Interim report
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Íslandsbanki Condensed Consolidated Interim Financial Statements Third quarter 2026 Unaudited Íslandsbanki hf. • Hagasmári 3 • 201 Kópavogur • Iceland • Reg.no. 491008-0160
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Contents 3 4 - 6 7 8 9 10 - 11 12 - 13 14 - 48 Notes to the Condensed Consolidated Interim Financial Statements ........................................................ Factsheet .................................................................................................................................................... Directors' Report ......................................................................................................................................... Consolidated Interim Income Statement .................................................................................................... Consolidated Interim Statement of Comprehensive Income ...................................................................... Consolidated Interim Statement of Cash Flows ......................................................................................... Consolidated Interim Statement of Changes in Equity ............................................................................... Consolidated Interim Statement of Financial Position ................................................................................
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Profit after tax (ISKm) Loans to customers (Sector split as of 30.9.26) Cost-to-income ratio1 Loans to customers (ISKbn) Factsheet Total assets (ISKbn) Liquidity coverage ratio Leverageratio2 Total capital ratio2 The information above has not been reviewed or audited by the Group's auditor. 1. C/I ratio for 4Q25 excludes salary expenses of ISK 804m due to early retirement of employees and income of ISK 237m withinnet interest income (ISK 550m reversed from charge in 3Q25 due to provision for legal proceedings and a charge of ISK 313m due to correction from previous years). C/I ratio for 3Q25 excludes a charge of ISK 550m within net interest income due to a provision for legal proceedings. 2. Including 3Q26 profit for 30.9.26, 1Q26 profit for 31.3.26 and 3Q25 profit for 30.9.25. Key figures 9M 2026 Return on equity Net profit ISK 21.8bn ROE 13.4% Cost-to-income ratio 39.9% NIM 3.6% Ratings and certifications A3 Stable outlook ISK 1,431bn A3Exceptional ESG risk rating 12.2% 10.5% 13.6% 13.3% 13.6% 3Q25 4Q25 1Q26 2Q26 3Q26 6,901 5,947 7,456 7,069 7,269 3Q25 4Q25 1Q26 2Q26 3Q26 38.2% 43.5% 38.5% 43.1% 38.4% 3Q25 4Q25 1Q26 2Q26 3Q26 1,734 1,728 1,787 1,788 1,819 62.5% 59.8% 58.7% 58.4% 57.8% 30.9.25 31.12.25 31.3.26 30.6.26 30.9.26 REA / total assets 1,333 1,367 1,401 1,416 1,431 132% 141% 138% 136% 133% 30.9.25 31.12.25 31.3.26 30.6.26 30.9.26 Customer loans / customer deposits ratio Mortgages to individuals 44% Other loans to individuals 5%Seafood 6% Commerce and services 16% Real estate 9% Industrial and transportation 6% Construction 7% Other 7% 207% 203% 177% 188% 179% 129% 127% 123% 126% 122% 30.9.25 31.12.25 31.3.26 30.6.26 30.9.26 Net stable funding ratio (NSFR) 11.9% 12.5% 11.5% 11.7% 10.9% 30.9.25 31.12.25 31.3.26 30.6.26 30.9.26 21.9% 24.0% 22.5% 23.0% 21.8% 18.9% 20.1% 18.6% 19.1% 18.4% 30.9.25 31.12.25 31.3.26 30.6.26 30.9.26 CET1 ratio BBB+/A-2 Positive outlook Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 3
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Directors' Report The Board of Directors and the CEO of Íslandsbanki hf. ("the Bank" or "Íslandsbanki") present this report together with the Condensed Consolidated Interim Financial Statements of Íslandsbanki hf. and its subsidiaries (together referred to as "the Group") for the period 1 January to 30 September 2026. Íslandsbanki is a customer-centric universal bank offering comprehensive financial services to individuals, corporations, and institutional investors in Iceland through various channels, including 12 branches . The Group seeks to move Iceland forward by empowering its customers to succeed and prioritising sustainability as an integral driver of its strategy and value creation. The Group is a force for good, with its corporate vision to create value for the future through excellent service, ultimately enhancing the financial health of its customers. Key operating highlights for the first nine months of 2026 The Bank remains committed to its strategy of empowering its customers to be a force for good, with special emphasis on financial health. Against that backdrop, the Bank introduced a new loyalty service, designed to differentiate between customers based on the number of products held and the scope of their relationship with the Bank. Since its launch, the loyalty service has been well received, with strong customer adoption. Additionally, the Bank has introduced various new products and digital solutions, including in the acquiring space. At the beginning of the year, the Bank introduced a new variable compensation scheme, applicable to all employees as permitted under Icelandic law. The scheme is contingent on the Group's return on equity. Under the scheme, most employees can receive up to 10% of their annual salary as variable compensation. Furthermore, a limited number of employees who have the most influence on the Bank's performance and strategic execution are eligible for higher variable compensation of up to 25% of their annual salary, which is also contingent upon the achievement of various predefined financial and non-financial performance metrics. In April, the Bank announced organisational changes, with the objective of simplifying the governance structure, shortening communication channels, and thereby enhancing the Bank's service to its customers and reinforcing continued growth and development. As part of these organisational changes, the number of senior managers will be reduced by 15% in 2026, and the number of executive directors b y 20%. In total, the number of FTEs will decrease by 50 over the course of the year, including reductions related to the dismantling of the early retirement scheme in the fourth quarter of 2025, as well as efficiency gains from increased automation and the use of artificial intelligence, representing a 7% reduction in FTEs from year-end 2025. The Bank estimates that the changes will positively impact salaries and related expenses by around ISK 1 billion annually, which will be fully realised in 2027. Operating income improved compared to the previous year The Group's profit for the reporting period amounted to ISK 21, 794 million, compared to ISK 19,302 million in the same period of the previous year. This corresponds to a return on equity of 13.4% and 11.5%, respectively. For the third quarter, profit amounted to ISK 7,269 million, compared with ISK 6,901 million in the same period of the previous year. As before, nearly all income consists of core income, defined as net interest income and net fee and commission income. Core income year-to-date grew by 16%. The year-to-date net interest margin was 3.6%, compared with 3.2% in the same period of the previous year. This is mainly attributable to higher inflation year-on-year in addition to strong margin control on both deposits and lending. Net interest income amounted to ISK 48,196 million, representing year- on-year growth of more than 20%. As in previous quarters, low turnover in capital markets had an adverse impact on the Group's net fee and commission income. As a result, net fee and commission income decreased by 1% year-to-date compared with the previous year. Salaries and related expenses amounted to ISK 13,860 million, increasing by ISK 1,166 million year-on-year. Thereof, around ISK 370 million is attributable to redundancies, while a further ISK 1,029 million relates to the variable employee remuneration scheme. Overall, the cost-to-income ratio was 39.9% compared to 42.1% in the same period of the previous year. At the end of the reporting period, the Group employed 754 full-time equivalents, 717 within the Bank and 37 in subsidiaries, excluding subsidiaries held for sale. Loan growth in line with through-the-cycle expectations and the capital position remains strong At the end of the reporting period, the Group's loan portfolio amounted to ISK 1,431 billion, having grown year-to-date by over 6% on an annual basis. The c omposition of the loan book is broadly comparable to that of previous years. Overall credit quality remains high , as 93% of the loan book is covered by collateral and LTVs remain low . The NPL ratio increased from 1.5% at the beginning of the year to 2.4% at the end of the reporting period, mainly due to borrower-specific circumstances. As a result, impairment charges amounted to ISK 2,694 million for the first nine months, compared with impairment reversals of ISK 406 million in the same period of the previous year. Deposits from customers have grown by 11.3% year-to-date, from ISK 969 billion at year-end 2025 to ISK 1,078 billion at the end of the reporting period. The Group's capital position remains strong. At the end of the reporting period , the Group's CET1 ratio was 18.4%, including half of the profit for the third quarter of 2026, in line with the Group's dividend policy. The Group received authorisation from the Central Bank for share buybacks totalling up to ISK 10 billion. The buybacks had not commenced at the reporting date. Overall, excess capital available for distributions and/or growth amounted to ISK 22.3 billion at the end of the reporting period, taking into account deducted but not yet completed buybacks and the profit for the third quarter of 2026, in line with the Group's dividend policy. Distributions during the first nine months of the year amounted to ISK 31.5 billion through an ordinary dividend and buybacks. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 4
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Directors' Report Operating results ahead of guidance Target for the medium term 3Q26 result YTD result Guidance for year-end 2026 Return on equity >13% 13.6% 13.4% >12.5% Cost-to-income ratio <43% 38.4% 39.9% 41-43% CET1 excess 100-300 bps 315 bps* 315 bps* ~300 bps Dividend payout ratio 50% 50% 50% 50% *Including half of the profit for the third quarter of 2026, in accordance with the dividend policy. Outlook for the Group Following a continued softening of the macroeconomic outlook throughout the year, rates are now expected to have peaked . Inflation is expected to remain elevated throughout the remainder of the year but to moderate next year. U ncertainty, however, remains high and relates to both domestic and international developments. Against this backdrop, domestic loan growth is expected to remain subdued, but the Group's overall loan growth is expected to be around mid-single digits for the year as a whole, as international lending continues to provide additional growth opportunities. Despite high interest rate margins year-to-date, margins are expected to be muted over the fourth quarter due to a lower seasonal inflationary impact. The Bank further notes that, although high inflation may support higher net interest income in the short term, asset quality may deteriorate over the long term as a result. There also remains uncertainty regarding capital market volumes and overall activity in investment banking services. The Bank maintains its market share and market position and is well positioned to benefit from a recovery in activity. In September, the Government announced plans to increase banking taxation. If the proposal is approved, the special bank tax rate will increase from the current rate of 0.145% to 0.254%. Based on the Bank's tax base as at 30 September 2026, the proposed tax increase would increase the Bank's special bank tax expense by ISK 1,671 million annually, or by approximately 75%. As the special bank tax is not deductible for income tax purposes, the increase would have a corresponding impact on the Bank's profit after tax, all else being equal. Taxation on Icelandic banks is currently among the highest in Europe, and further increases would adversely impact both the Group's profitability and competitiveness. The Bank's equity and liquidity positions remain strong and well in excess of both regulatory and internal requirements. Capital optimisation is expected to continue throughout the year, subject to market conditions and regulatory approvals. As before, the Bank may allocate capital towards growth and/or distributions through dividends or share buybacks. Ownership The shares of Íslandsbanki are listed on the Nasdaq Iceland stock exchange. The Bank has one of the largest shareholder bases among listed companies in Iceland. At the end of the reporting period, the Bank had 22,961 shareholders (year-end 2025: 25,302), with 90.8% of the Bank's shares owned by domestic parties and 9.2% by international investors. Pension funds are the largest investor group, holding 45.5% of outstanding shares, followed by retail investors with 28.7%, with both figures taking into consideration treasury shares. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 5
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Directors' Report Statement by the Board of Directors and the CEO The Condensed Consolidated Interim Financial Statements for the period 1 January to 30 September 2026 have been prepared on a going concern basis in accordance with the International Accounting Standard (IAS) 34 as adopted by the European Union and additional requirements in the Act on Annual Accounts, no. 3/2006; the Act on Financial Undertakings, no. 161/2002; and rules on accounting for credit institutions, where applicable. To the best of our knowledge, these Condensed Consolidated Interim Financial Statements provide a true and fair view of the Group's operating profits and cash flows in the reporting period and its financial position as of 30 September 2026. The Board of Directors and the CEO have today discussed and approved the Condensed Consolidated Interim Financial Statements for the period 1 January to 30 September 2026. K ópavogur, 29 October 2026 B oard of Directors: Heiðar Guðjónsson, Chairman Stefán Pétursson, Vice-Chairman Haukur Örn Birgisson Helga Hlín Hákonardóttir Margrét Pétursdóttir Stefán Sigurðsson Valgerður Hrund Skúladóttir C hief Executive Officer: Jón Guðni Ómarsson Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 6
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Notes 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 116,475 99,985 38,625 32,507 2,059 2,968 558 839 ( 70,338) ( 62,873) ( 23,368) ( 20,086) 5 48,196 40,080 15,815 13,260 14,330 14,312 4,815 4,706 ( 4,505) ( 4,396) ( 1,516) ( 1,477) 6 9,825 9,916 3,299 3,229 7 ( 530) ( 1,326) ( 223) ( 353) 8 595 270 171 152 9 37 718 22 124 102 ( 338) ( 30) ( 77) 58,123 49,658 19,084 16,412 10 ( 13,860) ( 12,694) ( 4,152) ( 3,793) 11 ( 9,353) ( 8,442) ( 3,171) ( 2,686) ( 1,667) ( 1,562) ( 573) ( 549) ( 24,880) ( 22,698) ( 7,896) ( 7,028) 33,243 26,960 11,188 9,384 12 ( 2,694) 406 ( 1,021) 7 30,549 27,366 10,167 9,391 13 ( 8,755) ( 8,064) ( 2,898) ( 2,490) 21,794 19,302 7,269 6,901 Earnings per share 14 12.80 10.33 4.39 3.73 12.79 10.33 4.38 3.73 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. Consolidated Interim Income Statement Other net operating income Fee and commission income .......................................................................... Interest income calculated using the effective interest rate method ................ Profit before tax Net impairment on financial assets ................................................................. Other interest income ..................................................................................... Fee and commission expense ........................................................................ Net fee and commission income Bank tax ......................................................................................................... Interest expense ............................................................................................. Net interest income Total operating expenses Profit before net impairment on financial assets Net financial expense ..................................................................................... Net foreign exchange gain .............................................................................. Other operating income .................................................................................. Salaries and related expenses ....................................................................... Other operating expenses .............................................................................. Total operating income Income tax expense ....................................................................................... Profit for the period Basic EPS attributable to shareholders of Íslandsbanki hf. (ISK) .................... Diluted EPS attributable to shareholders of Íslandsbanki hf. (ISK) ................. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 7 Amounts are in ISK million
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2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 21,794 19,302 7,269 6,901 ( 343) ( 620) 92 ( 132) 69 132 ( 18) 26 ( 274) ( 488) 74 ( 106) ( 6) - ( 3) - ( 1,425) 205 ( 274) 108 18 ( 3) - - 3 ( 2) ( 1) - 368 ( 52) 74 ( 28) ( 1,042) 148 ( 204) 80 ( 1,316) ( 340) ( 130) ( 26) 20,478 18,962 7,139 6,875 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. Items that may subsequently be reclassified to the income statement Tax related to net changes in FV of fin. liab. attrib. to changes in credit risk ... Net changes in FV of fin. liab. attributable to changes in credit risk ................ Other comprehensive expense for the period, net of tax Total comprehensive income for the period Foreign currency translation ........................................................................... Reclassification to the income statement of debt instruments at FVOCI ........ Changes in allowance for ECL of debt instruments at FVOCI ......................... Net changes in fair value of debt instruments at FVOCI ................................. Tax related to debt instruments at FVOCI ...................................................... Profit for the period ......................................................................................... Items that will not be reclassified to the income statement Consolidated Interim Statement of Comprehensive Income Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 8 Amounts are in ISK million
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Notes 30.9.2026 31.12.2025 19 88,676 80,394 20 78,121 80,009 15 172,452 151,959 21 2,662 5,304 22 1,431,038 1,367,106 15 11,755 20,517 24 34,759 22,858 1,819,463 1,728,147 25 21,429 13,250 26 1,078,259 968,695 21 8,181 6,183 28 423,013 444,593 29 36,459 40,315 14,868 12,757 30 21,861 16,995 1,604,070 1,502,788 8,273 8,900 26,380 42,472 5,715 7,201 175,025 166,786 215,393 225,359 1,819,463 1,728,147 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. Consolidated Interim Statement of Financial Position Cash and balances with Central Bank ............................................................. Assets Bonds and debt instruments ........................................................................... Loans to customers ......................................................................................... Derivatives ...................................................................................................... Loans to credit institutions ............................................................................... Total Liabilities and Equity Total Equity Share capital ................................................................................................... Share premium ............................................................................................... Reserves ......................................................................................................... Retained earnings ........................................................................................... Other assets* .................................................................................................. Derivative instruments and short positions ...................................................... Deposits from customers ................................................................................ Total Assets Deposits from Central Bank and credit institutions .......................................... *Comparative figures have been changed. In the context of materiality, the Group has determined that the line items "Investments in associates", "Investment property", "Property and equipment", and "Intangible assets" do not warrant separate presentation as line items in the Consolidated Interim Statement of Financial Position. Accordingly, these items have been reclassified and are now included within "Other assets". Other liabilities ................................................................................................ Debt issued and other borrowed funds ............................................................ Total Liabilities Liabilities Shares and equity instruments ........................................................................ Equity Tax liabilities ................................................................................................... Subordinated loans ......................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 9 Amounts are in ISK million
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Unrealised FV changes Reserve for Liability Foreign of financial Capitalised Unrealised debt credit currency Share Share Statutory assets in the development gains in instruments risk translation Retained Total capital premium reserve banking book cost associates at FVOCI reserve reserve earnings equity Equity as at 1 January 2025 9,473 55,000 2,500 2,829 1,067 648 192 ( 135) 1 155,780 227,355 Profit for the period ............................................................................. 19,302 19,302 Net changes in FV of fin. liab. due to changes in credit risk ................ ( 487) ( 133) ( 620) Tax on net changes in FV of fin. liab. due to changes in credit risk ..... 97 35 132 Foreign currency translation ............................................................... - Net changes in fair value of debt instruments at FVOCI ..................... 205 205 Reclassification to the income statement of debt inst. at FVOCI ........ ( 3) ( 3) Changes in allowance for ECL of debt instruments at FVOCI ............. ( 2) ( 2) Tax related to debt instruments at FVOCI ........................................... ( 52) ( 52) Total comprehensive income (expense) for the period - - - - - - 148 ( 390) - 19,204 18,962 Dividends ............................................................................................ ( 12,103) ( 12,103) Purchase of treasury shares ............................................................... ( 293) ( 6,989) ( 7,282) Reduction in share capital .................................................................. ( 12,528) ( 149) 12,677 - Share option charge ........................................................................... 42 42 Other changes to restricted reserves .................................................. ( 212) ( 219) 782 ( 351) - Equity as at 30 September 2025 9,180 42,472 2,351 2,617 848 1,430 340 ( 525) 1 168,260 226,974 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. Consolidated Interim Statement of Changes in Equity Reserves Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 10 Amounts are in ISK million
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Consolidated Interim Statement of Changes in Equity Unrealised FV changes Reserve for Liability Foreign of financial Capitalised Unrealised debt credit currency Share Share Statutory assets in the development gains in instruments risk translation Retained Total capital premium reserve banking book cost associates at FVOCI reserve reserve earnings equity Equity as at 1 January 2026 8,900 42,472 2,351 2,707 776 1,866 411 ( 913) 3 166,786 225,359 Profit for the period ............................................................................. 21,794 21,794 Net changes in FV of fin. liab. due to changes in credit risk ................ ( 343) ( 343) Tax on net changes in FV of fin. liab. due to changes in credit risk ..... 69 69 Foreign currency translation ............................................................... ( 6) ( 6) Net changes in fair value of debt instruments at FVOCI ..................... ( 1,425) ( 1,425) Reclassification to the income statement of debt inst. at FVOCI ........ 18 18 Changes in allowance for ECL of debt instruments at FVOCI ............. 3 3 Tax related to debt instruments at FVOCI ........................................... 368 368 Total comprehensive income (expense) for the period - - - - - - ( 1,036) ( 274) ( 6) 21,794 20,478 Dividends ............................................................................................ ( 12,604) ( 12,604) Purchase of treasury shares ............................................................... ( 659) ( 18,216) ( 18,875) Reduction in share capital .................................................................. ( 16,092) ( 159) 16,251 - Equity-settled incentive scheme charge .............................................. 53 53 Share option charge ........................................................................... 173 173 Share option exercised ....................................................................... 32 777 809 Other changes to restricted reserves .................................................. 3 ( 218) 204 11 - Equity as at 30 September 2026 8,273 26,380 2,192 2,710 558 2,070 ( 625) ( 1,187) ( 3) 175,025 215,393 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. The Bank's authorised and issued share capital at 30 September 2026 consisted of 1,753,175,393 ordinary shares (year-end 2025: 1,880,470,770) with a par value of ISK 5 each. The Annual General Meeting (AGM) for the 2025 operating year took place on 19 March 2026 where shareholders approved the Board's proposal to reduce the Bank's share capital by cancelling the Bank's own shares by ISK 636,476,885 nominal value, equivalent to 127,295,377 shares, from ISK 9,402,353,850 to ISK 8,765,876,965 nominal value. Reserves Upon derecognition (mainly repurchases) of financial liabilities designated at FVTPL, the amount accumulated in the liability credit risk reserve is transferred to retained earnings. In the first nine months of 2026, ISK 0 million (first nine months of 2025: negative ISK 98 million) was transferred to retained earnings upon the derecognition of financial liabilities designated at FVTPL. At the AGM, shareholders approved the Board's proposal to distribute dividends of ISK 12.6 billion, equivalent to ISK 7.28 per share (2025: ISK 6.46 per share). The dividends were paid on 8 April 2026. Íslandsbanki bought back 131.8 million own shares for ISK 18,875 million during the first nine months of 2026 (first nine months of 2025: 58.6 million own shares for ISK 7,282 million). As of 30 September 2026 the Bank owned 98.6 million own shares (year-end 2025: 100.5 million). Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 11 Amounts are in ISK million
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2026 2025 1.1-30.9 1.1-30.9 21,794 19,302 ( 36,387) ( 29,890) 17,327 48,379 103,131 97,493 ( 58,512) ( 44,149) 404 1,024 ( 1,292) ( 1,320) ( 6,526) ( 6,780) Net cash provided by operating activities 39,939 84,059 ( 7) ( 21) 12 198 ( 304) ( 295) ( 764) ( 488) Net cash used in investing activities ( 1,063) ( 606) 57,397 81,237 ( 59,921) ( 42,996) ( 463) ( 439) ( 12,604) ( 12,103) ( 18,875) ( 7,282) 809 - Net cash provided by (used in) financing activities ( 33,657) 18,417 5,219 101,870 ( 3,960) ( 5,235) 125,897 83,548 Cash and cash equivalents at the end of the period 127,156 180,183 Reconciliation of cash and cash equivalents Notes 19 3,316 3,191 19 50,055 78,440 20 65,719 81,062 18, 20 8,066 17,490 Cash and cash equivalents at the end of the period 127,156 180,183 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. Consolidated Interim Statement of Cash Flows Dividends received ................................................................................................................................. Bank tax paid .......................................................................................................................................... Income tax and special financial activities tax paid ................................................................................. Profit for the period ................................................................................................................................. Non-cash items included in profit for the period* ..................................................................................... Changes in operating assets and liabilities* ............................................................................................ Interest received ..................................................................................................................................... Interest paid** ......................................................................................................................................... Bank accounts not pledged as collateral against derivative instruments .............................. Purchase of investment property ............................................................................................................ Repayment of lease liabilities ................................................................................................................. Proceeds from sales of property and equipment ..................................................................................... Purchase of property and equipment ...................................................................................................... Additions of intangible assets ................................................................................................................. Proceeds from borrowings ...................................................................................................................... Repayment and repurchases of borrowings ............................................................................................ Cash and cash equivalents at the beginning of the year ......................................................................... Cash on hand ...................................................................................................................... Unrestricted balances with Central Bank ............................................................................. Money market loans and other loans to credit institutions .................................................... Dividends paid ........................................................................................................................................ Proceeds from exercise of share options ................................................................................................ Net increase (decrease) in cash and cash equivalents ........................................................................... Effects of foreign exchange rate changes ............................................................................................... Purchase of treasury shares ................................................................................................................... The Group has prepared its Consolidated Interim Statement of Cash Flows using the indirect method. The statement is based on the net profit after tax for the period and shows the cash flows from operating, investing and financing activities and the increase or decrease in cash and cash equivalents during the period. *For further breakdown see the following page. **Interest is defined as having been paid when it has been deposited into the customer's account. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 12 Amounts are in ISK million
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Consolidated Interim Statement of Cash Flows Non-cash items included in profit for the period 2026 2025 1.1-30.9 1.1-30.9 ( 48,196) ( 40,080) ( 2,763) 592 ( 595) ( 270) 1,509 1,274 1,667 1,562 2,800 ( 363) 8,755 8,064 436 ( 669) Total ( 36,387) ( 29,890) Changes in operating assets and liabilities 2026 2025 1.1-30.9 1.1-30.9 ( 1,595) ( 1,492) ( 3,657) 1,237 ( 24,977) 4,315 ( 68,558) ( 36,713) 8,330 6,807 ( 6,609) ( 2,024) 8,010 3,303 104,696 76,899 ( 655) ( 2,311) 2,342 ( 1,642) Total 17,327 48,379 The notes on pages 14 to 48 are an integral part of these Condensed Consolidated Interim Financial Statements. Net interest income ................................................................................................................................ Depreciation, amortisation, and write-offs ............................................................................................... Unrealised fair value (gain) loss recognised in the income statement ..................................................... Foreign exchange gain ........................................................................................................................... Mandatory reserve and pledged balances with Central Bank .................................................................. Net impairment on financial assets ......................................................................................................... Bank tax ................................................................................................................................................. Income tax expense ............................................................................................................................... Other changes ........................................................................................................................................ Other liabilities ........................................................................................................................................ Loans to credit institutions pledged as collateral against derivative instruments ..................................... Derivative instruments and short positions ............................................................................................. Bonds and debt instruments ................................................................................................................... Loans to customers ................................................................................................................................ Shares and equity instruments ............................................................................................................... Other assets ........................................................................................................................................... Deposits from Central Bank and credit institutions ................................................................................. Deposits from customers ........................................................................................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 13 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements Notes Page Notes Page General information 1 Corporate information ................................................. 15 20 Loans to credit institutions .......................................... 28 2 Basis of preparation .................................................... 15 21 Derivative instruments and short positions .................. 29 3 Significant accounting estimates and judgements ....... 16 22 Loans to customers .................................................... 30 4 Operating segments .................................................... 17 23 Expected credit losses ................................................ 30 24 Other assets ............................................................... 32 Notes to the Consolidated Interim Income Statement 25 Deposits from Central Bank and credit institutions ...... 32 5 Net interest income ..................................................... 20 26 Deposits from customers ............................................ 33 6 Net fee and commission income ................................. 20 27 Pledged assets ........................................................... 33 7 Net financial expense .................................................. 21 28 Debt issued and other borrowed funds ........................ 34 8 Net foreign exchange gain .......................................... 21 29 Subordinated loans ..................................................... 35 9 Other operating income ............................................... 22 30 Other liabilities ............................................................ 35 10 Salaries and related expenses .................................... 22 11 Other operating expenses ........................................... 23 Other notes 12 Net impairment on financial assets ............................. 23 31 Custody assets ........................................................... 35 13 Income tax expense .................................................... 24 32 Related party .............................................................. 36 14 Earnings per share ...................................................... 24 33 Legal proceedings ....................................................... 37 34 Events after the reporting period ................................. 37 Notes to the Consolidated Interim Statement of Financial Position Risk management 15 Classification of financial assets and 35 Risk management ....................................................... 37 financial liabilities ........................................................ 25 36-39 Credit risk ................................................................... 38 16-17 Fair value information for financial instruments ........... 26 40 Liquidity risk ................................................................ 43 18 Offsetting financial assets and financial liabilities ........ 28 41-43 Market risk .................................................................. 44 19 Cash and balances with Central Bank ......................... 28 44-45 Capital management ................................................... 46 Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 14
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Notes to the Condensed Consolidated Interim Financial Statements 1. Corporate information Íslandsbanki hf., the parent company, was incorporated on 8 October 2008 and is a limited liability company domiciled in Icel and. The registered office is at Hagasmári 3, 201 Kópavogur, Iceland. The Condensed Consolidated Interim Financial Statements for the period 1 January to 30 September 2026 comprise the financial statements of Íslandsbanki hf. ("the Bank" or "Íslandsbanki") and its subsidiaries, together referred to as "the Group". The Bank's main subsidiaries are Íslandssjóðir hf. (Iceland Funds) and Allianz Ísland hf. Additionally, Íslandsbanki has control over 12 other non-significant subsidiaries. All of the Bank's subsidiaries are wholly owned. The Condensed Consolidated Interim Financial Statements were approved and authorised for issue by the Board of Directors and the CEO of Íslandsbanki hf. on 29 October 2026. 2. Basis of preparation The Condensed Consolidated Interim Financial Statements have been prepared in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting, as adopted by the European Union and additional requirements in the Act on Annual Accounts no. 3/2006, the Act on Financial Undertakings no. 161/2002 and rules on accounting for credit institutions, where applicable. The Condensed Consolidated Interim Financial Statements do not include all the information required for annual financial stat ements and should be read in conjunction with the audited Consolidated Financial Statements for the year 2025, as well as the unaudited Pillar 3 Report for the year 2025. Both are available on the Bank's website: www.islandsbanki.is. The Condensed Consolidated Interim Financial Statements are presented in Icelandic króna (ISK), which is the functional currency of Íslandsbanki hf. All amounts presented in ISK have been rounded to the nearest million, except where otherwise indicated. At 30 September 2026, the exchange rate of the ISK against the USD was 120.65 and for the EUR 137.00 (year-end 2025: USD 125.20 and EUR 147.20). The Group's management has made an assessment of the Group's ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. Therefore, the Condensed Consolidated Interim Financial Statements have been prepared on a going concern basis. Changes to accounting policies The accounting policies are unchanged from those set out in Notes 3 and 62 in the Consolidated Financial Statements for the year 2025 except for the changes to accounting policies outlined below. The purpose of the following changes to accounting policies is to ensure a fairer presentation of the Condensed Consolidated Interim Financial Statements. In the context of materiality, the Group has determined that the line items "Investments in associates", "Investment property", "Property and equipment", and "Intangible assets" do not warrant separate presentation as line item s in the Consolidated Interim Statement of Financial Position. Accordingly, these items have been reclassified and are now included within "Other assets". The Consolidated Financial Statements for the year 2025 do not include a separate accounting policy for disposal groups held for sale, as the Group did not hold any disposal groups classified as held for sale during the year. Assets of disposal groups classified as held for sale are presented in the line item "Other assets " as "Repossessed collateral", and the related liabilities are presented in the line item "Other liabilities" as "Liabilities of disposal groups classified as repossessed collateral". Income and expenses arising from disposal groups held for sale are presented under "Other operating income" as "Net income (expense) from repossessed collateral". Basis of measurement The Condensed Consolidated Interim Financial Statements are prepared on a historical cost basis with the following exemptions: • A ssets and liabilities measured at fair value: bonds and debt instruments, shares and equity instruments, investment property, short positions in listed bonds, derivative financial instruments, and certain debt issued by the Group. • Recognised financial liabilities designated as hedged items in qualifying fair value hedge relationships are measured at amortised cost adjusted for changes in fair value attributable to the risk being hedged. • Investments in associates are accounted for using the equity method. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 15
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Notes to the Condensed Consolidated Interim Financial Statements 3. Significant accounting estimates and judgements In preparing these Condensed Consolidated Interim Financial Statements management has made judgements, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Management bases its judgements on previous experience and other factors that are considered reasonable under the circumstances, but actual results may differ from those estimates. Management continuously evaluates these judgements, estimates, and assumptions. Changes in accounting estimates are recognised when they occur. The key source of estimation uncertainty is the allowance for credit losses. Impairment of financial assets Note 62.3 in the Consolidated Financial Statements for the year 2025 contains a description of the Group's accounting policies for the impairment of financial assets. At the end of the third quarter of 2026, the following changes have been made. The Group's Chief Economist provided a new macroeconomic forecast in September 2026. The table below shows macroeconomic indicators from the new forecast that are used in the base case scenario. Change in economic indicators % 2025 Forecast 2026 Forecast 2027 Forecast 2028 Forecast 2029 Economic growth (YoY real GDP change) 1.1 1.2 1.8 2.3 2.5 Housing prices in Iceland (average YoY change) 5.3 1.8 2.8 7.5 6.0 Purchasing power (average YoY change) 3.7 0.8 1.4 1.3 1.9 ISK exchange rate index (average YoY change) (4.3) (1.1) 1.4 2.0 1.0 Policy rate, Central Bank of Iceland (average per year) 7.7 7.7 7.5 6.1 5.8 Inflation (average per year) 4.1 5.4 4.5 3.6 3.0 Capital formation (YoY real change) 4.8 0.3 (1.4) 2.0 3.1 - t hereof capital formation in industry 7.8 2.4 (3.2) 0.3 3.0 The All Risk Committee determined it appropriate to keep the weights of forward- looking scenarios unchanged from year-end 2025 at 20%-50%-30% (optimistic, base, pessimistic) at the end of the third quarter. Management reviews the sensitivity analysis on the impact of shifting weights between scenarios when determining the appropriate weights for the three scenarios. According to the analysi s, a shift of 5% weight from the baseline to the pessimistic scenario would increase the impairment allowance by ISK 290 million, while a 5% shift from the baseline to the optimistic scenario would decrease the allowance by ISK 12 0 million. Scenario weights can be scaled linearly, allowing a broader scope of analysis on the impairment allowance. The impairment process is designed to be systematic so that it can be consistently applied. For the largest part of the loan portfolio, the Group employs an automatic process to assign facilities to stages and to estimate the ECL. For large or complex credit cases where the automatic process is not appropriate, alternative ECL calculations (referred to as "manual impairment") are proposed by experts. Each manual impairment is subsequently reviewed and approved or rejected by the Impairment Council. As of 30 September 2026, exposure to a few counterparties amounting to ISK 20.9 billion was subject to manual impairment, with the associated ECL totalling ISK 2.9 billion (year-end 2025: ISK 9.3 billion and ISK 2.7 billion, respectively). The allowance for credit losses is further discussed in Notes 22-23 and in Notes 36-39 on risk management. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 16
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Notes to the Condensed Consolidated Interim Financial Statements 4. Corporate & Treasury & Subsidiaries, 1 January to 30 September 2026 Personal Business Investment Proprietary Cost The Bank eliminations & The Group Banking Banking Banking Trading centres total adjustments total Net interest income (expense) ...................................................................... 15,618 15,688 11,895 5,364 ( 253) 48,312 ( 116) 48,196 N et fee and commission income (expense) .................................................. 2,775 1,565 3,358 171 ( 7) 7,862 1, 963 9,825 Other net operating income ........................................................................... 167 ( 33) 874 184 249 1, 441 ( 1,339) 102 18,560 17,220 16,127 5,719 ( 11) 57,615 508 58, 123 Salaries and related expenses ...................................................................... ( 2,220) ( 2,001) ( 1,917) ( 217) ( 6,575) ( 12,930) ( 930) ( 13,860) Other operating expenses ............................................................................. ( 2,052) ( 982) ( 968) ( 311) ( 4,769) ( 9,082) ( 271) ( 9,353) Bank tax ........................................................................................................ ( 744) ( 391) ( 434) ( 87) ( 11) ( 1,667) - ( 1,667) Net impairment on financial assets ............................................................... ( 464) ( 1,487) ( 1,122) ( 18) - ( 3,091) 397 ( 2,694) Cost allocation .............................................................................................. ( 4,620) ( 3,864) ( 3,233) 361 11,356 - - - P rofit (loss) before tax ................................................................................... 8,460 8,495 8,453 5,447 ( 10) 30,845 ( 296) 30,549 In come tax expense ...................................................................................... ( 2,393) ( 2,310) ( 2,319) ( 1,527) ( 1) ( 8,550) ( 205) ( 8,755) Profit (loss) for the period 6,067 6,185 6,134 3,920 ( 11) 22,295 ( 501) 21,794 N et segment revenue from external customers ............................................. 27,514 20,818 24,494 ( 15,414) 203 57,615 508 58,123 Net segment revenue from other segments .................................................. ( 8,954) ( 3,598) ( 8,367) 21,133 ( 214) - - - F ee and commission income ........................................................................ 6,308 1,781 3,666 331 - 12,086 2, 244 14,330 Depreciation, amortisation, and write-offs ..................................................... ( 167) ( 36) ( 6) - ( 1,173) ( 1,382) ( 127) ( 1,509) At 30 September 2026 Loans to customers ...................................................................................... 682,026 357,461 394,243 597 - 1, 434,327 ( 3,289) 1,431,038 Other assets ................................................................................................. 3,039 1,796 5,004 361,607 9,800 381,246 7, 179 388,425 Total segment assets 685,065 359,257 399,247 362,204 9,800 1,815,573 3,890 1,819,463 Deposits from customers .............................................................................. 555,983 300,703 203,823 20,804 - 1, 081,313 ( 3,054) 1,078,259 Other liabilities .............................................................................................. 2,751 1,265 14,671 495,811 7,272 521,770 4, 041 525,811 Total segment liabilities 558,734 301,968 218,494 516,615 7,272 1,603,083 987 1,604,070 Allocated equity ............................................................................................ 39,506 52,575 71,275 47,749 1,385 212,490 2,903 215,393 Risk exposure amount .................................................................................. 243,928 309,398 422,489 62,203 8,392 1,046,410 5,464 1,051,874 The individual segment balance sheet positions are with external customers and exclude internal transactions, thus explaining the differences in total assets, and total liabilities and equity. Operating segments Total operating income Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 17 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 4. Operating segments (continued) Corporate & Treasury & Subsidiaries, 1 January to 30 September 2025 Personal Business Investment Proprietary Cost The Bank eliminations & The Group Banking Banking Banking Trading centres total adjustments total Net interest income (expense) ...................................................................... 12,940 14,697 10,196 2,429 ( 309) 39,953 127 40, 080 Net fee and commission income (expense) .................................................. 2,862 1,507 3,563 ( 108) ( 7) 7,817 2, 099 9,916 Other net operating income ........................................................................... 78 ( 11) 1,296 ( 1,101) 257 519 ( 857) ( 338) 15,880 16,193 15,055 1,220 ( 59) 48,289 1, 369 49,658 Salaries and related expenses ...................................................................... ( 2,057) ( 1,739) ( 1,718) ( 239) ( 6,116) ( 11,869) ( 825) ( 12,694) Other operating expenses ............................................................................. ( 2,012) ( 933) ( 915) ( 353) ( 4,118) ( 8,331) ( 111) ( 8,442) Bank tax ........................................................................................................ ( 692) ( 371) ( 389) ( 99) ( 11) ( 1,562) - ( 1,562) Net impairment on financial assets ............................................................... ( 157) 685 ( 62) ( 61) - 405 1 406 C ost allocation .............................................................................................. ( 4,164) ( 3,529) ( 3,019) 429 10, 283 - - - Profit (loss) before tax ................................................................................... 6,798 10,306 8,952 897 ( 21) 26,932 434 27, 366 Income tax expense ...................................................................................... ( 1,948) ( 2,776) ( 2,426) ( 558) - ( 7,708) ( 356) ( 8,064) Profit (loss) for the period 4,850 7,530 6,526 339 ( 21) 19,224 78 19, 302 Net segment revenue from external customers ............................................. 18,345 19,198 23,657 ( 13,123) 212 48,289 1,369 49,658 Net segment revenue from other segments .................................................. ( 2,465) ( 3,005) ( 8,602) 14,343 ( 271) - - - F ee and commission income ........................................................................ 6,091 1,697 3,858 174 - 11,820 2, 492 14,312 Depreciation, amortisation, and write-offs ..................................................... ( 150) ( 40) ( 8) - ( 1,065) ( 1,263) ( 11) ( 1,274) At 31 December 2025 Loans to customers ...................................................................................... 630,788 346,943 387,476 1,899 - 1, 367,106 - 1, 367,106 O ther assets ................................................................................................. 3,978 1,703 1,268 342,241 9,773 358,963 2, 078 361,041 T otal segment assets 634,766 348,646 388,744 344,140 9,773 1,726,069 2,078 1,728,147 Deposits from customers .............................................................................. 524,781 288,142 148,732 10,160 - 971,815 ( 3,120) 968,695 Other liabilities .............................................................................................. 3,033 2,870 3,778 516,573 6,049 532,303 1, 790 534,093 Total segment liabilities 527,814 291,012 152,510 526,733 6,049 1,504,118 ( 1,330) 1,502,788 Allocated equity ............................................................................................ 46,965 55,352 70,303 48,023 1,308 221,951 3,408 225,359 Risk exposure amount .................................................................................. 221,633 306,872 430,188 60,696 8,542 1,027,931 5,857 1,033,788 Total operating income Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 18 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 4. Subsidiaries, eliminations & adjustments 1 January to 30 September 2026 Íslands- Allianz Other Eliminations sjóðir hf. Ísland hf. subsidiaries & adjustments Total Net interest income (expense) ................................................... 6 113 - ( 235) ( 116) Net fee and commission income (expense) ............................... 998 968 - ( 3) 1,963 Other net operating income ....................................................... ( 42) ( 3) 485 ( 1,779) ( 1,339) Total operating income 962 1,078 485 ( 2,017) 508 Salaries and related expenses ................................................... ( 657) ( 200) ( 73) - ( 930) Other operating expenses .......................................................... ( 201) ( 152) ( 385) 467 ( 271) Net impairment on financial assets ............................................ - - - 397 397 Profit (loss) before tax ................................................................ 104 726 27 ( 1,153) ( 296) Income tax ................................................................................. ( 21) ( 178) ( 7) 1 ( 205) Profit (loss) for the period 83 548 20 ( 1,152) ( 501) Net segment revenue from external customers .......................... 1,240 962 ( 622) ( 1,072) 508 Net segment revenue from other segments ............................... ( 278) 116 1,107 ( 945) - Fee and commission income ..................................................... 1,446 1,245 - ( 447) 2,244 Depreciation, amortisation, and write-offs .................................. - - ( 2) ( 125) ( 127) At 30 September 2026 Total assets ............................................................................... 1,870 3,492 11,242 ( 12,714) 3,890 Total liabilities ............................................................................ 299 1,298 5,585 ( 6,195) 987 Total equity ................................................................................ 1,571 2,194 5,657 ( 6,519) 2,903 1 January to 30 September 2025 Íslands- Allianz Other Eliminations sjóðir hf. Ísland hf. subsidiaries & adjustments Total Net interest income .................................................................... 8 117 - 2 127 Net fee and commission income (expense) ............................... 1,069 1,049 - ( 19) 2,099 Other net operating income ....................................................... ( 129) ( 25) 398 ( 1,101) ( 857) Total operating income 948 1,141 398 ( 1,118) 1,369 Salaries and related expenses ................................................... ( 571) ( 199) ( 55) - ( 825) Other operating expenses .......................................................... ( 189) ( 134) ( 319) 531 ( 111) Net impairment on financial assets ............................................ - 1 - - 1 Profit (loss) before tax ................................................................ 188 809 24 ( 587) 434 Income tax ................................................................................. ( 38) ( 187) ( 6) ( 125) ( 356) Profit (loss) for the period 150 622 18 ( 712) 78 Net segment revenue from external customers .......................... 1,204 1,021 6 ( 862) 1,369 Net segment revenue from other segments ............................... ( 256) 120 392 ( 256) - Fee and commission income ..................................................... 1,497 1,439 - ( 444) 2,492 Depreciation, amortisation, and write-offs .................................. - ( 2) - ( 9) ( 11) At 31 December 2025 Total assets ............................................................................... 2,060 3,534 2,482 ( 5,998) 2,078 Total liabilities ............................................................................ 316 1,288 65 ( 2,999) ( 1,330) Total equity ................................................................................ 1,744 2,246 2,417 ( 2,999) 3,408 Operating segments (continued) Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 19 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 5. Net interest income 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 2,734 2,594 1,118 1,297 1,332 2,003 453 608 106,173 90,924 34,920 29,427 6,236 5,014 2,134 1,725 - ( 550) - ( 550) Interest income calculated using the effective interest rate method 116,475 99,985 38,625 32,507 2,055 2,963 558 837 4 5 - 2 Other interest income 2,059 2,968 558 839 ( 204) ( 232) ( 78) ( 70) ( 43,207) ( 39,895) ( 15,017) ( 12,757) ( 1,979) ( 2,168) ( 519) ( 638) ( 2,441) ( 925) ( 808) ( 418) ( 19,455) ( 17,333) ( 5,977) ( 5,466) ( 2,994) ( 2,243) ( 949) ( 717) ( 54) ( 54) ( 19) ( 18) ( 4) ( 23) ( 1) ( 2) Interest expense ( 70,338) ( 62,873) ( 23,368) ( 20,086) Net interest income 48,196 40,080 15,815 13,260 6. Net fee and commission income 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 2,189 2,159 716 695 2,499 2,663 829 790 6,285 6,093 2,135 2,085 1,895 1,638 615 607 1,462 1,759 520 529 Fee and commission income 14,330 14,312 4,815 4,706 ( 395) ( 416) ( 109) ( 111) ( 3,759) ( 3,421) ( 1,291) ( 1,231) ( 351) ( 559) ( 116) ( 135) Fee and commission expense ( 4,505) ( 4,396) ( 1,516) ( 1,477) Net fee and commission income 9,825 9,916 3,299 3,229 Fee and commission income by segment is disclosed in Note 4. Deposits from customers .................................................................................................... Debt issued and other borrowed funds designated as at fair value through profit or loss .... Loans to credit institutions .................................................................................................. Loans to customers ............................................................................................................ Financial assets mandatorily at fair value through profit or loss .......................................... Payment processing ........................................................................................................... Brokerage ........................................................................................................................... Loans and guarantees ........................................................................................................ Other fee and commission income ..................................................................................... Financial liabilities mandatorily at fair value through profit or loss ....................................... Financial assets mandatorily at fair value through other comprehensive income ................ Other fee and commission expense ................................................................................... Subordinated loans ............................................................................................................. Other liabilities .................................................................................................................... Lease liabilities ................................................................................................................... Provision for legal proceedings ........................................................................................... Other assets ....................................................................................................................... Investment banking and brokerage ..................................................................................... Cash and balances with Central Bank ................................................................................ Debt issued and other borrowed funds at amortised cost ................................................... Payment processing expenses ........................................................................................... Deposits from Central Bank and credit institutions .............................................................. Asset management ............................................................................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 20 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 7. Net financial expense 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 ( 3,443) ( 765) ( 3,087) ( 548) 3,133 ( 578) 2,872 171 ( 76) ( 39) ( 13) ( 49) ( 128) 55 5 73 ( 16) 1 - - Net financial expense ( 530) ( 1,326) ( 223) ( 353) 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 1,271 137 582 350 ( 1,347) ( 176) ( 595) ( 399) Net loss on fair value hedges ( 76) ( 39) ( 13) ( 49) 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 ( 7) ( 280) 19 ( 182) ( 617) ( 1,692) ( 85) ( 153) 404 1,024 36 174 ( 306) 134 ( 226) 14 12 ( 513) 33 ( 206) ( 16) 1 - - Net financial expense ( 530) ( 1,326) ( 223) ( 353) 8. Net foreign exchange gain 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 ( 114) ( 94) ( 73) ( 11) ( 17,946) ( 9,842) ( 14,111) ( 49) ( 3,395) 756 ( 2,414) 842 ( 4,093) ( 810) ( 2,728) 78 ( 14) ( 20) ( 8) ( 4) Net foreign exchange gain (loss) for assets ( 25,562) ( 10,010) ( 19,334) 856 7,770 7,961 6,868 167 6,331 693 4,371 ( 64) 10,503 1,854 7,334 ( 717) 1,553 ( 228) 932 ( 90) Net foreign exchange gain (loss) for liabilities 26,157 10,280 19,505 ( 704) Net foreign exchange gain 595 270 171 152 The following table shows the categorisation of the net financial expense by type. Net gain (loss) on derecognition of financial liabilities measured at amortised cost ............ Dividend income ................................................................................................................. Cash and balances with Central Bank ................................................................................ Debt issued and other borrowed funds at amortised cost ................................................... Fair value changes of the hedged items attributable to the hedged risk .............................. Deposits ............................................................................................................................. Debt issued and other borrowed funds designated as at fair value through profit or loss .... Net gain (loss) on sale of debt instruments measured at FVOCI ........................................ Net gain (loss) on economic hedging and other derivatives ................................................ Net loss on shares and related derivatives ......................................................................... Net gain (loss) on debt issued and related derivatives ........................................................ Net loss on financial assets and financial liabilities mandatorily at FVTPL .......................... Net loss on fair value hedges .............................................................................................. Fair value changes of the hedging derivatives .................................................................... The following table shows the categorisation of the net loss on fair value hedges. Net gain (loss) on bonds and related derivatives ................................................................ Loans at amortised cost ..................................................................................................... Net gain (loss) on financial liabilities designated as at FVTPL ............................................ Financial assets mandatorily at fair value through profit or loss .......................................... Net gain (loss) on sale of debt instruments measured at FVOCI ........................................ Subordinated loans ............................................................................................................. Financial assets mandatorily at fair value through other comprehensive income ................ Other assets ....................................................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 21 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 9. Other operating income 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 ( 7) 279 ( 3) ( 5) 204 247 92 99 ( 344) ( 7) ( 194) 9 4 133 - - 47 52 16 18 18 14 6 3 115 - 105 - Other operating income 37 718 22 124 10. Salaries and related expenses 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 9,955 9,781 2,951 2,904 796 - 273 - 173 42 52 42 1,641 1,512 491 452 1,437 1,347 453 427 155 117 27 13 ( 297) ( 105) ( 95) ( 45) Salaries and related expenses 13,860 12,694 4,152 3,793 Incentive scheme expenses ............................................................................................... Contributions to pension funds ........................................................................................... Fair value changes on investment property ........................................................................ Capitalisation of salaries and related expenses in software development ........................... Other net operating income ................................................................................................ Share-option programme expenses .................................................................................... Salaries .............................................................................................................................. Legal fees ........................................................................................................................... Social security charges and financial activities tax .............................................................. Rental income .................................................................................................................... Gain from sales of property and equipment ........................................................................ Net income (expense) from repossessed collateral ............................................................ Other salary-related expenses ............................................................................................ Incentive scheme An annual incentive scheme was implemented in early February 2026 for employees of the Group in accordance with Icelandic law and the Bank's remuneration policy. Employees working in Risk Management, Group Internal Audit, and Compliance are excluded from participating, as required by law. The purpose of the scheme is to promote alignment between the interests of shareholders, employees, customers, and other stakeholders, support sustainable long-term performance, and reinforce a performance-oriented culture. Expenses associated with the incentive scheme, including contributions to pension funds, social security charges and financial activities tax, and other salary-related expenses, are recognised within the respective expense categories. Share-option programme expenses represent the total expense recognised in relation to the Group's share-option programme. Variable compensation of up to 10% of annual base salary is settled in cash, variable compensation between 10% and 20% is settled equally in cash and shares, while variable compensation exceeding 20% (up to a maximum of 25%) is settled as 10% of annual base salary in cash and the remainder in shares. Variable compensation awarded and settled in shares is deferred for a minimum period of four years (five years for the CEO and direct reports). Deferred variable compensation remains subject to malus and clawback provisions throughout the deferral period, in accordance with the Bank's remuneration policy and applicable regulations. The financing of the scheme is contingent on the Group's return on equity. For 2026, the accrual range is a return on equity of 11.0-12.5%. Eligible employees may receive variable compensation of up to 10% of their fixed annual salary, settled in cash. For certain employees, including the Executive Committee and other key employees, variable compensation may amount to a maximum of 25% of annual base salary. For these employees, payments under the incentive scheme are contingent upon the achievement of various predefined financial and non-financial performance metrics. Following the end of the performance period, the Board of Directors assesses performance outcomes and determines final award levels. The Board is authorised to reduce or cancel variable remuneration, in whole or in part, in the event of unsatisfactory performance, breaches of internal rules or regulations, or a material deterioration in the financial position of the Group. Paid awards may be reclaimed for up to seven years in defined circumstances. Share of profit of associates, net of tax ............................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 22 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 10. Salaries and related expenses (continued) 11. Other operating expenses 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 1,388 1,339 455 365 4,166 3,724 1,462 1,282 570 501 200 145 1,509 1,274 470 436 1,720 1,604 584 458 Other operating expenses 9,353 8,442 3,171 2,686 12. Net impairment on financial assets 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 ( 2,683) 522 ( 977) 109 ( 11) ( 116) ( 44) ( 102) Net impairment on financial assets ( 2,694) 406 ( 1,021) 7 Net change in expected credit losses, on-balance-sheet items ........................................... Share-option programme The Group entered into share-option agreements with employees in August 2025, as described in Note 12 to the 2025 Consolidated Financial Statements. The first exercise period under the programme followed the publication of the Bank's half-year results for 2026. Employees exercised options to purchase 6,397,210 shares at an exercise price of ISK 126.4 per share, for total consideration of ISK 809 million. The options were settled through the delivery of treasury shares acquired under previous share buyback programmes. In August 2026, the Bank entered into share-option agreements under the same programme with 50 employees who were not parties to the original agreements. The agreements entitle each employee to purchase shares for up to ISK 1.5 million per year following the publication of the Bank's half-year results for 2027, 2028, 2029, and 2030, corresponding to a maximum of 518,650 shares per year in aggregate. The exercise price is ISK 144.6 per share, corresponding to the weighted average market price of the Bank's shares during the ten trading days preceding the grant date. The grant-date fair value of the options was measured using the Black-Scholes option-pricing model. Share-option programme expense amounted to ISK 173 million for the first nine months of 2026 (first nine months of 2025: ISK 42 million), of which ISK 52 million was recognised in the third quarter (third quarter 2025: ISK 42 million). The Group estimates that the remaining expense under the programme through August 2030 will amount to ISK 370 million. Following the publication of the half-year results for 2026, the CEO and seven other members of the Executive Committee exercised all options available to them in that exercise period. Each purchased 11,867 shares at ISK 126.4 per share, representing 94,936 shares in aggregate for total consideration of ISK 12 million. One member of the Executive Committee, who joined the Bank during the period and was therefore not a party to the original agreements, is among the 50 employees who entered into share-option agreements with the Bank in August 2026 on the terms described above. Software and IT expenses .................................................................................................. Real estate and office equipment ....................................................................................... Net change in expected credit losses, off-balance-sheet items ........................................... Professional services .......................................................................................................... Depreciation, amortisation, and write-offs ........................................................................... Other administrative expenses ........................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 23 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 13. Income tax expense 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 6,933 6,538 2,509 1,866 1,979 1,851 707 525 31 85 - - ( 188) ( 410) ( 318) 99 8,755 8,064 2,898 2,490 ( 437) ( 80) ( 56) 2 2026 2025 1.1-30.9 1.1-30.9 30,549 27,366 6,110 20.0% 5,473 20.0% 1,979 6.5% 1,851 6.8% 31 0.1% 85 0.3% ( 121) ( 0.4%) ( 279) ( 1.0%) 698 2.3% 932 3.4% 58 0.2% 2 0.0% Effective income tax expense 8,755 28.7% 8,064 29.5% 14. Earnings per share 2026 2025 2026 2025 1.1-30.9 1.1-30.9 1.7-30.9 1.7-30.9 21,794 19,302 7,269 6,901 1,703 1,869 1,657 1,851 Basic earnings per share (ISK) 12.80 10.33 4.39 3.73 21,794 19,302 7,269 6,901 1,704 1,869 1,658 1,851 Diluted earnings per share (ISK) 12.79 10.33 4.38 3.73 Other differences ................................................................................................................ Profit before tax .................................................................................................................. Income tax calculated on the profit for the period ............................................................... Special financial activities tax ............................................................................................. Adjustments in prior year's calculated income tax ............................................................... The Group has entered into equity-settled share option agreements with its employees, under which option holders may purchase Íslandsbanki shares with a value of up to ISK 1.5 million annually following the publication of the Bank's half-year results until 2030. The share options had a negligible dilutive effect on earnings per share for the first nine months and third quarter of 2026. Profit attributable to shareholders of the Bank .................................................................... Weighted average number of outstanding shares ............................................................... Current tax expense ........................................................................................................... Special financial activities tax ............................................................................................. Recognised income tax is based on applicable tax laws. The income tax rate for legal entities in 2026 is 20% (2025: 20%). Special financial activities tax is calculated as 6% of the Bank's taxable profit exceeding ISK 1 billion in accordance with the Act on Financial Activities Tax no. 165/2011. The effective income tax rate in the Group's income statement for the first nine months of 2026 is 28.7% (first nine months of 2025: 29.5%). Weighted average number of outstanding shares ............................................................... The Bank is taxed jointly with its subsidiary Íslandssjóðir hf. (Iceland Funds). Income not subject to tax .................................................................................................... Non-deductible expenses ................................................................................................... Profit attributable to shareholders of the Bank .................................................................... Adjustments in prior year's calculated income tax ............................................................... Changes in deferred tax assets and deferred tax liabilities ................................................. Income tax recognised in the income statement Income tax recognised in other comprehensive income Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 24 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 15. Classification of financial assets and financial liabilities At 30 September 2026 Mandatorily Hedge Mandatorily Amortised Carrying at FVTPL accounting* at FVOCI cost amount - - - 88,676 88,676 - - - 78,121 78,121 7,496 - 147,651 - 155,147 15,215 - - - 15,215 2,090 - - - 2,090 2,411 251 - - 2,662 - - - 1,431,038 1,431,038 3,012 - - - 3,012 5,852 - - - 5,852 2,891 - - - 2,891 - - - 7,939 7,939 Total financial assets 38,967 251 147,651 1,605,774 1,792,643 Mandatorily Hedge Designated Amortised Carrying at FVTPL accounting* as at FVTPL cost amount - - - 21,429 21,429 - - - 1,078,259 1,078,259 7,747 434 - - 8,181 - 74,383 81,111 267,519 423,013 - - - 36,459 36,459 - - - 15,220 15,220 Total financial liabilities 7,747 74,817 81,111 1,418,886 1,582,561 At 31 December 2025 Mandatorily Hedge Mandatorily Amortised Carrying at FVTPL accounting* at FVOCI cost amount - - - 80,394 80,394 - - - 80,009 80,009 11,149 - 132,559 - 143,708 6,123 - - - 6,123 2,128 - - - 2,128 3,533 1,771 - - 5,304 - - - 1,367,106 1,367,106 3,200 - - - 3,200 14,518 - - - 14,518 2,799 - - - 2,799 - - - 3,452 3,452 Total financial assets 43,450 1,771 132,559 1,530,961 1,708,741 Mandatorily Hedge Designated Amortised Carrying at FVTPL accounting* as at FVTPL cost amount - - - 13,250 13,250 - - - 968,695 968,695 6,183 - - - 6,183 - 90,607 89,416 264,570 444,593 - - - 40,315 40,315 - - - 10,309 10,309 Total financial liabilities 6,183 90,607 89,416 1,297,139 1,483,345 Unlisted shares and equity instruments ....................................................... Other financial assets ................................................................................. Deposits from customers ............................................................................ Derivative instruments and short positions .................................................. Debt issued and other borrowed funds ........................................................ Cash and balances with Central Bank ......................................................... Loans to credit institutions ........................................................................... Listed bonds and debt instruments ............................................................. Listed shares and equity instruments .......................................................... *For further information on hedge accounting see Notes 21 and 28. Deposits from Central Bank and credit institutions ...................................... Other financial assets ................................................................................. Other financial liabilities .............................................................................. Unlisted bonds and debt instruments .......................................................... Subordinated loans ..................................................................................... Other financial liabilities .............................................................................. Deposits from Central Bank and credit institutions ...................................... Deposits from customers ............................................................................ Derivative instruments and short positions .................................................. Cash and balances with Central Bank ......................................................... Loans to credit institutions ........................................................................... Listed bonds and debt instruments ............................................................. Listed bonds and debt instruments used for economic hedging .................. Unlisted bonds and debt instruments .......................................................... Derivatives .................................................................................................. Loans to customers ..................................................................................... Listed shares and equity instruments .......................................................... Listed shares and equity instruments used for economic hedging ............... Listed bonds and debt instruments used for economic hedging .................. Listed shares and equity instruments used for economic hedging ............... Unlisted shares and equity instruments ....................................................... Derivatives .................................................................................................. Loans to customers ..................................................................................... Debt issued and other borrowed funds ........................................................ Subordinated loans ..................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 25 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 16. Fair value information for financial instruments At 30 September 2026 Level 1 Level 2 Level 3 Total 170,362 - 2,090 172,452 - 2,662 - 2,662 8,864 - 2,891 11,755 179,226 2,662 4,981 186,869 1,338 - - 1,338 - 6,843 - 6,843 81,111 - - 81,111 82,449 6,843 - 89,292 At 31 December 2025 Level 1 Level 2 Level 3 Total 149,831 - 2,128 151,959 - 5,304 - 5,304 17,718 - 2,799 20,517 167,549 5,304 4,927 177,780 1,908 - - 1,908 - 4,275 - 4,275 89,416 - - 89,416 91,324 4,275 - 95,599 Bonds and debt instruments Shares and equity instruments Total 2,128 2,799 4,927 - ( 146) ( 146) ( 38) - ( 38) - 358 358 - ( 120) ( 120) Fair value at 30 September 2026 2,090 2,891 4,981 Bonds and debt instruments Shares and equity instruments Total 2,020 2,417 4,437 42 209 251 66 173 239 2,128 2,799 4,927 Settlements ........................................................................................................................................ Fair value at 1 January 2025 .............................................................................................................. Purchases and share capital increase ................................................................................................ Net gain on financial instruments recognised in the income statement ............................................... Derivative instruments .................................................................................................... Shares and equity instruments ....................................................................................... Total financial assets Total financial assets Total financial liabilities Derivative instruments .................................................................................................... Fair value at 1 January 2026 .............................................................................................................. Purchases and share capital increase ................................................................................................ Net loss on financial instruments recognised in the income statement ............................................... Sales and share capital decrease ....................................................................................................... Total financial liabilities Debt issued and other borrowed funds designated as at FVTPL .................................... Fair value at 31 December 2025 Management has assessed that reasonably possible changes in the assumptions used in the valuation of Level 3 financial instruments would not have a significant impact on their fair value. Accordingly, no sensitivity analysis of Level 3 financial instruments is presented. Changes in Level 3 financial instruments measured at fair value The following tables show financial instruments carried at fair value at 30 September 2026, categorised into three levels of the fair value hierarchy that reflect the type of inputs used in making the fair value measurements. At the end of each reporting period, the Group determines whether transfers have occurred between levels in the hierarchy, by reassessing categorisation based on the lowest-level input that is significant to the fair value measurement as a whole. No transfers between levels took place during the period. Short positions ............................................................................................................... Bonds and debt instruments ........................................................................................... Derivatives ..................................................................................................................... Bonds and debt instruments ........................................................................................... Short positions ............................................................................................................... Shares and equity instruments ....................................................................................... Financial instruments carried at fair value Debt issued and other borrowed funds designated as at FVTPL .................................... Derivatives ..................................................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 26 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 17. Total fair Carrying At 30 September 2026 Level 1 Level 2 Level 3 value amount Difference - 88,676 - 88,676 88,676 - - 78,121 - 78,121 78,121 - - - 1,429,348 1,429,348 1,431,038 ( 1,690) - 7,939 - 7,939 7,939 - Total financial assets - 174,736 1,429,348 1,604,084 1,605,774 ( 1,690) - 21,429 - 21,429 21,429 - - 1,078,241 - 1,078,241 1,078,259 ( 18) 249,848 10,538 - 260,386 267,519 ( 7,133) 36,641 - - 36,641 36,459 182 - 15,220 - 15,220 15,220 - Total financial liabilities 286,489 1,125,428 - 1,411,917 1,418,886 ( 6,969) Total fair Carrying At 31 December 2025 Level 1 Level 2 Level 3 value amount Difference - 80,394 - 80,394 80,394 - - 80,009 - 80,009 80,009 - - - 1,364,031 1,364,031 1,367,106 ( 3,075) - 3,452 - 3,452 3,452 - Total financial assets - 163,855 1,364,031 1,527,886 1,530,961 ( 3,075) - 13,250 - 13,250 13,250 - - 968,708 - 968,708 968,695 13 249,144 10,691 - 259,835 264,570 ( 4,735) 40,278 - - 40,278 40,315 ( 37) - 10,309 - 10,309 10,309 - Total financial liabilities 289,422 1,002,958 - 1,292,380 1,297,139 ( 4,759) Financial instruments not carried at fair value Other financial assets ............................................................. Debt issued and other borrowed funds .................................... Subordinated loans ................................................................. Other financial liabilities .......................................................... Debt issued and other borrowed funds .................................... Other financial liabilities .......................................................... Cash and balances with Central Bank .................................... Loans to credit institutions ...................................................... Loans to customers ................................................................ Other financial assets ............................................................. Deposits from Central Bank and credit institutions .................. Deposits from customers ........................................................ The following tables show the fair value measurement and classification of the Group's assets and liabilities not carried at fair value. Cash and balances with Central Bank .................................... Loans to credit institutions ...................................................... Loans to customers ................................................................ Subordinated loans ................................................................. Deposits from Central Bank and credit institutions .................. Deposits from customers ........................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 27 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 18. Offsetting financial assets and financial liabilities Derivatives 30.9.2026 31.12.2025 2,662 5,304 ( 2,653) ( 5,003) ( 777) ( 1,553) ( 1,021) ( 3,216) ( 855) ( 234) Net amount after consideration of potential effect of netting arrangements 9 301 Derivative instruments and short positions 30.9.2026 31.12.2025 8,181 6,183 ( 5,113) ( 2,349) ( 777) ( 1,553) ( 4,336) ( 796) Net amount after consideration of potential effect of netting arrangements 3,068 3,834 19. Cash and balances with Central Bank 30.9.2026 31.12.2025 3,316 3,270 50,055 43,414 Cash and unrestricted balances with Central Bank 53,371 46,684 111 712 35,194 32,998 Cash and balances with Central Bank 88,676 80,394 20. Loans to credit institutions 30.9.2026 31.12.2025 64,588 69,660 12,402 7,247 1,131 3,102 Loans to credit institutions 78,121 80,009 Cash on hand .......................................................................................................................................................... Unrestricted balances with Central Bank .................................................................................................................. Mandatory reserve deposits with Central Bank ........................................................................................................ Money market loans ................................................................................................................................................ Balances pledged as collateral to Central Bank ....................................................................................................... Bank accounts ......................................................................................................................................................... Other loans .............................................................................................................................................................. At 30 September 2026 and year-end 2025, no netting occurred between financial assets and liabilities subject to enforceable master netting agreements and comparable arrangements, resulting in no offsetting. Financial assets ....................................................................................................................................................... Amounts not set off but subject to master netting arrangements and similar agreements ........................................ - Financial liabilities ................................................................................................................................................. - Cash collateral received ....................................................................................................................................... - Financial instruments collateral received .............................................................................................................. Financial liabilities .................................................................................................................................................... Amounts not set off but subject to master netting arrangements and similar agreements ........................................ - Cash collateral pledged ........................................................................................................................................ The following tables show the reconciliation of financial assets and financial liabilities subject to offsetting, enforceable master netting agreements and similar agreements. - Financial assets .................................................................................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 28 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 21. Derivative instruments and short positions At 30 September 2026 Assets Liabilities 486 58,835 3,947 131,150 152 8,069 771 23,324 1,378 5,546 134 2,425 99 7,171 665 12,982 218 17,614 1,303 45,723 329 8,150 23 10,427 Derivatives 2,662 105,385 6,843 226,031 - - 1,338 1,140 Total 2,662 105,385 8,181 227,171 At 31 December 2025 Assets Liabilities 3,198 194,846 1,820 100,269 117 12,705 25 2,500 1,239 6,522 1,231 8,223 65 9,488 446 22,398 490 44,409 712 30,602 195 3,537 41 5,821 Derivatives 5,304 271,507 4,275 169,813 - - 1,908 1,891 Total 5,304 271,507 6,183 171,704 Foreign exchange swaps ................................................................................................ Bond forwards ................................................................................................................ Cross-currency interest rate swaps ................................................................................ Equity forwards .............................................................................................................. Short positions in listed bonds ........................................................................................ Foreign exchange swaps ................................................................................................ Notional values related to liabilities Notional values related to assets Interest rate swaps ......................................................................................................... Notional values related to liabilities The Group applies hedge accounting only with respect to certain EUR-denominated interest rate swaps, whereby the Group pays floating rate interest and receives fixed-rate interest. The interest rate swaps are hedging the exposure of changes in the fair value of certain fixed- rate EUR-denominated bonds (see Note 28) arising from changes in EURIBOR interest rates. The Group applies fair value hedge accounting to the hedging relationships. At 30 September 2026 the total fair value of the interest rate swaps in the hedging relationship was negative and amounted to ISK 183 million (year-end 2025: positive ISK 1,771 million) and their total notional amount was ISK 75,934 million (year-end 2025: ISK 88,320 million). The Group uses derivatives to hedge currency exposure, interest rate risk in the banking book, and inflation risk. The Group carries relatively low indirect exposure due to margin trading with clients and the Group holds collateral for possible losses. Other derivatives in the Group held for trading or for other purposes are insignificant. Short positions are in bonds issued by the Government of Iceland and bonds issued by municipalities, banks, and public companies. As a primary dealer the Group has access to securities lending facilities provided by the Central Bank and other issuers. The majority of the securities lending facilities have a maturity of less than a year. Short positions in listed bonds ........................................................................................ Cross-currency interest rate swaps ................................................................................ Foreign exchange forwards ............................................................................................ Interest rate swaps ......................................................................................................... Bond forwards ................................................................................................................ Notional values related to assets Equity forwards .............................................................................................................. Foreign exchange forwards ............................................................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 29 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 22. Loans to customers Net At 30 September 2026 carrying Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 amount 688,927 11,658 8,044 ( 932) ( 190) ( 544) 706,963 217,828 9,169 8,963 ( 760) ( 198) ( 1,026) 233,976 84,326 11,225 11,862 ( 653) ( 287) ( 1,697) 104,776 18,953 649 - ( 43) ( 5) - 19,554 305 - - - - - 305 75,493 5,533 858 ( 250) ( 97) ( 94) 81,443 47,576 1,881 341 ( 218) ( 71) ( 131) 49,378 14,438 4 18 ( 23) ( 1) ( 4) 14,432 122,699 3,599 5,093 ( 234) ( 37) ( 955) 130,165 89,908 188 50 ( 75) ( 13) ( 12) 90,046 Loans to customers 1,360,453 43,906 35,229 ( 3,188) ( 899) ( 4,463) 1,431,038 Net At 31 December 2025 carrying Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 amount 638,416 8,986 7,277 ( 739) ( 158) ( 491) 653,291 188,115 21,531 1,972 ( 729) ( 263) ( 385) 210,241 81,441 18,875 942 ( 522) ( 447) ( 299) 99,990 16,366 666 - ( 27) ( 4) - 17,001 119 - - - - - 119 84,294 3,927 5,879 ( 201) ( 81) ( 1,800) 92,018 42,866 3,669 383 ( 147) ( 114) ( 60) 46,597 16,683 1 18 ( 25) - ( 4) 16,673 133,465 4,903 3,935 ( 248) ( 134) ( 654) 141,267 89,519 485 19 ( 105) ( 3) ( 6) 89,909 Loans to customers 1,291,284 63,043 20,425 ( 2,743) ( 1,204) ( 3,699) 1,367,106 23. Expected credit losses Total allowances for expected credit losses Stage 1 Stage 2 Stage 3 Total 18 - - 18 70 - - 70 3,188 899 4,463 8,550 7 3 - 10 575 94 309 978 At 30 September 2026 3,858 996 4,772 9,626 17 - - 17 57 - - 57 2,743 1,204 3,699 7,646 13 3 - 16 682 164 121 967 At 31 December 2025 3,512 1,371 3,820 8,703 Industrial and transportation ............................... Public sector and non-profit organisations .......... Energy ................................................................ Financial services ............................................... Investment companies ....................................... Energy ................................................................ Financial services ............................................... Industrial and transportation ............................... Investment companies ....................................... Public sector and non-profit organisations .......... Cash and balances with Central Bank ............................................................................ Other financial assets ..................................................................................................... Seafood .............................................................. Individuals .......................................................... Commerce and services ..................................... Gross carrying amount Expected credit losses Expected credit losses Individuals .......................................................... Seafood .............................................................. Loans to customers ........................................................................................................ Loans to credit institutions .............................................................................................. Commerce and services ..................................... Construction ....................................................... Construction ....................................................... Real estate ......................................................... Gross carrying amount Off-balance-sheet loan commitments and financial guarantees ..................................... Off-balance-sheet loan commitments and financial guarantees ..................................... Real estate ......................................................... Loans to customers ........................................................................................................ Other financial assets ..................................................................................................... Cash and balances with Central Bank ............................................................................ Loans to credit institutions .............................................................................................. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 30 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 23. Expected credit losses (continued) Loans to customers Stage 1 Stage 2 Stage 3 Total 2,743 1,204 3,699 7,646 692 ( 538) ( 154) - ( 405) 477 ( 72) - ( 58) ( 963) 1,021 - ( 729) 725 1,506 1,502 1,567 179 426 2,172 ( 622) ( 184) ( 1,865) ( 2,671) - ( 1) ( 475) ( 476) - - 106 106 - - ( 7) ( 7) - - 278 278 At 30 September 2026 3,188 899 4,463 8,550 3,496 975 3,349 7,820 820 ( 663) ( 157) - ( 720) 866 ( 146) - ( 80) ( 360) 440 - ( 2,421) 378 888 ( 1,155) 2,854 200 518 3,572 ( 1,206) ( 192) ( 633) ( 2,031) - - ( 1,008) ( 1,008) - - 139 139 - - 4 4 - - 305 305 At 31 December 2025 2,743 1,204 3,699 7,646 Off-balance-sheet loan commitments and financial guarantees Stage 1 Stage 2 Stage 3 Total 682 164 121 967 64 ( 24) ( 40) - ( 25) 33 ( 8) - ( 3) ( 18) 21 - ( 351) ( 55) 42 ( 364) 268 7 223 498 ( 60) ( 13) ( 50) ( 123) At 30 September 2026 575 94 309 978 565 32 314 911 63 ( 35) ( 28) - ( 30) 51 ( 21) - ( 4) ( 4) 8 - ( 462) 122 ( 90) ( 430) 935 34 90 1,059 ( 385) ( 36) ( 152) ( 573) At 31 December 2025 682 164 121 967 Transfer to Stage 2 ........................................................................................................ Write-offs* ...................................................................................................................... New loan commitments and financial guarantees .......................................................... Transfer to Stage 3 ........................................................................................................ Transfer to Stage 3 ........................................................................................................ Net remeasurement of loss allowance ............................................................................ Transfer to Stage 1 ........................................................................................................ Derecognitions and maturities ........................................................................................ New financial assets originated or purchased ................................................................ Transfer to Stage 2 ........................................................................................................ Transfer to Stage 1 ........................................................................................................ Transfer to Stage 3 ........................................................................................................ Net remeasurement of loss allowance ............................................................................ The following tables reconcile the opening and closing balances of accumulated expected credit losses for loans to customers, and off- balance-sheet loan commitments and financial guarantees. Foreign exchange ........................................................................................................... Transfer to Stage 2 ........................................................................................................ Recoveries of amounts previously written off ................................................................. *During the year financial assets amounting to ISK 1,116 million were written off but are still subject to enforcement activity. Derecognitions and maturities ........................................................................................ At 1 January 2026 .......................................................................................................... New loan commitments and financial guarantees .......................................................... Unwinding of interest ...................................................................................................... Transfer to Stage 3 ........................................................................................................ Net remeasurement of loss allowance ............................................................................ Transfer to Stage 1 ........................................................................................................ Transfer to Stage 2 ........................................................................................................ At 1 January 2026 .......................................................................................................... Write-offs* ...................................................................................................................... Recoveries of amounts previously written off ................................................................. *During the period financial assets amounting to ISK 523 million were written off but are still subject to enforcement activity. Unwinding of interest ...................................................................................................... At 1 January 2025 .......................................................................................................... At 1 January 2025 .......................................................................................................... Transfer to Stage 1 ........................................................................................................ Derecognitions and maturities ........................................................................................ Foreign exchange ........................................................................................................... Net remeasurement of loss allowance ............................................................................ Derecognitions and maturities ........................................................................................ New financial assets originated or purchased ................................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 31 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 24. Other assets 8,407 1,749 5,590 5,384 2,900 2,900 4,923 4,702 2,844 2,682 1,042 2,363 6,984 1,151 1,778 1,655 166 151 125 121 Other assets 34,759 22,858 25. Deposits from Central Bank and credit institutions 30.9.2026 31.12.2025 21,168 13,041 261 209 Deposits from Central Bank and credit institutions 21,429 13,250 Repurchase agreements with Central Bank ............................................................................................................. 30.9.2026 Receivables ............................................................................................................................................................. Unsettled securities transactions ............................................................................................................................. Prepaid expenses .................................................................................................................................................... Other assets ............................................................................................................................................................ Deferred tax assets .................................................................................................................................................. Deposits from credit institutions ............................................................................................................................... *Comparative figures have been changed. In the context of materiality, the Group has determined that the line items "Investments in associates", "Investment property", "Property and equipment", and "Intangible assets" do not warrant separate presentation as line items in the Consolidated Interim Statement of Financial Position. Accordingly, these items have been reclassified and are now included within "Other assets". 31.12.2025 Investment property* ................................................................................................................................................ Property and equipment* ......................................................................................................................................... Intangible assets* .................................................................................................................................................... Repossessed collateral ............................................................................................................................................ Investments in associates* ...................................................................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 32 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 26. Deposits from customers 30.9.2026 31.12.2025 967,108 854,319 111,151 114,376 Deposits from customers 1,078,259 968,695 Deposits from customers specified by owners Amount % of total Amount % of total 17,205 2% 10,556 1% 10,709 1% 7,611 1% 480,895 44% 416,957 43% 569,450 53% 533,571 55% Deposits from customers 1,078,259 100% 968,695 100% 27. Pledged assets 30.9.2026 31.12.2025 395,234 420,760 14,754 18,364 4,685 1,483 2,586 7,229 Pledged assets against liabilities 417,259 447,836 ( 151,268) ( 160,225) Pledged assets against liabilities on balance 265,991 287,611 Other financial assets pledged as collateral are pledged with the Central Bank to ensure the clearing of the Icelandic payment system. Pledged assets against Covered Bonds held by the Bank ....................................................................................... The Group has pledged assets against the issuance of Covered Bonds under Icelandic law, which are pledged on a pool of consumer mortgage loans. The Group owns Covered Bonds for its own use which accounts for a portion of the pledged assets. The carrying amount of these bonds at 30 September 2026 was ISK 135,192 million (year-end 2025: ISK 131,212 million). Municipalities ................................................................................................................. Companies ..................................................................................................................... Individuals ...................................................................................................................... Loans to customers pledged as collateral against Covered Bonds .......................................................................... 31.12.2025 Other financial assets pledged as collateral ............................................................................................................. Demand deposits and deposits with maturity up to 3 months ................................................................................... Term deposits with maturity of more than 3 months ................................................................................................. 30.9.2026 Central government and state-owned enterprises .......................................................... Cash and balances pledged as collateral against Covered Bonds ........................................................................... Loans to credit institutions and balances with Central Bank pledged as collateral against derivative instruments .... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 33 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 28. Debt issued and other borrowed funds First Maturity Currency and outstanding nominal issued Maturity type 30.9.2026 31.12.2025 2015 07.05.2026 Bullet Fixed CPI, 3.37% - 27,337 2022 10.05.2027 Bullet REIBOR 1M + 0.40% 8,978 8,974 2020 16.09.2027 Amortising Fixed, 2.50% 5,978 12,270 2022 20.09.2027 Bullet Fixed, 3.00% 32,787 44,531 2026 11.03.2028 Bullet REIBOR 1M + 0.15% 6,630 - 2019 11.08.2028 Amortising Fixed CPI, 2.20% 13,591 19,465 2023 10.05.2029 Bullet Fixed CPI, 2.72% 41,553 39,441 2017 31.05.2030 Bullet Fixed CPI, 3.00% 36,821 34,708 2025 03.06.2031 Bullet Fixed, 7.39% 20,479 13,094 2024 03.12.2032 Bullet Fixed CPI, 3.44% 26,471 13,482 Covered bonds 193,288 213,302 2023 13.04.2026 Bullet STIBOR 3M + 3.65% - 5,975 2023 08.11.2026 Bullet STIBOR 3M + 2.70% 4,005 6,846 2024 25.01.2027 Bullet NIBOR 3M + 2.35% 4,171 6,265 2024 25.01.2027 Bullet STIBOR 3M + 2.35% 974 6,823 2024 02.07.2027 Bullet NIBOR 3M + 1.20% 2,549 2,521 2024 02.07.2027 Bullet STIBOR 3M + 1.20% 3,655 4,111 2025 16.07.2027 Bullet NIBOR 3M + 0.98% 2,542 2,515 2025 16.07.2027 Bullet STIBOR 3M + 1.00% 2,433 2,737 2022 22.11.2027 Amortising REIBOR 1M + 1.25% 1,876 3,080 2022 22.11.2027 Bullet Fixed, 7.70% 7,376 6,964 2024 27.03.2028 Bullet Fixed, 4.625% 41,596 46,077 2025 17.07.2028 Bullet NIBOR 3M + 1.19% 1,271 1,258 2025 17.07.2028 Bullet STIBOR 3M + 1.20% 6,083 6,843 2023 21.12.2028 Bullet Fixed CPI, 4.48% 23,138 21,232 2026 11.06.2029 Bullet NIBOR 3M + 0.78% 7,548 - 2026 11.06.2029 Bullet STIBOR 3M + 0.80% 16,922 - 2025 20.09.2030 Bullet Fixed, 3.875% 40,538 45,377 2025 11.11.2032 Bullet Fixed, 3.75% 40,573 44,039 2024 14.11.2036 Bullet Fixed CPI, 3.50% 8,414 7,746 Unsecured bonds 215,664 220,409 3,523 - 10,538 10,882 Other borrowed funds 14,061 10,882 Debt issued and other borrowed funds 423,013 444,593 *The Group applies hedge accounting to these bond issuances and uses certain EUR-denominated interest rate swaps as hedging instruments (see Note 21). The interest rate swaps are hedging the exposure of the Group's changes in the fair value of these fixed-rate EUR-denominated bonds arising from changes in EURIBOR interest rates. The Group applies fair value hedge accounting to the hedging relationships. At 30 September 2026 the total carrying amount of these bond issuances amounted to ISK 74,383 million and included in the amount are fair value changes amounting to ISK 721 million. The Group has issued additional bonds for its own use, e.g. for the purpose of securities lending and repurchase agreements. These bond amounts are not included in the total. ISB CBI 28 - ISK 8,981 million ............................ ISB CBF 27 - ISK 8,940 million .......................... NOK 328 million ................................................. SEK 329 million .................................................. EUR 300 million** ............................................... The Group repurchased own bonds during the period amounting to ISK 20,996 million (first nine months of 2025: ISK 10,192 million). SEK 0 million ...................................................... ISB CB - EUR 244 million* ................................. Interest ISB CBI 26 - ISK 0 million .................................. SEK 300 million .................................................. NOK 200 million ................................................. EUR 300 million** ............................................... **These bond issuances are classified as being designated at fair value through profit or loss to eliminate accounting mismatch. At 30 September 2026 the total carrying amount of the bonds amounted to ISK 81,111 million and included in the amount are fair value changes amounting to ISK 2,233 million. SEK 80 million .................................................... SEK 1,400 million ............................................... Other unsecured loans ............................................................................................................................................. ISB CBI 30 - ISK 23,040 million .......................... ISK 7,600 million ................................................ Other secured loans ................................................................................................................................................ ISB CBI 29 - ISK 34,780 million .......................... ISB CBF 28 - ISK 6,620 million .......................... ISK 6,940 million ................................................ EUR 300 million* ................................................ ISB CB 31 - ISK 19,960 million ........................... ISK 1,867 million ................................................ ISB CBI 32 - ISK 23,460 million .......................... NOK 200 million ................................................. ISB CB 27 - ISK 5,671 million ............................. SEK 200 million .................................................. NOK 100 million ................................................. SEK 500 million .................................................. ISK 19,460 million .............................................. NOK 600 million ................................................. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 34 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 29. Subordinated loans First First Currency and outstanding nominal issued Maturity Callable 30.9.2026 31.12.2025 2022 17.04.2033 17.04.2028 1,526 1,526 2022 17.04.2033 17.04.2028 11,392 10,797 2023 12.09.2034 12.09.2029 11,209 10,776 2026 24.09.2036 24.09.2031 1,402 - Tier 2 subordinated loans 25,529 23,099 2021 Perpetual 28.09.2026 - 5,262 2025 Perpetual 25.11.2030 8,422 9,472 2025 Perpetual 25.11.2030 2,508 2,482 Additional Tier 1 subordinated loans 10,930 17,216 Subordinated loans 36,459 40,315 30. Other liabilities 30.9.2026 31.12.2025 2,178 - 4,512 3,655 3,288 3,036 978 966 2,459 5,064 5,294 1,623 3,152 2,651 Other liabilities 21,861 16,995 31. Custody assets 30.9.2026 31.12.2025 4,139,063 3,802,565 ISK 1,400 million ................................................ REIBOR 1M + 1.02% NIBOR 3M + 3.58%NOK 200 million ................................................. Fixed CPI, 5.80% Unsettled securities transactions ............................................................................................................................. Withholding tax ........................................................................................................................................................ Accruals ................................................................................................................................................................... Expected credit losses for off-balance-sheet loan commitments and financial guarantees ...................................... Custody assets - not managed by the Group ........................................................................................................... Lease liabilities ........................................................................................................................................................ STIBOR 3M + 4.75% Interest Sundry liabilities ....................................................................................................................................................... Liabilities of disposal groups classified as repossessed collateral ............................................................................ Fixed, 8.62% SEK 700 million .................................................. STIBOR 3M + 3.50% SEK 0 million ...................................................... Fixed CPI, 4.86% ISK 9,600 million ................................................ ISK 9,020 million ................................................ ISK 1,500 million ................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 35 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 32. Related party Guarantees Right-of-use Loans to Net & loan com- At 30 September 2026 asset customers Liabilities balance mitments - 1,061 941 120 78 2,289 2,921 2,611 2,599 159 Balances with related parties 2,289 3,982 3,552 2,719 237 Interest Interest Other Other 1 January to 30 September 2026 income expense income expense 138 40 4 67 243 13 2 1,542 Transactions with related parties 381 53 6 1,609 Guarantees Right-of-use Loans to Net & loan com- At 31 December 2025 asset customers Liabilities balance mitments - 992 570 422 70 2,476 3,459 2,783 3,152 155 Balances with related parties 2,476 4,451 3,353 3,574 225 Interest Interest Other Other 1 January to 30 September 2025 income expense income expense 63 27 2 24 353 16 2 1,504 Transactions with related parties 416 43 4 1,528 Board of Directors, key management personnel and other related parties .. Associated companies ................................................................................................... Board of Directors, key management personnel and other related parties .. Board of Directors, key management personnel and other related parties ..................... The following tables show the Group's balances and transactions with related parties. The boards of directors, key management personnel, their close family members, and any legal entities controlled by these individuals of each of the Bank, and the Bank's subsidiaries, are defined as related parties. Transactions with related parties were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third party counterparties. Associated companies ................................................................................ Associated companies ................................................................................................... At 30 September 2026 a total of ISK 1 million (year-end 2025: ISK 1 million) was recognised as Stage 1 expected credit losses on balances with related parties. Board of Directors, key management personnel and other related parties ..................... Associated companies ................................................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 36 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 33. Legal proceedings Grenjar ehf. 34. Events after the reporting period 35. Risk management Risk governance No events have arisen after the reporting period that require amendments or additional disclosures in the Condensed Consolidated Interim Financial Statements for the first nine months of 2026. The Bank and its subsidiaries are parties to legal proceedings and regulatory matters arising in the ordinary course of business. At 30 September 2026, the Group had three contingent liabilities relating to such matters. Two of these relate to the proceedings involving 105 Miðborg slhf. – ÍAV hf. and EC Clear ehf., both of which have previously been disclosed in the Group's financial statements. No provisions have been recognised in respect of those matters. The third contingent liability relates to the proceedings described below. The Group is exposed to various risk factors, and managing these risks is an integral part of its operations. More information about the Group's risk management and risk assessment processes is available in the unaudited Pillar 3 2025 Report, which is available on the Bank's website: www.islandsbanki.is. In September 2026, Grenjar ehf. brought legal proceedings against the Bank, claiming damages of approximately ISK 2,546 million, together with late-payment interest and legal costs or, alternatively, the invalidation of the pledges and the return of properties. The claims relate to properties pledged by Grenjar as collateral for the obligations of Skaginn 3X ehf., which was formerly part of the same group. Following the bankruptcy of Skaginn 3X, Grenjar transferred the properties to the Bank. Grenjar alleges that the Bank breached its duties of care and disclosure. The Bank considers the claims to be unfounded and has not recognised a provision in respect of this matter. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 37 Amounts are in ISK million
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36. Total credit Total credit Maximum exposure exposure exposure to Residential Commercial Cash & Vehicles & Other covered by not covered by Associated Collateral held against credit exposure credit risk real estate real estate Vessels securities equipment collateral collateral collateral ECL 88,676 - - - - - - - 88,676 18 78,121 - - - - - - - 78,121 70 147,651 - - - - - 31,484 31,484 116,167 - Loans to customers: 1,431,038 735,612 312,620 62,129 44,013 99,576 75,805 1,329,755 101,283 8,550 706,963 636,948 6,561 6 27 23,500 6 667,048 39,915 1,666 633,015 632,316 - - 20 - - 632,336 679 323 233,976 15,270 87,575 633 27,076 58,062 29,908 218,524 15,452 1,984 104,776 52,125 40,232 28 139 4,973 4,043 101,540 3,236 2,637 19,554 30 11,221 - - 112 3,887 15,250 4,304 48 305 - 299 - - - - 299 6 - 81,443 1,284 42,017 4 71 11,502 15,251 70,129 11,314 441 49,378 2,940 19,949 - 13,928 932 3,788 41,537 7,841 420 14,432 42 742 - - 51 - 835 13,597 28 130,165 26,673 97,917 - 2,681 281 91 127,643 2,522 1,226 90,046 300 6,107 61,458 91 163 18,831 86,950 3,096 100 7,939 - - - - - - - 7,939 10 Off-balance-sheet items: 230,844 16,603 39,044 6,758 10,114 - 16,071 88,590 142,254 978 21,638 1,883 7,557 50 19 - 2,701 12,210 9,428 214 209,206 14,720 31,487 6,708 10,095 - 13,370 76,380 132,826 764 Total 1,984,269 752,215 351,664 68,887 54,127 99,576 123,360 1,449,829 534,440 9,626 Seafood ................................................................................... Real estate .............................................................................. Notes to the Condensed Consolidated Interim Financial Statements Maximum credit exposure and collateral At 30 September 2026 - Thereof mortgages ............................................................. Commerce and services .......................................................... The following tables show the maximum exposure to credit risk by collateral held against those exposures that are subject to IFRS 9 impairment requirements. Energy ..................................................................................... Construction ............................................................................ Cash and balances with Central Bank ......................................... Loans to credit institutions ........................................................... Bonds and debt instruments ....................................................... Individuals ................................................................................ Other financial assets .................................................................. Financial guarantees ................................................................ Loan commitments .................................................................. Maximum credit exposure for off-balance-sheet items reflects the maximum amount, not taking into account the Group's ability to reduce its loan commitments before the current undrawn amount is fully utilised by the customer. Financial services .................................................................... Industrial and transportation ..................................................... Investment companies ............................................................. Public sector and non-profit organisations ............................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 38 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 36. Total credit Total credit Maximum exposure exposure exposure to Residential Commercial Cash & Vehicles & Other covered by not covered by Associated Collateral held against credit exposure credit risk real estate real estate Vessels securities equipment collateral collateral collateral ECL 80,394 - - - - - - - 80,394 17 80,009 - - - - - - - 80,009 57 132,559 - - - - - 34,844 34,844 97,715 - Loans to customers: 1,367,106 698,066 314,558 66,424 43,835 82,152 77,806 1,282,841 84,265 7,646 653,291 588,786 5,586 4 155 19,890 131 614,552 38,739 1,388 584,723 584,165 - - 150 - - 584,315 408 246 210,241 15,741 79,270 824 20,153 50,597 31,001 197,586 12,655 1,377 99,990 53,907 35,571 41 784 3,326 3,817 97,446 2,544 1,268 17,001 3 10,731 - 3,162 137 - 14,033 2,968 31 119 106 - - - - - 106 13 - 92,018 1,139 57,328 - 4,219 7,558 17,965 88,209 3,809 2,082 46,597 2,256 16,565 - 14,362 275 7,014 40,472 6,125 321 16,673 42 801 - - 21 11 875 15,798 29 141,267 35,814 102,693 - 948 214 392 140,061 1,206 1,036 89,909 272 6,013 65,555 52 134 17,475 89,501 408 114 3,452 - - - - - - - 3,452 16 Off-balance-sheet items: 239,817 16,321 41,341 8,041 13,865 11 19,170 98,749 141,068 967 22,246 2,303 7,399 5 1,446 - 3,404 14,557 7,689 297 217,571 14,018 33,942 8,036 12,419 11 15,766 84,192 133,379 670 Total 1,903,337 714,387 355,899 74,465 57,700 82,163 131,820 1,416,434 486,903 8,703 At 31 December 2025 Maximum credit exposure for off-balance-sheet items reflects the maximum amount, not taking into account the Group's ability to reduce its loan commitments before the current undrawn amount is fully utilised by the customer. Seafood ................................................................................... Other financial assets .................................................................. Financial guarantees ................................................................ Loan commitments .................................................................. Cash and balances with Central Bank ......................................... Real estate .............................................................................. Loans to credit institutions ........................................................... Bonds and debt instruments......................................................... Individuals ................................................................................ - Thereof mortgages ............................................................. Commerce and services .......................................................... Construction ............................................................................ Energy ..................................................................................... Financial services .................................................................... Industrial and transportation ..................................................... Investment companies ............................................................. Public sector and non-profit organisations ............................... Maximum credit exposure and collateral (continued) Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 39 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 37. Credit quality of financial assets At 30 September 2026 Loans to customers: Stage 1 Stage 2 Stage 3 Total 567,923 1,085 - 569,008 597,479 8,148 - 605,627 177,139 22,823 - 199,962 16,468 10,100 - 26,568 - - 35,229 35,229 1,444 1,750 - 3,194 1,360,453 43,906 35,229 1,439,588 ( 3,188) ( 899) ( 4,463) ( 8,550) Net carrying amount 1,357,265 43,007 30,766 1,431,038 Off-balance-sheet loan commitments and financial guarantees: Stage 1 Stage 2 Stage 3 Total 103,236 79 - 103,315 74,685 424 - 75,109 44,634 2,424 - 47,058 2,479 251 - 2,730 - - 2,073 2,073 821 716 - 1,537 225,855 3,894 2,073 231,822 ( 575) ( 94) ( 309) ( 978) Total 225,280 3,800 1,764 230,844 The following tables provide the gross carrying amount of loans and credit risk exposure on loan commitments and financial guarantees. Amounts are broken down by risk class and the method by which their respective credit loss allowances (ECL) are calculated, i.e. Stage 1, 2 and 3. The Group uses internal rating models to assess the default probability of corporate and retail customers. The models assign each customer to one of ten risk classes. One risk class is for customers in default (risk class 10), and nine risk classes are for performing customers (risk classes 1-9). Risk classes are assigned on customer level and not facility level. Risk classes 1-4 represent low risk, risk classes 5-6 moderate risk, risk classes 7-8 increased risk, risk class 9 high risk, and risk class 10 represents customers that are in default. Unrated are customers that are yet to be rated. Risk class 10 ................................................................................................................... Unrated ........................................................................................................................... Expected credit losses .................................................................................................... Unrated ........................................................................................................................... Expected credit losses .................................................................................................... Risk class 1-4 .................................................................................................................. Risk class 5-6 .................................................................................................................. Risk class 7-8 .................................................................................................................. Risk class 9 ..................................................................................................................... Risk class 1-4 .................................................................................................................. Risk class 5-6 .................................................................................................................. Risk class 7-8 .................................................................................................................. Risk class 9 ..................................................................................................................... Risk class 10 ................................................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 40 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 37. Credit quality of financial assets (continued) At 31 December 2025 Loans to customers: Stage 1 Stage 2 Stage 3 Total 533,086 636 - 533,722 576,190 15,204 - 591,394 165,866 38,582 - 204,448 15,726 8,328 - 24,054 - - 20,425 20,425 416 293 - 709 1,291,284 63,043 20,425 1,374,752 ( 2,743) ( 1,204) ( 3,699) ( 7,646) Net carrying amount 1,288,541 61,839 16,726 1,367,106 Off-balance-sheet loan commitments and financial guarantees: Stage 1 Stage 2 Stage 3 Total 112,979 14 - 112,993 86,892 1,104 - 87,996 34,834 2,099 - 36,933 1,454 248 - 1,702 - - 698 698 461 1 - 462 236,620 3,466 698 240,784 ( 682) ( 164) ( 121) ( 967) Total 235,938 3,302 577 239,817 Risk class 1-4 .................................................................................................................. Risk class 5-6 .................................................................................................................. Risk class 5-6 .................................................................................................................. Risk class 7-8 .................................................................................................................. Risk class 9 ..................................................................................................................... Risk class 10 ................................................................................................................... Unrated ........................................................................................................................... Expected credit losses .................................................................................................... Risk class 7-8 .................................................................................................................. Risk class 9 ..................................................................................................................... Risk class 10 ................................................................................................................... Unrated ........................................................................................................................... Expected credit losses .................................................................................................... Risk class 1-4 .................................................................................................................. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 41 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 38. At 30 September 2026 Gross Expected Gross Expected Gross Expected Gross Expected carrying credit carrying credit carrying credit carrying credit amount losses amount losses amount losses amount losses 3,733 ( 17) 7,893 ( 49) 2,756 ( 128) 14,382 ( 194) 1,144 ( 14) 11,997 ( 332) 16,125 ( 2,847) 29,266 ( 3,193) Total 4,877 ( 31) 19,890 ( 381) 18,881 ( 2,975) 43,648 ( 3,387) At 31 December 2025 Gross Expected Gross Expected Gross Expected Gross Expected carrying credit carrying credit carrying credit carrying credit amount losses amount losses amount losses amount losses 3,275 ( 9) 5,626 ( 40) 2,290 ( 117) 11,191 ( 166) 1,419 ( 7) 17,544 ( 347) 6,096 ( 1,285) 25,059 ( 1,639) Total 4,694 ( 16) 23,170 ( 387) 8,386 ( 1,402) 36,250 ( 1,805) 39. At 30 September 2026 Groups of connected clients: Before After 89% 8% 11% 11% 10% 10% 10% 10% At 31 December 2025 Groups of connected clients: Before After 78% 8% 11% 11%Group 2 ..................................................................................................................................................................... Group 1 ..................................................................................................................................................................... Group 1 ..................................................................................................................................................................... Large exposures disclosure When the Group's total exposure to a group of connected clients is 10% or higher of the Group's Tier 1 capital it is considered a large exposure. Both on-balance-sheet and off-balance-sheet items from all types of financial instruments are included in the exposure as defined by EU regulation no. 575/2013 on prudential requirements for financial undertakings (CRR). The Group has internal criteria that define connections between clients. These criteria reflect the Group's interpretation of CRR, where groups of connected clients are defined. The exposure is evaluated both before and after credit risk mitigating effects according to the aforementioned regulation. After mitigating effects, the Group had three large exposures at 30 September 2026 (year-end 2025: one). No large exposure is above the maximum 25% large exposure limit set by the law. The Group's largest exposure before eligible credit risk mitigating effects is the Government of Iceland. The largest part of the exposure is due to the Government of Iceland's bonds in the Group's liquidity portfolio. Group 2 ..................................................................................................................................................................... Group 3 ..................................................................................................................................................................... Group 4 ..................................................................................................................................................................... When restructuring or modification measures are believed to be more appropriate than collection procedures, the Group offers several debt relief measures and restructuring frameworks for customers in financial difficulties. These forbearance measures include temporary payment holidays, extension of loan terms, capitalisation of arrears, and waiving of covenants. The relationship between forbearance and Stages is discussed in Note 62.3 in the Consolidated Financial Statements for the year 2025. The following tables provide a summary of the Group's forborne assets. Companies ................................................. Individuals .................................................. Companies ................................................. Individuals .................................................. Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Forbearance Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 42 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 40. Liquidity coverage and net stable funding ratio Net stable funding ratio 30.9.2026 31.12.2025 122% 127% Liquidity coverage ratio 30.9.2026 31.12.2025 179% 203% 133% 129% 478% 733% ISK EUR USD Other Total 87,048 625 304 368 88,345 77,304 33,396 - 13,825 124,525 39,438 3,528 11 277 43,254 203,790 37,549 315 14,470 256,124 3 40,202 30,349 2,133 72,687 203,793 77,751 30,664 16,603 328,811 ISK EUR USD Other Total 78,036 594 313 480 79,423 71,617 36,612 - 10,606 118,835 37,302 3,916 1 225 41,444 186,955 41,122 314 11,311 239,702 2 42,069 24,969 2,663 69,703 186,957 83,191 25,283 13,974 309,405 Balance with financial institutions .................................................................. Liquidity reserve At 31 December 2025 Cash and balances with Central Bank ........................................................... Level 2 liquid assets ...................................................................................... High quality liquidity assets Level 2 liquid assets ...................................................................................... High quality liquidity assets Balance with financial institutions .................................................................. Liquidity reserve The following tables show the composition of the Group's liquidity reserve. Level 1 bonds and debt instruments in ISK are eligible as collateral with the Central Bank. At 30 September 2026 Cash and balances with Central Bank ........................................................... Level 1 bonds and debt instruments .............................................................. Level 1 bonds and debt instruments .............................................................. According to the rules, the minimum LCR ratio that the Group is required to maintain remains 100% for the total LCR. The requirement for LCR in EUR is 80% and in ISK the requirement is 50%. The Group is required to maintain a 100% minimum NSFR ratio. For all currencies ...................................................................................................................................................... For all currencies ...................................................................................................................................................... ISK ............................................................................................................................................................................ EUR .......................................................................................................................................................................... Key measures for the assessment of liquidity risk are the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The Central Bank of Iceland, which is the main supervisory authority regarding liquidity risk, has incorporated the LCR and the NSFR based on the CRD IV standards into the rules on liquidity ratios and the rules on funding ratios. In addition, the Group complies with the liquidity coverage ratio rules no. 1520/2022. The following tables show the NSFR and the LCR for the Group at 30 September 2026 and 31 December 2025. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 43 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 41. Interest rate risk 80 ( 80) 61 ( 61) 100 ( 100) 60 ( 60) 180 ( 180) 121 ( 121) At 30 September 2026 0-3 3-12 1-2 2-5 5-10 Over 10 months months years years years years Total ( 26) ( 419) ( 608) ( 1,346) 1,289 668 ( 442) ( 17) ( 250) ( 142) ( 1,291) ( 50) - ( 1,750) 161 ( 133) ( 118) 79 54 - 43 ( 30) ( 11) - - - - ( 41) 19 ( 3) ( 54) ( 64) - - ( 102) ( 4) ( 22) ( 2) ( 12) - - ( 40) 14 ( 2) ( 6) ( 217) - - ( 211) Total 117 ( 840) ( 930) ( 2,851) 1,293 668 ( 2,543) At 31 December 2025 0-3 3-12 1-2 2-5 5-10 Over 10 months months years years years years Total ( 26) ( 155) ( 825) 1,015 639 632 1,280 ( 33) ( 110) ( 327) ( 457) 451 - ( 476) 119 ( 142) 34 ( 86) 62 - ( 13) ( 17) ( 22) - - - - ( 39) 38 ( 39) ( 17) ( 142) - - ( 160) 2 ( 10) ( 21) ( 36) - - ( 65) - ( 23) - - - - ( 23) Total 83 ( 501) ( 1,156) 294 1,152 632 504 Interest rate risk is defined as the current or prospective risk to earnings or capital arising from adverse movements in interest rates. ISK, indexed .............................................................. Downward shift Upward shift Downward shift Upward shift Currency ISK, indexed .................................................................................................................... ISK, non-indexed ............................................................................................................. Total Interest rate risk in the banking book Interest rate risk in the trading book The following table shows the interest rate sensitivity of the Group's trading book from a parallel 100 basis points change in all yield curves. Other ......................................................................... Currency ISK, indexed .............................................................. ISK, non-indexed ....................................................... EUR .......................................................................... USD .......................................................................... Interest rate risk in the banking book arises from the Group's core banking activities and reflects the risk that changes in interest rates adversely affect the Group's earnings or the economic value of its assets, liabilities and off-balance-sheet positions. The exposure is primarily driven by differences in repricing dates and reference rates between assets and liabilities. In the third quarter of 2026, the Group updated its methodology for calculating interest rate sensitivity in the banking book from a duration- based approach to a cash flow-based approach. The change improves the measurement accuracy by using cash flow revaluation rather than a duration-based approximation. Comparative figures have been restated to reflect the updated methodology. Sensitivity analysis for interest rate risk in the banking book ISK, non-indexed ....................................................... EUR .......................................................................... USD .......................................................................... SEK .......................................................................... NOK .......................................................................... Other ......................................................................... SEK .......................................................................... NOK .......................................................................... Currency Interest rate sensitivity in the banking book is estimated using contractual cash flows, adjusted for behavioural assumptions relating to applicable non-maturing deposits and prepayments, with callable debt issued assumed to be redeemed at the first applicable call date. Cash flows and other assumptions are held constant for the sensitivity calculation. The estimates are calculated as the change in present value resulting from a parallel 100-basis-point upward shift in all yield curves. Effect on profit before tax The following tables present the estimated change in the economic value of the banking book associated with a parallel upward shift of 100 basis points in all yield curves, categorised by repricing time band. Sensitivity analysis for trading bonds and debt instruments 30.9.2026 31.12.2025 Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 44 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 42. Currency risk At 30 September 2026 Other Total foreign foreign EUR USD SEK NOK currencies currencies 625 304 36 110 223 1,298 44,224 30,342 62 172 1,896 76,696 40,484 - 9,470 7,318 - 57,272 151,578 21,045 7,203 4,738 18,177 202,741 41 492 843 261 169 1,806 - 164 - - 185 349 Total assets 236,952 52,347 17,614 12,599 20,650 340,162 496 922 5 96 49 1,568 76,877 47,570 683 3,450 9,237 137,817 163,756 10,503 34,085 18,069 - 226,413 - - 8,422 2,508 - 10,930 - 162 25 - 203 390 Total liabilities 241,129 59,157 43,220 24,123 9,489 377,118 Net on-balance-sheet position ( 4,177) ( 6,810) ( 25,606) ( 11,524) 11,161 ( 36,956) Net off-balance-sheet position 1,557 7,333 25,455 11,606 ( 10,967) 34,984 Net position ( 2,620) 523 ( 151) 82 194 ( 1,972) At 31 December 2025 Other Total foreign foreign EUR USD SEK NOK currencies currencies 594 313 40 116 323 1,386 46,594 27,557 261 340 2,057 76,809 42,698 331 8,256 7,022 - 58,307 134,067 24,914 4,918 1,893 13,696 179,488 38 1,754 1,094 190 387 3,463 83 114 - - - 197 Total assets 224,074 54,983 14,569 9,561 16,463 319,650 2,121 1,354 6 60 52 3,593 47,569 42,668 1,071 5,120 10,893 107,321 180,530 10,903 33,340 12,545 - 237,318 - - 14,734 2,482 - 17,216 - 51 31 - 315 397 Total liabilities 230,220 54,976 49,182 20,207 11,260 365,845 Net on-balance-sheet position ( 6,146) 7 ( 34,613) ( 10,646) 5,203 ( 46,195) Net off-balance-sheet position 7,282 ( 1,088) 34,847 10,561 ( 4,831) 46,771 Net position 1,136 ( 1,081) 234 ( 85) 372 576 The analysis of the Group's foreign currency exposure presented below is based on the contractual currency of the underlying balance sheet items. Debt issued designated at fair value through profit or loss to eliminate accounting mismatch is presented as nominal amount plus accrued interest, adjusted for accumulated fair value changes attributable to changes in credit risk. Additionally, there are off-balance- sheet items that carry currency risk and are included in the total currency imbalance. The off-balance-sheet amounts below represent the notional amounts of derivatives and unsettled spot agreements. Cash and balances with Central Bank ......................................... Loans to credit institutions ........................................................... Cash and balances with Central Bank ......................................... Loans to credit institutions ........................................................... Bonds and debt instruments ........................................................ Loans to customers ..................................................................... Shares and equity instruments .................................................... Other assets ................................................................................ Deposits from credit institutions .................................................. Bonds and debt instruments ........................................................ Loans to customers ..................................................................... Shares and equity instruments .................................................... Other assets ................................................................................ Deposits from credit institutions .................................................. Deposits from customers ............................................................ Debt issued and other borrowed funds ........................................ Subordinated loans ..................................................................... Other liabilities ............................................................................ Deposits from customers ............................................................ Debt issued and other borrowed funds ........................................ Subordinated loans ..................................................................... Other liabilities ............................................................................ Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 45 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 43. Inflation risk 30.9.2026 31.12.2025 1,343 2,277 533,210 507,694 Total CPI-linked assets 534,553 509,971 125,584 120,742 149,988 163,411 22,601 21,573 1,092 4,493 569 180 Total CPI-linked liabilities 299,834 310,399 CPI imbalance 234,719 199,572 44. Capital management Capital requirement calculations for credit risk, market risk and operational risk are based on the standardised approach, the simplified standardised approach is used for counterparty credit risk, and the reduced basic approach is used for the credit valuation adjustment. According to the latest SREP report from the FSA, the Group shall as of 30 June 2026 maintain an additional capital requirement of 1.8% of the REA. The Group's overall capital requirement, taking into account capital buffers, is 19.5%. The Group's capital target includes a 1-3% management buffer on top of the overall capital requirement. The Group's regulatory capital requirement is calculated according to EU regulation no. 575/2013 as implemented into Icelandic law through the Act on Financial Undertakings no. 161/2002. CRR 3 was implemented in Iceland in December 2025 and had a significant impact on the Group's risk exposure amount (REA) and capital ratios. In addition, in January 2026, the Central Bank approved the adoption of a loan splitting approach for exposures secured by mortgages, where the underlying collateral consists of income-producing real estate. The implementation of this approach led to a 2% reduction in the Group's REA. Deposits from customers ...................................................................................................................................... Debt issued and other borrowed funds .................................................................................................................. Subordinated loans ............................................................................................................................................... Off-balance-sheet exposures ................................................................................................................................ Short positions ...................................................................................................................................................... The Group considers inflation risk to be the most significant market risk factor. The Group is exposed to inflation risk since the value of CPI- linked assets exceeds CPI-linked liabilities. The value of these assets and liabilities changes according to changes in the CPI at any given time and all changes in the CPI affect profit and loss. A 1% increase in the index would lead to an ISK 2,347 million increase in profit before tax and a 1% decrease would lead to a corresponding decrease, other risk factors held constant. Bonds and debt instruments .................................................................................................................................. Loans to customers ............................................................................................................................................... The minimum leverage ratio for Icelandic financial institutions is 3%. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 46 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 44. Capital management (continued) 30.9.2026 31.12.2025 Own funds 8,273 8,900 26,380 42,472 5,715 7,201 175,025 166,786 ( 7,269) - 1,187 913 ( 17,434) ( 16,671) ( 166) ( 151) ( 2,107) ( 1,822) ( 53) ( 52) CET1 capital 189,551 207,576 10,930 17,216 Tier 1 capital 200,481 224,792 25,529 23,099 Total capital base 226,010 247,891 30.9.2026 31.12.2025 Risk exposure amount 956,397 939,768 5,292 4,093 1,633 1,375 88,552 88,552 Total risk exposure amount (REA) 1,051,874 1,033,788 Capital ratios 18.0% 20.1% 19.1% 21.7% 21.5% 24.0% Capital ratios including third quarter profit* 18.4% 20.1% 19.4% 21.7% 21.8% 24.0% Leverage ratio Exposure amount 1,803,483 1,718,921 60,588 68,948 7,596 9,852 Total exposure measure (TEM) 1,871,667 1,797,721 200,481 224,792 Leverage ratio 10.7% 12.5% Leverage ratio including third quarter profit* 10.9% 12.5% Ordinary share capital ........................................................................................................................................... Share premium ..................................................................................................................................................... Reserves ............................................................................................................................................................... Retained earnings ................................................................................................................................................. Third quarter profit ................................................................................................................................................. The following tables show the capital base, the risk exposure amount (REA), the resulting capital ratios, and the leverage ratio for the Group at 30 September 2026 and 31 December 2025. Total capital ratio ................................................................................................................................................... On-balance-sheet exposures ................................................................................................................................. Off-balance-sheet exposures ................................................................................................................................ Derivative exposures ............................................................................................................................................. Tier 1 capital ......................................................................................................................................................... Due to operational risk .......................................................................................................................................... CET1 ratio ............................................................................................................................................................. Tier 1 ratio ............................................................................................................................................................. Total capital ratio ................................................................................................................................................... CET1 ratio ............................................................................................................................................................. Tier 1 ratio ............................................................................................................................................................. *Where the capital and leverage ratios are shown including third quarter profit, ISK 3,635 million has been subtracted from the capital base as is expected from the 50% dividend policy. Due to credit valuation adjustment ........................................................................................................................ Fair value changes due to own credit standing ...................................................................................................... Foreseeable dividend payment and approved buyback* ........................................................................................ Tax assets ............................................................................................................................................................. Intangible assets ................................................................................................................................................... Insufficient coverage for non-performing exposures .............................................................................................. Additional Tier 1 capital ......................................................................................................................................... Tier 2 capital ......................................................................................................................................................... *The Bank's AGM held on 19 March 2026 authorises the Board of Directors to acquire on behalf of the Bank up to 10% of issued share capital of the Bank. Furthermore, the Central Bank has granted the Bank permission to buy back own shares and reduce its share capital. At 30 September 2026, ISK 10 billion remained of approved buybacks and is therefore deducted from the CET1 capital. Due to credit risk ................................................................................................................................................... Due to market risk ................................................................................................................................................. Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 47 Amounts are in ISK million
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Notes to the Condensed Consolidated Interim Financial Statements 45. 30.9.2026 31.12.2025 Own funds and eligible liabilities 226,010 247,891 198,582 207,145 Own funds and eligible liabilities 424,592 455,036 Ratios of own funds and eligible liabilities 40.4% 44.0% 22.7% 25.3% Minimum requirement for own funds and eligible liabilities (MREL) The Group is required to meet the minimum requirement for own funds and eligible liabilities (MREL) at all times in accordance with Directive 2014/59/EU and Directive (EU) 2019/879 as implemented into Icelandic law by Act No. 70/2020 on the Resolution of Credit Institutions and Investment Firms. The Resolution Authority of the Central Bank of Iceland (the Resolution Authority) is responsible for determining the Group's MREL. In the annual MREL decision from the Resolution Authority, the Group's MREL was set at 18.8% of the risk exposure amount (REA) and 6.0% of the total exposure measure (TEM). The decision further requires that from 4 October 2027 a portion of the Group's MREL must be met with subordinated instruments. The subordination portion of the MREL will be set at 13.5% of REA from 4 October 2027. At 30 September 2026 the Group exceeds the future required subordination portion of the MREL. The MREL is published irrespective of the value of the combined buffer requirement, which must be met in parallel with the MREL as a percentage of REA. Taking into account the Group's combined buffer requirement as at 30 September 2026, the resulting MREL as a percentage of REA requirement at 30 September 2026 was 28.5%. Following the annual review of the Group's MREL, the Group expects its MREL requirement as a percentage of REA to increase from 18.8% to 19.6%, reflecting the Group's updated total SREP own funds requirement of 9.8%. The updated requirement had not taken effect at 30 September 2026. Own funds ............................................................................................................................................................. Eligible liabilities .................................................................................................................................................... Own funds and eligible liabilities as a % of REA .................................................................................................... Own funds and eligible liabilities as a % of TEM ................................................................................................... Íslandsbanki hf. Condensed Consolidated Interim Financial Statements third quarter 2026 48 Amounts are in ISK million
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Íslandsbanki hf. • Hagasmári 3 • 201 Kópavogur • Iceland • Reg.no. 491008-0160