Q3 Interim Report 2023

KLP Kommunekreditt ASQ3 2023

Interim Financial Statements 3/2023

Main features by third quarter:

Increased net interest income
Reduced costs on financial instruments
Moderate lending growth

Objective

The Company's objective is long-term financing of municipalities, county administrations and enterprises carrying out public sector assignments. Loans to companies must be guaranteed by municipalities, county administrations or the central government under the Norwegian Local Government Act. Guarantees are to be of the ordinary surety type covering both repayments and interest. The lending business is principally funded issuing covered bonds (OMF).

KLP Kommunekreditt AS is a wholly owned subsidiary of KLP Banken AS. The KLP Banken Group is owned by Kommunal Landspensjonskasse (KLP).

Income statement

The pre-tax profit by quarter end was NOK 64.2 (41.8) million. The change in profit is mainly due to increased net interest income and reduced negative profit effects from value changes on financial instruments.

Net interest income by third quarter were NOK 85.1 (74.2) million. The change is primarily related to increased interest rates and a somewhat higher lending volume. Lending margins have on average been at the same level as in the same period last year.

Net income effects of financial instruments so far this year amounts to NOK -4.2 (-16.8) million. This mainly comprises reduced market values on liquid investments and costs for covered bond refinancing. Realized and unrealized increase in value of the company’s liquid investments has so far this year had a P&L effect of NOK 1.7 (-10.8) million. Restructuring of the covered bond portfolio are done regularly to adjust average duration. This may cause both loss and gain. Accounting loss brought to book caused by covered bond refinancing is NOK -5.9 (-6.0) so far this year.

Operating expenses by third quarter amounted to -16.7 (-15.6) million. The Company has not had any losses on loans, and very low loss provisions are recognized in the income statement.

Lending

The Company's customer lending as of 30 September 2023 amounted to NOK 19.4 (18.7) billion. The Company's borrowers are municipalities, county municipalities and local government enterprises with by municipal guarantees.

Liquid investments

KLP Kommunekreditt AS has strict rules on what assets may be included in the securities holdings. In addition to public sector loans, the securities holdings comprise secure bonds as well as deposits in other banks. The securities comprise certificates and bonds of high credit quality, principally investments in covered bonds. As of 30 September 2023, the Company’s securities portfolio had a market value of NOK 1.5 (2.1) billion.

Borrowing

The Company's borrowing comprise covered bonds (OMF) as well as borrowing from KLP Banken AS. So far this year new covered bond issues amounts to NOK 6.0 (3.0) billion and net repurchase of previous issues was NOK 6.4 (2.7) billion. All covered bonds have achieved Aaa rating.

Risk and capital adequacy

KLP Kommunekreditt AS has established a framework for risk management aimed at ensuring that risks are identified, analyzed and subject to management using policies, limits, procedures, and instructions. The Company is to have a prudent risk profile and earnings are to be principally a result of the borrowing and lending activity as well as liquidity management. This means that the Company is to have low market risk. Interest risk arising within the borrowing and lending activities are reduced using derivatives. The Company is to have sufficient long-term financing within set limits. The credit risk in the Company is low and lending is limited to local government risk. Management of the Company's liquidity is conducted through investments in banks satisfying high credit quality requirements.

At the end of third quarter 2023, core capital in accordance with the capital adequacy rules were NOK 879 (756) million. Loans to municipalities and county administrations are risk-weighted 20 percent in accordance with the authorities' capital adequacy regulations. KLP Kommunekreditt AS had a core capital adequacy and capital adequacy ratio 20.4 (18.2) percent at the end of third quarter. The minimum statutory requirement is 16.0 percent capital adequacy ratio. Leverage ratio was 4.1 (3.6) percent. The minimum statutory requirement is 3.0 percent.

Signatures of the Board of Directors: Aage E. Schaanning, Janicke E. Falkenberg, Aud Norunn Strand, Jonas V. Kårstad, Carl Steinar Louis

Income statementKLP Kommunekreditt AS

NOTE	NOK THOUSANDS	Q3 2023	Q3 2022	01.01.2023 -30.09.2023	01.01.2022 -30.09.2022	01.01.2022 -31.12.2022
	Interest income, effective interest method	244 185	120 766	632 287	286 244	463 028
	Other interest income	52 167	20 866	154 815	50 748	98 981
3	Total interest income	296 351	141 633	787 102	336 992	562 009
	Interest expense, effective interest method	-234 813	-102 611	-624 529	-234 710	-404 952
	Other interest expenses	-28 237	-9 869	-77 465	-28 103	-49 451
3	Total interest costs	-263 050	-112 480	-701 994	-262 813	-454 403
3	Net interest income	33 301	29 153	85 108	74 178	107 606
17	Net gain/(loss) on financial instruments	1 486	-3 321	-4 201	-16 804	-10 751
	Total net gain/(loss) on financial instruments	1 486	-3 321	-4 201	-16 804	-10 751
	Other operating expenses	-5 971	-5 584	-16 663	-15 597	-20 725
18	Net loan losses	3	-1	0	-5	-8
	Total operating expenses	-5 969	-5 585	-16 663	-15 602	-20 733
	Operating profit/loss before tax	28 818	20 247	64 245	41 772	76 122
	Tax ordinary income	-6 340	-4 454	5 594	-6 214	-13 771
	Profit for the period	22 478	15 793	69 839	35 558	62 351
	Other comprehensive income for the period	0	0	0	0	0
	Comprehensive income for the period	22 478	15 793	69 839	35 558	62 351

BalanceKLP Kommunekreditt AS

NOTE	NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
	ASSETS
5	Loans to credit institutions	662 148	313 996	547 868
4,5	Loans to customers	19 370 631	18 717 589	19 117 097
5,6,15	Fixed-income securities	1 456 806	2 090 323	2 724 070
5,6	Financial derivatives	140 773	117 792	138 897
12	Other assets	3 296	6 036	20 092
	Total assets	21 633 654	21 245 736	22 548 024
	LIABILITIES AND OWNERS EQUITY
	LIABILITIES
5,9	Debt to credit institutions	1 107 225	1 506 565	1 707 544
5,7	Debt securities issued	19 412 910	18 806 433	19 783 028
5,6	Financial derivatives	40 651	32 927	25 939
	Deferred tax liabilities	2 129	5 110	21 857
13	Other liabilities	120 137	101 038	109 527
13	Provision for accrued costs and liabilities	389	354	28
	Total liabilities	20 683 441	20 452 427	21 647 922
	EQUITY
	Share capital	391 500	362 500	391 500
	Share premium	363 500	312 500	363 500
	Other owners' equity	125 374	82 751	145 102
	Unallocated profit/loss	69 839	35 558	0
	Total owners' equity	950 213	793 309	900 102
	Total liabilities and equity	21 633 654	21 245 736	22 548 024

Statement of changes in equityKLP Kommunekreditt AS

2023 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners' equity
Equity 1 January 2023	391 500	363 500	145 102	900 102
Profit for the period	0	0	69 839	69 839
Other comprehensive income	0	0	0	0
Total comprehensive income for the period	0	0	69 839	69 839
Group contribution received	0	0	69 944	69 944
Group contribution made	0	0	-89 671	-89 671
Total transactions with the owners	0	0	-19 728	-19 728
Equity 30 September 2023	391 500	363 500	195 213	950 213

2022 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners' equity
Equity 1 January 2022	362 500	312 500	85 727	760 727
Profit for the period	0	0	35 558	35 558
Other comprehensive income	0	0	0	0
Total comprehensive income for the period	0	0	35 558	35 558
Group contribution received	0	0	10 551	10 551
Group contribution made	0	0	-13 527	-13 527
Total transactions with the owners	0	0	-2 976	-2 976
Equity 30 September 2022	362 500	312 500	118 309	793 309

2022 NOK THOUSANDS	Share capital	Share premium	Other equity	Total owners' equity
Equity 1 January 2022	362 500	312 500	85 727	760 727
Income for the year	0	0	62 351	62 351
Other comprehensive income	0	0	0	0
Total comprehensive income for the period	0	0	62 351	62 351
Group contribution received	0	0	10 551	10 551
Group contribution made	0	0	-13 527	-13 527
Owners' equity received during the period	29 000	51 000	0	80 000
Total transactions with the owners	29 000	51 000	-2 976	77 024
Equity 31 December 2022	391 500	363 500	145 102	900 102

Statement of cash flowKLP Kommunekreditt AS

NOK THOUSANDS	01.01.2023 -30.09.2023	01.01.2022 -30.09.2022	01.01.2022 -31.12.2022
OPERATIONAL ACTIVITIES
Payments received from customers - interest, commission & charges	517 652	223 996	381 107
Disbursements on loans customers & credit institutions	-851 278	-1 614 362	-2 481 139
Receipts on loans customers & credit institutions	682 332	710 846	1 198 315
Disbursements on operations	-17 263	-18 466	-22 801
Net receipts/disbursements from operating activities	4 713	57 722	79 152
Interest from credit institutions	8 505	2 975	9 273
Net cash flow from operating activities	344 660	-637 288	-836 092
INVESTMENT ACTIVITIES
Payments on the purchase of securities	-301 239	-954 253	-2 084 060
Receipts on sale of securities	1 566 175	522 177	1 030 010
Receipts of interest from securities	60 820	20 637	36 175
Net cash flow from investment activities	1 325 757	-411 439	-1 017 875
FINANCING ACTIVITIES
Receipts on loans from credit institutions	6 000 000	3 000 000	4 200 000
Repayments and redemption of securities debt	-5 000 000	-3 008 000	-3 008 000
Change in securities debt, own funds	-1 378 494	251 605	-52 701
Net payment of interest on loans credit institions	-498 257	-203 474	-325 316
Receipts in internal funding	1 205 000	1 100 000	3 005 000
Disbursements in internal funding	-1 805 000	-350 000	-2 055 000
Net payment of interest on internal funding	-54 727	-5 641	-14 887
Payment on group contribution	-19 728	-2 976	-2 976
Change in owners' equity	0	0	80 000
Net cash flows from financing activities	-1 551 206	781 514	1 826 120
Net cash flow during the period	119 211	-267 213	-27 847
Cash and cash equivalents at the start of the period	525 685	553 531	553 531
Cash and cash equivalents at the end of the period	644 895	286 318	525 685
Net receipts/disbursements	119 211	-267 213	-27 847

Notes to the financial statementKLP Kommunekreditt AS

Note 1 General information

KLP Kommunekreditt AS was formed on 25August 2009. The company is a credit enterprise that provides or acquires public sector loans that are guaranteed by the Norwegian municipalities. Borrowers provide surety covering both repayments and interest.

The object of the Company is primarily to finance activities by issuing covered bonds with security in public sector guarantees loans. Parts of these loans are listed on Oslo Børs (Stock Exchange).

KLP Kommunekreditt AS is registered and domiciled in Norway. It's head office is at Beddingen 8 in Trondheim, and the company has a branch office in Dronning Eufemiasgate 10 in Oslo.

The company is a wholly owned subsidiary of KLP Banken AS which is in turn wholly-owned by Kommunal Landspensjonskasse (KLP). KLP is a mutual insurance company.

Note 2 Accounting principles

The interim report includes the interim Financial Statements of KLP Kommunekreditt AS for the period 1 January 2023 – 30 September 2023, with a specification of the results in the Q3. 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	Q3 2023	Q3 2022	01.01.2023 -30.09.2023	01.01.2022 -30.09.2022	01.01.2022 -31.12.2022
Interest income on loans to customers	238 809	118 712	620 249	281 841	453 754
Interest income on loans to credit institutions	5 376	2 054	12 038	4 403	9 273
Total interest income, effective interest method	244 185	120 766	632 287	286 244	463 028
Interest income on bonds and certificates	18 118	10 155	58 833	23 522	45 009
Other interest income	34 049	10 712	95 983	27 226	53 973
Total other interest income	52 167	20 866	154 815	50 748	98 981
Total interest income	296 351	141 633	787 102	336 992	562 009
Interest expenses on debt from KLP Banken AS	-20 862	-4 532	-54 407	-7 038	-17 264
Interest expenses on issued securities	-213 951	-98 079	-570 122	-227 672	-387 688
Total interest expenses, effective interest method	-234 813	-102 611	-624 529	-234 710	-404 952
Other interest expenses	-28 237	-9 869	-77 465	-28 103	-49 451
Total other interest expenses	-28 237	-9 869	-77 465	-28 103	-49 451
Total interest expenses	-263 050	-112 480	-701 994	-262 813	-454 403
Net interest income	33 301	29 153	85 108	74 178	107 606

Note 4 Loans to customers

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
Loans to customers before write-downs	19 283 503	18 738 687	19 101 791
Write-downs steps 1 and 2	-184	-181	-184
Loans to customers after write-downs	19 283 320	18 738 505	19 101 607
Accrued interest	216 136	98 737	113 540
Fair value hedging	-128 825	-119 654	-98 049
Loans to customers	19 370 631	18 717 589	19 117 097

All lending comprises loans to, or loans guaranteed by, Norwegian municipalities and county administrations, including loans to local government enterprises and intermunicipal (public sector lending). Guarantees are of the ordinary surety type covering both repayments and interest.

Note 5 Categories of financial instruments

NOK THOUSANDS	30.09.2023		30.09.2022		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	1 456 806	1 456 806	2 090 323	2 090 323	2 724 070	2 724 070
Financial derivatives	140 773	140 773	117 792	117 792	138 897	138 897
Total financial assets at fair value through profit and loss	1 597 579	1 597 579	2 208 115	2 208 115	2 862 967	2 862 967
FINANCIAL ASSETS FAIR VALUE HEDGING
Lending to Norwegian municipalities	1 493 349	1 503 950	1 679 957	1 687 999	1 702 745	1 706 638
Total financial assets fair value hedging	1 493 349	1 503 950	1 679 957	1 687 999	1 702 745	1 706 638
FINANCIAL ASSETS AT AMORTIZED COST
Loans to and receivables from credit institutions	662 148	662 148	313 996	313 996	547 868	547 868
Lending to Norwegian municipalities	17 877 282	17 877 282	17 037 632	17 037 632	17 414 352	17 414 352
Total financial assets at amortized cost	18 539 430	18 539 430	17 351 628	17 351 628	17 962 220	17 962 220
Total financial assets	21 630 358	21 640 959	21 239 700	21 247 742	22 527 932	22 531 825
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial derivatives	40 651	40 651	32 927	32 927	25 939	25 939
Total financial liabilities at fair value through profit and loss	40 651	40 651	32 927	32 927	25 939	25 939
FINANCIAL LIABILITIES FAIR VALUE HEDGING
Covered bonds issued	1 687 674	1 689 332	471 324	470 232	1 728 703	1 745 090
Total financial liabilities fair value hedging	1 687 674	1 689 332	471 324	470 232	1 728 703	1 745 090
FINANCIAL LIABILITIES AT AMORTIZED COST
Liabilities to credit institutions	1 107 225	1 107 225	1 506 565	1 506 565	1 707 544	1 707 544
Covered bonds issued	17 725 235	17 738 289	18 335 108	18 273 698	18 054 324	18 048 197
Total financial liabilities at amortized cost	18 832 460	18 845 514	19 841 673	19 780 263	19 761 869	19 755 741
Total financial liabilities	20 560 785	20 575 496	20 345 925	20 283 422	21 516 511	21 526 770

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 generally priced using 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 saving banks, municipalities and energy. Saving 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.

Fair value of loans to Norwegian local administrations

Fair value of lending without fixed interest rates is considered virtually the same as book value since the contract terms are continuously changed in step with market interest rates. Fair value of fixed rate loans is calculated by discounting contractual cash flows by the marked rate including a relevant risk margin on the reporting date. This is valued in Level 2 in the valuation hierarchy, cf. note 6.

Fair value of loans to and receivables from credit institutions

All receivables from credit institutions (bank deposits) are at variable interest rates. Fair value of these is considered virtually the same as book value since the contract terms are continuously changed in step with marked interest rates. This is valued in Level 2 in the valuation hierarchy, cf. note 6.

Fair value of liabilities to credit institutions

These transactions are valued using a valuation model, including relevant credit spread adjustments obtained from the market. This is valued in Level 2 in the valuation hierarchy, cf. note 6.

Liabilities created on issuance of covered bonds

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

30.09.2023 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	99 148	1 357 658	0	1 456 806
Financial derivatives	0	140 773	0	140 773
Total assets at fair value	99 148	1 498 430	0	1 597 579
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	40 651	0	40 651
Total financial liabilities at fair value	0	40 651	0	40 651

30.09.2022 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	99 496	1 990 828	0	2 090 323
Financial derivatives	0	117 792	0	117 792
Total assets at fair value	99 496	2 108 620	0	2 208 115
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)	0	32 927	0	32 927
Total financial liabilities at fair value	0	32 927	0	32 927

31.12.2022 NOK THOUSANDS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities	99 435	2 624 635	0	2 724 070
Financial derivatives	0	138 897	0	138 897
Total assets at fair value	99 435	2 763 533	0	2 862 967
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

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. 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	30.09.2023	30.09.2022	31.12.2022
Bond debt, nominal amount	21 700 000	19 500 000	20 700 000
Adjustments	-69 335	-29 018	12 429
Accrued interest	179 244	62 450	102 599
Own holdings, nominal amount	-2 397 000	-727 000	-1 032 000
Total debt securities issued	19 412 910	18 806 433	19 783 028
Interest rate on borrowings through the issuance of securities on the reporting date:	5.01 %	2.58 %	3.60%
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 adjustments	Balance sheet 30.09.2023
Bond debt, nominal amount	20 700 000	6 000 000	-5 000 000	0	21 700 000
Adjustments	12 429	0	0	-81 764	-69 335
Accrued interest	102 599	0	0	76 646	179 244
Own holdings, nominal amount	-1 032 000	0	-1 365 000	0	-2 397 000
Total debt securities issued	19 783 028	6 000 000	-6 365 000	-5 118	19 412 910

Note 8 Over-collateralisation

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
SECURITY POOL
Loans to customers	19 385 835	18 725 829	19 132 889
Financial derivatives (net)	100 044	84 821	112 913
Additional collateral ¹	4 188 048	2 791 650	3 974 463
Total security pool	23 673 927	21 602 301	23 220 266
Outstanding covered bonds incl. own funds and premium/discount	21 841 922	19 474 543	20 832 669
Coverage of the security pool	108.4 %	110.9 %	111.5 %
¹ Additional collateral includes loans and receivables from credit institutions and bonds and certificates. Liquidity reserve are not included in additional collateral.
Section 11-7 of the Regulations on Financial Institutions lays down a requirement for over-collateralisation by at least 2 percent of the value of the outstanding covered bonds.

Note 9 Liabilities to credit institutions

The interest rate is calculated as a weighted average of the act/360 basis.
30.09.2023 NOK THOUSANDS
	Due date	Nominal	Accrued interest	Book value
Debt to KLP Banken AS	16.12.2024	1 105 000	2 225	1 107 225
Total liabilities to credit institutions		1 105 000	2 225	1 107 225
Interest rate on debt to credit institutions at the reporting date:				4.53 %

The interest rate is calculated as a weighted average of the act/360 basis.
30.09.2022 NOK THOUSANDS
	Due date	Nominal	Accrued interest	Book value
Debt to KLP Banken AS	15.12.2023	150 000	156	150 156
Debt to KLP Banken AS	15.12.2023	400 000	416	400 416
Debt to KLP Banken AS	15.12.2023	200 000	208	200 208
Debt to KLP Banken AS	15.12.2023	505 000	525	505 525
Debt to KLP Banken AS	15.12.2023	50 000	52	50 052
Debt to KLP Banken AS	15.12.2023	200 000	208	200 208
Total liabilities to credit institutions		1 505 000	1 565	1 506 565
Interest rate on debt to credit institutions at the reporting date:				2.34 %

The interest rate is calculated as a weighted average of the act/360 basis.
31.12.2022 NOK THOUSANDS
	Due date	Nominal	Accrued interest	Book value
Debt to KLP Banken AS	15.12.2023	1 705 000	2 544	1 707 544
Total liabilities to credit institutions		1 705 000	2 544	1 707 544
Interest rate on debt to credit institutions at the reporting date:				3.16 %

Note 10 Financial assets and liabilities subject to net settlement

30.09.2023 NOK THOUSANDS				Related sums that are not presented net
	Gross financial assets/ liabilites	Gross assets/ liabilites presented net	Book value	Financial instruments	Security in cash	Net recognised value
ASSETS
Financial derivatives	140 773	0	140 773	-40 651	-104 349	17 441
Total	140 773	0	140 773	-40 651	-104 349	17 441
LIABILITIES
Financial derivatives	40 651	0	40 651	-40 651	0	0
Total	40 651	0	40 651	-40 651	0	0

30.09.2022 NOK THOUSANDS				Related sums that are not presented net
	Gross financial assets/ liabilites	Gross assets/ liabilites presented net	Book value	Financial instruments	Security in cash	Net recognised value
ASSETS
Financial derivatives	117 792	0	117 792	-32 927	0	84 865
Total	117 792	0	117 792	-32 927	0	84 865
LIABILITIES
Financial derivatives	32 927	0	32 927	-32 927	0	0
Total	32 927	0	32 927	-32 927	0	0

The purpose of the note is to show the potential effect of netting agreements at the KLP Kommunekreditt AS. The note shows derivative positions in the financial statement.
31.12.2022 NOK THOUSANDS				Related sums that are not presented net
	Gross financial assets/ liabilites	Gross assets/ liabilites presented net	Book value	Financial instruments	Security in cash	Net recognised value
ASSETS
Financial derivatives	138 897	0	138 897	-25 939	0	112 959
Total	138 897	0	138 897	-25 939	0	112 959
LIABILITIES
Financial derivatives	25 939	0	25 939	-25 939	0	0
Total	25 939	0	25 939	-25 939	0	0

Note 11 Transactions with related parties

NOK THOUSANDS	01.01.2023 -30.09.2023	01.01.2022 -30.09.2022	01.01.2022 -31.12.2022
KLP Banken AS, interest on borrowing	-54 407	-7 038	-17 264
KLP Banken AS, interest on deposits	6 089	2 490	4 177
KLP Banken AS, administrative services (at cost)	-10 008	-9 518	-13 116
KLP Kapitalforvaltning AS, fees for services provided	0	0	-74

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
BALANCES
KLP Banken AS, debt to credit institutions	-1 107 225	-1 506 565	-1 707 544
KLP Banken AS, deposit	211 320	203 544	205 231
KLP Banken AS, loan settlement	2 430	5 242	20 092
Net outstanding accounts to:
KLP Banken AS	-1 302	-1 110	-1 402

There are no direct salary cost in KLP Kommunekreditt AS. Personnel costs (administrative services) are allocated from KLP Banken AS.

Transactions with related parties are carried out on general market terms, with the exception of the Company's share of common functions, which is allocated at cost. Allocation is based on actual use. All internal receivables are settled as they arise.

Note 12 Other assets

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
Intercompany receivables	2 430	5 242	20 092
Prepaid expenses	866	794	0
Total other assets	3 296	6 036	20 092

Note 13 Other liabilities and provision for accrued costs

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
Creditors	1	0	25
Intercompany payables	1 302	1 110	1 402
Short-term balances with credit institutions	104 700	90 600	108 100
Other liabilities	14 134	9 328	0
Total other liabilities	120 137	101 038	109 527
VAT	389	354	28
Total accrued costs and liabilities	389	354	28

Note 14 Capital adequacy

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
Share capital and share premium fund	755 000	675 000	755 000
Other owners' equity	125 374	82 751	145 102
Total owners' equity	880 374	757 751	900 102
Adjustments due to requirements for proper valuation	-1 457	-2 090	-2 724
Core capital/Tier 1 capital	878 917	755 660	897 378
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)	878 917	755 660	897 378
Capital requirement	345 157	332 841	353 621
Surplus of own funds (Tier 1 and Tier 2 capital)	533 760	422 819	543 756
ESTIMATE BASIS CREDIT RISK:
Institutions	161 140	87 406	141 371
Local and regional authorities	3 916 156	3 825 005	3 963 118
Covered bonds	116 139	160 190	194 389
Other items	515	794	0
Calculation basis credit risk	4 193 950	4 073 394	4 298 878
Credit risk	335 516	325 872	343 910
Operating risk	9 432	6 826	9 432
Credit valuation adjustment (CVA)	209	144	280
Total capital requirement assets	345 157	332 841	353 621
Core capital adequacy ratio	20.4 %	18.2 %	20.3 %
Supplementary capital ratio	0.0 %	0.0 %	0.0 %
Capital adequacy ratio	20.4 %	18.2 %	20.3 %
Leverage ratio	4.1 %	3.6 %	4.0 %

CAPITAL REQUIREMENT PER 30.09.2023	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 %
Current capital requirement incl. buffers	12.5 %	3.5 %	16.0 %
Capital requirement leverage ratio	3.0 %	0.0 %	3.0 %

Note 15 Fixed-income securities

NOK THOUSANDS	30.09.2023		30.09.2022		31.12.2022
	Acquisition cost	Market value	Acquisition cost	Market value	Acquisition cost	Market value
Certificates	99 013	99 148	80 037	80 185	392 669	395 773
Bonds	1 357 140	1 357 658	2 019 917	2 010 139	2 328 552	2 328 297
Total fixed-income securities	1 456 153	1 456 806	2 099 954	2 090 323	2 721 221	2 724 070
Fixed income securities are brought to account at market value, including accrued but not due interests.

Note 16 Contingent liabilites

NOK THOUSANDS	30.09.2023	30.09.2022	31.12.2022
Loan commitment	27 750	37 012	35 491
Total contingent liabilities	27 750	37 012	35 491

Note 17 Net gain/(loss) on financial instruments

NOK THOUSANDS	Q3 2023	Q3 2022	01.01.2023 -30.09.2023	01.01.2022 -30.09.2022	01.01.2022 -31.12.2022
Net gain/(loss) on fixed-income securities	3 443	-2 753	1 747	-10 833	-4 379
Net gain/(loss) financial derivatives and realized amortization linked to lending	0	5	0	5	5
Net gain/(loss) financial derivatives and realized repurchase of own debt	-1 957	-572	-5 947	-5 976	-6 377
Total net gain/(loss) on financial instruments	1 485	-3 321	-4 201	-16 804	-10 751

Note 18 Loan loss provision

Changes in provisions for expected losses in third quarter 2023 are related to changes in lending volume. No other changes have been made to the assumptions or input to the model for calculating loss provisions in the third quarter of 2023. Refer to Note 8 and Note 2 in the annual report for more details of the model.

NOK THOUSANDS	12-month ECL stage 1	Lifetime ECL not credit impaired stage 2	Lifetime ECL credit impaired stage 3	Total
EXPECTED CREDIT LOSS (ECL) - LOANS TO CUSTOMERS - PUBLIC LENDING
Opening balance ECL 01.01.2023	184	0	0	184
Transfers to stage 1	0	0	0	0
Transfers to stage 2	0	0	0	0
Transfers to stage 3	0	0	0	0
Net changes	-8	0	0	-8
New losses	23	0	0	23
Write-offs	-15	0	0	-15
Closing balance ECL 30.09.2023	184	0	0	184
Changes (01.01.2023-30.09.2023)	0	0	0	0

NOK THOUSANDS	12-month ECL stage 1	Lifetime ECL not credit impaired stage 2	Lifetime ECL credit impaired stage 3	Total
VALUE OF LENDING AND RECEIVABLES FOR CUSTOMERS RECOGNISED IN THE BALANCE SHEET - PUBLIC LENDING
Lending 01.01.2023	19 215 331	0	0	19 215 331
Transfers to stage 1	0	0	0	0
Transfers to stage 2	0	0	0	0
Transfers to stage 3	0	0	0	0
Net changes	-625 884	0	0	-625 884
New lending	2 436 384	0	0	2 436 384
Write-offs	-1 526 191	0	0	-1 526 191
Lending 30.09.2023	19 499 640	0	0	19 499 640

Quarterly earnings trend

NOK MILLIONS	Q3 2023	Q2 2023	Q1 2023	Q4 2022	Q3 2022
Interest income	296.4	255.4	235.3	225.0	141.6
Interest expense	-263.1	-229.0	-210.0	-191.6	-112.5
Net interest income	33.3	26.5	25.3	33.4	29.2
Net gain/(loss) financial instruments	1.5	-3.2	-2.5	6.1	-3.3
Total net gain/(loss) on financial instruments	1.5	-3.2	-2.5	6.1	-3.3
Other operating expenses	-6.0	-5.7	-5.0	-5.1	-5.6
Total operating expenses	-6.0	-5.7	-5.0	-5.1	-5.6
Operating profit/loss before tax	28.8	17.6	17.8	34.4	20.2
Tax ordinary income	-6.3	-3.9	15.8	-7.6	-4.5
Profit for the period	22.5	13.7	33.6	26.8	15.8

Key figures - accumulated

NOK MILLIONS	Q3 2023	Q2 2023	Q1 2023	Q4 2022	Q3 2022
Pre-tax income	64.2	35.4	17.8	76.1	41.8
Net interest income	85.1	51.8	25.3	107.6	74.2
Other operating income	0.0	0.0	0.0	0.0	0.0
Other operating cost	-16.7	-10.7	-5.0	-20.7	-15.6
Net gain/(loss) financial instruments	-4.2	-5.7	-2.5	-10.8	-16.8
Lending with public sector guarantee	19 370.6	19 449.1	19 384.1	19 117.1	18 717.6
Non-performing loans	0.0	0.0	0.0	0.0	0.0
Total liabilities created on issuance of securities	19 412.9	18 555.2	18 474.4	19 783.0	18 806.4
Other borrowing	1 107.2	2 309.0	2 313.1	1 707.5	1 506.6
Total assets	21 633.7	21 948.7	21 843.2	22 548.0	21 245.7
Average total assets	22 090.8	22 248.4	22 195.6	21 336.9	20 685.7
Equity	950.2	927.7	914.0	900.1	793.3
Interest net	0.39 %	0.23 %	0.11 %	0.50 %	0.36 %
Profit/loss from ordinary operation before taxes	0.29 %	0.16 %	0.08 %	0.36 %	0.20 %
Return on equity	9.52 %	7.87 %	7.93 %	8.46 %	7.32 %
Capital adequacy ratio	20.4 %	20.2 %	20.4 %	20.3 %	18.2 %
Liquidity coverage ratio (LCR)	1 034 %	2 158 %	2 827 %	2 174 %	4 278 %

Contact information

KLP KOMMUNEKREDITT AS

Beddingen 8, 7042 Trondheim
Organization no.: 912 719 634

VISITOR ADDRESS

Trondheim: Beddingen 8
Oslo: Dronning Eufemias gate 10

https://www.klp.no/en

Phone number: +47 55 54 85 00

klpkommunekreditt@klp.no

Q3 Interim Report 2023KLP Kommunekreditt AS