Report for 1st quarter 2026

KBN’s net interest income totalled NOK 593 million in the first quarter of 2026, compared to NOK 552 million in the same period in 2025. KBN’s aggregate customer financing¹ increased with NOK 2 billion in the first quarter of 2026. The green loan portfolio remained unchanged during the quarter. Green lending represented 21 % of KBN’s total lending portfolio at the end of the quarter.

KBN’s core earnings² totalled NOK 317 million in the first quarter of 2026, compared to NOK 292 million in the same period in 2025. KBN’s net interest income totalled NOK 593 million in the first quarter of 2026, as compared to NOK 552 million in the same period in 2025. Rising 3-month NIBOR, together with favourable conditions for converting US dollars into Norwegian kroner have contributed positively to the KBN’s net interest income. Norges Bank kept its key policy rate unchanged at its March monetary policy committee meeting. The rate now stands at 4 %, while 3-month NIBOR at the end of the quarter was 4.34 %.

KBN’s result for the accounting period in the first quarter of 2026 was a profit of NOK 351 million, compared to a profit of NOK 437 million in the same period in 2025. In the first quarter of 2026, KBN recognised a net gain on financial instruments totalling NOK 3 million, as compared to a net gain of NOK 162 million in the same period in 2025. KBN’s net gains/losses on financial instruments comprise the sum of the realised and unrealised gains and losses recognised by KBN. There was a net realised gain from market transactions of NOK 9 million for the first quarter of 2026 as compared to NOK 21 million in the same period in 2025. Unrealised loss amounted to NOK 6 million in the first quarter of 2026, compared to unrealised gains of NOK 141 million in the same period in 2025.

KBN’s fixed rate lending and associated hedging instruments contributed a net unrealised loss of NOK 110 million in the first quarter of 2026, compared to net unrealised gain on fixed rate lending and associated hedging instruments amounted to NOK 53 million in the same period in 2025. The loss is attributed to a widening of credit spreads during the quarter, following the escalation of the conflict in Iran. KBN started to apply hedge accounting to all its new fixed rate lending with effect from 1 January 2022. KBN’s introduction of hedge accounting to its fixed rate lending will over time reduce the size of the portfolio of fixed rate loans carried at fair value, and this will reduce the net unrealised gains and losses included in KBN’s earnings. At the end of the first quarter of 2026, 28 % of KBN’s portfolio of fixed lending was carried at fair value.

KBN’s liquidity portfolio and associated hedging instruments contributed a net unrealised loss of NOK 14 million for the first quarter of 2026, while KBN's own bonds and associated hedging instruments contributed a net unrealised gain of NOK 119 million to its result from ordinary activities in the same period. KBN’s unrealised gains and losses are expected to reverse as the instruments approach maturity.

KBN’s provision for expected credit losses is relatively limited. This is because the Norwegian Local Government Act states that municipalities cannot be declared insolvent. KBN’s liquidity management portfolio is also of very high credit quality. KBN increased its provision for expected credit losses by NOK 6 million in the first quarter of 2026, bringing the total to NOK 44 million at the end of the quarter.

KBN’s total operating costs for the first quarter of 2026 were NOK 100 million, which is consistent with the same period in 2025.

KBN’s annualised return on equity in the first quarter of 2026 was 6.4 %, compared to 8.5 % in the first quarter of 2025. Based on its core earnings, KBN’s annualised return on equity in the first quarter of 2026 was 6.5 %, compared to 6.3 % in the first quarter of 2025. The return target set by KBN’s Board of Directors for the 2026-2028 period is at 6.5 %.

KBN’s total comprehensive income in the first quarter of 2026 was NOK 92 million, compared to NOK 437 million in the first quarter of 2025. There was an unrealised loss from changes to KBN’s own credit risk of NOK 345 million in the first quarter of 2026, compared to an unrealised loss of NOK 1 million in the first quarter of 2025. The loss is attributable to a widening of credit spreads on KBN’s issued bond debt.

Table 1: Result for the period and total comprehensive income

KBN’s total assets at the end of the first quarter of 2026 amounted to NOK 534 billion, up from NOK 533 billion at the end of 2025.

KBN’s lending portfolio totalled NOK 374 billion³ at the end of the first quarter of 2026, while aggregate customer financing⁴ totalled NOK 386 billion⁵ at the end of the first quarter of 2026. KBN's aggregate customer financing increased by NOK 2 billion in the first quarter of 2026, as compared to an increase of NOK 4 billion in the first quarter of 2025. High competition, particularly from the capital markets, was the main reason for lower growth in the first quarter of 2026 compared with the same period in 2025.

KBN’s green loan portfolio remained unchanged during the quarter, compared to growth of NOK 6 billion in the same period in 2025. At the end of the first quarter of 2026, KBN’s green lending represented 21 % of its overall lending portfolio.

The annual rate of debt growth in the local government sector as at the end of March 2026 was calculated to be 4.3 %. After adjusting for borrowing from the Norwegian State Housing Bank, the rate of debt growth was 3.9 %. After adjusting for borrowing from the Norwegian State Housing Bank, KBN’s market share based on its aggregate customer financing⁶ as at the end of the first quarter of 2026 was 49.0 %.

Chart 1: Quarterly growth in aggregate customer financing in billion kroner

The rate of inflation in Norway was running at 3.6 % at the most recent assessment in March, while core inflation was 3.0 %. The goal of monetary policy is for the annual rate of growth in the consumer price index to be as close as possible to 2 % annual growth.

The new conflict in the Middle East led to significant volatility in both interest rate and foreign exchange markets towards the end of the first quarter of 2026, resulting in higher-than-normal uncertainty regarding future developments both domestically and internationally. Credit spreads in both the municipal and OMF-markets widened towards the end of the quarter.

KBN enjoyed good access to the international capital markets and completed all its funding transactions as planned. KBN’s new borrowings in the first quarter of 2026 totalled approximately NOK 38 billion through 19 bond issues in 8 currencies, as compared to NOK 60 billion in the same period in 2025. The size of the annual funding programme in Norwegian kroner depends on funding maturities over the next twelve months, projected lending growth, and exchange-rate developments.

KBN continues to enjoy low borrowing costs and good market access thanks to its AAA/Aaa rating.

Chart 2: New borrowings by currency in 2025

KBN’s liquidity portfolio totalled NOK 121 billion⁷ at the end of the first quarter of 2026, as compared to NOK 134 billion at the end of the first quarter of 2025. Investments denominated in foreign currencies represented 55 % of the portfolio at the end of the first quarter of 2026. Fluctuations in the value of the Norwegian krone relative to other currencies will therefore result in fluctuations in the size of the liquidity portfolio in NOK terms.

The liquidity portfolio is largely held in zero-risk weighted assets that are particularly liquid. KBN’s liquidity portfolio is managed with the aim of matching its financing requirements, including lending growth, for the subsequent twelve months, and it is managed on the basis of a low-risk investment strategy.

Table 2: Capital adequacy key figures

As at the end of the quarter, KBN’s Pillar 2 requirement consisting of 1.1 % of the basis for calculation under Pillar 1. The Pillar 2 requirement is intended to address risks that the undertaking is exposed to and that are not, or are only partially, covered by the general capital requirements in Pillar 1. The requirement must be satisfied with at least 56.25 % common equity Tier 1 capital and at least 75 % Tier 1 capital.

KBN’s leverage ratio at the end of the first quarter of 2026 was 4.3 %, as compared to the requirement of 3.0 %.

KBN’s capital adequacy at the end of the first quarter of 2026 was in excess of the requirements set by the authorities.

Capital adequacy figures are sensitive to large fluctuations in exchange rates, particularly the USD-NOK rate, because these impact the size of KBN’s balance sheet through the conversion into NOK. In addition, changes in the value of KBN’s outstanding currency hedging instruments lead to fluctuations in cash collateral that influence KBN’s capital adequacy key figures. KBN has internal buffers that are intended to ensure its capital adequacy does not fall below the regulatory requirements as a result of such exchange rate fluctuations.

KBN has a long-term goal of reducing its own emissions by at least 55 % by 2030 compared to the 2019 level. KBN has calculated that its own CO₂e emissions⁸ in the of 2026 were 10 tonnes of CO₂e, representing a 71 % decrease from the 2019 level and an increase from 5 tonnes of CO₂e in the of 2025. In other words, the 2030 reduction goal has already been achieved in 2025. The reduction is due to lower energy consumption in new office premises as well as reduced travel activity.

At its monetary policy committee meeting in March 2026, Norges Bank stated that a more restrictive monetary policy is required to bring inflation back to the target of 2% within a reasonable timeframe. Norges Bank stated that price growth has been higher than projected so far in 2026 and assesses that there may be a need to raise the policy rate at one of the upcoming monetary policy committee meeting. The future path of the interet rate thereafter will depend on economic developments.

There is greater uncertainty than normal and worsening expectations regarding the outlook for the global economy, including due to the effect of changes to the USA’s economic policy and the new conflict in the Middle East.

KBN has good access to liquidity and will continue to provide its customers with attractive financing for local government sector projects across Norway.

Oslo, 30 April 2026

The Board of Directors and Chief Executive Officer of Kommunalbanken AS