Report for 3rd quarter 2026

KBN’s net interest income totalled NOK 633 million in the third quarter of 2026, compared to NOK 588 million in the same period in 2025. Stronger earnings from hedging contracts used to convert exposures into Norwegian kroner were the main driver of the increase in income. KBN’s aggregate customer financing¹ increased with NOK 5 billion in the third quarter of 2026. Green lending represented 22 % of KBN’s total lending portfolio at the end of the quarter.

KBN’s core earnings² totalled NOK 336 million in the third quarter of 2026, compared to NOK 308 million in the same period in 2025. KBN’s net interest income totalled NOK 633 million in the third quarter of 2026, as compared to NOK 588 million in the same period in 2025. Improved earnings from hedging contracts for conversion into Norwegian kroner have contributed positively to the KBN’s net interest income. Norges Bank increased its key policy rate by 0.25 of a percentage point at its September monetary policy committee meeting. The rate now stands at 4.5 %, while 3-month NIBOR at the end of the quarter was 4.8 %.

KBN’s result for the accounting period in the third quarter of 2026 was a profit of NOK 314 million, compared to a profit of NOK 445 million in the same period in 2025. In the third quarter of 2026, KBN recognised a net loss on financial instruments totalling NOK 75 million, as compared to a net gain of NOK 133 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 8 million for the third quarter of 2026 as compared to NOK 3 million in the same period in 2025. Unrealised loss amounted to NOK 83 million in the third quarter of 2026, compared to unrealised gains of NOK 130 million in the same period in 2025.

KBN’s fixed rate lending and associated hedging instruments contributed a net unrealised loss of NOK 93 million in the third quarter of 2026, compared to net unrealised loss of NOK 15 million in the same period in 2025. The loss is attributed to an increase of credit spreads during the quarter. 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 third quarter of 2026, 25 % of KBN’s portfolio of fixed lending was carried at fair value.

KBN’s liquidity portfolio and associated hedging instruments contributed to a net unrealised loss of NOK 33 million for the third quarter of 2026, while KBN's own bonds and associated hedging instruments contributed a net unrealised gain of NOK 43 million in 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 2 million in the third quarter of 2026, bringing the total to NOK 40 million at the end of the quarter.

KBN’s total operating costs for the third quarter of 2026 were NOK 110 million, which is consistent with the same period in 2025.

KBN’s core earnings² for the first nine months of 2026 totalled NOK 1 005 million, compared to NOK 905 million in the first nine months of 2025. KBN’s net interest income in the first nine months of 2026 was NOK 1 841 million, as compared to NOK 1 709 million in the first nine months of 2025. Improved earnings from hedging contracts for conversion into Norwegian kroner made a positive contribution to the Bank’s net interest income.

KBN’s result for the accounting period in the first nine months of 2026 was a profit of NOK 1 181 million as compared to a profit of NOK 1 261 million in the first nine months of 2025. KBN recognised net gains on financial instruments totalling NOK 107 million in the first nine months of 2026, compared with NOK 339 million in the first nine months of 2025.

KBN’s total operating costs for the first nine months of 2026 were NOK 321 million, compared to NOK 322 million in the first nine months of 2025. KBN’s cost-to-income ratio³ for the first nine months of 2026 was 18.1 %, compared to 19.6 % in the first nine months of 2025.

KBN’s annualised return on equity in the first nine months of 2026 was 7.4 %, compared to 8.3 % in the first nine months of 2025. Based on its core earnings, KBN’s annualised return on equity in the first nine months of 2026 was 7.0 %, compared to 6.6 % in the first nine months of 2025. The return target set by KBN’s Board of Directors for the 2026-2028 period is 6.5 %.

KBN’s total comprehensive income in the first nine months of 2026 was NOK 832 million, compared to NOK 1 204 million in the first nine months of 2025. There was an unrealised loss from changes to KBN’s own credit risk of NOK 465 million in the first nine months of 2026, compared to an unrealised loss of NOK 76 million in the first nine months of 2025. The loss is attributable to a tightening 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 third quarter of 2026 amounted to NOK 547 billion, up from NOK 534 billion at the end of 2025.

KBN’s lending portfolio totalled NOK 382 billion⁴ at the end of the third quarter of 2026, while aggregate customer financing⁵ totalled NOK 396 billion⁶ at the end of the third quarter of 2026. KBN's aggregate customer financing increased by NOK 5 billion in the third quarter of 2026, as compared to a decrease of NOK 2 billion in the third quarter of 2025. Competition remains high, particularly from the capital markets.

KBN’s green loan portfolio increased by NOK 2 billion in the third quarter of 2026, compared to NOK 1 billion in the same period in 2025. At the end of the third quarter of 2026, KBN’s green lending represented 22 % of its overall lending portfolio.

The annual rate of debt growth in the local government sector as at the end of September 2026 was calculated to be 4.9 %. After adjusting for borrowing from the Norwegian State Housing Bank, the rate of debt growth was 4.6 %. KBN’s market share based on its aggregate customer financing⁷, excluding loans provided by the Norwegian State Housing Bank, at the end of the third quarter of 2026 was 49.1 %.

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

The rate of inflation in Norway was running at 3.4 % at the most recent assessment in September, 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.

Financial markets in the third quarter were characterised by continued geopolitical uncertainty, higher long-term interest rates and a continued focus on inflation. Credit spreads in both the municipal and OMF-markets increased during the quarter. There is significant uncertainty regarding future developments both domestically and internationally.

KBN enjoyed good access to the international capital markets and completed all its funding transactions as planned. KBN’s new borrowings in the first nine months of 2026 totalled approximately NOK 96 billion through 66 bond issues in 11 currencies, as compared to NOK 114 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 2026

KBN’s liquidity portfolio totalled NOK 121 billion⁸ at the end of the third quarter of 2026, as compared to NOK 115 billion at the end of the third quarter of 2025. Investments denominated in foreign currencies represented 50 % of the portfolio at the end of the third 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 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 third quarter of 2026 was 4.3 %, as compared to the requirement of 3.0 %.

KBN’s capital adequacy at the end of the third 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 emissions⁹ in the first nine months of 2026 were 31 tonnes of CO₂e, representing a 88 % decrease from the 2019 level and a small decrease from 33 tonnes of CO₂e in the first nine months of 2025. In other words, the 2030 reduction goal has already been achieved.

At its monetary policy committee meeting in September 2026, Norges Bank stated that a more restrictive monetary policy is still 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 still be a need to raise the policy rate.

There continues to be significant uncertainty regarding the outlook for the global economy, partly due to the conflict in the Middle East. There is also growing concern in the sovereign debt markets, particularly regarding countries with already high debt levels.

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

Oslo, 29^th of October 2026

The Board of Directors and Chief Executive Officer of Kommunalbanken AS