Financial statement Q2 2018

Quarterly Report

www.snn.no

Index Key figures group..………….……………………………………………………………………... 1

Key figures ECC..………….……………………………………………………………………..... 2 Quarterly report…….……………………………………………………………………………..…3 Statement of income…..………………………………………………………………………….. 13 Statement of financial position……………………………………………………………… 14 Changes in equity………………………..………………………………………………………… 15 ECC ratio overall…………………………………………………………………………………... 15 Statement of cash flows……...………………………………………………………………... 16 Result from the Group’s quarterly accounts………..………………………………... 17 Notes 1 – Accounting policies…..……………………………………………………………..……….. 18 2 – Important accounting estimates and discretionary judgements…...……………. 18 3 – Changes in group structure………………………………………………….……………... 18 4 – Business areas…………….……………………………………………………………………. 19 5 – Capital adequacy….………………………………………………………………………...… 20 6 – Net bad and doubtful commitments…………………………………………………….. 21 7 – Losses incorporated in the accounts…………………………………………………..… 21 8 – Losses broken down by sector and industry………..……………………………..….. 22 9 – Loans broken down by sector and industry…………………………………………... 23 10 – SpareBank 1 Boligkreditt and Sparebank Næringskreditt – liquidity facility………………………………………….…………..…………………… 24 11 – Financial derivatives………...……………………………………………………………... 25 12 – Net accounting of financial derivates and related set-off agreements.……... 26

13 – Liquidity risk……...……………………………………...……………………………….…. 26 14 – Pensions………..………………………………………………………………………………. 27 15 – Classification of financial instruments stated at fair value…………………...... 28 16 – Subsidiaries……………………………………………………………………………...……. 29 17 – Other assets…………………………………………………………………………………… 29 18 – Other liabilities……….……………………………………………………………………… 29 19 – Deposits broken down by sector and industry…..…………………………………. 30

20 – Securities issued and subordinated loan capital………………………………...…. 31 21 – Equity Certificates………………………………………………………………………….. 32 22 – Events occuring after the end of the quarter……..…………………………………. 33

Definitions of alternative performance measuresc (APMs) ………………..……34

APM (Alternative Performance Measures) Group………………………………….37 Statement from the Board of Directors and CEO……………………………......... 38

Group financial highlights and key figures

(Amounts in NOK million and in % of average assets) 30.06.18 % 30.06.17 % 31.12.17 %From the profit and loss accountNet interest income 916 1.84 % 859 1.85 % 1 770 1.88 %Net fee-, commision and other operating income 525 1.05 % 472 1.02 % 992 1.06 %Net income from financial investments 262 0.52 % 239 0.51 % 552 0.59 %Total income 1 703 3.41 % 1 570 3.38 % 3 314 3.53 %Total costs 714 1.43 % 651 1.40 % 1 366 1.45 %Result before losses 989 1.98 % 919 1.98 % 1 948 2.07 %Losses 36 0.07 % 88 0.19 % 184 0.20 %Result before tax 953 1.91 % 831 1.79 % 1 764 1.88 %Tax 180 0.36 % 162 0.35 % 324 0.35 %Result non-current assets held for sale 0 0.00 % 0 0.00 % 0 0.00 %Result after tax 773 1.55 % 669 1.44 % 1 440 1.53 %

ProfitabilityReturn on equity capital 1 13.3 % 12.3 % 12.9 %Interest margin 2 1.84 % 1.85 % 1.88 %Cost/income 3 41.9 % 41.5 % 41.2 %

Balance sheet figures and liquidity Total assets 103 890 95 822 97 186Average assets 4 99 816 92 933 93 905Liquidity Coverage Ratio (LCR) 130 119 126

SolidityCommon Equity Tier I - incl. 50% of result 14.7 % 15.4 % 14.9 %Tier I Capital 15.4 % 16.2 % 16.2 %Total regulatory Capital % 17.1 % 18.5 % 18.1 %Common Equity Tier I 10 137 9 662 9 992Tier I capital 11 003 10 565 10 857Equity and related capital resources 12 231 12 039 12 141Adjusted risk-weighted assets base 71 497 65 125 67 222Leverage Ratio - incl. 50% of result 7.3 % 7.4 % 7.2 %

Branches and full-time employeesBranches 38 38 38Manyears 821 769 784

1 The profit after tax in relation to average equity, calculated as a quarterly average of equity and as at previous year and this years quarter The Bank's hybrid tier 1 securities issued in 2017 are classified as equity in the financial statements. However, when calculating the return on equity, hybrid tier 1 capital is treated as a liability and the associated interest costs are adjusted for in the result.2 Net total interests as a percentage of average total assets 3 Total costs as a percentage of total net income4 Average assets are calculated as average assets previous year and this years quarter.

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Key figures ECC2q18 2017 2016 2015 2014 2013 2012 2011 2010

1) NONG Quoted/market price 60.90 62.25 52.25 36.70 39.90 35.50 24.70 28.90 37.76 2) Number of Equity Certificates (EC) issued 100.40 100.40 100.40 100.40 100.40 100.40 74.40 74.00 56.92 3) Quoted/market price EC issued (NOK mill) 6 114 6 250 5 246 3 685 4 006 3 564 1 837 2 139 2 149 4) Quoted/market price total equity 13 189 13 481 11 315 7 948 8 464 7 530 4 418 5 083 6 223 5) Allocated dividend per EC - 4.00 3.45 2.00 1.90 1.10 1.02 1.25 1.81Paid-out dividend per EC 4.00 3.45 2.00 1.90 1.10 1.02 1.25 1.81 2.126) Dividend yield 6.4 % 6.4 % 6.6 % 5.4 % 4.8 % 3.1 % 4.1 % 4.3 % 4.8 %7) Total yearly return 4.3 % 25.7 % 47.8 % -3.3 % 15.5 % 47.9 % -10.2 % -18.7 % 15.2 %Total equity capital Parent bank, NOK mill 10 605 10 617 9 336 8 198 7 735 7 200 5 589 5 264 4 547 Total equity capital Group, NOK mill 12 113 12 299 11 011 9 961 9 343 8 502 6 832 6 408 5 670 8) Equity capital per EC Group 53.49 54.34 50.84 46.00 44.05 40.08 38.19 36.43 34.419) Result per EC Group, adjusted for interest hybrid capital 7.08 6.60 5.54 5.10 4.64 4.14 4.01 2.72 5.2610) Totalresult per EC Group, adjusted for interests hybrid cap 7.07 6.95 5.79 4.11 5.17 4.13 3.36 2.75 4.9511) P/E (Price/Earnings per EC Group) 8.60 9.43 9.03 8.93 7.72 8.59 7.34 10.51 7.6312) P/B (Price/Book Value per EC Group) 1.14 1.15 1.03 0.80 0.91 0.89 0.65 0.79 1.1013) Pay-out ratio Group 60.50 % 59.63 % 48.65 % 36.77 % 26.62 % 11.80 % 19.74 % 33.14 %EC ratio overall as at 31.12. 46.36 % 46.36 % 46.36 % 46.36 % 47.33 % 47.33 % 41.59 % 42.07 % 34.54 %EC ratio overall as at 01.01. used for allocaton of result 46.36 % 46.36 % 46.36 % 47.33 % 47.33 % 42.91 % 42.07 % 38.74 % 34.54 %

11) Market price/Result per EC Group adjusted for interests hybrid capital

12) Market price/Book value per EC Group

13) Dividend per EC/Result per EC Group

8) Equity excl. hybrid capital Group*EC ratio overall/Number of EC 9) Anualised result after tax Consern*EC ratio overall/Number of EC10) Anualised totalresult after tax Consern*EC ratio overall/Number of EC

1) Quoted/market price ajusted for equity issues, fund issues, dividend issues and splits2) Number of certificates issued3) Market price * number of ECs4) Market price * number of ECs/EC ratio overall5) Allocated dividend 6) Allocated dividend/Market price EC as at 31.127) (Market price EC 31.12 - market price EC 31.12 previous year + paid dividend)/Market price EC 31.12

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Interim Report for SNN – Q2 2018 (Figures in brackets are for the same period/date in 2017, unless otherwise specified).  

 

Highlights 

 

Macroeconomic trends  

The global macroeconomic picture is still positive. There is relatively good growth in all regions, although China shows a declining trend. Oil prices are now at their highest level for many years, pulled up by increased demand and  uncertainty  related  to  the  supply  side.  In  the  recent  past,  the  financial  markets  have  focused  more  on international politics than the fundamentals of the economy. The trade war which was previously feared now looks more and more like becoming reality. A trade war could reduce international growth and have a negative effect on the Norwegian economy.  Since the financial crisis, there has been significant improvement in the labour market in the USA and Europe. In the USA, unemployment was down to 3.8% in May, and there are now more vacant positions than jobseekers. Europe is also experiencing an increasingly tight labour market. However, this strong labour market has not yet led to global inflation. In the USA, core inflation is close to the Federal Reserve’s target of 2%. In the eurozone, the core inflation rate is around 1%.  The trend for the Norwegian economy is good, and the meeting of the main board of Norges Bank before the holidays concluded that the outlook and risk situation are now such that the key interest rate is likely to be raised at the September interest meeting. According to Norges Bank, there is also likely to be a gradual rise in interest rates in the coming years. The major driver for the growth in the Norwegian economy is now that oil prices have risen to a higher level, and expectations of continued relatively high oil prices are prompting increased activity and new investments for the companies in the energy sector. Greater activity in this sector in turn means increased activity and positive ripple effects for the remainder of the economy.  The unemployment rate in Norway, measured by registered claimants from NAV, is now at its lowest level since March 2009. Price inflation, excluding energy, also remains low. It is still reasonable to assume that price and wage growth will pick up the future. More and more industries are now experiencing a lack of qualified manpower.  There has long been a great deal of uncertainty about developments in the housing market. It now looks as if the housing market has calmed down after a relatively sharp fall in prices at the beginning of the year followed by an equally strong recovery in the spring. The latest figures for June show a flat price curve. Housing prices are now showing annual growth of 1.5% for the country as a whole.   

NOK mi l l 2Q18 1Q18 Change 30.06.18 30.06.17 Change

Operation costs 371 343 28 714 651             63

Profit after tax 448 325 123 773               669             104

Return of equity *) 15,6 % 11,2 % 4,4 13,3 % 12,3 % 1,1

Earnings per equity certificate 2,04 1,48 0,6 7,08 6,14 0,9

Common tier 1 capital ratios**) 14,7 % 14,8 % ‐0,1 14,7 % 15,4 % ‐0,6

Loan losses 20 16 4 36 88 ‐52

Lending growth 3,4 % 1,7 % 1,7 11,0 % 9,2 % 1,7

Growth in deposits 8,0 % 2,1 % 6,0 8,8 % 5,3 % 3,4

*) The Bank's hybrid tier 1 securities issued in 2017 are classified as equity in the financial statements.

  However, when calculating the return on equity, a NOK 530 mill hybrid tier 1 securities are decucted from equity,

 and  profit before tax are adjusted for NOK 6 million interests on hybrid tier 1 securities in 2q 18.

**) Calculated common tier 1 capital ratios including 50% of profit.

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High house prices have meant that many households have a high debt burden. This is especially true in the biggest cities. If interest rates were to rise more than expected, this could prove challenging to some households.   Northern  Norwegian  households  are,  by  and  large,  financially  healthy.  The  performance  of  the  northern Norwegian economy is good and has seen higher growth than the rest of the country in recent years. The analyses from the Economic Barometer for North‐Norway (KB) from October 2017 suggest that the growth in the regional economy in the coming years will still be good. The fact that the Norwegian economy as a whole is picking up also stimulates the regional economy even further. The growth in the regional economy is expected to remain higher than for Norway as a whole, but it is now expected to stay only just ahead of the rest of the country. This is partly because growth in the Norwegian economy has picked up and partly because growth in the northern Norwegian economy may be constrained by scarce resources. The greatest limitation is the shortage of manpower, where North‐Norway today relies on migrant labour. There are also capacity shortfalls in seafood production. Increased airport infrastructure is also needed to cater for the growth within tourism.    So far this year there has been a moderate rise in house prices in North‐Norway, and as of June, the annual growth is at the same level as the rest of the country. The price level in North‐Norway is still lower than in the country as a whole. Only Tromsø has higher house prices than the national average.   Investments in North‐Norway grew strongly in 2016 and 2017, primarily boosted by high housing investments. The number of new housing projects is expected to fall in the years ahead due to a weaker housing market. In the civil engineering sector, where activity is largely driven by the construction of roads and other infrastructure, the picture is more positive.   The value of seafood exports from North‐Norway increased by approximately 16% during the first half of the year compared to the same period in 2017. The industry still enjoys relatively high prices and low exchange rates, and Norway has never earned more from seafood exports than in the first half of 2018. Although salmon and trout make up the lion’s share of the export value, the first half‐year was also the best ever for cod exports too.   Optimism in the tourism industry remains high. The tourism industry in the region has seen substantial growth in recent years. In 2016, the number of foreign overnight stays rose by 18% and in 2017 the annual growth was 11%. Growth now looks set to decline in Nordland and Finnmark, but it remains good in Troms. In Troms the visitor numbers are boosted by winter tourism.   We can expect to see a regional economy marked by growth, record low unemployment and high investments. Unless the exchange rate strengthens significantly, the export industries will be helped by the weak krone.   There is also uncertainty around the development of the northern Norwegian economy. This applies to both the international macro picture and how  the Norwegian  krone exchange  rate develops  in  the  future  and  impacts export industries and tourism.  A tight labour market also presents a challenge for growth in the region, and is expected to continue. The same is true of  infrastructure, which  is not efficient enough. A trend towards more protectionism is not good for the Norwegian or the regional economy. So far, President Trump’s pronouncements in  this  area  have  not  had  any  direct  impact  on  the Norwegian  economy.  Still,  there  is  a  danger  that market participants will start to change their behaviour and cut demand, in order to reduce the risk from a more opaque and protectionist world order.  The  international, national and regional macroeconomic conditions therefore remain  in place  to provide good growth opportunities for North‐Norway and for SpareBank 1 Nord‐Norge.    

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Financial performance        

                                                                                                                                                                    

                                                     

The income statement for 30 June 2018 shows a profit after tax of NOK 448 million for the second quarter and 

NOK 773 million for the first half of 2018. These represent a return on equity of 15.6% and 13.3% respectively. 

The Group’s profitability target is a return on equity in the top rank of comparable financial groups, currently 

12% or higher.  

Net interest income  Net interest income as at 30 June 2018 was NOK 916 million (NOK 859 million). 

Net interest income represented 1.84% (1.85%) of average total assets.  

Income from the loan portfolio transferred to SpareBank 1 Boligkreditt (SB1BK) and SpareBank 1 Næringskreditt 

(SB1NK) totalled NOK 60 million for Q2 2018 (NOK 57 million), and is booked as commissions. As at 30 June 2018, 

these commissions amounted to NOK 136 million (NOK 104 million). 

Compared with  the  first quarter of 2018,  the changes  in net  interest  income,  including commissions  from the 

transferred loan portfolio but excluding charges for the Guarantee Fund, were as follows in the second quarter of 

2018: 

 

   

NOK mi l l 2Q18 1Q18 Change 30.06.18 30.06.17 Change

Total income 930         773 157 1.703      1.570      133

Total costs 371         343 28 714          651          63

Losses 20            16 4 36            88            ‐52

Tax 91            89 2 180          162          18

Profit after tax 448         325 123 773          669          104

NOK mi l l

Chance last 

quarter

Effect of days 4

Margin effects ‐12

Effect volume 9

Other effects 1

Total effects 2

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Development of lending and deposit margins (measured against average 3‐month 

NIBOR)  

 

  

Compared with the first quarter of 2018, the Bank’s average costs for borrowing in the capital markets increased 

by around 15 percentage points in the second quarter of 2018. The increase is primarily due to refinancing of the 

Bank’s  borrowing  at  higher  money  market  rates.    Increased  money  market  rates  also  resulted  in  increased 

borrowing costs in SpareBank 1 Boligkreditt in the second quarter, and hence reduced commission income to the 

Bank from this company. 

Assuming stable conditions in the capital markets, the Bank’s average borrowing costs are expected to increase 

by 1 to 3 basis points during the second half of 2018.  

Increased money market rates have contributed to pressure on the interest rate margin for Norwegian banks. In 

the medium term, higher interest rates are expected to provide the basis for re‐pricing deposits and loans. 

The development of net interest income will also depend in part on the competitive situation and volume growth. 

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Net commission and other income  

 

As mentioned earlier, the commission income from SpareBank 1 Boligkreditt decreased in the second quarter as 

a result of increased money market rates. The increase in commission and other income is mainly due to increased 

earnings from the subsidiaries EiendomsMegler 1 Nord‐Norge and SpareBank 1 Regnskapshuset Nord‐Norge. For 

the latter, the increased income from the absorption of new acquisitions in the second quarter is reflected in the 

accounts from 1 January 2018. 

The Group is actively working to increase the proportion of other income. 

 

Financial Investments – income and events in the accounting period 

  SpareBank 1 Gruppen’s total profit after tax as at 30 June 2018 was NOK 601 million, NOK 110 million less than 

the same period last year. This decrease is largely related to the non‐life insurance sector, and is due to weaker 

insurance results and lower net financial income. The results for the second quarter viewed in isolation are still 

significantly better than the previous quarter. 

After the Norwegian Competition Authority approved the merger between Vipps, BankAxept and BankID Norge at 

the end of April, on certain conditions, the Financial Supervisory Authority of Norway communicated its approval 

at  the  beginning  of  June.  The  banks  have  signed  a  letter  of  intent  to  enhance  the  current  payment  and 

identification solutions, and the aim is to provide an even better customer experience and strengthen the position 

in competition with the global technology giants.  In the second quarter of 2018 the Bank posted a profit from 

NOK mi l l 2Q18 1Q18 Change 30.06.18 30.06.17 Change

Net commission loans 60 76 ‐16 136 104 32

Net commission incurance 36 40 ‐4 76 83 ‐7

Net commission payment 61 60 1 121 127 ‐6

Commission real estate 41 26 15 67 60 7

Fee accounting services 54 33 21 87 62 25

Net other income 23 15 8 38 36 2

Total 275 250 25 525 472 53

Share results NOK mill Sharehold 2Q18 1Q18 Change 30.06.18 30.06.17 Change

SpareBank 1 Gruppen 19,50 % 81 36 45 117 139 ‐22

SpareBank 1 Boligkreditt 16,85 % ‐7 3 ‐10 ‐4 ‐29 25

SpareBank 1 Næringskreditt 14,48 % 1 2 ‐1 3 6 ‐3

SpareBank 1 Kredittkort 17,00 % 6 5 1 11 7 4

SpareBank 1 Mobilbetaling 19,70 % 0 0 0 0 ‐14 14

SpareBank 1 Betaling 19,70 % ‐3 ‐2 ‐1 ‐5 0 ‐5

BN Bank 23,50 % 16 20 ‐4 36 34 2

Other companies 6 ‐1 7 5 0 5

Sale Group company 0 0 0 0 15 ‐15

Total income associated companies 100 63 37 163 158 5

Share dividends 2 1 1 3 4 ‐1

Net change value equities 81 ‐1 82 80 36 44

Net change value of bonds, 5 19 ‐14 24 39 ‐15

currency and derivatives

Net change value loans at fait value 0 ‐8 8 ‐8 2 ‐10

included hedging

Net income from financial investments 188 74 114 262 239 23

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value adjustments  to  its holdings  in SpareBank 1 BankAxept AS and SpareBank 1 BankID AS,  totalling NOK 63 

million.

On 20 June, SpareBank 1 Gruppen AS and DNB ASA signed a letter of intent to merge their insurance operations. 

This will take the form of a merger between DNB Forsikring AS and SpareBank 1 Skadeforsikring AS. The merged 

will have a virtually complete product portfolio within risk insurance for the retail and SME markets.  

The  letter of  intent assumes a conversion ratio of approx. 80 percent  for SpareBank 1 Gruppen and about 20 

percent for DNB. This conversion ratio is based on the value of the two non‐life insurance companies. 

SpareBank 1 Gruppen AS will have a 60 percent interest and DNB 40 per cent in the new company. The company 

will remain a subsidiary of SpareBank 1 Gruppen AS. The market value will be  used when DNB increases its holding 

to 40 per cent through the purchase of the further 20 % of the company. At the date of merger, the new company 

will have a market share within risk  insurance of more than 15 per cent, making  it  the third  largest  insurance 

company in the country, and the largest with distribution through a bank. The company is continuing SpareBank 

1’s agreement to provide products to the 930,000 members of the Norwegian Confederation of Trade Unions (LO) 

through the LOfavør brand. The SpareBank 1 banks will also market the insurance under the SpareBank 1 brand, 

while DNB will market the insurance under their own brand. The merger is scheduled for completion on 1 January 

2019,  subject  to  approval  from  the  authorities.  SpareBank  1 Nord‐Norge  owns  19.5  per  cent  of  SpareBank  1 

Gruppen AS. 

The income share ‘Other’ consists of shares in the profit from the companies SpareBank 1 Banksamarbeidet DA, 

SMB Lab AS and Betr AS (formerly Proaware AS). 

The  jointly‐owned companies  in  the SpareBank 1 Alliance have good earnings.  In the estimation of the Board, 

there are substantial underlying assets in these companies. The planned merger is expected to some extent in to 

bring these underlying assets to the fore. 

The Group’s equities portfolio 

The Group’s equities portfolio as at 30 June 2018 amounted to NOK 403 million (NOK 235 million). The portfolio 

has increased in value by NOK 81 million in the last quarter, including the value adjustment relating to the merger 

with Vipps, BankAxept and BankID Norge. 

 

Certificates, bonds, currency and derivatives As at 30 June 2018, the Group’s holdings of certificates and bonds amounted to NOK 14,155 million, compared to 

NOK 12,442 million at the same time the year before. 

Total net changes in value for the second quarter of 2018 in this portfolio represented a gain of NOK 5 million, and were largely due to general spread gains compared to the first quarter of 2018.    A summary of the Group’s derivatives as at 30 June 2018 is provided in note 11 to the interim financial statements.  Subsidiaries and second tier subsidiaries The Group’s subsidiaries have a combined result before tax as at the second quarter of 2018 of NOK 108 million (NOK 76 million), which has been fully consolidated into the consolidated financial statements. The subsidiaries with operations within the Group’s core business (SpareBank 1 Finans Nord‐Norge, EiendomsMegler 1 Nord‐Norge and SpareBank 1 Regnskapshuset Nord‐Norge) have generated good earnings.   The individual subsidiaries’ results are presented in note 16 to the interim financial statements.  

Operating costs The Group’s long‐term cost target is a cost ratio of 40% or lower. As at 30 June 2018, this ratio was 41.9% (41.5%) for the Group and 33.7% (31.9%) for the Parent Bank.  

8/38

 

 

  The Group’s costs during the first half of 2018 were NOK 63 million (9,6%) higher than the same quarter in 2017. NOK 30 million of the increase was attributable to the Group’s subsidiaries, in addition to a NOK 33 million increase in  the  Parent  Bank.  Increased  costs  in  the  Parent  Bank  are  primarily  due  to  higher  activity  associated  with digitisation, automation and new system solutions.   An overview of the Group’s pension liabilities and pension costs  is provided in note 14 to the  interim financial statements.  The Group’s costs for the second quarter seen in isolation increased by NOK 28 million compared with the first quarter of 2018.   This is due to the continued increased rental costs in Tromsø and Bodø from the leasing of temporary facilities during  the  relocation  and  construction  of  a  new  head  office  in  Tromsø.  There  is  also  a  greater  focus  on digitalisation, automation and new system solutions. This will provide cost savings and increased revenues. These are expected to take effect  from 2019. New business acquired by the subsidiary SpareBank 1 Regnskapshuset Nord‐Norge  has  increase  revenues,  costs  and  profits  in  the  company  in  2018.  As mentioned  above,  the  new operation was absorbed in the second quarter of 2018, but with accounting effect from 1 January 2018.   There were 821 full‐time equivalents at the end of the second quarter of 2018 (769), 52 more than at 30 June 2017:  there  were  8  more  in  the  Parent  Bank  and  44  more  in  the  subsidiaries.  Most  of  the  latter  are  in Regnskapshuset, where the number of staff is increasing as a result of acquisitions.   The Parent Bank had 545 full‐time equivalents the end of the second quarter of 2018 (538). 

Losses and non‐performing loans The Group’s net losses on loans and guarantees at the end of the first half of 2018 amounted to NOK 36 million 

(NOK 88 million): NOK 6 million (NOK 19 million) from the retail market and NOK 30 million (NOK 69 million) from 

the corporate market and other losses. The level of losses is considered very low.  

Total loss provisions on loans and guarantees at 30 June 2018 came to NOK 555 million (NOK 624 million). This 

equates to a provision ratio of 142 % (100 %) of net non‐performing and doubtful commitments.  As at 30 June 

2018, total loss provisions amount to 0.63 % (0.82 %) of the Group’s total gross lending to customers, and 0.48 % 

(0.62 %) of gross lending to customers including intermediary loans.  

The Group’s total individual loss provisions under IFRS 9 on loans and guarantees as at 30 June 2018 come to NOK 

123 million (NOK 222 million). The provision was reduced by NOK 209 million in the last quarter, largely due to 

positive migration to a lower risk class in one individual exposure. Group loss provisions on loans and guarantees 

according to IFRS 9 as at 30 June 2018 amounted to NOK 432 million (NOK 402 million), an increase of NOK 95 

million compared to the previous quarter.  

See also notes 7, 8 and 9 to the interim financial statements. Note 7 provides an overview of total loss provisions 

under IFRS 9 at 30 June 2018, including off‐balance‐sheet items. 

NOK mill 2Q18 1Q18 Change 30.06.18 30.06.17 Change

Labor costs 145 139 6 284          259          25

Pension 12 11 1 23            26            ‐3

Social costs 28 28 0 56            56            0

Administration costs 121 109 12 230          192          38

Depreciation costs 14 18 ‐4 32            31            1

Property costs 6 4 2 10            11            ‐1

Other operation costs 45 34 11 79            76            3

Total operation costs 371 343 28 714          651          63

9/38

 

 

In the opinion of the Board, the quality of the Group’s loan portfolio is good and the Group is doing high quality 

work in connection with non‐performing and impaired commitments. There will continue to be a strong focus on 

this work going forward. The general level of losses is expected to be low for the immediate future. 

Balance sheet performance 

 

Loans On 30 June 2018, loans totalling NOK 31 billion (NOK 26 billion) were transferred to SpareBank 1 Boligkreditt, and 

NOK 0.4 billion (NOK 0 billion) to SpareBank 1 Næringskreditt. These loans do not appear as lending on the Bank’s 

balance sheet. Comments on the growth in lending include these intermediary loans. 

In the past two years, lending growth has been relatively strong. This is particularly true of the recent growth in 

the corporate market. There are several distinctive features of the market and the competitive conditions in the 

north that help to explain this growth, including: 

The international banks have lower market shares in North‐Norway than in the country as a whole 

The  business world  in  the  north  is  dominated  by  small  and medium‐sized  enterprises  (SMEs) which 

emphasise local presence. This is an advantage for the saving banks. For SpareBank 1 Nord‐Norge, this 

is reinforced by a series of office closures by competitors. The latter has also had a positive effect on 

lending growth in the retail market. 

Strong prioritisation of the SME segment by the Group. 

Lending to the retail market makes up 71% of total lending as at 30 June 2018 (73%).  

An overview of the Group’s lending is provided in note 6 to the interim financial statements. 

In the case of new loans, particular emphasis is placed on customers' ability to service and repay their outstanding 

loans, and on a satisfactory level of collateral and other security to ensure that the credit risk is maintained at an 

acceptable level. 

Liquidity  Customer  deposits  are  the  Bank’s  most  important  source  of  funding  and  note  19  to  the  interim  financial 

statements provides an overview of the Group’s deposits. At the end of the second quarter of 2018, the deposit‐

to‐loan ratio (excluding intermediary loans) was 80.7% (79.8%). The Bank’s remaining funding, apart from equity 

and subordinated loan capital and deposits from customers, is mainly long‐term funding from the capital markets. 

The Bank's access to liquidity and the key figures for liquidity are satisfactory. The Bank’s strategic aim is to keep 

liquidity risk at a low level. The LCR (liquidity coverage ratio) as at 30 June 2018 was calculated at 130 % (119 %). 

Please refer also to note 14 to the interim financial statements on liquidity risk. 

The long‐term ratings at the rating agencies Moody's and Fitch are A1 and A, respectively.   

NOK mill 30.06.2018 30.06.2017 Change 30.09.2017 Change

Loan retail 79.218 72.822 8,8 % 77.140 2,7 %

Loan corporate 31.670 27.114 16,8 % 30.116 5,2 %

Loan incl.committion loans 110.888 99.936 11,0 % 107.256 3,4 %

Loan exclusive committion loans 79.588 73.471 8,3 % 76.746 3,7 %

Deposits retail 35.326 32.952 7,2 % 32.206 9,7 %

Deposits corporate 28.447 25.682 10,8 % 26.833 6,0 %

Total deposits 63.773 58.634 8,8 % 59.039 8,0 %

Deposits as % of loans excl committion loans 80 % 80 % 0 % 77 % 4 %

Total assets 103.890 95.822 8,4 % 98.372 5,6 %

10/38

 

 

Financial strength and capital adequacy 

   The Group  uses  proportional  consolidation  for  its  capital  adequacy  reporting  for  the holdings  in  SpareBank  1 Boligkreditt, SpareBank 1 Næringskreditt, BN Bank, and SpareBank 1 Kredittkort.  The Group’s  common equity  tier  1  capital  ratio  has decreased  in  the  last quarter.  This  is  due primarily  to  an increased risk‐weighted basis for calculation resulting from lending growth and other balance‐sheet growth.  SpareBank 1 Nord‐Norge’s goal is to maintain unquestionable financial strength and satisfy the statutory minimum 

requirements  for  capital  adequacy. The Group has a  target  for  the  common equity  tier  1  capital  ratio of one 

percentage point above the minimum requirement, which results in a target common equity tier 1 capital ratio of 

14.5%. The total minimum requirement for the tier 1 leverage ratio is 5%.  

The Bank’s equity certificate holders   

 

A  summary  of  the  Bank’s  20  largest  equity  certificate  holders  is  provided  in  note  21  to  the  interim  financial 

statements. 

Concluding remarks and future prospects  Although  there  are  still  uncertainties  for  the Norwegian  and  regional  economy,  the  Board  considers  that  the international,  national  and  regional  macroeconomic  conditions  are  still  in  place  to  provide  good  growth opportunities for North‐Norway and for SpareBank 1 Nord‐Norge.  Growth in the northern Norwegian economy is also expected to be faster than in the rest of the country. However, this growth is now only expected to be slightly ahead of the rest of the country.   Significant  strategic measures  have been  implemented  in  the  last  few  years,  and  the Group’s  target  financial 

strength  is good. The Board  is still working on restructuring measures  in  the Group,  to strengthen the Goup’s 

market position, increase across‐the‐board sales and streamline all of the Group’s processes. Measures associated 

with increased efforts in digital channels, use of digital assistants (bots), and strengthened focus on innovation 

have led to increased costs that will increase some more in 2018. The cost and revenue effects of this work are 

expected to make themselves known from 2019. 

The Group’s future prospects are considered good. 

Including 50% result 30.06.2018 30.06.2017 Change 31.03.2018 Change

Common tier 1 capital 14,7 % 15,4 % ‐0,6 14,8 % ‐0,1

Tier 1 capital 15,9 % 16,7 % ‐0,8 16,1 % ‐0,1

Capital adequacy ratio 17,7 % 19,0 % ‐1,3 17,8 % ‐0,1

Leverage ratio 7,3 % 7,5 % ‐0,2 7,2 % 0,1

NOK mill 30.06.2018 30.06.2017 Change 31.03.2018 Change

Equity certificate capital 1.807 1.807 0 1.807 0

ECC Ownership fraction 46,36 % 46,36 % 0 46,36 % 0

Number of holders 8.277             7.829            448                 8.255               22                  

Proportion of northern Norwegian holders 19 % 19 % 0 20 % ‐0,74

Proportion of foreign holders 36 % 33 % 3 38 % ‐1,02

Market price NOK 60,90 56,75 4,15 62,00 ‐1,10

Market value 13.189           12.290          899                 13.427            ‐238

Earnings per equity certificate 7,08 6,14 0,94 5,93 1,15

Price/Earnings 7,5 9,2 ‐1,73 10,5 ‐3,0

Price/Book value 1,1 1,1 0,05 1,2 ‐0,07

11/38

 

 

 

Tromsø, 7 August 2018 

The Board of SpareBank 1 Nord‐Norge 

Karl Eirik Schjøtt‐Pedersen   Hans‐Tore Bjerkaas      Ingvild Myhre   

(Chairman of the Board)    (Deputy Chairman) 

 

 

 

Kjersti Terese Stormo    Greger Mannsverk      Bengt Olsen   

 

 

 

Sonja Djønne      Vivi‐Ann Pedersen      Kjetil Berntsen 

        (employee representative)    (employee representative) 

 

Jan‐Frode Janson 

(CEO) 

12/38

31.12.17 2Q17 2Q18 30.06.17 30.06.18 Note 30.06.18 30.06.17 2Q18 2Q17 31.12.17

2 387 592 633 1 189 1 226 Interest income 1 339 1 286 691 641 2 611 824 207 224 432 427 Interest costs 423 427 224 204 841

1 563 385 409 757 799 Net interest income 916 859 467 437 1 770

756 184 180 358 379 Fee- and commission income 474 446 238 235 931 77 19 17 38 34 Fee- and commission costs 42 41 21 20 85 46 3 4 7 7 Other operating income 93 67 58 33 146

725 168 167 327 352 Net fee-, commision and other operating income 525 472 275 248 992

4 4 2 4 3 Dividend 3 4 2 4 4 457 357 334 424 351 Income from investments 163 158 100 93 434 112 27 86 77 93 Net gain from investments in securities 12 96 77 86 27 114 573 388 422 505 447 Net income from financial investments 262 239 188 124 552

2 861 941 998 1 589 1 598 Total income 1 703 1 570 930 809 3 314

511 125 125 250 253 Personnel costs 14 363 341 185 169 708 342 83 106 169 201 Administration costs 230 192 121 96 393

51 13 11 25 23 Ordinary depreciation 32 31 14 16 65 151 31 32 62 59 Other operating costs 89 87 51 44 200

1 055 252 274 506 536 Total costs 714 651 371 325 1 366

1 806 689 724 1 083 1 062 Result before losses 989 919 559 484 1 948

46 19 17 61 28 Losses 7,8 36 88 20 44 1841 760 670 707 1 022 1 034 Result before tax 953 831 539 440 1 764

316 75 75 143 154 Tax 180 162 91 84 324 0 0 0 0 0 Result non-current assets held for sale 0 0 0 0 0

1 444 595 632 879 880 Result after tax 773 669 448 356 1 440

6.62 2.73 2.89 8.08 8.07 Result per Equity Certificate, adjusted for interests hybrid capital 7.08 6.14 2.04 1.63 6.60

Parent Bank Group(Amounts in NOK million)

31.12.17 2Q17 2Q18 30.06.17 30.06.18 30.06.18 30.06.17 2Q18 2Q17 31.12.17

1 444 595 632 879 880 Result after tax 773 669 448 356 1 440Items that will not be reclassified to profit/loss

0 0 0 0 0 Net change in fair market value of investment in joint ventures -8 2 -13 0 561 0 0 -1 0 Actuarial gains (losses) on benefit-based pension schemes 0 -1 0 0 69

-15 0 0 0 0 Tax 0 0 0 0 -1746 0 0 -1 0 Total -8 1 -13 0 57

Items that will be reclassified to profit/loss 0 0 0 0 0 Value adjustment of property, plant and equipment 0 0 0 0 00 0 0 0 0 Effective part of change in fair market value in cash flow hedging 0 0 0 0 0

15 0 7 0 7 Net change in fair market value of financial assets available for sale 7 0 7 0 150 0 0 0 0 Reclassification adjustments 0 0 0 0 00 0 0 0 0 Net change in fair market value of investment in joint ventures 0 0 0 0 30 0 0 0 0 Tax 0 0 0 0 0

15 0 7 0 7 Total 7 0 7 0 18

1 505 595 639 878 887 Total comprehensive income for the period 772 670 442 356 1 515

6.90 2.73 2.92 8.07 8.14 Total result per Equity Certificate, adjusted for interests hybrid capital 7.07 6.15 2.01 1.63 6.95

Group

Other comprehensive income

(Amounts in NOK million)

Parent Bank

Statement of income

13/38

31.12.17 30.06.17 30.06.18 Note 30.06.18 30.06.17 31.12.17

Assets 775 787 1 760 Cash and balances with central banks 1 760 787 775

7 081 6 623 6 105 Net loans and advances to credit institutions 6,7 1 331 2 513 2 65669 177 68 031 73 217 Net loans and advances to customers 6,7 79 071 72 885 74 487

255 222 391 Shares 403 235 27011 541 12 442 14 155 Certificates and bonds 14 155 12 442 11 541

1 511 1 529 1 072 Financial derivatives 11 1 072 1 529 1 511 924 820 1 073 Investments in Group Companies

3 160 2 849 3 243Investments in assosiated companies and joint ventures 4 613 4 194 4 755

234 342 209 Property, plant and equipment 398 490 453Non current assets held for sale 30 30 30Deduction for ntangible assets 94 67 68

499 379 710 Other assets 17 963 650 640

95 157 94 024 101 935 Total assets 103 890 95 822 97 186

Liabilities 436 672 294 Deposits from credit institutions 293 672 434

57 883 58 662 63 787 Deposits from customers 19 63 773 58 634 57 84923 552 21 737 24 087 Debt securities in issue 20 24 086 21 737 23 553

902 940 759 Financial derivatives 11 759 940 902 819 955 1 383 Other liabilities 18 1 738 1 211 1 093

98 83 170 Deferred tax liabilities 278 187 206 850 1 160 850 Subordinated loan capital 20 850 1 160 850

84 540 84 209 91 330 Total liabilities 91 777 84 541 84 887

Equity1 807 1 807 1 807 Equity Certificate capital 21 1 807 1 807 1 807

843 843 843 Equity Certificate premium reserve 843 843 843 530 350 530 Hybrid capital 530 350 530

1 980 1 310 1 567 Dividend Equalisation Fund 1 567 1 310 1 9805 235 4 460 4 757 The Savings Bank's Fund 4 757 4 460 5 235

120 120 120 Donations 120 120 120 35 20 42 Fair value reserve 42 20 35 67 26 59 Other equity capital 1 674 1 702 1 749

879 880 Result after tax 773 66910 617 9 815 10 605 Total equity 12 113 11 281 12 299

95 157 94 024 101 935 Total liabilities and equity 103 890 95 822 97 186

Statement of financial positionParent Bank

(Amounts in NOK million)

Group

14/38

(Amounts in NOK million) PCC capitalPremium

FundHybrid capital

Dividend Equalisation

FundSaving Bank's

FundDonations

FundFair value

reserveOther equity Total equity

Group

Equity at 01.01.17 1 807 843 1 657 4 459 521 20 1 704 11 011

Total comprehensive income for the Period result 669 310 465 - 4 1 440

Other comprehensive income: Net change in fair market value of investment in joint ventures 8 8Net change in fair market value of financial assets available for sale 15 15Actuarial gains (losses) on benefit-based pension schemes 69 69Tax on other comprehensive income - 17 - 17Total other comprehensive income 15 60 75Total comprehensive income for the 669 310 465 15 56 1 515

Transactions with ownersSet aside for dividend payments - 402 - 402Reversal of dividend payments 402 402Dividend paid - 346 - 346Other transactions 530 1 531Changes in minority interests Payments from Donations Fund - 401 - 11 - 412Total transactions with owners 530 - 346 1 - 401 - 11 - 227Equity at 31.12.2017 1 807 843 530 1 980 4 770 585 35 1 749 12 299

Equity at 01.01.18 1 807 843 530 1 980 4 770 585 35 1 749 12 299

Total comprehensive income for the Period result 773 773Other comprehensive income: Net change in fair market value of investment in joint ventures - 8 - 8Net change in fair market value of financial assets available for sale 7 7Tax on other comprehensive income Total other comprehensive income 0 0 0 0 0 7 -8 - 1Total comprehensive income for the period 7 765 772

Transactions with ownersDividend paid - 402 - 402Other transactions - 11 - 13 - 67 - 91Payments from Donations Fund - 465 - 465Total transactions with owners - 413 - 13 - 465 - 67 - 958Equity at 30.06.18 1 807 843 530 1 567 4 757 120 42 2 447 12 113

Changes in equity

Parent Bankadjusted

IFRS 9 effects (adjusted) (01.01.13)01.01.18 31.12.17 31.12.16 31.12.15 31.12.14 31.12.13 01.01.13 31.12.12

Equity Certificate capital 1 807 1 807 1 807 1 807 1 807 1 807 1 681 1 655Equity Certificate premium reserve 843 843 843 843 843 843 344 245Dividend Equalisation Fund 1 567 1 579 1 310 960 815 617 380 453Set aside dividend 402 402 347 201 191 110 0 - 76Share Fund Fair Value Options and other equity 46 46 22 69 6 31 - 33 - 33A. Equity attributable to Equity Certificate holders of the Bank 4 665 4 677 4 329 3 880 3 662 3 408 2 372 2 244

The Savings Bank's Fund 4 757 4 770 4 460 4 055 3 730 3 588 3 081 3 107Allocated dividends to ownerless capital 465 465 400 60 212 43 0 - 30Donations 120 120 120 120 120 120 120 120Share Fund Fair Value Options and other equity 55 55 29 83 12 41 - 45 - 45B. Total ownerless capital 5 397 5 410 5 009 4 318 4 074 3 792 3 156 3 152

Equity Certificate Ratio overall (A/(A+B)) 46.36 % 46.36 % 46.36 % 47.33 % 47.33 % 47.33 % 42.91 % 41.59 %

Hybrid capital 530 530

Total equity 10 592 10 617 9 338 8 198 7 736 7 200 5 528 5 396

ECC ratio overall

(Amounts in NOK million)

15/38

31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17

1 760 1 022 1 034 Result before tax 953 831 1 764 51 25 23 + Ordinary depreciation 32 31 65

- 11 0 0 + Write-downs, gains/losses fixed assets 0 0 1 46 61 28 + Losses on loans and guarantees 36 88 184

316 143 154 - Tax/Result investment held for sale 180 162 324 747 747 867 - Dividends/donations 867 747 747

783 218 64 Provided from the year's operations - 26 41 943

- 39 59 468 Change in sundry liabilities: + increase/ - decrease 482 46 - 17- 195 - 93 228 Change in various claims: - increase/ + decrease 90 - 69 - 46

-3 553 -2 422 -4 068 Change in gross lending to and claims on customers: - increase/ + decrease -4 620 -2 737 -4 435-1 341 -2 209 -2 750 Change in short term-securities: - increase/ + decrease -2 747 -2 207 -1 3413 959 4 738 5 904 Change in deposits from and debt owed to customers: + increase/ - decrease 5 924 4 764 3 979- 397 - 161 - 142 Change in debt owed to credit institutions: + increase/ - decrease - 141 - 146 - 384

- 783 130 - 296 A. Net liquidity change from operations -1 038 - 308 -1 301

- 40 - 6 - 28 - Investment in fixed assets (incl merger effects) - 84 - 20 - 90 123 0 30 + Sale of fixed assets 107 0 68

- 507 - 92 - 232 Change in holdings of long-term securities: - increase/ + decrease 142 175 - 385

- 424 - 98 - 230 B. Liquidity change from investments 165 155 - 407

2 387 572 535 Change in borrowings through the issuance of securities: + increase/ - decrease 533 572 2 388 30 160 0 Change in hybrid capital/subordinated loan capital: + increase/ - decrease 0 160 30

2 417 732 535 C. Liquidity change from financing 533 732 2 418

1 210 764 9 A + B + C. Total change in liquidity - 340 579 7106 646 6 646 7 856 + Liquid funds at the start of the period 3 431 2 721 2 721

7 856 7 410 7 865 = Liquid funds at the end of the period 3 091 3 300 3 431

Liquid funds are defined as cash-in-hand, claims on central banks,plus loans to and claims on credit institutions.

Statement of cash flows

Parent Bank(Amounts in NOK million)

Group

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(Amounts in NOK million) 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16Interest income 691 648 675 650 641 645 653 641 631Interest costs 224 199 214 200 204 223 219 218 230Net interest income 467 449 461 450 437 422 434 423 401Fee- and commission income 238 236 235 250 235 211 213 228 226Fee- and commission costs 21 21 21 23 20 21 22 22 22Other operating income 58 35 51 28 33 34 43 22 45Net fee-, commision and other operating income 275 250 265 255 248 224 234 228 249Dividend 2 1 0 0 4 0 1 0 73Income from investments 100 63 167 109 93 65 76 94 109Net gain from investments in securities 86 10 27 10 27 50 39 63 - 26Net income from financial investments 188 74 194 119 124 115 116 157 156

Total income 930 773 920 824 809 761 784 808 806Personnel costs 185 178 183 184 169 172 195 170 161Administration costs 121 109 103 98 96 96 100 86 95Ordinary depreciation 14 18 19 15 16 15 15 15 16Other operating costs 51 38 68 45 44 43 65 45 46Total costs 371 343 373 342 325 326 375 316 318

Result before losses 559 430 547 482 484 435 409 492 488Losses 20 16 37 59 44 44 64 61 64Net gain from sale of financial fixed assets 0 0 0 0 0 0 0 0 0Result before tax 539 414 510 423 440 391 345 431 424Tax 91 89 86 76 84 78 77 74 71Result non-current assets held for sale 0 0 0 0 0 0 0 0 0Result after tax 448 325 424 347 356 313 268 357 353

ProfitabilityReturn on equity capital 1 15.6 % 11.2 % 14.6 % 12.4 % 13.1 % 12.2 % 9.9 % 13.6 % 13.8 %Interest margin 1.85 % 1.84 % 1.93 % 1.90 % 1.86 % 1.85 % 1.93 % 1.87 % 1.78 %Cost/income 2 39.9 % 44.4 % 40.5 % 41.5 % 40.2 % 42.8 % 47.8 % 39.1 % 39.5 %Balance sheet figuresLoans and advances to customers 79 588 76 746 75 003 73 902 73 471 71 294 70 763 68 905 67 861Growth in loans and advances to cust. incl. commision loans past 12 months 11.0 % 10.3 % 9.6 % 9.0 % 9.2 % 8.4 % 8.9 % 6.3 % 5.1 %Deposits from customers 63 773 59 039 57 849 57 163 58 634 54 261 53 870 53 637 55 666Growth in deposits from customers past 12 months 8.8 % 8.8 % 7.4 % 6.6 % 5.3 % 7.4 % 12.0 % 11.7 % 10.8 %Deposits as a percentage of gross lending 4 80.1 % 76.9 % 77.1 % 77.3 % 79.8 % 76.1 % 76.1 % 77.8 % 82.0 %Deposits as a percentage of gross lending including commission loans 5 57.5 % 55.0 % 54.8 % 56.1 % 58.7 % 55.8 % 55.9 % 57.4 % 60.8 %Average assets 3 99 816 97 779 93 905 93 085 92 933 91 489 89 168 88 835 88 710Total assets 103 890 98 372 97 186 93 542 95 822 92 476 90 501 89 210 92 038Losses on loans and commitments in defaultLosses on loans to customers as a percentage of gross loans incl. commission loans 0.07 % 0.06 % 0.14 % 0.23 % 0.18 % 0.18 % 0.27 % 0.26 % 0.28 %Commitments in default as a percentage of gross loans incl. commission loans 0.19 % 0.34 % 0.35 % 0.36 % 0.42 % 0.37 % 0.31 % 0.44 % 0.54 %Commitments at risk of loss as a percentage of gross loans incl. commission loans 0.16 % 0.58 % 0.60 % 0.21 % 0.22 % 0.26 % 0.22 % 0.23 % 0.10 %Net comm. in default and at risk of loss as a per. of gross loans incl. commission loans 0.24 % 0.73 % 0.75 % 0.44 % 0.47 % 0.47 % 0.37 % 0.51 % 0.49 %SolidityCommon Equity Tier I - incl. 50% of result 14.7 % 14.8 % 14.9 % 15.4 % 15.4 % 15.3 % 15.0 % 15.1 % 14.2 %Tier I Capital 15.4 % 16.1 % 16.2 % 16.0 % 16.2 % 16.6 % 16.3 % 15.6 % 15.0 %Total regulatory Capital % 17.1 % 17.8 % 18.1 % 18.3 % 18.5 % 18.8 % 18.4 % 17.7 % 17.1 %Common Equity Tier I 10 462 9 951 9 992 10 601 10 454 9 417 9 467 9 563 9 206Tier I capital 11 003 10 980 10 857 10 485 10 565 10 370 10 267 10 361 9 360Equity and related capital resources 12 231 12 170 12 141 11 928 12 039 11 767 11 229 10 783 10 674Adjusted risk-weighted assets base 71 497 68 281 67 222 65 351 65 125 62 590 61 120 60 798 62 479

1) The profit after tax in relation to average equity, calculated as a quarterly average of equity and as at 1 January and 31 December. The Bank's hybrid tier 1 securities issued in 2017 are classified as equity in the financial statements. However, when calcula ng the return on equity, hybrid er 1 capital (530 mill) is treated as a liability and the associated interest costs (4 mill) are adjusted for in the result.

2) Total costs as a percentage of total net income3) Average assets are calculated as average assets each quarter and at 01.01. and 31.12.4) Deposits from customers as a percentage of gross lending5) Deposits from customers in percentage of gross lendring ex commission loans

Result from the Group's quarterly accounts

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Notes

Note 1 - Accounting policiesThe group's accounts for 2018 have been prepared in accordance with International Financial Reporting Standards (IFRS) approved by the EU, including IAS 34 – interim reporting. The quarterly accounts do not include all information required in a complete annual accounts, and should be read in conjunction with the annual accoufor 2017.

The IASB (International Accounting Standards Board) has decided that the new IFRS 9 Financial Instruments (International Financial Reporting Standards) should replace the existing IAS 39 Financial Instruments: Recognition and Measurement (International Accounting Standards) from 1.1.18. According to the new IFRS 9 (International Financial Reporting Standards), provisiofor anticipated losses must be made based on relevant information that is available at the time of reporting, including historical, current and future information. This means that loss will be shown in the accounts before a loss event has occurred, and that future expectations will be included in the calculations.

Over the last two years and in collaboration with the other banks in the SpareBank 1 Alliance, the Group has been developing models along with clarifications concerning valuation and classification. The work has now been completed, and implementation effects per 1.1.18 based on figures per 31.12.17, have been calculated and posted. An implementation effect arising from the introduction of new regulations is posted directly to equity per 1.1.18.

The whole of the implementation effect in the group is due to an increase in provision for bad debts on loans, and a total negative effect on equity is posted, with NOK 24.5 and 38.4 millionrespectively in the parent bank and the Group. Compared to what was reported per Q4 2017, this gives a positive effect on return on equity of 0.01 percentage points, as well as a reductio0.04 percentage points in tier 1 capital ratio.

Reference is made furthermore to further details around the implementation effects and the discussion of new regulations in note 11, as well as notes 7, 8 and 9 on loss and loans.

The quarterly accounts have not been audited. In the calculation of capital coverage and the leverage Pure Tier 1 capital ratio, the share of income is still taken into consideration. Share results are not included when reporting the capital coverage and the leverage Pure Tier 1 capital ratio to the Financial Supervisory Authority of Norway.

Note 2 - Important accounting estimates and discretionary judgementsIn preparing the consolidated financial statements the management makes estimates, discretionary judgements and assumptions that influence the application of the accounting policies. These could thus affect the stated amounts for assets, liabilities, income and costs. Note 3 to last year's annual financial statements provides a fuller explanation of the items subject to important estimates and judgements.

Note 3 - Changes in group structureNo change in group structure last quarter.

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Group

(Amounts in NOK million) 30.06.18

PM BM Markets

SpareBank 1

Regnskaps-

huset Nord-

Norge

Eiendoms-

Megler 1

Nord-Norge

SpareBank 1

Finans

Nord-Norge

Unspecified Total

Net interest income 528 308 0 0 118 - 38 916

Net fee-, commision and other operating income 311 33 2 88 94 0 - 3 525

Net income from financial investments 2 5 14 0 0 0 241 262

Total costs 415 60 9 72 80 33 45 714

Result before losses 426 286 7 16 14 85 155 989

Losses 19 10 0 7 0 36

Result before tax 407 276 7 16 14 78 155 953

Gross lending 48 333 25 257 5 998 1 331 80 919

Individual write-downs for impaired value on loans and advances to customers - 8 - 112 - 29 29 - 120

Collective write-downs for impaired value on loans and advances to customers - 122 - 226 - 50 1 - 397

Other assets 0 3 528 94 100 81 21 016 24 819

Total assets per business area 48 203 28 447 0 94 100 6 000 22 377 105 221

Deposits from customers 35 326 28 447 63 773

Other liabilities and equity capital 12 877 94 100 5 919 21 127 40 117

Total equity and liabilities per business area 48 203 28 447 0 94 100 5 919 21 127 103 890

30.06.17

Net interest income 492 255 103 9 859

Net fee-, commision and other operating income 285 27 3 62 82 13 472

Net income from financial investments 2 5 22 0 210 239

Total costs 418 66 11 49 71 25 11 651

Result before losses 361 221 14 13 11 78 221 919

Losses 19 42 27 88

Result before tax 342 179 14 13 11 51 221 831

Gross lending 46 357 22 040 5 074 2 513 75 984

Individual write-downs for impaired value on loans and advances to customers - 12 - 106 - 48 - 166

Collective write-downs for impaired value on loans and advances to customers - 64 - 337 - 19 - 420

Other assets 0 4 085 66 94 208 18 484 22 937

Total assets per business area 46 281 25 682 0 66 94 5 215 20 997 98 335

Deposits from customers 32 952 25 682 58 634

Other liabilities and equity capital 13 329 66 94 5 215 18 484 37 188

Total equity and liabilities per business area 46 281 25 682 0 66 94 5 215 18 484 95 822

Note 4 - Business AreasPursuant to IFRS 8, SpareBank 1 Nord-Norge has the following operating segments: retail market, corporate market, leasing and markets.

The segments correspond with the executive management team's internal reporting structure. In SpareBank 1 Nord-Norge, the executive management team is responsible for evaluating

and following up the segments' results and is defined as the chief operating decision maker in the sense used in IFRS 8.

The recognition and measurement principles in the Bank's segment reporting are based on accounting policies that comply with IFRS, as set out in the consolidated financial statements.

Any transactions between the segments are carried out at arm's length.

The item "unallocated" contains activities that cannot be allocated to the segments. The Bank operates in a limited geographic area and reporting geographical information provides little

additional information. Nonetheless, important assets classes (loans) are distributed geographically in a separate note 11 in Annual report.

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31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17

1 807 1 807 1 807 Equity certificates 1 807 1 807 1 807 0 0 0 - Own equity certificates 0 0 0

843 843 843 Premium reserve 843 843 8431 980 1 310 1 567 Equalisation reserve 1 567 1 310 1 9805 235 4 460 4 757 Savings bank's reserve 4 757 4 460 5 235

120 120 120 Endowment fund 120 120 120 35 20 42 Deduction Fund for urealised gains available for sale 42 20 35 67 26 59 Other equity 1 674 1 702 1 749

530 350 530 Hybrid capital 530 350 530 0 879 880 Period result 773 669 0

10 617 9 815 10 605 Total equity 12 113 11 281 12 299 0 - 879 - 880 Period result - 773 - 669 0

- 530 - 350 - 530 Hybrid capital - 530 - 350 - 530Additional Tier 1 Capital (AT 1 Capital)

- 866 0 0 Deduction for allocated dividends 0 0 - 866 0 0 0 Adjusted Tier 1 Capital from consolidated financial institutions - 45 - 136 - 36 0 0 0 Deduction for ntangible assets - 105 - 89 - 87

- 23 - 19 - 23 Adjustments to CET 1 due to prudential filters - 37 - 28 - 27- 130 - 95 - 130 Deduction defined benefit pension fund assets gross amounts - 136 - 101 - 136

- 75 0 0 IRB shortfall of credit risk adjustments to expected losses 0 0 - 36 0 0 0 CET1 instruments of financial sector entities where the institution has - 350 - 246 - 589

8 993 8 472 9 042 Common equity Tier 1 Capital (CET 1 Capital) 10 137 9 662 9 992 530 607 530 Hybrid Tier 1 bonds 870 907 869

0 0 0 Own Hybrid Tier 1 bonds - 4 - 4 - 49 523 9 079 9 572 Additional Tier 1 Capital (AT 1 Capital) 11 003 10 565 10 857

Tier 2 Capital (T2 Capital) 850 903 850 Nonperpetual subordinated capital 1 313 1 431 1 328

0 42 3 Expected losses on IRB, net of writedowns 52 96 0

- 61 - 63 - 137 Deduction for subordinated capital in other financial institutions with a significant investment - 137 - 53 - 44

789 882 716 Tier 2 Capital (T2 Capital) 1 228 1 474 1 284

10 312 9 961 10 288 Equity and related capital resources 12 231 12 039 12 141Minimum requirements subordinated capital, Basel I I

935 810 1 023 Specialised lending exposure 1 099 899 1 026 144 105 111 Other corporations exposure 120 114 154 352 387 372 SME exposure 382 395 362 920 914 985 Property retail mortage exposure 1 425 1 269 1 336

65 61 68 Other retail exposure 70 63 66 405 348 449 Equity investments 2 12 13

2 820 2 624 3 008 Total credit risk 3 098 2 752 2 958 616 711 735 Credit risk standardised approach 1 373 1 305 1 150

8 12 7 Debt risk 7 12 8 5 5 0 Equity risk 5 5 5

329 329 368 Operational risk 417 322 322 33 35 27 Credit Value Adjustment 77 74 83

0 0 0 Transitional arrangements 742 739 8523 810 3 717 4 145 Minimum requirements subordinated capital 5 720 5 210 5 378

47 629 46 457 51 811 RWA (Risk weighted assets) 71 497 65 125 67 223

Total regulatory Capital21.7 % 21.4 % 19.9 % Total regulatory Capital 17.1 % 18.5 % 18.1 %20.0 % 19.5 % 18.5 % Tier 1 Capital 15.4 % 16.2 % 16.2 %

1.7 % 1.9 % 1.4 % Tier 2 Capital 1.7 % 2.3 % 1.9 %18.9 % 19.2 % 18.3 % Common Equity Tier I - incl. 50% of result 14.7 % 15.4 % 14.9 %

9.7 % 9.8 % 9.5 % Leverage Ratio - incl. 50% of result 7.3 % 7.4 % 7.2 %

Parent Bank Group(Amounts in NOK million)

Note 5 - Capital AdequacyThe Group follows the EU’s capital adequacy rules for banks and investment companies, CRD IV/CRR (the Capital Requirements Directive/Capital Requirements Regulation). The use of IRB (the Internal Rating Based approach) places great demands on the Bank’s organisation, competence, risk models and risk management systems. Since 2015, SpareBank 1 Nord-Norge has been authorised by the Financial Supervisory Authority of Norway to use the Advanced Internal Rating Based approach, which means that the Bank can use internal models for loss levels in the corporate market portfolio to calculate the necessary requirements for tied-up capital.

The Financial Supervisory Authority of Norway has issued transitional rules for IRB banks that do not get the full effect of reduced regulatory capital requirements where the risk-weighted calculation basis under the new rules is lower than the calculation basis under the old capital calculation (BaselI). The calculation basis can then be adjusted upwards (a correction for the ‘floor’) to 80% of calculation basis according to Basel I.

In the calculation of capital adequacy, the same rules do not apply to consolidation of associates or joint ventures as for the accounts. The Group uses proportional consolidation for its capital adequacy reporting of the participations in SpareBank 1 Boligkreditt, SpareBank 1 Næringskreditt, SpareBank 1 Kredittkort and BN Bank.

The Group has a long-term goal that the Pure Tier 1 capital ratio should be a minimum of one percentage point above the regulatory minimum. Currently, this equates to a Pure Tier 1 capital ratio target of 14.5%.

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Group

31.12.17 31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17 31.12.17

(01.01.18) (01.01.18)

IFRS 9 IAS 39 IAS 39 IFRS 9 IFRS 9 IAS 39 IAS 39 IFRS 9

Loans at fair value through profit and loss

6 935 6 935 7 099 6 617 Loans to customers at fixed interest rates 6 617 7 099 6 935 6 935

4 002 4 735 Mortgages to customers for sale, housing credit company 4 735 4 002

10 937 6 935 7 099 11 352 Total loans at fair value through profit and loss 11 352 7 099 6 935 10 937

Loans at amortized cost

7 173 7 173 6 685 6 105 Loans to credit institutions 1 331 2 513 2 748 2 748

58 728 62 730 61 482 62 333 Other loans to customers 68 236 66 372 68 068 64 066

- 613 - 580 - 612 - 468 Total loan loss provisions - 517 - 586 - 608 - 659

65 288 69 323 67 555 67 970 Total loans at amortizes cost 69 050 68 299 70 208 66 155

76 225 76 258 74 654 79 322 Total loans 80 402 75 398 77 143 77 092

Group

31.12.17 31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17 31.12.17

(01.01.18) (01.01.18)

IFRS 9 IAS 39 IAS 39 IFRS 9 IFRS 9 IAS 39 IAS 39 IFRS 9

10 306 10 306 9 026 11 001 Real estate 11 100 8 920 10 234 10 234

1 605 1 605 1 467 1 693 Finanicial and insurance activities 1 603 1 444 1 607 1 607

3 870 3 870 3 411 3 771 Fishing and aquaculture 4 144 3 754 4 205 4 205

1 713 1 713 1 772 2 084 Manufacturing 2 388 2 026 1 960 1 960

1 089 1 089 1 025 1 091 Agriculture and forestry 1 195 1 124 1 185 1 185

1 330 1 330 1 458 1 710 Power and water supply and construction 2 364 2 050 1 951 1 951

1 489 1 489 1 393 1 621 Service industries 2 330 1 991 2 080 2 080

3 313 3 313 3 399 3 262 Transportation 4 132 4 128 4 132 4 132

1 429 1 429 1 338 1 486 Commodity trade, hotel and restaurant industry 1 892 1 611 1 809 1 809

26 144 26 144 24 289 27 719 Public market 31 148 27 048 29 163 29 163

153 153 56 98 Total government 107 66 164 164

43 368 43 368 44 236 45 868 Total retail market 48 333 46 357 45 676 45 676

69 665 69 665 68 581 73 685 Gross lending to customers 79 588 73 471 75 003 75 003

7 173 7 173 6 685 6 105 Net loans and advances to credit institutions 1 331 2 513 2 748 2 748

76 838 76 838 75 266 79 790 Gross lending 80 919 75 984 77 751 77 751

- 309 - 309 - 211 - 121 Individual write-downs as reduction of assets - 120 - 166 - 308 - 308

- 304 - 271 - 401 - 347 Collective write-downs for impaired value as reduction of

assets

- 397 - 420 - 300 - 351

76 225 76 258 74 654 79 322 Net loans 80 402 75 398 77 143 77 092

30 482 30 482 26 465 30 885 Loans transfered to SpareBank 1 Boligkreditt 30 885 26 465 30 482 30 482

0 0 0 415 Loans transfered to SpareBank 1 Næringskreditt 415 0 0 0

30 482 30 482 26 465 31 300 Gross commission loans 31 300 26 465 30 482 30 482

100 147 100 147 95 046 104 985Gross lending and advances to customers incl.

commission loans 110 888 99 936 105 485 105 485

Group

Stage 1 Stage 2 Stage 3 Total Total Stage 3 Stage 2 Stage 1

62 022 2 814 1 065 65 901 Gross lending to amortized cost 01.01.18 66 814 1 024 3 340 62 450

Changes in the period due to loans migrated between the stages:

-1 364 1 352 12 to (-from) stage 1 14 1 227 -1 241

803 - 823 20 to (-from) stage 2 21 - 644 623

167 362 - 529 to (-from) stage 3 - 530 362 168

1 973 1 269 - 705 2 537 Net increas (-reduction) eksisting lending 2 753 - 632 1 271 2 114

63 995 4 083 360 68 438 Net lending to amortized 30.06.18 69 567 392 4 611 64 564

11 352 Lending at fair value 11 352

63 995 4 083 360 79 790 Gross lending 30.06.18 80 919 392 4 611 64 564

(Amounts in NOK million)

Parent Bank

Fixed-rate loans

The margin requirement includes credit markup, administrative markup, anticipated loss, and a liquidity premium.

The bank considers on a continual basis changes in observable market rates that can affect the value of these loans.

There is also a continuous assessment of possible differences between discount rates

and observable market rates for similar loans. The Bank makes appropriate adjustments to the discount rate, if this difference becomes significant.

Value changes on loans are included in full in the result of the line - net value changes on financial assets.

Actual value is determined by the loans’ actual cash flows discounted by a discounting factor based on the swap rate, with the addition of a margin requirement.

Note 6 - Loans

Parent Bank

Mortgages for sale to housing credit companies

Mortgages to be sold to mortgage credit companies over the next 12 months are valued at the agreed value at which these loans are to be assigned.

For all loans at amortized cost there has been calculated expected losses and provisions according to IFRS 9. See note 7.

Loans at amortized cost

Loans broken down by sector and industry

(Amounts in NOK million)

Loans broken down by sector and industry

(Amounts in NOK million)

Parent Bank

IFRS 9 classificated loans

Loans at fair value through profit and loss

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Group

Stage 1 Stage 2 Stage 3 Total Changes to loan loss provisions on loans to amortized cost Total Stage 3 Stage 2 Stage 1

- 583 - 583 Loss provisions on balance sheet 31.12.17 - 611 - 611- 580 - Of which presented as a reduction of the assets - 608

- 3 - Of which presented as other debt - 3

- 149 - 100 216 - 33 Implementation effect 01.01.18 - 51 243 - 127 - 167- 149 - 100 - 367 - 616 Loss provisions on balance sheet 01.01.18 - 662 - 368 - 127 - 167

- 582 - Of which presented as a reduction of the assets- 34 - Of which presented as other debt

Changes in the period due to loans migrated between the stages: to (-from) stage 1

- 26 25 1 to (-from) stage 2 1 24 - 25 7 - 9 2 to (-from) stage 3 2 - 2

25 61 - 86 - 86 61 25- 27 - 86 223 110 New and increased loss provisions 107 241 - 94 - 40

11 Reversed individual loss provisions 17- 11 Actual loss for the period on loans with prior loss provisions - 17

Other changes- 176 - 186 - 144 - 506 Loss provisions on balance sheet 30.06.18 - 555 - 127 - 221 - 207

- 468 - Of which presented as a reduction of the assets - 517- 38 - Of which presented as other debt - 38

Parent Bank

Stage 2: Expected losses over the loan’s term to maturity due to increased credit risk without a loss eventStage 3: Expected losses over the loan's term to maturity due to increased credit risk with a loss event

Loss provisions for the loans posted on the balance sheet are presented as a reduction of the asset, and provisions for losses on assets not posted on the balance sheetappear on the line other debt.

(Amounts in NOK million)

Stage 1: Expected credit losses next 12 months

2. Substantial increase in credit risk since granting, but no objective proof of losses3. Substantial increase in credit risk since granting, and objective proof of losses

In stage 1, provision for losses is the expected loss for the next 12 months. In stages 2 and 3, provisions for losses are expected loss over the asset’s lifetime.

SpareBank 1 Nord-Norge uses a model developed in cooperation with the other banks in the SpareBank 1 Alliance. In the model the following are used PD (probability of default) is used to categorize the assets in the different steps. In addition, LGD (loss given default) is used to calculate expected credit losses. Unlike the capital coverage models, the model for loss provisions is a "point-in-time" model and expectations are based on one point in time. Estimates of expected credit losses in the capital coverage models are seen from a downturn perspective on the basis of a downturn scenario.

Provisions for losses also include expected losses on assets not posted to the balance sheet; guarantees, untapped credit frames, and granted, but not paid out, loans.

Specification of write-downs:

1. Not significantly higher credit risk than on granting

Note 7 - Loss provisionThe general rule of IFRS 9 is that the loss provision should be calculated as expected credit losses (ECL) over the next 12 months, or as expected credit losses over the entire lifetime of thIf the credit risk has not increased significantly since the first time calculation, the provision for losses is calculated as expected credit losses over the next 12 months. Expectedted credit losses over the entire lifetime are calculated for assets where the credit risk has increased substantially since the first time calculation, except for assets still considered to have low absolute credit risk at the time of reporting.

The calculation of the expected credit loss is based on an objective and probability-weighted analysis of alternative outcomes, where the time value is also taken into account. The analysis is based on relevant information that is available at the time of reporting, without undue cost or effort. The expected credit losses are defined as a weighted average of credit losses, where the weights are the respective risks of defaults occurring.

In order to calculate the expected credit losses according to this, the asset must first be categorized into one of three so-called "buckets" or stags;

22/38

31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17- 9 56 0 Periodens endring i nedskrivninger for forventet tap 2 62 - 11 34 12 11 Konstaterte tap 17 14 61- 9 - 7 - 3 Recoveries, previously confirmed losses - 3 - 7 - 10 16 61 8 Losses on loans to customers 16 69 40 30 0 20 Other losses 20 19 144 46 61 28 Total losses 36 88 184

31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17 3 8 - 12 Real estate - 12 8 3 5 2 - 2 Finanicial and insurance activities - 2 2 5

- 26 - 18 10 Fishing and aquaculture 11 - 18 - 26- 10 43 - 8 Manufacturing - 8 43 - 10

2 2 1 Agriculture and forestry 2 2 2 1 1 7 Power and water supply and construction 9 2 6

- 5 2 4 Service industries 5 4 1 21 8 2 Transportation 2 7 21

1 0 2 Commodity trade, hotel and restaurant industry 3 0 1- 8 48 4 Sum tap bedrifsmarkedet 10 50 3 24 13 4 Sum tap personmarkedet 6 19 37 16 61 8 Losses on loans to customers 16 69 40 30 0 20 Other losses 20 19 144 46 61 28 Total losses 36 88 184

31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17

353 336 186 Non-performing commitments 218 368 380 713 324 174 Other doubtful commitments 174 255 644

1 066 660 360 Total commitments in default and doubtful commitments 392 623 1 024

- 63 - 128 - 56 Individual write-downs on non performing commitments - 55 - 144 - 153- 157 - 78 - 68 Other doubtful individual write-downs - 68 - 78 - 158- 271 - 386 - 382 Collective write-downs for impaired value - 432 - 402 - 300- 491 - 592 - 506 Total write-downs loans and guarantees - 555 - 624 - 611

575 68 - 146 Net commitments in default and doubtful commitments - 163 - 1 413

46 % 90 % 141 % Loan loss provision ratio 142 % 100 % 60 %

Note 8 - Losses

Losses broken down by sector and industry

Losses incorporated in the accounts(Amounts in NOK million)

Parent Bank Group

Parent Bank Group

(Amounts in NOK million)Parent Bank Group

Note 9 -Net bad and doubtful commitments(Amounts in NOK million)

23/38

Note 10 - SpareBank 1 Boligkreditt and SpareBank 1 NæringskredittNote 10 - SpareBank 1 Boligkreditt and SpareBank 1 NæringskredittSpareBank 1 Nord-Norge has agreed, together with the other shareholders of SpareBank 1 Boligkreditt and Sparebank1 Næringskreditt, to provide a liquidity facility to the companies’. This involves the banks committing themselves to buying residential mortgage bonds and/or commercial mortgages bonds with a maximum net value of the companies debt maturing over the next twelve months. The agreementmeans that each shareholder has principal responsibility for his share of the requirement, and secondary responsibility for double the value of his principal responsibility. The bonds can be deposited with Norges Bank, which means that they do not significantly increase the Bank's risk exposure.

This obligation is, as of 30.06.2018, NOK 7,4 million.

The bank has concluded agreements concerning the sale of loans with good security and collateral in real estate to SpareBank 1 Boligkreditt AS and SpareBank 1 Næringskreditt AS. For more information about the accounting treatment of the agreements see note 2 and note 13 to the annual financial statements.

24/38

Note 11 - Financial derivativesParent Bank and Group(Amounts in NOK million)

Fair value hedging transactions 30.06.18 30.06.17 31.12.17Net loss charged to the statement of comprehensive income in respect of hedging instruments in connection with actual value - 54 21 30Total gain from hedging objects relating to the hedged risk 55 -28 - 44Total fair value hedging transactions 1 -7 - 14

(Amounts in NOK million)Fair value through statement of comprehensive income 30.06.18 30.06.17 31.12.17

Fair value Fair value Fair valueForeign currency instruments Contract Assets Liabilites Contract Assets Liabilites Contract Assets LiabilitesForeign exchange financial derivatives (forwards) 2 076 9 23 1 702 33 8 1 630 28 11Currency swaps 20 770 186 174 14 684 266 96 16 497 357 128Currency options Total non-standardised contracts 22 846 195 197 16 386 299 104 18 127 385 139Standardised foreign currency contracts (futures) Total foreign currency instruments 22 846 195 197 16 386 299 104 18 127 385 139

Interest rate instruments Interest rate swaps (including cross currency) 25 412 497 556 24 919 735 778 24 757 675 746Short,-term interest rate swaps (FRA) Other interest rate contracts 116 5 5 413 36 47 353 8 9Total non-standardised contracts 25 528 502 561 25 332 771 825 25 110 683 755Standardised interest rate contracts (futures) Total interest rate instruments 25 528 502 561 25 332 771 825 25 110 683 755

Hedging of funding loans

Foreign currency instruments Foreign exchange financial derivatives (forwards) Currency swaps Total, non-standardised contracts Standardised foreign currency contracts (futures) Total foreign currency instruments

Interest rate instruments Interest rate swaps (including cross currency) 15 555 375 1 13 899 459 11 14 816 443 8Short-term interest rate swaps (FRA) Other interest rate contracts Total, non-standardised contracts 15 555 375 1 13 899 459 11 14 816 443 8Standardised interest rate contracts (futures) Total interest rate instruments 15 555 375 1 13 899 459 11 14 816 443 8

Total interest rate instruments 41 083 877 562 39 231 1 230 836 39 926 1 126 763Total foreign currency instruments 22 846 195 197 16 386 299 104 18 127 385 139Total 63 929 1 072 759 55 617 1 529 940 58 053 1 511 902

The Bank's main Board of Directors has determined limits for maximum risk for the Bank's interest rate positions. Routines have been established to ensure that positions are maintained within these limits.

Interest rate swaps: Commitments to exchange one set of cash flow for another over an agreed period. Foreign exchange derivatives:Agreements to buy or sell a fixed amount of currency at an agreed future date at a rate of exchange which has been agreed in advanceCurrency swaps:Agreements relating to the swapping of currency- and interest rate terms and conditions, periods and amounts having been agreed in advance.Interest rate- and currency swap agreements:Agreements involving the swapping of currency- and interest rate terms and conditions, periods and amounts having been agreed in advance. Options:Agreements where the seller gives the buyer a right, but not an obligation to either sell or buy a financial instrument or currency at an agreed date or before, and at an agreed amount.

SpareBank 1 Nord-Norge enters into hedging contracts with respected Norwegian and foreign banks in order to reduce its own risk. Financial derivatives transactions are related to ordinary banking operations and are done in order to reduce the risk relating to the Bank’s activity in the financial markets, and in order to cover and reduce risk relating to customer-related activities.

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Category/counterpart Gross Offset Net Net amount Netamount amount amount to be posted at credit

bankruptcy or exposure(Amounts in NOK million) default

A B C=A+B D E=C-D

Financial derivatives - assets 23 682 23 434 248 0 248Financial derivatives - liabilities 21 621 21 352 269 0 269

Note 13 - Liquidity risk

Note 12 - Net accounting of financial derivates and related set-off agreements

At 30.06.18 the net figures were:

Liquidity risk is the risk that the Bank will be unable to meet its payment obligations,and/or the risk of not being able to fund a desired growth in assets. SpareBank 1 Nord-Norge prepares an annual liquidity strategy that encompasses, for example, the bank's liquidity risk. The Group's liquidity risk is revealed, except in the case of raising external financing, through the Bank's liquidity reserve/buffer,including sale of mortgage loans to SpareBank 1 Boligkreditt.

The Bank proactively manages the Group's liquidity risk on a daily basis. SpareBank 1 Nord-Norge must also comply with the regulatory minimum requirements for prudent liquidity management at all times.

The average remaining term to maturity for the Bank's debt securities in issue was 3.39 years as of 30 Jun 2018.The short-term liquidity risk measurement, liquidity coverage ratio (LCR), was 130 % as of the end of the quarter.

Financial derivatives are presented as gross on the balance sheet. As a result of ISDA agreements that have been entered intowith contracting parties with regard to financial derivatives transactions, set-off rights are obtained if the contracting partydefaults on the cash flow.

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2018 2017 2017

2Q 2Q 4Q

Assumptions

Discount rate 2.40 % 2.60 % 2.40 %

Expected return on pension assets 2.40 % 2.60 % 2.40 %

Future salary growth rate 1.00 % 1.50 % 1.00 %

Adjustment of NI basic amount (G) 2.25 % 2.25 % 2.25 %

Pension adjustment 0.00 % 0.00 % 0.00 %

Employer's NI liability 14.10 % 14.10 % 14.10 %

Employer's NI cost 14.10 % 14.10 % 14.10 %

Financial tax 5.00 % 5.00 % 5.00 %

Voluntary leaving over 50 years old 0.00 % 0.00 % 0.00 %

Voluntary leaving up to 50 years old 0.00 % 0.00 % 0.00 %

Expected statutory early retirement pension (AFP) acceptance from age 62 50.00 % 50.0 % 50.0 %

Mortality, marriage probability, etc.K2013BE IR2003 K2013BE IR2003 K2013BE IR2003

Net pension liabilities in the balance sheet

Present value of future pension liabilities 738 747 738

Estimated value of pension assets 994 910 994

Net pension liabilities in fund-based plans -256 -163 -256

Unrecognised estimate deviations (possible actuarial gains and losses) 0 0 0

Employer's NI contributions 0 0 0

Net pension liabilities/assets in the balance sheet - 256 - 163 - 256

Pension costs for the period

Accrued defined benefit-based pensions 1 2 7

Interest costs on pension liabilities 4 5 18

Expected return on pension assets -5 -5 -22

Estimate deviations recognised in the period 0 0 0

Effect of changed pension plan 0 0 0

Net defined benefit-based pension costs without employer's NI contributions 0 2 3

Accrued employer's NI contributions 0 0 1

Net defined benefit-based pension costs recognised through profit or loss 0 2 4

Curtailment/settlement 0 0 -5

Other pension costs (contribution pension scheme and early retirement pension) 15 16 33

Total pension costs including employer's NI Insurance contribution 15 18 32

Movement in net pension liabilities from benefit-based plan recognised in balance sheet

Net pension liabilities in the balance sheet as of 01.01 -256 -163 -163

Correction against equity OB 0 6 -16

Correction against equity CB 0 0 -57

Net defined benefit-based pension costs recognised through profit or loss 1 2 1

Curtailment/settlement 0 0 0

Paid directly from operations -1 -1 -2

Receipts - pension premiums defined benefit-based plans -10 0 -19

Net pension liabilities/assets in the balance sheet -266 -156 -256

Other pension liabilities (early retirement pensions) 32 32 33

Note 14 Pensions

The SpareBank 1 Nord-Norge Group has two types of pension agreements for its employees:defined benefit-based and defined contribution-

based plans.

The plans are described in more detail in the note 25 to the annual financial statements.

The following assumptions were made for defined benefit-based plans:

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Group

(Amounts in NOK million) Level 1 Level 2 Level 3 TotalAssets 30.06.18Loans to customers with fixed rate 6 617 6 617Loans to customers for sale 4 735 4 735Shares 107 79 217 403Bonds 9 004 5 151 14 155Financial derivatives 1 072 1 072Total assets 9 111 6 302 11 569 26 982

Liabilities as of 30.06.18Financial derivatives 759 759Total liabilities 759 759

Assets 30.06.17Loans to customers with fixed rate 7 099 7 099Shares 112 92 204Bonds 7 551 4 854 12 405Financial derivatives 1 529 1 529Total assets 7 663 6 383 7 191 21 237

Liabilities as of 30.06.17Financial derivatives 940 940Total liabilities 940 940

Note 15 Classification of financial instruments stated at fair value

Changes in instruments at fair value, level 3:

(Amounts in NOK million) Fixed-rate loans Shares BondsCarrying amount as of 30.06.17 7 099 92 0Net gains on financial instruments - 69Additions/acquisitions 1 741 125Disposals -2 154Transferred from level 1 or level 2Carrying amount as of 30.06.18 6 617 217 0 0 0

Financial liabilities

Financial derivativesFinancial

derivatives

Financial assets

Financial instruments at fair value are classified at different levels:

Level 1 covers financial instruments that are valued using listed prices in active markets for identical assets and liabilities. This level includes listed equities, units, commercial paper and bonds that are traded in active markets.

Level 2 covers instruments that are valued using information that is not listed prices, butwhere prices are directly or indirectly observable for assets and liabilities, and which also include listed prices in inactive markets. This level includes instruments for which Reuters or Bloomberg publish prices.

Level 3 covers instruments that are valued in manner other than on the basis of observable market data.This includes instruments in which credit margins constitute a material part of the basis for adjusting market value.

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Note 16 - Subsidiaries(Amounts in NOK 1 000)

EquityShare of Eq.% 30.06.18 30.06.17 31.12.17 30.06.18 30.06.17 31.12.17

SpareBank 1 Finans Nord-Norge AS 100 77 966 51 412 7 002 1043 835 803 163 857 035SpareBank 1 Nord-Norge Portefølje AS 100 - 554 - 549 -1 470 12 797 -11 257 13 117EiendomsMegler 1 Nord-Norge AS 100 13 775 10 819 18 118 53 688 35 403 43 356SpareBank 1 Nord-Norge Forvaltning ASA 0 0 1 656 1 656 0 0 0SpareBank 1 Regnskapshuset Nord-Norge AS 100 16 716 13 443 16 321 48 441 33 432 35 731Nord-Norge Eiendom IV AS 0 - 123 - 559 - 876 0 4 137 3 765Alsgården AS 0 398 243 - 635 0 8 335 7 698Fredrik Langesg 20 AS 100 - 113 - 229 - 665 27 274 7 885 27 554Total 108 065 76 236 39 451 1186 035 881 098 988 256

Profit from ordinary operations befor tax

Parent Bank Group31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17

10 10 8 Repossessed assets 28 125 29 5 2 4 Accrued income 56 74 65

288 285 532 Prepayments 540 278 292 196 82 166 Other assets 339 173 254 499 379 710 Total other assets 963 650 640

Parent Bank Group31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17

20 175 447 Costs incurred 722 381 237 3 3 37 Provisioning against incurred liabilities and costs 70 24 29

796 777 899 Other liabilities 946 806 827 819 955 1 383 Total other liabilities 1 738 1 211 1 093

3 3 38 1) Of which off balance loss provision 38 3 3

Note 17 - Other assets(Amounts in NOK million)

Note 18 - Other liabilities(Amounts in NOK million)

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Parent Bank Group31.12.17 30.06.17 30.06.18 30.06.18 30.06.17 31.12.17

2 753 3 205 3 301 Real estate 3 301 3 205 2 7531 123 962 1 222 Finanicial and insurance activities 1 222 962 1 1231 595 1 647 1 874 Fishing and aquaculture 1 874 1 647 1 5951 002 548 1 076 Manufacturing 1 076 548 1 002

489 518 529 Agriculture and forestry 529 518 4891 721 1 564 1 718 Power and water supply and construction 1 718 1 564 1 7214 499 4 401 4 717 Service industries 4 703 4 373 4 4651 716 1 630 1 780 Transportation 1 780 1 630 1 7161 724 1 660 2 734 Commodity trade, hotel and restaurant industry 2 734 1 660 1 724

16 622 16 135 18 951 Public market 18 937 16 107 16 58832 304 32 952 35 326 Total retail market 35 326 32 952 32 304

8 957 9 575 9 510 Total government 9 510 9 575 8 95757 883 58 662 63 787 Total deposits 63 773 58 634 57 849

(Amounts in NOK million)

Note 19 - Deposits broken down by sector and industry

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Parent Bank and Group(Amounts in NOK million)

Securities issued31.12.17 30.06.17 30.06.18

Certificates and other short-term borrowings Bond debt 23 553 21 737 24 086Total debt securities in issue 23 553 21 737 24 086

Changes in securities issued

Statement of financial position Issued

Matured/redeemed

Exchange rate

movementsOther

adjustments

Statement of financial position

31.12.17 30.06.18 30.06.18 30.06.18 30.06.18 30.06.18Certificates and other short-term borrowings Bond debt 23 553 2 694 -1 690 - 415 - 56 24 086Total debt securities issued 23 553 2 694 -1 690 - 415 - 56 24 086

Subordinated loan capital and hybrid Tier 1 instruments31.12.17 30.06.17 30.06.18

Hybrid Tier 1 instruments2099 3 mnd Nibor + 4,75 (Call opsjon 19.12.2017) Total hybrid Tier 1 instruments

Subordinated loan capitalSubordinated loan capital with definite maturities 850 850 850Total subordinated loan capital 850 850 850

Total subordinated loan capital and hybrid Tier 1 instruments 850 850 850

Changes in subordinated loan capital and hybrid Tier 1 instrumentsStatement of

financial IssuedMatured/

redeemedExchange

rate Other

adjustmentsStatement of

financial 31.12.17 30.06.18 30.06.18 30.06.18 30.06.18 30.06.18

Subordinated loan capital with definite maturities 850 850

Hybrid Tier 1 instruments Total subordinated loan capital and hybrid Tier 1 instruments 850 850

Hybrid Tier 1 instruments

Note 20 - Securities issued and subordinated loan capital

SpareBank 1 Nord-Norge has two outstanding perpetual hybrid tier 1 capital loans for NOK 350 million and NOK 180 million, respectively. One loan issued on 4 April 2017 for NOK 350 million is subject to interest of 3-month NIBOR + 330 bp.The second loan issued on 10 October 2017 for NOK 180 million is subject to interest of 3-month NIBOR + 315 bp. Both loans are classified as equity and presented on the line tier 1 capital instruments under equity. This means that the interest is not presented on the line for interest costs but is recognised directly against equity. The contract terms for both hybrid tier 1 capital loans mean that the loans are included in the Bank's tier 1 capital for capital adequacy purposes.

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Note 21 - Equity Certificates (ECs)The 20 largest EC holders as at 30.06.18

Number Share of EC Holders of ECs EC CapitalPARETO AKSJE NORGE 3 053 156 3.04%STATE STREET BANK AND TRUST COMP A/C CLIENT OMNIBUS F 2 977 898 2.97%THE NORTHERN TRUST COMP, LONDON BR NON-TREATY ACCOUNT 2 883 711 2.87%MP PENSJON PK 2 697 811 2.69%GEVERAN TRADING CO LTD 2 693 280 2.68%FLPS - PRINC ALL SEC STOCK SUB 2 320 163 2.31%METEVA AS 1 614 670 1.61%VPF EIKA EGENKAPITALBEVIS C/O EIKA KAPITALFORVALTNING AS 1 545 176 1.54%MORGAN STANLEY AND CO INTL PLC BNY MELLON SA/NV 1 512 747 1.51%SPAREBANKSTIFTELSEN SPAREBANK 1 NORD-NORGE 1 411 606 1.41%FORSVARETS PERSONELLSERVICE 1 391 630 1.39%J.P. MORGAN SECURITIES PLC 1 343 769 1.34%LANDKREDITT UTBYTTE 1 250 000 1.25%EUROCLEAR BANK S.A./N.V. 25% CLIENTS 1 239 855 1.23%STATE STREET BANK AND TRUST COMP A/C CLIENT OMNIBUS D 1 001 205 1.00%LANNEBO EUROPA SMÅBOLAG SKANDINAVISKA ENSKILDA BANKEN AB 985 377 0.98%PARETO AS 970 659 0.97%STATE STREET BANK AND TRUST COMP A/C WEST NON-TREATY ACCOUNT 874 982 0.87%SEB EUROPAFOND SMÅBOLAG SKANDINAVISKA ENSKILDA BANKEN AB 781 284 0.78%EIKA SPAR C/O EIKA KAPITALFORVALTNING AS 621 781 0.62%TOTAL 33 170 760 33.04%

Dividend policy

The Bank's dividend policy states that the Bank aims to provide a competitive direct return for the Bank's owners. The targetdividend rate is at minimum 50%. The future distribution rate will also take into account the group's capital coverage and future growth.

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Trading statistics

Price trend NONG

Note 23 - Events occurring after the end of the quarter

30

35

40

45

50

55

60

65

70

75

jan.17 feb.17 mar.17 apr.17 may.17 jun.17 jul.17 aug.17 sep.17 oct.17 nov.17 dec.17 jan.18 feb.18 mar.18 apr.18 may 18 jun.18

NOK

0

500.000

000.000

500.000

000.000

500.000

000.000

500.000

000.000

500.000

000.000

jan.17 feb.17 mar.17 apr.17 may.17 jun.17 jul.17 aug.17 sep.17 oct.17 nov.17 dec.17 jan.18 feb.18 mar.18 apr.18 may.18 jun.18

4.59

3.21

4

4.03

8.01

4

3.62

8.25

9

2.23

8.20

4

2.30

0.19

0 2.70

4.72

2

1.33

0.63

8

4.64

5.91

3

2.41

4.90

7

2.70

8.56

4

2.49

8.73

4

1.75

1.67

0

3.57

1.04

7 4.07

6.95

1

4.73

0.54

4

3.28

6.48

0

3.07

2.02

3 3.43

7.67

1

Note 22 - Events occuring after the end of the quarter.

No information has come to light about important events that have occurred between the balance sheet date, and the Board'sfinal consideration of the financial statements.

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Definitions of alternative performance measures (APMs)  SpareBank 1 Nord‐Norge’s alternative performance measures (APMs), provide relevant additional information on what is otherwise shown in the quarterly financial statements. These key figures are not defined through IFRS and cannot be directly compared with equivalent figures for other companies unless the same definition is used.  The alternative performance measures are not meant to replace any measurements/key figures under IFRS, but are included to provide more insight  into the Group’s operations, and also represent important targets in management’s control of the Group’s various business areas. Key figures regulated by IFRS or other regulations, e.g. (CRR/CRD) are not defined as APMs, and the same is true of non‐financial data. The APMs are presented on a separate page in the quarterly accounts, and show comparable figures for the corresponding period last year.  Definitions of different APMs:  Return on equity This measure provides relevant information about the Group’s profitability by measuring the ability to generate a returns on the owners’ investment. Return on equity is the Group’s strategic target for profitability and is measured by taking the net profit for the period in relation to average equity. Profit for the period is annualised through the year. Income is also adjusted for interest rate charges on tier 1 capital instruments classified as equity because they are not recognised through the income statement but directly against equity.  Average equity is calculated per the end of each quarter, along with opening and closing balances for the year. Average equity also excludes tier 1 capital instruments  Cost ratio Total costs in relation to total income. The cost ratio is included to provide accounting users with information on developments in this ratio.  Interest margin Net interest income in relation to average total assets. The interest margin shows the trend in the ratio between the sale price of products and lending costs from period to period. Average total assets are calculated per the end of each quarter, along with opening and closing balances.  Deposit‐to‐loan ratio including intermediary loans The ratio shows how much of the Group’s total lending including intermediary loans has been funded from its own customers’ deposits. It also shows how much of the Group’s total funding needs to be borrowed from external lenders. Total deposits are divided by total lending including intermediary loans.    

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  Deposit‐to‐loan ratio    The ratio shows how much of the Group’s total lending has been funded from its own customers’ deposits. It also shows how much of the Group’s total funding needs to be borrowed from external lenders. Total deposits divided by total lending.  Growth in lending to customers incl. intermediary loans (%) Growth in lending incl. intermediary loans tells us something about the Bank’s growth and also something about changes in market share. The growth is measured quarterly against the corresponding period 12 months ago.  Growth in lending to customers (%) Growth in lending tells us something about the Bank’s growth and also something about changes in market share. The growth is measured quarterly against the corresponding period 12 months ago.  Proportion of loans deducted in relation to gross lending Shows how much of the lending volume is deducted from our own balance sheet  Proportion of loans deducted in relation to gross lending to the retail market Shows how much of the lending volume to the retail market is deducted from our own balance sheet  Growth in deposits in last 12 months    The growth in deposits says something about changes in market share. The growth is measured quarterly against the corresponding period 12 months ago.  Loan losses compared to gross lending Total posted losses year to date in relation to total lending volume incl. intermediary loans.  Non‐performing commitments as a % of gross lending incl. intermediary loans Shows the percentage of non‐performing commitments (over 90 days) in relation to total lending volume incl. intermediary loans  Impaired commitments as a % of gross lending incl. intermediary loans    Shows the percentage of impaired commitments in relation to total lending volume incl. intermediary loans  Net non‐performing and impaired commitments as a % of gross lending incl. intermediary loans    Shows net non‐performing and impaired commitments taking account of loss provisions in relation to total lending volume incl. intermediary loans     

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Loss provision ratio    Shows the relationship between total loss provisions and non‐performing and impaired commitments.  Equity per equity certificate The equity is made up of part owned by equity certificate holders and part pwned by the community. The portion owned by the community is deducted from total equity. The remainder is owned equity certificate holders.  This equity is divided by the number of equity certificate holders. 

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APM (Alternative Performance Measures) Group

(Amounts in NOK million) 30.06.18 30.06.17 31.12.17Profit for the period 773 669 1 440Deduct interest hybrid capital 6 4 10Profit for the period excl. Interest hybrid capital 767 665 1 430

Total Equity 12 113 11 281 12 299Deduct hybrid capital 530 350 530Equity excl hybrid capital 11 583 10 931 11 769

Equity excl. hybrid capital 01.01. 11 769 11 011 11 011Equity excl. hybrid capital 31.03. 11 148 10 576 10 576Equity excl. hybrid capital 30.06. 11 583 10 931 10 931Equity excl. hybrid capital 30.09. 11 272Equity excl. hybrid capital 31.12. 11 769Average equity excl. hybrid capital 11 500 10 839 11 112

Profit for the period, annualised excl. Interest hybrid capital 1 534 1 330 1 430Average equity excl. Hybrid capital 11 500 10 839 11 112Return on Equity 13.3 % 12.3 % 12.9 %

Total operating expenses 714 651 1 366Total income 1 703 1 570 3 314Cost-income ratio 41.9 % 41.5 % 41.2 %

Net interest income 916 859 1 770Net interest income, annualised 1 832 1 718 1 770Average total assets 99 816 92 933 93 905Interest margin 1.84 % 1.85 % 1.88 %

Deposits from customers 63 773 58 634 57 849Gross loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt end of period 110 888 99 936 105 485Deposits as a percentage of gross lending including commission loans 57.5 % 58.7 % 54.8 %

Deposits from customers 63 773 58 634 57 849Gross loans to customers 79 071 73 471 75 003Deposits as a percentage of gross lending 80.7 % 79.8 % 77.1 %

Gross loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt end of period 110 888 99 936 105 485Gross lending and advances to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt, end of same period last year 99 936 91 497 96 287Growth in loans last 12 months incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 10 952 8 439 9 198Growth in loans and advances to cust. incl. commision loans past 12 months 11.0 % 9.2 % 9.6 %

Gross loans to customers end of period 79 588 73 471 75 003Gross loans to customers, end of same period last year 73 471 67 861 70 736Growth in loans (gross) last 12 months 6 117 5 610 4 267Growth in loans and advances to customers past 12 months 8.3 % 8.3 % 6.0 %

Loans transfered to SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 31 300 26 465 30 482Gross loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt end of period 110 888 99 936 105 485Share total lending transfered to SpareBank 1 Boligkreditt of total loans 28 % 26 % 29 %

Loans transfered to SpareBank 1 Boligkreditt 30 510 26 465 30 482Gross retail loans end of period 78 843 72 822 76 158Share total lending transfered to Sparebank 1 Boligkreditt of total retail loans 39 % 36 % 40 %

Deposits from customers end of period 63 773 58 634 57 849Deposits from customers end of same period last year 58 634 55 666 53 870Growth in deposits from customers past 12 months 5 139 2 968 3 979Growth in deposits from customers past 12 months 8.8 % 5.3 % 7.4 %

Losses on loans and guarantees 36 88 184Losses on loans and guarantees, annualised 72 176 184Gross Loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 110 888 99 936 105 485Losses on loans to customers as a percentage of gross loans incl. commission loans 0.1 % 0.2 % 0.2 %

Non-performing commitments 218 368 380Gross Loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 110 888 99 936 105 485Commitments in default as a percentage of gross loans incl. commission loans 0.2 % 0.4 % 0.4 %

Other doubtful commitments 174 255 644Gross Loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 110 888 99 936 105 485Commitments at risk of loss as a percentage of gross loans incl. commission loans 0.2 % 0.3 % 0.6 %

Non-performing commitments 218 368 380Other doubtful commitments 174 255 644Individual loss provisions 120 222 311Net commitments in default 272 401 713Gross loans to customers incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 110 888 99 936 105 485Net comm. in default and at risk of loss as a per. of gross loans incl. commission loans 0.25 % 0.40 % 0.68 %

Non-performing commitments 218 368 380Other doubtful commitments 174 255 644Commitments in default 392 623 1 024Individual loss provisions 120 222 311Loan loss provision ratio 31 % 36 % 30 %

Equity excl hybrid capital 11 583 10 576 11 769Deduct Savings Bank's reserve 4 757 4 460 5 235Deduct Savings Bank's reserve share of Unrealised gains reserve (Total multiplied by ECC Ratio) 20 11 20Deduct Savings Bank's reserve share of Other Equity (Total multiplied by ECC Ratio) 1 202 1 202 1 058Equity Capital Certificate holder's share of Equity 5 604 4 903 5 456Divided by number of Equity Certificates Issued 100.4 100.4 100.4 Booked equity capital per ECC 53.49 48.84 54.34

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The SpareBank 1 Nord‐Norge Group – a Statement from the Board of Directors and Chief Executive Officer   Today the Board of Directors and the Chief Executive Officer have considered and adopted the semi‐annual report and the consolidated semi‐annual financial statements of SpareBank 1 Nord‐Norge for the period from 1 January to 30 Jun 2018.  We confirm to the best of our knowledge that the semi‐annual financial statements for the period from 1  January  to  30  Jun  2018  have  been  prepared  in  accordance  with  current  applicable  accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the group taken as a whole.  We also confirm that the semi‐annual report gives a true and fair view of important  events  during  the  accounting  period  and  their  influence  on  the  semi‐annual  financial statements,  the most  important  elements  of  risk  and  uncertainty  that  the  group  faces  in  the  next accounting period, and a description of related parties' material transactions.                                                    Tromso, 07.08.17               The Board of Directors of SpareBank 1 Nord‐Norge   Karl Eirik Schjøtt‐Pedersen    Hans Tore Bjerkås      Ingvild Myhre (Chairman)        (Deputy Chairman)   Kjersti Terese Stormo     Greger Mannsverk      Bengt Olsen      Sonja Djønne                   Vivi Ann Pedersen      Kjetil Berntsen           (employee representative)    (employee representative)                                                                                                                 Jan‐Frode Janson                                                             (Chief Executive Officer)  

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