Q2 2023 Interim report

KLP Banken Group

Interim Financial Statements 2/2023

Main features by quarter end:

Good P&L development
Lower lending growth
Reduced loss on financial instruments

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 gjensidig forsikringsselskap (KLP). The Group manages a lending total of NOK 120 (118) billion. The overall business of KLP Banken AS and its subsidiaries is nationwide and divided into the retail market and public sector market 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

By the end of the first half, the KLP Banken Group achieved a pre-tax profit of NOK 121.5 (42.5) million. The change is mainly due to increased net interest income in both business areas and reduced loss on financial instruments. The retail market segment generated a profit of NOK 87.5 (21.8) million and the public sector segment a profit of NOK 34.0 (20.7) million. Group total income after taxes and actuarial adjustments amounted to NOK 155.1 (62.9) million as at second quarter.

Net interest income for the KLP Banken Group by first half year amounted to NOK 220.8 (159.0) million. The change is mainly due to increased margins between lending and funding as well as increased interest rate levels have contributed to higher returns on equity-financed lending. Net interest income has increased about 20 per cent from the first to the second quarter.

Net charges and commission income amounted NOK 13.2 (12.4) million. The change is mainly due to lending growth and fee rate 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 30.7 (30.2) million for the first half year.

Operating expenses including depreciations amounted to NOK -133.4 (-123.5) million. Most of the increase is due to price increase om external services.

At the end of the first half, the income statement includes a net loss associated with financial instruments of NOK -9.3 (-35.9) 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.

Loan loss provisions and realized losses in the first half amounted to NOK -0.4 (0.2) million. The interest rate increase has so far not incurred significant increase in credit losses, but high inflation and increased interest rates may lead to reduction in serviceability among lending customers ahead. Neither in 2023 the public sector market has incurred realized loan losses.

Lending and credits

On 30 June 2023, the KLP Banken Group had a lending balance of NOK 42.9 (41.4) billion. The distribution between the retail market and public sector lending was NOK 23.5 (23.1) billion and NOK 19.4 (18.3) billion, respectively.

In the retail market, KLP Banken had a mortgage growth at NOK 0.2 (1.0) billion in the first half. Reduced demand for new loans and refinancing is supposed to have a connection to that increased interest rate levels and inflation contribute to lower market growth. The bank’s target group in mortgage lending are the members of the KLP pension schemes.

Mortgage loans amounting to NOK 2.4 (2.9) billion are sold to the daughter company KLP Boligkreditt AS so far this year. The volume of managed mortgages for KLP in this period is little changed.

Drawn credits on credit cards and unused credit has been on a stable level through the first half. The number of credit card customers has, on the other hand, increased steadily since last year-end.

The KLP Banken public sector lending balance has increased during the first half, by NOK 0.3 (0.5) billion. Managed public sector lending on behalf of KLP has additionally increased by NOK 1.0 billion.

Liquid investments

Available liquidity is invested in other banks and in interest-bearing securities. Deposits in credit institutions was NOK 1.3 (1.4) billion. Securities held, booked at fair value in the KLP Banken Group, was NOK 5.1 (5.7) 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 -2.9 (-24.4) 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 14.5 (13.5) billion and issued securities amounted NOK 31.7 (32.4) billion. Of the outstanding volume of issued securities, covered bonds (OMF) issued by KLP Kommunekreditt AS and KLP Boligkreditt AS amounted to NOK 18.6 (19.2) billion and NOK 12.0 (12.2) billion respectively. All covered bond issues have achieved Aaa rating. Outstanding securities debt in KLP Banken AS amounted to NOK 1.1 (1.0) 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 2023, eligible Tier 1 and Tier 2 capital i.a.w. the capital adequacy rules were NOK 2 897 (2 470) 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 20.3 (17.7) per cent at the reporting time. The minimum statutory requirement is 14.0 per cent core capital adequacy and 17.5 per cent capital adequacy. Leverage ratio was 5.7 (5.0) per cent. Here the requirement is 3.0 per cent.

Future prospects

The KLP Banken Group’s target group in the retail market is KLP members. This covers a significant proportion of the population, and the basis for developing the KLP Banken Group’s position further is considered good. The KLP Banken Group will go on working to develop favourable and predictable products and services for its members.

Norwegian society is experiencing turbulent times with considerable macroeconomic uncertainty, and this also affects households. High inflation and higher interest rates on people’s personal finances are particularly noticeable. The KLP Banken Group’s members, who are mainly public-sector employees and their households, are more shielded than other groups from risk associated with their working conditions as employees in municipalities and health enterprises. The KLP Banken Group therefore assumes that its growth ambitions can be sustained and that the risk of defaults and losses will continue to be limited also in the future.

The household debt burden is subject to strict regulatory requirements for the provision of credit in the retail market. The KLP Banken Group regards this as a good basis for further development of our banking products and services in the retail market. The KLP Banken Group will pursue conservative procedures for granting credit in order to maintain low risk in the Bank’s lending portfolios, but will also be there wherever possible for customers facing challenges in difficult times.

The banking industry is at the forefront of technological development, and customers’ expectations for simple and digital solutions are increasing. The KLP Banken Group aims to exploit tried and tested technology to offer relevant, customer-friendly and efficient services to our customers. This creates a lasting need for IT investments if the Bank’s goals for further growth and profitability are to be achieved.

Norwegian municipalities have developed a good and comprehensive range of services to the public. Increased life expectancy, demographics, income growth and climate risk give reason to expect a significant need for investment in the public sector over the next few years. In the short term, increased costs resulting from higher inflation and interest rates could contribute to slightly lower lending growth than has been normal in recent years. Demand for loans for projects that contribute to climate adaptation is likely to continue to increase in the years ahead.

KLP Kommunekreditt AS is the only mortgage company in Norway that issues bonds secured by loans to the public sector. The presence of KLP Kommunekreditt AS together with KLP in the market for public loans contributes to competition and so provides the public sector with access to long-term financing on favourable terms.

KLP Banken AS has good solvency and an equity capital situation that meets all regulatory requirements. Combined with low credit risk in its lending business, this is a good position for accessing the best possible financing in the capital markets. This is an important prerequisite for offering favourable lending terms.

The KLP Banken Group is well equipped for further development and growth.

The Board of Directors. Trondheim, 10 August 2023.

Income statementKLP Banken Group

NOTES	NOK THOUSANDS	Q2 2023	Q2 2022	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
	Interest income, effective interest method	469 416	220 539	899 232	400 720	1 079 475
	Other interest income	81 954	31 985	170 353	58 205	174 402
3	Total interest income	551 370	252 523	1 069 585	458 925	1 253 877
	Interest expense, effective interest method	-411 978	-152 873	-791 967	-273 139	-818 588
	Other interest expense	-28 747	-12 753	-56 823	-26 813	-66 602
3	Total interest costs	-440 725	-165 626	-848 790	-299 952	-885 190
3	Net interest income	110 645	86 897	220 795	158 973	368 687
	Commision income and income from banking services	8 011	7 880	14 477	13 597	29 483
	Commision cost and cost from banking services	-589	-649	-1 287	-1 173	-2 566
	Net charges and commission income	7 422	7 231	13 189	12 424	26 917
	Other fee income	15 321	15 118	30 663	30 236	58 105
16	Net gain/ (loss) financial instruments	-2 594	-25 794	-9 325	-35 901	-26 252
	Total other operating income	12 727	-10 676	21 337	-5 665	31 853
	Salaries and administrative costs	-21 066	-22 292	-43 196	-44 102	-87 701
	Depreciation	-950	-991	-1 943	-2 005	-4 010
	Other operating expenses	-40 324	-36 195	-88 269	-77 401	-154 945
14	Net loan losses	-112	184	-448	246	-323
	Total operating expenses	-62 452	-59 294	-133 857	-123 262	-246 979
	Operating profit/loss before tax	68 341	24 157	121 465	42 469	180 478
	Tax ordinary income	-16 408	-5 972	20 598	18 326	-14 474
	Profit/loss for the period	51 933	18 185	142 063	60 795	166 004
	Estimate difference, pension obligation and assets	15 942	-15 291	17 331	2 822	11 094
	Tax on actuarial gains and losses	-3 985	3 823	-4 333	-705	-2 774
	Items that will not be reclassified to profit and loss	11 956	-11 468	12 998	2 116	8 321
	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	11 956	-11 468	12 998	2 116	8 321
	Comprehensive income for the period	63 889	6 717	155 061	62 912	174 324

Balance sheetKLP Banken Group

NOTES	NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
	ASSETS
5	Claims on central banks	73 913	72 349	72 960
5	Loans to credit institutions	1 284 002	1 366 228	1 320 087
4,5	Loans to customers	42 930 435	41 362 883	42 375 461
5,6,13	Fixed-income securities	5 080 230	5 744 028	6 564 627
5,6	Shareholdings	1 187	1 187	1 187
5,6,8	Financial derivatives	143 105	107 993	139 153
	Intangible assets	14 807	16 506	15 624
17	Right-of-use assets	15 430	17 300	16 365
	Fixed assets	436	436	436
10	Other assets	13 606	14 748	4 816
	Total assets	49 557 153	48 703 658	50 510 716
	LIABILITIES AND OWNERS EQUITY
	LIABILITIES
5,7	Debt securities issued	31 660 782	32 443 451	33 484 932
5	Deposits and borrowings from the public	14 523 972	13 464 917	13 778 881
5,6,8	Financial derivatives	43 361	31 256	25 939
	Deferred tax liabilities	3 798	985	40 343
17	Lease liabilities	15 953	17 549	16 761
11	Other liabilities	193 648	129 923	143 180
11	Provision for accrued costs and liabilities	43 701	60 523	54 215
	Total liabilities	46 485 217	46 148 604	47 544 250
	EQUITY
	Share capital	1 140 000	1 065 000	1 140 000
	Share premium	1 050 000	825 000	1 050 000
	Other owners' eqyity	726 875	602 142	776 466
	Profit for the period	155 061	62 912	0
	Total equity	3 071 936	2 555 054	2 966 466
	Total liabilities and equity	49 557 153	48 703 658	50 510 716

Statement of changes in equityKLP Banken Group

2023 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners’ equity
Equity 1 January 2023	1 140 000	1 050 000	776 466	2 966 466
Profit for the period	0	0	142 063	142 063
Other comprehensive income	0	0	12 998	12 998
Total comprehensive income for the period	0	0	155 061	155 061
Group contribution received during the period	0	0	159 535	159 535
Group contribution paid during the period	0	0	-209 126	-209 126
Total transactions with the owners	0	0	-49 591	-49 591
Equity 30 June 2023	1 140 000	1 050 000	881 936	3 071 936

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

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
Income for the year	0	0	166 004	166 004
Other comprehensive income	0	0	8 321	8 321
Comprehensive income for the year	0	0	174 324	174 324
Group contribution received during the period	0	0	89 292	89 292
Group contribution paid during the period	0	0	-117 932	-117 932
Owners' equity received during the period	75 000	225 000	0	300 000
Total transactions with the owners	75 000	225 000	-28 640	271 360
Equity 31 December 2022	1 140 000	1 050 000	776 466	2 966 466

Statement of cash flowKLP Banken Group

NOK THOUSANDS	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
OPERATING ACTIVITIES
Payments received from customers – interest, commission and charges	858 953	381 551	984 166
Payments to customers – interest, commission and charges	-190 610	-56 729	-168 854
Disbursements on loans to customers and credit institutions	-7 186 789	-8 381 825	-15 659 148
Receipts on loans to customers	6 629 331	6 892 371	13 246 513
Net receipts on customer deposits banking	745 433	564 021	877 993
Disbursements on operations	-84 226	-80 585	-153 688
Payments to staff, pension schemes, employer's social security contribution etc.	-42 655	-40 257	-80 949
Interest investment accounts	20 755	7 487	31 284
Net receipts/disbursements from operating activities	72 276	123 585	156 254
Net cash flow from operating activities	822 469	-590 383	-766 429
INVESTMENT ACTIVITIES
Receipts on the sale of securities	3 324 516	2 722 651	4 783 697
Payments on the purchase of securities	-1 846 303	-2 490 265	-5 348 540
Receipts of interest from securities	107 073	39 081	101 691
Payments on the purchase of tangible fixed assets	-191	-787	-974
Net cash flow from investment activities	1 585 096	270 680	-464 127
FINANCING ACTIVITIES
Receipts on loans	5 000 000	5 650 000	7 150 000
Repayments and redemption of securities debt	-7 000 000	-5 508 000	-5 808 000
Change in securities debt, own funds	199 261	408 246	118 142
Net payment of interest on loans	-577 782	-221 047	-580 002
Payment of lease liabilities	-808	-901	-1 563
Group contributions paid	-49 591	-28 640	-28 640
Change in owners' equity	0	0	300 000
Net cash flows from financing activities	-2 428 920	299 658	1 149 938
Net cash flow during the period	-21 355	-20 045	-80 618
Cash and cash equivalents at the start of the period	1 340 377	1 420 995	1 420 995
Cash and cash equivalents at the end of the period	1 319 022	1 400 950	1 340 377
Net receipts/disbursements (-)	-21 355	-20 045	-80 618

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 Accounting principles

The interim report includes the interim Financial Statements of KLP Banken Group for the period 1 January 2023 – 30 June 2023, 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".

Other accounting principles and calculations are the same in the interim financial statement as in the annual report for 2022, please see the annual report for further information.

Note 3 Net interest income

NOK THOUSANDS	Q2 2023	Q2 2022	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
Interest income on loans to customers	455 567	215 495	873 386	392 302	1 048 171
Interest income on loans to credit institutions	13 849	5 044	25 845	8 418	31 304
Total interest income, effective interest method	469 416	220 539	899 232	400 720	1 079 475
Interest income on bonds and certificates	50 591	22 898	108 288	41 643	120 291
Other interest income	31 364	9 087	62 065	16 562	54 110
Total other interest income	81 954	31 985	170 353	58 205	174 402
Total interest income	551 370	252 523	1 069 585	458 925	1 253 877
Interest expenses on deposits to KLP Banken	-97 140	-25 294	-182 240	-47 325	-149 986
Interest expenses on issued securities	-314 763	-127 497	-609 576	-225 648	-668 276
Interest expense lease liabilities	-75	-82	-151	-165	-326
Total interest expense, effective interest method	-411 978	-152 873	-791 967	-273 139	-818 588
Other interest expenses	-25 171	-8 977	-49 294	-18 310	-49 595
Interest expenses on deposits to customers	-3 576	-3 776	-7 529	-8 503	-17 007
Total other interest expense	-28 747	-12 753	-56 823	-26 813	-66 602
Total interest expense	-440 725	-165 626	-848 790	-299 952	-885 190
Net interest income	110 645	86 897	220 795	158 973	368 687

Note 4 Loans to customers

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
Principal on loans to customers	42 849 602	41 353 107	42 287 934
Credit portfolio	42 949	44 088	43 141
Overdraft current account	132	149	90
Write-downs step 1 and 2	-1 816	-1 481	-1 771
Write-downs step 3	-728	-1 061	-933
Loans to customers after write-downs	42 890 138	41 394 802	42 328 461
Accrued interest	172 794	77 084	145 049
Fair value hedging	-132 498	-109 003	-98 049
Loans to customers	42 930 435	41 362 883	42 375 461

Note 5 Categories of financial instruments

NOK THOUSANDS	30.06.2023		30.06.2022		31.12.2022
	Capitalized value	Fair value	Capitalized value	Fair value	Capitalized value	Fair value
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Fixed-income securities	5 080 230	5 080 230	5 744 028	5 744 028	6 564 627	6 564 627
Financial derivatives	143 105	143 105	107 993	107 993	139 153	139 153
Shares and holdings	1 187	1 187	1 187	1 187	1 187	1 187
Total financial assets at fair value through profit and loss	5 224 522	5 224 522	5 853 208	5 853 208	6 704 966	6 704 966
FINANCIAL ASSETS FAIR VALUE HEDGING
Loans to and receivables from customers	1 545 582	1 552 198	1 726 134	1 747 457	1 702 745	1 706 638
Total financial assets fair value hedging	1 545 582	1 552 198	1 726 134	1 747 457	1 702 745	1 706 638
FINANCIAL ASSETS AT AMORTIZED COST
Loans to and receivables from credit institutions	73 913	73 913	72 349	72 349	72 960	72 960
Loans to and receivables from central banks	1 284 002	1 284 002	1 366 228	1 366 228	1 320 087	1 320 087
Loans to and receivables from customers	41 384 853	41 384 853	39 636 749	39 636 749	40 672 715	40 672 715
Total financial assets at amortized cost	42 742 769	42 742 769	41 075 326	41 075 326	42 065 762	42 065 762
Total financial assets	49 512 872	49 519 488	48 654 667	48 675 990	50 473 474	50 477 367
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial derivatives	43 361	43 361	31 256	31 256	25 939	25 939
Total financial liabilities at fair value through profit and loss	43 361	43 361	31 256	31 256	25 939	25 939
FINANCIAL LIABILITIES FAIR VALUE HEDGING
Liabilities created on issuance of securities	1 679 489	1 679 388	472 432	477 424	1 728 703	1 745 090
Total financial liabilities fair value hedging	1 679 489	1 679 388	472 432	477 424	1 728 703	1 745 090
FINANCIAL LIABILITIES AT AMORTIZED COST
Liabilities created on issuance of securities	29 981 293	29 916 767	31 971 019	31 931 211	31 756 229	31 711 938
Deposits from customers	14 523 972	14 523 972	13 464 917	13 464 917	13 778 881	13 778 881
Total financial liabilities at amortized cost	44 505 266	44 440 740	45 435 936	45 396 128	45 535 109	45 490 818
Total financial liabilities	46 228 116	46 163 488	45 939 624	45 904 808	47 289 751	47 261 847

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.

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

30.06.2023 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	849 930	4 230 300	0	5 080 230
Shareholdings	0	0	1 187	1 187
Financial derivatives	0	143 105	0	143 105
Total assets at fair value	849 930	4 373 404	1 187	5 224 522
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	43 361	0	43 361
Total financial liabilities at fair value	0	43 361	0	43 361

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

31.12.2022 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	804 841	5 759 785	0	6 564 627
Shareholdings	0	0	1 187	1 187
Financial derivatives	0	139 153	0	139 153
Total assets at fair value	804 841	5 898 938	1 187	6 704 966
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	25 939	0	25 939
Total financial liabilities at fair value	0	25 939	0	25 939

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
CHANGES IN LEVEL 3 UNLISTED SHARES
Opening balance	1 187	1 187	1 187
Additions/purchases of shares	0	0	0
Unrealized changes	0	0	0
Closing balance	1 187	1 187	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	30.06.2023	30.06.2022	31.12.2022
Bond debt, nominal amount	32 760 359	33 565 879	34 763 119
Adjustments	-63 832	-22 170	9 932
Accrued interest	179 256	54 742	143 881
Own holdings, nominal amount	-1 215 000	-1 155 000	-1 432 000
Total debt securities issued	31 660 782	32 443 451	33 484 932
Interest rate on borrowings through the issuance of securities at the reporting date:	4.23 %	1.65%	3.62 %
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 31.12.2022	Issued	Matured/ redeemed	Other adjustements	Balance sheet 30.06.2023
Changes in debt securities issued - stock exchange listed covered bonds and cerftificates
Bond debt, nominal amount	34 763 119	5 000 000	-7 000 000	-2 760	32 760 359
Adjustments	9 932	0	0	-73 764	-63 832
Accrued interest	143 881	0	0	35 375	179 256
Own holdings, nominal amount	-1 432 000	0	217 000	0	-1 215 000
Total debt securities issued	33 484 932	5 000 000	-6 783 000	-41 150	31 660 782

Note 8 Financial assets and liabilities subject to net settlement

30.06.2023 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	143 105	0	143 105	-43 361	0	99 744
Total	143 105	0	143 105	-43 361	0	99 744
LIABILITIES
Financial derivatives	43 361	0	43 361	-43 361	-32	0
Total	43 361	0	43 361	-43 361	-32	0

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

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.
31.12.2022 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	139 153	0	139 153	-25 939	0	113 214
Total	139 153	0	139 153	-25 939	0	113 214
LIABILITIES
Financial derivatives	25 939	0	25 939	-25 939	-1 724	0
Total	25 939	0	25 939	-25 939	-1 724	0

Note 9 Transactions with related parties

NOK THOUSANDS	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
KLP, fees lending management	30 625	30 236	57 951
KLP Skadeforsikring AS, fees	38	0	155
KLP Kapitalforvaltning AS, fees for services provided	0	0	-180
KLP, rent	-1 706	-1 319	-2 755
KLP Skipsbygget AS, rent	-1 086	-858	-1 867
KLP Bassengtomten AS, rent parking	-48	-45	-90
KLP Eiendomsdrift AS, cost office buildings	-201	-323	-532
KLP, pension premium	-7 041	-7 341	-14 485
KLP, staff services (at cost)	-39 190	-35 688	-71 410
KLP Group companies, subsidised interest employee loans	8 438	6 607	14 120

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
BALANCES
KLP, net internal accounts	-4 120	-4 417	-6
KLP, loan settlement	-53 330	-37 351	-28 988
KLP Group companies, net other internal accounts	1 436	1 146	1 252
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	30.06.2023	30.06.2022	31.12.2022
Intercompany receivables	2 941	2 409	2 569
Miscellaneous receivables	5	42	2
Prepaid expenses	10 661	12 297	2 245
Total other assets	13 606	14 748	4 816

Note 11 Other liabilities and provision for accrued costs

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
Creditors	3 957	1 676	1 742
Intercompany payables	58 955	43 030	30 311
Short-term balances with credit institutions	101 400	77 700	108 100
Other liabilities	29 336	7 516	3 026
Total other liabilities	193 648	129 923	143 180
Withholding tax	2 109	2 112	2 886
Social security contributions	2 040	1 985	2 425
Capital activity tax	720	720	869
Holiday pay	2 995	2 983	6 708
Pension obligations	17 975	38 131	32 092
VAT	126	64	28
Provisioned costs	17 737	14 527	9 206
Total accrued costs and liabilities	43 701	60 523	54 215

Note 12 Capital adequacy

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
Share capital and share premium fund	2 190 000	1 890 000	2 190 000
Other owners' equity	726 875	602 142	776 466
Total owners' equity	2 916 876	2 492 142	2 966 466
Adjustments due to requirements for proper valuation	-5 080	-5 744	-6 565
Deduction goodwill and other intangible assets	-14 807	-16 506	-15 624
Core capital/Tier 1 capital	2 896 989	2 469 892	2 944 277
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)	2 896 989	2 469 892	2 944 277
Capital requirement	1 142 092	1 119 151	1 138 790
Surplus of own funds (Tier 1 and Tier 2 capital)	1 754 897	1 350 741	1 805 487
Estimate basis credit risk:
Institutions	284 426	270 151	298 953
Retail	580 932	442 154	501 314
Local and regional authorities (incl. municipalities/county administations)	3 954 738	3 734 287	3 963 118
Investments with mortgage security in real estate	8 260 717	8 174 051	8 168 815
Investments fallen due	42 426	48 680	46 208
Covered bonds	391 703	464 135	502 740
Other holdings	32 825	186 127	24 731
Calculation basis credit risk	13 547 767	13 319 586	13 505 877
Credit risk	1 083 821	1 065 567	1 080 470
Operating risk	58 035	53 416	58 035
Credit valuation adjustments (CVA)	235	169	284
Total capital requirement assets	1 142 092	1 119 151	1 138 790
Core capital adequacy ratio	20.3 %	17.7 %	20.7 %
Supplementary capital ratio	0.0 %	0.0 %	0.0 %
Capital adequacy ratio	20.3 %	17.7 %	20.7 %
Leverage ratio	5.7 %	5.0 %	5.7 %

CAPITAL REQUIREMENT PER 30.06.2023	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	2.5 %	0.0 %	2.5 %
Pilar 2-requirement	1.5 %	0.0 %	1.5 %
Current capital requirement incl. buffers	14.0 %	3.5 %	17.5 %
Capital requirement leverage ratio	3.0 %	0.0 %	3.0 %

Note 13 Fixed-income securities

NOK THOUSANDS	30.06.2023		30.06.2022		31.12.2022
	Acquisition cost	Market value	Acquisition cost	Market value	Acquisition cost	Market value
Certificates	530 686	534 265	0	0	693 949	697 059
Bonds	4 555 110	4 545 965	5 768 669	5 744 028	5 865 698	5 867 567
Total fixed-income securities	5 085 796	5 080 230	5 768 669	5 744 028	6 559 647	6 564 627
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 2023 the copmpanies has not made any adjustments in the expected loss models.

The total loan loss provisions in KLP Banken Group has decreased by two percent.

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 01.01.2023	2 390	2 090	998	5 478
Transfer to stage 1	598	-501	-97	0
Transfer to stage 2	-29	61	-33	0
Transfer to stage 3	-2	-64	65	0
Net changes	-624	936	20	332
New losses	175	173	26	374
Write-offs	-135	-180	-214	-529
Closing balance ECL 30.06.2023	2 375	2 515	766	5 656
Changes (01.01.2023 - 30.06.2023)	-15	424	-232	178
This includes provisions for losses on loans and receivables - unused credit				3 112

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 01.01.2023	144	207	422	774
Transfer to stage 1	3	-3	0	0
Transfer to stage 2	-6	6	0	0
Transfer to stage 3	0	-34	34	0
Net changes	-51	97	-78	-32
New losses	41	138	0	180
Write-offs	-3	-36	-24	-63
Closing balance ECL 30.06.2023	128	376	353	858
Changes (01.01.2023 - 30.06.2023)	-16	169	-69	85
This includes provisions for losses on loans and receivables - unused credit on mortgages				9

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 01.01.2023	184	0	0	184
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	17	0	0	17
Write-offs	-9	0	0	-9
Closing balance ECL 30.06.2023	186	0	0	186
Changes (01.01.2023 - 30.06.2023)	2	0	0	2

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 01.01.2023	2 040	1 883	516	4 440
Transfer to stage 1	596	-499	-97	0
Transfer to stage 2	-22	55	-33	0
Transfer to stage 3	-2	-30	32	0
Net changes	-689	695	-103	-97
New losses	114	34	0	148
Write-offs	0	0	0	0
Closing balance ECL 30.06.2023	2 037	2 139	316	4 491
Changes (01.01.2023 - 30.06.2023)	-4	255	-201	51
This includes provisions for losses on loans and receivables - unused credit on credit card				3 102

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 01.01.2023	21	0	0	21
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	3	0	0	3
Write-offs	0	0	0	0
Closing balance ECL 30.06.2023	23	0	0	23
Changes (01.01.2023 - 30.06.2023)	2	0	0	2
This includes provisions for losses on loans and receivables - unused credit on senior loans				1

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 01.01.2023	0	0	60	60
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	0	0	12	12
New losses	0	0	26	26
Write-offs	0	0	0	0
Closing balance ECL 30.06.2023	0	0	98	98
Changes (01.01.2023 - 30.06.2023)	0	0	38	38

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 01.01.2023	41 943 196	489 280	43 654	42 476 129
Transfer to stage 1	86 166	-85 852	-313	0
Transfer to stage 2	-272 345	276 413	-4 068	0
Transfer to stage 3	-9 074	-4 127	13 201	0
Net changes	-885 608	-4 102	-1 473	-891 183
New losses	6 901 867	22 485	1 739	6 926 091
Write-offs	-5 336 434	-99 051	-10 113	-5 445 598
Lending 30.06.2023	42 427 768	595 045	42 626	43 065 439

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 01.01.2023	20 906 667	485 896	41 976	21 434 538
Transfer to stage 1	84 667	-84 667	0	0
Transfer to stage 2	-271 214	275 190	-3 976	0
Transfer to stage 3	-8 852	-4 021	12 874	0
Net change	-3 102 292	-46 712	-11 044	-3 160 048
New lending	4 810 174	22 413	1 703	4 834 289
Write-offs	-1 577 959	-56 027	-24	-1 634 010
Lending 30.06.2023	20 841 191	592 071	41 507	21 474 769

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 01.01.2023	19 215 331	0	0	19 215 331
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	-516 734	0	0	-516 734
New lending	1 837 388	0	0	1 837 388
Write-offs	-954 204	0	0	-954 204
Lending 30.06.2023	19 581 780	0	0	19 581 780

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 01.01.2023	38 554	3 384	1 594	43 532
Transfer to stage 1	1 499	-1 185	-313	0
Transfer to stage 2	-1 131	1 223	-92	0
Transfer to stage 3	-209	-106	314	0
Net change	-1 320	-414	-521	-2 255
New lending	2 087	72	0	2 159
Write-offs	0	0	0	0
Lending 30.06.2023	39 480	2 974	982	43 436

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 01.01.2023	1 782 407	0	0	1 782 407
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	-69 441	0	0	-69 441
New lending	252 145	0	0	252 145
Write-offs	0	0	0	0
Lending 30.06.2023	1 965 110	0	0	1 965 110

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 01.01.2023	239	0	84	322
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	-13	0	13	0
Net change	-91	0	3	-88
New lending	73	0	36	110
Write-offs	0	0	0	0
Lending 30.06.2023	207	0	136	344

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 01.01.2023	1 339 781	54 926	231	1 394 938
Transfer to stage 1	10 305	-10 277	-28	0
Transfer to stage 2	-15 153	15 177	-24	0
Transfer to stage 3	-24	-1	25	0
Net change	4 270	-425	65	3 910
New lending	831 330	965	0	832 295
Write-offs	-328 966	-5 188	-135	-334 289
Other changes	323 962	0	0	323 962
Lending 30.06.2023	2 165 505	55 177	134	2 220 815

Losses recognised in the profit and loss account consist of:

NOK THOUSANDS	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
Change in loss provisions in stage 1, 2 and 3	-707	686	-276
Established losses	0	-739	-815
Recovery for previously established losses	259	299	768
Total losses in the income statement	-448	246	-323

Note 15 Contingent liabilites

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
Credit facilities for lending not utilized	1 173 795	1 094 285	885 395
Credit facilities issued credit card	258 681	260 307	259 010
Loan promise	1 529 932	1 930 445	1 170 419
Total contingent liabilities	2 962 408	3 285 037	2 314 823

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 2023	Q2 2022	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
Net gain/(loss) on fixed-income securities	-503	-17 122	-5 620	-27 110	-18 704
Net gain/(loss) financial derivatives and realized amortization linked to lending	130	87	122	293	270
Net gain/(loss) financial derivatives and realized repurchase of own debt	-3 287	-9 898	-5 958	-11 361	-12 335
Net accrual of over/under rates borrowings and securities	1 382	1 380	2 762	2 760	5 521
Other financial income and expenses	-316	-241	-631	-483	-1 004
Total net gain/(loss) on financial instruments	-2 594	-25 794	-9 325	-35 901	-26 252

Note 17 Leases

NOK THOUSANDS	30.06.2023	30.06.2022	31.12.2022
	Property
RIGHT-OF-USE ASSETS
Opening balance 01.01.	16 365	18 236	18 236
Depreciation	-935	-935	-1 870
Closing balance	15 430	17 300	16 365
LEASE LIABILITIES
Opening balance 01.01.	16 761	18 323	18 323
Repayments	-808	-774	-1 563
Closing balance	15 953	17 549	16 761

NOK THOUSANDS	Q2 2023	Q2 2022	01.01.2023 -30.06.2023	01.01.2022 -30.06.2022	01.01.2022 -31.12.2022
	Property
Interest expense lease liabilities	75	82	151	165	326
Interest expense lease liabilities	75	82	151	165	326
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	30.06.2023	30.06.2022	31.12.2022
Capitalized net liability	32 092	36 693	36 693
Pension costs taken to profit/loss	6 821	7 163	14 307
Finance costs taken to profit/loss	631	483	1 004
Actuarial gains and losses incl. social security contributions	-17 331	-2 822	-11 094
Premiums/supplement paid-in including admin	-4 238	-3 386	-8 818
Capitalized net liability	17 975	38 131	32 092

ASSUMPTIONS	30.06.2023	30.06.2022	31.12.2022
Discount rate	3.70%	3.20%	3.00%
Salary growth	3.50%	3.50%	3.50%
The National Insurance basic amount (G)	3.25%	3.25%	3.25%
Pension increases	2.60%	2.48%	2.60%
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 17.3 million as of 30.06.2023. The change is recognized in comprehensive income.

Quarterly earnings trend

NOK MILLIONS	Q2 2023	Q1 2023	Q4 2022	Q3 2022	Q2 2022
Interest income	551.4	518.2	474.7	320.2	252.5
Interest expense	-440.7	-408.1	-364.2	-221.0	-165.6
Net interest income	110.6	110.1	110.5	99.2	86.9
Commision income and income from banking services	8.0	6.5	7.7	8.1	7.9
Commision cost and cost from banking services	-0.6	-0.7	-0.7	-0.7	-0.6
Net charges and commission income	7.4	5.8	7.1	7.4	7.2
Other fee income	15.3	15.3	15.2	12.7	15.1
Net gain/(loss) financial instruments	-2.6	-6.7	16.6	-6.9	-25.8
Total other operating income	12.7	8.6	31.7	5.8	-10.7
Salaries and administrative costs	-21.1	-22.1	-25.5	-18.1	-22.3
Depreciation	-1.0	-1.0	-1.0	-1.0	-1.0
Other operating expenses	-40.3	-47.9	-39.4	-38.1	-36.2
Net loan losses	-0.1	-0.3	-0.4	-0.2	0.2
Total operating expenses	-62.5	-71.4	-66.3	-57.4	-59.3
Operating profit/loss before tax	68.3	53.1	83.0	55.0	24.2
Tax ordinary income	-16.4	37.0	-19.7	-13.1	-6.0
Profit/loss for the period	51.9	90.1	63.3	41.9	18.2
Other comprehensive income	15.9	1.4	7.8	0.5	-15.3
Tax on other comprehensive income	-4.0	-0.3	-2.0	-0.1	3.8
Other comprehensive income for the period	12.0	1.0	5.9	0.3	-11.5
Comprehensive income for the period	63.9	91.2	69.2	42.2	6.7

Key figures – accumulated

NOK MILLIONS	Q2 2023	Q1 2023	Q4 2022	Q3 2022	Q2 2022
Pre-tax income	121.5	53.1	180.5	97.5	42.5
Net interest income	220.8	110.2	368.7	258.2	159.0
Other operating income	43.9	21.1	85.0	62.8	42.7
Other operating cost and depreciation	-133.9	-71.4	-247.0	-180.7	-123.3
Net gain/(loss) financial instruments	-9.3	-6.7	-26.3	-42.8	-35.9
Deposits	14 524.0	14 136.2	13 778.9	13 606.8	13 464.9
Lending customers	23 481.3	23 332.8	23 258.4	23 368.6	23 041.8
Lending with public sector guarantee	19 449.1	19 384.1	19 117.1	18 717.6	18 321.1
Non-performing loans	42.6	45.6	43.7	42.8	46.4
Total liabilities created on issuance of securities	31 660.8	31 998.9	33 484.9	32 613.2	32 443.5
Other borrowing	0.0	0.0	0.0	0.0	0.0
Total assets	49 557.2	49 373.4	50 510.7	49 369.5	48 703.7
Average total assets	50 033.9	49 942.1	48 996.3	48 425.7	48 092.8
Equity	3 071.9	3 008.0	2 966.5	2 897.3	2 555.1
Interest net	0.44 %	0.22 %	0.75 %	0.53 %	0.33 %
Profit/loss from ordinary operation before taxes	0.24 %	0.11 %	0.37 %	0.20 %	0.09 %
Return on equity	8.19 %	7.16 %	7.16 %	5.15 %	3.37 %
Capital adequacy ratio	20.3 %	20.5 %	20.7 %	19.7 %	17.7 %
Liquidity coverage ratio (LCR)	513 %	435 %	567 %	472 %	425 %

Contact information

KLP BANKEN AS

Beddingen 8
7042 Trondheim

Org. number: 993 821 837

Visitors adress, Trondheim:
Beddingen 8

Visitors adress, Oslo:
Dronning Eufemias gate 10

Klp.no/bank

Phone: +47 55 54 85 00

klpbanken@klp.no

Q2 2023 Interim reportKLP Banken Group