four years later 2,241.6 2,128.9 2,218.5 2,474.8 2,773.2 - - - - Five years later 2,250.7 2,118.5 2,211.2 2,420.4 - - - - - Six years later 2,257.0 2,120.4 2,205.5 - - - - - - Seven years later 2,256.2 2,119.4 - - - - - - - Eight years later 2,254.2 - - - - - - - -

Calculated amount as at 31.12.2011 2,254.2 2,119.4 2,205.5 2,420.4 2,773.2 2,955.1 3,090.9 3,657.4 4,070.2Total paid to date 2,188.7 2,014.6 2,049.9 2,186.3 2,409.5 2,500.6 2,497.7 2,755.9 2,051.4Claims provisions UB 65.6 104.8 155.6 234.1 363.7 454.5 593.2 901.5 2,108.7 4,891.7Claims provisions for claims before 2003 - - - - - - - - - 304.0Total claims provisions land-based - - - - - - - - - 5,195.7Claims provisions Marine/Energy/Opening Re in Runoff - - - - - - - - - 184.7Claims provisions pools - - - - - - - - - 150.2Indirect claims handling costs - - - - - - - - - 264.7Total 5,795.2

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NOK million 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total

FOR OWN ACCOUNTCALCULATED COMPENSATION COSTS

At start of claim year 1,518.5 1,661.8 1,781.9 2,356.4 2,546.8 2,643.7 2,775.9 3,212.1 3,651.2One year later 1,489.1 1,618.8 1,782.4 2,355.1 2,541.0 2,695.9 2,848.8 3,383.9 -Two years later 1,473.8 1,547.7 1,723.8 2,305.4 2,496.4 2,722.6 2,793.9 - -Three years later 1,452.5 1,524.7 1,696.0 2,280.4 2,523.5 2,693.9 - - -Four years later 1,457.6 1,513.9 1,694.8 2,298.1 2,491.6 - - - -Five years later 1,459.9 1,507.7 1,689.6 2,250.9 - - - - -Six years later 1,463.7 1,510.3 1,680.9 - - - - - -Seven years later 1,461.8 1,508.3 - - - - - - -Eight years later 1,461.7 - - - - - - - -

Calculated amount as at 31.12.2011 1,461.7 1,508.3 1,680.9 2,250.9 2,491.6 2,693.9 2,793.9 3,383.9 3,651.2Total paid to date 1,438.9 1,452.5 1,570.0 2,045.0 2,198.2 2,336.3 2,306.4 2,595.4 1,918.4Claims provisions UB 22.8 55.8 110.9 205.9 293.5 357.5 487.5 788.5 1,732.8 4,055.1Claims provisions for claims before 2003 - - - - - - - - - 253.3Deduction XL-reassuranse - - - - - - - - - -31.5Total claims provisions land-based - - - - - - - - - 4,276.9Claims provisions Marine/Energy/Opening Re in Runoff - - - - - - - - - 118.7Claims provisions pools - - - - - - - - - 150.0Indirect claims handling costs - - - - - - - - - 264.7Total 4,810.3

NOTE 47 – SALARIES AND OTHER REMUNERATION OF CEO AND SENIOR EXECUTIVESOther Accrued

remuner- pension

NOK 1,000 Pay Bonus1) ation cost

Group executive management teamKirsten Idebøen 3 147 650 460 785Torbjørn Martinsen 2 656 507 392 542 Aud Lysenstøen 2 379 437 360 521 Tore Tenold 2 242 445 303 809 Leif Ola Rød 2 148 2 047 66 - Thoralf Granerød 1 904 366 292 385 Jarle Haug 2 035 417 312 270 Øyvind Aass 2 071 353 279 461 Sigurd Aune 2 061 386 310 360 Total 2011 20 643 5 608 2 774 4 133 Total 2010 18 980 3 843 2 622 2 704

BoardFinn Haugan 176 - - - Hans Olav Karde 181 - - - Bjørn Engaas 190 - - - Bente N. Halvorsen, board member until 26.01.11 70 - - - Knut Bekkevold 844 48 144 - Venche Johnsen 132 - - - Tor-Arne Solbakken, board member until 26.01.11 38 - - - Steinar Karlsen, attending substitute board member 148 - - - Sally Lund-Andersen 106 - - - Richard Heiberg 174 - 4 - Total 2011 2 059 48 148 - Total 2010 1 615 - 82 -

Terje Varberg, board member until 26.01.11, and Arne Austreid, board member from 26.01.11, did not receive board member pay.Vivi Ann Pedersen, substitute board member received no payments in 2011.

Control committeeDag Nafstad 155 - - Knut Ro 115 - - Ivar Listerud 115 - - Odd Broshaug 115 - - Rolf Røkke 115 1 - Total 2011 615 1 - Total 2010 590 - -

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78 SpareBank 1 Gruppen

Other Accrued

remuner- pension

NOK 1,000 Pay Bonus1) ation cost

Supervisory BoardHalvorsen Per 639 50 31 - Petersen Kjell Olav 52 - - - Hagerud Trond 7 - - - Stenrud Ellen 7 - - - Elvegård Kyrre 692 81 94 - Martinsen Gunnar 14 - - - Leite Helge 7 - - - Eidesvik Kristian 7 - - - Sundnes Trine Lise 7 - - - Koch Per Axel 14 - - - Sollie Bjørg Marit 14 - - - Vyrmo Bjørn 385 27 57 - Bourne Philip 773 50 - - Stubne Liv Berit 535 46 29 - Nordstrøm Even 14 - - - Aske Øyvind 21 - - - Supervisory Board 2011 3 190 254 211 - Supervisory Board 2010 113 - - -

1) The bonus amount is the bonus paid out in the 2011 financial year.

The maximum achievable bonus amount for senior executives, who are defined as the group executive management team, with an individualbonus agreement is 1-3 months' salary in SpareBank 1 Gruppen. The bonus for meeting targets in 2011 will be paid out in accordance withthe Ministry of Finance's regulations relating to remuneration schemes in financial institutions. This means half of the achieved bonusamount will be paid out in 2012 and the remaining half will be paid out, in accordance with the pro rata principle, in 2013, 2014, and 2015.The deferred bonus payments will be related to the returns on selected equity certificates in SpareBank 1 Gruppen's owner banks.

Employee elected board members in SpareBank 1 Gruppen are covered by the general bonus scheme for other employees of the company. Board members otherwise receive no other form of variable remuneration.

The CEO is entitled to a pension amounting to 70% of annual salary from the year she turns 60. The right is earned on a pro rata basis.The CEO's salary and bonus are based on an overall evaluation of a combination of the Group's profit, the Group's target achievement compared to other comparable financial institutions, the CEO's individual performance, and average salary for comparable management positions. Any bonus is decided by the Board and an assessment of the bonus that will be paid out for one financial year must be made beforethe next financial year ends.

No obligation exists to award the Chairman of the Board any special remuneration upon resigning, or changes being made to, the post. No doany agreements exist concerning bonuses, profit sharing, options or similar benefits for the Chairman of the Board.

Loans to employees are granted by Bank 1 Oslo Akershus AS and the collateral provided satisfies the requirements of section 2-15 of theFinancial Institutions Act. Employees are granted loans with a 20% discount compared to ordinary customers. The various companies in theGroup are charged for their proportion of the discount.

Employee discounts are granted for loans and some insurance services. Benefits awarded to senior executives and board members do not differ from the benefits awarded to other employees. All loans to employees and the Board are approved by the Control Committee. The discounts given are about 25% of the terms for ordinary customers. SpareBank 1 Livsforsikring AS offers no discounts to employees or boardmembers. All insurance contracts are based on the ordinary terms for customers.

SpareBank 1 Gruppen AS's sole business is to administer its interests in its subsidiaries. All transactions with related parties are entered intoon normal business terms. All intergroup payments not related to sales and portfolio management are priced at cost. See note 52.

Insurance premium SpareBank 1 Skadeforsikring AS 2011Group Other

executive Control Associated relatedNOK 1,000 management Board committe companies parties

Annual premium 157 860 160 442 36 658 See note 52 143 634 Claims 61 444 60 285 - See note 52 146 109

Insurance premium SpareBank 1 Skadeforsikring AS 2010Group Other

executive Control Associated relatedNOK 1,000 management Board committe companies parties

Annual premium 151 773 146 163 26 775 See note 52 116 139 Claims 18 062 233 903 40 699 See note 52 23 111

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NOTE 48 – PENSIONS

General description of the company's pension liabilities:The employees are part of SpareBank 1 Gruppen's pension scheme which is administrated by SpareBank 1 Livsforsikring AS. The definedbenefit plan ensures most of the employees a pension payment that constitutes 70 % of the expected final salary until the age of 77 with afuture decrease in payments. In addition, a defined contribution plan has been established for employees from 01.01.2005. The defined benefit plan was closed for new employees as of the same date.

For the parent company, the defined benefit plan includes 97 current employees and 76 pensioners. For the total group the defined benefitplan inclueds 482 current employees and 487 pensioners. 824 employees are covered by the Group's defined contribution scheme.

Estimates are used for preparing the valuation of the pension retirement benefit and for the resulting excess or deficit. Adjustments to thesevalues are made on a yearly basis and in accordance to statements of the transfer value from the life insurance company and actuarial valuations of the liability's size.

The costs are calculated based on the assumptions made for the opening balance. The pension liabilities are revised and calculations updatedas of 31.12 according to the assumptions made at year end. Actuarial gains and losses (changes in estimates) are presented in the statement ofcomprehensive income. The period's pension costs consist of the pension entitlements accrued in the period and interest costs on the pension liabilities, less the expected return and accrued employer's national insurance contribution. Payments according to the defined contribution scheme are registered through profit and loss in the year of payment.

A new act relating to state subsidies to workers who take a statutory early retirement pension in the private sector came into force on19.02.10. Workers who take early retirement from 2011 or later will be given benefits under the new scheme. The new pension scheme constitutes a lifelong entitlement from the National Insurance Scheme and can be taken from age of 62. Employees earn the right to a statutoryearly retirement pension retirement annually at a rate of 0.314% of pensionable income up to 7.1G at the age of 62. Vesting of the new schemeis calculated on the basis of the worker's lifetime income, so that all earlier working years are included in the accrual basis. The new schemewill be financed by the state covering 1/3 of pension expenditure and 2/3 which shall be borne by the employers. Employers' premiums willbe determined as a percentage of salaries between 1G and 7.1G.

The new pension scheme is, for accounting purposes, considered a defined benefit multi-employer scheme. This means that each entityshould account for its proportionate share of the scheme's pensions liabilities, pension funds and pensions costs.

In the absence of estimates of the individual components and a consistent and reliable basis for allocation recorded, the new pension schemeis recognised as a defined contribution scheme.

When the new act was implemented, the previous scheme was, for accounting purposes, considered closed and under termination, and willbe treated in accordance with the rules for curtailment and settlement. For employees born after 31.12.1948, the effect of the new scheme isaccounted for in the first half of 2010. For retired employees with previous scheme, the accounting remains unchanged. As a result of this,the parent company entered an income of NOK 10 million and the Group NOK 46 million at the end of the first half of 2010.

Child and spouse insurance were closed in 2010. This resulted in a gain of NOK 13.3 million and NOK 45.7 million in the parent companyand the Group, respectively.

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80 SpareBank 1 Gruppen

Parent company Group

2011 2010 NOK 1,000 2011 2010

Pension liabilities related to defined benefit pensions213 972 238 365 Present value of pension liabilities as of 1.1 974 623 1 003 252

- - Pension liabilities additions - 25 43412 565 12 169 Pension entitlements accrued in the period 41 248 41 4996 650 7 846 Interest costs on pension liabilities 32 037 35 950

- - Terminated pension plans - -1126 319 -32 382 Actuarial losses/gains 128 266 -50 623-10 413 -12 025 Benefits paid -64 545 -79 661

- - Other changes - -1 217249 090 213 972 Present value of pension liabilities as of 31.12 1 111 629 974 623217 217 186 546 of which fund-based 991 182 870 55131 876 27 426 of which not fund-based 120 447 104 072

Pension assets148 106 147 651 Pension assets as of 1.1 692 924 689 043

- - Pension assets additions - 9 2726 974 8 067 Expected return in the period 33 542 38 389

- - Terminated pension plans - - 221 -12 620 Actuarial losses/gains 29 143 -33 409

10 972 10 097 Employer's NI contributions 51 086 40 905-4 478 -5 089 Benefits paid -39 966 -50 059

- - Other changes - -1 217161 795 148 106 Pension assets as of 31.12 766 729 692 924

Financial status as of 31.12249 090 213 972 Present value of pension liabilities as of 31.12 1 111 629 974 623161 795 148 106 Pension assets as of 31.12 766 729 692 92487 295 65 866 Net pension liabilities as of 31.12 344 900 281 699

87 295 65 866 Net pension liabilities as of 31.12, excl. employer's NI contributions 344 900 281 6999 100 12 604 Employer's NI contributions as of 1.1 39 689 44 458

- - Employer's NI contributions additions - 2 0591 726 1 685 Costs related to employer's NI contributions 5 451 5 508

- - Net employer's NI contributions related to terminated pension plans - - 3 679 -2 786 Actuarial losses/gains 13 976 -2 395-2 384 -2 402 Benefits paid -10 669 -9 941

- - Other changes - - 12 120 9 100 Employer's NI contributions as of 31.12 48 448 39 689

- - Other changes - 3 96799 419 74 966 Net pension liabilities in the balance sheet 393 347 325 355

Pension costs for the period 12 565 12 169 Accrued defined benefit-based pensions 41 248 44 8436 650 7 846 Interest costs on pension liabilities 32 037 36 401-6 974 -8 067 Expected return on pension assets -33 542 -38 76912 240 11 947 Net defined benefit-based pension costs without employer's NI contributions 39 743 42 4751 726 1 685 Accrued employer's NI contributions 5 451 5 97413 966 13 631 Net defined benefit-based pension costs recognised in profit or loss 45 195 48 449

- applied to secured defined benefit pension costs 9 270 10 202 including employer's NI contributions 36 453 33 0178 631 8 499 Defined contribution-based pension costs, incl. employer's NI contributions 37 106 31 36522 598 22 131 Pension costs in the period recognised in the income statement 82 301 79 814

- -10 271 Run-off gain due to cessation of salary increases, incl.employer's NI contribution - -44 988- -13 335 Run-off gains upon termination and issuance of paid-up policies - -43 985

22 598 -1 475 Total pension costs defined benefit and contribution pensions, incl. run-off gains 82 301 -9 159

Estimated pension costs defined benefit and contribution pensions for 2011, 19 679 19 424 incl. employer's NI contributions 78 693 74 157

60 405 65 019 Pensionable salary 273 494 298 805

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81

2011 2010 NOK 1,000 2011 2010*

Actuarial losses/gains-21 438 761 Actuarial gains/(losses) for the period, recognised in equity after tax -81 432 -54 882-90 206 -68 768 Actuarial gains/(losses), recognised in equity after tax -425 476 -344 044

Composition of pension assets21,90 % 20,40 % Buildings and real estate 21,90 % 20,40 %22,20 % 18,40 % Investments held to maturity 22,20 % 18,40 %10,60 % 15,70 % Equities and units 10,60 % 15,70 %48,80 % 43,20 % Bonds and other fixed-income securities 48,80 % 43,20 %-3,50 % 2,30 % Other assets -3,50 % 2,30 %100,00 % 100,00 % Total pension assets 100,00 % 100,00 %

* Incl. comparative figures for Unison Forsikring AS in 2010

6 974 8 067 Actual return on pension assets 33 542 38 389

Assumptions2,40 % 3,50 % Discounting rate 2,40 % 3,50 %3,90 % 4,60 % Expected return on pension assets 3,90 % 4,60 %4,00 % 4,00 % Future salary growth rate 4,00 % 4,00 %3,75 % 3,75 % Adjustment of national insurance basic amount (G) 3,75 % 3,75 %0,60 % 1,30 % Pension adjustment 0,60 % 1,30 %14,10 % 14,10 % Employer's NI contributions 14,10 % 14,10 %

4% and 2% 4% and 2% Staff turnover 4% and 2% 4% and 2%40,0 % 40,0 % Expected statutory early retirement pension acceptance from age 62 40,0 % 40,0 %

Demographic assumptionsK2005 K2005 Mortality K2005 K2005IR2003 IR2003 Disability IR2003 IR2003

Development during the last five years for the Group's defined benefit-based pension plan

2011 2010 NOK 1,000 2011 2010 2009 2008 2007

Present value of pension 249 090 213 972 liabilities as of 31.12 1 111 629 974 623 1 272 038 1 265 003 1 105 713161 795 148 106 Pension assets as of 31.12 766 729 692 924 868 457 845 748 838 87687 295 65 866 Deficit 344 900 281 699 403 581 419 255 266 837

Experienced adjustments on 26 319 -32 382 pension liabilities 128 266 -50 623 -32 286 98 632 -5 277

Experienced adjustments on 221 -12 620 pension assets 29 143 -33 409 -40 416 -92 357 7 738

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82 SpareBank 1 Gruppen

NOTE 49 – NUMBER OF EMPLOYEES AND FULL-TIME EQUIVALENTS

Average nbr.Full-time Average nbr. fulltime

Employees equivalent of employees equivalents31.12.2011 31.12.2011 in 2011 in 2011

SpareBank 1 Gruppen AS 234 229 227 221SpareBank 1 Livsforsikring AS 249 241 248 239SpareBank 1 Skadeforsikring AS 394 382 379 367Unison Forsikring AS 35 34 32 32ODIN Forvaltning AS 60 60 59 58SpareBank 1 Medlemskort AS 9 8 9 8SpareBank 1 Gruppen Finans AS 50 48 49 47Conecto AS 144 138 147 141SpareBank 1 Markets AS (formerly Argo Securities AS) 92 92 84 84SB Securities LLP 1) 5 5 3 3Total 1 272 1 237 1 231 1 197

Average nbr.Full-time Average nbr. fulltime

Employees equivalent of employees equivalents31.12.2010 31.12.2010 in 2010 in 2010

SpareBank 1 Gruppen AS 220 213 219 213SpareBank 1 Livsforsikring AS 246 238 249 242SpareBank 1 Skadeforsikring AS 363 353 375 366Unison Forsikring AS 2) 29 30 14 14ODIN Forvaltning AS 57 57 54 54SpareBank 1 Medlemskort AS 9 8 9 9SpareBank 1 Gruppen Finans AS 47 45 45 42Conecto AS 84 81 84 81Actor Fordringsforvaltning AS 65 63 62 59Argo Securities AS 75 75 71 71Total 1 195 1 162 1 181 1 150

1) SpareBank 1 Markets AS acquired a 99.9% ownership interest in SB Securities LLP, which has offices in London, in Q2 2011.2) SpareBank 1 Skadeforsikring AS acquired Unison Forsikring AS with effect from 01.07.10. Average number of employees and full-timeequivalents in Unison Forsikring AS in 2010 has thus only be calculated for the period SpareBank 1 Skadeforsikring AS has owned UnisonForsikring AS.

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NOTE 50 – TAXES

Connection between pre-tax profit and tax base

Parent company Group

2011 2010 NOK 1,000 2011 2010

478 425 555 463 Pre-tax profit 387 289 985 13324 030 -11 742 Change in temporary differences 254 945 -182 228

-657 958 -600 950 Permanent differences 143 325 -647 805304 741 433 743 Received group contributions with tax effect - - 74 760 -17 789 Loss allowance carried forward -208 469 87 053-941 - Correction for previous years -25 808 61 707

223 057 358 725 Basis for payable tax in the income statement 551 282 303 860-223 057 -358 725 Distributed group contribution with tax effect - -

- - Effect of policy changes 56 885 - - - Other differences -5 511 - - - Basis for payable tax in the balance sheet 602 656 303 860

- Payable tax as of 31.12.10 85 081- Revised due to policy changes 13 366- Payable tax as of 1.1.11 98 447

- - Tax payable 168 744 85 081-19 324 8 269 Change in deferred tax asset -266 088 58 82662 456 100 443 Taxable distributed group contributions - -

- - Insufficient/excess tax provision previous years -66 399 3 484- 296 Other tax effects (net) 25 237 6 195

43 132 109 008 Total tax -138 506 153 586

43 132 109 008 Tax before other income elements -138 506 153 586-8 337 -296 Tax on other income elements -32 424 -23 980

Of which related to: -8 337 -296 Estimate variances in the pension agreement -31 668 -21 340

- - Revaluation of properties -756 -3 544- - Adjustment of insurance liabilities - 904

34 795 108 712 Total tax including other income elements -170 930 129 606

Net deferred tax asset as of 31.12 - - Fixed assets 189 20 049- 9 Securities 2 937 16 720- - Shares in associated companies - 75 631- - Insurance provisions (equity) 358 742 464 524- - Other changes 1) 29 470 197 383- 9 Total deferred tax 391 339 774 307

-56 283 -53 200 Fixed assets -65 866 -56 397-267 - Securities -64 560 -10 130

- - Shares in associated companies -267 - - - Receivables -145 -17- - Provisions -16 206 -12 084

-27 837 -24 467 Pension liabilities -110 924 -95 306- - Other changes - -

-84 387 -77 667 Total deferred tax asset -257 968 -173 935

-36 938 -16 006 Deferred tax asset linked to tax losses carried forward and unused allowance -146 771 -351 911-121 325 -93 664 Deferred tax asset -13 400 248 461

-121 325 -93 664 Deferred tax asset -13 400 - - - Deferred taxes - 248 461- - Deferred tax asset, not recorded 5 374 4 956

-121 325 -93 664 Net deferred tax asset -8 026 253 417

-93 664 Net deferred tax asset as of 31.12.10 253 417- Revised due to policy changes -80 902

-93 664 Net deferred tax asset as of 1.1.11 172 515

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84 SpareBank 1 Gruppen

Parent company Group

2011 2010 NOK 1,000 2011 2010

Reconciliation of total tax133 959 155 530 28% of pre-tax profit 107 335 276 884-184 228 -168 266 Permanent differences (28%) 40 131 -181 65385 328 121 448 Tax on group contribution - - -264 - Correction for previous years -222 974 44 3558 337 296 Transactions directly against equity 16 208 2 872

- - Other differences 2) -79 207 2 708- - Change in unused dividend carried forward - 8 420

43 132 109 008 Calculated total tax -138 506 153 586

The deferred tax benefit in the parent company is recognised in the balance sheet since our expectations for results in subsidiaries are suchthat we can realise the benefit within a 3–5 year perspective.

The Group's payable tax will insofar as it is possible be offset with group contributions. However, the tax effects of group contributions arenot recognised before the year a decision is made, since both their approval and amounts are uncertain. Therefore, the Group's payable taxwill, assuming the group contributions are approved in 2012, be reduced by the tax effect of the group contributions.

1) In 2010, tax relief was claimed for provisions allocated to the securities adjustment reserve amounting to NOK 289.7 million in SpareBank1 Livsforsikring AS. When the tax cost was calculated, a correction was made for the uncertainty that existed at the time concerning whet-her or not the tax authorities would approve the deduction of NOK 634.6 million.

2) Other differences in 2011 were primarily linked to the tax effects that follow from the disappearance of temporary differences in the con-version of subsidiaries from associated companies to limited companies, and the effects linked to changes in the Taxation Act concerningthe 3% rule in the tax exemption method.

NOTE 51 – OTHER LIABILITIES

Parent company Group

2011 2010 NOK 1,000 2011 2010

111 316 111 616 Accounts payable 140 040 150 82110 430 9 066 Advance tax deduction 54 398 56 3679 904 7 342 Governmental fees 41 587 31 85220 927 18 061 Owed salaries and holiday pay 146 660 113 49227 860 25 177 Other accruals 145 006 204 541

- - Commission liabilities 101 811 73 486- - Margin payments or other account arrangements with customers 50 195 70 273

223 057 358 725 Provision for group contributions - - - - Occupational injury insurance claim to RTV 36 038 56 796- - Premium deposits 138 846 133 847

1 981 4 880 Other liabilities 401 513 238 423405 475 534 867 Total other liabilities 1 256 094 1 129 898

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NOTE 52 – MATERIAL TRANSACTIONS WITH RELATED PARTIES

Org. Ownership OWNERS OF SPAREBANK 1 GRUPPEN AS REGARDED AS RELATED PARTIES number interest

SpareBank 1 SR-Bank 937 895 321 19.5%SpareBank 1 Nord-Norge 952 706 365 19.5%SpareBank 1 SMN 937 901 003 19.5%Sparebanken Hedmark 920 426 530 12.0%Samarbeidende SpareBanker AS 977 061 164 19.5%

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATED COMPANIES, ETC. Org. OwnershipOF OWNERS OF SPAREBANK 1 GRUPPEN AS REGARDED AS RELATED PARTIES number interest

SPAREBANK 1 SR-BANK:

SpareBank 1 SR-Finans AS 925 102 512 100.0%EiendomsMegler 1 SR-Eiendom AS 958 427 700 100.0%Westbroker Finans AS 950 475 978 100.0%SR-Forvaltning AS 983 054 560 100.0%SR-Investering AS 989 005 464 100.0%SpareBank 1 SR-Forretningsservice AS 990 945 748 100.0%Kvinnherad Sparebank Eigedom AS 977 242 304 100.0%

SPAREBANK 1 NORD-NORGE:

SpareBank 1 Nord-Norge Invest AS 935 491 533 100.0%SpareBank 1 Finans Nord-Norge AS 930 050 237 100.0%EiendomsMegler 1 Nord-Norge AS 931 262 041 100.0%North-West 1 Alliance Bank (25% owned by Saint-Petersburg Commercial Bank «Tavrichesky». The bank is registered in Russia and regulated by Russian law) - 75.0%SpareBank 1 Nord-Norge Forvaltning ASA 982 699 355 100.0%SNN Økonomihus Holding AS 997 580 095 100.0%Consis Alta AS (owned by SNN Økonomihus Holding AS) 983 381 138 60.0%

SPAREBANK 1 SMN:

SpareBank 1 SMN Finans AS 938 521 549 100.0%SpareBank 1 Bilplan AS (owned by SpareBank 1 SMN Finans AS) 979 945 108 100.0%Berg Data AS (owned by SpareBank 1 Bilplan AS) 983 257 542 80.0%SpareBank 1 SMN Invest AS 990 961 867 100.0%GMA Invest AS (owned by SpareBank 1 SMN Invest AS) 994 469 096 100.0%EiendomsMegler 1 Midt-Norge AS 936 159 419 87.0%SpareBank 1 SMN Kvartalet AS 990 283 443 100.0%SpareBank 1 SMN Regnskap AS 936 285 066 100.0%Allegro Finans ASA 980 300 609 90.1%SpareBank 1 Bygget Steinkjer AS 934 352 718 100.0%SpareBank 1 Bygget Trondheim AS 993 471 232 100.0%SpareBank 1 SMN Card Solutions AS 990 222 991 100.0%

SpareBank 1 SMN - Investments in associated companies:PAB Consulting AS 967 171 344 34.0%Molde Kunnskapspark AS 981 036 093 20.0%Sandvika Fjellstue AS 993 952 451 50.0%Grilstad Marina AS 991 340 475 35.0%GMN 1 AS 994 254 596 35.0%GMN 4 AS 994 254 626 35.0%GMN 51 AS 996 534 316 35.0%GMN 52 AS 996 534 413 35.0%GMN 53 AS 996 534 502 35.0%GMN 54 AS 996 534 588 35.0%GMN 6 AS 994 254 707 35.0%Hommelvik Sjøside AS 992 469 943 40.0%Polaris Media ASA 992 614 145 23.5%

SPAREBANKEN HEDMARK:

Hedmark Eiendom AS 945 727 306 100.0%SpareBank 1 Finans Østlandet AS 975 963 748 100.0%Consis AS 967 661 643 100.0%Vato AS 932 378 094 100.0%

Sparebanken Hedmark - Investments in associated companies:Fageråsen Invest AS 990 375 410 36.0%Engerdal Høvleribygg AS 954 333 582 20.0%

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86 SpareBank 1 Gruppen

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATED COMPANIES, ETC. Org. OwnershipOF OWNERS OF SPAREBANK 1 GRUPPEN AS REGARDED AS RELATED PARTIES number interest

Sparebanken Hedmark - Investments in joint ventures:Torggt 22 AS 982 786 150 50.0%

SAMARBEIDENDE SPAREBANKER AS:

Samarbeidende SpareBanker Fellestjenester AS 992 258 381 100.0%

OTHER JOINT VENTURES AND ASSOCIATED COMPANIES OWNED BY SPAREBANK 1 GRUPPEN'S OWNERS Org. Ownership(who in turn treat SpareBank 1 Gruppen AS as a joint venture) number interest

Alliansesamarbeidet SpareBank 1 DA 986 401 598SpareBank 1 Boligkreditt AS 988 738 387SpareBank 1 Næringskreditt AS 894 111 232Bank 1 Oslo Akershus AS 910 256 351BN Bank ASA 914 864 445

Org. OwnershipSUBSIDIARIES OF SPAREBANK 1 GRUPPEN AS REGARDED AS RELATED PARTIES number interest

SpareBank 1 Skadeforsikring AS 915 651 232 100.0%SpareBank 1 Livsforsikring AS 915 651 321 100.0%ODIN Forvaltning AS 957 486 657 100.0%SpareBank 1 Medlemskort AS 964 422 206 100.0%SpareBank 1 Gruppen Finans AS 948 396 882 100.0%SpareBank 1 Markets AS 992 999 101 97.2%Sparebankutvikling AS 975 966 453 100.0%

Org. OwnershipSUBSIDIARIES OF SUBSIDIARIES OF SPAREBANK 1 GRUPPEN AS number interest

SPAREBANK 1 SKADEFORSIKRING AS:

Unison Forsikring AS 983 336 027 100.0%Falck Ytters Plass Eiendom AS 979 275 617 100.0%Herkules tomt AS 982 749 522 100.0%Teglverkstomta AS 982 749 549 100.0%Tårnhuset AS 987 004 339 100.0%Sjølyst Forretningsbygg Senterdrift AS 976 102 363 100.0%Bøler Senter Næring AS 988 329 932 100.0%Bøler Sentrum AS 934 007 069 100.0%Kongeveien 49 Kolbotn AS 988 330 116 100.0%Grev Wedelsgate 3 AS 996 963 772 100.0%Jernbanetorget 2 AS (1% owned by SpareBank 1 Livsforsikring AS) 997 666 445 99.0%Hammersborggata 9 AS (50% owned by SpareBank 1 Livsforsikring AS) 996 860 779 50.0%Storgaten 33 Oslo AS (89% owned by SpareBank 1 Livsforsikring AS) 997 671 643 11.0%Drammensveien 130 Bygning 9 AS (99% owned by SpareBank 1 Livsforsikring AS) 997 666 399 1.0%

SPAREBANK 1 LIVSFORSIKRING AS:

Calmeyersgate 1 AS 996 901 505 100.0%Hammersborggata 9 AS (50% owned by SpareBank 1 Skadeforsikring AS) 996 860 779 50.0%Ørn Eiendom AS 980 390 764 100.0%Tordenskioldsgate 2 Oslo AS 888 455 442 100.0%Storgaten 1 AS 876 855 712 100.0%Storgaten 1 Eiendom AS (100% owned by Storgaten 1 AS) 889 496 932 100.0%Hammersborggata 2 AS (1% owned by Ørn Eiendom AS) 997 666 267 99.0%Tukthuset DA (99% owned by Hammersborggata 2 AS. Title holding company for Hammersborggata 2 AS) 979 945 132 1.0%Tukthuset II DA (1% owned by Ørn Eiendom AS. The company is being wound up) 986 534 318 99.0%Storgaten 33 Oslo AS (11% owned by SpareBank 1 Skadeforsikring AS) 997 666 267 89.0%Storgaten 33 Oslo DA (11% owned by SpareBank 1 Skadeforsikring AS. Title holding company for Storgaten 33 Oslo AS) 965 742 891 89.0%Drammensveien 130 Bygning 9 AS (1% owned by SpareBank 1 Skadeforsikring AS) 997 666 399 99.0%Bygning 9 DA (1% owned by SpareBank 1 Skadeforsikring AS. Title holding company for Drammensveien 130 Bygning 9 AS) 960 200 497 99.0%Jernbanetorget 2 AS (99% owned by SpareBank 1 Skadeforsikring AS) 997 666 445 1.0%Jernbanetorget 2 DA (99% owned by SpareBank 1 Skadeforsikring AS. Title holding company for Jernbanetorget 2 AS) 963 431 902 1.0%Provita AS 975 918 173 100.0%Ostara AS 975 918 106 100.0%Saturna AS 975 918 254 100.0%Ramira AS 975 918 211 100.0%Benull AS 974 483 769 100.0%

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Org. OwnershipSUBSIDIARIES OF SUBSIDIARIES OF SPAREBANK 1 GRUPPEN AS number interest

Norsk Moteforum AS (100% owned by Benull AS) 977 363 004 100.0%Moteuka DA (99% owned by Norsk Moteforum AS and 1% by Senterforeningen) 992 079 487 100.0%

ODIN FORVALTNING AS:

Fondex OY, Finland - Separate Finnish company and only liable for tax in Finland 1628289-0 100.0%ODIN Fonder - Swedish branch of ODIN Forvaltning AS - 100.0%

SPAREBANK 1 GRUPPEN FINANS AS:

Conecto AS 952 226 010 100.0%

SPAREBANK 1 MARKETS AS:

SB Securities LLP 99.9%

Group's transactions with related parties:The general principle for transactions between SpareBank 1 Gruppen AS and related parties is that these must be carried out on ordinarybusiness terms and conditions.

The cost division principle is used, without a profit premium, for services provided directly to group companies, as well as common servicesthat SpareBank 1 Gruppen AS provides for subsidiaries and the alliance through Alliansesamarbeidet SpareBank 1 DA. A premium and othermarket considerations are used to set the price for other transactions between SpareBank 1 Gruppen AS and group companies.

Parent company GroupNOK 1,000Sales of services (income): 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - - - Subsidiary 120 166 100 238 - - Associated companies 475 723 337 759 - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties - 139 78 133 62 501

Purchases of services (costs): 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - -481 908 -539 675Subsidiary -24 503 -22 330 - - Associated companies - - - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties - - -154 612 -23 807

Balance sheet items due to sales or purchases of services 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - -1 537 - Subsidiary - - - - Associated companies - - - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties - - -62 408 -29 105

Lease income 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - - - Subsidiary 26 270 17 339 - - Associated companies - - - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties - 14 955 - -

Disposals of fixed assets 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - - - Subsidiary - - - - Associated companies - - - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties 47 274 - - -

Page 88: Annual Report SpareBank 1 Gruppen 2011

88 SpareBank 1 Gruppen

Lending, receivables and other financial transactions 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - - - Subsidiary 180 930 161 868 - - Associated companies - - - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties 125 484 18 120 183 540 279 071

Loans, liabilities and other financial transactions 2011 2010 2011 2010

Parent company - - - - Companies with joint control or significant influence over the company - - - - Subsidiary -223 057 -358 725 - - Associated companies - - - - Joint ventures in which the company is a participant - - - - Key personnel in the management of the company or the company's parent company - - - - Other related parties -817 - -1 322 -996

The remuneration of executive employees in the group executive management team, Board, Control Committee and Supervisory Board arediscussed in: Note 47 - Salaries and other remuneration of CEO and senior executives.

NOTE 53 – EVENTS AFTER THE BALANCE SHEET DATE AND LEGAL DISPUTES

Events after the balance sheet dateNo events have been registered after the balance sheet date that would have a material effect on the consolidated financial statements of SpareBank 1 Gruppen Group.

Legal disputesAs of 31.12.11, SpareBank 1 Gruppen Group was party to 18 legal disputes. All of these are disputes with policyholders and other insurance companies, and concern claims settlements in insurance contracts. Provisions are made in the insurance companies' accounts for these disputes as they occur, and the outcome of these cases is immaterial for the Group's financial position.

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NOTE 54 – REVISED BALANCE SHEET FOR SPAREBANK 1 GRUPPEN GROUP AS OF 31 DECEMBER 2010

GroupRevised

Balance Re- balance sheetNOK 1,000 Sheet classifications 31.12.10

ASSETSDeferred tax asset - - - Goodwill 850 819 - 850 819Other intangible assets 1) 142 933 3 950 146 883Investments in subsidiaries - - - Investments in associated companies and joint ventures 9 010 - 9 010Property, plant and equipment 1) 2) 3) 4) 1 340 389 -181 772 1 158 617Reinsurance receivables 1 494 338 - 1 494 338Other assets 4) 616 077 -6 200 609 877Investment properties 2) 4 094 812 95 225 4 190 037Bonds held to maturity 4 679 131 - 4 679 131Bonds at amortised cost 1 249 291 - 1 249 291Securities available for sale 20 216 - 20 216Lending to customers and deposits with financial institutions 5) 658 452 -73 886 584 566Securities at fair value 3) 6) 23 024 332 -32 778 22 991 554Financial derivatives 130 605 - 130 605Insurance receivables from policyholders 1 394 441 - 1 394 441Cash and cash equivalents 5) 6) 985 375 105 784 1 091 159TOTAL ASSETS 40 690 221 -89 676 40 600 545

EQUITY AND LIABILITIESShareholders equity 2 030 277 - 2 030 277Retained earnings 7) 2 691 636 -180 960 2 510 676Other equity - not recognised in the profit and loss account 71 454 - 71 454Minority interests 15 446 - 15 446Total equity 4 808 813 -180 960 4 627 853

Subordinated loan capital and hybrid tier 1 capital 848 846 - 848 846Securities adjustment reserve 616 870 - 616 870Insurance provisions in life insurance 7) 22 315 681 10 305 22 325 986Premium and claims provisions in P&C Insurance 7) 8 067 303 238 191 8 305 494Net pension liabilities 325 355 - 325 355Deferred tax liability 7) 253 417 -80 902 172 515Tax payable 7) 85 081 13 366 98 447Securities issued 1 376 914 - 1 376 914Liabilities related to reinsurance 77 706 - 77 706Financial derivatives 160 265 - 160 265Other liabilities 1 129 898 - 1 129 898Deposits from and liabilities to customers and financial institutions 5) 624 072 -89 676 534 396TOTAL EQUITY AND LIABILITIES 40 690 221 -89 676 40 600 545

1) Intangible assets with booked amount NOK 3,950 thousand originally classified as property, plant and equipment were reclassified to other intangible assets.

2) Book value of Hammersborggt 9 of NOK 95,225 thousand was reclassified from property, plant and equipment to investment properties.3) Bank fund investment choice portfolio with book value of NOK 88,797 thousand was reclassified from property, plant and equipment tosecurities at fair value.

4) NOK 6,200 thousand was reclassified from other assets to property, plant and equipment.5) Reclassification in 2010 of lending and liability accounts of NOK 89,676 thousand were reclassified to lending to customers and depositswith financial institutions NOK 73,886 thousand and cash and cash equivalents NOK 15,790 thousand.

6) Bank accounts linked to the investment portfolio in the life insurance company with a balance of NOK 121,575 thousand were reclassifiedfrom securities at fair value to cash and cash equivalents.

7) Change in regulations for technical insurance provisions in P&C insurance and life insurance resulted in increased provisions. The changes are regarded as policy changes and the effect of the policy changes were corrected against equity as of 31.12.2010. Taking intoaccount the tax effects in the changes, the equity was reduced by NOK 180,960 thousand.

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