Annual report 2024

Credit in old Norway was about friendship, acquaintance and kinship. When the savings banks emerged in full force in the early 19^th century, fifty years before commercial banks, they had an educational role, encouraging people to save for greater financial security in times of illness and old age. The savings banks also played a central role in the self-governance and financing of local communities. Over time, the savings banks evolved into professional intermediaries of credit, helping to create a society where more people could finance investments in agriculture, industry, trade, and shipping. This opportunity to finance loans became a momentum in building the modern Norway.

Sparebanken Sør celebrated 200 eventful years in 2024. The Bank’s history is long and filled with transitions, mergers, crises, and economic upswings. Its earliest roots trace back to Christianssands Sparebank, which was founded on September 11, 1824. One hundred years later, Wilhelm Krag captured the spirit of the city's people when, in the Bank’s centennial publication, he described those who had taken the initiative to establish the Bank through an advertisement in the local newspaper of the time.

"Who had written that advertisement? What were the names listed below it? Surely, it must have been the town's most prominent citizens, only people from Christianssand inviting others to establish Christianssand Savings Bank? However, there was not a single local resident among the signatories; they were all outsiders — three from Eastern Norway and one Dane — but not a single native son of the town. This is remarkably striking, though certainly not a coincidence. It was neither the first nor the last time that outsiders dared to take the initiative and move forward, while the locals, with their inborn and deeply rooted skepticism, held back. They preferred to wait and see how things would unfold; they were so afraid of being ridiculed. Nothing was more unsettling to them than the thought of 'jumping into the sea with a top hat on’.”

— Wilhelm Krag

After Christianssands Sparebank, Arendals Sparebank followed, opening for the first time on October 1 the following year — the same day King Karl Johan laid the foundation stone for the Royal Palace in Oslo. Arendals Sparebank played an important role in building the city, financing, among other things, the old town hall and what is today Arendal Upper Secondary School.

In the mid-19^th century, Arendal was the largest shipping city in Northern Europe, and there was a lot of money to be made. This created room for speculation, and many took out loans to invest.

At the time, Axel Herlofson was one of Arendal’s largest shipowners and landowners. In 1874, he founded Arendals Privatbank, a bank where he was the manager. To secure funds, he gradually began a series of frauds and embezzlements. As his need for capital escalated, he fell into a downward spiral, borrowing money both from his own bank and other banks. In 1886, everything came to an end. Herlofsen was exposed, and the debt was colossal. Together, he and his brother had accumulated NOK 12.5 million in debt — equivalent to nearly 50,000 average annual salaries at the time. Adjusted for today’s value, this would amount to approximately NOK 25 billion.

The financial collapse was a fact and had dramatic consequences for the region. All four banks in Arendal, along with numerous businesses, declared bankruptcy. Between 1,500 and 1,700 workers in the area lost their jobs. As a result of the crisis, the Norwegian Labour Party was founded in Eydehavn, and the Banking turmoil prompted the Norwegian Parliament (Stortinget) to introduce a savings bank law and establish the Savings Banks Inspectorate, the forerunner of today’s Financial Supervisory Authority of Norway (Finanstilsynet). And Arendal Sparebank was the only bank to be refinanced.

The world, Norway, and Southern Norway have changed significantly since Christianssands Sparebank was established in 1824. Two hundred years later, Sparebanken Sør is the result of mergers between more than fifty different banks from Agder and Telemark, which over time have strengthen competitiveness, and create sustainable growth and development in local communities.

In 2024, as part of documenting the Bank’s history, Øyvind Raddum was interviewed. A newly retired banker, who started his career at Arendals Sparebank over fifty years ago — at just 19 years old. At that time, employees were recruited straight from upper secondary school and completed the Banking Academy while working at the Bank. Most banking tasks were performed manually; customer accounts were recorded on index cards, and interest was calculated by hand. During his half-century in the Banking industry, Øyvind witnessed a technological revolution: PCs became part of daily banking operations, postal giro payments were introduced in the early 1990s, online banking in 1995, and eventually, mobile banking transformed how people interact with their bank.

As Sparebanken Sør merges once again with another savings bank in 2025, it is part of a natural development. In 1959, Norway had 599 savings banks. By 1990, the number had dropped to 142. Today, the number of savings banks is around 80, but they are larger and better positioned for the future than ever before. The same applies to Sparebanken Sør!

Throughout the year, the Retail Market Division has continued to develop and strengthen its services for personal customers. With competent, authorised financial advisors in the branch network, there has been an additional demand for advice on personal finances and liquidity, which customers have appreciated. This is also reflected in the Bank's measurement of customer satisfaction through the EPSI survey (Extended Performance Satisfaction Index), where the Bank achieved its highest-ever score compared to its competitors. On the community engagement front, we are also receiving very positive feedback, with customers now expressing greater approval of the Bank’s support for teams, associations, and community development initiatives.

Lending growth in the retail market was 4.9 percent in 2024, showing a significantly positive development compared to 2023. Total lending increased by NOK 4.0 billion, reaching NOK 86.4 billion. The growth in 2024 confirms that the Bank remains attractive to customers in its market area, successfully gaining market share. Total deposits from the retail customers also increased compared to previous years, with a growth of 5.8 percent, by NOK 1.9 billion, to NOK 34.9 billion.

The competitive situation in 2024 remained relatively stable throughout the year. The Bank experiences that the value proposition we have for retail customers is very good and attracts new customers, while we have had a stable and loyal customer base. The Bank's margins on lending and deposits remained at a solid level.

By leveraging new technology, centralising tasks, standardising products and work processes, the division is becoming increasingly efficient. In addition to continuously working on delivering strong customer experience while improving operational efficiency, 2024 has also been characterised by the work to comply with more extensive regulatory requirements related to anti-money laundering (AML), terrorism financing, and data privacy. The Bank's digital solutions are perceived as more functional and user-friendly, after further enhancements to mobile banking and online banking.

The retail market continues to experience strong demand for additional products, including insurance, savings, and financing.

The total investment in the fund portfolio increased by NOK 1.5 billion in 2024, corresponding to 26.1 percent and now has an AUM (Assets under management) of NOK 7.2 billion.

Additionally, more customers started mutual fund savings agreements in 2024, corresponding to an increase of 8.3 percent in the number of customers with (one or more) savings agreements.

Throughout 2024, the Bank has strengthened its position as the commercial bank in our market areas. This applies to the acquisition of new customers, but also to an expansion of additional products and services.

Lending to corporate customers increased by NOK 1.9 billion to NOK 47.4 billion in 2024, corresponding to a growth of 4.2 percent. Total deposits from corporate customers increased by NOK 3.0 billion to NOK 39.1 billion. This corresponds to growth of 8.3 percent.

The Bank’s corporate customers represent a balanced and solid portfolio and reflects the business community in the region. In addition to representing a large part of the regional business community — including large parts of the public sector — the Bank also represents a national customer segment through its agreement with Knif. This segment includes private hospitals and healthcare institutions, schools, kindergartens, church organisations, mission organisations, and children’s and youth organisations.

For corporate customers, the Bank offers non-life insurance, personal insurance and occupational pensions through Frende Forsikring AS and Nordea Liv Forsikring AS. The Bank also provides car financing through Brage Finans AS. In recent years, collaboration with Frende and Brage has been strengthened through an increased focus on financial advisory services and close cooperation between employees in the Bank and the product companies. There has been an increased focus on advice on other products, including Brage having more advisors in our market area, and by the Bank having hired more insurance advisors during 2024. Market conditions in 2024 led many customers to hedge both interest rates and currencies through Sparebanken Sør Markets. At the same time, Sørmegleren’s expansion into commercial real estate brokerage has further strengthened collaboration between the Bank and its real estate business.

The Bank’s corporate support division serves as an important center of expertise within customer service, customer onboarding, domestic and international payments, anti-money laundering (AML), cash management, and other daily banking services. The Bank continuously develops new digital solutions, and customer support for corporate clients remains a key service.

During 2024, the Bank has maintained close cooperation with trade associations in the regions. From Lyngdal in the west to Porsgrunn in the east, there has been cooperation on business seminars with current topics. During Arendalsuka (political gathering), the Bank was the facilitator and organiser of several events. The annual Sparebanken Sør Business Award generated significant interest among the business community.

The Bank has registered that, throughout 2024, many corporate customers have been impacted by increased costs and more demanding operations. Requests for adjusted repayment schedules on loans have increased, although relatively few customers have payment problems. The Bank is committed to providing good advisory services, even in demanding times.

Throughout 2024, the division has worked systematically to develop even better services for customers. Changes have been made to the organisation to ensure improved competence development and responsibility awareness. All managers have completed a six-month leadership training program, and a pilot project has been launched to enhance industry-specific expertise and service delivery. The division has also worked actively with other parts of the Bank to improve digital user solutions for our customers.

• Established in 1824 and listed on the stock exchange since 1998
• Celebrated its 200th anniversary in 2024
• Head office in Kristiansand and additional 29 branches from Bryne to Sandefjord
• 535 full-time equivalents (FTEs) in banking operations at the end of 2024
• Subsidiary Sørmegleren is the largest real estate agency in Southern Norway
• The second-largest shareholder in Frende Forsikring, Frende Kapitalforvaltning, Brage Finans, and Norne Securities
• Total assets of NOK 177 billion
• 204,100 personal customers and 18,900 corporate customers
• Listed with equity certificates and an ownership ratio of approximately 40 percent

At the end of 2024, the Bank had 535 full-time equivalents (FTEs), with a total of 637 FTEs in the Group. The sickness absence rate for the year amounted to 4.08 percent, a decrease from the previous year, where the absence rate was 4.45 percent. Both short-term and long-term absences declined.

The Bank systematically and continuously works on sick leave follow-up, with the ambition of keeping the absence rate below 4 percent.

The Bank has also made accommodations for employees with reduced functional ability. New buildings and renovations follow the principles of universal design, ensuring that facilities are accessible to all without the need for special adaptations or assistive devices.

Continuous efforts are being made to ensure that the Bank’s employees have the necessary expertise. In addition to ongoing training in products, systems, procedures, and key areas such as anti-money laundering (AML), information security, and data privacy. For more detailed information on the Bank’s workforce, see Chapter 4.

At the turn of the year, the Bank had a total of 558 employees, consisting of 272 women and 286 men. The proportion of women in leadership positions was 39.1 percent, up from 38.6 percent the previous year. The Bank has set a target for the share of female leaders to be between 40 and 60 percent and is working systematically with various initiatives to achieve this goal. In the Bank’s governing bodies, women accounted for 42 percent of the general assembly and 50 percent of the board of directors.

The Bank has developed a dedicated policy on equality and diversity. In August 2024, the Bank was recertified for the second time in the field of equality and diversity for the period 2024–2027. The recertification process resulted in a three-year action plan with various measures to promote equality and diversity and prevent discrimination. These measures comply with the requirements set out in the Activity and Reporting Duty (ARP). The report, prepared in accordance with the Equality and Anti-Discrimination Act, is publicly available on the Bank’s website under Corporate Social Responsibility.

Sparebanken Sør has a limited direct environmental impact, as the Bank’s operations involve minimal input factors or processes that lead to pollution. However, the Bank is aware of its responsibility and annually produces a climate report to identify and reduce its environmental impact. This report includes consumption related to transport, energy use, waste, and air travel.

The greatest environmental and climate impact associated with Sparebanken Sør’s activities occurs indirectly — through financing, investments, and interactions with customers, suppliers, and partners. The Bank acknowledges its role in contributing to a sustainable transition in business and society at large.

Sparebanken Sør has joined the UN Global Compact and the UNEP Principles for Responsible Banking, thereby committing to following the precautionary principle in addressing climate and environmental challenges.

Combating financial crime, including money laundering and terrorist financing, is a core element of Sparebanken Sør’s corporate social responsibility. The Bank takes this responsibility very seriously and has established a comprehensive framework of governance documents, policies, and guidelines to ensure compliance with applicable regulations. Significant resources are invested in this work to protect customers, the financial system, and society. Based on a business-oriented risk analysis, the Bank has a risk-based approach, after which adequate measures are implemented to manage the risk to which the Bank is exposed. The risk analysis is regularly updated to ensure continuous improvement and adaptation of measures in line with new trends and threats in financial crime.

Sparebanken Sør actively participates in national networks for combating financial crime and collaborates with industry players, supervisory authorities and public bodies. The Bank experiences low barriers to experience- and knowledge-sharing across the sector, which strengthens the collective efforts against financial crime. Each year, the Bank conducts in-depth reviews of a substantial number of suspicious transactions. If suspicions cannot be disproven through internal investigations, the case is reported to Økokrim (The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) in accordance with legal requirements.

Sparebanken Sør supports and respects international human rights and labor rights in accordance with Norwegian standards and legal requirements. As a member of the Financial Industry Employers’ Association, the Bank is bound by relevant collective agreements and has its own corporate agreement with employee representatives.

The Bank’s operations are based in Norway, and its guidelines on human rights and labor rights are published under Corporate Social Responsibility on the Bank’s website.

Sparebanken Sør sets high standards for ethical behavior and the management of conflicts of interest. Employees are expected to act with care, integrity, and in compliance with applicable norms, laws, and regulations to ensure trust, competitiveness, and a good reputation. The guidelines on ethics and conflicts of interest apply to all employees, managers, elected representatives, temporary employees, and hired consultants. These guidelines describe the handling of impartiality concerns, conflicts of interest, participation in external business activities, and trading in financial instruments. The guidelines are available on the Bank’s website under Corporate Social Responsibility.

Sparebanken Sør has a zero-tolerance policy for corruption and bribery. The Bank has established anti-corruption guidelines that apply to employees, customers, and business partners, which are published on the website.

The whistleblowing procedure allows employees, customers, and external parties to report unwanted incidents or misconduct. Reports are handled by an independent external body (BDO). The procedure is reviewed annually by a working group and is easily accessible on the intranet and the Bank’s website.

Sparebanken Sør is obligated under Section 5 of the Norwegian Transparency Act to report on due diligence assessments related to fundamental human rights and decent working conditions.

The report will be updated and published by June 30, 2025, under Corporate Social Responsibility on the Bank’s website. This is a joint report for Sparebanken Sør and Sparebanken Sør Boligkreditt, both of which have independent reporting obligations. Sørmegleren also has an independent reporting obligation but will publish its own report on its website. Other subsidiaries are not covered by the reporting requirements under the Transparency Act.

An important element of the Bank’s dividend policy is the equal distribution of dividends between capital classes. The profit is allocated equally between equity certificate capital (equity certificate holders) and primary capital, in proportion to their respective share of the Bank’s total equity capital. This ensures that the ownership ratio remains stable. Hybrid capital (perpetual bond loans), which is classified as equity, is excluded from the ownership ratio calculation.

The Bank aims to distribute approximately 50 percent of the Group’s net profit as dividends. Dividends are distributed through cash dividends to equity certificate holders, customer dividends to the Bank’s customers, and donations to regional communities where primary capital has been accumulated. When determining the dividend payout, the Bank considers the potential for profitable growth, expected earnings development under normalised market conditions, external framework conditions, future needs for Common Equity Tier 1 capital, and the Bank’s strategic plans.

For the financial year 2024, the Board of Directors has proposed a dividend of NOK 12.21 per equity certificate to the General Meeting. This corresponds to approximately 67 percent of the Group’s profit per equity certificate. As of December 31, 2024, the market price of the equity certificate was NOK 197.9. Based on this, the proposed dividend represents a dividend yield of 6.2 percent. For 2024, it has been proposed to allocate NOK 348 million to donations and NOK 416 million to customer dividends.

Sparebanken Sør is a prominent and vital community stakeholder, committed to fostering sustainable growth and development in the region it serves. As the Bank is partially owned by the region, a portion of its profits is reinvested locally.

Community contributions are a strategically important focus area for Sparebanken Sør. Through the Sør Fund, the Bank provides grants for public-benefit projects that contribute to community development and strengthen the region. The Bank's giving strategy prioritises children and youth, with a significant share of the fund allocated to initiatives related to education, sports, and culture. Broad-based engagement is prioritised over niche initiatives, with support directed toward teams and organisations rather than individual participants. As the Sør Fund has grown, so has the Bank's ability to make larger, more strategic contributions. In recent years, this has resulted in substantial support for research and development in the region, including partnerships with the University of Agder.

Gift distributions have grown significantly in recent years, and if this year's proposed allocation is approved, a total of NOK 1.5 billion will have been allocated in gifts and dividends to the Sparebankstiftelsen Sparebanken Sør over the past five years. These funds have benefited, and will continue to benefit, volunteer organisations, sports clubs, cultural initiatives, educational and research institutions, and local communities.

In March 2022, Sparebanken Sør decided to introduce a customer dividend, whereby a portion of the primary capital’s dividend is distributed to the Bank’s customers. The customer dividend can be awarded to both retail and corporate customers. Customers may receive a dividend based on loans of up to NOK 2 million and deposits of up to NOK 2 million. Customer dividends below NOK 100 are not paid out. Similar to community donations, the customer dividend is an important part of Sparebanken Sør’s savings bank model, ensuring that customers and local communities receive a share of the Bank’s profits.

For 2024, the Board of Directors has proposed allocating NOK 416 million for the distribution of customer dividends, corresponding to 0.35 percent (compared to 0.36 percent in 2023) of customers' average deposits and loans up to NOK 2 million.

In November 2024, the Savings Bank Committee presented its report (NOU 2024:22). The committee was mandated to assess the capital structure of savings banks, including the regulatory framework for customer dividends and donations for public-benefit purposes. The report proposed removing the option to distribute customer dividends.

The report was submitted for consultation with a deadline of February 3, 2025. Sparebanken Sør, along with several other savings banks, has submitted a consultation response, highlighting several negative consequences of the committee’s proposal, including key reasons why customer dividends should be maintained. The Bank believes that the introduction of customer dividends, as proposed in the Banking Law Commission’s report (NOU 2009:2), was a natural part of modernising the regulatory framework for savings banks.