Report for 4th quarter 2025

KBN’s net interest income totalled NOK 757 million in the fourth quarter of 2025, compared to NOK 554 million in the same period in 2024. The Tax Appeals Committee issued its decision 18 December 2025 in KBN’s appeal concerning the tax treatment and timing of financial instruments for the fiscal years 2014-2021. The Committee ruled in favor of the Bank on the key questions relating to the classification of previously taxable income. As a result of the decision, KBN has received a refund of approximately NOK 1 billion in previously paid taxes, together with interest compensation. The deferred tax asset recognised on the balance sheet was reduced by NOK 1 billion as a direct consequence. Isolated, this contributed to increasing the Bank’s Common Equity Tier 1 adequacy ratio by approximately 0.4 percentage points. In the fourth quarter of 2025, the bank recognised a total of NOK 189 million in interest compensation related to the tax appeal, which contributes positively to net interest income. Adjusted for this interest compensation, net interest income increased by NOK 14 million from the fourth quarter of 2024 to the fourth quarter of 2025.

KBN’s aggregate customer financing¹ increased with NOK 1 billion in the fourth quarter of 2025. The growth in green lending amounted to NOK 1 billion this quarter. Green lending represented 21.0 % of KBN’s total lending portfolio at the end of the quarter.

KBN’s core earnings² totalled NOK 477 million in the fourth quarter of 2025, compared to NOK 293 million in the same period in 2024. The aforementioned interest compensation related to the tax appel contributes positively to the Bank’s core earnings. KBN’s net interest income totalled NOK 757 million in the fourth quarter of 2025, as compared to NOK 554 million in the same period in 2024. Norges Bank kept its key policy rate unchanged at its December monetary policy committee meeting. The rate now stands at 4 %, while the money market interest rate at the end of the quarter was 4.07 %.

KBN’s result for the accounting period in the fourth quarter of 2025 was a profit of NOK 634 million, compared to a profit of NOK 280 million in the same period in same period in 2024. In the fourth quarter of 2025, KBN recognised a net gain on financial instruments totalling NOK 161 million, as compared to a net loss of NOK 62 million in same period in 2024. 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 4 million for the fourth quarter of 2025 as compared to NOK 10 million in the same period in 2024. Unrealised gains amounted to NOK 158 million in the fourth quarter of 2025, compared to unrealised loss of NOK 71 million in the same period in 2024.

KBN’s fixed rate lending and associated hedging instruments contributed a net unrealised gain of NOK 153 million in the fourth quarter of 2025. Net unrealised loss on fixed rate lending and associated hedging instruments amounted to NOK 44 million in the same period in 2024. 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 fourth quarter of 2025, 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 gain of NOK 48 million for the fourth quarter of 2025, while KBN's own bonds and associated hedging instruments contributed a net unrealised loss of NOK 43 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 decreased its provision for expected credit losses by NOK 2 million in the fourth quarter of 2025, bringing the total to NOK 39 million at the end of the quarter.

KBN’s total operating costs for the fourth quarter of 2025 were NOK 115 million, compared to NOK 98 million in the same period in 2024. This increase was in accordance with the plans adopted by KBN and was primarily due to a higher level of activity in developing and improvements of operations.

KBN’s core earnings³ in 2025 totalled NOK 1 381 million, compared to NOK 1 276 million in 2024. The interest compensation from the tax appeal contributes positively to the bank’s core earnings. Adjusted for this, KBN’s core earnings in 2025 amounted to NOK 1 193 million. KBN’s net interest income in 2025 was NOK 2 466 million, compared to NOK 2 253 million in 2024. Interest compensation related to the tax appeal amounted to a total of NOK 189 million in net interest income in 2025. Adjusted for this, net interest income increased by NOK 24 million from 2024 to 2025.

KBN’s result for the accounting period in 2025 was a profit of NOK 1 894 million compared to a profit of NOK 1 474 million in 2024. KBN recognised net gains on financial instruments totalling NOK 501 million in 2025, compared with NOK 157 million in 2024.

KBN’s total operating costs in 2025 were NOK 437 million, compared to NOK 383 million in 2024. This increase was in accordance with the plans adopted by KBN and was primarily due to a higher level of activity in developing and improvements of operations. KBN’s cost-to-income ratio⁴ for 2025 was 18.4 %, compared to 17.1 % in 2024.

KBN’s annualised return on equity in 2025 was 9.5 %, compared to 7.4 % in 2024. Based on its core earnings, KBN’s annualised return on equity in 2025 was 7.6 %, compared to 7.2 % in 2024. The interest compensation related to the tax appeal contributes positively to the return on equity in 2025. The return target set by KBN’s Board of Directors for the 2025-2027 period is at least 7 %.

KBN’s total comprehensive income in 2025 was NOK 1 740 million, compared to NOK 1 254 million in 2024. There was an unrealised loss from changes to KBN’s own credit risk of NOK 224 million, compared to an unrealised loss of NOK 305 million in 2024.

Table 1: Result for the period and total comprehensive income

KBN’s lending portfolio totalled NOK 374 billion⁵ at the end of the fourth quarter of 2025, while aggregate customer financing⁶ totalled NOK 381 billion⁷ at the end of the fourth quarter of 2025. KBN's aggregate customer financing increased by NOK 1 billion in the fourth quarter of 2025, as compared to an increase of NOK 7 billion in the fourth quarter of 2024. The main reason for the reduction in growth in KBN’s aggregate customer financing was the favourable terms and low prices available to local government sector borrowers in the capital markets.

KBN’s portfolio of green loans increase by NOK 1 billion in the fourth quarter of 2025, as compared to NOK 6 billion in the same period in 2024. KBN's green lending in the fourth quarter of 2025 included green loans for the county of Nordland and the municipality of Oslo. At the end of the fourth quarter of 2025, KBN’s green lending represented 21.0 % of its overall lending portfolio.

The annual rate of debt growth in the local government sector as at the end of December 2025 was calculated to be 6.3 %. After adjusting for borrowing from the Norwegian State Housing Bank, the rate of debt growth was 5.7 %. After adjusting for borrowing from the Norwegian State Housing Bank, KBN’s market share based on its aggregate customer financing⁸ as at the end of the fourth quarter of 2025 was 49.7 %.

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

The rate of inflation in Norway was running at 3.2 % at the most recent assessment in December, while core inflation was 3.1 %. 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 change in economic policy following the change of President in the USA has led to significant fluctuations in the fixed income and foreign exchange markets in whole of 2025, and there is significantly more uncertainty than usual regarding future growth both nationally and internationally.

Following a weakening of the US dollar in the first half of the year, the exchange rate against both the US dollar and the euro was approximately unchanged at the end of the fourth quarter of 2025 as at the end of the previous quarter, although there were periods of significant volatility within the quarter. Credit spreads on local government and covered bonds declined throughout the quarter.

KBN enjoyed good access to the international capital markets in the whole of 2025 and completed all its funding transactions as planned. KBN’s new borrowings in the whole of 2025 totalled approximately NOK 128 billion through 56 bond issues in 9 currencies, as compared to NOK 92 billion in the whole of 2024. 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 119 billion⁹ at the end of the fourth quarter of 2025, as compared to NOK 140 billion at the end of the fourth quarter of 2024. 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.

The liquidity portfolio is largely held in zero-risk weighted assets that are particularly liquid. Investments denominated in foreign currencies represented 50 % of the portfolio at the end of the fourth quarter of 2025. 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.

Table 2: Capital adequacy key figures

KBN’s total assets at the end of the fourth quarter of 2025 amounted to NOK 533 billion, down from NOK 568 billion at the end of 2024. The decrease is primarily due to a decrease in the NOK value of balance sheet assets.

KBN received the Financial Authority of Norway’s (Finanstilsynet’s) decision regarding its Pillar 2 requirement (SREP) on 3 December 2025. The Financial Supervisory Authority of Norway determined that KBN will have a Pillar 2 requirement consisting of 1.1 % of the basis for calculation under Pillar 1. KBN’s Pillar 2 requirement has thus decreased by 0.6 percentage points. 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 fourth quarter of 2025 was 4.2 %, as compared to the requirement of 3.0 %.

KBN’s capital adequacy at the end of the fourth quarter of 2025 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 emissions¹⁰ in the whole of 2025 were 56 tonnes of CO₂e, representing a 71 % decrease from the 2019 level and a decrease from 83 tonnes of CO₂e in the whole of 2024. 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 Desember 2025, Norges Bank stated that a restrictive monetary policy was still required, but that the outlook for the coming year indicates lower inflation than previously expected. Norges Bank stated that a cautious normalisation of the policy rate would pave the way for inflation to return to the target of 2 % without restricting the economy more than necessary. The future path of the policy 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.

In connection with the 2026 National Budget, the Norwegian Parliament adopted a resolution requesting “The Government to assess whether loans to municipalities should have the same risk weight as loans to the central government in the capital requirements regulations. In this context, the Government is also asked to assess whether Kommunalbanken’s risk weight should be changed and whether Kommunalbanken should be given the status of promotional bank.” Clarification on this matter is of importance to KBN.

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

The Board of Directors proposes a dividend for 2025 of NOK 760 million. This represents 40 % of KBN’s profit for the period in 2025 and 55 % of its core earnings.

Oslo, 12 February 2026

The Board of Directors and Chief Executive Officer of Kommunalbanken AS