Q2 2022 Interim report KLP Banken Group

KLP Banken GroupQ2 2022

KLP Banken Group Interim financial statements 2/2022

Main features by quarter end:

Good lending growth
Increased operating income
Reduced market value on liquid investments

The KLP Banken Group provides lending to municipalities, county administrations and companies carrying out public sector assignments. Additionally, the KLP Banken manages a lending portfolio on behalf of its parent company Kommunal Landspensjonskasse (KLP). The Group manages a lending total of NOK 118 (114) billion. The overall business of KLP Banken AS and its subsidiaries is nationwide and divided into the retail market and public sector loans business areas.

In the retail market KLP Banken shall provide products and services at competitive terms to contribute to enterprises having elected KLP as their pension scheme provider are perceived as attractive employers.

In the public sector market KLP Kommunekreditt AS, together with KLP, shall contribute to market competition and thereby access to favorable long-term financing for the sector.

KLP Banken AS is wholly owned by KLP. KLP Banken AS has two wholly owned subsidiaries, KLP Kommunekreditt AS and KLP Boligkreditt AS. The main office is in Trondheim.

Income statement

Net interest income for the KLP Banken Group by second quarter end amounted to NOK 159.0 (152.8) million. The change is mainly due to lending growth in both business areas. Lending margins has increased from first to second quarter.

Net charges and commission income amounted NOK 12.4 (8.9) million. In addition to lending growth, the change is also due to card fee rates adjustments.

The bank group administers housing mortgages and public sector lending financed by its parent company (KLP). The management fee for this task amounted to NOK 30.2 (29.7) million for the first half year.

Operating expenses including depreciations amounted to NOK -123.5 (-117.4) million. The increase is mainly due to price increase om external services as well as lending volume dependencies.

At the end of the first half, the income statement includes a net loss associated with securities of NOK -35.9 (-18.6) million. These effects are mainly due to market value changes in the liquidity investment portfolios and to one-off expenses from buy-back of own bond issues. The cost brought to book is firstly connected to an increase in market credit-spreads reducing the value of liquid investments. An unsignificant part of this is realized expenses.

Loan loss provisions and realized losses in the first half amounted to NOK 0.2 (-1.2) million. In the first half accounts statements, the reversal of previous loss provisions on credit cards and mortgages has been higher than new losses and provisions. Neither in 2022 the public sector market has incurred realized loan losses.

By the end of the first half, the KLP Banken Group achieved a pre-tax profit of NOK 42.5 (54.3) million. The change is mainly due to the fall in market value on liquid investments. Operating income in total has strengthened in the period. The retail market segment generated a profit of NOK 21.8 (46.3) million and the public sector segment a profit of NOK 20.7 (8.0) million. Group total income after taxes and actuarial adjustments amounted to NOK 62.9 (74.1) million as at second quarter.

Lending and credits

On 30 June 2022, the KLP Banken Group had a lending balance of NOK 41.4 (38.2) billion. The distribution between the retail market and public sector lending was NOK 23.1 (21.4) billion and NOK 18.3 (16.8) billion, respectively.

In the retail market, KLP Banken had a mortgage growth at NOK 1.0 (0.8) billion in the first half. The bank’s mortgage loan products seem well adapted among the target group members of the KLP pension schemes.

Mortgage loans amounting to NOK 2.9 (3.0) billion are sold to the daughter company KLP Boligkreditt AS so far this year. Managed mortgages for KLP have increased by NOK 0.2 (-0.1) billion in the same period.

Drawn credits on credit cards show an increase during the first half, but granted unused credits are reduced. This follows a general decrease in the market for unsecured credits as well as laps of inactive users. The number of credit card customers has increased in the period.

The KLP Banken public sector lending balance has also increased during the first half, by NOK 0.5 (-0.9) billion. Managed public sector lending on behalf of KLP has additionally increased by NOK 0.9 billion.

Liquid investments

Available liquidity is invested in other banks and in interest-bearing securities. Deposits in credit institutions was NOK 1.4 (1.8) billion. Securities held, booked at fair value in the KLP Banken Group, was NOK 5.7 (5.1) billion at the end of the quarter.

Net profit and loss due to market value changes on securities held in the first half show a booked expense of NOK -24.4 (7.4) million.

Borrowing

The KLP Banken Group's external financing comprises deposits, certificates and bonds. On the reporting date, deposits from individuals and companies amounted NOK 13.5 (12.6) billion and issued securities amounted NOK 32.4 (29.2) billion. Of the outstanding volume of issued securities, covered bonds (OMF) issued by KLP Kommunekreditt AS and KLP Boligkreditt AS amounted to NOK 19.2 (17.7) billion and NOK 12.2 (11.6) billion respectively. All covered bond issues have achieved AAA rating. Outstanding securities debt in KLP Banken AS amounted to NOK 1.0 (0.9) billion.

Risk and capital adequacy

The KLP Banken Group is exposed to various types of risks, and the bank has established a framework for risk management aimed at ensuring risks are identified, analysed and subjected to management using policies, limits, procedures and instructions.

The bank is to have a prudent risk profile, earnings are to be principally a result of borrowing and lending activities as well as liquidity management. This means that the bank is to have low market risk, and interest rate risks arising within the borrowing and lending activity are reduced using derivatives.

The KLP Banken Group and its subsidiaries are to have responsible long-term financing and limits have been established to ensure that that this objective is achieved.

The credit risk associated with the banking group assets is low, and lending is mainly limited to loans with local government risk and loans with lien on housing property. Management of the bank's liquidity is conducted through investments in other banks satisfying set credit quality requirements and in securities in accordance with Board-approved credit lines.

At the end of second quarter 2022, eligible Tier 1 and Tier 2 capital i.a.w. the capital adequacy rules were NOK 2 470 (2 404) million. Eligible Tier 1 and Tier 2 capital comprises core capital only. Lending is risk-weighted in accordance with the authorities' capital adequacy regulations. The KLP Banken Group had a capital adequacy ratio of 17.7 (18.4) per cent at the reporting time. The minimum statutory requirement is 13.0 per cent core capital adequacy and 16.5 per cent capital adequacy. Leverage ratio was 5.0 (5.2) per cent. Here the requirement is 3.0 per cent.

Future prospects

The KLP Banken target group in the retail market is the KLP pension scheme members. It includes a significant part of the population, thus the basis for further developing the banks position is considered good. KLP Banken will continue to develop its banking products to ensure the members are given our best terms and that the terms are predictable.

The banking industry is challenged by new technologies and other industries. KLP Bankens aim is to utilize proven technology to be able to offer relevant, customer friendly and efficient services to its customers. This entails the need for significant IT investments ahead to achieve the banks aim on further growth and profitability.

The ability to service mortgage loans among the Banks most important customer groups, who are mainly public employees, is expected to remain satisfactory also looking ahead. This will limit defaults and losses. Debt burdens on households are strictly regulated by the authorities’ criteria for credit grants in the retail market. KLP Banken consider this as positive and a good basis for further development of our retail market products.

The KLP Banken Board is concerned about the consequences of the war in Ukraine. The bank has no credit exposure in the area, but will, like other Norwegian banks, be affected by the financial turmoil caused by the war. Increase in inflation and interest rate levels over the last year may in the long run lead to a decrease in the customer’s ability to serve loans. This will therefore be closely monitored ahead.

Norwegian municipalities have developed good and comprehensive public service offerings to the population. The combination of increased life-time prospects and population growth gives reason to expect a continued high investment level in the public sector also in the years ahead. Particularly the demand for lending to environmental projects is expected to grow.

KLP Kommunekreditt AS is the only issuer of covered bonds secured by public sector loans in the country. The presence of the Bank's daughter enterprise, together with KLP, contribute to competition in the public sector lending market and thus offering the sector access to long-term financing at favorable terms. Given continued growth and extended capital requirements it will be natural to discuss further capital increase with the mother company, as it is embodied in the long-term capital adequacy plan.

KLP Banken AS is in a good position for further development and growth.

Income statementKLP Banken Group

NOTES	NOK THOUSANDS	Q2 2022	Q2 2021	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
	Interest income, effective interest method	220 539	154 101	400 720	306 274	621 624
	Other interest income	31 985	16 090	58 205	31 790	68 176
3	Total interest income	252 523	170 191	458 925	338 064	689 801
	Interest expense, effective interest method	-152 873	-68 217	-273 139	-137 256	-290 728
	Other interest expense	-12 753	-24 861	-26 813	-47 971	-90 463
3	Total interest costs	-165 626	-93 078	-299 952	-185 228	-381 191
3	Net interest income	86 897	77 113	158 973	152 836	308 609
	Commision income and income from banking services	7 880	5 229	13 597	9 782	21 520
	Commision cost and cost from banking services	-649	-507	-1 173	-882	-2 033
	Net charges and commission income	7 231	4 722	12 424	8 900	19 487
	Other fee income	15 118	14 850	30 236	29 700	59 400
16	Net gain/ (loss) financial instruments	-25 794	-33 031	-35 901	-18 564	-32 896
	Total other operating income	-10 676	-18 181	-5 665	11 136	26 504
	Salaries and administrative costs	-22 292	-20 470	-44 102	-40 759	-81 930
	Depreciation	-991	-1 659	-2 005	-3 321	-6 409
	Other operating expenses	-36 195	-35 221	-77 401	-73 322	-147 846
14	Net loan losses	184	-646	246	-1 179	-2 299
	Total operating expenses	-59 294	-57 996	-123 262	-118 581	-238 484
	Operating profit/loss before tax	24 157	5 658	42 469	54 291	116 117
	Tax ordinary income	-5 972	-1 308	18 326	14 044	-423
	Profit/loss for the period	18 185	4 350	60 795	68 335	115 694
	Estimate difference, pension obligation and assets	-15 291	0	2 822	7 732	7 136
	Tax on actuarial gains and losses	3 823	0	-705	-1 933	-1 784
	Items that will not be reclassified to profit and loss	-11 468	0	2 116	5 799	5 352
	Changes in the fair value through profit and loss	0	0	0	0	0
	Tax on changes in fair value of available for sale financial assets	0	0	0	0	0
	Items that may be reclassified to profit and loss	0	0	0	0	0
	Other comprehensive income for the period	-11 468	0	2 116	5 799	5 352
	Comprehensive income for the period	6 717	4 350	62 912	74 134	121 046

Balance sheetKLP Banken Group

NOTES	NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
	ASSETS
5	Claims on central banks	72 349	69 387	67 244
5	Loans to credit institutions	1 366 228	1 785 256	1 398 501
4,5	Loans to customers	41 362 883	38 161 378	39 934 100
5,6,13	Fixed-income securities	5 744 028	5 130 004	6 001 099
5,6	Shareholdings	1 187	1 197	1 187
5,6,8	Financial derivatives	107 993	35 677	42 051
	Deferred tax assets	0	1 159	0
	Intangible assets	16 506	16 484	16 789
17	Right-of-use assets	17 300	1 169	18 236
	Fixed assets	436	436	436
10	Other assets	14 748	13 499	2 217
	Total assets	48 703 658	45 215 647	47 481 860
	LIABILITIES AND OWNERS EQUITY
	LIABILITIES
5	Debt to credit institutions	0	701 847	0
5,7	Debt securities issued	32 443 451	29 194 613	31 917 798
5	Deposits and borrowings from the public	13 464 917	12 642 590	12 901 004
5,6,8	Financial derivatives	31 256	44 313	9 990
	Deferred tax liabilities	985	0	23 343
17	Lease liabilities	17 549	1 225	18 323
11	Other liabilities	129 923	98 540	38 369
11	Provision for accrued costs and liabilities	60 523	58 650	52 249
	Total liabilities	46 148 604	42 741 777	44 961 078
	EQUITY
	Share capital	1 065 000	1 065 000	1 065 000
	Share premium	825 000	825 000	825 000
	Other owners' eqyity	602 142	509 736	630 782
	Profit for the period	62 912	74 134	0
	Total equity	2 555 054	2 473 870	2 520 782
	Total liabilities and equity	48 703 658	45 215 647	47 481 860

Statement of changes in equityKLP Banken Group

2022 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners’ equity
Equity 1 January 2022	1 065 000	825 000	630 782	2 520 782
Profit for the period	0	0	60 795	60 795
Other comprehensive income	0	0	2 116	2 116
Total comprehensive income for the period	0	0	62 912	62 912
Group contribution received during the period	0	0	89 292	89 292
Group contribution paid during the period	0	0	-117 932	-117 932
Total transactions with the owners	0	0	-28 640	-28 640
Equity 30 June 2022	1 065 000	825 000	665 054	2 555 054

2021 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners’ equity
Equity 1 January 2021	1 065 000	825 000	536 801	2 426 801
Profit for the period	0	0	68 335	68 335
Other comprehensive income	0	0	5 799	5 799
Total comprehensive income for the period	0	0	74 134	74 134
Group contribution received during the period	0	0	84 919	84 919
Group contribution paid during the period	0	0	-111 985	-111 985
Total transactions with the owners	0	0	-27 065	-27 065
Equity 30 June 2021	1 065 000	825 000	583 870	2 473 870

2021 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners’ equity
Equity 1 January 2021	1 065 000	825 000	536 801	2 426 801
Income for the year	0	0	115 694	115 694
Other comprehensive income	0	0	5 352	5 352
Comprehensive income for the year	0	0	121 046	121 046
Group contribution received during the period	0	0	84 919	84 919
Group contribution paid during the period	0	0	-111 985	-111 985
Total transactions with the owners	0	0	-27 065	-27 065
Equity 31 December 2021	1 065 000	825 000	630 782	2 520 782

Statement of cash flowKLP Banken Group

NOK THOUSANDS	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
OPERATING ACTIVITIES
Payments received from customers – interest, commission and charges	381 551	310 168	638 105
Payments to customers – interest, commission and charges	-56 729	-43 140	-89 196
Disbursements on loans to customers and credit institutions	-8 381 825	-8 132 164	-16 640 961
Receipts on loans to customers	6 892 371	8 126 911	14 782 637
Net receipts on customer deposits banking	564 021	861 434	1 119 290
Disbursements on operations	-80 585	-56 569	-148 301
Payments to staff, pension schemes, employer's social security contribution etc.	-40 257	-40 128	-81 174
Interest investment accounts	7 487	1 098	9 617
Net receipts/disbursements from operating activities	123 585	70 904	64 335
Net cash flow from operating activities	-590 383	1 098 514	-345 647
INVESTMENT ACTIVITIES
Receipts on the sale of securities	2 722 651	5 885 089	9 763 759
Payments on the purchase of securities	-2 490 265	-4 790 634	-9 551 367
Receipts of interest from securities	39 081	16 689	45 074
Payments on the purchase of tangible fixed assets	-787	0	-2 578
Net cash flow from investment activities	270 680	1 111 144	254 889
FINANCING ACTIVITIES
Repayment and redemption from credit institutions	0	-1 800 000	-2 500 000
Net payment of interest from credit institutions	0	-4 417	-6 517
Receipts on loans	5 650 000	5 100 000	9 300 000
Repayments and redemption of securities debt	-5 508 000	-5 563 882	-6 569 839
Change in securities debt, own funds	408 246	804 297	343 369
Net payment of interest on loans	-221 047	-118 272	-238 607
Payment of lease liabilities	-901	-798	-1 654
Group contributions made	-28 640	-27 066	-27 065
Net cash flows from financing activities	299 658	-1 610 138	299 685
Net cash flow during the period	-20 045	599 520	208 928
Cash and cash equivalents at the start of the period	1 420 995	1 212 067	1 212 067
Cash and cash equivalents at the end of the period	1 400 950	1 811 587	1 420 995
Net receipts/disbursements (-)	-20 045	599 520	208 928

Notes to the financial statementKLP Banken Group

Note 1 General information

KLP Banken AS was formed 25 February 2009. KLP Banken AS owns all the shares in KLP Kommunekreditt AS and KLP Boligkreditt AS. These companies together form the KLP Banken Group. KLP Banken Group provide or acquire loans to Norwegian municipalities and county authorities, as well as to companies with public sector guarantee. The lending activities are principally financed by issuance of covered bonds. The Group also offers standard banking products to private customers. KLP Banken AS is registered and domiciled in Norway. It's head office is at Beddingen 8 in Trondheim. The company has a branch office in Dronning Eufemiasgate 10, Oslo.

The company, KLP Banken AS, is a wholly owned subsidiary of Kommunal Landspensjonskasse (KLP). KLP is a mutual insurance company.

Note 2 Acounting principles

The interim report includes the interim Financial Statements of KLP Banken Group for the period 1 January 2022 – 30 June 2022, with a specification of the results in the second quarter. The interim Financial Statements has not been audited.

The interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting".

The Group has changed its guiding assumptions for calculating pension liabilities. The changes from the year end are presented in the table below:

	31.12.2021	30.06.2022	Change
Discount rate	1.90 %	3.20 %	1.30 %
Salary growth	2.75 %	3.50 %	0.75 %
National Insurance basic amount (G)	2.50 %	3.25 %	0.75 %
Pension increases	1.75 %	2.48 %	0.73 %
Social security contributions	14.1 %	14.1 %	0.0 %
Capital activity tax	5.0 %	5.0 %	0.0 %

In total, these changes result in a NOK 2.8 million decrease in pension liabilities for the Group.

Other accounting principles and calculations are the same in the interim financial statement as in the annual report for 2021.

Note 3 Net interest income

NOK THOUSANDS	Q2 2022	Q2 2021	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
Interest income on loans to customers	215 495	153 653	392 302	305 033	617 688
Interest income on loans to credit institutions	5 044	448	8 418	1 240	3 937
Total interest income, effective interest method	220 539	154 101	400 720	306 274	621 624
Interest income on bonds and certificates	22 898	7 827	41 643	14 577	36 486
Other interest income	9 087	8 263	16 562	17 212	31 690
Total other interest income	31 985	16 090	58 205	31 790	68 176
Total interest income	252 523	170 191	458 925	338 064	689 801
Interest expenses on deposits to KLP Banken	-25 294	-17 142	-47 325	-33 700	-70 216
Interest expenses on issued securities	-127 497	-51 067	-225 648	-103 540	-220 403
Interest expense lease liabilities	-82	-7	-165	-16	-109
Total interest expense, effective interest method	-152 873	-68 217	-273 139	-137 256	-290 728
Other interest expenses	-8 977	-19 184	-18 310	-39 320	-73 196
Interest expenses on deposits to customers	-3 776	-5 677	-8 503	-8 651	-17 268
Total other interest expense	-12 753	-24 861	-26 813	-47 971	-90 463
Total interest expense	-165 626	-93 078	-299 952	-185 228	-381 191
Net interest income	86 897	77 113	158 973	152 836	308 609

Note 4 Loans to customers

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Principal on loans to customers	41 353 107	38 051 235	39 870 185
Credit portfolio	44 088	44 163	43 355
Overdraft current account	149	603	179
Write-downs step 1 and 2	-1 481	-1 012	-1 075
Write-downs step 3	-1 061	-1 472	-1 040
Loans to customers after write-downs	41 394 802	38 093 516	39 911 604
Accrued interest	77 084	58 129	53 852
Fair value hedging	-109 003	9 732	-31 356
Loans to customers	41 362 883	38 161 378	39 934 100

Note 5 Categories of financial instruments

NOK THOUSANDS	30.06.2022		30.06.2021		31.12.2021
	Capitalized value	Fair value	Capitalized value	Fair value	Capitalized value	Fair value
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Fixed-income securities	5 744 028	5 744 028	5 130 004	5 130 004	6 001 099	6 001 099
Financial derivatives	107 993	107 993	35 677	35 677	42 051	42 051
Shares and holdings	1 187	1 187	1 197	1 197	1 187	1 187
Total financial assets at fair value through profit and loss	5 853 208	5 853 208	5 166 878	5 166 878	6 044 337	6 044 337
FINANCIAL ASSETS FAIR VALUE HEDGING
Loans to and receivables from customers	1 726 134	1 747 457	2 985 638	3 040 872	2 012 822	2 056 718
Total financial assets fair value hedging	1 726 134	1 747 457	2 985 638	3 040 872	2 012 822	2 056 718
FINANCIAL ASSETS AT AMORTIZED COST
Loans to and receivables from credit institutions	72 349	72 349	69 387	69 387	67 244	67 244
Loans to and receivables from central banks	1 366 228	1 366 228	1 785 256	1 785 256	1 398 501	1 398 501
Loans to and receivables from customers	39 636 749	39 636 749	35 175 740	35 120 104	37 921 278	37 877 270
Total financial assets at amortized cost	41 075 326	41 075 326	37 030 383	36 974 747	39 387 023	39 343 014
Total financial assets	48 654 667	48 675 990	45 182 899	45 182 497	47 444 181	47 444 069
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial derivatives	31 256	31 256	44 313	44 313	9 990	9 990
Total financial liabilities at fair value through profit and loss	31 256	31 256	44 313	44 313	9 990	9 990
FINANCIAL LIABILITIES FAIR VALUE HEDGING
Liabilities created on issuance of securities	472 432	477 424	1 005 304	1 015 876	508 146	515 581
Total financial liabilities fair value hedging	472 432	477 424	1 005 304	1 015 876	508 146	515 581
FINANCIAL LIABILITIES AT AMORTIZED COST
Liabilities to credit institutions	0	0	701 847	701 847	0	0
Liabilities created on issuance of securities	31 971 019	31 453 786	28 189 308	28 318 588	31 409 652	30 977 884
Deposits from customers	13 464 917	13 464 917	12 642 590	12 642 590	12 901 004	12 901 004
Total financial liabilities at amortized cost	45 435 936	44 918 703	41 533 745	41 663 024	44 310 656	43 878 888
Total financial liabilities	45 939 624	45 427 384	42 583 362	42 723 213	44 828 792	44 404 459

Fair value shall be a representative price based on what a corresponding asset or liability would have been traded for on normal market terms and conditions. A financial instrument is considered to be listed in an active market if the listed price is simply and regularly available from a stock market, dealer, broker, industry grouping, price setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm’s length. If the market for the security is not active, or the security is not listed on a stock market or similar, valuation techniques are used to set fair value. These are based for example on information on recently completed transactions carried out on business terms and conditions, reference to trading in similar instruments and pricing using externally collected yield curves and yield spread curves. As far as possible the estimates are based on externally observable market data and rarely on company-specific information.

The different financial instruments are thus priced in the following way:

Fixed-income securities - government

Nordic Bond Pricing is used as a source for pricing Norwegian government bonds. The prices are compared with the prices from Bloomberg to reveal any errors.

Fixed-income securities - other than government

Norwegian fixed-income securities, except government are priced directly on prices from Nordic Bond Pricing. Those securities that are not included in Nordic Bond Pricing are priced theoretically. The theoretical price is based on the assumed present value on the sale of the position. A zero-coupon curve is used for discounting. The zero-coupon curve is adjusted upwards by means of a credit spread, which is to take account of the risk the bond entails. The credit spread is calculated on the basis of a spread curve taking account of the duration of the bond. Nordic Bond Pricing is the main source of spread curves. They provide company-specific curves for Norwegian savings banks, municipalities and energy. Savings banks have various spread curves based on total assets. For companies where Nordic Bond Pricing do not deliver spread curves, the Group use spread curves from three Norwegian banks. When spread curves are available from more than one of these banks, an equal-weighted average is used. If a bond lacks an appropriate spread curve, spread from a comparable bond from the same issuer is used.

Financial derivatives

These transactions are valued based on the applicable swap curve at the time of valuation. Derivative contracts are to be used only to hedge balance amounts and to enable payments obligations to be met. Derivative contracts may be struck only with counterparties with high credit quality.

Shares (unlisted)

For liquid shares and units, the closing price on the balance sheet date is used as the basis for measurement at fair value. If the prices are not quoted, the last price traded is used. Illiquid shares are priced on the basis of the Oslo Stock Exchange’s index algorithm based on the last traded prices. If the price picture is out of date, a derived valuation is produced from relevant equity indices or other similar securities. If this is also considered unsatisfactory, a discretionary valuation is made in which the Company’s financial key figures, broker assessment etc. are used.

Fair value of loans to retail customers

The fair value through profit/loss is calculated by discounting contractual cash flows to present values. The discount rate is determined as the market rate, including a suitable risk margin. For loans measured at fair value through other comprehensive income, the fair value is calculated as the recognised principal minus estimated loss provisions on loans classified in Stage 2 and 3 (see note 14 Loan losses provision).

Fair value of loans to Norwegian local administrations

The fair value of these loans is considered to be virtually the same as the book value, as the contract terms are constantly adjusted in line with market interest rates. The fair value of fixed rate loans is calculated by discounting contractual cash flows by market interest rates including a suitable risk margin at the end of the reporting period. This is valued at Level 2 in the valuation hierarchy, cf. Note 6.

Fair value of deposits

The fair value of floating rate deposits is taken to be approximately equal to the deposit amount including accrued interest. The fair value of fixed rate deposits is calculated by discounting contractual cash flows by market interest rates including a suitable risk margin. Discounting contractual cash flows by market interest rates including a suitable risk margin.

Fair value of loans to and receivables from credit institutions

All receivables from credit institutions (bank deposits) are at variable interest rates. The fair value of these is considered to be virtually the same as the book value, as the contract terms are continuously changed in step with change in market interest rates. This is valued at Level 2 in the valuation hierarchy, cf. Note 6.

Liabilities created on issuance of securities

Fair value in this category is determined on the basis of internal valuation models based on external observable data. This is valued in Level 2 in the valuation hierarchy, cf. Note 6.

Note 6 Fair value hierarchy

30.06.2022 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	771 602	4 972 426	0	5 744 028
Shareholdings	0	0	1 187	1 187
Financial derivatives	0	107 993	0	107 993
Total assets at fair value	771 602	5 080 419	1 187	5 853 208
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	31 256	0	31 256
Total financial liabilities at fair value	0	31 256	0	31 256

30.06.2021 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	596 534	4 533 470	0	5 130 004
Shareholdings	0	0	1 197	1 197
Financial derivatives	0	35 677	0	35 677
Total assets at fair value	596 534	4 569 148	1 197	5 166 878
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	44 313	0	44 313
Total financial liabilities at fair value	0	44 313	0	44 313

31.12.2021 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	595 610	5 405 489	0	6 001 099
Shareholdings	0	0	1 187	1 187
Financial derivatives	0	42 051	0	42 051
Total assets at fair value	595 610	5 447 540	1 187	6 044 337
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	9 990	0	9 990
Total financial liabilities at fair value	0	9 990	0	9 990

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
CHANGES IN LEVEL 3 UNLISTED SHARES
Opening balance	1 187	1 197	1 197
Additions/purchases of shares	0	0	77
Unrealized changes	0	0	-87
Closing balance	1 187	1 197	1 187
Realized gains/losses	0	0	0

Fair value shall be a representative price based on what a corresponding asset or liability would have been traded for at normal market terms and conditions. Highest quality in regard to fair value is based on listed prices in an active market. A financial instrument is considered as listed in an active market if listed prices are simply and regularly available from a stock market, dealer, broker, industry group, price-setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm's length.

Level 1:

Instruments at this level obtain fair value from listed prices in an active market for identical assets or liabilities to which the entity has access at the reporting date. Examples of instruments in Level 1 are stock market listed securities.

Level 2:

Instruments at this level obtain fair value from observable market data. This includes prices based on identical instruments, but where the instrument does not maintain a high enough trading frequency and is therefore not considered to be traded in an active market, as well as prices based on corresponding assets and price-leading indicators that can be confirmed from market information. Example instruments at Level 2 are fixed-income securities priced on the basis of interest rate paths.

Level 3:

Instruments at Level 3 contain non-observable market data or are traded in markets considered to be inactive. The price is based generally on discrete calculations where the actual fair value may deviate if the instrument were to be traded.

Note 5 discloses the fair value of financial assets and financial liabilities that are recognized at amortized cost and according to the rules on hedge accounting. Financial assets measured at amortized cost and hedge accounting comprise lending to and due to credit institutions, Norwegian municipalities and retail customers. The stated fair value of these assets is determined on terms qualifying for level 2. Financial liabilities recognized at amortized cost and hedge accounting consist of debt securities issued and deposits. The stated fair value of these liabilities is determined by methods qualifying for level 2.

There have been no transfers between level 1 and level 2.

Note 7 Debt securities issued - stock exchange listed covered bonds and certificates

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Bond debt, nominal amount	33 565 879	30 235 533	33 426 640
Adjustments	-22 170	74 329	60 603
Accrued interest	54 742	20 750	38 554
Own holdings, nominal amount	-1 155 000	-1 136 000	-1 608 000
Total debt securities issued	32 443 451	29 194 613	31 917 798
Interest rate on borrowings through the issuance of securities at the reporting date:	1.65 %	0.56 %	1.10 %
The interest rate is calculated as a weighted average of the act/360 basis. It includes interest rate effects and amortization costs.

NOK THOUSANDS	Balance sheet 31.12.2021	Issued	Matured/ redeemed	Other adjustements	Balance sheet 30.06.2022
Changes in debt securities issued - stock exchange listed covered bonds and cerftificates
Bond debt, nominal amount	33 426 640	5 650 000	-5 508 000	-2 760	33 565 879
Adjustments	60 603	0	0	-82 773	-22 170
Accrued interest	38 554	0	0	16 188	54 742
Own holdings, nominal amount	-1 608 000	0	453 000	0	-1 155 000
Total debt securities issued	31 917 798	5 650 000	-5 055 000	-69 346	32 443 451

Note 8 Financial assets and liabilities subject to net settlement

30.06.2022 NOK THOUSANDS				Related sums that are not presented net
	Gross financial assets/liabilites	Gross assets/ liabilities presented net	Book value	Financial instruments	Security in cash	Net recognised value
ASSETS
Financial derivatives	107 993	0	107 993	-31 256	-75 942	14 136
Total	107 993	0	107 993	-31 256	-75 942	14 136
LIABILITIES
Financial derivatives	31 256	0	31 256	-31 256	0	0
Total	31 256	0	31 256	-31 256	0	0

30.06.2021 NOK THOUSANDS				Related sums that are not presented net
	Gross financial assets/liabilites	Gross assets/ liabilities presented net	Book value	Financial instruments	Security in cash	Net recognised value
ASSETS
Financial derivatives	35 677	0	35 677	-34 460	0	1 217
Total	35 677	0	35 677	-34 460	0	1 217
LIABILITIES
Financial derivatives	44 176	0	44 176	-34 460	-1 923	7 793
Total	44 176	0	44 176	-34 460	-1 923	7 793

The purpose of the note is to show the potential effect of netting agreements at the KLP Banken Group . The note shows derivative positions in the financial position statement.
31.12.2021 NOK THOUSANDS				Related sums that are not presented net
	Gross financial assets/liabilites	Gross assets/ liabilities presented net	Book value	Financial instruments	Security in cash	Net recognised value
ASSETS
Financial derivatives	42 051	0	42 051	-9 200	0	32 851
Total	42 051	0	42 051	-9 200	0	32 851
LIABILITIES
Financial derivatives	9 990	0	9 990	-9 200	-3 628	0
Total	9 990	0	9 990	-9 200	-3 628	0

Note 9 Transactions with related parties

NOK THOUSANDS	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
KLP, fees lending management	30 236	29 700	59 400
KLP Kapitalforvaltning AS, fees for services provided	0	-98	-171
KLP, rent	-1 319	-1 363	-2 699
KLP Skipsbygget AS, rent	-858	-1 252	-1 727
KLP Bassengtomten AS, rent parking	-45	-65	-87
KLP Eiendomsdrift AS, cost office buildings	-323	-366	-366
KLP, pension premium	-7 341	-6 649	-13 140
KLP, staff services (at cost)	-35 688	-33 846	-68 399
KLP Group companies, subsidised interest employee loans	6 607	5 833	11 825

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
BALANCES
KLP, net internal accounts	-4 417	-773	-1 667
KLP, loan settlement	-37 351	-42 547	-1 333
KLP Group companies, net other internal accounts	1 146	970	1 046
Transactions with related parties are carried out at general market terms, with the exception of the company's share of common functions, which are allocated at cost. Allocation is based on actual use. All internal receivables are settled as they arise.

Note 10 Other assets

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Intercompany receivables	2 409	2 127	2 196
Miscellaneous receivables	42	114	0
Prepaid expenses	12 297	11 258	21
Total other assets	14 748	13 499	2 217

Note 11 Other liabilities and provision for accrued costs

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Creditors	1 676	25 019	2 867
Intercompany payables	43 030	44 477	4 150
Other liabilities	85 216	29 045	31 352
Total other liabilities	129 923	98 540	38 369
Withholding tax	2 112	1 908	2 813
Social security contributions	1 985	1 868	2 265
Capital activity tax	720	677	820
Holiday pay	2 983	2 734	6 273
Pension obligations	38 131	36 687	36 693
VAT	64	14	211
Provisioned costs	14 527	14 764	3 176
Total accrued costs and liabilities	60 523	58 650	52 249

Note 12 Capital adequacy

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Share capital and share premium fund	1 890 000	1 890 000	1 890 000
Other owners' equity	602 142	536 801	630 782
Total owners' equity	2 492 142	2 426 801	2 520 782
Adjustments due to requirements for proper valuation	-5 744	-6 083	-6 001
Deduction goodwill and other intangible assets	-16 506	-16 484	-16 789
Core capital/Tier 1 capital	2 469 892	2 404 234	2 497 992
Supplementary capital/Tier 2 capital	0	0	0
Supplementary capital/Tier 2 capital	0	0	0
Total eligible own funds (Tier 1 and Tier 2 capital)	2 469 892	2 404 234	2 497 992
Capital requirement	1 119 151	1 046 738	1 070 801
Surplus of own funds (Tier 1 and Tier 2 capital)	1 350 741	1 357 496	1 427 191
Estimate basis credit risk:
Institutions	270 151	363 135	286 512
Retail	442 154	328 004	302 739
Local and regional authorities (incl. municipalities/county administations)	3 734 287	3 563 926	3 628 147
Investments with mortgage security in real estate	8 174 051	7 547 003	7 824 605
Investments fallen due	48 680	40 502	36 584
Covered bonds	464 135	416 707	498 905
Other holdings	186 127	183 156	131 535
Calculation basis credit risk	13 319 586	12 442 432	12 709 027
Credit risk	1 065 567	995 395	1 016 722
Operating risk	53 416	51 225	53 416
Credit valuation adjustments (CVA)	169	119	663
Total capital requirement assets	1 119 151	1 046 738	1 070 801
Core capital adequacy ratio	17.7 %	18.4 %	18.7 %
Supplementary capital ratio	0.0 %	0.0 %	0.0 %
Capital adequacy ratio	17.7 %	18.4 %	18.7 %
Leverage ratio	5.0 %	5.2 %	5.2 %

CAPITAL REQUIREMENT PER 30.06.2022	Core capital/Tier 1 capital	Supplementary capital/Tier 2 capital	Own funds
Minimum requirement excl. buffers	4.5 %	3.5 %	8.0 %
Protective buffer	2.5 %	0.0 %	2.5 %
Systemic risk buffer	3.0 %	0.0 %	3.0 %
Counter-cyclical capital buffer	1.5 %	0.0 %	1.5 %
Pilar 2-requirement	1.5 %	0.0 %	1.5 %
Current capital requirement incl. buffers	13.0 %	3.5 %	16.5 %
Capital requirement leverage ratio	3.0 %	0.0 %	3.0 %

Note 13 Fixed-income securities

NOK THOUSANDS	30.06.2022		30.06.2021		31.12.2021
	Acquisition cost	Market value	Acquisition cost	Market value	Acquisition cost	Market value
Certificates	0	0	622 732	622 795	567 264	567 443
Bonds	5 768 669	5 744 028	4 503 469	4 507 209	5 437 376	5 433 656
Total fixed-income securities	5 768 669	5 744 028	5 126 201	5 130 004	6 004 640	6 001 099
Fixed income securities are brought to account at market value, including accrued but not due interests.

Note 14 Loan loss provision

In the second quarter of 2022 the copmpanies has not made any adjustments in the expected loss models.

The total loan loss provisions in KLP Banken AS is nevertheless decreased by five percent and by five percent on the group level. The decrease is due to the fact that the individual loss write-downs have been reduced this quarter.

Refer to Note 10 and Note 2 in the annual report for more details of the model.

Expected credit loss (ECL) loans to customers - all segments

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2022	4 346	282	1 753	6 382
Transfer to stage 1	90	-67	-23	0
Transfer to stage 2	-37	39	-2	0
Transfer to stage 3	-7	-23	29	0
Net changes	118	53	-920	-750
New losses	252	35	1	288
Write-offs	-397	-91	-223	-711
Change in risk model	-1 954	1 324	497	-133
Closing balance ECL 30.06.2022	2 412	1 552	1 113	5 077
Changes (01.01.2022 - 30.06.2022)	-1 935	1 270	-640	-1 305

Expected credit loss (ECL) loans to customers – mortgage

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2022	159	121	1 497	1 776
Transfer to stage 1	9	-9	0	0
Transfer to stage 2	-4	4	0	0
Transfer to stage 3	-1	-8	9	0
Net changes	-111	-61	-907	-1 079
New losses	103	6	0	109
Write-offs	-4	0	-154	-159
Closing balance ECL 30.06.2022	151	53	444	648
Changes (01.01.2022 - 30.06.2022)	-8	-68	-1 053	-1 129

Expected credit loss (ECL) - public lending

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2022	176	0	0	176
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	-6	0	0	-6
New losses	20	0	0	20
Write-offs	-10	0	0	-10
Closing balance ECL 30.06.2022	180	0	0	180
Changes (01.01.2022 - 30.06.2022)	4	0	0	4

Expected credit loss (ECL) - credit card

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2022	3 987	161	67	4 215
Transfer to stage 1	80	-58	-23	0
Transfer to stage 2	-32	35	-2	0
Transfer to stage 3	-5	-15	20	0
Net changes	-194	23	6	-165
New losses	128	29	0	156
Write-offs	0	0	0	0
Change in risk model	-1 903	1 324	513	-66
Closing balance ECL 30.06.2022	2 061	1 499	581	4 141
Changes (01.01.2022 - 30.06.2022)	-1 926	1 338	514	-74

Expected credit loss (ECL) loans to customers - senior loans

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2022	19	0	0	19
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	-1	0	0	-1
New losses	2	0	0	2
Closing balance ECL 30.06.2022	19	0	0	19
Changes (01.01.2022 - 30.06.2022)	0	0	0	0

Expected credit loss (ECL) loans to customers - overdrafts deposit accounts

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2022	5	0	190	195
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	46	0	-87	-41
New losses	0	0	1	1
Write-offs	0	0	0	0
Change in risk model	-51	0	-16	-67
Closing balance ECL 30.06.2022	0	0	88	88
Changes (01.01.2022 - 30.06.2022)	-5	0	-102	-106

Book value of loans and receivables from customers - all segments

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	39 404 432	527 587	35 954	39 967 973
Transfer to stage 1	228 201	-227 368	-833	0
Transfer to stage 2	-135 820	135 889	-69	0
Transfer to stage 3	-10 037	-7 089	17 126	0
Net changes	-788 439	-6 259	-1 570	-796 268
New losses	7 966 189	1 699	656	7 968 543
Write-offs	-5 561 336	-99 768	-4 913	-5 666 017
Lending 30.06.2022	41 103 190	324 690	46 351	41 474 232

Book value of loans and receivables from customers - mortgages

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	19 782 618	524 203	33 565	20 340 386
Transfer to stage 1	226 269	-226 128	-142	0
Transfer to stage 2	-134 255	134 255	0	0
Transfer to stage 3	-9 639	-6 588	16 227	0
Net change	-3 111 846	-74 445	-2 676	-3 188 967
New lending	5 784 198	1 637	655	5 786 489
Write-offs	-1 673 956	-31 159	-3 331	-1 708 447
Lending 30.06.2022	20 863 389	321 775	44 298	21 229 462

Book value of loans and receivables from customers - public lending

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	17 875 934	0	0	17 875 934
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net change	-483 486	0	0	-483 486
New lending	2 022 813	0	0	2 022 813
Write-offs	-984 979	0	0	-984 979
Lending 30.06.2022	18 430 282	0	0	18 430 282

Book value of loans and receivables from customers - credit card

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	38 284	3 383	2 202	43 869
Transfer to stage 1	1 932	-1 240	-692	0
Transfer to stage 2	-1 564	1 633	-69	0
Transfer to stage 3	-397	-500	897	0
Net change	-940	-422	-408	-1 770
New lending	2 459	61	0	2 521
Lending 30.06.2022	39 774	2 915	1 930	44 620

Book value of loans to receivables from customers - senior loans

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	1 707 532	0	0	1 707 532
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net change	-94 661	0	0	-94 661
New lending	156 662	0	0	156 662
Lending 30.06.2022	1 769 533	0	0	1 769 533

Book value of loans to receivables from customers - overdraft deposit accounts

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	65	0	188	252
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	-1	0	1	0
Net change	92	0	-67	24
New lending	57	0	1	58
Lending 30.06.2022	212	0	123	334

Exposure - unused credit

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Lending 01.01.2022	1 158 308	62 601	153	1 221 062
Transfer to stage 1	31 146	-31 060	-85	0
Transfer to stage 2	-11 641	11 650	-9	0
Transfer to stage 3	-69	-25	94	0
Net change	33 234	3 752	31	37 017
New lending	148 067	40	0	148 107
Write-offs	-51 276	-318	0	-51 594
Lending 30.06.2022	1 307 768	46 640	184	1 354 592

Losses recognised in the profit and loss account consist of:

NOK THOUSANDS	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
Change in loss provisions in stage 1, 2 and 3	686	-1 536	-2 509
Established losses	-739	-4	-356
Recovery for previously established losses	299	360	566
Total losses in the income statement	246	-1 179	-2 299

Note 15 Contingent liabilites

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Credit facilities for lending not utilized	1 094 285	860 305	949 244
Credit facilities issued credit card	260 307	261 800	271 818
Loan promise	1 930 445	1 598 789	1 458 520
Total contingent liabilities	3 285 037	2 720 893	2 679 581

Credit facilities for lending not utilized: The ‘Fleksilån’ product is included here; this is a credit facility which allows the customer to borrow up to a specified credit limit.

Credit facilities issued credit card: Customers’ credit card limits are a contingent liability for the Bank, where the customer can choose to utilise the credit up to the allocated credit limit.

Loan commitment: The Bank issues funding certificates that customers can use in bidding procedures for home purchases. This also includes other loans that have been granted but not disbursed.

Note 16 Net gain/(loss) on financial instruments

NOK THOUSANDS	Q2 2022	Q2 2021	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
Net gain/(loss) on fixed-income securities	-15 742	-13 274	-24 350	7 430	-3 395
Net gain/(loss) financial derivatives and realized amortization linked to lending	87	0	293	0	-750
Net gain/(loss) financial derivatives and realized repurchase of own debt	-9 898	-19 557	-11 361	-25 330	-28 146
Net value change lending and borrowing, hedge accounting	0	44	0	-178	336
Other financial income and expenses	-241	-244	-483	-486	-941
Total net gain/(loss) on financial instruments	-25 794	-33 031	-35 901	-18 564	-32 896

Note 17 Leases

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
	Property
RIGHT-OF-USE ASSETS
Opening balance 01.01.	18 236	1 948	1 948
Depreciation	-935	-779	-1 636
Deduction	0	0	-779
Addition	0	0	18 703
Closing balance	17 300	1 169	18 236
LEASE LIABILITIES
Opening balance 01.01.	18 323	2 023	2 023
Repayments	-774	-798	-1 582
Deduction	0	0	-821
Addition	0	0	18 703
Closing balance	17 549	1 225	18 323

NOK THOUSANDS	Q2 2022	Q2 2021	01.01.2022 -30.06.2022	01.01.2021 -30.06.2021	01.01.2021 -31.12.2021
	Property
Interest expense lease liabilities	82	7	165	16	109
Interest expense lease liabilities	82	7	165	16	109
In the fourth quarter of 2021, a new 10-year lease has been capitalized. It is an intercompany lease for the rental of office premises with KLP Eiendom.

Note 18 Pension obligations - own employees

NOK THOUSANDS	30.06.2022	30.06.2021	31.12.2021
Capitalized net liability	36 693	41 550	41 550
Pension costs taken to profit/loss	7 163	6 492	12 983
Finance costs taken to profit/loss	483	486	942
Actuarial gains and losses incl. social security contributions	-2 822	-7 732	-7 136
Premiums/supplement paid-in including admin	-3 386	-4 110	-11 646
Capitalized net liability	38 131	36 687	36 693

ASSUMPTIONS	30.06.2022	30.06.2021	31.12.2021
Discount rate	3.20%	2.00%	1.90 %
Salary growth	3.50%	2.25%	2.75 %
The National Insurance basic amount (G)	3.25%	2.00%	2.50 %
Pension increases	2.48%	1.24%	1.75 %
Social security contribution	14.10%	14.10%	14.10 %
Capital activity tax	5.00%	5.00%	5.00 %
The effect of changes in the assumptions is a reduction of the obligation by NOK 2.8 million as of 30.06.2022. The change is recognized in comprehensive income.

Quarterly earnings trend

NOK MILLIONS	Q2 2022	Q1 2022	Q4 2021	Q3 2021	Q2 2021
Interest income	252.5	206.4	185.2	166.5	170.2
Interest expense	-165.6	-134.3	-109.4	-86.6	-93.1
Net interest income	86.9	72.1	75.8	80.0	77.1
Commision income and income from banking services	7.9	5.7	6.0	5.7	5.2
Commision cost and cost from banking services	-0.6	-0.5	-0.6	-0.6	-0.5
Net charges and commission income	7.2	5.2	5.4	5.2	4.7
Other fee income	15.1	15.1	14.9	14.9	14.9
Net gain/(loss) financial instruments	-25.8	-10.1	-9.4	-4.9	-33.0
Total other operating income	-10.7	5.0	5.4	10.0	-18.2
Salaries and administrative costs	-22.3	-21.8	-23.5	-17.7	-20.5
Depreciation	-1.0	-1.0	-1.4	-1.7	-1.7
Other operating expenses	-36.2	-41.2	-38.4	-36.1	-35.2
Net loan losses	0.2	0.1	-1.0	-0.2	-0.6
Total operating expenses	-59.3	-64.0	-64.3	-55.6	-58.0
Operating profit/loss before tax	24.2	18.3	22.4	39.5	5.7
Tax ordinary income	-6.0	24.3	-5.2	-9.2	-1.3
Profit/loss for the period	18.2	42.6	17.1	30.2	4.4
Other comprehensive income	-15.3	18.1	18.7	-19.3	0.0
Tax on other comprehensive income	3.8	-4.5	-4.7	4.8	0.0
Other comprehensive income for the period	-11.5	13.6	14.0	-14.5	0.0
Comprehensive income for the period	6.7	56.2	31.1	15.8	4.4

Key figures – accumulated

NOK MILLIONS	Q2 2022	Q1 2022	Q4 2021	Q3 2021	Q2 2021
Pre-tax income	42.5	18.3	116.1	93.8	54.3
Net interest income	159.0	72.1	308.6	232.8	152.8
Other operating income	42.7	20.3	78.9	58.6	38.6
Other operating cost and depreciation	-123.3	-64.0	-238.5	-174.2	-118.6
Net gain/(loss) financial instruments	-35.9	-10.1	-32.9	-23.5	-18.6
Deposits	13 464.9	13 372.2	12 901.0	12 773.7	12 642.6
Lending customers	23 041.8	22 635.4	0.0	21 364.8	21 409.3
Lending with public sector guarantee	18 321.1	17 974.4	0.0	16 842.2	16 752.1
Non-performing loans	46.4	45.6	36.0	31.5	34.1
Total liabilities created on issuance of securities	32 443.5	31 862.2	31 917.8	29 535.7	29 194.6
Other borrowing	0.0	0.0	0.0	0.0	701.8
Total assets	48 703.7	47 954.0	47 481.9	44 980.2	45 215.6
Average total assets	48 092.8	47 717.9	45 084.9	43 834.1	43 951.8
Equity	2 555.1	2 548.3	2 520.8	2 489.7	2 473.9
Interest net	0.33 %	0.15 %	0.68 %	0.53 %	0.35 %
Profit/loss from ordinary operation before taxes	0.09 %	0.04 %	0.26 %	0.21 %	0.12 %
Return on equity	3.37 %	2.91 %	4.78 %	5.15 %	4.47 %
Capital adequacy ratio	17.7 %	18.1 %	18.7 %	18.6 %	18.4 %
Liquidity coverage ratio (LCR)	425 %	242 %	495 %	353 %	438 %

Contact information

KLP BANKEN

Beddingen 8

7042 Trondheim

Org. number: 993 821 837

Visitors adress, Trondheim:
Beddingen 8

Visitors adress, Oslo:

Dronning Eufemias gate 10

Klpbanken.no

Phone: +47 55 54 85 00

klpbanken@klp.no