account annual report 2008

TABLE OF CONTENTS

1.

Main figures - Group

Page 2

2.

Main figures - Parent Bank

Page 3

3.

Report and Accounts 2008 from the Board of Directors

Page 4

4.

Corporate governance

Page 16

5.

Profit and Loss Account – Group and Parent bank

Page 18

6.

Balance Sheet – Group and parent bank

Page 19

7.

Change in equity capital – Group and parent bank

Page 20

8.

Cash Flow Statement – Group and parent bank

Page 21

9.

Notes to the Accounts - Group and parent bank

Page 22

10.

Key figures Group and parent bank

Page 74

11.

Auditor's Report

Page 77

12.

Report from the Control Committee

Page 79

13.

Elected representatives and senior management

Page 80

2

FINANCIAL SUMMARY GROUP (Amounts in NOK million)

2008

FROM THE PROFIT AND LOSS ACCOUNT Net interest- and credit commission income Gains/losses on financial assets available for sale Total operating costs

2007

Amount

As % of average assets

Amount

As % of average assets

340

2.19

313

2.34

-5

-0.03

31

0.23

209

1.34

207

1.54

Losses on loans, guarantees etc.

36

0.24

10

0.07

Gains/losses from associated companies

15

0.10

37

0.27

Result after credit losses and write-downs

177

1.14

242

1.81

2008

Change - %

2007

Change - %

FROM THE BALANCE SHEET Assets

16 594

16.4 %

14 256

12.8

Gross loans to customers

14 190

10.7 %

12 818

11.4

Development gross loans to retail market Development gross loans to corporate market Deposits from customers

8 581

Deposits from retail market Deposits from corporate market Total net equity and related capital

11.4 %

12.9 %

9.4 %

9.9 %

8.2 %

Of which core capital accounted for RATIOS Deposits as a percentage of gross loans Loss provisions as % of gross loans

7.5

10.8 %

9.3 %

4.0 %

4.7 %

1 475

Capital adequacy ratio

7 930

1 360 14.1 %

13.8 %

13.1 %

12.8 %

2008

2007

60.5 %

62.6 %

0.8 %

0.9 %

Year's credit losses as % of gross loans

0.3 %

0.1 %

After-tax rate of return on equity capital

8.8 %

14.8 %

48.4 %

51.6 %

2008

2007

220

201

Costs as a percentage of income adjusted for trading gains PRIMARY CAPITAL CERTIFICATES (PCCs) PCC-capital (NOK million) Premium Fund (NOK million)

128

120

PCC-fraction as at 01.01

25.7 %

25.8 %

Earnings per PCC (NOK)

14.9

26.2

3

FINANCIAL SUMMARY – PARENT BANK (Amounts in NOK million)

2008

2007

As % of average Amount assets

FROM THE PROFIT AND LOSS ACCOUNT Net interest- and credit commission income Gains/losses on financial assets available for sale Total operating costs Losses on loans, guarantees etc.

Amount

As % of average assets

339

2,19

314

2,35

-6

-0,04

33

0,25

209

1,35

202

1,51

33

0,21

12

0,09

Gains/losses from associated companies

12

0,07

6

0,04

Result after credit losses and write-downs

174

1,12

212

1,58

Beløp

Endring i %

Beløp

Endring i %

FROM THE BALANCE SHEET Assets

16 600

16.4 %

14 263

12.9 %

Gross loans to customers

14 200

10.5 %

12 852

11.1 %

Development gross loans to retail market Development gross loans to corporate market Deposits from customers

8 615

Deposits from retail market Deposits from corporate market Total net equity and related capital

10.8 %

12.9 %

9.4 %

9.9 %

8.2 %

Of which core capital accounted for RATIOS Deposits as a percentage of gross loans Loss provisions as % of gross loans

7.5 % 9.3 %

4.0 %

4.7 %

1 461

Capital adequacy ratio

7 962

10.8 %

1 331 14.0 %

13.5 %

13.1 %

12.5 %

2008

2007

60.7 %

62.1 %

0.8 %

1.1 %

Year's credit losses as % of gross loans

0.2 %

0.1 %

After-tax rate of return on equity capital

8.6 %

12.7 %

48.8 %

50.8 %

2008

2007

220

201

Costs as a percentage of income adjusted for trading gains PRIMARY CAPITAL CERTIFICATES (PCCs) PCC-capital (NOK million) Premium Fund (NOK million)

128

120

PCC-fraction as at 01.01

25.7 %

25.8 %

Earnings per PCC (NOK)

14.3

22.3

4

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS

2008 ANNUAL REPORT AND ACCOUNTS FROM THE BOARD OF DIRECTORS

term supply contracts and full order books at the beginning of 2009. The oil industry

The Helgeland market

Helgeland is in the process of getting a significant oil industry relating to the Norne field which is already in production, and the Skarv field which is being prepared for production in 2011. Both oil fields are located just outside the Helgeland coast, some 200 kilometers west of Sandnessjoen. This has given the local supply industry good development opportunities and created optimism and a great belief in the future of the entire region as well as strong growth impulses particularly at Sandnessjoen.

The business sector 2008 was a good year for industry and commerce at Helgeland, with a high level of employment and good company results. Industry Helgeland has a large processing- and engineering industry with an aggregate turnover in excess of NOK 12 billion in 2008 and a labour force of more than 3,000. For this industry, 2008 was a good year, both in relation to activity levels and operating results.

The building-, construction- and civil engineering sector This sector has had a good year with high activity levels. In some locations, there are clear signs of lower building activity, whereas in other places, such as Mo i Rana, there is still full employment.

Many of the largest industrial concerns, such as Elkem Aluminium at Mosjoeen and Celsa Armeringsstaal at Mo i Rana, today have new owners with long-term development targets. During the course of 2008, several large industrial development projects were completed which have brought about increased production, new products and big gains for the environment.

Retail- and wholesale trade, the service industry and tourism High levels of employment and good development in purchasing power gave the trade- and service sectors a good level of turnover in 2008. Torghatten Nord AS, a wholly-owned subsidiary of Torghatten Trafikkselskap ASA at Broennoeysund, acquired the ferry- and steamship operations of Hurtigruten Group ASA at the end of the year. The agreement comprises 45 ships and 606 employees. After this acquisition, Torghatten Trafikkselskap ASA is among the largest traffic companies in Norway.

During the autumn of last year it became apparent that the global economic crisis would have a serious impact on the markets for several of the largest industrial concerns. Falling demand in international markets has resulted in some companies reducing their manufacturing output and sending out notices of lay-off to their workforces. Against this background, there is considerable uncertainty at the beginning of 2009.

The tourism industry enjoyed increasing demand for overnight accommodation- and activity package offers in 2008. 70 per cent of the visiting tourists are from Norway, activity tourism and intra-island trips, cycle safaris, walks and mini-cruises accounting for the strongest increase. There is increasing interest in new tourist attractions primarily within local culture and involving spectacular nature- and scenic adventures.

The question of power for industry was not settled in 2008. The ongoing adjustment of the authorities’ climate policy is a challenge for the processing companies. The criteria create problems for Celsa Armeringsstaal which has to buy CO2 quotas in order to be able to utilise the increased production capacity following the modernisation of its steelworks process.

The higher demand has brought about an increase in the number of tourism firms especially as far as activities such as sea rafting, sailing; kayaking and sea fishing are concerned.

After several years of production growth, the pulp and paper industry experienced a marked reduction in demand during the second quarter of 2008. The stoppage in the domestic house building industry has resulted in production adaptations and lay-offs at several pulp and paper companies at Helgeland.

Fisheries, fish farming industry and agriculture 2008 was a fairly good year for the traditional fisheries, with good fishing conditions, quotes and prices.

The engineering industry For several years, the positive development in the processing- and oil industry provided growth impulses for an active and innovative engineering industry at Helgeland. This industry has developed from a local supplier industry to being competitive in new markets. Many of the engineering firms at Helgeland have long-

The salmon fish farming industry had a good year. Markets and prices have been good and there has been little disease. Investment is made in increased production of smolt and food fish and new licences are expected to be allotted to Helgeland.

5

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS athletics stadium at Soemna and a new first division football pitch at Rana.

Other production of food fish such as halibut and cod is still in an early development phase. Substantial amounts are invested in research and production of new species and the access to risk capital appears to be good.

The local labour market and the house- and leisure market 2008 was a year with full employment and good purchasing power development at Helgeland. It has been a worker's market in many industrial and commercial sectors and the demand for skilled labour within most crafts and trades has provided many new apprentice contracts for young people in the process of being further educated.

Helgeland's agricultural industry has been enjoying a positive development in recent years and there is optimism and belief in the future within the industry. This is noticed as many of the Bank's agricultural customers are buying larger quotas, building new farm buildings and entering into joint venture-related solutions. Helgeland has become North Norway's largest area within pig production, with an expansive production environment and a larger number of producers.

Prices of residential property and holiday cottages have been increasing steadily for many years and this trend continued during 2008 too, albeit at a somewhat lower rate towards the end of the year.

Public enterprises and -operations The big state-owned enterprises such as the Broennoeysund Registers, NAV Servicesenter and Statens Innkrevingssentral keep growing through the addition of new work tasks and the employment of more staff.

Helgeland has a varied and magnificent nature and scenery and local people are very good at making the most of it. In recent years, the building and sale of holiday cottages have increased and this has brought with it new activity and economic growth within many smaller, local communities.

With the exception of the three Helgeland municipalities which were involved in the Terra-matter, the other municipalities at Helgeland have had a good year with good tax revenues and high activity levels.

Transport and communications Helgeland is a geographically large region with big transport- and communications-related challenges both at sea, on land and in the air. The county council has decided that work will start on the building of a new tunnel through Toven, and Statens Veivesen (The Norwegian Highway Authorities) has been given the necessary initial funds for starting on this long awaited improvement of the E6 at Majavatn. In addition, the government's crisis package of measures contains funds for the improvement of the E6 through the northern parts of Dunderlandsdalen. The project work relating to the building of new airports is in full swing but no decisions have yet been taken as far as the commencement of building of any of these airports is concerned.

Culture, athletics, sport and education Helgeland Sparebank is an important and committed participant within culture, athletics and sport in the Helgeland region. The region benefits from a variety of cultural alternatives. We would like to mention Norway's largest theatre festival, 'Vinterlysfestivalen' ("The Winter Light Festival") at Mo i Rana, which is arranged by Nordland Teater in February each year. The summer festivals, the Traena Festival attracting in excess of 3,000 visitors to the little group of islands 33 nautical miles from the coast, the Roots Festival at Broennoeysund and Hemnes Jazz and Blues Festival which is always very popular with enthusiastic listeners.

Helgeland Sparebank and our corporate responsibility

In addition, there are local concerts and revues arranged by a large number of theatre associations, choirs and music groups from many parts of Helgeland.

Helgeland Sparebank is a merger of 13 local savings banks located at Helgeland, with a history going back as far as 1860. With its very deep roots in the Helgeland region, the Bank takes a very keen interest in what goes on locally, and the Bank has a stated corporate vision to be a pivotal force for growth in the Helgeland region.

Bysprinten at Mosjoen, which attracts large parts of the ski elite, Kippermoen Cup, with several thousand football-mad children, and huge touring races such as Hattrennet and Blaavegenrennet, are all great local sporting events.

In order to be able to contribute more to the further development of local communities and places, in 2007, 2008 and now in 2009, the Bank decided to set aside funds for its Donations Fund. Through this fund (the Helgeland Fund), the Bank allotted some NOK 15 million in 2008 to associations and clubs and for other

At the present time, substantial capital investments are being made in new sports- and athletics facilities, including the building of artificial grass pitches, an

6

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS 14.3 billion at the end of 2007. The Group had a moderate lending growth of 10.7 per cent and a satisfactory growth in deposits of 8.2 per cent. In 2008, there has been a focus on controlled lending growth with a more restrictive lending policy as far as new customers are concerned. The credit growth lessened towards the end of 2008. Throughout 2008, every effort was being made to work effectively with our deposit customers and the Group maintained a good overall deposit coverage ratio for the whole of the year under review. At the end of 2008, the Group's overall deposit coverage ratio was 60.5 per cent, compared to 62.0 per cent the year before. The Group's profit and loss account- and balance sheet development in 2008 provides the basis for a continued, good capital adequacy ratio of 14.1 per cent and a core capital coverage ratio of 13.1 per cent at the end of 2008.

purposes for the benefit of the local communities in the region. Helgeland Sparebank has therefore become the biggest contributor of funds for community development, cultural activities, new initiative and growth at Helgeland. In 2008, substantial parts of these donated funds were used on various initiatives and measures which shall focus on the region's opportunities through cooperation and community- and local development. However, most of the funds have been allotted to culture as well as sport and athletics to which children and young people are actively committed, but the Fund has also provided financial help for projects which are supported by everyone in the villages and towns involved, projects and initiatives which create happiness, activity and local pride. It is important for us as a local bank to provide good framework conditions for those dedicated people who spend time and energy in order to create a meaningful and eventful environment for the young people who will one day be developing our communities further, creating a basis for settlement and growth.

The Group's funding structure remained good throughout 2008 and the liquidity situation is reassuringly good. In addition, during the course of 2008, Helgeland Sparebank received an upgraded rating to A- from all rating bureaus which do credit ratings in Norway, and this is very satisfactory. The authorities' package of measures for the financial sector which was introduced in November 2008 has been utilised through loans at fixed interest rates from Norges Bank. In order to further strengthen the Bank's access to sources of funding, and in order to be in a better position to make the most of the government's packages of measures, the Bank is in the process of establishing its own mortgage company, Helgeland Boligkreditt AS. The company is applying for the necessary licence to conduct mortgage company business, including the ability to issue preference bonds. In this way, the Bank will be in a position to participate in the authorities' swap scheme in accordance with which preference bonds may be exchanged for government securities with effect from the second quarter of 2009. The mortgage company will be wholly-owned by Helgeland Sparebank.

Settlement and growth are fundamental conditions for banking operations. Without vibrant and attractive local communities it would be difficult to recruit people to work in private businesses and public companies, something we need in order to promote growth in our communities. In our co-existence, we therefore depend on each other, our destinies being interlinked – the Bank and the people from Helgeland – and the Helgeland Fund is part of the Bank's contribution to development, optimism and growth in villages and towns in the Helgeland region.

Main features at Helgeland Sparebank in 2008 2008 was strongly affected by the great turbulence in global financial markets which is also having an impact on the Norwegian financial market. Despite this background, Helgeland Sparebank is able to report a good result for 2008 and stable profitability in the Bank's core operations. The Group's pre-tax result amounted to NOK 177 million, as against NOK 242 million in 2007. The change in the result compared to the year before is primarily ascribable to substantial gains on shares and income from associated companies in 2007, coupled with increased loss provisions in 2008. The Group has a conservative, careful securities strategy and this has resulted in small losses on securities in 2008. The 2008 result produced a return on equity capital of 8.8 per cent and a result per Primary Capital Certificate (PCC) of NOK 14.90. The Board of Directors is pleased with this rate of return on equity capital for 2008.

Towards the end of 2007, the Bank changed its provider of life insurance products to Frende Liv and has an equity stake in the holding company, Frende Holding AS. During the transition phase, the change of provider has produced somewhat lower income. In 2008, the Bank participated in the establishment of the securities firm, Norne Securities AS, together with 12 other banks. In due course, Frende Holding AS and Norne Securities AS are expected to produce a return on the Bank's equity stakes in the two companies and this will have a positive impact on net commission income. Every year, Helgeland Sparebank conducts a customer satisfaction survey. The feedback from the 2008 survey shows that the Bank's customers are generally satisfied with the Bank, and that the Bank has been maintaining its solid market share of 56 per cent in the Helgeland region. Our customers' satisfaction and loyalty has been very stable during the last 3 years and in line with

The Group's aggregate assets expanded by 16.4 per cent, totalling NOK 16.6 billion, as opposed to NOK

7

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS all our competitors. The Bank is very pleased with the result of the survey.

(Amounts in NOK million) As at 31.12.08 As at 31.12.07 Parent Bank's result - IFRS 122 163 Impact of sub. and ass.comp. +8 +30 IFRS-adjustments - Group - 2 -2 Result for the Group – IFRS 128 191

The 2008 annual accounts The Group's business is mainly traditional banking operations, in addition to brokerage-based sale of investment- and insurance products. The business conducted by the Parent Bank's subsidiaries and associated companies are mainly related to the renting out and management of commercial real estate.

Net interest- and credit commission income The Bank's main source of revenue is net interest income, which is affected by the average interest margin and volumes for deposits and loans. In 2008, net interest- and credit commission income totalled NOK 340 million, up by NOK 27 million on 2007. In relative terms, the Group still has a good but falling net interest income. Measured against average assets, the net interest margin amounted to 2.19 per cent in 2008, compared to 2.34 per cent at the end of 2007. Growth in volumes has produced higher income in cash terms, whereas the net interest income in relation to average assets has shrunk. This development is partly due to higher interest rates for funding loans throughout 2008. Credit spreads fell somewhat towards the end of the year and have continued to fall a little at the beginning of 2009 but are still high. In 2008, the Bank paid a third of the full levy to the Norwegian Banks' Guarantee Fund, and NOK 3 million has been charged to the profit and loss account in this connection. No levy was payable in 2007. The Bank has implemented 5 interest rate changes for loans to, and deposits from customers during 2008.

In the same way as its subsidiaries and associated companies, the Bank has strategic shareholdings, its strategic equity stakes in the product companies Frende Liv and Norne Securities being part of this.

Accounting principles Helgeland Sparebank presents its Group- and Parent Bank accounts in accordance IFRS (international accounting standards). The Group accounts are based on a consolidation of the Parent Bank, Helgeland Sparebank, and its subsidiaries. A more detailed description of the accounting principles involved may be found in Notes to the Accounts. The annual accounts are based on the assumption of a going concern. The Group is not involved in any legal disputes which are deemed to be of importance for the Group's financial strength or profitability. The Board of Directors is not aware of any circumstances after the end of the year under review which would have significant importance for the annual accounts.

Net commission income Net commission income totalled NOK 69 million. In relation to average assets, net commission income amounted to 0.45 per cent, as against 0.53 per cent in 2007. This was as expected, and net commission income was reduced partly as a result of the transition to Frende Liv, and due to a gradual disappearance of fee income. This development is also happening within the Norwegian banking industry in general. Available figures for the average of savings banks show that our income percentages are somewhat better than the average level. Throughout 2008, the Bank has held the required licence in accordance with the new securities market directive, MIFID. The Bank does not have any complicated loan-financed savings products in its product portfolio.

The figures referred to are all Group figures unless it is stated that they apply to the Parent Bank.

Results The Group is able to report stable and good banking operations in 2008. The pre-tax result totalled NOK 177 million, as against NOK 242 million in 2007. The result is equivalent to 1.14 per cent of average assets, as opposed to 1.81 per cent in 2007. The Group achieved its strategic targets for capital adequacy and return on equity capital for 2008.

Net value change relating to financial instruments The shrinkage in net income from financial instruments compared to the year before is principally attributable to substantial gains on shares during the first quarter of 2007. The Group has a NOK 31 million unrealised loss on interest-bearing securities and a NOK 20 million unrealised gain on deposits and interest rate swaps. NOK 5 million has been charged to the profit and loss account in respect of net losses on shares. The net impact of value change and gains/losses on financial

The Group's result is somewhat higher than that of the Parent Bank, due to transfer of income from subsidiaries and associated companies. The table below explains the difference between the Parent Bank's result and the Group's result:

8

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS Cash flow In 2008, liquid funds increased by NOK 463 million. During the course of the year, there was a NOK 306 million increase in cash flow from lending, and an increase of NOK 234 million from customer deposits.

instruments has been charged to the profit and loss account, the amount being NOK 5 million. Income from investments in associated companies Income from associated companies totalled NOK 15 million, as against NOK 37 million in 2007. Of the NOK 22 million reduction, NOK 15 million is related to income from the sale of shares in an associated company during the first quarter of 2007.

Certificates, bonds and shares available for sale The portfolio of certificates and bonds posted a net increase of NOK 332 million last year. The Bank has a conservative and careful strategy relating to securities and this resulted in small losses on securities in 2008. The Bank's exposure to the stock market was increased by NOK 23 million in 2008.

Other (non-interest) operating income Other operating income totalled NOK 3 million. This involved a NOK 4 million reduction in comparison with 2007, NOK 2 million of which is related to a gain from the sale of a site in 2007.

Commitments Gross loans to customers amounted to NOK 14.2 billion at the end of the year. As expected, lending growth levelled out somewhat in 2008. So far this year, the growth amounted to NOK 1,372 million, or 10.7 per cent. For the Group as a whole, loans to retail banking customers posted the biggest growth, at 11.4 per cent, whereas loans to corporate clients grew by 9.4 per cent. At the end of 2008, loans to retail banking customers accounted for NOK 9.1 billion of the total, or 63.9 per cent. 84 per cent of total gross loans were made to customers domiciled in the Helgeland region. This is within the Bank's strategic target. Guarantees provided on behalf of customers were up by NOK 120 million in 2008, totalling NOK 715 million at the end of the year. Guarantees are largely provided on behalf of corporate customers, with a share of 98 per cent.

Operating costs Aggregate operating costs amounted to NOK 209 million in 2008, up from NOK 207 million in 2007. The relative figures, however, improved markedly, costs in relation to average assets ending up at 1.34 per cent, down from 1.54 per cent in 2007. Operating costs in relation to income (excluding trading gains) finished up at 48.7 per cent. The main reason for the enhanced revenue generation effectiveness is that the increased business volumes throughout 2008 were handled by the same amount of man-years as in 2007. The total manyear equivalent at the end of 2008 was 193, unchanged from 2007. Credit losses and commitments in default NOK 36 million was charged to the profit and loss account in 2008 in respect of losses on loans and guarantees.

Unutilised drawing rights under customers' credit facilities totalled NOK 1.3 billion, the retail banking- and corporate markets accounting for 34 and 66 per cent respectively.

Increased losses are related to higher individual writedowns and collective write-downs. Collective writedowns on loans were up from NOK 47 million to NOK50 million at the end of 2008. This is equivalent to 0.35 per cent of gross lending, whereas individual write-downs amounted to 0.5 per dent of gross loans.

In comparison with last year, the corporate portfolio, divided into different risk classes, showed a reduction in low risk loans, an increase in medium risk, and an unchanged share of commitments classified as high risk. Such shifts in the portfolio, coupled with the current uncertainty in the real economy, mean a higher credit risk overall.

During the year currently under review, total net commitments in default and bad and doubtful commitments increased by NOK 38 million. As at 31.12.2008, net commitments in default amounted to 0.9 per cent of gross lending, up from 0.8 per cent 12 months earlier, whereas net bad and doubtful loans represented 0.6 per cent of gross lending, unchanged from 2007.

Deposits from customers The Group has a stable portfolio of deposits and its overall deposit coverage ratio remained at a good level throughout 2008. Of total deposits of NOK 8.6 billion, retail banking customers accounted for NOK 5.5 billion, or 63.7 per cent. This is an increase on 2007, when retail banking customers accounted for 62.2 per cent of total deposits. The Group had a moderate growth in overall deposits of 8.2 per cent in 2008. At the end of the year, deposits from customers funded 60.5 per cent of gross loans to customers, the aggregate, internally generated funding up from 60.2 per cent the year before. At the end of 2008, depositors located at

Balance sheet developments At the end of 2008, total assets amounted to NOK 16.6 billion. During the last 12 months, there was an increase of NOK 2,338 million, equivalent to 16.4 per cent.

9

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS investors in the Notes to the Accounts. At the end of 2008, the Bank's PCC price was NOK 100.50. The Bank held 6,100 of its own PCCs at the end of the year.

Helgeland accounted for NOK 7.9 billion or 92.1 per cent of total deposits. Funding After countless rescue packages introduced by authorities and central banks all over the world, in addition to severe cuts in interest rates, there are signs pointing to a preliminary stabilisation of the financial markets. However, banks' credit spreads have remained at historically high levels, and this has contributed to an increase in the Bank's funding loan costs, as maturing loans has to be refinanced.

Allocation of profit for the year In the Board of Directors' opinion, the submitted profit and loss account and balance sheet give a correct picture of the Bank's position and result. The Parent Bank's after-tax profit for the year of NOK 122 million, together with the NOK 4 million transfer from the Fund for Unrealised Gains, provides a dividend basis of NOK 126 million. In view of the difficult downturn both in the Norwegian and international economy, the Board of Directors wishes to retain some extra capital in order to contribute to maintaining a good level of capital adequacy.

The Bank has participated in the government's F-loan scheme and in addition made a good deal of preparatory work relating to the establishment of its own mortgage company. This is being done in order to be able to take advantage of the government's scheme enabling banks to swap preference bonds for government securities.

Against this background, the Board of Directors proposes to the Supervisory Board payment of a NOK 8 cash dividend, amounting to NOK 18 million. In addition, NOK 6 per PCC is to be set aside for the Dividend Equalisation Fund, totalling NOK 13 million. Furthermore, it is proposed to set aside NOK 10 million to the Bank's Donations Fund. The maximum amount permitted by law is not set aside for the Donations Fund, 'The Helgeland Fund', in 2008, as the Bank has good remaining reserves from earlier years. The NOK 85 million remaining part of the profit for the year is to be transferred to the Savings Bank's Fund.

At the end of 2008, the Bank's proportion of long-term funding (maturities in excess of 12 months) was approximately 88 per cent. The Bank has increased its liquidity buffers and lengthened the average duration of the funding loan portfolio throughout 2008. The Financial Supervisory Authority of Norway's (FSAN) liquidity indicator 1 was 105.4 as at 31.12.2008. The Bank's committed drawing rights facilities of NOK 0.6 billion remain unutilised. Financial strength The Group's equity capital totalled NOK 1,486 million at the end of 2008. The Group's net equity and related capital, which forms the basis for the computation of the capital adequacy ratio, amounted to NOK 1,475 million. Based on the standard approach in the Basel II rules and regulations, the capital adequacy ratio was 14.1 per cent at the end of the year under review. The Bank has a relatively high proportion of core capital, the ratio of which was 13.1 per cent.

Basel II – capital adequacy rules and regulations Capital requirements (Basel II) came into force on 1 January 2007 and involve a system consisting of three parts. Pillar I comprises the minimum capital requirements, and is a further development of the former capital adequacy rules and regulations (Basel I). Pillar II deals with the institution’ s own assessment of the total capital requirement which is not covered in Pillar I, in addition to supervisory follow-up, whereas Pillar III consists of the publication of financial information.

PCCs – HELG It is a priority to pay a competitive cash dividend to the Bank's PCC-holders, and the sum of the total cash dividend payment and the amount set aside for the Dividend Equalisation Fund shall reflect the PCCholders' share of the equity capital.

Capital management Risk categories:

The Bank completed a dividend issue and a separate issue earmarked for staff in 2008. The dividend issue attracted a subscription rate of 72 per cent and the staff-related issue 73 per cent subscriptions. The Board of Directors is very pleased with these levels of subscriptions. Overall, 181,875 new PCCs were subscribed for, and the Bank's PCC-capital increased by NOK 18 million, from NOK 202 million to NOK 220 million.





• •

Helgeland Sparebank's PCC-capital is held by some 2,500 investors. There is a summary of the 20 largest

10

Credit risk: the risk of loss as a result of customers or counterparts being unable to fulfil their obligations in relation to the Bank. Market risk: the risk of loss due to changes in interest rates, foreign exchange rates and share-/securities prices. Funding risk: the risk of the Group being unable to fulfil its obligations at maturity. Operational risk: this is defined as the risk of direct or indirect loss due to failure in internal routines, systems and processes, insufficient competence, damage to assets, operational

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS policy, the latter taking care of the areas of funding risk and market risk.

breakdown or systems failure, or internal or external fraud.

In connection with the implementation of Basel II in recent years, a great deal of time has been spent on the development of a system for overview relating to risk assessment in the processes and related key control aspects in the operative functions. Internal control is reported on every year by line management up to Board of Directors level. The management- and steering documents and control systems are designed in order to ensure focus on effective operations, risk control, sensible consideration for care and prudence, correct financial and nonfinancial information, as well as compliance with applicable laws, rules and regulations, internal guidelines and strategies. Against this background, the Board of Directors has a satisfactory basis for confirming that the Bank's internal control is handled in an appropriate manner.

Irrespective of how good the Bank's risk management is, unexpected losses may be incurred, which means that the Group must have sufficient equity and related capital. As part of the Basel II project, the need for supplementary capital for the different risk areas has been assessed. The assessments are supported by various internal evaluations and calculation methods. A summary of this has been made in the Bank's ICAAP, which is the Board of Directors' document for the documentation of calculated capital requirements and the plan for capital management. Corporate governance Good corporate governance at Helgeland Sparebank comprises the values, aims, targets and overall principles according to which the Bank is governed, managed and controlled in order to safeguard PCCholders', depositors' and other groups' interests in the Bank. The Group's principles for good corporate governance shall ensure appropriate management of assets and liabilities and provide increased assurance that the agreed and reported targets and strategies are achieved and adhered to.

The Group's internal auditing involves the equivalent of one man-year and reports directly to the Board of Directors. The internal auditor shall assess whether reassuringly appropriate routines have been established for the most important areas in the Bank in order to reduce risk.

Risk management and internal control The Board of Directors' governance of Helgeland Sparebank is based on the principles contained in the Norwegian recommendation for corporate governance. The Group's principles and limits for internal control and risk management are set out in separate managementand steering documents which are reviewed by the Board of Directors: • • •

Financial risk Funding risk Funding risk is defined as the risk of the Group being unable to meet its payment obligations at maturity. The Group's strategy for the management of funding risk is reviewed each year by the Board of Directors. The strategy has been under revision and a revised strategy for funding risk has been agreed by the Board of Directors in 2008. The strategy sets out the Bank's aggregate liquidity risk tolerance and contains actual limits and management parameters.

Policy for corporate governance Policy for risk management and internal control Guidelines and requirements for systems and processes

The Group's funding risk is reduced through diversification of funding loans as far as different markets, funding loan sources and maturities are concerned. The Bank has clear targets for the share of long-term financing of funding loans. The Board of Directors has agreed a target of at least 70 per cent long-term funding and a management target for the level of FSAN's liquidity indicators. As at 31.12.2008, the share of long-term financing was 88 per cent, which is well in excess of the targeted percentage. At the end of 2008, the liquidity indicator was 105.4, which is within the official requirements and higher than the last known average value for the reference banks. This is also within the Bank's agreed target requirements.

The management- and steering documents represent the Group's internal framework for good management and control, and the policy describes the relevant aspects of the Group's overall attitudes to risk management in addition to ensuring that the Group has an effective and appropriate process in place for this. Risk management is an important assumption for the Group managing to achieve its aims and targets over time. Risk management is a central aspect of day-today operations and the Board of Directors' ongoing focus. Risk is primarily managed through policy and guidelines, limits, powers of attorney, reporting requirements and skills- and competence-related requirements. The Board of Directors stipulates the Bank's credit policy which covers credit risk and the Bank's funding

The Group has liquidity buffers in the form of long-term and short-term unutilised drawing rights facilities, as well as placements in liquid interest rate portfolios in order to further limit the Group's funding risk.

11

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS Several management- and steering documents relating to the handling and follow-up of credit matters have been established. The most important measures in the execution of the credit rules and regulations are:

The overall deposit coverage ratio is an important parameter with regard to the follow-up of funding risk, i.e. the extent to which gross loans to customers are covered by deposits from customers. The Board of Directors has introduced minimum requirements for deposit coverage, and this requirement was adhered to throughout 2008. The Board of Directors monitors the development of the deposit coverage and funding structure on an ongoing basis, placing a great deal of emphasis on the Group's funding risk.



• Market risk The Group's market risk consists of interest rate risk, price risk for shares, and foreign exchange risk. The Group's market risk strategy is reviewed each year by the Board of Directors. The market risk strategy has been reviewed and a new strategy agreed by the Board of Directors in 2008. The revised strategy includes overall targets for the Group's market liquidity tolerance.







The interest rate risk is managed towards the desired level through the interest rate fixing for placements and funding loans, coupled with the use of interest rate swaps in order to reduce interest rate risk in connection with fixed interest rate loans. The Group has a conservative risk strategy for interest-bearing securities. The Board of Directors has agreed a limit for the total interest rate risk to be incurred by the Group. The Group's aggregate interest rate risk is deemed to be low.





restrictive granting of credit in relation to - specially defined sectors - spin-offs involving the Bank's corporate customers - taking over corporate customers from other banks (temporarily suspended due to the financial crisis) tightened-up requirements with regard to risk sharing through higher equity capital shares management of operations through the use of administration systems and a range of powers of attorney a strong focus on the rules and regulations relating to the use of delegated lending authority, including special documentation requirements relating to customers’ ability to service their outstanding debt, coupled with a description of critical factors in connection with the granting of credit a high level of skills and competence in the case of all staff dealing with lending operations the granting of credit to individual customers and different sectors to be assessed in relation to staff's total competence credit to be given primarily to customers within the Bank's geographical area of operations

In the case of the credit strategy (revised in June 2008), the prioritisation of the Bank's own customers within the retail banking market in relation to its corporate customers has been continued. Credit exposure is managed and followed up through regular analyses of borrowers' and potential borrowers' ability to pay interest and instalments, coupled with an assessment of the collateral and/or other security which has been pledged in order to obtain a loan.

The Group does not have a trading portfolio in shares. The Bank has both strategic investments in shares and other investments in local and central companies. Market risk relating to these share investments is regarded as moderate. The Group's foreign exchange risk is considered to be very low, as the Group does not have active foreign exchange portfolios. The Group's foreign exchange exposure is related to a syndicate in the funding loan sector, where the entire risk has been hedged through a currency swap.

In 2008, the Bank started using a new model for the calculation of collective write-downs. The model is based on expected commitment in the case of default, likelihood of default and the extent of loss when a commitment is defaulted on. The model is used by several other savings banks and the banks have entered into an agreement to develop the model further.

Credit risk Credit risk is defined as the risk of loss as a result of customers or counterparts being unable or unwilling to meet their obligations to the Bank. The Bank's strategy in the credit area is based on the overall strategy and contains guidelines for the allocation between the retail banking- and corporate markets, concentration risk and separate rules for specific industrial and commercial sectors. In the case of ongoing follow-up of risk by the Board of Directors, a set of reports has been defined which shall be submitted to the Board of Directors at different frequencies.

Against the background of FSAN's lending rules and regulations and internal guidelines, commitments are monitored on an ongoing basis with regard to identification of any bad and doubtful commitments. Throughout the organisation, there is a strong focus on quality in all credit work and on the need for better understanding of the importance of good management and control. The management and monitoring of risk in the Bank's corporate portfolio is done through ongoing assessment of customers' circumstances, customer relationships, ability to pay, and the security pledged for loans, coupled with reviews by the Bank's credit committee.

12

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS Based on an assessment of the Group's skills, competence, organisation and division of responsibility, its revenue generation and financial strength, the Board of Directors is of the opinion that the Group's aggregate risk exposure is reasonable and appropriate.

Against the background of the general economic situation, larger business customers are subject to extended reporting of development features together with accounting details. The breakdown of the lending portfolio according to corporate- and retail banking commitments is reported on a quarterly basis to the Board of Directors. As at 31.12.2008, compared to a year earlier, there was a reduction in low risk, a correspondingly higher share of medium risk, whereas the share of high risk loans remained unchanged. Such shifts in the portfolio coupled with the uncertainty currently existing in the real economy result in a higher credit risk overall The maximum limit for a single commitment, introduced by the Ministry of Finance, is 25 per cent of the Group’ s equity and related capital. At the end of 2008 the Group had three customer groups where the commitments in question, on a total basis, were in excess of 10 per cent of equity and related capital.

Auditing External auditing: The Group's external auditors are PriceWaterhouseCoopers.

Personnel and working environment As at 31.12.2008, Helgeland Sparebank employed 212 people at its 16 branches. Mo i Rana and Mosjoen are the two largest branches with 76 and 62 staff respectively, whereas the three smallest branches have 1 and 2 employees respectively. Of the 212 staff, 41 are employed on a part-time basis, the total number of man-years amounting to 194. The 194 man-years also include caretaker, canteen- and cleaning staff, those three categories accounting for 13 employees, amounting to 6 man-years.

Operational risk Operational risk is defined as the risk of direct or indirect loss or loss of reputation incurred as a result of the organisation, staff, systems, machinery or buildings not functioning as expected. In 2008, the Group focused strongly on internal control and operational risk, partly as a natural continuation of the adaptation to the Basel II rules and regulations. Satisfactory handling of operational risk assumes that there is good internal control and quality assurance. The work involving the development of systems and processes for identification, analysis and quantification of risk, and an overview of the related key controls in the operational functions, has contributed to a sharper focus on quality and effectiveness, as well as targeted operations throughout the Group.

The working environment at the Bank is open and healthy and the 'we-culture' is well entrenched at the Bank. In October last year, a special work-related day was arranged for all the Bank's staff, and organisational psychologist, Jan Atle Andersen, made a professional contribution. Such experiences and events help to further strengthen the 'we culture'. Each year, a survey is done in order to measure job satisfaction among staff. The annual Health, Safety and Environment survey shows that our employees are happy in their jobs and have good relationships with their managers, work colleagues and their teams. Staff are satisfied with the way in which work is organised and with the opportunities given them to influence their own work situations. The periodic MBO staff development conversations with staff have been completed as planned.

More and more companies realise that effective management of operational risk will represent a competitive advantage in an increasingly tougher and more unpredictable market. At the same time, there is an increasing degree of complexity within industry and commerce, with big market fluctuations, new technology and requirements for enhanced effectiveness. In addition, the risk of more threats has increased (terror, crime and internal fraud, irregularity, malpractice and misconduct.). The new capital adequacy rules and regulations (Basel II) demand that banks have effective systems, skills and competence with regard to management of operational risk.

In 2008, the working environment committee held 4 meetings, focusing amongst other things on absenteeism through illness, CW-activities (Care in the Workplace), rebuilding projects, health, safety and environment reports, and on an evaluation of the company health service. Helgeland Sparebank has been a CW company since 2005. This has given the Bank a sharper focus on the challenges relating to absenteeism through illness. In 2008, average absenteeism through illness was 6 per cent, unchanged from 2007. The absenteeism was mainly related to illness which was not work-related. The Bank is focusing on this by providing support for training, workplace surveys and various forms of active preparations.

This may be summed up in requirements for the maintenance of a certain level of equity and related capital in order to be able to take care of any future expected losses which may be incurred by the Group as a result of operational risk. The Group pays a great deal of attention to targeted measures aimed at reducing the operational risk, and internal control measures are important methods for reducing operational risk.

13

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS There were no inspection visits within the working environment area in 2008.

Environment strategy and environmental

Enthusiasm and competence are two of the Bank's core values. These values represent the dual driving force with regard to the planning and implementation of training activities. In 2008, many of the Bank's staff in customer-orientated positions, internal- and managerial positions have participated in courses through which they can obtain 'study points' from BI (Institute of Economics and Business Administration). In addition, employees have attended other courses at different colleges and at Spama. A great deal of this work has been aimed at preparations for meeting the requirement for licensing of advisers working with financial products. Regular sales training involving all different customer environments is also done on a regular basis.

The Group thinks that it is natural – through its corporate responsibility and attitude to its staff – for the environment to be an important aspect of the Bank's day-to-day operations. An overall environment strategy has therefore been designed and this strategy is the responsibility of the Board of Directors. The strategy comprises overall targets for working environment, safety, influence on the external environment, and environmental measures. During the course of 2008, the Bank's branches at Mo i Rana and Mosjoen have been working on becoming officially recognised as so-called 'Environmental Lighthouse Companies', and the required licences will be granted very soon.

Safety for staff and customers is a key area which is being addressed on an ongoing basis. A dedicated officer who reports directly to the Bank's CEO has the overall responsibility for this work. Furthermore, local officers have been given responsibility for safety at each of the Bank's branches. Managers working in the two largest day-to-day banking environments are given tailor-made internal training relating to preparedness and emergency involving robberies and threatening situations, and this type of training has been implemented in all customer environments.

The Group's operations do not cause any direct pollution of the external environment.

measures

Subsidiaries Ans Bankbygg Mo The company's purpose is to own and rent out a commercial building at Jernbanegata 15 at Mo i Rana. Helgeland Sparebank is the biggest tenant in the building and the Bank owns 96.8 per cent of the company's equity capital. The company has no staff. The company's 2008 result totalled NOK 4.3 million and the equity capital at the end of the year amounted to NOK 47.3 million.

Equality between the sexes and equal opportunities

AS Sparebankbygg The company's purpose is to own and rent out premises at Storgt. 75. The company is located in the municipality of Broennoey. Helgeland Sparebank owns all the shares in the company. The company made a loss of NOK 0.1 million in 2008 and its equity capital at the end of the year was NOK 0.8 million. The company has no staff.

Helgeland Sparebank has agreed an action plan for promoting equality between the sexes and equal opportunities and an established practice where every effort is made in order to achieve this aim. This, for example, involves opportunities of various specialistand managerial positions, and also personal salary development and education. Qualifications and suitability for the job are the fundamental principles. In addition, the Bank has a flexible approach to domestic situations involving care for other family members, and to the 'problem with time' in particular experienced by parents with babies and small children. Such parents are given the opportunity of working a shorter day during the winter without loss of salary.

Helgeland Sparebank Eiendomsselskap AS The company rents out property located at Mosjoen in the municipality of Vefsn. The company has one employee. The company's 2008 after-tax result totalled NOK 0.1 million and its equity capital at the end of the year was NOK 1 million. Helgeland Sparebank owns all the shares in the company.

The Bank's Supervisory Board has 25 members, 7 of whom are women and 18 men. The Bank's Board of Directors has 6 permanent members, 3 of whom are women and 3 men. The Bank's senior management group consists of 7 members, 4 women and 3 men. Of Helgeland Sparebank's 212 employees, 151 are women and 61 men. Of the Bank's departmental managers, branch managers and other managers, 20 are women and 20 men.

Helgeland Utviklingsselskap AS Helgeland Utviklingsselskap AS is a company which rents out property, buys and sells real estate, and makes equity investments in the property market. The company's office is located in the municipality of Vefsn and Helgeland Sparebank owns all the shares in the company.

14

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS Prospects remain good within the agricultural industry, which is a stable sector without any crises. The processing industry at Mo and Mosjoen has had to introduce some lay-offs. However, there is no need for concern for these businesses from a long-term perspective. In recent years, substantial capital investments have been made by their financially strong owners.

The company's 2008 after-tax result totalled NOK 3 million and its equity capital at the end of the year was NOK 5 million. The company has no staff.

The Board of Directors and senior management Eivind K. Lunde is the Chairman of the Board of Directors. There were no changes in the composition of the Board of Directors in 2008.

For the Bank, the turbulence in the global financial markets is likely to continue to mean high funding loan costs in a sluggish money market. The Bank benefits from a good funding structure and a good liquidity situation. The extent to which the Bank will make use of the authorities' crisis packages of measures will be assessed on an ongoing basis in relation to the Bank's requirements and financial strategy.

The Board of Directors consists of 6 members, 3 of whom are women and 3 men. The Board of Directors held 14 meetings in 2008.

Corporate governance The Norwegian recommendation for corporate governance was last issued on 4 December 2007. Helgeland Sparebank's Board of Directors embraces the contents of this recommendation and makes every effort to adhere to it at all times. Evaluation of the Board of Directors' work in 2008 has been done. Corporate governance comprises targets, aims and overall principles according to which the Group is managed in order to safeguard the Bank's PCCholders', the depositors' and other groups' interests in the Group. Corporate governance shall ensure that the Group's assets and liabilities are managed and taken care of in an appropriate manner, providing added assurance that the stated targets and goals are met and that the strategies are adhered to and realised. The main principles are based on openness, predictability and transparency. A more detailed description of the Group's policy with regard to corporate governance has been included in a separate section of the Annual Report.

The Bank has established Helgeland Boligkreditt AS and during the first quarter of 2009 it will be applying for the necessary licence to run a mortgage company which would be able to issue preference bonds. This would enable the Bank to participate in the authorities’ scheme according to which preference bonds may be swapped for government securities. The company is a wholly-owned subsidiary of Helgeland Sparebank. An increase in credit losses is expected due to the general economic development, but not on a higher level than the rest of the Norwegian banking industry. This means a continued, sharp focus on preventive work relating to the Bank's corporate banking commitments. In 2009 too, the Bank will make every effort to increase other (non-interest) income through the sale of insurance- and savings products, and in order to ensure a satisfactory level of net interest income.

Future prospects

Vote of thanks

There is uncertainty related to the way in which Helgeland will be affected by the global financial crisis. The general economic outlook has worsened and this will mean big challenges in 2009. Reduced activity levels in industry and commerce and higher unemployment are expected. Moderate property prices over time are likely to bring about lower falls in prices of residential- and commercial property in our region than in central locations.

The Board of Directors is very pleased with the good result which was achieved in 2008 and would like to say a big thank you to all staff for their excellent efforts throughout the year which is now behind us. The Board of Directors would also wish to express its appreciation to all the Bank's customers and good contacts for their cooperation in 2008.

The building sector and engineering industry are experiencing reasonable activity levels, and even though it varies from place to place, there has not been the same slowdown here as in the rest of Norway.

15

ANNUAL REPORT AND ACCOUNTS 2008 FROM THE BOARD OF DIRECTORS

Mo i Rana 31. december 2008 / 26. february 2009

Eivind K. Lunde

Chair

Marianne Myrnes Steinrud

Thore Michalsen

Inger Lise Pettersen

Deputy chair

Bjørn Johansen

May Heimdal

Staff's repr.

Arnt Krane CEO

16

CORPORATE GOVERNANCE

Corporate Governance

follows: "The Bank considers it important to pay a competitive cash dividend to holders of Primary Capital Certificates, and the sum total of cash dividend and provisions to the dividend equalisation reserve shall reflect the Primary Capital Certificate holders' share of the equity. When determining the annual settlement, the Bank will consider offering a scrip issue in lieu of dividend and/or allocation to the dividend equalisation reserve as an alternative to a cash dividend."

1.Role and division of responsibility Helgeland Sparebank complies in its corporate governance policy with the "Norwegian Recommendation for Corporate Governance" last issued 4 December 2007, as far as it is appropriate for savings banks with Primary Capital Certificates (PCCs) listed on the Oslo Stock Exchange.

4. Predictability and treating all PCC-holders equally

The Bank emphasises the importance of ensuring independent governance and control, equal treatment of PCC holders, and a balanced relationship with other interest groups.

The Board of Directors and the Bank's senior management make every effort to treat all PCC-holders equally. In accordance with currently applicable laws, acquisition of more than 10 per cent of a bank's PCCs requires the authorities' approval.

The Board of Trustees is the Bank's highest governing body and is composed of four groups with a total of 25 members. The depositors elect 8 members, Nordland County Council 3 members, the PCC holders, 8 members, and the Bank's employees, six members. To amend the Bank's Articles of Association, a motion to this effect must be considered by two meetings of the Board of Trustees, and two-thirds of the members of the Board of Trustees who are present must vote in favour of the amendment proposal.

5. Freely negotiable certificates The Bank's by-laws contain no limitations with regard to the negotiability of its PCCs.

6. The PCC-holders' participation and influence

The Board of Trustees elects the Bank's Board of Directors, which is responsible for ensuring that the Bank has sound corporate governance. The Board of Trustees also elects a Control Committee consisting of three members.

The PCC-holders can exercise their influence through the election of members for the Bank's Board of Trustees, on which they have 8 of the 25 members. The elections shall take place in election meetings which must have been held by the end of April, and before the constitutional meeting of the Board of Trustees. Invitations to the election meeting, together with agenda, forms for signing up, and the election committee's nominations, are sent to all PCC-holders two weeks before the election meeting is to take place. It is possible for a member to give a power of attorney to someone else who would represent the member at the meeting.

2 Operations Helgeland Sparebanken's objects are set out in Article 1-1 of the Articles of Association. The Bank's objects are to promote saving by accepting deposits from an undefined group of depositors, to supply investment services and other financial services, and to administer securely all the assets at its disposal in compliance with the statutory regulations that apply at any time to savings banks and securities firms.

7. Election Committees

The Articles of Association are reproduced in full (in Norwegian) on the Bank's website: www.hsb.no

The election committees prepare the depositors' election for the Board of Trustees, the PCC-holders' election for the Board of Trustees and the election which take place at the Board of Trustees. The Bank's net pages contain information about the persons on the committees.

The Board of Directors has determined the Bank's corporate vision, business concept, core values, strategic and financial objectives, service objectives, and ethical guidelines. 3. The Company's capital and dividend

8. The composition of the Board of Directors and its independence

The Bank''s strategic aim for core capital and capital adequacy is that these two ratios shall be at the level of other Norwegian savings banks (excluding DnB NOR). The Bank's objective is to achieve a return on equity that is competitive in the market seen in relation to the Bank's risk profile. The return on equity shall be equivalent to the risk-free interest-rate + 5 %.

The election committee of the Board of Trustees proposes candidates to the Board of Directors in accordance with the provisions on its composition in legislation and Articles of Association. No members of the Board of Directors or representatives of the Bank's senior management are members of the election committee. The Chairman and Vice-Chairman of the Board are elected in separate ballots.

In autumn 2007, the Board of Trustees considered a proposal to adjust the Bank's dividend policy to read as

17

CORPORATE GOVERNANCE management. The Bank has no share options or bonus agreements. The remunerations paid to individual senior management are shown in a note to the accounts.

The Board of Directors has 6 members as follows: •





Chairman of the Board: Eivind Kåre Lunde, 60, Bergen. Graduate economist (diplomøkonom) and director and chairman of the board for a number of companies. Deputy Chairman: Thore Michalsen, 64, Rana. Master of Science in Engineering (sivilingeniør) and CEO of Eka Chemicals Rana. Directors: Inger Lise Pettersen, 56, Hemnes. Advisor, Nordland County Administration. Bjørn Johansen, 60, Brønnøy. Siviløkonom (master's degree in economics). Marianne Myrnes Steinrud, 40 Education in tourism. May Lisbeth Heimdal, 54, employees' representative. Varied professional education in banking and human resources administration

13 .Information and communication Helgeland Sparebank is listed on the Oslo Stock Exchange, which is informed of dates of important events such as election meetings and meetings of the Board of Trustees and also of financial information in the form of interim reports and annual financial statements. Corresponding information is made available on the Bank's net pages. 14. Merger The Financing Activities Act set limitations for how big a part of the Bank's PCCs may be held by one owner. Any question of merger is decided by the Boards of Trustees in the savings banks involved.

9. The work of the Board of Directors

15. Auditor

The Board of Directors meets once a month on average, and works in accordance with the plan established for the year. In addition to the elected members, the employees' deputy representative, CEO and deputy CEO attend Board meetings.

Helgeland Sparebank has appointed an internal auditor who on behalf of its CEO shall evaluate and check that reassuringly appropriate routines within the most important areas have been established in order to limit risk. The control exercised by the internal auditor shall be based on an audit plan prepared each year. The Board of Trustees has appointed the Bank's external auditor and approves his/her remuneration.

Primary objectives and strategy are determined in the annual strategy process. Action plans and budgets are prepared on this basis. The Board of Directors undertakes an annual evaluation of the members' independence and the Board's combined competence.

The Board of Trustees has appointed an external auditor from PriceWaterhouseCoopers, and has approved the auditor's fee

10. Risk management and internal control The Bank's management team includes the post of bank director in charge of risk management. The Bank’ s various areas of risk are assessed annually and an overview of risk prepared. The Board of Directors has also adopted guidelines for internal control. Reporting of internal control follows the Bank's organisational structure, and internal control reports are considered annually by the Board at the same time as the review of risk 11. Remuneration to the Board of Directors The Board of Trustees fixes the fees paid by the Bank to Directors. Directors' remunerations reflect their responsibilities and competence, the amount of time they spend on board duties and the complexity of the matters they deal with. The fees paid to individual Directors appear in a note to the accounts. No remuneration is paid other than fees set by the Board of Trustees. 12. Remuneration to senior management The Board of Directors sets the remunerations paid to the Bank's CEO and the principles for remunerating senior

18

PROFIT AND LOSS ACCOUNT PROFIT AND LOSS ACCOUNT

Parent Bank

Group

(Amounts in NOK mill.)

2007

2008

807

1 133

Interest receivable and similar income (Note 5)

2008

2007

1 136

808

493

794

Interest payable and similar costs (Note 5)

796

495

314

339

Net interest- and credit commission income

340

313

85

83

Commissions receivable and income from banking services (Note 6)

83

85

14

14

Commissions payable and costs relating to banking services (Note 7)

14

14

70

69

Net commission income

69

71

33

-6

Gains/losses on financial instruments available for sale (note 8)

-5

31

3

2

202

209

Operating costs (Notes 10, 11, 12, 13, 14)

12

33

Losses on loans guarantees etc (note 15)

206

162

6

12

212

174

49

52

163

122

29

10

Other operating income (note 9)

Result before gains/losses from associated companies and tax Gains/losses from associated companies (note 16) Result before tax Tax payable on ordinary result (note 17) Result from ordinary operations after tax (note 18)

3

7

209

207

36

10

162

205

15

37

177

242

49

51

128

191

Allocations Donations fund

37

18

Dividends on PCCs

9

13

Transferred to/from Dividend Equalisation Fund

91

85

Transferred to Savings Bank's Fund

-3

-4

Fund for evaluation differences

163

122

Total transfers and allocations

22,3

14,3

Result per PCC in kroner (note 18)

14,9

26,2

22,3

14,3

Diluted result per PCC, Kroner (note 18)

14,9

26,2

19

BALANCE SHEET

BALANCE SHEET

Parent bank 31.12.07

Group 31.1208

(Amounts in NOK million)

31.1208

31.12.07

ASSETS 313

593

Cash and balances at central banks (note 19, 32)

593

313

0

183

Loans to and claims on credit institutions (note 20)

183

0

12 718

14 080

14 070

12 697

28

197

197

28

Loans to and claims on customers (note 21,22) Financial derivatives (note 23)

936

1 264

112

135

46

48

Investments in subsidiaries (note 26,28)

32

37

49

51

29

12

14 263

16 600

Certificates, bonds and shares available for sale (note 22,24,25)

1 264

936

154

135

Deferred tax benefit (note 29)

40

32

Fixed assets, investment property and fixed assets held for sale (note 30)

77

85

Investments in associated companies (note 27)

Other assets (note 31) Total assets

16

30

16 594

14 256

LIABILITIES AND EQUITY CAPITAL 187

519

519

185

7 962

8 615

Deposits from customers and liabilities to customers (note 2, 34)

8 581

7 930

4 461

5 724

Borrowings through the issuance of securities (note 2,22,35)

5 724

4 461

32

1

1

32

205

209

213

211

71

70

12 918

15 138

321

348

Liabilities to credit institutions without agreed maturity (note 2,22,33)

Financial derivatives (note 23) Other liabilities (note 36) Subordinated loan capital (note 2, 37) Total liabilities Paid-in equity capital (note 38,39)

70

71

15 108

12 890

348

321

1 024

1 114

Accrued equity capital/retained earnings (note 38)

1 138

1 045

1 345

1 462

Total equity capital

1 486

1 366

14 263

16 600

16 594

14 256

Total liabilities and equity capital Contingent liabilities off the Balance Sheet (note 40,41)

Helgeland Sparebank's Board of Directors Mo i Rana 31. december 2008 | 26. february 2009

Eivind K. Lunde

Thore Michalsen

Chairman

Deputy Chairman

Marianne Myrnes Steinrud

Bjørn Johansen

Inger – Lise Pettersen

May Heimdal Staff’ s representative

Arnt Krane

CEO

20

CHANGE IN EQUITY CAPITAL Group

Change in equity capital during the year PCC capital owners Premium

Own

Res. for

Savings

Donat.

Divid.

capital

Fund

PCCs

valuation

Bank's Fund

Fund

Equal

variances

(Amounts in NOK million) Equity capital 01.01.08

202

120

18

9

-1

879

Value changes equity

17

11

- value change assets

6

37

Capital

9

37

12

1.366

-10

18

27

-Value change derivatives

11 -7

-9

-37

85

10

13

18

2

128

976

39

13

18

6

1.486

Paid 2008 Profit after taxes Equity capital as at 31.12.08

Total

Other Equity

Res.

74

New capital issued

Dividend

PCC-

220

129

-1

91

-53

Group

Change in equity capital during the year PCC capital owners PCC-

Premium

Res. for

Savings

capital

Fund

valuation

Bank's Fund

Donat. Fund

variances

(Amounts in NOK million) Equity capital 01.01.07

201

120

Value changes equity

57

786

4

2

Equity capital as at 31.12.07

201

120

Total

Other Equity

Equal

Capital

Res.

Paid Profit after taxes

Dividend

Divid.

19

28

-13

-28

6

1.217

-7

-1 -40

12

91

29

9

37

13

191

73

879

37

9

37

12

1.366

Parent bank

Change in equity capital during the year PCC capital owners PCC-

Premium

Own

Res. for

Savings

capital

Fund

PCCs

valuation

Bank's

variances

Fund

64

879

(Amounts in NOK million) Equity capital 01.01.08 New capital issued

202

120

18

9

-1

Total

Divid.

Fund Equal

36

Res.

Dividend

9

37

1.345 27

Value changes equity

11

- value change assets

11

22

1

-value change derivatives

11

Paid Profit after taxes Equity capital as at 31.12.08

Donat.

220

129

-1

21

-7

-9

-37

-53

-4

85

10

13

18

122

73

974

39

13

18

1.462

CASH FLOW STATEMENT

Parent bank

Change in equity capital during the year PCC capital owners

(Amounts in NOK million) Equity capital 31.12.06

Res.For

Savings

PCC-

Valuation

Bank's

capital

variances

fund

321

IFRS 01.01.07 Equity capital 01.01.07

321

Didid.

0

822

63

-37

63

786

4

2

Value changes equity Paid

Donat.

Equal

fund

Res.

Equity capital 31.12.07

321

Total

19 19

1 163 0

28

55

28

1 217

-28

-40

6 -13

Profit after taxes

Dividend

-3

91

29

9

37

163

64

879

36

9

37

1 345

CASH FLOW STATEMENT Parent Bank

Group

31.12.07

31.12.08

-563

-306

296

234

-195

-323

31.12.08

31.12.07

Cash flow from lending operations (A)

-306

-563

Cash flow from deposit operations ( B)

234

296

-323

-195

Cash flow from securities investments (C)

12

28

28

12

-143

-185

Remaining cash flow from current operations ( E)

-185

-143

-593

-552

Cash flow from operations (A+B+C+D+E=F)

-552

-593

662

1 031

1 031

662

2

-16

Cash flow from investments in fixed assets ( H )

-16

2

71

463

Change in liquid assets (F+G+H)

463

71

Liquid assets at the start of the period (note 19 og 21.2)

313

242

Liquid assets at the end of the period (note 19 og 21.2)

776

313

Cash flow from deposits with credit institutions ( D)

Cash flow from financing ( G )

242

313

313

776

313

593

Cash and claims on central banks

593

313

0

183

Loans to and claims on credit institutions (note 19)

183

0

Liquid assets consist of:

22

NOTES

NOTE 1 - – Accounting principles Group General background

Basis for the preparation of the accounts

The Parent Bank Helgeland Sparebank aims to be a profitable and leading bank in Helgeland. The objective of the Bank is to sell all types of financial products and services, including insurance and pension products, to retail customers, small and medium-sized enterprises, municipalities and institutions in Helgeland.

Helgeland Sparebank has prepared its consolidated accounts for 2008 in compliance with International Financial Reporting Standards (IFRS), which have been approved by the EU. The company accounts for Helgeland Sparebank are presented in compliance with simplified IFRS: The Group applies the historical cost principle with the following modifications: available-for-sale financial assets, financial assets and liabilities (including financial derivatives) carried at fair value in the profit and loss account, and investment properties The consolidated financial statements were adopted by the Board of Directors on 26 February 2009.

The Bank's registered office is located at Jernbanegata 15, 8622 Mo i Rana. The Bank's head office function is divided between Mosjøen and Mo i Rana. The Bank also has 14 branches located throughout Helgeland: Brønnøysund, Berg, Vevelstad, Hommelstø, Vega, Hattfjelldal, Trofors, Sandnessjøen, Herøy, Vågaholmen, Lurøy, Hemnesberget, Nesna and Korgen.

Amendments to published standards effective in 2008

Helgeland Sparebank is listed on Oslo Børs, the Oslo stock exchange.

The following amendments to published standards are mandatory for accounting periods beginning on or after 1 January 2008, but are not relevant for the group's operations:

Subsidiaries Subsidiaries are defined as all companies in which Helgeland Sparebank has a controlling interest. A controlling interest is normally achieved when the Group owns, directly or indirectly, more than 50 per cent of the shares in the company and the Group is able to exercise control over the company. The acquisition method is applied to accounting relating to acquired units. Companies that have been acquired or sold during the year are consolidated in the Group accounts from/up to the date on which the acquisition/sale was implemented. Identifiable assets and liabilities in subsidiaries are carried at fair value at the acquisition date. Any surplus value over and above what can be linked to identifiable assets and liabilities is shown in the accounts as goodwill, and any shortfall in market value is recognised in the profit and loss account directly. Minority interests are included in the Group's equity. Intra-group transactions, balances, internal profit and unrealised gains/losses are netted out.



IAS 39 (Amendment), 'Reclassification of financial assets'. An amendment to the standard, permits an entity to reclassify non-derivative financial assets out of the fair value through profit or loss category in particular circumstances. The amendment also permits an entity to transfer from the available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables.



IFRS 7 (Amendment), 'Reclassification of financial assets'. Specify the demands on notes if the changes in reclassification according to IAS 39 are relevant for the group's financial statements.

Interpretations effective in 2008 •

Associated companies Associated companies are defined as companies in which the Group exercises significant influence. This would normally involve investments of between 20 per cent and 50 per cent of the companies' equity. Investments in associated companies are valued using the equity method. When the Group's share of a loss exceeds the investment, the investment is recognised in the accounts at zero value. The loss is included in the accounts to the extent that the Group has obligations to cover the loss. Intra-group transactions, balances and unrealised gains are netted out against the Group's equity stake in the associated company.

IFRIC 14,'IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction', provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the group's financial statements, as the group has a pension deficit and is not subject to any minimum funding requirements.

Interpretations effective in 2008 but not relevant The following interpretation to published standards is mandatory for accounting periods beginning on or after 1 January 2008 but is not relevant to the group's operations:

23

NOTES



or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation as equity, provided the financial instruments have particular features and meet specific conditions. The group will apply the IAS 32 and IAS 1(Amendment) from 1 January 2009.

IFRIC 11, 'IFRS 2 – Group and treasury share transactions', provides guidance on whether share-based transactions involving treasury shares or involving group entities (for example, options over a parent's shares) should be accounted for as equity-settled orcash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. This interpretation does not have an impact on the group's financial statements.



IFRS 1 (Amendment) 'First time adoption of IFRS', and IAS 27 'Consolidated and separate financial statements' (effective from 1 January 2009). The amendment will not have any impact on the group's financial statements. The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor.



IFRS 3 (Revised), 'Business combinations' (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, withsome significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-byacquisition basis to measure the non-controlling interest in the acquiree either at fair vale or at the non-controlling interest’ s proportionate share of the acquiree's net assets. All acquisition-related costs should be expensed. The group will apply IFRS 3 (Revised) prospectively to all business combinations from 1 January 2010.



IFRS 2 (Amendment), 'Share-based payment' (effective from 1 January 2009). The amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a sharebased payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The group will apply IFRS 2 (Amendment) from 1 January 2009. It is not expected to have a material impact on the group's financial statements.



IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in IAS 39 'Financial instruments: Recognition and measurement'. This eliminates the inconsistency of terms between IAS 39 and IAS 23. The group will apply the IAS 23 (Amendment) prospectively to the capitalisation of borrowing costs on qualifying assets from 1 January 2009.

• IFRIC 12, Service concession arrangements

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group The following standards and amendments to existing standards have been published and are mandatory for the group's accounting periods beginning on or after 1 January 2009 or later periods, but the group has not early adopted them: •





IFRS 8,'Operating segments', was early adopted in 2008. IFRS 8 replaces IAS 14, 'Segment reporting', and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and relatedinformation'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented. In addition, the segments are reported in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker. IAS 1 (Revised), 'Presentation of financial statements' (effective from 1 January 2009). The revised standard will prohibit the presentation of items of income andexpenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The group will apply IAS 1 (Revised) from 1 January 2009. IAS 32 (Amendment), 'Financial instruments: Presentation', and IAS 1 (Amendment), 'Presentation of financial statements' – 'Puttable financial instruments and obligations arising on liquidation' (effective from 1 January 2009). The amended standards require entities to classify puttable financial instruments and instruments,

24

NOTES •

IAS 28 (Amendment), 'Investments in associates' (and consequential amendments to IAS 32, 'Financial Instruments: Presentation', and IFRS 7, 'Financial instruments: Disclosures') (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. An investment in associate is treated as a single asset for the purposes of impairment testing. Any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The group will apply the IAS 28 (Amendment) to impairment tests related to investments in subsidiaries and any related impairment losses from 1 January 2009.



IAS 36 (Amendment), 'Impairment of assets' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The group will apply the IAS 28 (Amendment) and provide the required disclosure where applicable for impairment tests from 1 January 2009.



IAS 38 (Amendment), 'Intangible assets' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. A prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. The group will apply the IAS 38 (Amendment) from 1 January 2009. It is not expected to have a material impact on the group's financial statements.



IAS 19 (Amendment), 'Employee benefits' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. – The amendment clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation. – The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation. – The distinction between short term and long term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered.



IAS 37, 'Provisions, contingent liabilities and contingent assets, requires contingent liabilities to be disclosed, not recognised. IAS 19 has been amended to be consistent.

The group will apply the IAS 19 (Amendment) from 1 January 2009. •

IAS 39 (Amendment), 'Financial instruments: Recognition and measurement' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. – This amendment clarifies that it is possible for there to be movements into and out of the fair value through profit or loss category where a derivative commences or ceases to qualify as a hedging instrument in cash flow or net investment hedge. – The definition of financial asset or financial liability at fair value through profit or loss as it relates to items that are held for trading is also amended. This clarifies that a financial asset or liability that is part of a portfolio of financial instruments managed together with evidence of an actual recent pattern of short-term profittaking is included in such a portfolio on initial recognition. – The current guidance on designating and documenting hedges states that a hedging instrument needs to involve a party external to the reporting entity and cites a segment as an example of a reporting entity. This means that in order for hedge accounting to be applied at segment level, the requirements for hedge accounting are currently required to be met by the applicable segment. The amendment removes the example of a segment so that the guidance is consistent with IFRS 8, 'Operating segments', which requires disclosure for segments to be based on information reported to the chief operating decision-maker. – When remeasuring the carrying amount of a debt instrument on cessation of fair value hedge accounting, the amendment clarifies that a revised effective interest rate (calculated at the date fair value hedge accounting ceases) are used.

The group will apply the IAS 39 (Amendment) from 1 January 2009 •

25

IAS 1 (Amendment),'Presentation of financial statements' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39, 'Financial instruments: Recognition and measurement' are examples of current assets and liabilities respectively. The group will apply the IAS 39 (Amendment) from 1 January 2009.

NOTES •





IFRS 5 (Amendment), 'Non-current assets held-for-sale and discontinued operations' (and consequential amendment to IFRS 1, 'First-time adoption') (effective from 1 July 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The amendment clarifies that all of a subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. A consequential amendment to IFRS 1 states that these amendments are applied prospectively from the date of transition to IFRSs. The group will apply the IFRS 5 (Amendment) prospectively to all partial disposals of subsidiaries from 1 January 2010.

• •

• • • •

IAS 27 (Revised), 'Consolidated and separate financial statements', (effective from 1 July 2009). The revised standard requires the effects of all transactions with noncontrolling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The group will apply IAS 27 (Revised) prospectively to transactions with non-controlling interests from 1 January 2010.

• •



Consolidation principles

There are a number of minor amendments to IFRS 7, 'Financial instruments: Disclosures', IAS 8, 'Accounting policies, changes in accounting estimates and errors’ , IAS 10,'Events after the reporting period', IAS 18, 'Revenue' and IAS 34, 'Interim financial reporting', which are part of the IASB's annual improvements project published in May 2008 (not addressed above). These amendments are unlikely to have an impact on the group’ s accounts and have therefore not been analysed in detail.

The consolidated accounts comprise Helgeland Sparebank and all its subsidiaries. The consolidated financial statements have been prepared under the assumption of uniform accounting principles for equal transactions and other events under equal circumstances.

Presentation currency All amounts are stated in NOK million unless otherwise specified. The Group's functional foreign currency and presentation currency is Norwegian kroner. The Group has no operations of its own abroad. Assets and liabilities in foreign currencies are translated into Norwegian kroner at the exchange rate applicable on the balance sheet date, and income and expenses are translated into Norwegian kroner at the exchange rates applicable at the time of the transaction. Translation differences are recognised in the profit and loss account as they occur.

Interpretations and amendments to existing standards that are not yet effective and not relevant for the group's operations The following interpretations and amendments to existing standards have been published and are mandatory for the group's accounting periods beginning on or after 1 January 2009 or later periods but are not relevant for the group's operations: • • •

• •

Presentation' and IFRS 7, 'Financial instruments: Disclosures') (effective from 1 January 2009). IAS 29 (Amendment), 'Financial reporting in hyperinflationary economies' (effective from 1 January 2009). IAS 31 (Amendment), 'Interests in joint ventures' (and consequential amendments to IAS 32 and IFRS 7) (effective from 1 January 2009). IAS 38 (Amendment), 'Intangible assets' (effective from 1 January 2009). IAS 40 (Amendment), 'Investment property' (and consequential amendments to IAS 16) (effective from 1 January 2009). IAS 41 (Amendment), 'Agriculture' (effective from 1 January 2009). IAS 20 (Amendment), 'Accounting for government grants and disclosure of government assistance' (effective from 1 January 2009). IFRIC 15, 'Agreements for construction of real estates' (effective from 1 January 2009). The minor amendments to IAS 20'Accounting for government grants and disclosure of government assistance', and IAS 29, 'Financial reporting in hyperinflationary economies', IAS 40, 'Investment property', and IAS 41, 'Agriculture', which are part of the IASB's annual improvements project published in May 2008 (not addressed above) (effective from 1 January 2009). IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009).

Presentation in the balance sheet and profit and loss account

IFRIC 13, 'Customer loyalty programmes' (effective from1 July 2008). IFRIC 16, 'Heges of a net investment in a foreign operation' (effective from 1 October 2008). IAS 16 (Amendment), 'Property, plant and equipment' (and consequential amendment to IAS 7, 'Statement of cash flows') (effective from 1 January 2009). IAS 27 (Amendment), ‘ Consolidated and separate financial statements’ (effective from 1 January 2009). IAS 28 (Amendment), 'Investments in associates' (and consequential amendments to IAS 32, 'Financial Instruments:

Loans Loans are recognised in the balance sheet depending on the counterparty, either as loans to and deposits with credit institutions or as loans to customers, depending on the measurement principle. Interest income on loans is included in the line for "net interest income". Changes in value that can be linked to identified objective evidence of impairment on the balance-sheet date for loans carried at amortised cost and for the portfolios of loans at fixed interest rates

26

NOTES that are carried at fair value are included in "write-downs of loans and guarantees". Other changes in the value of portfolios of loans at fixed interest rates carried at fair value are included in the line "net gains on financial instruments at fair value".

The Group conducts its business mainly within one geographical segment, which is Helgeland, with a minor proportion outside Helgeland.

Financial instruments The Group defines its financial assets and liabilities within the following categories: • Financial derivatives • Available-for-sale financial assets • Securities issued and subordinated loan capital Securities issued at floating rates of interest Securities issued, fixed-interest Securities issued, hedges • Loans to customers Loans at floating rates of interest Loans at fixed-interest rates

Certificates and bonds available for sale This category includes certificates and bonds that the Group can sell as needed and that do not form part of a trading portfolio. Interest income and expenses for other portfolios of certificates and bonds are included in "net interest income". Other changes in value are included in "net gains on financial instruments at fair value". Shares available for sale Unrealised changes in value in the portfolio available for sale are recognised against equity. Write-downs below cost price are recognised in the profit and loss account. When such gains or losses are realised, they are recognised under "net gains/losses on financial instruments".

Financial instruments are valued in accordance with IAS 39. All purchases and sales of financial instruments are recognised in the accounts at the transaction date.

Liabilities to credit institutions and deposits from customers. Liabilities to financial institutions and customers are recognised, depending on the counterparty, either as liabilities to credit institutions or as deposits from customers, regardless of the measurement principle. Interest expense on the instruments is included in "net interest income" based on the internal rate of return method. Other changes in value are included in "net gains on financial instruments at fair value".

Financial derivatives The agreements entered into by the Group are derivatives related to interest rates and exchange rates. Interest swaps are related to fixed-interest deposits and loans; currency swaps are related to syndicated borrowing in euro Derivatives are measured at their fair value (clean value), and together with accrued/earned interest amount to the value in the balance sheet (also see the separate section on hedge accounting). The impact of any change in fair value is recognised in the profit and loss account as "gains/losses on financial instruments". Interest on derivatives is included as a component of the net interest.

Securities issued and subordinated loan capital Securities issued and subordinated loan capital include issued certificates, bonds and subordinated loan capital regardless of the measurement principle. Interest expense on the instruments is included in "net interest income". Other changes in value are included in "net gains on financial instruments at fair value". Financial guarantees issued Contracts that require the Group to compensate the holder for a loss resulting from a specific debtor's omission to pay in accordance with the conditions in the debt instrument are classified as financial guarantees issued. Changes in the fair value of financial guarantees are included in the line "financial instruments at fair value". The change in value of guarantees is included in loans that are written down individually. Changes in the value of such guarantees are included in "net write-downs on loans and guarantees".

Fair value is defined as the quoted stock exchange price for listed securities. In the case of unlisted securities where there is no active market, the Group uses measurement techniques to determine the fair value. Financial derivatives are recognised as assets when the fair value is positive and as liabilities when the fair value is negative Financial assets available for sale Financial assets available for sale are assets acquired for purposes other than for achieving gains. These are defined as investments that do not form part of a trading portfolio, but that are negotiable and can be sold freely if required. The Group has shares, certificates, bonds, and other interest-bearing securities which are classified within this group.

Segment reporting

Financial assets available for sale are recognised as equity at fair value. Write-downs below the cost price are recognised in the profit and loss account, and in the event of reversal, the writedown is reversed in the profit and loss account as long as it is lower than the cost price. Realised gains/losses recognised in the profit and loss account, as well as changes in value in the profit and loss account including dividends, are shown in the financial statements under "net gains/losses on financial instruments" during the period in which they arise. For interest-bearing financial

The Group's operations involve only one strategic business area, which is organised and managed on a total basis. The Group conducts traditional banking operations involving the sale of savings, investment and insurance products on a brokerage basis. The banking operations are divided into segments, categorised as the retail market and the corporate market.

27

NOTES assets, the interest is recognised as income in the profit and loss statement against "net interest". The Bank has no items in foreign exchange.

securities, liabilities are reduced, and the difference between book value and the payment made (premium or discount) is recognised in the profit and loss account as a gain or loss relating to securities issued.

On 16 October 2008, the Norwegian Ministry of Finance laid down regulations based on changes in the accounting standards IAS 39 and IFRS 7 established by the IASB and approved by the EU. The changes allow the reclassification of portfolios previously classified as trading portfolios to held-to-maturity investments. The reclassification means that the portfolio is carried at amortised cost (whereas previously it was valued at fair value). As indicated in the section above, Helgeland Sparebank has chosen not to reclassify the portfolio.

Loans to customers The Bank has defined its market area (Helgeland) as one risk area. Loans at floating rates of interest are measured at amortised cost in compliance with IAS 39. The amortised cost is the purchase cost less repayments on capital, plus or minus cumulative amortisation resulting from an effective interest method, less any amount for impairment or exposure to loss. Loans at amortised cost, including accrued interest, reflect the value in the balance sheet. Interest income on loans to customers is recognised as income under net interest. When loans are first recognised in the balance sheet, they are valued at fair value.

The fair value of listed investments is based on the price in effect on the balance sheet date. In the case of unlisted securities where there is no active market, the measurement is based on the last issue price or traded value of which we are aware. For securities that are not traded, the value is determined on the basis of the available accounting information.

Loans at fixed interest rates are recognised at fair value in the profit and loss account. The change in value is included in the line "net gains/losses on financial instruments". Loans at fair value, including accrued interest, reflect the value in the balance sheet. Interest income on fixed interest loans to customers is recognised as income under net interest.

Financial assets are presented as current assets if the Bank's management has decided to sell these assets within 12 months of the balance sheet date; if not, they are classified as fixed assets. Securities issued and subordinated loan capital Securities issued are defined as securities which the Group does not intend to trade and which were originally issued by the Group. Buy-backs of own bonds in connection with debt reduction are netted against bond debt. Liabilities at floating rates of interest are assessed at fair value when they are first included in the accounts and later at amortised cost through the use of the effective interest method. Any premium/discount is accrued over the term to maturity. The liabilities are shown in the balance sheet at amortised cost (including accrued interest). Changes in value for amortised cost are recognised in the profit and loss account and net interest.

Write-downs on loans A loan or a group of loans is written down when there is objective evidence of impairment of value as a result of loss events which can be reliably estimated, and which are important for the expected future cash flows from the loan or group of loans. Objective evidence that a loss event has occurred may be: • The borrower has significant financial problems. • Default on payment of due interest/capital instalment • Collateral or other security is expected not to cover the loan in the event of realisation. • It is likely that the borrower will go bankrupt or enter into debt negotiations • There are indications of a measurable reduction in the future cash flows from a group of loans, although it is not yet possible to identify the impairment of value for each individual loan within the group (for instance negative changes in payment status or in financial assumptions of importance for the group).

Liabilities at fixed rates of interest are assessed at fair value. The liabilities are shown in the balance sheet at fair value (clean price) including accrued interest, less the Bank's own portfolio. Changes in value are recognised in the profit and loss account as "gains/losses on financial instruments" and interest expense in the profit and loss account against net interest. Hedge accounting - the Bank assesses and documents the effectiveness of hedging, both when it is first classified and on an ongoing basis. In the case of value hedge accounting, the hedged item is recognised at amortised cost with the change in value in the profit and loss account and net interest. The change in value of the hedging instrument is recognised against equity. The Group does not have cash flow hedges.

Loans are written down individually when there is objective evidence of the loan's impairment of value. The amount of the write-down is calculated as the difference between the book and present value of future cash flows calculated according to the expected life of the loan in question. The discounting is done through the use of the effective interest method. Calculated loss is shown on a gross basis in the balance sheet as an individual write-down on loans and is recognised in the profit and loss account as a loss cost. Loans which have been written down individually are not included in the basis for collective writedowns.

The fair value is calculated by discounting the cash flow from the loans using a required rate of return derived from the zero coupon curve. Credit spreads on interest-bearing securities are changed on the basis of an all-round assessment in which observed trades in the market, credit margin reports from various securities houses, and internal assessments are included as a basis for the overall assessment. A change in credit spreads will influence the required rate of return, as the supplement added to the zero coupon curve is changed. In the case of purchase of own

Loans are written down collectively when there is objective evidence suggesting impairment of a group of loans. Customers are classified in risk groups on the basis of different parameters

28

NOTES such as financial strength, revenue generation, liquidity and funding, business sector, geographical location and behavioural score. These factors provide indications of debtors' ability to service their loans, and are relevant for the calculation of future cash flows from the different risk groups. Each individual risk group is assessed collectively with regard to the need for writedowns.

cost price. The recoverable amount is calculated each year, and also when there are indications of impairment of value. Intangible assets with limited economic life are depreciated and any need for write-down is assessed. Depreciation is made on a straight-line basis over estimated economic life. The depreciation amount and depreciation method are subject to annual review, when financial realities are used as a basis.

The calculation of the write-down amount for a group of loans is made on the basis of expected future cash flows and historical loss experience for the different risk groups. Historical losses are adjusted for the impact of new conditions which were not reflected during the period to which the historical losses refer, and the effect of events which are no longer relevant is removed. If the previously calculated write-down should later prove to have been too high, it is reversed and recognised in the profit and loss account.

Costs relating to the purchase of new electronic data processing programmes are shown in the balance sheet as an intangible asset when such costs do not form part of the acquisition cost relating to hardware. The abovementioned programmes are depreciated over a period of 5 years. Costs of maintenance of these programmes are charged direct to the profit and loss account provided that the changes to the programmes do not increase the future financial benefits involved.

Estimates of future cash flows depend upon changes in relevant, observable data which can indicate a change in the likelihood of loss and the size of loss within the group. The method and assumptions for calculating future cash flows are reviewed on a regular basis.

Fixed assets Fixed assets, with the exception of investment property and buildings, are evaluated at cost price minus accumulated depreciation and write-downs. When operating equipment is sold or discarded, the cost price and accumulated depreciation and writedowns are reversed any, gains or losses being included in the profit and loss account.

When a loan can no longer be recovered and the size of the loss has been determined, the loan is written off against the related provisions for losses. Recoveries from previously written down loans are recognised in the profit and loss account as a reduction in write-downs of losses.

Interest income and interest costs

Cost price of an item of operating equipment is defined as purchase price including taxes, levies and direct costs relating to making the operating equipment in question ready for use. Any costs incurred after the company has started to use the operating equipment, such as repairs and maintenance, are normally charged to the profit and loss account In those cases where increased revenue generation as a result of such repairs/maintenance can be proved, the costs involved are shown in the balance sheet as additions to assets. Depreciation is calculated by using the straight-line method over the following periods:

Interest income and interest costs relating to assets and liabilities measured at amortised cost are recognised in the profit and loss account on an ongoing basis through the use of the effective interest method. Interest income on loans which have been written down is calculated by using the same effective rate of interest as the one applied when discounting the original cash flow. Interest income on fixed-interest loans is recognised at fair value. Changes in the fair value of fixed-interest loans are recognised in the profit and loss account as a change in the value of financial instruments.

-Buildings and other real estate -Machinery, equipment fixtures and cars

Commission income and expenses In general, commission income and expenses are accrued as a service is provided.

30 – 40 years 3 – 10 years

The depreciation period and – method are reviewed annually in order to make sure that the method and period being used correspond to the economic realities for the operating equipment involved. The same applies to scrap value. In connection with the implementation of IFRS, a breakdown into the several components involved is made in the case of operating equipment of larger value and when the various components have different economic lives. A new assessment of economic life is then made for each individual component and depreciation is adjusted accordingly.

Intangible assets Intangible assets are shown in the balance sheet when probable future financial advantages relating to the asset in question can be identified, and when the asset's cost price can be reliably estimated. Intangible assets are shown in the accounts at cost price.

Investment property is assessed at market value based on a valuation made by independent experts Independent valuation is obtained when there are indications of a change in value but at

Intangible assets with unlimited economic life are not depreciated, but write-down is applied if the recoverable amount is lower than the

29

NOTES least every third year. Any increase in the value shown in the balance sheet as a result of revaluation of investment property is adjusted direct against the equity capital. Any downward adjustment of the balance sheet value, following revaluation, which offsets a previous increase in value of the same property is also adjusted direct against the equity capital. Any further downward adjustment as a result of revaluation is charged to the profit and loss account. Investment property is not subject to depreciation.

In cases where there are several obligations of the same kind, the likelihood of the obligation resulting in a settlement is determined by assessing the group as a whole. Provisions for the Group are included in the accounts even if the likelihood of a settlement relating to the group's individual elements may be low.

Pension costs and pension liabilities The Group's pension liabilities are related to benefit-based group pension schemes secured in insurance companies, and in unsecured schemes. Pension costs and pension liabilities shown in the accounts have been arrived at through computations made by an actuary.

Operating equipment held for sale consists of assets acquired by the Group as part of the recovery of an outstanding commitment in default. This involves assets, which the Group does not intend to keep and which are to be sold within 1 year. Such assets held for sale are assessed at market value and are not subject to depreciation.

The secured and unsecured guarantee liabilities are calculated as the discounted value of the future pension benefits which are deemed to have accrued on the balance sheet day in question, secured and unsecured, based on the employees having accrued their pension rights evenly over the period during which they were employed.

Rental agreements The Group as a tenant Rental agreements where most of the risk involves the counterpart to the agreement are classified as operational rental agreements. Rental payments are classified as operating costs and charged to the profit and loss account over the period of the contract. The Group has no financial rental agreements.

Pension resources are assessed at market value and shown net against the pension liabilities in the balance sheet. Each individual pension scheme is assessed on its own, but the value of overfunding in one scheme and under-funding in other schemes is included in the balance sheet on a net basis provided that the pension resources can be transferred between the various schemes. Net pension resources are shown in the balance sheet as prepaid costs and accrued income, whereas net pension liabilities are shown as provisions for liabilities.

The Group as a landlord/lessor The Group shows assets, which have been rented out as fixed assets in the balance sheet. Rental income is included in the accounts as income on a straight-line basis over the rental period. Direct costs incurred initially in order to establish a rental relationship are added to the rented-out asset's value in the accounts. The Group has no financial rental agreements

The pension cost for the period involved is included under Wages salaries and social costs, consisting of the period's pensionable accruals, interest cost on the calculated pension liability, expected return on the pension resources, the impact of scheme changes and changes in estimates and pension schemes included in the profit and loss account, the effect of discrepancies between actual and expected return included in the profit and loss account, coupled with employers social security contributions subject to accrual accounting. The impact of changes in estimates and discrepancies between actual and expected return is subject to accrual accounting over the reminding accrual time or expected life only if the accumulated effect exceeds 10 per cent of the larger of pension resources and liabilities. Any change in the pension schemes is subject to accrual accounting over the remaining time of accruals.

Cash and cash equivalents In the cash flow statement, cash and cash equivalents are defined as cash, deposits with Norges Bank and other banks, certificates, bonds and loans and credits provided for other banks. Cash equivalents are short-term liquid funds, which can be converted into cash within 3 months.

Provisions

Tax

Provisions are included in the accounts when the Group has a currently valid obligation (legal or assumed) as a result of events, which have occurred, and when it is more likely than not that a financial settlement as a result of the obligation will take place, and when the size of the amount involved can be reliably estimated.

Deferred tax is calculated on all temporary differences between accounts-related and tax-related balance sheet values according to the currently applicable tax rate at the end of the period (the liabilities method). Tax-increasing temporary differences include a deferred tax liability, and tax-reducing, temporary differences, together with any loss to be carried forward, include a possible deferred tax benefit. Deferred tax benefit is shown in the balance sheet when it is likely that in the future there will be taxable income against which the deferred tax benefit can be used.

Provisions are reviewed on each balance sheet date in question, the level reflecting the best estimate of the obligation. When the effect of time is insignificant, the provisions will be equal to the amount of the cost required in order to be free of the obligation. When the effect of time is significant, the provisions will be equal to the present value of the future cash payments needed to meet the obligation.

The tax cost in the profit and loss account comprises both the period's payable tax and any change in deferred tax. The change in

30

NOTES Comparability

deferred tax reflects future payable taxes which are incurred as a result of the operations during the year.

Comparable figures have been adjusted whenever it has been deemed necessary in order to make sure that they are in accordance with the accounts presentation for this year.

Events after the balance sheet date PCC-capital

Events occurring up until the date the financial statements are regarded as approved for publication, and which concern matters which were already known on the balance sheet date, will be included in the disclosure base for adopting accounting estimates and will thus be fully reflected in the accounts. Events concerning matters, which occur after the balance sheet date, will be disclosed if they are deemed significant

In the case of the issuance of new PCCs or the acquisition of other operations, the additional costs directly related to the issuance of new certificates or the acquisition invovled are treated in the accounts as a reduction of the PCCs’ nominal value. Dividends payable on PCCs are classified as equity capital until the Bank's Board of Trustees has approved the dividend. When the Board of Trustees has approved the dividend the amount required for the dividend payment is removed from the equity capital and classified as short-term liabilities up to the time when payment is made. In the case of the Bank or the other members of the Group buying PCCs issued by the Bank, the total consideration is deducted from the aggregated PPC capital.

31

NOTES

NOTE 2 – Financial risk management

Group and parent bank Capital management

Policy for risk management and internal control Guidelines and requirements for systems and processes The governing documents are the Group's internal framework for good management and control, and the policy provides guidelines for the Group's overall attitudes to risk management, while at the same time ensuring that the Group has an effective and appropriate process for this. • •

Risk categories Credit risk: the risk of loss as a result of customers or counterparties being unable to fulfil their obligations in relation to the Bank. Market risk: the risk of loss due to changes in interest rates, foreign exchange rates and the price of shares and other securities. Liquidity risk: the risk of the Group being unable to fulfil its obligations at maturity. Operational risk: the risk of direct or indirect loss due to failure in internal routines, systems and processes, insufficient competence, damage to assets, operational breakdown or systems failure, or internal or external fraud.

Risk management is very important in order to ensure that the Group will achieve its objectives over time. Risk management is a central feature of the day-to-day operations and the Board of Directors' ongoing focus. Risk is primarily managed through policy and guidelines, parameters, powers of attorney, reporting requirements and requirements with regard to professional competence. The Board of Directors determines the Bank's credit policy, which covers credit risk, and the Bank's funding policy, which covers the areas of funding risk and market risk.

Irrespective of how good the Bank's risk management is, unexpected losses may be incurred, which means that the Group must have sufficient equity and related capital. As part of the Basel II project, the need for supplementary capital for the different risk areas has been assessed. The assessments are supported by various internal evaluations and calculation methods. A summary of this has been made in the Bank's ICAAP, which is the Board of Directors' document for the documentation of calculated capital requirements and the plan for capital management. On this basis, the Bank has specified targets for capital adequacy.

With the implementation of Basel II, a great deal of time has been spent in recent years on developing a system to provide an overview of risk assessment in the processes and associated key controls in the operative functions. Every year, the line management reports on internal control to the Board of Directors. The governing documents and control systems have been developed to take care of the focus on effective operation, risk control, principles of prudence, correct financial and non-financial information, and compliance with legislation and guidelines as well as internal guidelines and strategies. Against this background, the Board of Directors has a satisfactory basis for confirming that internal control has been taken care of in an appropriate manner.

Corporate Governance Sound corporate governance at Helgeland Sparebank includes the values, objectives, and overall principles according to which the Bank is managed and controlled in order to secure the interests of the owners, depositors, and other groups in the Bank. The Group's principles for sound corporate governance shall ensure appropriate asset management and provide added assurance that the stated targets and goals are made and that the strategies are adhered to and realised.

The Group's internal audit involves one full-time equivalent, reporting directly to the Board of Directors. The internal auditor shall assess whether reliable routines have been established in the most important areas of the Bank in order to reduce risk.

Risk management and internal control The Board's management of Helgeland Sparebank is based on the principles laid down in the Norwegian recommendation for corporate governance. The Group's principles and parameters for internal control and risk management are laid down in its own governing documents, which are reviewed by the Board of Directors: • Policy for corporate governance NOTE 2.1 - Credit risk

Group and parent bank The Group is exposed to credit risk which, can be defined as the risk of a borrower being unable to fully repay his/her/its outstanding commitments as they mature. The Bank's credit risk exposure is managed and followed up through regular analyses of borrowers’ and potential borrowers’ ability to service their outstanding commitments as far as interest and repayments are concerned and

through an assessment of the collateral or other security provided for the loans in question. The Bank's credit policy is approved by the Bank's Board of Directors providing clear guidelines for the reduction of credit risk

32

NOTES The loan portfolios – broken down by different risk classes – for corporate- and retail banking customer commitments are reported quarterly to the Board of Directors. In the case of management and monitoring of the Bank's risk contained in the corporate portfolio ongoing assessment is applied with regard to customer circumstances, ability to pay, collateral- or other security for loans, coupled with reviews done by the Bankk's credit ommittee.

outstanding commitments on the basis of official accounts for 2006, combined with a number of other parameters such as commercial or industrial sector, geographical location, any remarks made by the auditors etc. The financial class in question is combined with the security coverage provided, and the customer is classified as low, medium or high risk. Classification according to the regional model is done on an ongoing basis, based on available information in the system. All retail banking customer risk is classified on the basis of a behavioral score.The use of behavioral score is partly implemented in the Bank's power of attorney- and credit granting routines .

Risk development within the entire corporate portfolio is registered by using DnB NOR'S risk classification model (the regional model). The model takes into account the customer’ s ability to service NOTE 2.2 - Funding risk

Group and parent bank Funding risk is the risk that the Group cannot fulfil its payment obligations at maturity or as the need for funding increases. The Group's strategy for the management of liquidity risk is reviewed each year by the Board of Directors. The strategy has been under revision and a revised strategy for funding risk was approved by the Board of Directors in 2008. The strategy sets out the Bank's aggregate liquidity risk tolerance and contains specific limits and management parameters. The Bank Director, Treasury, is responsible for liquidity management, but the department for risk management monitors this area.

supervisory authority]. At 31 December 2008, the proportion of long-term funding was 88%, which is well above the target requirement. Liquidity indicator 1 was 105.4 at 31 December 2008, which is within the specified target requirements and higher than the last known average value for the reference banks. This is also within the Bank's specified target requirement. The Group has liquidity buffers in the form of long-term and short-term unutilised credit facilities, as well as investments in liquid interest rate portfolios in order to further limit the Group's funding risk. The overall deposit coverage ratio is an important parameter with regard to the follow-up of liquidity risk, i.e. the extent to which gross loans to customers are covered by deposits from customers. The Board of Directors has stipulated minimum requirements for deposit coverage, and this requirement was met throughout 2008. The Board of Directors monitors the development of the deposit coverage and funding structure on an ongoing basis, placing a great deal of emphasis on the Group's liquidity risk. The relationship between deposits from customers and loans was 60.5 % at 31 December 2008 compared with 62 % at 31 December 2007.

The Group is exposed to daily changes in available funds as a result of new deposits, deposits which have matured, drawdowns under credit facilities and guarantees, and from other cash settlements such as the settlement of financial derivatives. The Group's deposit coverage ratio is not sufficient to meet all these requirements, as experience has shown that a minimum level of reinvestment of maturing funds can be forecast with a reasonable degree of certainty. The Group's liquidity risk is reduced through diversification of funding loans as far as different markets, funding loan sources and maturities are concerned. The Bank has clear targets for the share of long-term financing of funding loans. The Board has approved a target of at least 70% long-term funding. At the same time, target figures have been set for the level of the liquidity indicators specified by Kredittilsynet [Norway's financial

33

NOTES The tables below analyse the Group's assets and liabilities at 31 December 2008 and 31 December 2007 according to relevant maturity groups with regard to the remaining term to contractual maturity. The table has been prepared in accordance with currently valid requirements and does not necessarily give a complete picture of the liquidity risk. Funding risk remaining periods until maturity, as at 31.12.2008

Group Up to 1 month

1-3 months

Liabilities to credit institutions 8 543

Deposits from and liabilities to costumers

1-5 years

103

433

Over 5 years

214

1 049

536

5 149

6 415 213

1

71

7

72

324

222

1 333

5 906

35

58

302

Subordinated loan capital 1)

8 546

Total payments 1) Financial derivatives gross settlement (in flow)

Total 8 581

Liabilities without remaining life Financial derivatives gross settlement (out flow)

Without rem life

38

3

Borrowings through the issuance of securities

3 months1 year

213 72 403

213

16 220 395

The Bank's loan approvals at 31 December 2008 were not of material value and are therefore not incorporated Funding risk remaining periods until maturity, as at 31.12.2007

Group

Liabilities to credit institutions

Up to 1 month

1-3 months

3 months1 year

1-5 years

29

40

118

514

1 165

3 239

1

4

76

Over 5 years

Without rem life

187

7 930

Deposits from and liabilities to costumers

7 930

2

Borrowings through the issuance of securities

4 918 211

Liabilities without remaining life Subordinated loan capital

2

7

36

557

1 294

3 351

9

34

Financial derivatives gross settlement (out flow) 1) 7 961

Total payments

Total

1) Financial derivatives gross settlement (in flow)

211 81 45

211

13 374 43

Funding risk remaining periods until maturity, as at 31.12.2008

Parent Bankt Up to 1 month

1-3 months

Liabilities to credit institutions 8 577

Deposits from and liabilities to costumers

3

Borrowings through the issuance of securities

3 months1 year

1-5 years

103

433

Without rem life

214

1 049

8 615 5 149

6 415 209

1

71

7

72

324

222

1 333

5 906

35

58

302

Subordinated loan capital 1)

Total payments 1) Financial derivatives gross settlement (in flow)

8 580

34

Total 536

38

Liabilities without remaining life Financial derivatives gross settlement (out flow)

Over 5 years

209 72 403

209

16 250 395

NOTES

Funding risk remaining periods until maturity, as at 31.12.2007

Parent Bank

Liabilities to credit institutions Deposits from and liabilities to costumers Borrowings through the issuance of securities

Up to 1 month

1-3 months

3 months1 year

29

40

120

514

1 165

1-5 years

Over 5 years

Without rem life

Total 189

7 962

7 962

2

3 237

4 918 205

Liabilities without remaining life

205

Subordinated loan capital

1

4

76

81

Financial derivatives gross settlement (out flow) 1)

2

7

36

45

557

1 296

3 349

9

34

7 993

Total payments 1) Financial derivatives gross settlement (in flow)

205

13 400 43

Unutilised drawing rights facilities as at 31.12:

Parent Bank 31.12.07

Group 31.12.08

31.12.08

31.12.07

1 316

1 241

616

498

Assets: 1 241

1 316 Unutilised drawing rights Liabilities:

498

616 Total long-term drawing rights facilities maturity 2011

130 628

746

Short-term drawing rights facility 1 year

130

130

Total

746

628

593

313

Total Long-term drawing in Euro 62 500. 313

593 Surplus liquidity at Norges Bank

Match and mismatch between maturities and interest rates for assets and liabilities are very important for the management of the Group. It is unusual for banks to have perfect match in this connection, as transactions done are often of an uncertain nature and of many different types. A non-matched position can potentially create profit, but it can also increase the risk of loss. Maturities of assets and liabilities, the ability to replace these at an acceptable cost, and interest-bearing liabilities when they mature, are important factors in order to determine the Group's overall funding and its exposure to interest rate changes. Funding needs in order to be able to meet requirements relating to settlement involving guarantees and letters of credit are substantially lower than the size of the actual liability in question as the Group generally does not expect that a third will remove liquidity under the guarantee in question. The total outstanding contract-related liabilities to increase credits do not necessarily represent future requirements for liquid funds, due to the fact that many of these liabilities will mature or be discontinued without having to be funded. NOTE 2.3 - Market risk

Group & paren tbank Market risk occurs in the form of impact on the result due to changes in the level of interest rates and equity capital products both of which are exposed to general and specific movements in the market . General and specific movements in the market which may affect the Group's result will be changes in external factors such as the framework conditions of the industrial sector in question, the framework conditions of the primary industries, new business establishments in the Helgeland region etc. The Group is exposed to price risk in relation to changes in share values involving long-term investments classified in the balance sheet as available for sale. Foreign exchange risk The Group only has smaller financial positions and cash flows in foreign currencies in the balance sheet. These items are regarded as not significant. However the Group is exposed to foreign exchange risk relating to foreign currency loans. In view of the fact that Helgeland

35

NOTES Sparebank is not a foreign exchange bank in its own right, its foreign exchange loans are managed by a foreign exchange bank . Helgeland Sparebank has provided the necessary guarantees in favour of the foreign exchange bank . The table below summarises the Group's foreign exchange risk through guarantee liabilities relating to foreign currency loans managed by the foreign exchange bank in question as at 31 12: Garantiansvar for valutalån:

Group and parnet bank Guarantee liabilities relating To foreign exchange loans

31.12.2007

31.12.2008 Loan amounts in foreign currencies

Guarantee liabilities in NOK

Loan amounts in foreign currencies

Guarantee liabilities in NOK

euro

1

10

4

31

Amerikanske dollar

1

8

0

0

Sveitsiske franc

31

208

8

39

Svenske kroner

62

56

62

53

148

11

89

4

Japanske yen Total guarantee liabilities related to foreign exchange loans

293

Cash flow and market value of interest rate risk Cash flow interest rate risk is defined as the risk of future cash flows relating to the individual financial asset- and liabilities items involved fluctuating due to changes in market interest rates. Market value of the interest rate risk is defined as the risk of the value of a financial asset- or liabilities item fluctuating due to changes in the market interest rates. Both in the case of cash flow and market value of the interest rate risk the Bank is exposed to the effects of fluctuations in the currently applicable level of market interest rates. Unexpected changes in the level of market interest rates can trigger increases in interest margins, but they can also be reduced or such changes can result in loss. The Board of Directors has fixed a limit for the total interest rate exposure the Bank may take on. The Bank manages and guides the interest rate risk towards the desired level through the interest

127

rate fixing of placements and funding loans, coupled with the use of interest rate swaps. The Bank applies a 'bank risk model' as a tool for managing interest rate risk for the entire balance sheet . The table below summarises the Group's exposure to interest rate risk. The table shows the Group's assets and liabilities at book values, according to the remaining periods, until the next interest rate adjustment. The book value of financial derivatives, interest rate swaps used for the purpose of reducing the Group's interest rate risk is included under' Other non-interest-bearing assets' and 'Other non-interest-bearing liabilities'. Expected interest rate adustment- and maturiy dates are not significantly different from the contract-related dates involved.

Interest rate risk – remaining periods until next interest rate re-fixing as at 31.12.08

Group Up to 1

1-3 months

3 months - 1 year

1-5 years

Over 5

No int rate ch

Total

ASSETS Cash and claims on central banks

593

Loans to and claims on credit inst with no a/maturity

132

50

182

13 966

Net loans to and claims on customers Bonds and certificates

593

126

1 049

104

14 070

24

1 199

Other non-int -bearing assets (including swaps) Total assets

851

15 065

103

15

24

104

0

550

550

550

16 594

LIABILITIES AND EQ. CAP Liabilities to credit inst. with no agreed maturity Liabilities to credit inst. with agreed maturity Deposits from and liabilities to cust no agreed mat. Deposits from and liabilities to customers with agreed mat. Borrowings through the issuance of securities

401

519

8 229

8 229

352

352

1001

3 415

1 378

5 794 214

214

1 104

12 011

1 378

401

0

214

15 108

-253

3.054

-1.354

-297

0

336

1.486

Other non-int -bearing liabilities (including swaps) Total liabilities Net int rate sensitivity gap

36

NOTES

If we assume that the financial assets and liabilities shown in the balance sheet as at 31.12. 2008 remain until maturity or settlement without the Group changing the built-in interest rate risk, a sudden and lasting increase in the market interest rate of 1 percentage point applying to all maturities in question would not produce an impact on overall results exceeding the limit for maximum interest rate risk set by the Board of Directors.

Interest rate risk – remaining periods until next interest rate re-fixing as at 31.12.07

Group Up to 1 month

1-3 months

3 months - 1 year

1-5 years

Over No intrest 5 rate change years

Total

ASSETS Cash and claims on central banks

313

313

Loans to and claims on credit inst with no maturity 12 697

Net loans to and claims on customers Bonds and certificates

110

12 697

704

48

862

Other non-int -bearing assets (including swaps) Total assets

424

13 401

48

0

0

384

384

384

14 256

LIABILITIES AND EQ . CAP. Liabilities to credit inst. with no agreed maturity Liabilities to credit inst. with agreed maturity

29

29

103

Deposits from and liabilities to cust no agreed mat. Deposits from and liabilities to cust with agreed Borrowings through the issuance of securities

55

158

7 608

7 608

322 201

322

3 524

803

4 528

Other non-int -bearing liabilities (including swaps) Total liabilities Net interest rate sensitivity gap

245

245

333

11 509

803

0

0

245

12 890

91

1 892

-755

0

0

139

1 366

Interest rate risk – remaining periods until next interest rate re-fixing as at 31.12.07

Parent bank Up to 1 month

1-3 months

3 months - 1 year

1-5 years

Over No interest 5 rate change

Total

ASSETS Cash and claims on central banks

593

Loans to and claims on credit inst with no maturity

132

50

182

13 976

Net loans to and claims on customers Bonds and certificates

593

126

1 049

104

14 080

24

1 199

Other non-int -bearing assets (including swaps) Total assets

851

15 075

103

15

24

104

0

546

546

546

16 600

LIABILITIES AND EQ . CAP. Liabilities to credit inst .with no agreed maturity Liabilities to credit inst. with agreed maturity Deposits from and liabilities to cust no agreed mat. Deposits from and liabilities to cust with agreed mat. Borrowings through the issuance of securities

1 001

401

519

8 263

8 263

352

352

3 415

1 378

5 794

Other non-int -bearing liabilities (including swaps) Total liabilities Net interest rate sensitivity gap

210

210

1 104

12 045

1 378

401

0

210

15 138

-253

3.030

-1 354

-297

0

336

1 462

37

NOTES

Interest rate risk – remaining periods until next interest rate re-fixing as at 31.12.07:

Parentbank Up to 1 month

1-3 months

3 months - 1 year

1-5 years

Over 5 No interest years rate change

Total

ASSETS Cash and claims on central banks

313

313

Loans to and claims on credit inst with no maturity 12 718

Net loans to and claims on customers Bonds and certificates

110

708

12 718 48

868

Other non-int -bearing assets (including swaps) Total assets

424

13 426

48

0

0

365

365

365

14 263

LIABILITIES AND EQ . CAP. Liabilities to credit inst .with no agreed maturity Liabilities to credit inst . with agreed maturity

29

29

103

Deposits from and liabilities to cust no agreed mat.

158

7 640

7 640

322

Deposits from and liabilities to cust with agreed mat. Borrowings through the issuance of securities

55

201

3 527

322 803

4 532

Other non-int -bearing liabilities (including swaps) Total liabilities Net interest rate sensitivity gap

237

237

333

11 544

803

0

0

237

12 918

91

1 882

-755

0

0

128

1 345

38

NOTES

NOTE - 3 important accounting estimates and application of accounting principles The Group prepares estimates and assumptions which have an impact on reported balance sheet figures for the next accounting year. Estimates and assessments are constantly subject to evaluation and are based on historical experience and other factors including expectations in relation to future events which are deemed to be reasonable.

Parentbank/Group

they are used and tested in order to ensure that output reflects actual data and comparable market prices . For practical reasons the models use observable data, but in the case of areas such as credit risk, volatility and correlation, management is required to prepare estimates. Any changes in assumptions relating to these factors may affect market values of financial instruments shown in the balance sheet.

3.1 Write-down of loans/provisions for guarantee liabilities Loan portfolios and guarantee liabilities are monitored on an ongoing basis with regard to the need for writedowns/provisions for meeting possible liabilities. Writedown/provisions are made when there is objective proof of impairment in value involving loans and/or it is regarded as probable that guarantee liabilities will have to be settled. Observable data qualifying as objective proof would be knowledge of any significant financial problems involving the debtor in question, any payment obligations in default, breach of contract, delays in payment, or if it is regarded as probable that the debtor will open debt negotiations or be subject to bankruptcy treatment.

3.3 Write-down of financial assets available for sale The Group applies write-down of financial assets available for sale when there is a significant or long-lasting impairment of market value and the market value is lower than the historical cost involved. In order to be able to ascertain whether the impairment of value is substantial or long-lasting, the Group makes an assessment of, amongst other things, normal fluctuations in market price. In addition it may be necessary to apply write-down when there is proof of impairment of the financial situation involving the debtor in question, profitability within the business sector involved, changes in technology or operational- and financial cash flow.

For groups of loans with largely similar risk aspects write-down is based on objective proof of impairment of value within the loan group in question. The proof may include observable data indicating that there has been a negative change in the payment status of the borrowers in the group, changes in framework conditions within the defined business sectors involved or location corresponding to the standard of the loans within the group. Estimates based on historical credit loss experience for loans with defined risk characteristics and objective proof of value impairment corresponding to the portfolio are used when calculating future cash flows. The method of calculating amounts and time horizons for future cash flows is reviewed on a regular basis for the purpose of reducing any discrepancies between loss estimates and actual loss experience.

3.4

Pensions

Net pension liabilities and the year's pension cost are based on a number of estimates, including the investment return on the pensions resources, future rates of interest, wage development, the development in the basic wage amount, 'G', and the general development of the number of disabled pensioners, and the duration of life. Uncertainty is largely related to the Bank's gross liabilities in this connection, not the net liabilities, which are shown in the balance sheet. Changes in estimates as a result of alterations in the abovementioned parameters will to a large extent be subject to accrual accounting over the average remaining time of pensionable service. 3.5 Tax The Group is taxed on income and wealth in Norway. No uncertainty of any significance relating to the final tax liability is deemed to exist. The tax liability is calculated in accordance with standard Norwegian rates for income- and wealth tax. Deferred tax liability and tax benefit are calculated on the basis of the best estimate available and in accordance with currently valid tax rates in Norway.

3.2 Market value of financial derivatives Market value of financial instruments not quoted on a stock exchange is assessed by using market values of non-listed financial instruments with which it is relevant to make comparisons, and by using value assessment models. The assessment is reviewed on a periodical basis by qualified personnel who are independent of the people who have entered into the agreements in question. All models are approved before

39

NOTES

NOTE 4 - segment information

Group and parentbank The Group has defined its geographical segment as a main area of Norway – Helgeland. The Group's exposure to credit risk is mainly concentrated on this area. The Group only has smaller exposure to credit risk in areas other than its geographically defined main area.Helgeland is the home region of the Parent Bank which is the Group's operating company. Geographical exposure within the loan portfolio was as follows: 31.12.08

Parent bank 2008 11 933 2 238 29 14 200

Group %-share

2008

84.0 Helgeland 15.8 Areas other than Helgeland 0.2 International 100.0 Total

%-share

11 923

84.0

2 238

15.8

29

0.2

14 190

100.0

Geographical exposure within the loan portfolio was as follows .31.12.07

Parent bank 2007 10 911 1 925 16 12 852

Group %-share 84.9 Helgeland 15.0 Areas other than Helgeland 0.1 International 100 Total

2007

%-share

11 010

85.9

1 795

14.0

13

0.1

12 818

100

Geographical exposure deposits from and liabilities to customers 31.12.08

Parent bank 2008 7 934 603 78 8 615

Group %-share 92.1 Helgeland 7.1 Areas other than Helgeland 0.8 International 100 Total

2008

%-share

7 900

92.1

603

7.1

78

0.8

8 581

100.0

Geographical exposure deposits from and liabilities to customers.31.12.07

Parent bank 2007 7 329 576 57 7 962

Group %-share 92.0 Helgeland 7.2 Areas other than Helgeland 0.7 International 100.0 Total

40

2007

%-share

7 271

91.7

601

7.6

58

0.7

7 930

100

NOTES

The group has split the bank into two segments, corporate and retail banking.31.12.08

Parent bank

Group

Retail Corporate

Not divided

Total

199

159

-19

339

31

12

26

69

Net commission income

7

7

Other operating income

-99

-22

-87

-208

-2

-27

-4

-33

129

122

-77

174

9 064

5 136

-12

-58

9.052

5.078

5 463

3 152

5 463

3 152

14 200 -70 -50

-50

2 520

2 520

2 470

16 600 8 615

7 985

7 985

7 985

16 600

Segmentinformation Net interest and credit commission

Retail

Corporate

Not divided

Total

199

160

-19

340

31

12

26

69

13

13

-99

-23

-87

-209

Operating costs

-2

-30

-4

-36

129

119

-71

177

9 064

5 126

-12

-58

Losses on loans guaranteed Result before tax Loans to and claims on customers Individual write-downs

-70 -50

Collective write-downs on loans Other assets Total assets per segment

9.052

5.068

Deposits from customers and

5 463

3 118

Other liabilities and equity Total liabilities and equity per segm.

14 190

5 463

3 118

-50

2 525

2 524

2 475

16 594 8 581

8 014

8 013

8 014

16 594

The group has split the bank into two segments, corporate and retail banking 31.12.07

Parent bank

Group

Retail Corporate 163

151

32

11

Not divided

Total 314

27

70

42

42

-94

-202

Segmentinformation Net interest and credit commission Net commission income

-22

-4

-8

105

132

8 134

4 718

12 852

-12

-76

-87

Individual write-downs Collective write-downs on loans

8.122

4.642

4 720

3 242

4 720

3 242

Operating costs

-12

Losses on loans guaranteed

212

Result before tax

-47

-47

1 546

1 546

1 499

14 263 7 962

6 301

6 301

6 301

14 263

Corporate

163

150

32

11

Other operating income

-86

-25

Retail

Loans to and claims on customers

313 27

70

74

74

-99

-207

-22

-4

-6

105

134

8 134

4 684

12 818

-12

-60

-72

Total assets per segment

8 122

4 624

Deposits from customers and

4 720

3 210

Other liabilities and equity

41

Total

-86

Other assets

Total liabilities and equity per segm.

Not divided

4 720

3 210

-9 2

242

-47

-47

1 557

1 557

1 510

14 256 7 930

6 326

6 326

6 326

14 256

NOTES

NOTE 5 – Net interest- and credit commission income

Parent bank 2007

Group 2008

2008

2007

1 038

759

Interest receivable and similar income: 758

1 035 Interest receivable and credit commissions on loans etc. *)

12

28 Interest on deposits with and loans to credit institutions

28

12

37

70 Interest from bearer bonds and certificates

70

37

1 136

808

432

282

807

1 133

Total interest receivable and similar income Interest payable and similar costs:

281 9 177 26 493

420 Interest payable on deposits from customers 13 Interest payable on deposits and loans from credit institutions 324 Interest payable on certificate- and bond loans and on syndicated loans**) 37 Interest payable on long-term loans/other funding loan costs 794

Total interest payable and similar costs

9

9

318

177

37

26

796

495

*) Includes interest receivable loans at floating rated of interest and loans at fixed rates of interest. **) Includes Interest payable deposits at floating rated of interest and deposits at fixed rates of interest

NOTE 6 - Commissions and income from banking services

Parent bank 2007 9 55 2

Group 2008 9 Guarantee commission 55 Fees relating to payments transmission services 2 Interbank fees received

2008

2007

9

9

55

55

2

2

19

17 Other fees

17

19

85

83

83

85

Total commissions and income from banking services

NOTE 7 - Commissions payable and costs relating to banking services

Parent Bank 2007

Group 2008

2008

2007

3

2 Interbank fees paid

2

3

3

3 Fees - customers' use of payment terminals

3

2

8

9 Payments transmission services

9

8

1

0 Other fees

0

1

14

14

69

71

15

14

Total commissions payable and costs relating to banking services

70

69 Net commission income

42

NOTES

NOTE 8 - Gains/losses on financial instruments

Parent Bank 2007 0

Group 2008

2008

-31 Value change in interest-bearing securities

5

3

28

-8

5

6

Net gain/loss in interest-bearing securities Net gain/loss shares Share dividend Value change in value on lending

-3

4

-2

20

33

-6 Total value change financial instruments

Value change on funding and derivatives

2007

-31

0

3

5

-5

28

4

3

4

-3

20

-2

-5

31

NOTE 9 - Other operating income

Parent Bank 2007

Group 2008

2008

2007

0

0 Operating income from real estate

0

4

1

1 Other operating income

2

0

2

1 Gains on sale of real estate and movable property

1

3

3

2

3

7

Total other operating income

NOTE 10 - Total operating costs

Parent Bank

Group

2007

2008

107

110

57 9 30 202

Wages salaries and social costs (note 11)

58 General administration costs (note 13) 9 Deprecate/write-downs etc. of fixed- and intangible assets 32 Other operating costs (note 14) 209

Total operating costs

2008

2007

111

107

58

57

12

13

28

29

209

207

NOTE 11 – Wages salaries and social costs

Parent Bank 2007 80 4 18 5

Groupn 2008 86 Wages salaries and fees 5

Employers' social security contributions

16 Pension costs relating to benefit plans (note 12) 3 Other personnel costs Total wages salaries and social costs

2008

2007

87

81

5

4

16

18

3

5

107

110

111

107

211

211 Number of employees measured in man-years as at 31.12

212

212

193

193 Average number of employees of man-years worked as at 31.12

194

194

43

NOTES NOTE 11.1 - Remuneration and loans for senior management Board of Directors and Board of Trustees 31.12.08

Group and parent bank 2008 (beløp i tusen kr.)

Payments

CEO Arnt Krane DCEO Lisbeth Flågeng Total remuneration for senior management

Pension cost

Loans

1 846*

742

746

1 165

416

419

3 010

1 158

1 165

Chairman of the board Eivind Lunde

133

Thore Michalsen

93

Inger Lise Petersen

67

Marianne Myrnes Steinrud

67

Bjørn Johansen

67

May Heimdal

207

67

879

494

1 086

Chairman of the Control Committee, Asle Bardal

41

72

Chairman of the Control Committee, Christian Platou

15

0

Other members of the Control Committee

41

1 352

Chairman of the Board of Trustees, Grete Bang

17

0

Total boards of Directors

Chairman of the Board of Trustees Kåre Åsli

6

Other members of the Board of Trustees

167

8 274

Total – Board of Trustees and Control Committee

287

9 698

Grand total

1 158

3 792

11 949

*) The CEO had a pension agreement that gave him the right to retire from the Bank at the age of 62, that is, at the end of 2008. The CEO and the Board of Directors have entered into an agreement that retirement will be postponed for two years, to the end of 2010. In this connection, the CEO received an extra payment of NOK 500,000 in 2008. This is included in the above. The above-mentioned pension costs are in accordance with calculations made by an actuary for the accounting year. Members of the Bank's senior management borrow on the same terms and conditions as those applying to staff and repay the loans in accordance with the ordinary repayment plan. The Board of Directors at the Bank and the Board of Trustees borrow on the ordinary terms applicable to customers with regard to both interest and repayment period. Remuneration and loans for senior management Board of Directors and Board of Trustees 31.12.07

Group and parent bank 2007 (beløp i tusen kr.)

Payments

CEO Arnt Krane

Pension cost

1 276

1 126

Loans 732

DCEO Lisbeth Flågeng

1 116

328

419

Total remuneration for senior management

2 392

1 454

1 151

Chairman of the board Eivind Lunde

117

0

68

0

Inger Lise Petersen

58

254

Marianne Myrnes Steinrud

40

0

Bjørn Johansen

58

0

Thore Michalsen

May Heimdal Total boards of Directors

58

879

399

1 133

Chairman of the Control Committee, Christian Platou

45

0

Other members of the Control Committee

63

861

Chairman of the Board of Trustees Kåre Åsli

28

566

Other members of the Board of Trustees

248

7 072

Total – Board of Trustees and Control Committee

384

8 499

Grand total

3 175

44

1 454

10 783

NOTES Note 11.1.1 – Salary and other remuneration to senior management

Group and parent bank In accordance with Section 7-31b of the Accounting Act [Regnskapsloven], the Board of Directors shall present a statement on guidelines for the stipulation of salary and other remuneration to executive management. The statement was approved by the Board of Directors at Helgeland Sparebank on 26 February 2009 and is to be presented to the Board of Trustees on 31 March 2009. The CEO's salary is stipulated by the Bank's Board of Directors, while the salary to the deputy CEO is stipulated by the CEO. Payment is in the form of fixed salary, benefits in kind and a pension scheme. The level of senior executives' salaries in Helgeland Sparebank shall be competitive, make the Bank an attractive employer, and stimulate increased wealth creation for the Bank. Senior executives' salaries are determined in relation to the exercise of the Bank's management requirements and core values, and also on the basis of salary levels in the region and in the banking industry in general. The Bank has defined Arnt Krane, CEO, and Lisbeth Flågeng, Deputy CEO, as executive management. The nature and value of benefits in kind shall be in line with customary practice for senior executives in the banking industry. Senior executives have an agreement giving them a free company car, telephone, newspaper, Internet subscription and home PC. The Bank has a group pension scheme with a life insurance company, which also applies to senior executives. The CEO previously had a pension agreement that gave him the right to retire from the Bank at the age of 62, that is, at the end of 2008. The CEO and the Board of Directors have entered into an agreement that retirement will be postponed for two years, to the end of 2010. The agreement regarding an early retirement pension entitles the CEO to a pension on a level with his full salary from the age of 64 to 67, and this is to be adjusted annually by 5%. The lifelong retirement pension from the age of 67 shall amount to 66 per cent of the part of the fixed annual salary that exceeds 12 G (the basic amount of the National Insurance). The Deputy CEO has a right (but not a duty) to retire from her post at age 60. In the event of early retirement, the Bank is committed to paying an annual early retirement pension from the 60th to the 67th birthday. The early retirement pension will be 66 % of annual salary at the date the early retirement pension commences. In the case of departure before age 60, the Bank may offer to substitute payment of a cash amount for the earned pension entitlement. Retirement pension from the age of 67 shall represent 66 % of the salary that exceeds 12 G. The Bank has no pre-established share option, bonus or severance payment schemes over and above the pension schemes. The Bank's executive remuneration policy for 2008 has been implemented in compliance with the main principles under clause 3. The CEO and the Board of Directors have entered into an agreement in 2008 that retirement would be postponed for two years, to the end of 2010. In this connection, the CEO received an extra allowance of NOK 500,000 in 2008.

NOTE 11.2 - Loans to elected representatives and employees:

Parent Bank 31.12.07 196

Group 31.12.08

Loans to:

31.12.07

205

196

1 Board of Directors

1

1

8

8 Board of Trustees

8

8

1

1 Control Committee

1

1

215

205

1

205

205 Loans to employees

31.12.08

215

Total loans to elected representatives and employees

The interest rate applied to staff loans has been lower than the normal rate of interest for 2008. The benefit in kind amounted to about NOK 3.0 million.

45

NOTES

NOTE 12 – Pension costs and pension liabilities

Group and Parent bank Helgeland Sparebank and its significant subsidiaries has a benefit-based group pension scheme for its employees; the scheme is managed by an insurance company. This scheme also comprises dependents' and disability pensions. The pension scheme gives employees the right to future pension benefits amounting to 66 per cent of leaving salary. In addition to the pension liabilities which are covered through the insurance arrangements the Bank has uncovered pension liabilities. These liabilities comprise supplementary pensions involving salaries in excess of 12 times the National Insurance's basic amount and statutory early retirement pension (SERP) The Group's pension schemes comprise 221 employees and 79 pensioners of whom 21 opted for early retirement. The pension liability is computed by using straight-line accruals. Unrealised gains and loss as a result of changes in actuarial assumptions are spread over the expected remaining pension accrual period. The net pension cost is arrived at in the following way

Parent Bank

Group

2004

2005

2006

2007

2008

7

8

10

11

11

Present value of pensionable accruals during the year

2008

2007

2006

2005

2004

11

11

11

8

5

8

8

9

10

11 + Interest cost of incurred pension liabilities

11

10

9

8

5

-6

-6

-7

-7

-8 - Expected return on pension resources

-8

-7

-6

-6

-3

1

2

4

1

1

1

2

0

0

0

0

1

1

1 + Administration costs

1

1

0

0

0

2

1

0

2

1 + Employers' social security contributions

1

2

2

1

0

12

13

17

18

17

18

18

11

7

1

+ Changes in estimates and discrepancies are included in the profit and loss account

17

Net pension cost

Look comments below: Change in net liabilities shown in the balance sheet:

Parent Bank

Group

31.12 2004

31.12 2005

31.12 2006

31.12 2007

31.12 2008

31.12 2008

31.12 2007

31.12 2006

31.12 2005

31.12 2004

12

15

18

68

76 Net pension liabilities as at 01.01

76

68

66

66

35

12

13

16

18

17 + Pension cost charged to the profit and loss account

17

18

18

11

6

-7

-9

-14

-6

-7 - Premium payments

-7

-6

-14

-9

-2

-2

-2

-3

-4

-5 - Payments through the profit and loss account

-5

-4

-3

-2

-1

15

18

68

76

81

81

76

68

67

38

50

Implementation IFRS

Net pension liabilities shown in the balance sheet as at 31.12

The Group implemented IFRS with effect from 1 January 2005. The comparative figures have not been restated, and the figures at 31 December 2004 show NGAAP. The Parent Bank implemented IFRS with effect from 1 January 2006. The comparative figures have not been restated, and the figures at 31 December 2004 and 31 December 2005 show NGAAP Pension liabilities shown in the balance sheet have been arrived at as follows:

Parent Bank 31.12 2004

Group

31.12 2005

31.12 2006

31.12 2007

160

179

212

236

-111

-121

-131

-137

49

57

81

99

-34

-39

-62

-24

15

18

18

76

31.12 2008

31.12 2008

241 Present value of accrued pension liabilities

31.12 2007

31.12 2006

31.12 2005

31.12 2004

241

236

221

190

109

-134

-137

-131

-124

-66

107 Net calculated pension liabilities/(-resources)

107

99

90

66

43

+/- Impact of estimate-/scheme changes not included -26 in profit and loss account

-26

-24

-21

1

-5

Net pension liabilities/(-resources) shown in the balance sheet

81

76

68

67

38

-134 - Actual value of pension resources

81

46

NOTES The Group implemented IFRS with effect from 1 January 2005. The comparative figures have not been restated, and the figures at 31 December 2004 show NGAAP. The Parent Bank implemented IFRS with effect from 1 January 2006. The comparative figures have not been restated, and the figures at 31 December 2004 and 31 December 2005 show NGAAP The following financial assumptions have been used as a basis when calculating the pension liabilities:

Konsern og morbank 2004

2005

2006

2007

2008

2008

2007

2006

2005

2004

5.5 %

4.75 %

4.40 %

4.40 %

4.80 %

Discount rate of interest

4.80 %

4.40 %

4.40 %

4.40 %

4.70 %

6.5 %

5.75 %

5.40 %

5.40 %

5.80 %

Wage- and salary adjustment

5.80 %

5.40 %

5.40 %

5.40 %

5.70 %

3.00 %

3.00 %

3.50 %

4.00 %

4.50 %

Adjustment of current pension

4.50 %

4.00 %

3.50 %

3.00 %

3.00 %

4.25 %

3.75 %

3.50 %

3.00 %

3.00 %

Adjustment of the National I insurance's 3.00 %

3.00 %

3.50 %

3.75 %

4.25 %

basic amount

3.00 %

3.00 %

3.50 %

3.75 %

4.25 %

resources

4.25 %

3.75 %

3.50 %

3.00 %

3.00 %

14.10%

14.10%

5.10 %

5.10 %

5.10 %

Employer's social security contributions –

5.10 %

5.10 %

5.10 %

14.10 %

14.10 %

50.00%

50.00%

50.00 %

50.00 %

50.00 %

50.00 %

50.00 %

50.00 %

50.00 %

50.00 %

1.00 %

1.00 %

1.00 %

1.00 %

Expected rate of return on the pension

Staff's propensity to opt for SERP - Yearly per cent retirement for working

25 år

25 år

- From age

25 år

25 år

40 år

40 år

- to age

40 år

40 år

The pension liabilities recognised in the balance sheet include pensions to the CEO and Deputy CEO. The CEO previously had a pension agreement that gave him the right to retire from the Bank at the age of 62, that is, at the end of 2008. The CEO and the Board of Directors have entered into an agreement that retirement will be postponed for two years, to the end of 2010. The agreement regarding an early retirement pension entitles the CEO to a pension on a level with his full salary from the age of 64 to 67, and this is to be adjusted annually by 5%. The lifelong retirement pension from the age of 67 shall amount to 66 per cent of the part of the fixed annual salary that exceeds 12 G (the basic amount of the National Insurance). The Deputy CEO has a right (but not a duty) to retire from her post at age 60. In the event of early retirement, the Bank is committed to paying an annual early retirement pension from the age of 60 to 67. The early retirement pension will be 66 % of annual salary at the date the early retirement pension commences. In the case of departure before age 60, the Bank may offer to substitute payment of a cash amount for the earned pension entitlement. The retirement pension from the age of 67 shall amount to 66 % of the amount over 12 G.

47

NOTES

NOTE 13 - Other administration costs

Parent Bank 2007

Group 2008

2008

2007

10

10 Marketing

10

10

26

27 Electronic data processing costs

27

26

4

4

11

11

6

6

58

57

4 11

4 Technical- and financial literature forms and office supplies 11 Advertisements postage and telephone

6 57

6 Other administration costs 58

Total other administration costs

NOTE 14 - Other operating costs

Parent Bank 2007

Group 2008

2008

2007

8

9 Operating costs relating to rented premises

9

8

2

2 Operating costs involving real estate

2

2

3

2 Maintenance of premises

2

3

6

6 Maintenance of machinery and equipment

6

6

1 Auditor's fees

1

0

0 Auditor consulting fees

0

0

1 10

12 Other operating costs

30

32

Total other operating costs

8

10

28

29

NOTE 15 - Losses on loans guarantees etc

Parent Bank 2007

Group 2008

2008

2007

33

17

Write-downs on loans guarantees: 20

30 Individual write-down on loans guarantees etc relating to customers

-8 12

3 Collective write-down on loans guarantees etc relating to customers 33

Total write-down on loans guarantees etc

3

-8

36

10

Details of write-downs on loans guarantees 89

71 Total write-downs to cover losses on commitments as at 31.12

70

72

118

89 - Total write-downs to cover losses on commitments as at 01.01

72

106

+3 - Change in collective write-down during the period

+3

8

26

8

24 + Confirmed losses against which ind. write-downs were made in previous years

11

27

30

33 + Conf. losses against which on ind. write-downs were made in previous years

33

31

9

6

36

10

6 12

9 - Recoveries from previous periods' confirmed losses 33 Total write-down of losses guarantees etc.

NOTE 16 - Gains/losses from associated companies

Parent Bank 2007 6

Group 2008

2008

12 Dividend Share of result

6

12 Gains from associated companies

48

2007

12

6

3

31

15

37

NOTES NOTE 17 - Tax cost

Morbank

Konsern

2007

2008

2008

2007

Tax for the year: 56

48 Tax payable

48

52

-4

-4 Change in deferred tax adjusted direct against the equity capital

-4

2

-3 49

8 Change in deferred tax (Note 23)

5

-3

49

51

177

245

7 Permanent differences

3

19

0 Use of previous losses carried forward

0

-1

52

Tax cost for the year Breakdown between accounts-related result before tax and the year's income liable to tax:

163 19 0 5 186

174 Accounts-related result before tax

-10 Change in temporary differences (Note 23)

-12

10

171

168

272

Income subject to tax

NOTE 18 - Ordinary result per PCC:

Parent Bank 2007 163 27.7 % 46

Group 2008 122 Result from ordinary operations after tax 25.8 % PCC-holders' percentage share of the result 31 PCC-holders' share of the result

2008

2007

128

191

25.8 %

27.7 %

33

53

22.3

14.3

Result per PCC

14.9

26.2

22.3

14.3 Diluted result per PCC

14.9

26.2

The result per PCC is calculated by dividing the PCC-holders' share of the net result from ordinary operations after tax by the weighted average number of PCCs who has been issued throughout the year under review. Diluted result per PCC Diluted share per PCC is calculated by a reduction in the result per PCC due to the fact that it is assumed that convertible instruments are converted and that options or subscription rights are exercised as a result of certain contitions being met.

NOTE 19 – Cash and claims on central banks

Parent Bank 2007 72

Group 2008

31.12.08

65 Cash reserve

31.12.07

65

72

241

528 Deposits at Norges Bank in excess of liquidity reserve requirements

528

241

313

593

593

313

Total cash and claims on central banks

NOTE 20 - Loans to and claims on credit institutions

Parent Bank 2007

Group 31.12.08

31.12.07

0

2008 183 Loans to and claims on credit institutions

183

0

0

183 Total loans to and claims on credit institutions

183

0

Loans to and claims on credit institutions are in their entirety subject to floating rates of interest.

49

NOTES

NOTE 21 – Loans to and claims on customers

Parent Bank

Group

31.12.07

31.12.08

31.12.08

31.12.07

1 606

1 085

Utlån fordelt på fordringstyper, nominell hovedstol 1 085

1 606

262

290

11 363

12 150

12 710

14 046

(87)

(69)

12 623

13 977

49

58

Overdraft- and working capital facilities Building loans

290

262

Mortgage loans

12 140

11 343

Gross loans to customers

14 036

12 690

(69)

(87)

13 967

12 603

58

49

(10)

(10)

(50)

(47)

13 965

12 595

104

104

1

-2

105

102

14 070

12 697

Individual write-downs Loans to customers after Individual write-downs Accrued interest

(10)

(10)

Amortisation (fees, etc)

(47)

(50)

Collective write-downs

12 615 104 -2 102 12 718

13 975

Loans to and receivables from customers at amortised cost

104 Loans to and receivables from customers, nominal capital: 1 Accrued interest and adjustment to fair value 105 Loans to and receivables from customers, fair value: 14 080 Net loans to and receivables from customers

Information about security and collateral: The BM/regional model is combined with security coverage, and the customer is classified as low, medium or high risk. Classification according to the regional model is done on an ongoing basis, based on the information available in the system. Assessment of collateral and security is performed prior to new loans being granted, and in connection with customer contact and routine follow-up of own portfolios. Collateral is also assessed prior to half-yearly risk reports presented in accordance with agreed routines, administratively and to the Board of Directors. As of 31 December 2008, the aggregate customer portfolio was classified according to behavioural score. The model forms part of the administrative system in this connection, and the loan portfolio is divided into low, medium and high risk. Agricultural customers / NOK 934 million (819 million in 2007) is to agricultural customers (traditionally a low-risk segment) Retail customers / Of the total lending portfolio, NOK 9.1 billion (8.1 billion in 2007) is accounted for by loans to retail banking customers, mainly well-secured residential mortgage loans NOTE 21.1 - Breakdown of loans between retail banking- and corporate markets 31.12.08

Parent Bank

Group

Retail banking 926

Corporate m. 680

Retail banking Overdraft- and working capital facilities

Corporate m.

926

Building loans

680

53

237

53

237

8 085

4 219

Mortgage loans

8 085

4 209

9 064

5 136

Gross loans to customers

9 064

5 126

Breakdown of loans between retail banking- and corporate markets 31.12.07

Parent Bank

Gropu

Retail banking 634

Corporate m. 450

Retail banking Overdraft- and working capital facilities Building loans

Corporate m.

634

450

50

212

50

212

7 450

4 056

Mortgage loans

7 450

4 022

8 134

4 718

Gross loans to customers

8 134

4 684

50

NOTES NOTE 21.2 – Write-downs on loans and guarantees

Parent Bank 31.12.07

Group 31.12.08

31.12.08

31.12.07

72

106 -26

Individual write-downs: 118

89

Individual write-downs to cover losses on loans and guarantees as at 01.01

-26

-24

- Period's conf losses against which individual write-downs were previously made

-12

5

6

+ Increased individual write-downs during the period where individual write-downs were previously made

6

17

36

+ New individual write-downs during the period +Period's change in amortised loans and credit

36

17

2

0

0

2

-26

-37

- Reversal of individual write-downs during the period

-32

-26

89

70

Total individual write-downs on loans and guarantees

70

72

70

70

0

2

47

55

Of which: 87

70

2

0

Loans Guarantees Collective write-downs:

55

47

-8

3

47

50

136

119

Collective write-downs to cover losses on loans and guarantees as at 01.01 +/- Period's change in collective write-downs Collective write-downs to cover losses on loans and guarantees as at 31.12 Total write-downs on loans and guarantees

3

-8

50

47

120

119

NOTE 21.3 - Bad and doubtful loans and guarantees

Parent Bank 31.12.07

Group 31.12.08

31.12.08

31.12.07

122

150 Commitments in default for over 90 days

150

122

23

27 - Write-downs of commitments in default

27

23

122 Total net commitments in default

122

99

129 Other bad and doubtful commitments not in default

129

108

99 110 52

43 - Write-downs of other bad and doubtful commitments not in default

43

37

58

86 Total net bad and doubtful commitments not in default

86

71

NOTE 21.4 - Bad and doubtful loans and guarantees over 3 mnd.

Parent Bank

Group 2008

Interval

Ret .bkg. m

2007

Corporate m.

TotalRet .bkg. m

Corporate m.

Total

3-6 months

10

85

95

6

15

21

6-12 months

9

5

14

8

26

34

Over 12 months

31

10

41

29

37

66

Gross doubtful loans

50

100

150

43

78

121

51

NOTES

NOTE 21.5 – Risk classification of loans and credits Risk classification is an integral part of the Bank's administrative system. The system permits risk development in the Bank’ s loan portfolio to be monitored. The risk classification model used for corporate customers has been developed by DnB NOR (the regional model). As of 31 December 2008, the classification system was used for the entire corporate loan portfolio. The model analyses the customer’ s ability to service the loan based on published financial statements for 2007 combined with a number of other parameters, such as the commercial or industrial sector involved, geographic location, any comments made by the auditors, etc. The financial class is combined with the level of collateral or other security in question, and the customer is classified as low, medium or high risk. Classification according to the regional model is done on an ongoing basis, based on the information available in the system. Assessment of collateral and security is performed prior to new loans being granted, and in connection with customer contact and routine follow-up of own portfolios. Collateral is also assessed prior to half-yearly risk reports presented in accordance with agreed routines, administratively and to the Board of Directors. As of 31 December 2008, the aggregate customer portfolio was classified according to behavioural score. The model forms part of the administrative system in this connection, and the loan portfolio is divided into low, medium and high risk Risk classification of loans and credits 31.12.08

Parent bank Gross loans

Group

Guarantees

Unut Potensial drawing Exposure right

Share

Gross loans

Guarantees

Unut drawing right

Potensial Exposure

Share

Regional model Corporate: 506

473

4 226

63 % Low risk

3 238

1 225

61

242

1 528

23 % Medium risk

664

131

150

945

5 136

698

865

6 699

3 247

14 % High risk 100 % Total - corporate

506

473

4 217

63 %

1 224

61

242

1 541

23 %

664

131

150

931

14 %

5 126

698

865

6 689

100 %

8 152

15

390

8 557

90 %

795

2

47

844

9%

Behavioral score Retail banking:

90 % Low risk

8 152

15

390

8 557

795

2

47

844

9 % Medium risk 1 % High risk 100 % Total – retail

117

0

14

131

9 064

17

451

9 532

14 200

715

1 316

16 231

Grand total

117

0

14

131

1%

9 064

17

451

9 532

100 %

14 190

715

1 316

16 221

Risk classification of loans and credits 31.12.07

Parent Bank Gross loans

Group

Guarantees

Unut Potensial drawing Exposure right

Share

Gross loans

Guarantees

Unut drawing right

Potensial Exposure

Share

Regional model Corporate: 3 035

408

702

4 135

67 %

66

92

1 160

19 %

105

102

865

14 %

579

896

6 160

100 %

7 233

16

288

7 537

89 %

790

3

50

843

10 %

702

4 145

67 % Low risk

3 025

19 % Medium risk

1 002 657 4 684

1 002

66

92

1 160

681

105

102

888

4 718

579

896

6 193

14 % High risk 100 % Total - corporate

408

Behavioral score Retail banking: 7 233

16

288

7 537

790

3

50

843

111

0

6

117

8 134

18

345

8 497

12 853

597

1 241

14 690

89 % Low risk 10 % Medium risk 1 % High risk 100 % Total – retail Regional model

52

111

0

6

117

1%

8 134

18

345

8 497

100 %

12 818

597

1 241

14 657

NOTES Note 21.6.Risk classification split by sector/industry

Group 31.12.08

Low risk

Municipalities and municipal enterprise

Medium risk

High risk

Total

66

0

0

66

Agriculture and forestry

494

319

243

1 056

Fisheries and aquaculture

627

64

247

938

Mining and industry

304

83

31

418

Building and construction

240

144

40

424

Trade, hotel, restaurants.

371

113

112

596

1 988

243

147

2 379

128

574

112

814

Property, property development Transport and services Retail market Total

8 557

844

131

9 532

12 774

2 385

1 062

16 221

Risk classification split by sector/industry Parent Bank 31.12.08

Low risk

Medium risk

High risk

Total

66

0

0

66

Agriculture and forestry

494

319

243

1 056

Fisheries and aquaculture

627

64

247

938

Municipalities and municipal enterprise

Mining and industry

304

83

31

418

Building and construction

240

144

40

424

Trade, hotel, restaurants.

371

113

112

596

1 988

243

147

2 379

127

559

128

814

Property, property development Transport and services Retail market Total

8 567

844

131

9 542

12 783

2 369

1 079

16 231

NOTE 21.7 - Commitments and losses according to different business- and other sectors The level of losses in the retail banking market remains low and at a level corresponding to the average for the sector. Routines for debt collection and follow-up have been implemented. Based on empirical figures, sector-related figures and local market conditions, the Bank's forecast for credit losses expected in the retail banking loan portfolio is in the region of 0.05 - 0.1 %. The Bank has a strong focus on preventive work in its credit exposure combined with close follow-up of non-performing and doubtful loans. The Group's credit risk is affected by the impact of the crisis in finance and the real economy on large industrial enterprises and the consequences that this may in turn have for subcontractors in the service and engineering industries. There is great uncertainty related to the economic development of both Norway and the Helgeland region. As a result of this, the Bank expects an increase in losses, but not at a higher level than in the banking sector in general. Based on historical evidence, a thorough knowledge of the Group's lending and local market conditions, the Bank's forecast for credit losses expected over a five-year period is 0.20-0.5 per cent of gross lending within the corporate lending portfolio. In the pricing of loans, great emphasis is placed on customers' ability to service their debt. There will therefore normally be a correlation between the risk classification and the pricing of loans. The Bank has defined its market area (Helgeland) as one risk area.

53

NOTES

Gross loans and guarantees guarantees break down as follows according to the various commercial, industrial and retail banking sectors involved: 31.12.08

Group Gross loans

Guarantees

Potential Exposure

31.12.08 Financial institutions Municipalities and municipal enterprises

Individual loan loss provisions

Commitments in default

0 4

62

Agriculture and forestry

934

4

118

1

Fishing and fish farming

664

42

232

Mining and industry

256

85

77

Building and construction

278

65

81

Trade hotels and restaurants Financing and real estate Transport and service industry. Retail banking market Total

Bad and doubtful not in default

4

4

24

1

86

5

55

0

3

3

10

412

89

95

1

1

1 926

293

158

8

22

17

652

58

104

15

15

8

9 064

17

451

12

49

4

14 190

715

1 316

69

150

129

Gross loans and guarantees guarantees break down as follows according to the various commercial, industrial and retail banking sectors involved: 31.12.07

Group Gross loans

Guarantees

Potential Exposure

Individual loan loss provisions

Commitments in default

Bad and doubtful not in default

Financial institutions Municipalities and municipal enterprises

4

Agriculture and forestry

819

5

100

4

3

13

Fishing and fish farming

610

57

251

3

14

0

Mining and industry

233

81

156

5

0

10

Building and construction

242

78

68

3

2

4

Trade hotels and restaurants

431

105

102

10

3

Financing and real estate Transport and service industry. Retail banking market

1 722

57

83

28

41

48

623

197

126

8

15

25

8 134

19

345

12

43

9

72

122

109

Not allocated to sectors Total

11 12 818

598

54

1 241

NOTES

Gross loans and guarantees guarantees break down as follows according to the various commercial, industrial and retail banking sectors involved: 31.12.08

Parent Bank Gross loans

Financial institutions

0

Municipalities and municipal enterprises

4

Guarantees

Potential Exposure

Individual loan loss provisions

Commitments in default

Bad and doubtful not in default

62

Agriculture and forestry

934

4

118

1

4

4

Fishing and fish farming

664

42

232

24

1

86

Mining and industry

256

85

77

5

55

0

Building and construction

278

65

81

3

3

10

Trade hotels and restaurants

412

89

95

1

1

1 936

293

158

8

22

17

652

58

104

15

15

8

Financing and real estate Transport and service industry. Retail banking market Total

9 064

17

451

12

49

4

14 200

715

1 316

69

150

129

Gross loans and guarantees guarantees break down as follows according to the various commercial, industrial and retail banking sectors involved: 31.12.07

Parent Bank Gross loans

Guarantees

Potential Exposure

Individual loan loss provisions

Commitments in default

Bad and doubtful not in default

Financial institutions Municipalities and municipal enterprises

4

Agriculture and forestry

819

5

100

4

3

13

Fishing and fish farming

610

57

251

3

14

0

Mining and industry

233

81

156

5

0

10

Building and construction

242

78

68

3

2

4

Trade hotels and restaurants Financing and real estate Transport and service industry. Retail banking market

431

105

102

10

3

1 756

57

83

28

41

48

623

197

126

8

15

25

8 134

19

345

12

43

9

72

122

109

Not allocated to sectors Total

11 12 852

598

55

1 241

NOTES

NOTE 22 – Financial instruments group 31.12.08

Group Loans and claims

Loans to and claims on credit institutions Loans to and claims on customers

Assets to real value throghProfit and loss account

Available for sale

Total

183

183

13 966

104

14 070

Certificates bonds and shares available for sale

1 264

Financial derivatives Total assets

Derivatives used for hedging

1 264

185 14 149

289

1 264

Other financial Commitment Liabilities to credit institutions with agreed maturity

12

197

12

15 714

Commitment to real value through profit and loss acc

Total

519

519

Deposit from customers and liabilities to customers

8 581

8 581

Financial liabilities incurred through the issuance of sec.

4 724

Financial derivatives Subordinated loan capital

1 000

5 724

1

1

70

Total liabilities

70

13 894

1 001

14 895

Financial instruments group 31.12.07

Group Loans and claims Loans to and claims on credit institutions

Assets to real value throghProfit and loss account

Available for sale

0

Loans to and claims on customers

12 594

0 103

Certificates bonds and shares available for sale

12 697 936

Financial derivatives

28

Total assets

12 594

131 Other financial Commitment

Liabilities to credit institutions with agreed maturity

7 780

Financial liabilities incurred through the issuance of sec. Financial derivatives

936

13 661

Commitment to real value through profit and loss acc

total

185 150

7 930

4 461

4 461

32

Subordinated loan capital

71

Total liabilities

8 036

56

936 28

185

Deposit from customers and liabilities to customers

Total

32 70

4 643

12 678

NOTES

Financial instruments parent bank 31.12.08

Parent Bank Loans and claims

Loans to and claims on credit institutions Loans to and claims on customers

Assets to real value throghProfit and loss account

Available Derivativ for sale es used for hedging

183

183

13 976

104

14 080

Certificates bonds and shares available for sale

1 264

Financial derivatives Total assets

Total

185 14 159

289

Liabilities to credit institutions with agreed maturity

12

197

12

15 724

Commitment to real value through profit and loss acc

Total

1 264

Other financial Commitment

1 264

519

Deposit from customers and liabilities to customers

8 615

Financial liabilities incurred through the issuance of sec.

4 724

519 8 615 1 000

5 724

1

1

1001

14 929

Financial derivatives Subordinated loan capital

70

Total liabilities

70

13 928

Financial instruments parent bank 31.12.07

Parent Bank Loans and claims

Loans to and claims on credit institutions

Assets to real value through Profit and loss account

Available for sale Sum

0

Loans to and claims on customers

0

12 615

103

Certificates bonds and shares available for sale

12 718 936

Financial derivatives

28

Total assets

12 615

131 Other financial Commitment

Liabilities to credit institutions with agreed maturity

936 28

936

13 682

Commitment to real value through profit and loss acc

Sum

187

187

Deposit from customers and liabilities to customers

7 962

7 962

Financial liabilities incurred through the issuance of sec.

4 311

Financial derivatives Subordinated loan capital

150

4 461

32

32

182

12 713

70

Total liabilities

12 530

57

70

NOTES

NOTE 22.1 – Real value of financial instruments

Group

Parent Bank 31.12.2007 Real Balance Sheet

31.12.2008 Real Balance Sheet Real value on financial instruments

Value Value

Value Value

31.12.2008 Balance Real Sheet

31.12.2007 Balance Real Sheet

Value Value

Value Value

ASSETS 0

183

183 Loans to and claims on credit institutions

103

104

104 Loans to and claims on customers to real value

12 615

13 976

0

103 12 615 28

28

197

936

936

1 264

13 682

13 682

15 724

183

13 976 Loans to and claims on customers to amortised cost

104

104

13 966

13 966

197 Financial derivatives 1 264 Certificates, bonds and shares available for sale 15 724 Total

183

0 103

103

12 594 12 594

197

197

28

28

1 264

1 264

936

936

15 714

15 714

13 661 13 661

LIABILITIES 519 Liabilities to credit institutions to amortised cost

187

187

519

7 962

7 962

8 615

8 615 Deposits from customers to amortised cost

150

150

1 000

1 000 Borrowing through the issuance of securities real value

1 000

1 000

150

150

4 303

4 311

4 822

4 724 Borrowing through the issuance of securities amortised cost

4 724

4 822

4 311

4 303

32

32

1

71

71

70

12 705

12 713

15 027

519

519

185

185

8 581

8 581

7 930

7 930

1 Financial derivatives

1

1

32

32

70

70

70

70

14 895

14 993

70 Subordinated loan capital to amortised cost 14 929 Total

12 678 12 670

NOTE 23 - Financial derivatives

parent bank

Group

31.12.08

31.12.08

Nominal value Total

Market value Assets

Nominal value

Commit.

Total

Market value Assets

commitment

Assets: 70

1 Interest rate swaps – fixed interest rate loans

70

1

1

Liabilities: 6

Interest rate swaps – bank deposits with share yield

1 550

140

505

112

2 131

252

Interest rate swaps – certificates and bonds

6 1 550

1

505

112

2 131

252

Currency Currency swap – Syndicate loan * 1 Total financial derivatives

1

Financial derivatives

parent bank

Group

31.12.07

31.12.07

Nominal value Total

Market value Assets

Nominal value

Commit.

Total

Market value Assets

commitment

Assets: 135

1

Interest rate swaps – fixed interest rate loans

135

1

Liabilities: 8 150

Interest rate swaps – bank deposits with share yield 1

Interest rate swaps – certificates and bonds

8 150

1

Currency 505 798

Currency swap – Syndicate loan * 2

0 Total financial derivatives

505 798

*)In Euro exchange to NOK

58

2

1

NOTES The agreements entered into by the Bank are interest rate-related financial derivatives, such as interest rate swaps relating to fixed interest rate loans, loans and bank deposit with share yield. The financial derivatives used by the Group are not classified as hedging instruments according to IFRS. The reason for using interest rate swaps is that the positive or negative value change relating to the underlying item would largely be compensated for by an opposite value change involving the interest rate swap.

NOTE 24 - Financial assets available for sale 1)

Parent bank and group Certificates and bonds

31.12.08

31.12.07

1 191

862

Accrued interests financial assets Shares unit trust certificates and PCCs Total certificates bonds and shares available for sale 2)

8

6

65

68

1 264

936

1) ) The figures represent the maximum credit exposure. 2) The Group's policy of prudence in the securities market will be continued, and changes in the value of financial investments are expected to reflect this. The interest portfolio (including short-term instruments in banks) amounts to about 10 % of the Bank's total assets. Portfolio of certificates and bonds:

Parent Bank and group 31.12.08 Nominal value Bonds issued by public sector borrowings Other bearer bonds

31.12.07

Market value

Nominal value

Market value

30

30

80

78

1 191

1 161

785

784

Accrued interests financial assets

8

Total certificates and bonds

1 221

1 199

6 865

868

The Bank has adopted a cautious strategy with regard to securities, with specified parameters including minimum requirements for ratings for both Norwegian and foreign securities. The framework and authorisations are revised annually and are approved by the Bank's Board of Directors. The Group's portfolio of certificates and bonds is in its entirety classified as current assets. The purpose of the certificate and bond portfolio is to ensure that the Group has liquidity reserves. The Bank's securities portfolio is deemed not to be a trading portfolio. As at 31 December 2008 the securities portfolio had an average remaining term to maturity of just over 2.1 years. The average rate of interest for the certificate and bond portfolio in 2008 amounted to 6.72 per cent. The rate of return is calculated on total interest income for the entire portfolio as a percentage of the average securities portfolio throughout the year. NOK 30.1 million was expensed in respect of the net price adjustment to bonds. NOTE 25 – shares unit trust certificates and PCCs

Parent Bank and group 31.12.08 Nominal value Shares – stock exchange

31.12.07 Market value

Nominal value

Marked value

4

4

8

8

Shares – not stock exchange

72

61

67

60

Total shares

76

65

74

68

*) The shares are unlisted shares where the fair value cannot be measured reliably and where the acquisition cost or written-down value is used as the book value.

59

NOTES

Additions/disposals of shares unit trust certificates and PCCs

Parent Bank and group 31.12.08

31.12.07

Portfolio as at 1.1 Helgeland Sparebank

68

53

Additions

19

32

Disposals

14

-14

2

-2

Write-down Adjustment to market value

-7

Portfolio as at 31.12

64

68

Additions/disposals of shares Associated Companies and Group Companies

Parent Bank Details for 2008:

Portfolio as at

Additions Disposals

Write-down

01.01.08 Aassociated companies: Group companies

112 46

18 5

Adjustment Portfolio as at to real value

31.12.08

5

135 48

3

NOTE 26 - Investment in subsidiaries

Parent Bank Subsidiaries

Office adress:

ANS Bankbygg Mo *)

Mo i Rana

AS Sparebankbygg

Sandnessjøen

Equity stake 97% 100 %

Helgeland Sparebanks Eiendomsselskap AS

Mosjøen

100 %

Helgeland Utviklingsselskap AS

Mosjøen

100 %

*) The minority interest in ANS Bankbygg is not shown on a separate line in the accounts as the value is not significant.

NOTE 26.1 - Intra-Group balances - subsidiaries

Parent Bank Mellomværende:

31.12.08

31.12.07

10

33

34

32

Interest income from subsidiaries

1

2

Interest costs from subsidiaries

2

1

Rental costs to subsidiaries

7

7

Payments from subsidiaries

0

2

Payments to subsidiaries

3

0

Assets: Loans to subsidiaries Liabilities: Deposits from subsidiaries Transactions:

60

NOTES

NOTE 27 - Associated companies

Group Location

Business sector

Eq. stake

COMPANY

Equity methode 2008

Equity methode 2007

ROI Invest AS*)

Mo i Rana

Investment

42,0 %

106

93

Eiendomsmegleren Helgeland AS

Mo i Rana

Real estate

34,0 %

2

5

Helgeland Vekst AS

Sandnessjøen

Investment

38,9 %

44

36

Storgt. 73 AS

Brønnøysund

Real estate

42,9 %

2

2

154

135

Sum *) The book value of the company is therefore based on preliminary figures from the company as at 31.12.2007

NOTE 27.1 - Summary of financial information on the various associated companies for 2008

Group Company

Assets

ROI Invest AS *)

Equity capital

Turnover

285

72

213

5

6

4

9

3

91

0

91

0

0

6

2

4

1

1

387

80

312

Eiendomsmegleren Helgeland AS Helgeland Vekst AS Storgata 73 AS Total

Liabilities

Result for the year

*)2007- figures

NOTE 27.2 Summary of financial information on the various associated companies for 2007 Group Company

Assets

ROI Invest AS

Equity capital

Turnover

246

91

155

6

2

4

94

0

91

6

2

4

352

95

254

Eiendomsmegleren Helgeland AS Helgeland Vekst AS Storgata 73 AS Total

Liabilities

Result for the year 8

3

1

1

NOTE 27.3- Intra-group balances and transactions between the Bank and its associated companies

Parent Bank 31.12.08

Group 31.12.07

Intra-group balances:

31.12.08

31.12.07

Claims: 2

2 Loans to associated companies

2

2

2

2

2

2

Total net claims Liabilities:

111

34 Deposits from associated companies

34

111

111

34

34

111

Total liabilities Transactions:

0

0 Interest income from associated companies

0

0

5

4 Interest costs from associated companies

4

5

12

5

5

12 Dividends from associated companies

61

NOTES

NOTE 28 - DISCLOSURES OF RELATED PARTIES Transactions with related parties: during the quarter, the sum of NOK 5.1 million was paid in group contribution to the company Helgeland Utviklingsselskap as. Debt of NOK 11.7 million was converted to share capital in the same company Helgeland Sparebank owns about 9 % of the shares in Frende Holding AS and has received commission for distribution of life insurance for NOK 0.6 million in 2008.

NOTE 29 - Deferred tax / Deferred tax benefit

Parent Bank 31.12.07

Group 31.12.08 Deferred tax / deferred tax benefit:

31.12.08

31.12.07

Positive temporary differences: 11

55 Operating equipment

55

10

11

55 Total positive temporary differences

55

10

3

15 Deferred tax

15

3

1

30 Operating equipment

30

24

19 Pension liabilities

29

36

76

81 Other temporary differences

81

76

2

1

142

113

0

0

142

113

40

32

Negative temporary differences

15 116 0 116 32

2 Total negative temporary differences 132 Loss carried forward 0 Total negative temporary differences 132 Deferred tax benefit 37 Deferred tax / deferred tax benefit:

Deferred tax/tax benefit is calculated on the basis of the temporary differences wich exist at the end of the acconting year between accounts-related and tax-related values through the application of the debt method. Deferred tax is shown in the accounts on a net basis when the Group has a legal right to set off the deferred tax benefit against deferred tax in the balance sheet.

62

NOTES

NOTE 30 - Fixed assets

Parent Bank

Group

Total Mach. eqt . fixtures and cars 255

Buildings and other real estate

188

68 Acquisition cost as at 01.01.07

10 7

Buildings Mach. eqt . and other fixtures and real estate cars 133

Total

135

268

8

8

125

143

268

75

117

192

5

6

11

80

123

203

45

20

65

125

143

268

1

8

9

126

151

277

80

123

203

4

8

12

10 IFRS implementation 7

+ additions

9

9 - disposals

9

263

195

68 = Acquisition cost as at 31.12.07

221

173

48 Accumulated depreciation/write-down as at 01.01.07

8

6

2 + ordinary depreciation 1)

9

Disposal depreciation/write-down as at 31.12 229

179

34

16

263

195

9

8

50

Accumulated depreciation/write-down as at 31.12.07

18 Book value as at 31.12.07 68 Acquisition cost as at 01.01.08 1 + additions - disposals

271

203

69 Acquisition cost as at 31.12.08

229

179

50 Accumulated depreciation/write-down as at 01.01.08

9

8

1 + ordinary depreciation 1) Write down

2

2

Disposal depreciation/write-down as at 31.12 238

187

33

16 10-33 %

51

Accumulated depreciation/write-down as at 31.12.08

18 Book value as at 31.12.08 3-4 % Rates applied to ordinary depreciation

3-10 år

30 år Economic life 1)

86

131

217

40

20

60

3-4 %

10-33 %

30 år

3-10 år

NOTE 30.1 - Details of additions and disposals

Parent Bank 31.12.07

Group 31.12.08

7

8 I

0

0 D

0

1 I

9

0 D

7

9 I

9

0 D

Machinery fixtures and transport equipment Own buildings and other real estate/sites building plots

31.12.08

31.12.07

I

8

8

D

0

0

I

1

0

D

0

9

Sum

I

9

8

Sum

D

0

9

(I= Investment D = Disposals) NOTE 30.2 - Investment property

Parent Bank 2007

Group 2008

2007

0

0 Book value as at 01.01

8

26

0

0 Additions

6

-17

0

2008

0 Net gains/losses on changes in market value

0

0 Book value as at 31.12

2

63

8

NOTES An independent valuation of investment property at market value was made on 31.12.2004. There are no restrictions with regard to when the investment property may be sold or how the income and cash flow relating to such a sale may be used. There are no significant contractual obligations to buy construct or develop investment properties

NOTE 30.3 - Fixed assets held for sale

Parent Bank 2007 20

Group 2008

-2 0

2008

2007

13

16

11

0

15 Book value as at 01. 01 IFRS implementation 11 Additions

-2

-8 Disposals

-8

-2

-1

-1 Net gains/losses on changes in market value

-1

-1

15

17 Book value as at 31.12

15

13

NOTE 31 - Other assets

Parent Bank 31.12.07

Group 31.12.08

17 5 7 29

31.12.08

31.12.07

4 Sundry suspense accounts

9

25

5 Members' deposits with Kredittforening for Sparebanker

5

5

3 Prepaid costs 12

Total other assets

2

0

16

30

NOTE 32 - Foreign exchange

Parent Bank

Group

The Group has no reserve of foreign currencies but sells foreign notes and travellers cheques on a commission basis Helgeland Sparebank uses DnB NOR as its foreign exchange bank. The Group has no transactions in foreign currencies of any importance but has provided guarantees for foreign currency loans managed by its foreign exchange bank on behalf of Helgeland Sparebank. See Note 2.3 foreign exchange risk.

NOTE 33 - Liabilities to credit institutions

Parent Bank 31.12.07

Group 31.12.08

29

31.12.08

31.12.07

1

27

1 Liabilities to credit institutions – without agreed maturities 401 Loan's Norges Bank

401

158

118 Liabilities to Kredittforening for Sparebanker – with maturities over 6 months

118

158

187

519

519

185

Total

Details of liabilities to credit institutions – with maturities over 6 months: Kredittforeningen for Sparebanker Kredittforeningen for Sparebanker

Cupon 3m Nibor + 0,35

Nom amount

01.10.2009

Maturities 09.09.2010

3m Nibor + 0,30

15

Total – Kredittforeningen for Sparebanker

103 118

Loan's Norges Bank

30.11.2010

64

Fastrente

400

NOTES

NOTE 34 – Deposit from customers split by sector/industry

Parent Bank

Group

%

31.12.07

%

31.12.08

1.2

98

0.9

74

8.3

661

7.4

635

3.0

235

3.0

1.4

109

1.4

5.0

4.4

398

2.2

2.3

172

4.2

3.5

333

6.7

6.8

536

6.1

6.9

489

31.12.08

%

31.12.07

%

74

0.9

98

1.2

Municipalities and municipal enterprise

635

7.4

661

8.3

259

Agriculture and forestry

259

3.0

235

3.0

121

Fisheries and aquaculture

121

1.4

109

1.4

380

Mining and industry

380

4.4

398

5.0

199

Building and construction

199

2.3

172

2.2

301

Trade, hotel, restaurants.

301

3.5

333

4.2

589

Property, property development

555

6.5

504

6.4

594

Transport and services

Financial institutions

61.9

4 931

63.4

5 463

Retail market

100.0

7 962

100.0

8.615

Total

594

6.9

489

6.1

5 463

63.7

4 931

62.2

8 581

100.0

7 930

100.0

NOTE 34.1- Deposits from and liabilities to customers

Parent Bank 31.12.07

Group 31.12.08

31.12.08

31.12.07

3 092

3 257 Ordinary terms without notice of withdrawal or agreed maturities

3 257

3 092

4 548

5 006 Special terms for customer deposits without agreed maturities

4 973

4 491

297

327 Special terms for customer deposits with agreed maturities

326

322

25

25 Funding deposits from customers with agreed maturities

25

25

8 581

7 930

7 962

8 615 Total deposits from customers

NOTE 35 - Financial liabilities incurred through the issuance of securities

Parent Bank and Group Effective int rate Certificate loans

6.6

Own Certificate

31.12.08 Effective int rate 31.12.07 520

5.8

753

4.8

3 488

-49

Bond loans

7.2

Own bonds

5 245 -608

Syndicated loans

6.7

Share-/stock exchange indexed bond loans

Total financial liabilities incurred through the issuance of securities

65

-339

616

5.1

0 5 724

5.3

506 54 4 461

NOTES

Details of bond loans:

Maturity

Bond Loans

Bond loans

Own portfolio

Nom. amount

2009

1 227

-362

865

Bond Loans

2010

1 397

-97

1 300

Bond Loans

2011

900

Bond Loans

2012

950

Bond Loans

2012

400

Bond Loans

2013

500

Bond Loans

2013

400

-100

300

Total Bond loans

5 774

-609

5 165

Syndicated loan – last maturity 2011*) Total of all bond loans, syndicated loan, share/stock exchange

6 390

-609

5 781

31.12.08

31.12.07

Long-term drawing rights facility maturity 2011

616

516

Short-term drawing rights facility 1 year

130

130

Total drawing rights facilities as at 31.12

746

646

593

313

900 -50

900 400 500

616

616

*) * Syndicated loan in Euro 62.500 NOTE 35.1- Unutilised drawing rights facilities 31.12:

*) Long term drawing rights facilities in Euro 62.500. Exchange to NOK 31.12.08 In addition the Group has Surplus liquidity at Norges Bank as at 31.12

Bonds at floating rates of interest; interest rates are fixed in advance for 3-6 months at the time and the interest cost charged to interest costs. The Bankk's bonds are repaid at maturity; if the agreements in question permit and if the Bank should so wish the loans may be repaid earlier. None of the Group's bonds are secured. The Group has not defaulted on borrowed funds during the accounting year. This applies to principal amount the payment of interest and/or redemption amount.

NOTE 36 - Other liabilities

Parent Bank 31.12.07

Group 31.12.08

31.12.08

31.12.07

39

36 Other short – term liabilities

42

41

55

51 Tax payable

49

54

94

87

91

94

9

10

8 6

Total other liabilities

9 Accrued holiday pay and employers' social security contributions

2

6

15

14 Other incurred costs

2 Set aside severance pay

14

21

29

25

25

36

76

81 Pension liabilities (note 12)

81

76

3 78 3 204

Total incurred costs and prepaid income Provisions for losses on guarantees

81

3

Total incurred liabilities

16 Deferred tax 209

Total other liabilities

66

81

78

16

3

213

211

NOTES NOTE 37 - Equity capital/subordinated loan capital

Parent Bank and Group Details of subordinated loan capital:

Last maturity

Subordinated Loan,

2014

Coupon 3m Nibor + 1,65 %

Repayment structure Call 04.06.09

Intrest Total subordinated loans

Market value

Nominal amount 70

70

1

1

71

71

Subordinated loans to floating rate measured to amortised cost in the balance sheet NOTE 38 - Equity capital NOTE 38.1- Capital adequacy

Parent Bank 31.12.07

Group 31.12.08

31.12.07

202

220 PCC-capital

220

202

120

129 Premium Fund

129

120

-1

-1

-1

31.12.08

-1 Own PCCs

321

348 Total paid-in capital

348

321

879

972 Savings Bank's Fund

972

879

64

73 Reserve for valuation variances

91

59

36

38 Donations Fund

38

36

13 Dividend equalisation reserve

13

9

18 Cash dividend

18

37

9 37

0 Other equity capital 1 024

1 114

Total accrued equity capital/retained earnings

6

26

1.138

1.045

29

20

Additional:: 20

29 Non amortised variance in accounting estimates returned to zero

Deduction: -64

-73 Not realized profits

-91

-59

-37

-18

Cash dividend

-18

-37

-31

-37 Intangible assets

-40

-28

1 367

1 262

1 233

1 363

Total core capital

70

70

Supplementary capital subordinated loan capital

70

70

28

28

Net nor realized profits

38

28

98

98

Total net supplementary capital

108

98

1 331

1 461

1 475

1 360

10 471

9 893

9 875

Total net equity and related capital

10 446 Weighted asset calculation basis

13.48 %

13.98 %

12.49 %

13.05 % Of which core capital accounted for

Capital adequacy ratio

14.08 %

13.75 %

13.05 %

12.76 %

Basel II and the capital adequacy regulations. Helgeland Sparebank has chosen the standardised approach for calculating credit risk and the basic indicator approach for calculating operational risk. Irrespective of how good the Bank's risk management is, unexpected losses may be incurred, which means that the Group must have sufficient equity. As part of the Basel II project, the need for supplementary capital for the different risk areas has been assessed. The assessments are supported by various internal evaluations and calculation methods. A summary of this has been made in the Bank's

67

NOTES ICAAP, which is the Board of Directors' document for the documentation of calculated capital requirements and the plan for capital management. On the basis of these assessments, the Bank has specified targets for capital adequacy. The weighting of the Bank's asset and off-balance-sheet items has been undertaken in accordance with Basel II regulations, established by Kredittilsynet (the Financial Supervisory Authority of Norway). Capital adequacy indicates the Group's solvency in relation to the risk-weighted asset base. NOTE 38.2 - requirement after Basel II 31.12.08

Parent Bank

Group

31.12.08

31.12.08

0

Governments and central banks

0

2

Local and regional authorities (including municipalities)

2

0

State-owned enterprises

0

0

Multilateral development banks

0

0

International organisations

0

32

Institutions

32

317

Corporate

316

130

Retail exposure

130

265

Exposure with security in property

265

23

Loans past due

0

High-risk exposure

0

0

Covered bonds

0

0

Interests in securities funds

0

16

Other exposure

785

Capital requirement credit risk

59

Capital requirement operational risk 1)

-9 836

23

17 785 63

Deductions from the capital requirement

-10

Total capital requirement

838

The capital requirement has been calculated on the basis of the standardised approach for calculating credit risk and the basic indicator approach for calculating operational risk

NOTE 38.2.1 - Basis for calculation of capital adequacy 31.12.07

Group

0% Cash and ordinary deposits with banks

10%

20%

50% 0

0

15

25

393

0

370

451

313

Short-term placements in securities

73

Loans

100%

Riskweighted amount

42

7

7 723

5 007

8 870

Other claims including repossessed assets

0

0

47

64

87

Other fixed assets (excluding goodwill)

0

0

0

289

289

399

7 769

5 730

9 697

72

16

281

303

Total assets

429

Items off b/s with a conversion factor of 100 %

25

2

Items off b/s with a conversion factor of 50 %

17

207

108

Interest rate-related contracts

797

3 0

0

0

2

Total items off the balance sheet

802

72

33

487

413

Deductions for loss provisions and adjustments which cannot be incl in eq and related capital Basis for calculation of capital adequacy

-216 1 231

68

25

472

7 802

6 217

9 893

NOTES Basel II came into force on 1 January 2007. The Bank chose to apply transitional rules and reported under the new rules from the first quarter of 2008 inclusive. Figures for 2007 thus show the basis for the calculation and capital adequacy in accordance with Basel I.

NOTE 38.2.2 - Basis for calculation of capital adequacy 31.12.07

Parent Bank

0% Cash and ordinary deposits with banks

10%

20%

50% 0

0

25

393

0

370

451

7

7 723

5 007

8 870

313

Short-term placements in securities

73

Loans

42

100%

Riskweighted amount

Other claims including repossessed assets

0

0

47

64

87

Other fixed assets (excluding goodwill)

0

0

0

289

289

399

7 769

5 730

9 697

Total assets

429

Items off b/s with a conversion factor of 100 %

2

Items off b/s with a conversion factor of 50 %

3

25

72

16

281

303

17

207

108

Interest rate-related contracts

797

0

0

0

2

Total items off the balance sheet

802

72

33

487

413

Deductions for loss provisions and adjustments which cannot be incl in eq and related capital Basis for calculation of capital adequacy

-217 1 231

25

472

7 802

6 217

9 893

Basel II came into force on 1 January 2007. The Bank chose to apply transitional rules and reported under the new rules from the first quarter of 2008 inclusive. Figures for 2007 thus show the basis for the calculation and capital adequacy in accordance with Basel I.

NOTE 38.3 - Change in equity capital

Parent Bank 31.12.07 1 217

Group 31.12.08 1 345 Equity capital at 01.01 27 New capital issued

4 11 9 91

-19 Dividend 4 Dividend equalisation fund 96 Change Savings Bank's Fund 3 Donations fund

-3

6 Fund for unrealized profit

1 345

1 462

31.12.07

1 366

1 217

27

Other changes in equity capital

17

31.12.08

Equity capital 31.12

69

-3

26

-19

9

4

9

96

91

3

17

12

-3

1 486

1 366

NOTES

NOTE 39 - PCC-holders

Parent Bank NOTE 39.1 - PCC-holdings as at 31. 12. 08 according to the number of certificates held

Parent Bank Number of PCC-holders Breakdown acc to number of PCCs held *

Number of PCCs

Share

Share - %

Share

Share - %

2 332

92.9 %

289 988

13 %

1 001 – 10 000

158

6.3 %

463 294

21 %

10 001 – 50 000

13

0.5 %

276 734

13 %

50 001 – 100 000

4

0.2 %

275 581

13 %

100 001 – 500 000

4

0.2 %

894 537

41 %

2 511

100.0 %

2 200 134

100

1 – 1 000

Total

*PCC-holders with more than 50 000 certificates account for 0.24 per cent of the number of PCC-holders

Trading in Helgelands Sparebank's PCCs The price as at 31.12.08 was NOK 100,5 per PCC See table below for price movements and trading volumes The pink line shows the price movements for finance sector at Oslo stock exchange.

Helgeland Sparebank Norwegian Financial Sector

NOTE 39.2 PCC-holdings as at 31. 12. 07 according to the number of certificates held

Parent Bank grunnfondsbeviseiere Breakdown acc to number of PCCs held

grunnfondsbevis

Share

Share - %

Share

Share - %

2 131

92.6

266 868

13.2

1 001 – 10 000

151

6.5

426 606

21.1

10 001 – 50 000

12

0.5

231 471

11.5

50 001 – 100 000

4

0.2

284 767

14.1

100 001 – 500 000

4

0.2

808 547

40.1

2 302

100.0

2 018 259

100.0

1 – 1 000

Total

70

NOTES Market-making agreement Helgeland Sparebank has entered into a market-making agreement relating to trading in the Bank's PCCs. The purpose of the agreement is to ensure liquidity in the paper and to even out the levels of offers and bids and to contribute to the marketing of the PCCs. Furthermore according to the agreement every effort will be made to keep the difference between buying- and selling prices to maximum 4 percentage points but rounded up or down to the natural amount. The difference may nevertheless be kept smaller if the market interest should warrant it. The price set should at all times reflect the market's assessment of the Bank's PCCs. Return and dividend policy Helgeland Sparebank's aim is to achieve a return on its equity capital, which is competitive in the market in relation to the Bank's overall risk profile. The sum of cash dividend payments and transfer to the Dividend Equalisation Fund shall reflect the PCC-holders' share of the Bank's equity capital. Investor policy The Bank wishes to have an open dialogue with PCC-holders and other investors in the market. In the Board of Directors' assessment correct and relevant information provided at the right time creates trust and predictability, contributing to correct pricing of Helgeland Sparebank's PCCs. In the case of events which involve an obligation to provide information reports will be sent to the Oslo Stock Exchange and thereafter added to the Bank's own how pages on the Internet. The Bank has been listed on the Oslo Stock Exchange since 2000 and has always complied with its requirements with regard to reporting and information applicable to listed companies. The Bank's ticker code is Helg. NOTE 39.3 – PCC-holders

Parent Bank The Bank has a PCC-capital of NOK 220 million consisting of 2 200 134 certificates of a nominal value of NOK 100 each. The PCCs are registered at VPS (the Norwegian Registry of Securities) under ISIN NO 0010029804 and listed on the Oslo Stock Exchange with the ticker code, HELG. PCC-holders: As at 31.12.2008 Helgeland Sparebank had 2 500 PCC-holders At the same time the 20 largest PCC-holders owned 65,5 per cent of the company's PCC-capital. At the same time foreign PCC-holders owned 0.1 per cent per cent of the company's PCC-capital NOTE 39.4 - The 20 largest PCC-holders at 31.12.08

Parent Bank Number

% share

Sparebank 1 Nord Norge

435 280

19.78

Share

% share

DnB NOR bank ASA investeringsdivisj.

30 432

1.38

Bank 1 Oslo

203 626

9.26

Nervik, Steffen

30 000

1.36

Sparebanken Øst

128 998

5.86

Tromstrygd

25 000

1.14

MP Pensjon

126 633

5.76

Hartviksen, Harald

19 966

0.91

Sparebankstiftelsen DnB NOR

92 708

4.21

Sivesind, Johan

16 444

0.75

Haslum Industri AS

73 899

3.36

WarrenWicklund utbytte

15 136

0.69

Helgelandskraft AS

58 498

2.66

WarrenWicklund assets

13 637

0.62

Hifo Invest AS

50 476

2.29

ROI Invest AS

13 000

0.59

Terra Utbytte

43 976

2.00

Toten Sparebank

12 833

0.58

Sparebanken Vest

38 350

1.74

The Northern Trust

12 360

0.56

1 252 444

56.92

1 441 252

65.50

Total 10 largest PCC holders

Total 20 largest PCC holders

71

NOTES

NOTE 39.5 - The 20 largest PCC-holders at 31.12.07

Parent Bank Number

% share

Sparebank 1 Nord-Norge

403 652

20.0

Share

% share

Nervik, Steffen

26 000

Romern AS

174 600

1.3

8.7

Tromstrygd

25 000

1.2

Sparebanken Øst MP Pensjon

115 002

5.7

Dnb Nor Bank ASA investeringsdiv.

19 475

1.0

112 893

5.6

Hartviksen, Harald Paul

17 800

0.9

Terra utbytte VPF

91 217

4.5

BBS Ansattefond

17 400

0.9

Haslum Industri AS

73 899

3.7

Sivesind, Johan

14 660

0.7

Sparebankstiftelsen DnB NOR

72 300

3.6

ROI Invest AS

13 000

0.6

Helgelandskraft AS

52 151

2.6

The Northern Trust C

12 360

0.6

Hifo Invest AS

45 000

2.2

Instituttet for sammenlig. Kulturforsk.

12 100

0.6

Warrenwicklund

28 657

1.4

Sparebank 1 Nord-Norge

8 659

0.4

1 335 825

66.2

Total 10 largest PCC holders

1 169 371

Total 20 largest PCC holders

58.0

NOTE 39.6 – Dividend 31.12.08

Parent Bank Equity in the balance sheet + Subordinated loan capital

31.12.08

31.12.07

1 532

1 415

-160

-171

1 372

1 244

PCC percentage 31.12

25.7 %

25.8 %

Calculation of dividend:

31.12.08

31.12.07

122

163

4

3

Deduction (Subordinated loan capital /fund for evaluation differences/dividends on PCC) Total adjusted equity

Profit Transferred from equalisation fund

126

166

Calculated dividende*)

31

46

Dividend provision per. PCC

14

22.8

8

18.5

6

4.3

Basis dividend

*Cash dividend * equalisation reserve *)2008 Deducted remainder that must be covered, lent by the savings bank's fund.

NOTE 39.7- KEY FIGURES PCC

Parent Bank 31.12.07 180

Group 31.12.08 100.5 PCC price quoted on the stock exchange

31.12.08

31.12.07

100.5

180

8.1

7.0 P/E (price as at 31.12 divided by profit per PCC)

6.7

6.8

1.1

0.6 P/B (price as at 31.12. divided by book value of equity capital)

0.6

1.1

25.8 163.9

25.7 PCC percentage 31.12 158.1 Equity capital per PCC, in Norway currency

25.7

25.8

158.1

163.8

22.3

14.3 Yield per primary certificate in Norway currency

14.9

26.2

22.3

14.3 Diluted result per PCC in Norway currency

14.9

26.2

18.50 4.3

8.0 Cash dividend 6.0 Equalisation reserve

72

NOTES

NOTE 40 - The Bank's guarantee liabilities according to different types of guarantee

Parent Bank 31.12.07

Group 31.12.08

31.12.08

31.12.07

87

178 Payment guarantees

178

87

139

114 Contract guarantees

114

139

315

363 Loan guarantees

363

314

57

60 Other guarantee liabilities

60

57

598

715 Total guarantee liabilities *)

715

598

31.12.07

31.12.07

0

0

SBGF 0

0 Guarantee issued in favour of SBGF

*) *) Adjustment of the fair value has not been incorporated in the balance sheet, as the change in value is not material

NOTE 41 – Assets pledged as collateral security

Parent Bank 31.12.07

Group 31.12.08

31.12.07

31.12.06

Bonds pledged as collateral security for: 345

905 D-loan from Norges Bank

905

345

345

905 Total assets pledged as collateral security

905

345

NOTE 42- Events after the balance sheet date

Parent Bank and group The Group and the Parent Bank are not aware of events after the balance sheet date that influence the financial statements

73

NOTES

NOTE 43 – Balance sheet divided into short and long term

Parent Bank

Group

31.12.07 31.12.08

31.12.08

31.12.07

Assets 313

593

Cash and balances at central banks

593

313

0

183

Loans to and claims on credit institutions

183

0

1 481

1 668

1 668

1 481

185

153

2 629

1 974

12 402

11 216

Loans to and claims on customers Financial derivatives

27

27

Certificates, bonds and shares available for sale

153

185

1 974

2 629

11 237

12 412

1

197

783

1 079

112

135

46

48

Investments in subsidiaries

32

37

Total short term assets Loans to and claims on customers Financial derivatives

197

1

1 079

783

154

135

Deferred tax benefit

40

32

Certificates, bonds and shares available for sale Investments in associated companies

0

49

51

Fixed assets

77

85

29

12

Other assets

16

30

12 289

13 971

Total long term assets

13 965

12 282

14 263

16 600

Grand total assets

16 594

14 256

LIABILITIES AND EQUITY CAPITAL Liabilities to credit institutions

67

103

103

67

7 962

8 615

Deposits from customers and liabilities to customers

8 581

7 930

1 557

1 024

Borrowings through the issuance of securities

1 024

1 557

31

0

0

31

9 617

Financial derivatives

71

Subordinated loan capital

71

9 813

Total short term liabilities

9 779

120

416

2 904

4 699

1

1

205

209

71

0

3 301

5 325

12 918

15 138

321

348

Liabilities to credit institutions Borrowings through the issuance of securities Financial derivatives Other liabilities Subordinated loan capital Total long term liabilities Grand total liabilities Paid-in equity capital

9 585

416

118

4 699

2 904

1

1

213

211

0

71

5 329

3 305

15 108

12 890

348

321 1 045

1 024

1 114

Accrued equity capital/retained earnings

1 138

1 345

1 462

Total equity capital

1 486

1 366

14 263

16 600

16 594

14 256

Total liabilities and equity capital

74

KEY FIGURES PROFIT AND LOSS ACCOUNT ITEMS AS A PERCENTAGE OF AVERAGE ASSETS

Parent Bank

Group

2007

2008

2007

2007

6.03 3.69

7.31 Interest receivable and similar income

7.33

6.04

5.12 Interest payable and similar costs

5.14

3.70

2.35

2.19 Net interest- and credit commission income

2.19

2.34

0.63

0.53 Commissions receivable and income from banking services

0.53

0.64

0.11

0.08 Commissions payable and costs relating to banking services

0.09

0.11

0.53

0.45 Net commission income

0.45

0.53

-0.03

0.23

0.25

-0.04 Gains/losses on financial instruments

0.03

0.01 Other operating income

0.02

0.05

1.51

1.36 Other operating costs

1.34

1.54

0.09

0.21 Losses on loans gurantees etc

0.24

0.07

1.54

1.05 Result from ordinary operations before tax

1.05

1.54

0.04

0.07 Gains/losses from associated companies

0.10

0.27

1.58

1.12 Result from ordinary operations before tax

1.14

1.81

0.37

0.34 Tax payable on ordinary result

0.32

0.38

1.22

0.78 Result from ordinary operations after tax

0.82

1.43

75

KEY FIGURES FINANCIAL SUMMARY

Parent Bank 2007

Group 2008

2007

14 270

16 600 Total assets as at 31.12

2008 (Amounts in NOK million and %)

16 594

14. 256

13 378

15 496 Average assets

15 488

13 371

12 852

14 200 Gross lending

14 190

12 818

-87

-70 Individual write-downs

-70

-72

-47

-50 Period's change in collective write downs

-50

-47

0

-2

-2

0 Individual write-downs on gurantees 60.7 %

Deposit coverage as a percentage of gross loans

60.5 %

62.0 %

63.3 %

63.8 %

Loans to retail banking customers

63.9 %

63.5 %

11.1 %

10.5 % Growth in gross loans

10.7 %

11.4 %

62.1 %

7.5 %

8.2 % Growth in customer deposits

8.2 %

7.5 %

1 331

1 461 Core capital and related capital as at 31.12

1 475

1 360

10 446 Weighted asset calculation basis

10 471

9 893

69.2 %

9 875

62.9 % Weighted asset calculation basis as a percentage of average assets

63.1 %

69.4 %

13.5 %

14.0 % Capital adequacy ratio

14.1 %

13.8 %

12.5 %

13.1 % Core capital ratio

9.4 % 12.7 % 1.2 % 180 8.1 1.1

13.1 %

12.8 %

8.8 % Equity capital ratio

89%

9.6 %

8.6 % Rate of return on equity capital

8.8 %

14.8 %

0.8 % Return on assets

0.8 %

1.4 %

100.5 PCC price quoted on the Oslo Stock Exchange

100.5

180

6.7

6.9

7.0 P/E (price as at 31.12 divided by profit per PCC)

0,6

1.1

25.8

25.7 PCC percentage as at 31.12

0.6 P/B (price as at 31.12 divided by book value of equity capital per PCC)

25.7

25.8 %

163.9

158.1 Equity capital per PCC in NOK

158,1

22.3

14.3 Result per PCC in NOK

14.9

26.2

22.3

14.3 Diluted result per PCC in NOK

14.9

26.2

48,4 %

51.6 %

1.3 %

1.5 %

193

193

18.5 4.3 1.5

8.0 Cash dividend 6.0 Equalisation reserve 1.4 Costs as a percentage of income

50.8

48.8 Cost in percentage of average total assets

193

193 Number of man-years

0.9

1.1 Gross commitments in default

1.1 %

1.0 %

0.8

0.9 Net commitments in default

0.9 %

0.8 %

1.1

0.8 Total write-downs

0.8 %

0.9 %

0.1

0.2 Losses on commitments

0.3 %

0.1 %

As a percentage of gross loans:

Definitions: Average assets: Core capital: Weighted calc basis: Capital adequacy ratio: Equity capital percentage: Return on equity capital: Return on total assets: Costs as % of income: Net comms in default:

Average assets throughout the year PCC-capital Savings Bank's Fund and other Funds Defined acc to FSAN's definitions rules and regulations Equity/related capital as % of risk-weighted calculation basis Equity capital as a percentage of assets Ordinary net result as a % of average equity capital Ordinary net resultat as a % of average assets Total op costs as a % of net interest- and other income Total commitments in default minus specific loss provisions

76

ELECTED REPRESENTATIVES AND ADMINISTRATION

Group and parent Bank

Note 33.4 - 4 PCCs owned by the Bank's elected representatives as at 31.12.08 Navn/Firma Stanghelle, Helge

POSITION Forstanderskap

Own PCCs I

38

Drevland, Wenche

Forstanderskap

I

33

Skjæran, Stein

Forstanderskap

I

76

Strømnes, Øystein

Forstanderskap

O

280

Brattbakk, Ove (egne og Helgelandskraft AS)

Forstanderskap

G

59 145

Wangerud, Asbjørn (egne og Warrenwicklund utb.)

Forstanderskap

G

26 273

Forbergskog, Brynjar (Hifo Invest AS og TTS)

Forstanderskap

G

56 084

Nervik, Steffen

Forstanderskap

G

30 000

Svendsen, Tom

Forstanderskap

G

373

Høyen, Frank

Forstanderskap

G

274

Bugdø-Petersen, Asle (Halden Sparebank)

Forstanderskap

G

5 608

Brasøy, Hans G.

Forstanderskap

A

157

Sund, Liv

Forstanderskap

A

157

Bogfjellmo, Edgar

Forstanderskap

A

178

Ditlefsen, Roger

Forstanderskap

A

45

Eliassen, Einar

Forstanderskap

A

45

Johansen, Bente

Forstanderskap

A

86

Lunde, Eivind

Styreleder

S

45

Pettersen, Inger Lise

Styremedlem

S

45

Johansen, Bjørn

Styremedlem

S

45

Michalsen, Thore

Styrets nestleder

S

45

Heimdal, May

Styremedlem

S

83

Krane, Arnt

Chief Executive Officer

L

352

Flågeng, Lisbeth

Dep Chief Ex Officer

L

306

G= PCC-holders I = Elected from the Bank's depositors K= Elected from the region's municipalities A= Elected from the Bank's employees L= Member of the Bank's senior management S= Member of the Board of Directors M= Member of the Control Committee

77

To the Annual Shareholders' Meeting of Helgeland Sparebank Auditor’s report for 2008 We have audited the annual financial statements of Helgeland Sparebank as of December 31, 2008, showing a profit of NOK 122 000 000 for the parent company and a profit of NOK 128 000 000 for the group. We have also audited the information in the directors' report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit. The annual financial statements comprise the financial statements of the parent company and the group. The financial statements of the parent company comprise the balance sheet, the statements of income and cash flows, the statement of changes in equity and the accompanying notes. The financial statements of the group comprise the balance sheet, the statements of income and cash flows, the statement of changes in equity and the accompanying notes. International Financial Reporting Standards as adopted by the EU have been applied in the preparation of the financial statements. These financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors. We conducted our audit in accordance with the laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards an audit also comprises a review of the management of the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion. In our opinion, • the financial statements have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the Company and the Group as of December 31, 2008 and the results of its operations and its cash flows and the changes in equity for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU • the company's management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway • the information in the directors' report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit are consistent with the financial statements and comply with the law and regulations Mo i Rana, February 26, 2009 PricewaterhouseCoopers AS

Per Erik Pedersen State Authorised Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only.

78

Responsibility Statement from the Boards of Directors and the CEO We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2008 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 entity and the group taken as a whole. We also confirm that the management report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.

Mo i Rana, 26 February

Eivind K. Lunde

Chair

Marianne Myrnes Steinrud

Thore Michalsen

Inger Lise Pettersen

Deputy chair

Bjørn Johansen

May Heimdal

Staff's repr.

Arnt Krane CEO

79

REPORT FROM THE CONTROL COMMITTEE RELATING TO HELGELAND SPAREBANK’S ANNUAL FINANCIAL STATEMENT FOR 2008

In accordance with the Savings Banks Act paragraph 13 the Financing Act paragraph 3-11 and the directives for the Control Committee the following statement is hereby provided: During the period from 1 April the Control Committee has consisted of the following members: Asle Bardal Financial Manager (chairman) Heidi Dahl, Lawyer Kåre Johan Åsli, Master of Sicience in Egineering The Control Committee held 5 meetings during the period from 1 April 2008. At these meetings the Committee has checked that the Bank'ss operations have been conducted in accordance with the Savings Banks Acts rules and regulations contained in paragraphs 2425 and 27 and according to the Financing Activities Act paragraph 2-15 and rule and regulations contained in the circular letter from the Financial Supervisory Authority of Norway as well as the Bank's by-laws. The Control Committee has examined the Minutes of the Bank's Board of Directors and otherwise examined matters as stipulated by the directives contained in the Savings Bank's Act Financing Act and the Control Committees' directives. The Control Committee has examined the Annual Report from the Board of Directors the Profit and Loss Account and Balance Sheet for 2008, as well as the Auditor's Report and has no comments to make in this connection. The Control Committee would like to recommend that the Profit and Loss Account and Balance Sheet are adopted as the Bank's accounts for 2008. Mosjøen, 26 February 2009 HELGELAND SPAREBANK'S CONTROL COMMITTEE

Asle Bardal

Heidi Dahl

Chairman

80

Kåre Johan Åsli

ELECTED REPRESENTATIVES AND ADMINISTRATION

Elected representatives and senior management Members of the Board of Trustees Bogfjellmo, Edgar Sund, Liv

Elected from the Bank's depositors Deputy Chairman : Hofstad, Finn Ove Drevland, Wenche Solhaug, Sten Oddvar Stanghelle, Helge Robertsen, Inger Risøy, Torill

Members of the Board of Directors: Chairman: Lunde, Eivind Deputy Chairman: Michalsen, Thore Other members of the Board of Directors: Pettersen, Inger Lise Johansen, Bjørn Steinrud, Marianne Myrnes Heimdal, May

Elected from the public sector: Chairman: Bang, Grete Strømnes, Øystein

Members of the Control Committee:

Elected from the Bank's PCC-holders:

Chairman Bardal, Asli

Brattbakk, Ove Wangerud, Asbjørn Forbergskog, Brynjar Svendsen, Tom Frank, Høyen Bugdø-Petersen, Asle Nervik, Steffen

Dahl, Heidi Åsli, Kåre

Senior management and key personnel: Krane, Arnt, CEO Flågeng, Lisbeth, DCEO Heimstad, Dag Hugo, General Manager Region South Strøm, Inger Lise, General Manager Corporate staff Sætran, Geir, General Manager development Ekroll, Anne, General Manager risk management Krogli, Ann Karin, Personnel Manager

Elected from the Bank's staff: Eliassen, Einar Ditlefsen, Roger Johansen, Bente Brasøy, Hans G.

81

82