Årsrapport 2024

The bank delivered a strong result for 2024, with a return on equity of 10,9 %. This result is the best ever in terms of both the amount and return on capital. The main reason for the good result is a stable and relatively high interest rate throughout the year. In addition, the bank has high loan growth and an increasing market share in our primary market area. In the corporate market, we see a growth of 13,0 % over the past year. In the retail market, we have a total loan growth of 9,0 % over the past year, while the general loan growth in the retail market in our market area has been 2,2 % in the same period.

The past year can be characterized as a more normal year for many. However, high prices for energy, food, and other inputs, combined with a stable and relatively high interest rate throughout the year, have still contributed to a relatively tight economy for many of the bank's customers. Signals and expectations going forward are more positive, with good prospects for a somewhat lower interest rate and continued real wage growth.

The profit for the year was NOK 336,2 million before tax and NOK 275,1 million after tax.

The financial statements are reported in accordance with IFRS® Accounting Standards as adopted by the EU. The annual financial statements have been submitted under the going concern assumption, an assumption that is in place given current equity. The Board is not aware of any major elements of uncertainly that could be of significance to the assessment of the bank’s annual financial statements.

The Board is of the view that the annual report provides an accurate overview of the bank’s assets and liabilities, financial position and financial result as of 31.12.2024. All figures in parenthesis apply to the corresponding period in 2023.

The bank’s net interest income was NOK 413,8 million (NOK 378,7 million) – an increase of NOK 35,0 million from 2023. Measured as a percentage of the average total assets, interest income increased from 2,21 % in 2023 to 2,29 % in 2024. This was mainly due to higher lending rates compared to the previous year. The money market rate showed a stable trend throughout last year. Norges Bank kept the policy rate unchanged at 4,50 % throughout 2024.

The money market rate (measured by 3-month Nibor) was reasonably stable throughout 2024. The average 3-month Nibor was 4,72 % in 2024, up from 4,15 % in 2023 and 2,05 % in 2022. In other words, the interest rate level has risen sharply in the period 2022–2024. According to Norges Bank's latest interest rate trajectory, it is expected that the interest rate peak has been reached and that the policy rate will be gradually reduced from March 2025. However, published interest rate trajectories are based on forecasts and will always be associated with some degree of uncertainty.

Other income in 2024 totalled NOK 106,6 million (NOK 83,7 million). This gives a net increase of NOK 22,9 million. This amounts to 0,59 % (0,49 %) of average total assets.

Commission income increased by NOK 23,0 million to NOK 116,0 million (NOK 93,0 million). Income from credit services (mainly commissions from Eika Boligkreditt) is at a significantly higher level in 2024 compared to the previous year. Commissions from Eika Boligkreditt alone increased by NOK 14,3 million from 2023 to 2024. The increased margin on loans in EBK is due to a stable interest rate level after the interest rate peak was reached in spring 2024. In addition, growth has been high throughout 2024. Payment services, savings and insurance show positive developments in 2024 compared with 2023. Guarantee commissions showed a minor decline from the previous year.

Other operating income rose to NOK 0,5 million (NOK 0,3 million). Commission expenses showed a marginal increase in 2024 and amounted to NOK 9,8 million (NOK 9,7 million).

Earnings from financial investments amounted to NOK 22,3 million (NOK 37,2 million) in 2024. This amounts to 0,12 % (0,22 %) of average total assets. Reduced earnings in 2024 are mainly due to significantly lower dividends from Eika Gruppen. The return on securities is also at a somewhat lower level compared to the previous year. Slightly lower credit risk led to a positive change in value of NOK 1,3 million in the bank's bond portfolio.

The bank’s operating expenses for 2024 were NOK 212,5 million (NOK 209,9 million). This is an increase of NOK 2,7 million. The bank’s operating expenses amounted to 1,18 % (1,22 %) of average total assets. Costs in relation to income were 39,2 % (42,0 %). We focus on continuously improving our cost ratio, while also offering good services and the right level of service to our customers. The bank’s objective is a cost ratio below 40,0 %, and the development in recent years has been positive.

Personnel costs totalled NOK 115,6 million (108,5 million). Costs for salaries and personnel were up by NOK 7,1 million, equivalent to 6,6 %. The average number of FTEs in 2024 has been 2,2 higher than the previous year. In addition, the wage settlement as well as general cost growth contributed to a certain increase. The Bank’s extended management team has also conducted management development courses divided into several modules during 2023 and into 2024.

Other operating expenses amounted to NOK 84,0 million (NOK 88,9 million). Operating expenses are down by NOK 5,0 million, corresponding to 5,6 %. The costs associated with the bank’s operation of IT systems are a significant item in the bank’s operating expenses. The IT systems are standardised, and the management and operation of these systems have to a great extent been outsourced to external service providers. The bank converted to a new core banking solution in November 2022. IT costs are down by NOK 9,6 million in 2024 compared to the previous year.

Compensation in relation to fraud cases has been recognised in the amount of approximately NOK 3,3 million as at the end of 2024. The increase from the previous year is marginal and amounts to approximately NOK 0,1 million. This type of cases has a high focus in the bank.

Net losses on loans were minus NOK 6,0 million (NOK 2,7 million). Group write-downs (stage 1 and 2) have been reduced by NOK 6,2 million to NOK 25,1 million during the year. This amounted to 0,16 % of gross lending at year-end. The reduction is mainly due to the fact that in the first and fourth quarters, the bank's additional write-downs were reduced by NOK 4,4 million, mainly due to a changed risk assessment related to commercial real estate.

Gross non-performing commitments (more than 90 days) amounted to NOK 30,0 million (NOK 32,2 million). Gross other defaulted exposures (doubtful) amounted to NOK 83,9 million (NOK 51,2 million). Total defaulted (more than 90 days) and other defaulted exposures (doubtful) have thus increased from NOK 83,4 million to NOK 113,9 million. Total individual write-downs (stage 3) amounted to NOK 7,6 million (NOK 6,4 million).

At the end of each quarter, the bank compiles a detailed review of the loan portfolio. This is to reveal indications of impairment and assess the need for write-downs. Discretionary estimates are made of the bank’s assessments of the write-down and provision amounts, for both individual loans and for groups of loans. This assessment relates to both the probability of default and loss given default.

The Board of Directors proposes the following allocation of the profit after tax of NOK 275 062:

Customer dividends for 2024 that are not collected by October 31, 2025, will be reallocated to charitable purposes/gift fund.

On 12 November 2020, Jæren Sparebank applied to the Financial Supervisory Authority of Norway for permission to amend the articles of association to enable the payment of dividends to customers from primary capital. The amendment to the articles of association was discussed at a meeting of the board of trustees on 9 November 2020. On 11 January 2021, the bank received a letter from the Financial Supervisory Authority of Norway approving the application to amend the articles of association. The calculation and payment of dividends to customers apply as from the allocation in the financial statements for 2021.

It is proposed that customer dividends and gifts are distributed with NOK 80,8 million in customer dividends and NOK 10,0 million allocated to the gift fund in the bank. The gift fund is administered by a separate gift committee established by the bank, and awards shall be made in accordance with its own guidelines. Gift awards shall be made on the initiative of the Bank. Gift funds shall be provided for purposes that have a public benefit, support good business practice and contribute to the sustainable development of the local environment.

The bank’s total assets at the end of 2024 amounted to NOK 18,9 billion. Total assets have increased by NOK 1453,8 million in the past 12 months - equivalent to an increase of 8,4 %. The bank’s business capital at the end of 2024 was NOK 26,2 billion. The business capital increased by NOK 2,283,9 million during the preceding 12 months – equivalent to an increase of 9,5 %. The business capital consists of the bank’s total assets, in addition to transferred volumes in Eika Boligkreditt.

Total gross lending in the balance sheet increased by NOK 1 227,3 million to NOK 15,3 billion during the year. This represents an increase of 8,7 %. Including Eika Boligkreditt, gross lending increased by 10,0 % to NOK 22,7 billion. The lending growth for Eika Boligkreditt alone was 12,7 % in 2024. Gross lending to the retail market increased by NOK 573,4 million to NOK 9,6 billion during the year. This represents an increase of 6,3 %. Including Eika Boligkreditt, lending in the retail market increased by NOK 1 403,5 million – equivalent to 9,0 %. Gross lending to the corporate market increased by 13,0 % to NOK 5,7 billion. The growth target for 2024 was within the range of 4,0-6,0 %. In the strategic plan for the period 2025-2027, the growth target has been changed to over 5,0 %.

The transferred volume in Eika Boligkreditt amounted to NOK 7 390,6 million at the end of 2024. The volume increased by NOK 830,1 million during 2024 – equivalent to 12,7 %. Eika Boligkreditt is a stable and important source of funding for the bank. Eika Boligkreditt has access to more affordable funding with longer terms to maturity than we can achieve as a local savings bank. The transfer ratio to Eika Boligkreditt at the end of 2024 was 43,4 %, up from 42,0 % the previous year.

Deposits from customers increased by NOK 1 030,4 million to NOK 12,2 billion during the year. This represents an increase of 9,2 %. Deposits from the retail market increased by 7,1 % to NOK 8,6 billion, while deposits from the corporate market increased by 14,4 % to NOK 3,6 billion. We see good stability for deposits. The deposit spread is considered good, with relatively few large customer deposits in the portfolio.

The deposit-to-loan ratio at year-end was 79,9 % (79,5 %). The deposit-to-loan ratio within the retail market was 89,4 % (88,8 %), while the ratio within the corporate market was 63,7 % (62,9 %). The deposit-to-loan ratio including volume transferred to Eika Boligkreditt was 53,9 % (54,3 %). The bank’s long-term objective is a minimum deposit-to-loan ratio of 70,0 %. Taking into account the transferred volume in Eika Boligkreditt, the minimum deposit-to-loan ratio must be 50,0 %.

The Board of Directors generally assesses the risk of losses on loans and guarantees for retail and agricultural customers to be low. The credit risk for the bank’s other business customer commitments is to a great extent in the low and moderate risk groups, while the risk is higher for the doubtful and non-performing commitments. For those of these commitments that have indications of impairment, individual write-downs are made on the basis of a specific assessment.

Liquidity risk is the risk of there being inadequate liquidity to be able to meet obligations upon maturity. The bank has a low to moderate liquidity risk. Work is actively carried out on the market for external funding so as to ensure that sufficient funding is always available.

The bank has NOK 3,6 billion in deposits from the bond market. This is NOK 325,2 million more than at the beginning of 2024. The bank prioritises long-term deposits with an appropriate maturity spread. The bank works actively to achieve a good and even maturity distribution of deposits taken in the market. The remaining maturity of bond loans is from just over three months to just over 5 years, with an average maturity of approximately 2,5 years. At year-end, the bank’s liquidity situation was assessed to be good. The credit facility in DNB is NOK 250,0 million at year-end. At year-end, the bank’s LCR (liquidity coverage requirement) is 203,0 and the Bank’s NSFR (net stable funding ratio) is 131,6.

The transfer of loans to Eika Boligkreditt during 2024 increased by NOK 830,1 million to NOK 7 390,5 million. The increase during the year was 12,7 %. The bank’s deposits via the bond market amounted to NOK 3 622,6 million at the end of 2024. The bank considers the liquidity situation to be favourable in relation to the maturity structure in both the short and long terms.

The bank's market risk consists of interest rate risk, price risk, and currency risk. Interest rate risk arises when there are differences in interest rate binding between the asset and liability sides and off-balance sheet items. Total interest rate risk is regularly reported to the board. The interest rate sensitivity in the bank's portfolio is reasonably stable compared to last year. The bank's net result effect in a scenario where short-term interest rates increase by 3 percentage points gives a total interest rate risk of NOK 5,0 million as of 31.12.2024. Similarly, a decrease of 3 percentage points gives a total interest rate risk of minus NOK 6,8 million.

The bank's loan portfolio has an interest rate maturity of less than one year. Fixed-rate loans to customers are swapped to floating rates. For larger fixed-rate loans, an interest rate swap agreement is entered into per loan. For smaller loans, the interest rate swap agreement will cover several loans. Both fixed-rate loans and interest rate swap agreements are recorded at fair value in the accounts. Customer deposits have an interest rate maturity of one year or less. The duration of the bond portfolio is 0,15 as of 31.12.2024. According to the market policy, the bank should not have more than 0,50 in duration on the bond portfolio.

Price risk is related to shares, equity funds, and bonds. For these investments, the board has adopted limits in the market policy. Exposure is regularly reported to the board. These securities are valued at fair value in the accounts.

Regarding currency risk, the bank has a small cash holding in connection with the purchase and sale of travel currency. The bank owns shares in USD (Visa) with a book value of NOK 31,8 million as of 31.12.2024. The bank otherwise has no asset or liability items in the balance sheet related to currency.

Operational risk is the risk of loss resulting from inadequate or failing internal processes or systems, human errors or external events. The bank attaches importance to targeted measures to reduce operational risk.

The bank’s book equity at year-end amounted to NOK 2 608,4 million. Of this, the ownership capital and share premium account totalled NOK 548,2 million.

Consolidated net subordinate capital was NOK 2 678,6 million at the end of the year. Core tier 1 capital adequacy, taking account of proportional consolidation in the cooperative group, is calculated at 18,0 % (19,3 %) at year-end. The core capital ratio of the parent bank is calculated at 22,7 % (19,6 %). The figures take into account the year’s retained earnings. Quantitative balance sheet lending growth in 2024 was highest within the corporate market – where the weighting is at a higher level compared with the retail market. Taking into account the volume transferred to Eika Boligkreditt, overall growth in 2024 has been highest within the retail market. The consolidated leverage ratio (LR) was 8,8 % (9,0 %) at year-end.

The bank has a Pillar 2 requirement of 1,9 % at the consolidated level. As a result, the bank has an overall minimum core tier 1 capital requirement of 15,1 % given the current level of buffer requirements as well as taking into account that the Pillar 2 requirement can be partly covered by subordinated bonds and perpetual bonds. The bank’s internal minimum target for core tier 1 capital at the consolidated level is 16,1 %. The bank satisfies these requirements by a good margin, which contributes to establishing a good basis for the continued growth and development of the bank in the coming years.

The bank is governed by the rules pertaining to capital adequacy in the Financial Institutions Act with associated regulations. Compliance with the minimum capital adequacy requirements is a condition for the bank’s business activities and therefore of vital importance to the day-to-day operation of the business.

Earnings per equity capital certificate amounted to NOK 27,70 in 2024, up from NOK 24,10 in 2023. The Board of Directors proposes payment of cash dividend of NOK 20,00 per equity capital certificate, which is equivalent to a distribution ratio of approximately 72 %. The total cash dividend is NOK 98,7 million. The corresponding distribution ratio in the previous year was approximately 67 %. The cash dividend was then NOK 78,9 million, equivalent to NOK 16,00 per equity capital certificate. Based on the market price at year-end (NOK 328,00), a dividend of NOK 20,00 implies a direct return of approximately 6,1 %. In 2023, the direct return was also approximately 6,1 %. At that time, the price at the end of the year was NOK 264,00.

The bank finds that a minimum of 60 % of the ownership capital’s (equity capital certificate owners’) share of the profit may be paid out as cash dividend. On determining the dividend, consideration is given to the expected profit trend in a normalised market situation, external framework conditions and the need for core tier 1 capital.

Adjusted for dividend, the value of the bank’s equity capital certificates increased by 30,3 % during 2024 and ended at a price equivalent to NOK 328,00 per equity capital certificate. By comparison, the Oslo Stock Exchange Equity Certificate Index (OSEEX) was up 31,7 % for the same period. The market capitalisation at the end of the year was NOK 1,618 million and the price/book equity ratio was 1,26. The number of equity capital certificates issued was 4 932 523.

The long-term objective for the bank’s return on equity after tax was a minimum of 10,0 % in 2024. In the strategic plan for the period 2025-2027, the minimum target has been increased to 11,0 %. The annual profit after tax is equivalent to a return on equity after tax of 10,9 %. This is an increase from 10,1 % for the previous year.

There is still a tense and uncertain situation in the world, as well as uncertainty related to war and political instability. In addition, a relatively high price level, a weak NOK exchange rate, and a continued high interest rate level pose challenges for many, both households and businesses. This situation persists into 2025. However, we have likely put the interest rate hikes behind us, and from March 2025, we will probably see a gradual and cautious reduction in the interest rate level. In addition, we see that price growth has come down significantly and that most people are experiencing real wage growth.

The Savings Bank Committee delivered its report in November 2024. The consultation deadline was in February 2025. The bank has submitted a consultation response together with other banks that distribute customer dividends. Eika has also submitted a consultation response on behalf of the Eika banks. The report is comprehensive, and if the recommendations are implemented in the legislation, it could have significant ripple effects for the Norwegian banking sector and the position of equity certificates. The arrangement of allocating part of the bank's annual result to customer dividends will also be abolished if the committee's proposal is adopted. We hope that the politicians will preserve a diverse savings bank structure throughout the country.

The bank is in a good position in terms of the market, liquidity and capital adequacy. There is still a sound basis to further develop the bank’s position as the local bank for Jæren going forward.

To conclude, the Board of Directors would like to express our thanks to all employees and elected representatives for their valuable contribution and fruitful cooperation throughout last year. A sound foundation has been laid for the further development of the bank as a strong and visible local bank for Jæren. The Board of Directors would also like to thank all customers and business partners for the confidence they have shown in the bank during the past year.