Interim report
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Condensed Consolidated Interim Financial Statements 30 September 2026 Unaudited Unaudited
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 page 3 4 7 8 9 10 12 14 Contents Consolidated Interim Income Statement ............................................................................................................................................... Consolidated Interim Statement of Cash Flows ..................................................................................................................................... Arion Bank highlights ............................................................................................................................................................................ Endorsement and statement by the Board of Directors and the CEO .................................................................................................... Consolidated Interim Statement of Financial Position ........................................................................................................................... Consolidated Interim Statement of Comprehensive Income .................................................................................................................. Consolidated Interim Statement of Changes in Equity .......................................................................................................................... Notes to the Condensed Consolidated Interim Financial Statements .................................................................................................... 2
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Arion Bank highlights 30 September 2026 9M 2026 15.1% Return on Equity* 9M 2026 39.2% Total cost-to-core income 18.5% CET1 ratio Return on equity* (%) Net interest margin (%) Total cost-to-Core income ratio (%) CET1 ratio (%) LCR ratio (%) Total assets (ISK bn) Moody’s Long term: A3 Covered bond: Aa1 Outlook: Stable d d s s s o s o s d s y o d s s o od o d ood s s d s s d s y y d Loans to customers by sector *Return on equity attributable to shareholders of Arion Bank Unaudited
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Operations during the period Q3 2026 9M 2026 Arion Bank's medium-term financial targets Return on equity attributable to shareholders of Arion Bank 16.3% 15.1% Exceed 13% Core operating income / REA 7.9% 8.0% Exceed 7.2% Insurance revenue growth (YoY) 4.4% 5.8% Exceed weighted average growth of competitors (3.7% in H1 2026 YoY) Combined ratio 85.7% 91.4% Below 95% Total cost-to-core income ratio 37.1% 39.2% Below 45% Economic outlook A bill proposing an increase in the bank levy rate from 0.145% to 0.254% is currently under consideration by the Icelandic Parliament. If enacted, the increase would result in an estimated additional expense of approximately ISK 1,700 million for the financial year 2026. The full amount would be recognized in the fourth quarter of 2026. Had the additional expense been recognized in the third quarter, the ROE would have been 15.5% for the third quarter and 14.3% for the first nine months. Arion Bank's medium-term financial targets compared with the operational results for the period The Icelandic economy continues to cool as the prolonged period of restrictive monetary policy works its way through to domestic demand. GDP was lower than expected in the second quarter, contracting by 1.1% year-on-year after growth of 3.8% in the first quarter. Net trade was the main drag, with exports falling by 7.3% on the back of a 13.8% decline in goods exports. Imports rose by 0.2%, supported by record investment in data centre-related industries. The export outlook for next year has improved slightly, supported by Iceland’s position as a commodity exporter. Seafood prices are at record highs, aluminium prices remain elevated and the terms of trade have improved despite higher oil prices. Aluminium production is back at full capacity, and data centres are beginning to generate substantial export revenues, while salmon farming is heading for a record year. Fisheries, by contrast, face reduced catch quotas once again. Tourist arrivals are expected to be broadly unchanged, with the outlook depending largely on air capacity to Iceland. Dividend pay-out ratio Arion Bank's balance sheet grew by 7.2% from year-end 2025. Loans to customers increased by 6.4%, where loans to individuals increased by 4.7% and loans to corporates by 8.1%. Deposits increased by 10.1%, primarily from individuals and SMEs with low LCR outflow weight. Shareholders’ equity amounted to ISK 216.4 billion at the end of the period. Capital distribution amounted to ISK 25.6 billion in the first nine months of 2026, through dividends and buybacks of own shares. 320 bps 50% 100-250 bps management buffer (~16.3 - 17.8%) Pay-out ratio of approximately 50% of net earnings attributable to shareholders through either dividends or buyback of the Bank's shares or a combination of both 320 bps 50% Endorsement and statement by the Board of Directors and the CEO The Condensed Consolidated Interim Financial Statements of Arion Bank for the period ended 30 September 2026 include the Condensed Consolidated Interim Financial Statements of Arion Bank ("the Bank") and its subsidiaries, together referred to as "the Group". Income Statement Net earnings amounted to ISK 8.7 billion for the third quarter and ISK 24.1 billion for the first nine months of the year. Net earnings amounted to ISK 8.2 billion for the third quarter of 2025 and ISK 26.3 billion for the first nine months, with ISK 24.4 billion attributable to the shareholders of Arion Bank. Return on equity was 16.3% for the third quarter and 15.1% for the first nine months of 2026. Earnings per share were ISK 6.42 for the quarter and ISK 17.79 for the first nine months of 2026, compared with ISK 5.95 and ISK 17.55 in the previous year. Core income, defined as net interest income, net commission income and insurance service results (excluding opex), increased by 10.6%, compared with the third quarter of the previous year. Net interest income increased by 14.4%, compared with the third quarter of the previous year, and the net interest margin was 3.5%, compared with 3.3% in the third quarter of 2025. Net commission income decreased by 5.6% between years, with corporate and investment banking activity lower than in recent quarters, reflecting the more transactional nature of fees. The operation of Vördur contributed a standalone profit of ISK 0.4 billion in the quarter, compared with ISK 0.7 billion in the third quarter of 2025. Net financial income was negative by ISK 0.1 billion for the third quarter. Operating expenses, including operating expenses of the insurance operation, increased by 13.0% compared with the previous year or ISK 0.9 billion. The increase was partly driven by rise of ISK 0.6 billion in salary and related expenses due to the 3.5% collective wage increase from January 2026 and ISK 0.2 billion lay-off costs. Inflation in the third quarter measured 5.3% between years. The Group had 890 full-time equivalent positions at the end of September, compared with 901 at the end of 2025. The cost-to- income ratio in the third quarter was 34.3%, compared with 32.6% in the same quarter of 2025, while the total cost-to-core income ratio was 37.1%, compared with 36.3% in 2025. Impairments were calculated at 27bps for the quarter. The effective income tax rate was 26.6%. Domestic demand is also losing momentum. Labour market slack has increased further, with private sector employment falling, firms scaling back hiring plans and unemployment rising to 4% from 3.5% a year ago. Household balance sheets remain relatively sound, but high interest rates, persistent inflation and falling real house prices are weighing on spending. Payment card turnover grew by just 0.7% year-on-year in Q3, down from 1.3% in Q2, pointing to weaker and potentially negative consumption growth ahead. The impact of tight monetary policy is most visible in the housing market, where a growing stock of unsold homes, longer selling times and falling real prices point to weakening demand amid high financing costs. Arion Research expects real house prices to keep declining until mid-2028. Balance Sheet CET1 ratio above regulatory capital requirements 4
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Endorsement and statement by the Board of Directors and the CEO Outlook for the Group Funding and liquidity Capital adequacy and dividends Ownership of Arion Bank Risk management Despite these clear signs of cooling, inflation has remained well above 5% throughout the year and has proved more persistent than expected, driven by higher public levies and rising oil prices amid the conflict in the Middle East. The strong króna has helped contain imported inflation, while wage growth continues to sustain domestic price pressures, particularly in services. There have, however, been positive developments. The major collective wage agreements have held and been extended, removing a key source of uncertainty, and companies and institutions have frozen prices or limited increases to the CBI’s inflation target. Although inflation expectations remain elevated and poorly anchored, interest rates are expected to remain unchanged until next year, when inflation is set to fall rapidly, paving the way for rate cuts. The Bank’s funding position remained strong throughout the quarter. There was no market issuance in the third quarter, as the Bank is comfortably placed and has already pre-financed all large maturities falling due in 2026. The next maturities are in the second half of 2027. The Bank continues to have access to both international and domestic debt capital markets, which it will use opportunistically as conditions allow. In recent years, Arion has followed a strategy designed to drive leadership in our markets, the success of our customers and society as a whole. This vision builds on long-term client relationships, diverse products and services and strong teamwork which form the basis for a seamless customer experience and sustainable value creation. The Group’s performance over the past few years, which has continued through the first nine months of 2026, indicates that we are on the right track. Arion Bank's dividend policy states that the Bank aims to pay 50% of net earnings in dividends and that additional dividend or share buybacks can be considered when the Bank's capital levels exceed the minimum regulatory requirements together with the Bank's management buffer. In the medium term, the Bank aims to maintain capital adequacy ratios 100-250bps above total regulatory requirements. Arion Bank is currently rated A3 with a stable outlook from Moody's. The external operating environment continues to evolve. As before, Arion benefits from its strong capital, funding and liquidity position, diverse revenue streams and sound infrastructure, while also retaining the flexibility to respond to the shifting operating environment. The Group's capital adequacy ratio on 30 September 2026 was 22.4% and the CET1 ratio was 18.5%, when the unaudited interim net earnings for the third quarter of 2026 are included. The ratios account for a deduction due to foreseeable dividend payments that represent 50% of net earnings, in line with the Bank's dividend policy. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 21.9% and the CET1 ratio was 18.1%. This compares to a regulatory capital requirement of 19.7%, including the combined buffer requirement. The Bank's REA decreased by ISK 20.3 billion in the third quarter of 2026 driven primarily by a decrease in market risk and loan portfolio REA. Changes relating to other factors were less material. The Group’s liquidity position remains very strong, with an LCR of 195% at the end of the quarter. Lífeyrissjódur verzlunarmanna was the largest shareholder in Arion Bank with a shareholding of 9.78% at the end of September, and Arion Bank held 2.88% of its own shares. The number of shareholders was 10,608 at the end of the period, compared with 10,703 at year-end 2025. Further information on Arion Bank's shareholders can be found in Note 39. The Group faces various risks arising from its day-to-day operations as a financial institution. Managing risk is therefore a core activity within the Group. The key to effective risk management is a process of on-going identification of significant risk, quantification of risk exposure, actions to limit risk, and constant monitoring of risk. This process of risk management and the ability to manage and price risk factors is critical to the Group's continuing profitability as well as ensuring that the Group's exposure to risk remains within acceptable levels. The Board of Directors is ultimately responsible for the Bank’s risk management framework, ensuring that satisfactory risk policies and governance structures for controlling the Bank’s risk exposure are in place. The Group’s risk management, its structure and main risk factors are described in the notes and in the Bank’s unaudited Pillar 3 Risk Disclosures. The Annual General Meeting (AGM) of Arion Bank, held on 11 March 2026, approved the reduction of the Bank’s share capital by ISK 40 million nominal value, through the cancellation of the Bank’s own shares. The reduction was carried out on 14 April 2026. Thus, the share capital of Arion Bank was reduced from ISK 1,420 million to ISK 1,380 million in April 2026. In 2025, the nominal value of Arion Bank's share capital was reduced by ISK 93,423,078. The Bank's MREL requirements are 19.8% of REA excluding own funds used to meet the combined buffer requirement and 6.0% of TEM. The Bank comfortably exceeded both at the end of the third quarter. An MREL subordination requirement of 13.5% will apply to the Bank from Q3 2027. In March 2026, the Bank paid a dividend of ISK 11.5 per share, ISK 15.8 billion, as authorized by the Annual General Meeting. In addition to its authority to propose that the Bank pay dividends or other disbursements of equity, the Board is authorized to purchase up to 10% of the Bank’s issued share capital. During Q3, the Bank bought back shares in the amount of ISK 2.7 billion and thus concluded the FSA-approved buyback program that commenced during Q2. 5
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Endorsement and statement by the Board of Directors and the CEO Endorsement of the Board of Directors and the Chief Executive Officer Reykjavík, 28 October 2026 Board of Directors Paul Horner, Chairman The Condensed Consolidated Interim Financial Statements of Arion Bank for the period ended 30 September 2026 have been prepared in accordance with International Financial Reporting Standards (IFRS Accounting Standards) IAS 34 Interim Financial Reporting as adopted by the European Union and additional requirements in the Icelandic Financial Statements Act, Financial Undertakings Act and Rules on Accounting for Credit Institutions. The Board of Directors and the CEO have today discussed the Condensed Consolidated Interim Financial Statements of Arion Bank for the period ended 30 September 2026 and confirm them by means of their signatures. It is our opinion that the Condensed Consolidated Interim Financial Statements give a true and fair view of the financial performance and cash flow of the Group for the period ended 30 September 2026 and its financial position as at 30 September 2026. Furthermore, in our opinion the Condensed Consolidated Interim Financial Statements and the Endorsement of the Board of Directors and the CEO give a fair view of the development and performance of the Group's operations and its position and describe the principal risks and uncertainties faced by the Group. Chief Executive Officer Benedikt Gíslason Tómas Már Sigurdsson Kristín Pétursdóttir, Vice Chairman Gunnar Sturluson Steinunn Kristín Thórdardóttir 6
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Consolidated Interim Income Statement Notes 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 117,647 100,647 39,299 32,832 (70,314) (60,455) (23,488) (19,006) 8 47,333 40,192 15,811 13,826 14,929 16,016 4,919 4,994 (3,289) (2,924) (1,142) (991) 9 11,640 13,092 3,777 4,003 16,246 15,338 5,534 5,293 (14,853) (13,673) (4,730) (4,663) 10 1,393 1,665 804 630 11 (981) (289) (146) 483 12 446 4,690 181 45 (535) 4,401 35 528 59,831 59,350 20,427 18,987 13-15 (21,888) (19,492) (7,003) (6,194) 16 (1,711) (1,559) (588) (530) 17 (2,047) (1,359) (977) (1,128) 34,185 36,940 11,859 11,135 18 (10,100) (10,638) (3,153) (2,928) 24,085 26,302 8,706 8,207 19 - (19) - 3 24,085 26,283 8,706 8,210 Attributable to 24,078 24,400 8,706 8,229 7 1,883 - (19) 24,085 26,283 8,706 8,210 Earnings per share 20 17.79 17.55 6.42 5.95 17.24 17.41 6.22 5.90 Net impairment ................................................................................................... Income tax expense ............................................................................................ Shareholders of Arion Bank hf. .......................................................................... Net earnings from continuing operations ........................................................ Net earnings ...................................................................................................... Earnings before income tax ............................................................................. Net earnings ...................................................................................................... Basic earnings per share attributable to shareholders of Arion Bank (ISK) .......... Diluted earnings per share attributable to shareholders of Arion Bank (ISK) ....... Non-controlling interest ....................................................................................... Discontinued operations held for sale, net of income tax ..................................... Insurance service expenses ................................................................................ Net financial income ............................................................................................ Bank levy ............................................................................................................ Interest income ................................................................................................... Interest expense ................................................................................................. Fee and commission income .............................................................................. Net interest income ........................................................................................... Other operating income ...................................................................................... Operating expenses ............................................................................................ Fee and commission expense ............................................................................. Insurance revenue .............................................................................................. Net fee and commission income ...................................................................... Insurance service results ................................................................................. Other net operating income .............................................................................. Operating income ............................................................................................. The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements 7
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Consolidated Interim Statement of Comprehensive Income Notes 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 24,085 26,283 8,706 8,210 (431) 237 43 152 11 (31) 141 (16) 90 Changes to reserve for financial instruments at FV thr. OCI that (462) 378 27 242 (18) (2) (21) (2) Other comprehensive income that is or may be reclassified (480) 376 6 240 23,605 26,659 8,712 8,450 Attributable to 23,598 24,776 8,712 8,469 7 1,883 - (19) Total comprehensive income 23,605 26,659 8,712 8,450 Comprehensive income per share 20 17.43 17.82 6.43 6.12 16.90 17.68 6.23 6.07 Net change in FV of financial assets carried at FV through OCI, net of tax ......... net of tax transferred to the income statement ................................................. is or may be reclassified subsequently to the income statement ................. Shareholders of Arion Bank ................................................................................ Non-controlling interest ....................................................................................... Basic compreh. income per share attrib. to shareholders of Arion Bank (ISK) ..... Diluted compreh. income per share attrib. to shareholders of Arion Bank (ISK) .. Net realized (profit) loss on financial assets carried at FV through OCI, Total comprehensive income ........................................................................... Exchange difference on translating foreign subsidiaries ...................................... Net earnings ...................................................................................................... The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements subsequently to the Income Statement .......................................................... 8
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Consolidated Interim Statement of Financial Position Assets Notes 21 107,895 150,111 22 78,288 22,567 23 1,414,774 1,329,056 24-26 241,963 215,816 26 7,651 7,305 28 870 760 29 7,166 7,533 30 2 2 31 298 98 32 23,484 22,517 1,882,391 1,755,765 Liabilities 25 16,303 12,003 25 1,013,789 921,182 25 9,145 3,129 30 16,201 12,983 33 58,142 50,736 25,34 509,773 494,823 25,35 42,540 43,518 1,665,893 1,538,374 Equity 38 1,340 1,383 11,852 14,382 203,235 201,562 216,427 217,327 71 64 216,498 217,391 1,882,391 1,755,765 The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements Loans to customers ...................................................................................................................... Financial instruments ................................................................................................................... Subordinated liabilities ................................................................................................................. Total Equity ................................................................................................................................. Total Liabilities and Equity ........................................................................................................ Non-controlling interest ................................................................................................................ Other liabilities ............................................................................................................................. Borrowings ................................................................................................................................... Share capital and share premium ................................................................................................. Other reserves ............................................................................................................................. Retained earnings ........................................................................................................................ Shareholders' Equity .................................................................................................................. Total Liabilities ........................................................................................................................... Tax liabilities ................................................................................................................................ Investment property ..................................................................................................................... Deposits ....................................................................................................................................... Financial liabilities at fair value ..................................................................................................... Investments in associates ............................................................................................................ Intangible assets .......................................................................................................................... Tax assets .................................................................................................................................... Other assets ................................................................................................................................. Due to credit institutions and Central Bank ................................................................................... Assets and disposal groups held for sale ..................................................................................... Total Assets ................................................................................................................................ 31.12.202530.9.2026 Cash and balances with Central Bank .......................................................................................... Loans to credit institutions ............................................................................................................ 9
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Debt invest- Gain in ments at Foreign Non- subs. & Gain in Capitalized fair value currency cont- Share Share Share assoc., securities, develop- thr. OCI, translation Statutory Retained holders' rolling Total capital premium option unrealized unrealized ment cost unrealized reserve reserve earnings equity interest equity 1,383 - 827 12,760 320 - 91 6 378 201,562 217,327 64 217,391 24,078 24,078 7 24,085 (431) (431) (431) (31) (31) (31) (18) (18) (18) - - - - - - (462) (18) - 24,078 23,598 7 23,605 (15,768) (15,768) (15,768) (51) (1,355) (8,441) (9,847) (9,847) 54 54 54 6 1,039 (229) 816 816 (75) 75 - - 145 145 145 2 316 (217) 101 101 (1,733) 5 1,729 1 1 1,340 - 505 11,027 325 - (371) (12) 378 203,235 216,427 71 216,498 The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements Net changes in reserves ..................................... Equity 30 September 2026 ................................. Total comprehensive income ............................ Share option vested ........................................... Purchase of treasury shares ............................... Net changes in reserves ....................................... Share option charge ........................................... Consolidated Interim Statement of Changes in Equity Total share- Net earnings ......................................................... Restricted reserves Equity 1 January 2026 ........................................ Dividend paid ..................................................... Net change in fair value ........................................ Net realized profit transferred to P/L ..................... Share option forfeited ......................................... Transactions with owners Share option charge - incentive scheme ............ Incentive scheme ............................................... 10
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Consolidated Interim Statement of Changes in Equity Debt invest- Gain in ments at Foreign Non- subs. & Gain in Capitalized fair value currency cont- Share Share Share assoc., securities, develop- thr. OCI, translation Statutory Retained holders' rolling Total capital premium option unrealized unrealized ment cost unrealized reserve reserve earnings equity interest equity 1,412 4,274 411 10,957 513 759 (328) - 1,637 186,947 206,582 504 207,086 24,400 24,400 1,883 26,283 237 237 237 141 141 141 (2) (2) (2) - - - - - - 378 (2) - 24,400 24,776 1,883 26,659 (16,114) (16,114) (16,114) (36) (5,218) (699) (5,953) (5,953) 6 715 (135) 84 670 670 85 85 85 1 229 230 230 2,279 (117) (91) (1,259) (812) - - 1,384 - 361 13,237 396 668 50 (2) 378 193,807 210,276 2,387 212,662 6,226 6,226 (2) 6,224 20 20 20 21 21 21 8 8 8 - - - - - - 41 8 - 6,226 6,275 (2) 6,273 15 4 19 19 451 304 755 755 (476) (76) (668) 1,220 - - - (2,321) (2,321) 1,383 - 827 12,760 320 - 91 6 378 201,562 217,327 64 217,391 The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements Transactions with owners Share option charge - incentive scheme ............ Net earnings ......................................................... Net change in fair value ........................................ Equity 1 January 2025 ........................................ Restricted reserves Net changes in reserves ....................................... Net earnings ......................................................... Equity 30 September 2025 ................................. Net changes in reserves ..................................... Net changes in share options ............................. Incentive scheme ............................................... Purchase of treasury shares ............................... Dividend paid ..................................................... Share option charge - incentive scheme ............ Net realized loss transferred to P/L ...................... Total comprehensive income ............................ Total share- Net change in fair value ........................................ Net realized loss transferred to P/L ...................... Net changes in reserves ....................................... Total comprehensive income ............................ Transactions with owners Net changes in share options ............................. Net changes in reserves ..................................... Equity 31 December 2025 .................................. Sale of a subsidiary ............................................ 11
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions 2026 2025 Operating activities 1.1.-30.9. 1.1.-30.9. 24,085 26,283 (30,807) (29,488) (18,802) (14,310) 76,622 72,238 (41,524) (41,170) 469 187 (6,718) (6,086) 3,325 7,654 Investing activities (48) (91) - 447 (678) (337) - 7 - 27 (381) (752) (1,107) (699) Financing activities (15,768) (16,114) (9,847) (5,953) - 10,040 (726) (8,769) 817 602 (25,523) (20,195) (23,305) (13,240) 138,548 117,310 (1,062) 70 114,181 104,140 The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements Interest received .......................................................................................................................................................... Interest paid ................................................................................................................................................................. Dividend received ........................................................................................................................................................ Income tax paid ............................................................................................................................................................ Dividend paid to shareholders of Arion Bank ................................................................................................................ Acquisition of property and equipment ......................................................................................................................... Acquisition of intangible assets .................................................................................................................................... Net cash from operating activities ............................................................................................................................ Dividend and decreased share capital of associates .................................................................................................... Proceeds from sale of investment property .................................................................................................................. Proceeds from sale of property and equipment ............................................................................................................ Acquisition of investment property ............................................................................................................................... Net decrease in cash and cash equivalents ................................................................................................................. Issued subordinated liabilities ...................................................................................................................................... Purchase of treasury stock ........................................................................................................................................... Consolidated Interim Statement of Cash flows Net earnings ................................................................................................................................................................ Non-cash items included in net earnings ...................................................................................................................... Changes in operating assets and liabilities ................................................................................................................... Net cash used in financing activities ........................................................................................................................ Net cash used in investing activities ........................................................................................................................ Settlement of subordinated liabilities ............................................................................................................................ Proceeds from vested share options ............................................................................................................................ Cash and cash equivalents at beginning of the year .................................................................................................... Effect of exchange rate changes on cash and cash equivalent .................................................................................... Cash and cash equivalents ........................................................................................................................................ 12
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions 2026 2025 Non-cash items included in net earnings 1.1.-30.9. 1.1.-30.9. (47,332) (40,190) 2,047 1,359 10,100 10,638 1,711 1,559 1,428 1,280 (72) (396) 501 (363) 1,227 1,261 (110) (6) (298) (4,802) (9) 172 (30,807) (29,488) Changes in operating assets and liabilities (217) 886 (37,655) (300) (67,586) (56,040) (34,520) (44,952) (209) 11 9,163 128 4,274 2,116 80,937 45,555 22,565 48,523 4,446 (10,237) (18,802) (14,310) Cash and cash equivalents 107,895 110,481 40,106 25,247 (33,820) (31,588) 114,181 104,140 The accompanying Notes are an integral part of these Condensed Consolidated Interim Financial Statements Net interest income ..................................................................................................................................................... Notes to the Condensed Consolidated Interim Statement of Cash flows Non-cash items included in net earnings ................................................................................................................ Net impairment ........................................................................................................................................................... Income tax expense ................................................................................................................................................... Bank levy .................................................................................................................................................................... Net foreign exchange gain .......................................................................................................................................... Net loss (gain) on financial instruments ...................................................................................................................... Depreciation and amortization .................................................................................................................................... Share of profit of associates ....................................................................................................................................... Due to credit institutions and Central Bank ................................................................................................................. Deposits ..................................................................................................................................................................... Borrowings .................................................................................................................................................................. Other liabilities ............................................................................................................................................................ Changes in operating assets and liabilities ............................................................................................................ Changes in provisions for unearned premiums and claims ......................................................................................... Cash and balances with Central Bank ........................................................................................................................ Bank accounts ............................................................................................................................................................ Mandatory reserve deposit with Central Bank ............................................................................................................. Cash and cash equivalents ...................................................................................................................................... Loans to credit institutions, excluding bank accounts .................................................................................................. Loans to customers .................................................................................................................................................... Financial instruments and financial liabilities at fair value ........................................................................................... Non-current assets and liabilities and disposal groups held for sale ........................................................................... Other assets ............................................................................................................................................................... Net gain from investment property .............................................................................................................................. Other changes ............................................................................................................................................................ Mandatory reserve with Central Bank ......................................................................................................................... 13
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 page page General information Basis of preparation .......................................................... 15 Financial assets and financial liabilities ............................. 30 Going concern assumption ................................................ 15 Fair value hierarchy .......................................................... 32 Changes in accounting policies ......................................... 15 Offsetting financial assets and financial liabilities .............. 37 Material accounting estimates and judgments Investment in associates .................................................. 37 in applying accounting policies ....................................... 16 Intangible assets .............................................................. 38 The Group ......................................................................... 16 Tax assets and tax liabilities ............................................. 39 Assets and disposal groups held for sale .......................... 39 Operating segment reporting Other assets ..................................................................... 39 Operating segments .......................................................... 17 Other liabilities .................................................................. 39 Borrowings ....................................................................... 40 Quarterly statements Subordinated liabilities ...................................................... 41 Operations by quarters ...................................................... 20 Liabilities arising from financial activities ........................... 41 Pledged assets ................................................................. 42 Notes to the Consolidated Income Statement Equity ............................................................................... 42 Net interest income ........................................................... 21 Net fee and commission income ....................................... 23 Other information Insurance service results .................................................. 24 Shareholders of Arion Bank .............................................. 44 Net financial income .......................................................... 25 Legal matters .................................................................... 44 Other operating income ..................................................... 25 Events after the reporting period ....................................... 45 Operating expenses .......................................................... 25 Personnel and salaries ...................................................... 26 Off Balance sheet information Other operating expense ................................................... 26 Commitments ................................................................... 46 Bank levy .......................................................................... 27 Assets under management, supervision and custody ....... 46 Net impairment .................................................................. 27 Income tax expense .......................................................... 27 Related party Discontinued operations held for sale, net of income tax ... 28 Related party .................................................................... 46 Earnings per share ............................................................ 28 Risk management disclosures Notes to the Consolidated Statement of Credit risk ......................................................................... 48 Financial Position Market risk ........................................................................ 60 Cash and balances with Central Bank ............................... 29 Liquidity and Funding risk ................................................. 66 Loans to credit institutions ................................................. 29 Capital management ........................................................ 70 Loans to customers ........................................................... 29 Operational risk ................................................................ 72 Financial instruments ........................................................ 29 Sustainability risk .............................................................. 73 Notes to the Condensed Consolidated Interim Financial Statements Contents 14
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions General information 1. Basis of preparation Statement of compliance Basis of measurement Functional and presentation currency 2. Going concern assumption 3. Changes in accounting policies These Condensed Consolidated Interim Financial Statements are presented in Icelandic krona (ISK), which is the Parent Company's functional currency, rounded to the nearest million, unless otherwise stated. At the end of the period the exchange rate of the ISK against USD was 121.21 and 140.81 for EUR (31.12.2025: USD 125.44 and EUR 147.28). New standards, amendments to standards and interpretations have been issued but are not yet effective for the period ended 30 September 2026, and have not been applied in preparing these Consolidated Financial Statements. Relevant to the Group's reporting is IFRS 18 Presentation and disclosures in financial statements. The Group's management has made an assessment of the ability to continue as a going concern and is satisfied that the Group has the resources to continue. In making this assessment, management has taken into consideration the risk exposures facing the Group, which are further described in the Risk Management Disclosures. The Condensed Consolidated Interim Financial Statements are prepared on a going concern basis. IFRS 18 Presentation and disclosures in financial statements replaces IAS 1, carrying forward many of the requirements in IAS 1 unchanged and complementing them with new requirements. IFRS 18 introduces new requirements for presentation within the statement of profit or loss, including specified totals and subtotals. Furthermore, entities are required to classify all income and expenses within the statement of profit or loss into one of five categories: operating, investing, financing, income taxes and discontinued operations, whereof the first three are new. The standard requires disclosure of newly defined management-defined performance measures, subtotals of income and expenses, and it also includes new requirements for aggregation and disaggregation of financial information based on the identified ‘roles’ of the primary financial statements (PFS) and the notes. The Group is currently working to identify all impacts the amendments will have on the primary Consolidated Financial Statements and Notes to the Consolidated Financial Statements. The initial expected impacts on Group’s Consolidated Financial Statements are not expected to be material. A new disclosure will be added for management-defined performance measures as required by the standard. In addition to the adoption of IFRS 18, there are consequential amendments to several other standards that are not expected to have material impacts on the Consolidated Financial Statements. IFRS 18, and the amendments to the other standards, are effective for reporting periods beginning on or after 1 January 2027. IFRS 18 will apply retrospectively. - investment properties are measured at fair value; and Notes to the Condensed Consolidated Interim Financial Statements The same accounting policies, presentation and methods of computation are followed in these Condensed Consolidated Interim Financial Statements as were applied in the Consolidated Financial Statements for the year 2025. - bonds and debt instruments, shares and equity instruments, short positions in listed bonds and equities, derivatives and certain loans to customers. For details on the accounting policy, see Note 59 in the Annual Financial Statements 2025; Arion Bank hf., the Parent Company, was established on 18 October 2008 and is incorporated and domiciled in Iceland. The registered office of Arion Bank hf. is located at Borgartún 19, Reykjavík. The Condensed Consolidated Interim Financial Statements for the period ended 30 September 2026 comprise the Parent Company and its subsidiaries (together referred to as "the Group"). The Condensed Consolidated Interim Financial Statements were approved and authorized for publication by the Board of Directors of Arion Bank on 28 October 2026. In preparing these Condensed Consolidated Interim Financial Statements, the Group has applied the concept of materiality to the presentation and level of disclosure. Only essential and mandatory information is disclosed which is relevant to an understanding by the reader of these Condensed Consolidated Interim Financial Statements. The Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Financial Reporting Standard (IFRS Accounting Standards), IAS 34 Interim Financial Reporting, as adopted by the European Union and additional requirements in the Icelandic Financial Statements Act, Financial Undertakings Act and Rules on Accounting for Credit Institutions. The Condensed Consolidated Interim Financial Statements do not include all the information and disclosures required in the Annual Financial Statements, and should be read in conjunction with Arion Bank's Annual Consolidated Financial Statements for the year ended 31 December 2025. The Annual Consolidated Financial Statements are available on Arion Bank's website www.arionbank.com. These Condensed Consolidated Interim Financial Statements have been prepared on a historical cost basis except for the following: - non-current assets and disposal groups held for sale are stated at the lower of their carrying amounts and fair value, less cost to sell. 15
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions 4. Material accounting estimates and judgements in applying accounting policies Estimates and assumptions Impairment of financial assets Macroeconomic outlook Impairment of intangible assets Revaluation of investment properties 5. The Group Shares in the main subsidiaries in which Arion Bank holds a direct interest Currency 30.9.2026 31.12.2025 GBP 100.0% 100.0% ISK 100.0% 100.0% ISK 100.0% 100.0% ISK 51.0% 51.0% ISK 100.0% 100.0% ISK 100.0% 100.0% Equity interest Operating activity Arion (Financial) Advisory Services Ltd, 30-32 Fleet Street, London, UK .......... Financial service Eignabjarg ehf., Borgartún 19, Reykjavík, Iceland ............................................ Holding company Leiguskjól ehf., Sundagardar 2, Reykjavík, Iceland ........................................... Rental guarantee Stefnir hf., Borgartún 19, Reykjavík, Iceland ..................................................... Asset management Landey ehf., Borgartún 19, Reykjavík, Iceland .................................................. Real estate Vördur tryggingar hf., Borgartún 19, Reykjavík, Iceland .................................... Insurance The carrying amounts of goodwill, infrastructure and customer relationship and related agreements are reviewed annually to determine whether there is any indication of impairment. If any such indication exists the asset's recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in the Consolidated Income Statement. The recoverable amount of an asset is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The Group carries its investment properties at fair value, with changes in fair value being recognized in the income statement. For investment properties, either a valuation methodology based on present value calculations is used, as there is a lack of comparable market data because of the nature of the properties, or the investment properties are valued by reference to transactions involving properties of a similar nature, location and condition. The Icelandic economy continues to cool as restrictive monetary policy weighs on domestic demand. GDP surprised to the downside, contracting 1.1% year-on-year, with net trade the main drag. Imports rose 0.2%, supported by record data centre-related investment, while exports fell 7.3%, driven by a 13.8% decline in goods exports. Labour market slack is growing, with private sector employment falling, firms scaling back hiring and unemployment rising to 4% from 3.5% a year earlier. Although household finances remain relatively sound, high interest rates, persistent inflation and falling real house prices are weighing on consumption. Payment card turnover grew just 0.7% year-on- year in Q3, pointing to weaker, potentially negative, consumption growth ahead. The book value of financial assets which fall under the impairment requirements of IFRS 9 are presented net of expected credit losses in the statement of financial position. On a monthly basis expected credit losses for stages 1 and 2 are recalculated for each asset, the calculations are based on probability of default (PD), loss given default (LGD) and exposure at default (EAD) models. Stage 3 calculations are based on LGD and EAD parameters. In addition to the model outcomes, the assessment of expected credit losses is based on three key factors: management's assumptions regarding the development of macroeconomic factors over the next five years, how those factors affect each model and how to estimate a significant increase in credit risk. The assumptions for macroeconomic development are incorporated into each model for three scenarios: a base case, an optimistic case, and a pessimistic case. Management estimates the probability weight for each scenario used for calculations of the probability weighted expected credit losses. The amount of expected credit losses to be recognized is dependent on the Bank's definition of significant increase in credit risk, which controls the impairment stage each asset is allocated to. Management has estimated factors to measure significant increase in credit risk from origination, by comparison of changes in PD values, annualized lifetime PD values, days past due and watch list. Notes to the Condensed Consolidated Interim Financial Statements The preparation of these Condensed Consolidated Interim Financial Statements requires management to make judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the Condensed Consolidated Interim Financial Statement were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Inflation has remained well above 5% throughout the year, driven by higher public levies and oil prices amid the conflict in the Middle East. The strong króna has contained imported inflation, while wage growth has sustained domestic price pressures. On a positive note, the major collective wage agreements have held and been extended, and companies and institutions have frozen prices or limited increases to the CBI’s inflation target. Despite elevated and poorly anchored inflation expectations, interest rates are unlikely to rise further, with most analysts expecting cuts next year. In July 2026, Landey ehf. put all its shares in Blikastadir ehf. up for sale. The company manages a 98-hectare plot in Blikastadir, Iceland. At the end of September, the second phase of the sales process began, with bids of ISK 14–16 billion received. The bids remain subject to several conditions and, consequently, the valuation has not been updated. Blikastadir has total assets of ISK 7.6 billion, mainly investment property. 16
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements Operating segment reporting 6. Operating segments Markets & Stefnir Corporate & Investment Banking (CIB) Retail Banking Treasury Vördur tryggingar hf. Supporting units Supporting units include the Bank's headquarters which carry out support functions such as the CEO office, Risk Management, Finance (excluding Treasury), IT and Operations & Culture. The information presented relating to the supporting units does not represent an operating segment. A significant proportion of expenses from support functions is allocated to operating segments in a separate line in the operating segment overview. Treasury is responsible for the Bank's funding, liquidity and asset-and-liability management. Treasury oversees the internal funds‘s transfer pricing and manages the relationship with investors, credit rating agencies and financial institutions. Market making activities in domestic securities and FX as well as FX brokerage sits within Treasury. Vördur is a comprehensive insurance company that services both individuals and companies and focuses on simple and convenient services. Vördur collaborates closely with Retail Banking and Corporate and Investment Banking on insurance sales and customer services. Corporate Banking's experienced account managers specialize in key economic sectors such as retail and services, seafood, energy and real estate. The division serves companies ranging from SMEs to large cap´s and provides full range lending and insurance products, including guarantees, deposit accounts, payment solutions, and a variety of value-added digital solutions. The Corporate portfolio composition is diversified between sectors, customers and currencies which include international exposures, partly through syndicates with other Icelandic or international banks. Arion Bank‘s Corporate Finance works closely with Corporate Banking and provides the Bank’s clients with comprehensive financial advisory services, with a key focus on M&A advisory, private placements, IPOs and other offerings of securities. Retail Banking provides a diverse range of financial services in 12 branches and service points across Iceland in addition to service centre and digital solutions both in the Arion app and online banking. These services include deposits and loans, savings, payment cards, pensions, securities and funds. In order to improve efficiency the branch network is split into four regions, and smaller branches can therefore benefit from the strength of larger units within each region. Corporate & Investment Banking provides comprehensive financial services to companies and investors with focus on meeting the needs of each client, both in Iceland and internationally. The division is divided into Corporate Banking and Corporate Finance. Markets & Stefnir comprise Asset Management and Capital Markets. Asset Management manages financial assets on behalf of its clients according to a pre-determined investment strategy. Asset Management also handles the operation and development of securities and pension funds. Asset Management comprises Institutional Asset Management, Premia Services, development and operations, research, and sales and services. Premía Services are divided into three service streams: Premia; Premia - Private Banking; and Premia – Wealth Management and provide customers with comprehensive and personal financial services. Capital Markets is a securities brokerage and brokers listed securities transactions for the Bank’s international and domestic clients on all the world’s major securities exchanges.The operation of Stefnir hf. is presented under the segment. Stefnir hf. is an independently operating financial company owned by Arion Bank and manages a broad range of mutual funds, investment funds and institutional investor funds for investors. Markets also offer a comprehensive selection of funds from some of the leading international fund management companies, both through the Bank and the Bank's subsidiary Arion (Financial) Advisory Services Ltd. Segment information is presented in respect of the Group's operating segments and is based on the Group's management and internal reporting structure. The business units are segmented according to customers, products and services characteristics. Segment performance is evaluated based on earnings before tax. Inter segment pricing is determined on an arm's length basis. Operating segments pay and receive interest to and from Treasury on an arm's length basis to reflect the allocation of capital, funding cost and relevant risk premium. 17
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions 6. Operating segments, continued Subsidi- Supporting 1.1.-30.9.2026 aries excl. units Markets Retail Stefnir and and elimi- Income Statement and Stefnir CIB Banking Treasury Vördur Vördur nations Total Net interest income ................................... 1,119 26,036 14,067 6,236 (97) 97 (125) 47,333 Net fee and commission income ............... 4,126 3,801 2,641 554 (156) 283 391 11,640 Insurance service results .......................... - - - - 1,444 - (51) 1,393 Net financial income .................................. (11) 7 - (1,039) 28 72 (38) (981) Other operating income ............................. 1 1 (18) - 6 318 138 446 Operating income .................................... 5,235 29,845 16,690 5,751 1,225 770 315 59,831 Operating expenses .................................. (2,283) (1,999) (2,693) (486) 992 (390) (15,029) (21,888) Allocated expenses ................................... (2,614) (4,229) (5,510) (1,134) (1,036) (49) 14,572 - Bank levy .................................................. (34) (694) (644) (339) - - - (1,711) Net impairment .......................................... (2) (1,523) (521) 1 - - (2) (2,047) Earnings before income tax ................... 302 21,400 7,322 3,793 1,181 331 (144) 34,185 Net seg. rev. from ext. customers ............. 1,047 40,490 35,247 (19,066) 1,031 764 318 59,831 Net seg. rev. from other segments ............ 4,188 (10,645) (18,557) 24,817 194 6 (3) - Operating income .................................... 5,235 29,845 16,690 5,751 1,225 770 315 59,831 Statement of financial position Loans to customers ................................... 11,236 731,633 670,363 - - - 1,542 1,414,774 Financial instruments ................................ 22,743 - - 184,584 37,686 158 (3,208) 241,963 Other external assets ................................ 5,876 588 1,999 185,464 4,819 9,950 16,958 225,654 Internal assets .......................................... 68,205 - - 255,747 - - (323,952) - Total assets ............................................. 108,060 732,221 672,362 625,795 42,505 10,108 (308,660) 1,882,391 Deposits .................................................... 97,296 433,420 465,770 19,725 - - (2,422) 1,013,789 Other external liabilities ............................. 1,942 3,088 3,764 595,341 26,895 1,511 19,563 652,104 Internal liabilities ....................................... - 162,656 158,241 - - 4,905 (325,802) - Total liabilities ......................................... 99,238 599,164 627,775 615,066 26,895 6,416 (308,660) 1,665,893 Allocated equity ...................................... 8,822 133,057 44,587 10,729 15,610 3,692 - 216,498 Notes to the Condensed Consolidated Interim Financial Statements 18
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 6. Operating segments, continued Subsidi- Supporting 1.1.-30.9.2025 aries excl. units Markets Retail Stefnir and and elimi- Income Statement and Stefnir CIB Banking Treasury Vördur Vördur nations Total Net interest income ................................... 1,006 21,824 11,648 5,895 (67) (6) (108) 40,192 Net fee and commission income ............... 4,308 5,215 2,507 625 (131) 155 413 13,092 Insurance service results .......................... - - - - 1,727 (5) (57) 1,665 Net financial income .................................. (22) 5 - (63) (206) 20 (23) (289) Other operating income ............................. 2 11 18 2 7 4,634 16 4,690 Operating income .................................... 5,294 27,055 14,173 6,459 1,330 4,798 241 59,350 Operating expenses .................................. (1,982) (1,676) (2,518) (457) 848 (395) (13,312) (19,492) Allocated expenses ................................... (2,270) (3,627) (5,023) (1,014) (900) (76) 12,910 - Bank levy .................................................. (32) (586) (619) (322) - - - (1,559) Net impairment .......................................... 22 (1,115) (158) (1) - - (107) (1,359) Earnings before income tax ................... 1,032 20,051 5,855 4,665 1,278 4,327 (268) 36,940 Net seg. rev. from ext. customers ............. 2,174 34,618 30,662 (14,333) 1,121 4,865 243 59,350 Net seg. rev. from other segments ............ 3,120 (7,563) (16,489) 20,792 209 (67) (2) - Operating income .................................... 5,294 27,055 14,173 6,459 1,330 4,798 241 59,350 Statement of financial position Loans to customers ................................... 7,858 653,105 640,221 4 - - 520 1,301,708 Financial instruments ................................ 20,944 - - 203,969 37,987 116 (3,179) 259,837 Other external assets ................................ 5,908 135 1,759 138,216 4,777 16,449 7,746 174,990 Internal assets .......................................... 70,721 - - 263,506 - - (334,227) - Total assets ............................................. 105,431 653,240 641,980 605,695 42,764 16,565 (329,140) 1,736,535 Deposits .................................................... 95,417 402,731 382,612 38,666 - - (2,200) 917,226 Other external liabilities ............................. 1,782 2,141 4,090 552,745 26,558 9,251 10,081 606,648 Internal liabilities ....................................... - 130,255 202,939 - - 3,827 (337,021) - Total liabilities ......................................... 97,199 535,127 589,641 591,411 26,558 13,078 (329,140) 1,523,874 Allocated equity ...................................... 8,232 118,113 52,339 14,284 16,206 3,487 - 212,661 56,608 826 67,914 34,490 34,490 34,812 4,061 Income taxes and discontinued operations held for sale are excluded from the profit and loss segment information. 19
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements Notes to the Consolidated Interim Income Statement Quarterly statements 7. Operations by quarters, unaudited 1.1.-30.9.2026 Q1 Q2 Q3 Total 16,303 15,219 15,811 47,333 3,876 3,987 3,777 11,640 (66) 655 804 1,393 (767) (68) (146) (981) 114 151 181 446 19,460 19,944 20,427 59,831 (7,456) (7,429) (7,003) (21,888) (541) (582) (588) (1,711) (391) (679) (977) (2,047) 11,072 11,254 11,859 34,185 (3,743) (3,204) (3,153) (10,100) 7,329 8,050 8,706 24,085 - - - - 7,329 8,050 8,706 24,085 1.1.-30.9.2025 12,166 14,200 13,826 40,192 4,536 4,553 4,003 13,092 (31) 1,066 630 1,665 (951) 179 483 (289) 3,321 1,324 45 4,690 19,041 21,322 18,987 59,350 (6,601) (6,697) (6,194) (19,492) (508) (521) (530) (1,559) (378) 147 (1,128) (1,359) 11,554 14,251 11,135 36,940 (3,726) (3,984) (2,928) (10,638) 7,828 10,267 8,207 26,302 (11) (11) 3 (19) 7,817 10,256 8,210 26,283 Net fee and commission income ........................................................................................... Net interest income .............................................................................................................. Insurance service results ...................................................................................................... Net financial income ............................................................................................................. Other operating income ........................................................................................................ Operating expenses ............................................................................................................. Bank levy ............................................................................................................................. The half-year results were reviewed by the Bank's auditors. Other quarterly statements and the split between quarters were not audited or reviewed by the Bank's auditors. Insurance service results ...................................................................................................... Net financial income ............................................................................................................. Other operating income ........................................................................................................ Operating expenses ............................................................................................................. Net earnings ........................................................................................................................ Operating income ............................................................................................................... Earnings before income tax ............................................................................................... Net earnings from continuing operations ......................................................................... Net earnings ........................................................................................................................ Operating income ............................................................................................................... Bank levy ............................................................................................................................. Net impairment ..................................................................................................................... Income tax expense ............................................................................................................ Discontinued operations, net of tax ....................................................................................... Earnings before income tax ............................................................................................... Net earnings from continuing operations ......................................................................... Net impairment ..................................................................................................................... Income tax expense ............................................................................................................ Discontinued operations, net of tax ....................................................................................... Net interest income .............................................................................................................. Net fee and commission income ........................................................................................... 20
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 8. Net interest income 1.1.-30.9.2026 Amortized Fair value Fair value Interest income cost thr. P/L thr. OCI Total 4,842 - - 4,842 769 - - 769 105,529 150 - 105,679 - 1,104 5,216 6,320 37 - - 37 111,177 1,254 5,216 117,647 Interest expense (42,005) - - (42,005) (24,267) (594) - (24,861) (3,283) (30) - (3,313) (135) - - (135) (69,690) (624) - (70,314) 41,487 630 5,216 47,333 1.1.-30.9.2025 Interest income 4,928 - - 4,928 681 - - 681 89,391 104 - 89,495 - 414 5,061 5,475 68 - - 68 95,068 518 5,061 100,647 Interest expense (37,534) - - (37,534) (18,517) (1,522) - (20,039) (2,496) (280) - (2,776) (106) - - (106) (58,653) (1,802) - (60,455) 36,415 (1,284) 5,061 40,192 Loans to credit institutions .................................................................................................... Subordinated liabilities .......................................................................................................... Loans to customers .............................................................................................................. Net interest income calculated using the effective interest rate method were ISK 116,986 million (9M 2025: ISK 98,777 million). Net interest income ............................................................................................................ Securities ............................................................................................................................. Loans to credit institutions .................................................................................................... Cash and balances with Central Bank .................................................................................. Securities ............................................................................................................................. Other .................................................................................................................................... Borrowings ........................................................................................................................... Deposits ............................................................................................................................... Interest income ................................................................................................................... Interest expense ................................................................................................................. Other .................................................................................................................................... Cash and balances with Central Bank .................................................................................. Deposits ............................................................................................................................... Borrowings ........................................................................................................................... Subordinated liabilities .......................................................................................................... Other .................................................................................................................................... Interest income ................................................................................................................... Loans to customers .............................................................................................................. Net interest income ............................................................................................................ Other .................................................................................................................................... Interest expense ................................................................................................................. 21
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 8. Net interest income, continued 1.7.-30.9.2026 Amortized Fair value Fair value Interest income cost thr. P/L thr. OCI Total 1,558 - - 1,558 277 - - 277 34,955 44 - 34,999 - 481 1,966 2,447 18 - - 18 36,808 525 1,966 39,299 Interest expense (14,445) - - (14,445) (7,589) (351) - (7,940) (1,031) (34) - (1,065) (38) - - (38) (23,103) (385) - (23,488) 13,705 140 1,966 15,811 1.7.-30.9.2025 Interest income 1,598 - - 1,598 223 - - 223 29,316 32 - 29,348 - 188 1,457 1,645 18 - - 18 31,155 220 1,457 32,832 Interest expense (11,901) - - (11,901) (5,976) (171) - (6,147) (906) (26) - (932) (26) - - (26) (18,809) (197) - (19,006) 12,346 23 1,457 13,826 Interest spread 2026 2025 2026 2025 Interest spread (the ratio of net interest income to the average carrying amount 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 3.6% 3.3% 3.5% 3.3% Deposits ............................................................................................................................... Subordinated liabilities .......................................................................................................... Loans to customers .............................................................................................................. Net interest income ............................................................................................................ Loans to credit institutions .................................................................................................... Cash and balances with Central Bank .................................................................................. Loans to customers .............................................................................................................. Cash and balances with Central Bank .................................................................................. Loans to credit institutions .................................................................................................... Securities ............................................................................................................................. Other .................................................................................................................................... Other .................................................................................................................................... Deposits ............................................................................................................................... Other .................................................................................................................................... Borrowings ........................................................................................................................... Net interest income calculated using the effective interest rate method were ISK 38,896 million during the quarter (Q3 2025: ISK 32,617 million). Other .................................................................................................................................... Subordinated liabilities .......................................................................................................... Interest income ................................................................................................................... Securities ............................................................................................................................. Interest expense ................................................................................................................. Borrowings ........................................................................................................................... of interest bearing assets) ................................................................................................... Interest expense ................................................................................................................. Interest income ................................................................................................................... Net interest income ............................................................................................................ 22
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 9. Net fee and commission income Net Net Income Expense income Income Expense income 4,217 (496) 3,721 4,138 (359) 3,779 1,363 (22) 1,341 2,027 (27) 2,000 3,009 - 3,009 3,861 - 3,861 955 (54) 901 1,095 (64) 1,031 4,872 (2,191) 2,681 4,304 (2,048) 2,256 513 (865) (352) 591 (670) (79) - 339 339 - 244 244 14,929 (3,289) 11,640 16,016 (2,924) 13,092 Net Net Income Expense income Income Expense income 1,447 (188) 1,259 1,449 (114) 1,335 384 (5) 379 555 (7) 548 990 - 990 992 - 992 321 (17) 304 344 (19) 325 1,634 (758) 876 1,466 (713) 753 143 (287) (144) 188 (214) (26) - 113 113 - 76 76 4,919 (1,142) 3,777 4,994 (991) 4,003 Fee and commission income on collection and payment services is from billing services, such as issuing invoices and payment collection notices, wire transfer services and other payment services. Fee and commission income from capital markets and corporate finance includes miscellaneous corporate finance services plus commission from capital markets relating to sales of shares, bonds, FX and derivatives. Cards and payment solution ............................................................ 1.7.-30.9.2025 1.1.-30.9.2025 Fee and commission income from lending and financial guarantees is mainly related to lending activities, extension fees, advisory services and documentation, notification and payment fees plus fees from the issuing of guarantees on behalf of customers. Lending and financial guarantees .................................................... Capital markets and corporate finance ............................................ Collection and payment services ..................................................... Cards and payment solution ............................................................ Capital markets and corporate finance ............................................ Asset management ......................................................................... 1.7.-30.9.2026 Commission expense from insurance operation .............................. Lending and financial guarantees .................................................... Other ............................................................................................... Asset management fees are earned by the Group for trust and fiduciary activities where the Group holds or invests assets on behalf of the customers. Other fee and commission income is mainly fees relating to sale, custody and market making on the Icelandic stock exchange. Commission from cards and payment solutions is mainly from the Bank's issuance of credit and debit cards and other card related commission, e.g. yearly fee on cards and transaction fees. Collection and payment services ..................................................... Net fee and commission income .................................................. Commission expense from insurance operation .............................. Asset management ......................................................................... 1.1.-30.9.2026 Other .............................................................................................. Net fee and commission income .................................................. Commission expense from insurance operation is transferred to insurance service results in accordance with IFRS 17. 23
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 10. Insurance service results 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 16,246 15,338 5,534 5,293 (11,074) (10,683) (3,426) (3,587) (3,233) (2,801) (1,021) (881) (14,307) (13,484) (4,447) (4,468) (546) (189) (283) (195) 1,393 1,665 804 630 Operation results of Vördur 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 1,393 1,665 804 630 9 31 (14) (7) 1,402 1,696 790 623 375 420 (18) 499 (601) (845) (232) (271) (226) (425) (250) 228 6 7 2 2 1,181 1,278 542 853 (421) (382) (190) (155) 760 896 351 698 Combined ratio 91.4% 89.0% 85.7% 88.2% Insurance revenue ................................................................................................................ Service expenses ................................................................................................................. Net earnings ........................................................................................................................ Combined ratio of Vördur, including insurance revenue from the Group ............................... Insurance service results ................................................................................................... Insurance service expenses ................................................................................................. Net (expense) income from reinsurance contracts held ........................................................ Vördur's operation resulted in a profit of ISK 760 million, with a return on equity of 7.4%, compared with a profit of ISK 896 million in 9M 2025 and a return on equity of 8.4%. Insurance service results ...................................................................................................... Insurance revenue elimination and reclassification ............................................................... Total investment return ......................................................................................................... Incurred claims ..................................................................................................................... Insurance service results according to the Financial Statements of Vördur .......................... Investment return ................................................................................................................. Net financial loss from insurance contracts ........................................................................... Other income ........................................................................................................................ Earnings before income tax ............................................................................................... Income tax ............................................................................................................................ 24
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 11. Net financial income 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. Net (loss) gain on financial assets and financial liabilities mandatorily measured (408) 369 285 735 7 (15) - (16) (93) (6) (83) 49 42 (190) 21 (121) (601) (845) (232) (271) 72 398 (137) 107 (981) (289) (146) 483 Net (loss) gain on financial assets and financial liabilities mandatorily measured at fair value through the income statement (1,986) (1,278) (53) 187 1,188 1,336 275 504 428 337 74 52 (38) (26) (11) (8) Net (loss) gain on financial assets and financial liabilities (408) 369 285 735 Net (loss) gain on fair value hedge of interest rate swap (6,954) 2,449 (5,892) 402 6,861 (2,455) 5,809 (353) (93) (6) (83) 49 12. Other operating income 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 298 5,230 102 1 - (428) - - (9) 15 (15) 13 110 6 83 15 47 (133) 11 16 446 4,690 181 45 13. Operating expenses 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 14,541 12,779 4,501 3,908 10,242 9,271 3,410 3,093 (2,895) (2,558) (908) (807) 21,888 19,492 7,003 6,194 at fair value through the income statement ......................................................................... Net (loss) gain on assets held for sale .................................................................................. Share of profit of associates ................................................................................................. Other income ........................................................................................................................ Gain on prepayments of borrowings ..................................................................................... Net (loss) gain on fair value hedge of interest rate swap ....................................................... Net realized gain (loss) on financial assets carried at fair value through OCI ........................ Net financial loss from insurance contracts ........................................................................... Realised loss on investment property ................................................................................... Loans ................................................................................................................................... Fair value change of interest rate swaps designated as hedging instruments ....................... Fair value change on bonds issued by the Group attributable to interest rate risk ................ mandatorily measured at fair value through the income statement .............................. Net (loss) gain on fair value hedge of interest rate swap ................................................. Net foreign exchange gain (loss) .......................................................................................... Net financial income ........................................................................................................... Equity instruments ................................................................................................................ Debt instruments .................................................................................................................. Derivatives ........................................................................................................................... Fair value changes on investment property .......................................................................... Other operating income ..................................................................................................... Salaries and related expenses .............................................................................................. Operating expenses from insurance operation ..................................................................... Operating expenses ........................................................................................................... Other operating expenses .................................................................................................... 25
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 14. Personnel and salaries 2026 2025 2026 2025 Number of employees 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 896 870 896 872 890 891 890 891 Salaries and related expenses 10,911 10,194 3,372 2,997 215 (245) 71 178 121 67 42 20 1,714 1,551 540 497 1,580 1,212 476 216 14,541 12,779 4,501 3,908 Incentive schemes Share-based payment expense 15. Other operating expenses 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 4,220 3,783 1,434 1,235 1,103 1,017 223 400 1,112 995 367 360 410 390 131 121 2,170 1,825 833 576 366 382 134 108 113 120 38 41 748 759 250 252 10,242 9,271 3,410 3,093 During the first nine months of 2026 the Group made a ISK 215 million provision for the incentive scheme, including salary-related expenses (9M 2025: ISK 245 million was revised). At the period end the Group's accrual for the incentive scheme payments amounted to ISK 247 million (31.12.2025: ISK 1,678 million). The estimated cost of the deferred part of the incentive scheme from the fiscal years 2023–2025, to be settled in 2027–2031, amounting to ISK 535 million, will be expensed on a proportional basis over the years leading up to their settlement. Marketing ............................................................................................................................. Housing expenses ................................................................................................................ Other administration expenses * ........................................................................................... Depreciation of property and equipment ............................................................................... Depreciation of right of use asset ......................................................................................... Amortization of intangible assets .......................................................................................... The current incentive scheme for Arion Bank hf. and Vördur came into effect in 2021. The scheme is in compliance with the FSA’s rules on remuneration policy for financial institutions. The scheme is divided into two parts. Firstly, employees can receive up to 10% of their fixed salary for each fiscal year in the form of a cash payment. Secondly, a limited group can receive up to 25% of their fixed salary as a payment in the form of shares or share options in the Bank. Of this 25%, (i) a total of 20% will be settled instantly with cash, 40% will be settled instantly with shares subject to a 3-year lock-up period and the remaining 40% will be settled with shares or share options after 4-5 years or (ii) a total of 20% will be settled instantly with cash and the remaining 80% will be settled with share options after 4-5 years. The key metric used to determine whether incentive scheme payments will be paid by the Bank, in part or in full, is whether the Bank’s return on equity is higher than the weighted ROE of the Bank’s main competitors. Other supporting metrics include ROE and cost-to-income ratio vs target, compliance, staff NPS etc. Stefnir hf. has a special incentive scheme where other criteria are used as a basis. No accrual was recognised in the Income Statement due to the performance in 2026. Given that all criteria are expected to be met, the maximum total expense is estimated at ISK 2.0 billion, including salary-related expenses. This comprises ISK 1.0 billion for the group subject to the 10% fixed-salary limit and ISK 1.0 billion for the group subject to the 25% fixed-salary limit. The amount includes a deferred portion of ISK 0.4 billion, which is expensed over 4–5 years. Full-time equivalent positions at the end of the period .......................................................... Salaries ................................................................................................................................ Incentive scheme, including salary related expenses ........................................................... Share-based payment expenses .......................................................................................... Defined contribution pension plans ...................................................................................... Salary-related expenses ....................................................................................................... Arion Bank has in place a share option plan for all employees of the Bank, Vördur and Stefnir, approved at the Banks annual general meeting. A total expense of ISK 121 million was recognised in the Income Statement during the period (9M 2025: ISK 67 million). Estimated remaining expenses due the share option contracts are ISK 283 million and will be expensed over the next 5 years. For further information on the share option program, see Note 38. Salaries and related expenses ........................................................................................... IT expenses .......................................................................................................................... Professional services ........................................................................................................... * Included ISK 280 million fine following settlement with the Financial supervision of the Central Bank in October 2026. Average number of full-time equivalent positions during the period ...................................... Other operating expenses .................................................................................................. 26
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 16. Bank levy 17. Net impairment 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. Net impairment on financial instruments and value changes on loans (2,058) (1,371) (978) (1,142) - (4) - (1) 11 16 1 15 (2,047) (1,359) (977) (1,128) Net impairment by customer type (493) (155) (205) (473) (1,554) (1,204) (772) (655) (2,047) (1,359) (977) (1,128) 18. Income tax expense 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. 9,989 8,656 3,126 2,497 111 1,982 27 431 10,100 10,638 3,153 2,928 Reconciliation of effective tax rate 34,185 36,940 20.0% 6,837 20.0% 7,388 6.3% 2,157 4.9% 1,824 0.4% 136 0.2% 67 1.9% 637 3.1% 1,135 1.0% 342 0.8% 312 0.0% - 0.0% 16 (0.0%) (8) (0.2%) (64) (0.0%) (1) (0.1%) (40) 29.5% 10,100 28.8% 10,638 A bill proposing an increase in the bank levy rate from 0.145% to 0.254% is currently under consideration by the Icelandic Parliament. If enacted, the increase would result in an estimated additional expense of approximately ISK 1,700 million for the financial year 2026. The full amount would be recognized in the fourth quarter of 2026. Effective tax rate ................................................................................................................. Tax exempt revenues / loss consist mainly of profit / loss from equity positions. Other changes ...................................................................................................................... Tax exempt revenues / loss .................................................................................................. 2026 The Bank levy is 0.145% on total debts excluding tax liabilities, in excess of ISK 50 billion. The Bank levy is assessed on Financial Undertakings but non-financial subsidiaries are exempt from this tax. Additional 6% tax on Financial Undertakings ........................................................................ Non-deductible expenses ..................................................................................................... Other value changes of loans ............................................................................................... Net impairment ................................................................................................................... Individuals ............................................................................................................................ Financial undertakings pay 6% additional tax on taxable profit exceeding ISK 1 billion. Current tax expense ............................................................................................................. Deferred tax expense ........................................................................................................... Income tax expense ............................................................................................................ Effect of tax rates in foreign jurisdictions .............................................................................. Net impairment on other financial instruments at FVOCI ...................................................... 1.1.-30.9. Non-deductible taxes (Bank levy) ......................................................................................... Earnings before income tax .................................................................................................. Income tax using the Icelandic corporate tax rate ................................................................. Tax incentives not recognized in the Income Statement ....................................................... 2025 Corporates ........................................................................................................................... Net impairment ................................................................................................................... 1.1.-30.9. Net impairment on loans to customers and financial institutions ........................................... 27
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 19. Discontinued operations held for sale, net of income tax 2026 2025 2026 2025 1.1.-30.9. 1.1.-30.9. 1.7.-30.9. 1.7.-30.9. - (19) - 3 - (19) - 3 20. Earnings per share 2026 2025 2026 2025 2026 2025 1.1.-30.9. 24,078 24,419 - (19) 24,078 24,400 23,599 24,795 - (19) 23,599 24,776 1,354 1,390 - 1,390 1,354 1,390 1,396 1,402 - 1,402 1,396 1,402 17.79 17.56 - (0.01) 17.79 17.55 17.24 17.42 - (0.01) 17.24 17.41 17.43 17.83 - (0.01) 17.43 17.82 16.90 17.69 - (0.01) 16.90 17.68 1.7.-30.9. 8,706 8,226 - 3 8,706 8,229 8,713 8,466 - 3 8,713 8,469 1,356 1,384 - 1,384 1,356 1,384 1,399 1,395 - 1,395 1,399 1,395 6.42 5.94 - 0.00 6.42 5.95 6.22 5.90 - 0.00 6.22 5.90 6.43 6.12 - 0.00 6.43 6.12 6.23 6.07 - 0.00 6.23 6.07 Diluted comprehensive income per share (ISK) .......................... Basic comprehensive income per share (ISK) ............................ Weighted average number of outstanding shares (millions) ............ Net earnings attributable to the shareholders of Arion Bank ............ Basic comprehensive income per share (ISK) ............................ Basic earnings per share (ISK) .................................................... Weighted average number of outstanding shares (millions) ............ Continued including options (millions) .......................................................... Basic earnings per share (ISK) .................................................... Weighted average number of outstanding shares, Discontinued Net earnings attributable to the shareholders of Arion Bank ............ Total compreh.income attributable to the shareholders ................... Weighted average number of outstanding shares Diluted earnings per share (ISK) .................................................. including options (millions) .......................................................... Total comprehensive income attributable to the shareholders ......... Basic earnings per share is based on net earnings attributable to the shareholders of Arion Bank and the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated by adjusting the weighted average number of outstanding shares to assume conversion of all dilutive potential ordinary shares. Arion Bank has issued share options and share rights that have dilutive effects. Net loss from discontinued operations held for sale .............................................................. Discontinued operations held for sale, net of income tax ............................................... operationsoperations Sólbjarg ehf., a subsidiary of Eignabjarg is classified as held for sale. Diluted earnings per share (ISK) .................................................. Net earnings Diluted comprehensive income per share (ISK) .......................... 28
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements Notes to the Consolidated Interim Statement of Financial Position 21. Cash and balances with Central Bank 30.9.2026 31.12.2025 2,521 2,022 71,554 114,486 33,820 33,603 107,895 150,111 22. Loans to credit institutions 30.9.2026 31.12.2025 40,106 22,040 38,182 527 78,288 22,567 23. Loans to customers Gross Gross Gross carrying Book carrying Book carrying Book 30.9.2026 amount value amount value amount value 16,660 15,904 56,835 55,195 73,495 71,099 19,113 18,807 2,907 2,804 22,020 21,611 - - 2,085 1,564 2,085 1,564 606,462 605,546 109,927 108,077 716,389 713,623 - - 88,574 87,255 88,574 87,255 426 420 7,685 7,511 8,111 7,931 30,458 29,854 486,956 481,837 517,414 511,691 673,119 670,531 754,969 744,243 1,428,088 1,414,774 31.12.2025 15,373 14,666 53,125 50,643 68,498 65,309 17,558 17,301 2,561 2,478 20,119 19,779 - - 1,933 1,450 1,933 1,450 577,492 576,828 91,007 89,765 668,499 666,593 - - 57,705 56,224 57,705 56,224 681 674 7,174 7,046 7,855 7,720 31,851 30,925 485,158 481,056 517,009 511,981 642,955 640,394 698,663 688,662 1,341,618 1,329,056 24. Financial instruments 30.9.2026 31.12.2025 192,807 170,985 24,420 21,260 7,584 8,624 17,152 14,947 241,963 215,816 Credit cards .................................................................................... Derivatives ................................................................................................................................................................. Mandatory reserve deposit with Central Bank ............................................................................................................ Cash on hand ............................................................................................................................................................ Money market loans ................................................................................................................................................... Loans to customers ...................................................................... Bonds and debt instruments ...................................................................................................................................... Construction loans .......................................................................... Cash with Central Bank .............................................................................................................................................. Overdrafts ....................................................................................... Capital lease ................................................................................... Loans to customers ...................................................................... Other loans ..................................................................................... The total book value of loans that were pledged against outstanding borrowings was ISK 302 billion at the end of the period (31.12.2025: ISK 286 billion). Pledged loans comprised mortgage loans to individuals. Total Other loans ..................................................................................... Loans to customers at fair value ..................................................... Loans to customers at fair value ..................................................... Mortgage loans ............................................................................... Loans to credit institutions ..................................................................................................................................... Individuals Cash and balances with Central Bank .................................................................................................................... The mandatory reserve deposit with the Central Bank is not available for the Group to use in its daily operations. The minimum interest-free fixed reserve requirement of the Central Bank is 3%. Bank accounts ........................................................................................................................................................... Further analysis of loans is provided in Risk management disclosures. Financial instruments .............................................................................................................................................. Shares and equity instruments with variable income .................................................................................................. Securities used for economic hedging ........................................................................................................................ Construction loans .......................................................................... Credit cards .................................................................................... Corporates Mortgage loans ............................................................................... Overdrafts ....................................................................................... Capital lease ................................................................................... 29
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 25. Financial assets and financial liabilities Fair value Fair value Financial assets Amortized through through Loans cost OCI P/L Total 107,895 - - 107,895 78,288 - - 78,288 1,413,210 - 1,564 1,414,774 1,599,393 - 1,564 1,600,957 Bonds and debt instruments - 154,045 38,234 192,279 - - 528 528 - 154,045 38,762 192,807 Shares and equity instruments with variable income - - 9,793 9,793 - - 7,334 7,334 - - 7,293 7,293 - - 24,420 24,420 Derivatives - - 6,553 6,553 - - 1,031 1,031 - - 7,584 7,584 Securities used for economic hedging - - 7,667 7,667 - - 9,485 9,485 - - 17,152 17,152 Other financial assets 2,994 - - 2,994 14,070 - - 14,070 17,064 - - 17,064 1,616,457 154,045 89,482 1,859,984 Financial liabilities 16,303 - - 16,303 1,013,789 - - 1,013,789 509,773 - - 509,773 42,540 - - 42,540 - - 35 35 - - 2,452 2,452 - - 6,658 6,658 23,251 - - 23,251 1,605,656 - 9,145 1,614,801 Loans to credit institutions .................................................................................................... Derivatives used for hedge accounting ................................................................................. Shares and equity instruments with variable income ...................................................... OTC derivatives ................................................................................................................... Derivatives used for hedge accounting ................................................................................. Securities used for economic hedging ............................................................................. Financial assets .................................................................................................................. Other financial assets ........................................................................................................ Listed ................................................................................................................................... Other financial assets ........................................................................................................... Shares and equity instruments with variable income, listed .................................................. Bonds and debt instruments ............................................................................................. Loans to customers .............................................................................................................. 30.9.2026 Loans ................................................................................................................................... Cash and balances with Central Bank .................................................................................. Deposits ............................................................................................................................... Bond funds with variable income, unlisted ............................................................................ Derivatives ........................................................................................................................... Due to credit institutions and Central Bank ........................................................................... Other financial liabilities ........................................................................................................ Borrowings * ......................................................................................................................... Unlisted ................................................................................................................................ Derivatives .......................................................................................................................... Subordinated liabilities * ....................................................................................................... Unlisted ................................................................................................................................ Bonds and debt instruments, listed ....................................................................................... Accounts receivable ............................................................................................................. Listed ................................................................................................................................... Short positions in bonds ....................................................................................................... * Including effect from hedge accounting derivatives. Financial liabilities ............................................................................................................. 30
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 25. Financial assets and financial liabilities, continued Fair value Fair value Financial assets Amortized through through Loans cost OCI P/L Total 150,111 - - 150,111 22,567 - - 22,567 1,327,606 - 1,450 1,329,056 1,500,284 - 1,450 1,501,734 Bonds and debt instruments - 138,302 32,479 170,781 - - 204 204 - 138,302 32,683 170,985 Shares and equity instruments with variable income - - 11,499 11,499 - - 9,008 9,008 - - 753 753 - - 21,260 21,260 Derivatives - - 5,414 5,414 - - 3,210 3,210 - - 8,624 8,624 Securities used for economic hedging - - 1,732 1,732 - - 13,215 13,215 - - 14,947 14,947 Other financial assets 3,465 - - 3,465 13,566 - - 13,566 17,031 - - 17,031 1,517,315 138,302 78,964 1,734,581 Financial liabilities 12,003 - - 12,003 921,182 - - 921,182 494,823 - - 494,823 43,518 - - 43,518 - - 1,411 1,411 - - 1,718 1,718 11,792 - - 11,792 1,483,318 - 3,129 1,486,447 * Including effect from hedge accounting derivatives. Financial liabilities ............................................................................................................. Due to credit institutions and Central Bank ........................................................................... Subordinated liabilities * ....................................................................................................... Loans to credit institutions .................................................................................................... Bonds and debt instruments, listed ....................................................................................... Deposits ............................................................................................................................... Listed ................................................................................................................................... Other financial assets ........................................................................................................ Unlisted ................................................................................................................................ Derivatives used for hedge accounting ................................................................................. Cash and balances with Central Bank .................................................................................. Securities used for economic hedging ............................................................................. Shares and equity instruments with variable income ...................................................... Other financial assets ........................................................................................................... Bond funds with variable income, unlisted ............................................................................ Unlisted ................................................................................................................................ Bonds and debt instruments ............................................................................................. Loans ................................................................................................................................... Listed ................................................................................................................................... Derivatives ........................................................................................................................... 31.12.2025 Shares and equity instruments with variable income, listed .................................................. Derivatives .......................................................................................................................... Loans to customers .............................................................................................................. Derivatives used for hedge accounting ................................................................................. Other financial liabilities ........................................................................................................ Borrowings * ......................................................................................................................... OTC derivatives ................................................................................................................... Accounts receivable ............................................................................................................. Financial assets .................................................................................................................. 31
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 25. Financial assets and financial liabilities, continued Manda- Fair value torily at through fair value OCI thr. P/L Total 1,537 10,062 11,599 152,508 24,244 176,752 - 4,456 4,456 154,045 38,762 192,807 1,434 8,667 10,101 136,868 20,366 157,234 - 3,650 3,650 138,302 32,683 170,985 26. Fair value hierarchy Level 1 Level 2 Level 3 Total - - 1,564 1,564 188,115 4,692 - 192,807 9,733 11,488 3,199 24,420 - 6,553 - 6,553 - 1,031 - 1,031 17,152 - - 17,152 - - 7,651 7,651 215,000 23,764 12,414 251,178 35 - - 35 - 2,452 - 2,452 - 6,658 - 6,658 35 9,110 - 9,145 Derivatives used for hedge accounting ................................................................................. Bonds and debt instruments at fair value ............................................................................................ Corporates .............................................................................................................................................. Financial and insurance activities ............................................................................................................ The total amount of pledged bonds was ISK 3.3 billion at the end of the period (31.12.2025: ISK 3.2 billion). Pledged bonds comprise Icelandic Government Bonds that were pledged against funding received and included in Due to credit institutions and Central Bank as well as short positions included in Financial liabilities at fair value. Public sector ........................................................................................................................................... Loans to customers .............................................................................................................. Derivatives ........................................................................................................................... Short positions in bonds ....................................................................................................... Assets and liabilities recorded at fair value by level of the fair value hierarchy Level 2: valuation techniques for which all significant inputs are market observable, either directly or indirectly; and For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. 30.9.2026 The Group uses the following hierarchy for determining and disclosing the fair value of assets and liabilities by valuation technique: Bonds and debt instruments at fair value ............................................................................................ Investment property .............................................................................................................. Corporates .............................................................................................................................................. Public sector ........................................................................................................................................... 30.9.2026 Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Shares and equity instruments with variable income ............................................................ Liabilities at fair value Assets at fair value Level 3: valuation techniques which include significant inputs that are not based on observable market data. 31.12.2025 Bonds and debt instruments measured at fair value, specified by issuer Derivatives ........................................................................................................................... Derivatives used for hedge accounting ................................................................................. Securities used for economic hedging .................................................................................. Assets at fair value ............................................................................................................. Liabilities at fair value ........................................................................................................ Bonds and debt instruments ................................................................................................. Financial and insurance activities ............................................................................................................ 32
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 26. Fair value hierarchy, continued Level 1 Level 2 Level 3 Total - - 1,450 1,450 167,250 3,732 3 170,985 11,201 6,055 4,004 21,260 - 5,414 - 5,414 - 3,210 - 3,210 14,947 - - 14,947 - - 7,305 7,305 193,398 18,411 12,762 224,571 - 1,411 - 1,411 - 1,718 - 1,718 - 3,129 - 3,129 Methods for establishing fair value Liabilities at fair value ........................................................................................................ Derivatives ........................................................................................................................... Shares and equity instruments with variable income ............................................................ Derivatives used for hedge accounting ................................................................................. Liabilities at fair value Securities used for economic hedging .................................................................................. Level 2: Fair value established using valuation techniques with observable market information Derivatives ........................................................................................................................... Bonds and debt instruments ................................................................................................. For listed and liquid stocks and bonds, certain financial derivatives and other market traded securities, the fair value is derived directly from quoted market prices. These instruments are disclosed under Financial instruments and Financial liabilities at fair value in the Statement of Financial Position. Fair value of assets and liabilities Assets at fair value ............................................................................................................. Transfers from Level 1 to Level 2 amounted to ISK 43 million during the period (2025: no transfers). The best evidence of the fair value of an asset and liability at initial recognition is the transaction price, unless the fair value can be evidenced by comparison with other observable current market transactions, or is based on a valuation technique whose variables include only data from observable markets. In some cases, the carrying value of an asset in Note 25 is used as an approximation for the fair value of the asset. This is straight forward for cash and cash equivalents but is also used for short term investments and borrowings to highly rated counterparties, such as credit institutions, on contracts that feature interest close to or equal to market rates and expose the Group to little or no credit risk. 31.12.2025 Loans to customers .............................................................................................................. Assets at fair value For assets and liabilities, for which the market is not active, the Group applies valuation techniques to attain a fair value using as much market information as available. Valuation techniques include using recent market transactions between knowledgeable and willing parties, if available, reference to current fair value of another instrument that is substantially the same, discounted cash flow analysis, option pricing models or other commonly accepted valuation techniques used by market participants to price the instrument. For assets and liabilities for which quoted prices on active markets are not available, the fair value is derived using various valuation techniques. This applies in particular to OTC derivatives such as options, swaps, futures and unlisted equities but also some other assets and liabilities. Investment property .............................................................................................................. Level 2 instruments include unlisted shares, unlisted funds with underlying bonds and equity holdings (share certificates), unlisted and less liquid listed bonds and all OTC derivatives. Derivatives used for hedge accounting ................................................................................. Level 1: Fair value established from quoted market prices The fair value of asset and liabilities is the amount at which the asset and liability could be exchanged in a current transaction between willing parties, i.e. not during a forced sale or liquidation. The existence of published price quotations in an active market is the best evidence of fair value and when they exist they are used by the Group to measure assets and liabilities. If quoted prices for an asset fail to represent actual and regularly occurring transactions in active market transactions or if quoted prices are not available at all, fair value is established by using an appropriate valuation technique. In most cases the valuation is based on theoretical financial models, such as the Black Scholes model or variations thereof. These techniques also include forward pricing and swap models using present value calculations. 33
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 26. Fair value hierarchy, continued Level 3: Fair value established using valuation techniques with significant unobservable market information Movements in Level 3 assets measured at fair value Loans Bonds Shares Total 7,305 1,450 3 4,003 12,762 298 114 (2) (828) (418) 48 - - 24 72 - - (1) - (1) 7,651 1,564 - 3,199 12,415 9,387 1,313 5 1,655 12,360 5,277 92 - (218) 5,151 191 45 - 2,570 2,806 (7,550) - (2) (3) (7,555) 7,305 1,450 3 4,004 12,762 Line items where effects of Level 3 assets are recognized in the Income Statement Loans Bonds Shares Total - 152 - - 152 - (38) (2) (828) (868) 298 - - - 298 298 114 (2) (828) (418) - 122 - - 122 - (30) - (218) (248) 4,848 - - - 4,848 4,848 92 - (218) 4,722 Effects recognized in the Income Statement ................................................. 31.12.2025 Net interest income ............................................................................................ The Group applies management valuation for determining fair value of investment properties. Management valuation is either based on recent transactions and offers for similar assets or present value calculations which involve estimation of future cash flow and the assessment of appropriate discount rate. Additions ............................................................................................................ Financial assets Net financial income .......................................................................................... 30.9.2026 Other operating income ..................................................................................... 31.12.2025 Balance at the end of the period ..................................................................... Net financial income .......................................................................................... Disposals ........................................................................................................... Net fair value changes ....................................................................................... Net fair value changes ....................................................................................... Equity instruments that do not have a quoted market price are evaluated using methods and guidelines from pertinent international organizations. In most cases intrinsic value is the basis for the assessment but other factors, such as cash flow analysis, can also modify the results. Financial assets In some cases there is little or no market data to rely on for fair value calculations. The most common valuation technique is present value calculations. Such calculations involve the estimation of future cash flow and the assessment of appropriate discount rate. The discount rate should both reflect current market rates and the uncertainty in the future cash flow. In such cases internal models and methods are used to calculate the fair value. The models may be statistical in nature, based on internal or external history of assets with similar characteristics and/or based on internal knowledge and experience. For example, the credit margin on most loans to customers which, is added to the current and suitable interest rate to arrive at an appropriate discount rate, is estimated using credit rating and loss parameters in case of default that have been derived from internal models. 30.9.2026 Investment property Balance at the beginning of the year .................................................................. Effects recognized in the Income Statement ................................................. Other operating income ..................................................................................... Net interest income ............................................................................................ Investment property Additions ............................................................................................................ Balance at the beginning of the year .................................................................. Disposals ........................................................................................................... Balance at the end of the year ........................................................................ 34
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 26. Fair value hierarchy, continued Carrying values and fair values of financial assets and financial liabilities not carried at fair value Carrying Fair Unrealized Financial assets not carried at fair value value value (loss) gain 107,895 107,895 - 78,288 78,288 - 1,413,210 1,404,758 (8,452) 17,064 17,064 - 1,616,457 1,608,005 (8,452) Financial liabilities not carried at fair value 16,303 16,303 - 1,013,789 1,013,789 - 509,773 513,661 (3,888) 42,540 49,805 (7,265) 23,251 23,251 - 1,605,656 1,616,809 (11,153) Financial assets not carried at fair value 150,111 150,111 - 22,567 22,567 - 1,327,606 1,329,204 1,598 17,031 17,031 - 1,517,315 1,518,913 1,598 Financial liabilities not carried at fair value 12,003 12,003 - 921,182 921,182 - 494,823 501,211 (6,388) 43,518 50,461 (6,943) 11,792 11,792 - 1,483,318 1,496,649 (13,331) Derivatives Notional value Assets Liabilities 75,621 208 1,010 291,510 1,031 6,658 45,672 388 940 7,210 168 42 14,803 5,789 460 434,817 7,584 9,110 95,591 430 419 268,565 3,210 1,718 33,616 167 204 1,882 70 5 18,025 4,747 783 417,679 8,624 3,129 Loans to customers ................................................................................................................................. Other financial liabilities ........................................................................................................................... Due to credit institutions and Central Bank .............................................................................................. Due to credit institutions and Central Bank .............................................................................................. Loans to customers ................................................................................................................................. Subordinated liabilities ............................................................................................................................ Cash and balances with Central Bank ..................................................................................................... Share swap agreements .......................................................................................................................... 31.12.2025 Bond swap agreements ........................................................................................................................... 31.12.2025 Forward exchange rate agreements ........................................................................................................ 30.9.2026 Borrowings .............................................................................................................................................. Other financial assets .............................................................................................................................. 30.9.2026 Loans to credit institutions ....................................................................................................................... Bond swap agreements ........................................................................................................................... Other financial assets .............................................................................................................................. Cash and balances with Central Bank ..................................................................................................... Interest rate and exchange rate agreements ........................................................................................... Subordinated liabilities ............................................................................................................................ Financial assets not carried at fair value ............................................................................................. Financial liabilities not carried at fair value ......................................................................................... Forward exchange rate agreements ........................................................................................................ Loans to customers largely bear variable interest rates. Those loans, including corporate loans, are presented at book value as they generally have a short duration and very limited interest rate risk. Loans with fixed interest rates, mainly retail mortgages, are estimated by using the discount cash flow method with the interest rates offered on new loans, taking into account loan to value. Defaulted loans are presented at book value as no future cash flow is expected on them. Instead they are written down according to their estimated potential recovery value. Financial assets not carried at fair value ............................................................................................. Borrowings .............................................................................................................................................. Interest rate and exchange rate agreements ........................................................................................... Loans to credit institutions ....................................................................................................................... Fair value hedge of interest rate swap ..................................................................................................... Other financial liabilities ........................................................................................................................... Deposits .................................................................................................................................................. Deposits .................................................................................................................................................. Derivatives ............................................................................................................................................. Share swap agreements .......................................................................................................................... Fair value hedge of interest rate swap ..................................................................................................... Derivatives ............................................................................................................................................. Fair value Financial liabilities not carried at fair value ......................................................................................... 35
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 26. Fair value hierarchy, continued Fair value hedge of interest rate swap Gain (loss) Notional on FV 1.1.-30.9.2026 Value Assets Liabilities changes 68,496 - 338 1,033 - - - (151) 2,417 108 - (59) 41,098 923 - (1,133) 15,107 - 703 (585) 41,098 - 1,296 (1,423) 41,098 - 2,300 (1,676) 41,098 - 1,458 (1,976) 41,098 - 563 (984) 1,031 6,658 (6,954) - - - 693 73,640 - 1,395 1,387 44,184 1,815 - (248) 2,509 53 - 30 44,184 656 - (447) 15,680 178 - 422 44,184 508 - (229) 44,184 - 323 (423) 3,210 1,718 1,185 Hedged borrowings and subordinated liabilities Gain (loss) Book on FV value Assets Liabilities changes 39,704 1,899 - 1,950 27,926 - 23 (1,028) 39,892 1,567 - 1,405 - - - 150 2,858 5 - 58 42,150 511 - 1,121 14,215 780 - 581 38,842 2,016 - 1,655 40,587 952 - 969 246,174 7,730 23 6,861 - - - (648) 72,265 1,038 - (1,391) 44,731 209 - 196 46,252 - 154 247 2,893 - 53 (31) 44,916 - 622 427 15,635 218 - (434) 43,835 423 - 436 270,527 1,888 829 (1,198) EUR 300 million - issued 2025 - 6 years ............................................................................... EUR 300 million - issued 2025 - 5 years ............................................................................... EUR 500 million - issued 2021 - 5 years ............................................................................... During the period the slope for the regression line was in all cases within the range of 0.92-1.03 and the coefficient of determination was at least 0.92. During 2025, the slope of the regression line was in all cases within the range of 0.95-1.24 and the correlation coefficient was at least 0.94. In all cases the effectiveness is within limits in 2026 and 2025. 1-5 years The effectiveness of each hedge is measured regularly with linear regression. The relationship between fair value changes of an interest rate swap on the one hand and a borrowing and subordinated liabilities on the other hand is examined. Maturity date The Group applies fair value hedge accounting only with respect to interest rate swaps in EUR and USD, whereby the Group pays floating rate interest and receives fixed rate interest, with identical cash flows to the borrowings and subordinated liabilities. The interest rate swaps are hedging the exposure of changes in the fair value of certain fixed-rate EUR and USD bonds, see Notes 34 and 35, arising from changes in EURIBOR and SOFR benchmark interest rates. 3-6 mth 1-5 years Interest rates swaps - EUR ............................................................. Interest rates swaps - EUR ............................................................. Interest rates swaps - EUR ............................................................. 1.1.-31.12.2025 Interest rates swaps - EUR ............................................................. Interest rates swaps - USD ............................................................. 1.1.-31.12.2025 EUR 300 million - issued 2024 - 4 years ............................................................................... Interest rates swaps - EUR ............................................................. Interest rates swaps - EUR ............................................................. Interest rates swaps - USD ............................................................. USD 125 million - issued 2024 - Perpetual ........................................................................... USD 21 million - issued 2024 - 3 years ................................................................................. Hedged borrowings and subordinated liabilities .............................................................. Interest rates swaps - USD ............................................................. EUR 300 million - issued 2025 - 6 years ............................................................................... 1-5 years EUR 300 million - issued 2026 - 5 years ............................................................................... fair value USD 21 million - issued 2024 - 3 years ................................................................................. Hedged borrowings and subordinated liabilities .............................................................. USD 125 million - issued 2024 - Perpetual ........................................................................... EUR 300 million - issued 2021 - 4 years ............................................................................... Interest rates swaps - EUR ............................................................. EUR 500 million - issued 2021 - 5 years ............................................................................... over 5 yearsInterest rates swaps - EUR ............................................................. EUR 300 million - issued 2024 - 4 years ............................................................................... EUR 300 million - issued 2025 - 5 years ............................................................................... Interest rates swaps - USD ............................................................. - 1-5 years Interest rates swaps - EUR ............................................................. 1-5 years 1-5 years 6-12 mth 1-5 years Interest rates swaps - EUR ............................................................. 1-5 years 1-5 years 1-5 years 1-5 years Interest rates swaps - EUR ............................................................. Interest rates swaps - EUR ............................................................. Accumulated EUR 300 million - issued 2026 - 3 years ............................................................................... EUR 300 million - issued 2023 - 3 years ............................................................................... 1.1.-30.9.2026 Fair value Interest rates swaps - EUR ............................................................. 0-3 mth - EUR 300 million - issued 2023 - 3 years ............................................................................... 36
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 27. Offsetting financial assets and financial liabilities Assets Assets after Total assets Gross assets Nettings recognized consideration enforceable recognized before with gross on Balance Financial Collateral of netting netting arr- on Balance 30.9.2026 nettings liabilities Sheet, net liabilities received potential angements Sheet, net Reverse repurchase agreements .............. 17,855 (11,241) 6,614 11,241 - 17,855 - 6,614 Derivatives ................................................ 2,037 - 2,037 (145) (5,879) (3,987) 5,547 7,584 Total assets ............................................. 19,892 (11,241) 8,651 11,096 (5,879) 13,868 5,547 14,198 31.12.2025 Reverse repurchase agreements .............. 17,035 (10,789) 6,246 10,789 - 17,035 - 6,246 Derivatives ................................................ 3,739 - 3,739 (1,486) (5,602) (3,349) 4,885 8,624 Total assets ............................................. 20,774 (10,789) 9,985 9,303 (5,602) 13,686 4,885 14,870 Liabilities Liabilities not Total Gross Liabilities after subject to liabilities liabilities Nettings recognized consideration enforceable recognized before with gross on Balance Financial Collateral of netting netting arr- on balance 30.9.2026 nettings assets Sheet, net assets pledged potential angements sheet, net Repurchase agreements ........................... 16,922 (11,241) 5,681 11,241 - 16,922 - 5,681 Derivatives ................................................ 8,438 - 8,438 (145) (8,828) (535) 672 9,110 Total liabilities ......................................... 25,360 (11,241) 14,119 11,096 (8,828) 16,387 672 14,791 31.12.2025 Repurchase agreements ........................... 16,579 (10,789) 5,790 10,789 - 16,579 - 5,790 Derivatives ................................................ 2,555 - 2,555 (1,486) (1,752) (683) 574 3,129 Total liabilities ......................................... 19,134 (10,789) 8,345 9,303 (1,752) 15,896 574 8,919 28. Investments in associates 30.9.2026 31.12.2025 760 814 - (19) - (8) 110 (27) 870 760 The Group's interest in its principal associates 31.8% 31.8% 24.8% 24.8% 35.3% 35.3% 19.5% 19.5% Matorka ehf., Eyrartröd 12, Grindavik, Iceland ........................................................................................................... Háblær ehf., Sudurlandsbraut 18, Reykjavík, Iceland ................................................................................................. In January 2026 Arion Bank obtained shares in Glassriver ehf. as a result of debt restructuring of the company. In August 2026 the entire shareholding was sold with no effects on the Income Statement. Share of profit (loss) of associates ............................................................................................................................. Carrying amount at the beginning of the year ............................................................................................................. Netting potential not recognized in the Balance Sheet Financial assets subject to enforceable master netting arrangements and similar arrangements Reiknistofa bankanna hf., Dalvegur 30, Reykjavík, Iceland ........................................................................................ Assets not subject to Liabilities subject to netting arrangements Decreased share capital ............................................................................................................................................ Dividend received ...................................................................................................................................................... Investment in associates ......................................................................................................................................... Netting potential not recognized in the Balance Sheet Assets subject to netting arrangements Financial liabilities subject to enforceable master netting arrangements and similar arrangements SER eignarhaldsfélag ehf., Borgartún 19, Reykjavík, Iceland .................................................................................... Reverse repurchase agreements and repurchase agreements are recognized within the line items Financial instruments and Due to credit institutions and Central Bank respectively. 37
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 29. Intangible assets Policies applied to the Group's intangible assets Customer relationship Infra- and related 1.1.-30.9.2026 Goodwill structure Software Total 730 2,383 367 4,053 7,533 - - - 381 381 - - (45) (703) (748) 730 2,383 322 3,731 7,166 1.1.-31.12.2025 730 2,383 427 4,148 7,688 - - - 852 852 - - (60) (947) (1,007) 730 2,383 367 4,053 7,533 Acquired software and internally developed software is capitalized on the basis of the cost of acquiring and bringing the software into service. Expenditure on internally developed software is recognized as an asset when the Group is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits, and when it can reliably measure the costs to complete the development. The capitalized costs of internally developed software include external expenses directly attributable to developing the software and salary and salary related expenses of implementation of core systems. Capitalized costs of software are amortized over its useful life. Computer software licenses and internally developed software recognized as intangible assets are amortized over their useful life, which is estimated to be 3-10 years. Acquired Infrastructure, which is capitalized as an intangible asset, is related to the asset management operation and the insurance operation. The business activity is based on years of developing expertise and systems, during which a valuable platform has been created for future growth. An impairment test is performed annually. Balance at the beginning of the year .................................................................. Goodwill related to the insurance operation is recognized among assets in the operating segment Vördur and goodwill related to the subsidiary Leiguskjól is recognized in the operating segment Other subsidiaries, see Note 6. Balance at the end of the year ........................................................................ Amortization ....................................................................................................... Intangible assets comprise the following categories: Goodwill, which arises on business combinations; Infrastructure, Customer relationships and related agreements which are identified during the acquisition of subsidiaries and related to the activities of the businesses being acquired; and Software, which is acquired (e.g. software licenses) and cost of implementation. Amortization method ....................................................................... Softwareand infrastructure Goodwill Customer relationships and related agreements are connected to business relationships and agreements which the Bank acquired in subsidiaries. The asset is based on the assumption that business relationships and agreements generate regular payments and earnings to the relevant business segments. The lifetime of these agreements is based on the experience of the Group and the industry. As a result, these agreements are assessed as having an identified useful lifetime. and related agreements Straight-line basis over 6-15 years and impairment test Additions ............................................................................................................ Balance at the beginning of the year .................................................................. Additions ............................................................................................................ Balance at the end of the period ..................................................................... agreements Useful lives ..................................................................................... Customer relationship Straight-line basis over 3-10 years AcquiredInternally generated or acquired ..................................................... Finite 6-15 years and undefined Acquired and internally generated Finite 3-10 years Impairment test Undefined Amortization ....................................................................................................... 38
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 30. Tax assets and tax liabilities Assets Liabilities Assets Liabilities - 13,845 - 10,738 2 2,356 2 2,245 2 16,201 2 12,983 31. Assets and disposal groups held for sale 30.9.2026 31.12.2025 298 98 298 98 32. Other assets 30.9.2026 31.12.2025 3,666 3,354 876 745 2,995 3,465 9,930 9,174 6,017 5,779 23,484 22,517 33. Other liabilities 30.9.2026 31.12.2025 1,325 1,496 8,242 3,041 23,639 22,435 1,636 6,560 2,510 2,107 4,483 5,508 1,646 1,466 658 682 977 867 13,026 6,574 58,142 50,736 Insurance contract liabilities 3,706 3,739 19,132 17,866 802 830 23,639 22,435 Insurance contract liabilities ................................................................................................................................... Tax assets and tax liabilities .............................................................................................. Real estates and other assets classified as assets held for sale are generally the result of foreclosures on companies and individuals. Other assets ............................................................................................................................................................. Right-of-use asset ...................................................................................................................................................... Accounts receivable ................................................................................................................................................... Liabilities for remaining coverage ............................................................................................................................... Sundry assets ............................................................................................................................................................ Sundry liabilities ......................................................................................................................................................... Withholding tax .......................................................................................................................................................... Lease liability ............................................................................................................................................................. Accounts payable ...................................................................................................................................................... Deferred tax ......................................................................................................................... Unsettled securities trading ........................................................................................................................................ Property and equipment ............................................................................................................................................. Assets and disposal groups held for sale .............................................................................................................. 31.12.2025 Insurance contract liabilities ....................................................................................................................................... Prepaid income .......................................................................................................................................................... Bank levy ................................................................................................................................................................... Accrued expenses ..................................................................................................................................................... Risk adjustment ......................................................................................................................................................... Other liabilities ......................................................................................................................................................... Real estate and other assets ..................................................................................................................................... Liabilities for incurred claims ...................................................................................................................................... Unsettled securities trading ........................................................................................................................................ Impairment of off-balance items ................................................................................................................................. Current tax ........................................................................................................................... 30.9.2026 39
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 34. Borrowings First Maturity 30.9.2026 31.12.2025 Currency, original nominal value issued Maturity type Terms of interest ARION CBI 26 ISK 17,080 million ............. 2019 10/2026 At maturity 13,801 20,094 ARION CB EUR 500 million* ..................... 2021 10/2026 At maturity 27,926 72,265 ARION CB 27 ISK 53,100 million .............. 2022 10/2027 At maturity 26,770 26,083 ARION CBI 28 ISK 27,420 million ............. 2024 9/2028 At maturity 24,314 23,286 ARION CBI 29 ISK 27,200 million ............. 2014 12/2029 At maturity 43,929 41,370 ARION CBI 30 ISK 31,920 million ............. 2023 11/2030 At maturity 35,704 33,421 ARION CB EUR 300 million* ..................... 2026 2/2031 At maturity 39,704 - ARION CBI 31 ISK 26,300 million ............. 2025 8/2031 At maturity 27,172 8,299 ARION CBI 48 ISK 11,680 million ............. 2018 1/2048 Amortizing 12,916 12,732 252,236 237,550 SEK 300 million ......................................... 2023 3/2026 At maturity - 4,091 EUR 300 million* ....................................... 2023 5/2026 At maturity - 46,252 ARION 26 1222 Green, ISK 5,760 million .. 2021 12/2026 At maturity 5,616 5,417 NOK 250 million ........................................ 2017 4/2027 At maturity 3,189 3,182 SEK 500 million Green .............................. 2024 10/2027 At maturity 6,079 6,840 NOK 500 million Green ............................ 2024 10/2027 At maturity 6,366 6,288 USD 21 million* ......................................... 2024 12/2027 At maturity 2,858 2,893 NOK 600 million Green ............................ 2025 12/2027 At maturity 7,566 7,479 SEK 900 million Green .............................. 2025 12/2027 At maturity 10,882 12,248 SEK 250 million ......................................... 2025 1/2028 At maturity 3,037 3,418 NOK 350 million ........................................ 2025 1/2028 At maturity 4,451 4,397 USD 27 million .......................................... 2025 7/2028 At maturity 3,028 3,015 EUR 300 million * ...................................... 2024 11/2028 At maturity 42,150 44,916 ARION 28 1512, ISK 16,920 million .......... 2023 12/2028 At maturity 19,504 18,271 NOK 550 million Green ............................ 2026 1/2029 At maturity 6,973 - SEK 650 million Green .............................. 2026 1/2029 At maturity 7,878 - EUR 300 million * ...................................... 2026 11/2029 At maturity 40,587 - EUR 300 million * ...................................... 2025 5/2030 At maturity 39,892 44,731 EUR 300 million Green * ........................... 2025 9/2031 At maturity 38,842 43,835 NOK 300 million Green ............................. 2026 1/2031 At maturity 3,803 - SEK 200 million Green .............................. 2026 1/2031 At maturity 2,423 - 255,124 257,273 Other loans EUR - credit institutions ......... 2026 7/2038 Amortizing 2,413 - 2,413 - 509,773 494,823 Fixed 0.05% .................................. Fixed CPI linked 4.35% ................. Floating NIBOR 3M +1.11% .......... * The Group applies fair value hedge accounting to these bond issuances and uses certain foreign currency denominated interest rate swaps as hedging instruments, see Note 26. The interest rate swaps are hedging the Group’s exposure to fair value changes of these fixed-rate bonds in EUR and USD arising from changes in interest rates. Borrowings ............................................................................................................................................................... Floating, Stibor 3M + 1.07% .......... Floating, Nibor 3M + 0.80% ........... Floating, Stibor 3M + 0.83% .......... Floating STIBOR 3M +1.20% ........ Fixed 5.00% ................................. Fixed 6.25% .................................. Fixed 3.40% ................................. Floating STIBOR 3M +1.20% ........ Fixed, 2.75 % ................................ Floating STIBOR 3M +1.13% ........ Fixed CPI linked 2.00% ................. Floating STIBOR 3M +3.00% ........ Fixed 4.70% .................................. Fixed CPI linked 2.75% ................. Fixed CPI linked 4.25% ................. Fixed CPI linked 3.50% ................. Fixed CPI linked 3.65% ................. Floating NIBOR 3M +1.17% .......... Fixed 3.50% .................................. Fixed CPI linked 2.50% ................. Fixed 3.625% ................................ Fixed 4.625% ................................ Statutory covered bonds ......................................................................................................................................... Fixed 5.50% .................................. Floating NIBOR 3M +1.20% .......... Fixed 7.25% .................................. Floating, Nibor 3M + 1.05% ........... Floating, Euribor 3M + 0.614% ...... Senior unsecured bonds ......................................................................................................................................... The book value of listed bonds was ISK 507 billion at the end of the period (31.12.2025: ISK 495 billion). The market value of those bonds was ISK 511 billion (31.12.2025: ISK 501 billion). The Group repurchased own debts amounting to ISK 50 billion during the period with a net gain of ISK 7 million recognized in the Income Statement (9M 2025: ISK 15 million loss). Fixed 3.625% ................................ Other loans ............................................................................................................................................................... 40
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 35. Subordinated liabilities First call 30.9.2026 31.12.2025 Currency, original nominal value Issued Maturity date Terms of interest EUR 5 million ............................................ 2019 1/2026 6 Mar '26 - 753 ARION T2I ISK 33 9,860 million ................ 2022 12/2033 15 Dec '28 12,404 11,613 ARION T2 33 ISK 2,240 million ................. 2022 12/2033 15 Dec '28 2,300 2,249 SEK 225 million ......................................... 2024 11/2034 20 Nov '29 2,733 3,078 ARION T2I 36 ISK 10,040 million .............. 2025 12/2036 2 Dec '31 10,888 10,190 28,325 27,883 ARION AT1 USD 125 million * .................. 2024 Perpetual 24 Sep '29 14,215 15,635 14,215 15,635 42,540 43,518 36. Liabilities arising from financial activities Net cash Interest Foreign Effect At period 1.1.-30.9.2026 At 1 Jan. flows expenses exchange from hedge end 139,202 6,865 11,769 - - 157,836 26,083 (730) 1,417 - - 26,770 72,265 (460) 2,074 (5,278) (971) 67,630 233,585 12,999 7,726 (16,489) (5,404) 232,417 5,417 (83) 217 - 65 5,616 18,271 (425) 1,658 - - 19,504 21,803 (562) 2,051 - - 23,292 2,249 (105) 156 - - 2,300 3,831 (854) 111 (355) - 2,733 15,635 (1,302) 995 (562) (551) 14,215 538,341 15,343 28,174 (22,684) (6,861) 552,313 1.1.-31.12.2025 153,965 (24,357) 9,594 - - 139,202 25,652 (1,458) 1,889 - - 26,083 68,775 (1,555) 1,958 1,648 1,439 72,265 166,795 53,098 9,843 4,552 (703) 233,585 5,411 (285) 291 - - 5,417 12,580 4,237 1,454 - - 18,271 17,802 2,556 1,445 - - 21,803 3,153 (1,116) 212 - - 2,249 3,579 (174) 171 255 - 3,831 20,004 (4,832) 1,684 (1,683) 462 15,635 477,716 26,114 28,541 4,772 1,198 538,341 Subordinated bond T2 ISK............................................................... Liabilities arising from financial activities.................................... Subordinated bond T2 in ISK - CPI linked........................................ Covered bonds in ISK...................................................................... Covered bonds in FX....................................................................... Covered bonds in ISK - CPI linked................................................... Subordinated bond T2 FX................................................................ Fixed CPI linked 5.00% ................. Subordinated bond T2 ISK............................................................... Subordinated bond T2 in ISK - CPI linked........................................ Additional Tier 1 and Tier 2 subordinated liabilities are eligible as regulatory capital under the Icelandic Financial Undertakings Act No. 161/2002. Fixed 8.125% ................................ Liabilities arising from financial activities.................................... Subordinated bond AT1 FX.............................................................. Senior unsecured bonds in FX......................................................... Senior unsecured bonds in ISK - CPI linked..................................... Senior unsecured bonds in ISK........................................................ Subordinated liabilities ............................................................................................................................................ Fixed 9.25% ................................. Covered bonds in ISK...................................................................... Non-cash changes Additional Tier 1 subordinated liabilities ............................................................................................................... * The Group applies fair value hedge accounting to these bond issuances and uses certain foreign currency denominated interest rate swaps as hedging instruments, see Note 26. Fixed CPI linked 4.95% ................ Tier 2 subordinated liabilities .................................................................................................................................. Subordinated bond AT1 FX.............................................................. The net cash flow presented above comprise cash flows presented within both operating and financing activities in the statement of cash flows. Accordingly, these amounts should not be expected to reconcile directly to a single line item in the statement of cash flows. Senior unsecured bonds in ISK........................................................ Senior unsecured bonds in FX......................................................... Subordinated bond T2 FX................................................................ Senior unsecured bonds in ISK - CPI linked..................................... Fixed 3.24% ................................. Floating 3 mth STIBOR +2.65% .... Covered bonds in ISK - CPI linked................................................... Covered bonds in FX....................................................................... 41
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 37. Pledged assets 30.9.2026 31.12.2025 Pledged assets against liabilities 430,236 359,645 12,128 5,049 442,364 364,694 (139,556) (85,549) 16,227 15,727 319,035 294,872 38. Equity Share capital and share premium Share Own Share 2026 Share Own Share 2025 capital shares premium total capital shares premium total Balance at the beginning of the year ......... 1,420 (36) - 1,383 1,513 (101) 4,273 5,686 Share capital reduction ............................. (40) 40 - - (93) 93 - - Purchase of treasury shares ..................... - (51) (1,355) (1,406) - (36) (5,218) (5,254) - 6 1,039 1,045 - 6 715 721 - 2 316 318 - 1 229 230 Balance at the end of the period ............ 1,380 (40) - 1,340 1,420 (36) - 1,383 Own shares / issued share capital ............. 2.88% 2.59% In accordance with the Bank's dividend policy Arion Bank has in place a regular buyback program. In January and May 2026, the FSA granted the Bank the authorization to buy back own shares in Iceland and Sweden amounting on each occasion to up to ISK 5.0 billion, or a total of ISK 10.0 billion. There are no ongoing programs at the end of September 2026. In 2025, the FSA authorized the Bank to initiate share buyback programs in Iceland and Sweden amounting to up to a total of 19.9 million shares or up to ISK 3.0 billion. The AGM of Arion Bank, held on 11 March 2026, approved to reduce the Bank’s share capital by ISK 40 million nominal value, by cancelling the Bank’s own shares. Thus, the share capital of Arion Bank was reduced from ISK 1,420 million to ISK 1,380 million in April 2026. In 2025 the nominal value of Arion Bank's share capital was reduced by ISK 93 million nominal value. The Group has issued covered bonds amounting to ISK 108 billion that can be used for repo borrowings at the Central Bank of Iceland, the European Central Bank or sold if market conditions are favorable (31.12.2025: ISK 61 billion). Pledged assets against those covered bonds are ISK 123 billion (31.12.2025: ISK 70 billion). The Group has pledged assets against due to credit institutions and borrowings, both issued covered bonds and other issued bonds and loan agreements under Icelandic law. Pledged loans comprised mortgage loans to individuals. The book value of those liabilities were ISK 252 billion at period end (31.12.2025: ISK 238 billion). Pledged assets against liabilities on balance ........................................................................................................ Pledged assets against liabilities ........................................................................................................................... Thereof pledged assets against issued covered bonds held by the Bank ................................................................... Share option vested ................................... Incentive scheme ....................................... Assets pledged as a collateral against loans from banks and other financial liabilities ............................................... The Group has pledged bonds against short term lending from the Central Bank of Iceland and against short positions, related to swap agreements, to hedge market risk of those assets to ensure the clearing of the Icelandic payment system. Moreover, it has pledged cash in foreign banks and financial institutions, mainly as collateral for trades under ISDA agreements to hedge market risk. Assets against repoed issued bonds .......................................................................................................................... Assets, pledged as collateral against borrowings ....................................................................................................... According to the Bank's Articles of Association, total share capital amounts to ISK 1,380 million, with par value of ISK 1 per share. The holders of ordinary shares are entitled to receive dividends as approved by the AGM and are entitled to one vote per share at shareholders' meetings. 42
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 38. Equity, continued Share options Number Exercise of shares Exercise price (in ths.) year (ISK) 1,281 2028-29 * 4,337 2028-30 ** 776 2029-30 * 31,411 2027-31 199.6 3,940 2029-31 ** 898 2030-31 * 42,643 Weighted Weighted Number average Number average of shares contract of shares contract (in ths.) rate (in ths.) rate 8,952 139.1 17,116 135.1 31,411 199.6 1,203 172.0 (2,776) 162.8 (4,523) 130.1 (6,176) 132.1 (4,844) 124.2 31,411 199.6 8,952 135.1 4,338 - 3,940 4,562 - (224) 8,278 ** 4,338 ** 3,420 3,618 898 785 - (9) (1,364) 199.5 (974) 175.5 2,954 * 3,420 * 42,643 16,710 Share options pursuant to Icelandic income tax act ........................................................ Arion Bank has in place a share option plan for all employees of the Bank, Vördur and Stefnir, approved at the Banks AGM, under which employees may be granted options to purchase ordinary shares. The annual maximum purchase price for each employee is ISK 1.5 million, in line with Article 10 of the Income Tax Act no. 90/2003, at an exercise price determined by the Bank’s average share price 10 days prior to issue date. The employee must remain continuously employed with Arion Bank until the expiring date. The options carry neither rights to dividends nor voting rights and are valued using the Black-Scholes pricing model. 30.9.2026 The following share option contracts are in existence at period end. Issued in 2026 - incentive scheme - employees of Group ....................................................................... Issued in 2026 (ISK 1,500,000) - employees of the Group ...................................................................... Issued in 2025 - deferred remuneration contingent on specific conditions ............................................... Issued in 2026 - deferred remuneration contingent on specific conditions ............................................... Issued in 2025 - incentive scheme - employees of Group ....................................................................... Share options granted ......................................................................................................... No share options are exercisable at period end. Next exercise period is in February 2027. To meet the Bank's obligations on the basis of the share option plan, the Bank will issue new share capital or deliver treasury shares. Arion Bank has no legal or constructive obligation to repurchase or settle the options in cash. Share options forfeited ......................................................................................................... Share options - incentive scheme ..................................................................................... Outstanding at the beginning of the year .............................................................................. Share options pursuant to Icelandic income tax act Share options - incentive scheme Share options - deferred remuneration contingent on specific conditions .................... Share options - deferred remuneration contingent on specific conditions Outstanding at the beginning of the year .............................................................................. Share options granted ......................................................................................................... Share options forfeited ......................................................................................................... Share options exercised (deferred from 2023) ...................................................................... * Market price on payment date Movements in share options during the period. Outstanding at the beginning of the year .............................................................................. All outstanding share options, if exercised, represent approximately 3.1% of the total issued shares. ** Market price on the contract date, plus annual interest of 5%, less any dividend payments up to the exercise date Outstanding share options at the end of the period ......................................................... Share options granted .......................................................................................................... Share options forfeited ......................................................................................................... 31.12.2025 Issued in 2024 - deferred remuneration contingent on specific conditions ............................................... In accordance with the current incentive scheme for Arion Bank hf. and Vördur, a limited group of employees can receive payments of up to 25% of the employees fixed salaries, of which 40% or 80% can be in the form of share options in the Bank. The share options are settled 4- 5 years after granting. See Note 14 for further disclosures on the incentive scheme. Share options exercised, WAVG share price ISK 197.8 at exercise date (2025: 169.5) ........ 43
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements Other information 39. Shareholders of Arion Bank 30.9.2026 31.12.2025 9.78% 9.56% 9.14% 9.24% 7.52% 9.55% 5.30% 5.22% 5.00% 5.07% 4.11% 4.07% 4.10% 3.97% 3.62% 3.87% 2.88% 2.59% 2.85% 2.97% 2.76% 2.61% 2.74% 0.00% 2.66% 2.59% 2.59% 2.92% 1.21% 1.73% 1.00% 0.97% 0.73% 1.05% 0.50% 1.44% 31.50% 30.60% 100.0% 100.0% Number Number of shares of shares - 12,000 - 12,000 - 49,173 - 49,933 37,573 3,229,488 12,136 3,181,575 1,905,185 3,511,741 627,353 3,328,222 40. Legal matters Contingent liabilities Legal proceedings regarding damages Festa pension fund .................................................................................................................................................... Gildi pension fund ...................................................................................................................................................... 30.9.2026 Almenni-Lífsverk pension fund ................................................................................................................................... Frigus Invest ehf. ....................................................................................................................................................... Other shareholders with less than 1% shareholding ................................................................................................... Key management personnel* ............................................................................................... At the end of the period the Group's employees held a shareholding of 1.62% in Arion Bank (31.12.2025: 1.36%). The Board of Directors and key management personnel shareholding is as follows: Steinunn K. Thórdardóttir, Director ....................................................................................... OptionsOptions 31.12.2025 In a lawsuit brought in June 2013, Kortaþjónustan hf. claimed damages from Arion Bank hf., Íslandsbanki hf., Landsbankinn hf., Borgun hf. and Valitor hf. in the amount of ISK 1.2 billion plus interest. The lawsuit is a result of damage which Kortaþjónustan hf. contended the five parties had caused the company due to violations of the Competition Act. In June 2017, the Supreme Court dismissed the case on procedural grounds. Since then, Kortaþjónustan hf. and subsequently its largest shareholder EC-Clear have tried to initiate five lawsuits against the same defendants which have all been dismissed, the last one in March 2021. In September 2021, EC-Clear once again brought an action concerning the same dispute, claiming damages in the amount of ISK 922 million plus interest, against the same defendants. In September 2022, the District Court dismissed the claims. EC-Clear appealed the dismissal but with a ruling in January 2023 the Court of Appeal rejected the District Court’s ruling and ruled that the case should be heard on its merits by the District Court. Should the defendants be found liable for damages, they would be jointly responsible. Therefore, the Bank has not made any provision. Alternate directors of the Board ............................................................................................ The Group has formal controls and policies in place for managing legal claims. Once professional advice has been obtained and the likelihood and amount of loss reasonably estimated, the Group makes adjustments, if appropriate, to account for any adverse effects the claims may have on its financial standing. Should the Group conclude that it is to the detriment of the Group's case to disclose such potential amounts, relating to the legal claims raised, it elects not to do so. At the end of the period, the Group had several unresolved legal claims. * Key management personnel are defined in Note 44. Benedikt Gíslason, CEO ....................................................................................................... Birta pension fund ...................................................................................................................................................... Arion banki hf. ............................................................................................................................................................ Lífeyrissjódur verzlunarmanna ................................................................................................................................... Stefnir funds .............................................................................................................................................................. Stapi pension fund ..................................................................................................................................................... Brú pension fund ........................................................................................................................................................ Stodir hf. ................................................................................................................................................................... Frjálsi lífeyrissjódurinn ............................................................................................................................................... Vanguard ................................................................................................................................................................... Lífeyrissjódur starfsmanna ríkisins ............................................................................................................................. Íslandsbanki hf. .......................................................................................................................................................... Landsbréf hf. .............................................................................................................................................................. Kjálkanes ehf. ............................................................................................................................................................ Hvalur hf. ................................................................................................................................................................... 44
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 40. Legal matters, continued Consumer Association’s class-action lawsuit Legal matters concluded 41. Events after the reporting period The Consumer Association of Iceland sent a letter to Arion Bank, Íslandsbanki and Landsbankinn in April 2020 urging the banks to review their contractual terms on variable rate mortgages to individuals. The letter called for revised terms and compensation to borrowers who, according to the Association, had suffered damage. The Association’s argument is that the standard contractual terms lack proper legal grounds, as the parameters for interest rate decisions lack transparency and predictability, thus causing a contractual imbalance to the detriment of the consumer. The Financial Supervisory Authority of the Central Bank of Iceland (FSA) commenced an investigation in April 2024 into the Bank‘s compliance with certain provisions of Act No. 60/2021 on measures against market abuse and Act No. 115/2021 on markets in financial instruments. Following receipt of the FSA’s preliminary findings in March 2026, which identified deficiencies in the Bank’s compliance, the Bank requested that the matter be concluded by way of settlement. The matter was concluded on 9 October 2026 by means of settlement under which the Bank agreed to pay a fine of ISK 280 million. The full amount was recognised as an expense in the third quarter of 2026. No event has arisen after the reporting period and up to the approval of these Condensed Consolidated Interim Financial Statements that require additional disclosures. It should be noted that the terms of Arion Bank mortgages which contain provisions on variable interest rates differ from those which were the subject of the Supreme Court judgment in the case against Íslandsbanki and Landsbankinn. The terms of Arion Bank mortgages in respect of varying the interest rates are exhaustively listed, unlike the terms of the Íslandsbanki and Landsbankinn mortgages, and each reference or term is further defined by a brief explanation. The terms of the Bank’s non-indexed loans are similar to those addressed in the Bank’s Supreme Court ruling, except that they also refer to interest rates set by the Central Bank. Therefore, the impact of the judgements in Íslandsbanki’s and Landsbanki’s case on Arion Bank’s loans bearing non-indexed rates cannot be asserted with full certainty. Moreover, in the Bank’s assessment, the argument the Supreme Court uses in Íslandsbanki’s and Landsbankinn’s cases, regarding reference to the Central Bank’s policy rate, is also applicable to the terms of Arion Bank mortgages bearing non-indexed rates. If the Íslandsbanki and Landsbanki verdict is applied to Arion Bank’s non-indexed loans, the loss is estimated to be less than ISK 500 million pre-tax. The Bank has not made any provision in respect of impending court cases. The Bank is also party to a case concerning a non-indexed loan. With a judgement of the District Court of Reykjavik in October 2026, the Bank was acquitted. Cases regarding non-indexed loans were also filed against Landsbankinn and Íslandsbanki. Supreme Court judgements in cases for both banks were delivered in 2025. The Supreme Court found that the disputed contractual clause permitting changes to interest rates was partially invalid. The only part of the terms that was considered valid was a reference to the Central Bank’s policy rate. Íslandsbanki and Landsbankinn were, however, acquitted of the borrower’s financial claim. Since 2008 Arion Bank has formally been a party to proceedings in Luxembourg, commenced against the Luxembourg company R Capital S.á r.l. and its beneficial owner, Mr. Umberto Ronsisvalle, for the collection of EUR 6 million plus interest. During this time, Kaupthing ehf. has been the beneficial owner of the claim, with Arion Bank’s involvement limited to being the formal party to the proceedings while enjoying indemnity from Kaupthing. The reason for the setup is a decision by the Icelandic Financial Supervisory Authority in 2009 during the division of Kaupthing into the “new” and “old” bank. In 2019, a counterclaim was made against Arion Bank in the proceedings, for the net sum of EUR 24 million plus interest, with the Bank continuing to enjoy full indemnity from Kaupthing. In September 2021, Kaupthing and Arion Bank agreed that all rights and liabilities in the Luxembourg proceedings would be transferred to Arion Bank. The Bank is still held harmless for any liabilities associated with the claims and has therefore not made any provision. In May 2021, the Consumer Association published an article on its website calling for participants in a class action lawsuit. The intention was to commence court proceedings against the Icelandic banks to provide a legal precedent for loans with variable rates. Arion Bank received requests for information from a legal firm representing approximately 1,200 individuals. A case was filed against the Bank concerning an indexed loan and with a judgement of the Supreme Court on 10 December 2025 the Bank was acquitted. The Supreme Court thereby upheld the judgments of the District Court and the Court of Appeal in the case. Other legal proceedings In response to the letter, Arion Bank undertook a review of its contractual terms and processes for interest rate decisions, concluding that no changes were required and that the Association’s arguments were unfounded. A response was sent to the Consumer Association in September 2020. According to information published on the Consumer Association’s website, all three banks rejected the Association’s arguments. Settlement with the FSA regarding MAR and MiFID II 45
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements Off balance sheet information 42. Commitments 30.9.2026 31.12.2025 23,592 25,450 88,829 90,187 67,082 85,329 179,503 200,966 43. Assets under management, supervision and custody 30.9.2026 31.12.2025 1,655,344 1,563,569 504,886 425,248 1,222,794 1,107,656 Related party 44. Related party 30.9.2026 31.12.2025 30.9.2026 31.12.2025 5,044 3,940 1,026 1,072 4 4 - - 5,048 3,944 1,026 1,072 (3,044) (995) (12) (10) (3) - (28) (24) (3,047) (995) (40) (33) personnel The Group, acting as custodian, is responsible for safeguarding a firm's or individual's financial assets, hold in safekeeping securities such as stocks, bonds and securities funds, arrange the settlement of trades and movements of securities, process corporate actions such as income on bonds and dividends on shares; and pricing on securities. Associated Financial guarantees, unused credit facilities and undrawn loan commitments Total liabilities .................................................................................................................... Total assets ......................................................................................................................... Deposits ............................................................................................................................... Other liabilities ...................................................................................................................... Other assets ......................................................................................................................... Loans ................................................................................................................................... companies Assets under supervision ........................................................................................................................................... Shareholders with significant influence are shareholders that have the power to participate in the financial and operating decisions of Arion Bank but do not control those policies. At the end of the period no shareholder was defined as related party with an influence over the Group (31.12.2025: none). The key management personnel includes the Board of Directors, the Executive Committee of Arion Bank and heads of other internal control functions, as well as their close family members and legal entities controlled by them. The Executive Committee consists of the CEO, Managing Directors of Retail banking, CIB, Markets, Finance, Risk, IT and Operations & culture. For compensation, pension and other transactions with the Board of Directors and the Executive Committee, see Notes 14 and 39. Financial guarantees, unused credit facilities and undrawn loan commitments ................................................. Key management For information on the Group's associated companies, see Note 28. Assets under management represent the total market value of the financial assets which the Group manages on behalf of its customers. Arion Bank defines related party as shareholders with significant influence over the Group, the key management personnel and the Group's associated companies. Undrawn loan commitments ....................................................................................................................................... Assets under custody ................................................................................................................................................. Assets under supervision refer to the total market value of financial assets in non-proprietary funds that the Group administers on behalf of its customers. Transactions with related parties have been conducted on an arm's length basis. There have been no further guarantees provided or received for related party receivables or payables. Assets under management ........................................................................................................................................ Unused overdrafts ..................................................................................................................................................... Financial guarantees .................................................................................................................................................. 46
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Risk management disclosures Notes to the Condensed Consolidated Interim Financial Statements The Board of Directors is ultimately responsible for the Bank's risk management framework and for ensuring that satisfactory risk policies and governance are in place. Each subsidiary is responsible for its own risk management framework but adheres to the Bank's ownership policies which outline the Group's internal control policy, risk appetite and reporting mechanisms. The Board sets the risk appetite for the Bank, and in some cases the Group, which is translated into exposure limits and targets monitored by the Bank's Risk Management division. The Chief Executive Officer (CEO) is responsible for sustaining an effective risk management framework, processes and controls as well as maintaining a high level of risk awareness among employees, making risk everyone's business. The Bank operates several committees to manage risk. The Board Risk Committee (BRIC) is responsible for supervising the Bank's risk management framework, risk appetite and the internal capital and liquidity adequacy assessment processes (ICAAP/ILAAP). The Board of Directors is the supreme authority for cases which entail deviations from risk appetite or strategy. Five primary risk committees, appointed by the CEO, operate at the management level within a framework defined by the Board of Directors. The Asset and Liability Committee (ALCO) is responsible for managing asset-liability mismatches, liquidity and funding risk, market risk, capital adequacy, and decides on underwriting and investment exposures. The Operational Risk Committee (ORCO) is responsible for managing operational risk, which includes information security, financial crime, regulatory compliance and data management. The Arion Credit Committee (ACC) administers the Bank's credit rules and decides on the origination of credit while the Arion Composition and Debt Cancellation Committee (ADC) is the principal authority for debt cancellation, debt restructuring and composition agreements. Major credit decisions, including debt cancellation, are made by the Board of Directors. Finally, the Executive Risk Committee (ERCO), chaired by the CRO, oversees the implementation of risk policies, ensures that the Bank's limit framework adheres to the risk appetite, reviews the Bank's ICAAP, ILAAP and stress testing, and approves economic scenarios, credit models and specific provisions under IFRS9. The Executive Committee is concerned with business and strategic risk. In their coverage of risks, these committees take into account emerging risks and risk drivers that may amplify or otherwise impact the risks under consideration. These include, but are not limited to, sustainability, geopolitical and natural catastrophe risks. The Bank's Internal Audit conducts independent reviews of the Bank's and several subsidiaries' operations, risk management framework, processes and measurements. Internal Audit discusses its results with management and reports its findings and recommendations to the Board Audit Committee (BAC) and to the Board of Directors. The Bank’s Risk Management division is headed by the Chief Risk Officer. It is independent and centralized and reports directly to the CEO. Risk Management is divided into four units. Balance Sheet Risk and Models is responsible for the quantification of risk on a portfolio level, including risk modelling and reporting; Operational and Sustainability Risk facilitates and monitors the management of risk and controls in the first line and supports the Bank's quantification and management of sustainability risk; and Credit Risk supports the Bank's credit transaction process, participates in credit decisions and monitors credit quality. The Security Team monitors the effectiveness of the Bank’s defences against risks associated with IT security, physical security and external cyber fraud. Arion Bank is a small bank in international context but classified as systemically important in Iceland. The Group operates in a small economy which is subject to sectoral concentration, fluctuations in capital flows, and exchange rate volatility. Among the Group’s most significant risks are credit risk, concentration risk, liquidity risk, interest rate risk, cyber risk, third party risk, business risk and reputational risk. These risk factors are to the largest extent encountered within the parent company. Through the Bank's subsidiaries, the Group bears risk arising from insurance activities and fund management. Risk management is a core activity within the Group as it faces various risks arising from its day to day operations. The key to effective risk management is a process of on-going identification of significant risks, quantification of risk exposures, actions to limit risk and regular monitoring. This process, and the ability to evaluate, manage and correctly price the risk encountered is critical to the Group's continuing profitability, and ensures that risk exposures remain within acceptable levels. The Bank's Compliance function is headed by the Compliance Officer. It is independent and centralized and the Compliance Officer reports directly to the CEO. The Compliance function manages the Bank's conduct and compliance risk, including risk relating to data protection and financial crime. Further information on risk management and capital adequacy is provided in the Annual Financial Statements for 2025, in the Pillar 3 Risk Disclosures for 2025 and in the quarterly Additional Pillar 3 Risk Disclosures. These documents are available on the Bank's website, www.arionbank.com. 47
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk Exposure to credit risk The value of collateral is based on estimated market value. The valuation of real estate is based on market price, valuation model, or the opinion of internal or external specialists. The valuation of fishing vessels takes into account related fishing quotas. The quality of collateral is evaluated in the lending process with regards to specialization, location, age and condition and possibilities for reuse. Collateral value is monitored and action is taken to remedy insufficient collateral coverage where the underlying agreement provides for such remedies. Collateral value is reviewed to ensure the adequacy of the allowance for impairment losses. Collateral values shown are capped by the related book value amount. - Other collateral: Fixed and current assets including vehicles, equipment, inventory and trade receivables - Vessels: Ships with assigned fishing quota and other vessels Credit risk is managed and controlled by setting limits on the amount of risk the Group is willing to accept for individual counterparties, group of connected clients, industries, geographies and loan types, and by monitoring exposures in relation to such limits. The Group seeks to limit its total credit risk through diversification of the loan portfolio across sectors and by limiting large exposures to groups of connected clients. Credit risk arises when the Group commits its funds, resulting in capital or earnings being dependent on counterparty, issuer or borrower performance. Loans to customers are the largest source of credit risk. Credit risk is also inherent in other types of assets, such as loans to credit institutions, bonds, derivatives and off-balance sheet items such as commitments and guarantees. Managing and analyzing the Group's loan portfolio is of utmost importance. Great emphasis is placed on the quality of the credit portfolio, by maintaining a strict credit process, by critically inspecting loan applications, by actively monitoring the credit portfolio and by identifying and reacting to possible problem loans at an early stage as well as by restructuring impaired credits. The Group grants credit based on well-informed lending decisions and seeks to build business relationships with customers that have good repayment capacity and are backed by strong collateral. The risk level of each credit is considered in the pricing. The following table shows the maximum exposure to credit risk for the components of the Statement of Financial Position before the effect of mitigation due to collateral agreements or other credit enhancements. The table also shows related collateral and credit enhancements. The amount and type of collateral required depends on an assessment of the credit risk of the counterparty and the exposure type. The main types of collateral obtained are as follows: - Real estate: Residential property, commercial real estate and land - Cash and securities: Cash, treasury notes and bills, asset backed bonds, listed equity, and funds that consist of eligible securities Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations. 48
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Maximum Cash and Real Other Total 30.9.2026 exposure securities estate Vessels collateral collateral 107,895 - - - - - 78,288 - - - - - 1,413,210 14,767 1,063,658 67,555 103,029 1,249,009 670,531 156 617,765 5 13,484 631,410 605,546 105 604,821 - - 604,926 64,985 51 12,944 5 13,484 26,484 742,679 14,611 445,893 67,550 89,545 617,599 160,801 4,540 150,786 - 216 155,542 127,196 242 114,180 - 4,527 118,949 111,514 1,290 34,021 53,029 13,865 102,205 98,101 1,105 37,432 3,753 24,138 66,428 47,573 92 44,748 - 288 45,128 42,838 6,606 9,881 - 17,667 34,154 79,985 454 36,489 271 15,850 53,064 26,243 38 1,355 10,467 9,023 20,883 23,107 235 1,587 - 3,334 5,156 11,617 9 2,775 9 118 2,911 13,704 - 12,639 21 519 13,179 17,064 - - - - - 23,592 1,395 5,881 284 4,219 11,779 155,911 - - - - - 154,045 - - - - - 152,508 - - - - - 1,537 - - - - - 1,950,005 16,162 1,069,539 67,839 107,248 1,260,788 31.12.2025 150,111 - - - - - 22,567 - - - - - 1,327,606 15,816 982,047 65,647 111,401 1,174,911 640,394 161 589,706 28 14,604 604,499 576,828 134 576,297 - - 576,431 63,566 27 13,409 28 14,604 28,068 687,212 15,655 392,341 65,619 96,797 570,412 126,000 2,168 118,383 11 294 120,856 108,071 222 98,010 6 2,886 101,124 107,416 1,294 26,435 58,230 13,314 99,273 87,036 1,554 36,263 1,063 25,114 63,994 46,775 34 44,842 - 206 45,082 58,606 9,528 18,072 4,069 20,174 51,843 69,908 532 32,288 - 18,288 51,108 17,925 40 1,223 2,208 9,038 12,509 40,458 275 1,606 - 6,810 8,691 11,354 8 2,678 11 104 2,801 13,663 - 12,541 21 569 13,131 17,031 - - - - - 25,450 1,348 4,989 274 6,597 13,208 175,516 - - - - - 138,302 - - - - - 136,868 - - - - - 1,434 - - - - - 1,856,583 17,164 987,036 65,921 117,998 1,188,119 Maximum exposure to credit risk and collateral held against different types of financial instruments subject to the impairment requirements of IFRS 9 Fair value through OCI ................................................................... Balance at the end of the period .................................................. Bonds issued by financial institutions and corporates .................. Government bonds ...................................................................... Other .................................................................................................... Mortgages ............................................................................................ Agriculture and forestry ........................................................................ Other assets with credit risk ............................................................ Transportation ...................................................................................... Construction ......................................................................................... Information and communication technology ........................................ Public sector ........................................................................................ Industry, energy and manufacturing .................................................... Commerce and services ...................................................................... Corporates .................................................................................. Individuals ................................................................................... Accommodation and food service activities ......................................... Financial and insurance activities ........................................................ Cash and balances with Central Bank ............................................. Real estate activities ............................................................................ Loans to customers at amortized cost ............................................ Other .................................................................................................... Fishing industry .................................................................................... Loans to credit institutions at amortized cost .................................. Collateral Loans to credit institutions at amortized cost .................................. Loans to customers at amortized cost ............................................ Industry, energy and manufacturing .................................................... Undrawn loan commitments and unused overdrafts ....................... Individuals ................................................................................... Corporates .................................................................................. Real estate activities ............................................................................ Financial and insurance activities ........................................................ Commerce and services ...................................................................... Accommodation and food service activities ......................................... Cash and balances with Central Bank ............................................. Fishing industry .................................................................................... Other assets with credit risk ............................................................ Transportation ...................................................................................... Information and communication technology ........................................ Public sector ........................................................................................ Agriculture and forestry ........................................................................ Financial guarantees ...................................................................... Construction ......................................................................................... Mortgages ............................................................................................ Financial guarantees ...................................................................... Undrawn loan commitments and unused overdrafts ....................... Fair value through OCI ................................................................... Bonds issued by financial institutions and corporates .................. Government bonds ...................................................................... Balance at the end of the year ..................................................... 49
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued LTV ratio for residential mortgage lending 30.9.2026 31.12.2025 30.9.2026 31.12.2025 218,717 223,975 2,711 2,832 106,526 107,698 1,551 2,110 110,016 102,661 1,349 1,587 99,900 88,631 1,152 1,427 64,797 51,163 807 708 4,362 1,669 269 114 1,983 1,497 253 261 161 198 34 5 606,462 577,492 8,126 9,044 30.9.2026 31.12.2025 30.9.2026 31.12.2025 534,405 516,063 6,951 7,925 51,781 45,445 712 743 15,050 12,363 246 230 3,762 2,521 96 77 541 385 48 41 762 517 39 23 161 198 34 5 606,462 577,492 8,126 9,044 Collateral for financial assets in stage 3 Collateral repossessed More than 100% ................................................................................................................... Gross carrying amount ...................................................................................................... 60-70% ................................................................................................................................ Thereof in Stage 3 Not classified ........................................................................................................................ Not classified ........................................................................................................................ 80-90% ................................................................................................................................ 90-100% .............................................................................................................................. Less than 50% ..................................................................................................................... 50-60% ................................................................................................................................ Thereof in Stage 3 Less than 55% ..................................................................................................................... The following table gives an alternative representation of the loan to value profile of the mortgage portfolio. Here, each exposure is split into pieces and each piece is placed into the appropriate LTV bucket. A single exposure can therefore be spread between several rows in the table (loan-splitting approach). 55-70% ................................................................................................................................ 70-80% ................................................................................................................................ 90-100% .............................................................................................................................. The following table describes the loan to value (LTV) and impairment status of the Group's residential mortgage portfolio. LTV is calculated as the ratio of the total exposure of individual borrowers to the value of the pledged real estate without adjusting for possible costs of obtaining and selling the collateral. An exposure to a particular borrower appears in a single row in the table (whole-loan approach). The residential real estate valuation model used gives an estimate of current value on a monthly basis. This model is used when the market transaction value becomes older than 2 years. 70-80% ................................................................................................................................ The Group has taken possession of assets due to foreclosures. The total value of real estate the Group took possession of and still holds was ISK 296 million at the end of the period (31.12.2025: ISK 98 million) and ISK 2 million in other assets (31.12.2025: nil). Assets acquired due to foreclosure are held for sale, see Note 31. Gross carrying amount ...................................................................................................... 80-90% ................................................................................................................................ More than 100% ................................................................................................................... At the end of the period, the gross carrying amount of assets in stage 3 was ISK 35,917 million (31.12.2025: ISK 32,661 million) with ISK 30,338 million in collateral (31.12.2025: ISK 28,860 million), thereof ISK 27,247 million in real estate (31.12.2025: ISK 24,474 million). 50
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Large exposures Credit quality A large exposure is defined as an exposure to a group of financially related borrowers which is equal to or exceeds 10% of the Group's Tier 1 capital according to the Financial Undertakings Act No. 161/2002. The legal maximum for individual large exposures is 25% of Tier 1 capital, net of eligible credit risk mitigation. The Group had no net large exposure at the end of the period (31.12.2025: no net large exposure). The Group uses internal credit ratings and external credit ratings, if available, to monitor credit risk. The Group's internal credit rating system rates customers through application of statistical models based on a variety of information that has been determined to be predictive of default. This includes demographic, behavioral, financial and economic data, coupled with qualitative expert judgment for large corporate exposures. Six exposure type models rate individuals' exposures – mortgages, consumer loans, auto loans, guarantees, loans to individuals for work purposes, and other loans. The models are validated annually and recalibrated and updated with current data with the aim of maintaining their predictive power. Year-on-year changes in risk classification of loans may in part be due to model refinement. External ratings are primarily used for marketable securities and loans to credit institutions. For further information on the rating scales used, see Note 59 in the Annual Financial Statements 2025. The following tables show financial instruments subject to the impairment requirements of IFRS 9 broken down by rating scale, where risk class 5, DD, represents exposures in default. Assets carried at fair value through profit and loss are not subject to the impairment requirements of IFRS 9. The tables below sum up the gross carrying amount of assets by rating class and impairment stage. The gross carrying amount net of loss allowance is the book value of the underlying assets. For off-balance sheet exposures, the nominal amount is shown. FVOCI stands for fair value through other comprehensive income. Exposures that are 'Unrated' are typically due to newly formed entities, entities for which the Bank's rating models are not applicable or no external rating is available. 51
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Credit quality profile for financial instruments subject to IFRS 9 impairment requirements 30.9.2026 Loans to customers Stage 1 Stage 2 Stage 3 POCI Total 419,077 101 - 120 419,298 428,344 1,790 - 134 430,268 314,492 14,548 - 57 329,097 144,594 66,470 - - 211,064 - - 35,463 454 35,917 358 1 - - 359 1,306,865 82,910 35,463 765 1,426,003 (3,199) (1,899) (7,487) (208) (12,793) 1,303,666 81,011 27,976 557 1,413,210 Loans to customers - Individuals 325,942 101 - 120 326,163 257,703 297 - 134 258,134 51,934 5,391 - 57 57,382 9,763 11,932 - - 21,695 - - 9,562 148 9,710 34 1 - - 35 645,376 17,722 9,562 459 673,119 (792) (507) (1,287) (2) (2,588) 644,584 17,215 8,275 457 670,531 Loans to customers - Corporates and public sector entities 93,135 - - - 93,135 170,641 1,493 - - 172,134 262,558 9,157 - - 271,715 134,831 54,538 - - 189,369 - - 25,901 306 26,207 324 - - - 324 661,489 65,188 25,901 306 752,884 (2,407) (1,392) (6,200) (206) (10,205) 659,082 63,796 19,701 100 742,679 Loan commitments, guarantees and unused credit facilities 90,572 217 - - 90,789 76,817 6,587 584 - 83,988 4,725 - - - 4,725 172,114 6,804 584 - 179,502 (353) (285) (20) - (658) 171,761 6,519 564 - 178,844 Risk class 5 - (DD) ............................................................................................ Unrated ....................................................................................................... Loss allowance .................................................................................................. Book value ....................................................................................................... Gross carrying amount ............................................................................. Loss allowance ............................................................................................ Unrated ....................................................................................................... Book value ................................................................................................. Book value ................................................................................................. Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................... Nominal less loss allowance .......................................................................... Nominal ............................................................................................................ Risk class 5 - (DD) ...................................................................................... Risk class 1 - (Grades BBB+ to BBB-) ........................................................ Unrated ............................................................................................................. Risk class 0 to 1 (Grades AAA to BBB-) ............................................................ Risk class 2 to 4 (Grades BB+ to CCC-) ........................................................... Gross carrying amount ............................................................................. Loss allowance .................................................................................................. Risk class 2 - (Grades BB+ to BB-) ............................................................. Risk class 3 to 4 - (Grades B+ to CCC-) ............................................................ Risk class 0 - (Grades AAA to A-) ..................................................................... Risk class 2 - (Grades BB+ to BB-) ............................................................. Risk class 0 - (Grades AAA to A-) ............................................................... Gross carrying amount ................................................................................... Risk class 1 - (Grades BBB+ to BBB-) .............................................................. Risk class 0 - (Grades AAA to A-) ............................................................... Loss allowance ............................................................................................ Risk class 5 - (DD) ...................................................................................... Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................... Risk class 2 - (Grades BB+ to BB-) ................................................................... Unrated ............................................................................................................. Risk class 1 - (Grades BBB+ to BBB-) ........................................................ 52
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued 31.12.2025 Loans to customers Stage 1 Stage 2 Stage 3 POCI Total 441,647 256 - 117 442,020 413,457 1,827 - 124 415,408 289,610 6,889 - 63 296,562 105,819 46,753 - 23 152,595 - - 32,255 406 32,661 439 - - - 439 1,250,972 55,725 32,255 733 1,339,685 (2,833) (1,551) (7,508) (187) (12,079) 1,248,139 54,174 24,747 546 1,327,606 Loans to customers - Individuals 345,978 256 - 117 346,351 216,374 518 - 124 217,016 46,562 4,108 - 63 50,733 8,883 8,932 - 23 17,838 - - 10,892 120 11,012 5 - - - 5 617,802 13,814 10,892 447 642,955 (611) (332) (1,617) (1) (2,561) 617,191 13,482 9,275 446 640,394 Loans to customers - Corporates and public sector entities 95,669 - - - 95,669 197,083 1,309 - - 198,392 243,048 2,781 - - 245,829 96,936 37,821 - - 134,757 - - 21,363 286 21,649 434 - - - 434 633,170 41,911 21,363 286 696,730 (2,222) (1,219) (5,891) (186) (9,518) 630,948 40,692 15,472 100 687,212 Loan commitments, guarantees and unused credit facilities 114,147 46 - - 114,193 76,291 4,758 1,116 - 82,165 4,608 - - - 4,608 195,046 4,804 1,116 - 200,966 (342) (266) (73) - (681) 194,704 4,538 1,043 - 200,285 Risk class 0 to 1 - (Grades AAA to BBB-) .......................................................... Risk class 2 to 4 - (Grades BB+ to CCC-) ......................................................... Unrated ............................................................................................................. Loss allowance ............................................................................................ Gross carrying amount ............................................................................. Risk class 1 - (Grades BBB+ to BBB-) ........................................................ Risk class 2 - (Grades BB+ to BB-) ............................................................. Loss allowance ............................................................................................ Risk class 0 - (Grades AAA to A-) ............................................................... Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................... Risk class 5 - (DD) ...................................................................................... Risk class 5 - (DD) ...................................................................................... Book value ................................................................................................. Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................... Book value ................................................................................................. Unrated ............................................................................................................. Gross carrying amount ................................................................................... Nominal ............................................................................................................ Nominal less loss allowance .......................................................................... Loss allowance .................................................................................................. Gross carrying amount ............................................................................. Risk class 2 - (Grades BB+ to BB-) ................................................................... Risk class 3 to 4 - (Grades B+ to CCC-) ............................................................ Risk class 0 - (Grades AAA to A-) ..................................................................... Risk class 1 - (Grades BBB+ to BBB-) ........................................................ Risk class 5 - (DD) ............................................................................................ Unrated ....................................................................................................... Loss allowance .................................................................................................. Risk class 0 - (Grades AAA to A-) ............................................................... Unrated ....................................................................................................... Book value ....................................................................................................... Risk class 2 - (Grades BB+ to BB-) ............................................................. Risk class 1 - (Grades BBB+ to BBB-) .............................................................. 53
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Gross Gross Gross Carrying Loss Carrying Loss Carrying Loss Book 30.9.2026 amount allowance amount allowance amount allowance value 340,222 6 - - - - 340,228 645,375 (791) 18,033 (507) 9,710 (1,289) 670,531 583,081 (299) 15,253 (237) 8,127 (380) 605,545 62,294 (492) 2,780 (270) 1,583 (909) 64,986 661,489 (2,407) 65,188 (1,392) 26,207 (6,406) 742,679 146,057 (323) 9,307 (251) 7,171 (1,160) 160,801 107,204 (467) 15,602 (251) 7,531 (2,423) 127,196 99,026 (209) 10,400 (125) 3,085 (663) 111,514 91,110 (440) 5,815 (159) 2,408 (633) 98,101 36,949 (127) 8,276 (73) 3,049 (501) 47,573 37,942 (238) 3,937 (112) 1,607 (298) 42,838 74,426 (231) 5,625 (169) 948 (614) 79,985 22,224 (78) 4,275 (179) 13 (12) 26,243 22,686 (218) 540 (28) 204 (77) 23,107 11,116 (38) 516 (26) 63 (14) 11,617 12,749 (38) 895 (19) 128 (11) 13,704 (3,192) 83,221 (1,899) 35,917 (7,695) 1,753,438 31.12.2025 310,987 (7) - - - - 310,980 617,802 (611) 14,141 (332) 11,012 (1,618) 640,394 556,668 (201) 11,780 (123) 9,044 (340) 576,828 61,134 (410) 2,361 (209) 1,968 (1,278) 63,566 633,170 (2,222) 41,911 (1,219) 21,649 (6,077) 687,212 117,560 (237) 5,623 (68) 3,919 (797) 126,000 93,971 (475) 9,159 (279) 7,639 (1,944) 108,071 105,252 (197) 1,086 (31) 1,934 (628) 107,416 79,503 (331) 5,911 (212) 2,685 (520) 87,036 35,122 (133) 10,897 (274) 1,653 (490) 46,775 55,466 (288) 3,433 (138) 191 (58) 58,606 69,437 (168) 390 (46) 582 (287) 69,908 14,596 (49) 3,440 (69) 22 (15) 17,925 38,092 (274) 1,255 (75) 2,792 (1,332) 40,458 11,299 (32) 53 (7) 41 - 11,354 12,872 (38) 664 (20) 191 (6) 13,663 (2,840) 56,052 (1,551) 32,661 (7,695) 1,638,586 Financial and insurance activities ............................. Transportation .......................................................... Agriculture and forestry ............................................ Accommodation and food service activities .............. Public Sector ............................................................ Transportation .......................................................... 1,561,959 Industry, energy and manufacturing ......................... Loans to credit instit., securities & cash ....................... Loans to individuals ..................................................... Mortgages ................................................................ Other ........................................................................ Balance at the end of the period ............................... Financial and insurance activities ............................. Real estate activities ................................................ Information and communication technology .............. Stage 3 Loans to individuals ..................................................... Loans to credit instit., securities & cash ....................... Stage 1 Commerce and services ........................................... Loans to corporates and public sector entities ............. Sector split, gross carrying value and loss allowance for financial instruments subject to IFRS 9 impairment requirements Construction ............................................................. Fishing industry ........................................................ Stage 2 Other ........................................................................ Real estate activities ................................................ Mortgages ................................................................ Loans to corporates and public sector entities ............. Information and communication technology .............. 1,647,086 Industry, energy and manufacturing ......................... Public Sector ............................................................ Agriculture and forestry ............................................ Commerce and services ........................................... Construction ............................................................. Fishing industry ........................................................ Accommodation and food service activities .............. Balance at the end of the year ................................... 54
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Transfers of financial assets between impairment stages Net remeasurement of loss allowance New financial assets, originated or purchased Derecognitions and maturities Write-offs 30.9.2026 Impairment loss allowance * Stage 1 Stage 2 Stage 3 POCI Total (3,175) (1,817) (7,581) (187) (12,760) (926) 727 199 - - 274 (601) 327 - - 80 197 (277) - - 662 (341) (2,433) (21) (2,133) (1,006) (558) (806) - (2,370) 530 194 1,350 - 2,074 9 15 1,714 - 1,738 (3,552) (2,184) (7,507) (208) (13,451) 6 - - - 6 (3,546) (2,184) (7,507) (208) (13,445) Transfers to Stage 1 (12-month ECL) ......................................................... **** Loss allowance for all assets other than cash, bonds and loans to credit institutions. Reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms. Transfers to Stage 3 (credit impaired financial assets) ................................ Write-offs *** ..................................................................................................... Impairment loss allowance **** ....................................................................... Total impairment loss allowance .................................................................... Transfers of financial assets: The table below reconciles the opening and closing allowance balance for loans to customers and debt securities at amortized cost and FVOCI and loan commitments, guarantees and unused credit facilities by impairment stages. The reconciliation includes: Derecognitions and maturities ........................................................................... The amount after net remeasurements of loss allowance written off during the year. Net remeasurement of loss allowance ** ........................................................... Transfers to Stage 2 (lifetime ECL) .............................................................. All transfers are presumed to occur before any corresponding remeasurement of the loss allowance. Include purchases and originations and reflect the allowance related to assets newly recognized during the year. Comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions, partial repayments and additional draws on existing facilities, inflation, changes in the measurement following a transfer between stages, effects of foreign exchange rate changes, impairment of interest income due to impaired debt instruments and unwinding of the time value discount due to the passage of time. Balance at the beginning of the year ................................................................. * These amounts are a combination of all impairments, including an allowance for loan commitments and guarantees presented as a liability in these Consolidated Financial Statements. The amounts represent the difference between the loss allowance at the beginning of the year and at the reporting date, ignoring other intra- period changes. ** During the period the loss allowance balance for stage 3 loans was reduced by ISK 913 million due to unwinding of interest income. Impairment loss allowances for assets only carrying 12-month ECL .................. *** During the period an amount of ISK 202 million was written off but is still subject to enforcement activities subject to Icelandic law. New financial assets, originated or purchased ................................................... 55
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Impairment loss allowance for loans to customers Stage 1 Stage 2 Stage 3 POCI Total (2,833) (1,551) (7,508) (187) (12,079) (868) 669 199 - - 254 (581) 327 - - 80 163 (243) - - 591 (373) (2,447) (21) (2,250) (868) (408) (806) - (2,082) 436 167 1,277 - 1,880 9 15 1,714 - 1,738 (3,199) (1,899) (7,487) (208) (12,793) Impairment loss allowance for loans to customers - Individuals (611) (332) (1,617) (1) (2,561) (188) 113 75 - - 37 (133) 96 - - 8 58 (66) - - 51 (191) (379) (1) (520) (159) (76) (145) - (380) 61 40 519 - 620 9 14 230 - 253 (792) (507) (1,287) (2) (2,588) Impairment loss allowance for loans to customers - Corporates (2,222) (1,219) (5,891) (186) (9,518) (680) 556 124 - - 217 (448) 231 - - 72 105 (177) - - 540 (182) (2,068) (20) (1,730) (709) (332) (661) - (1,702) 375 127 758 - 1,260 - 1 1,484 - 1,485 (2,407) (1,392) (6,200) (206) (10,205) Impairment loss allowance for loan commitments, guarantees and unused credit facilities (342) (266) (73) - (681) (58) 58 - - - 20 (20) - - - - 34 (34) - - 71 32 14 - 117 (138) (150) - - (288) 94 27 73 - 194 (353) (285) (20) - (658) Balance at the beginning of the year ..................................................... Write-offs ............................................................................................... Transfers of financial assets Transfers of financial assets: Balance at the beginning of the year ........................................................... Derecognitions and maturities ..................................................................... Transfers to Stage 1 (12-month ECL) ............................................. Net remeasurement of loss allowance ......................................................... Transfers to 12-month ECL .................................................................. Balance at the beginning of the year ........................................................... Transfers Transfers to credit impaired ................................................................... Total loss allowance for loans to customers ........................................... Transfers to Stage 3 (credit impaired financial assets) .................... Transfers of financial assets Derecognitions and maturities ..................................................................... Net remeasurement of loss allowance ......................................................... Transfers to Stage 2 (lifetime ECL) ........................................................ Transfers to Stage 1 (12-month ECL) ................................................... Transfers to Stage 3 (credit impaired financial assets) .......................... New financial assets, originated or purchased ............................................. Net remeasurement of loss allowance ................................................... Write-offs ............................................................................................... Transfers to Stage 2 (lifetime ECL) .................................................. Transfers to Stage 1 (12-month ECL) ............................................. Total loss allowance for loans to individuals .................................... Balance at the beginning of the year ..................................................... Derecognitions and maturities ............................................................... New financial assets, originated or purchased ....................................... Write-offs ..................................................................................................... New financial commitments originated ......................................................... Total loss allowance for loans to corporates ..................................... Transfers to Stage 3 (credit impaired financial assets) .................... New financial assets, originated or purchased ....................................... Derecognitions and maturities ............................................................... Transfers to lifetime ECL ....................................................................... Transfers to Stage 2 (lifetime ECL) .................................................. Net remeasurement of loss allowance ................................................... Total loss allowance for loan commit., guarantees, unused facilities ........ 56
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued 31.12.2025 Impairment loss allowance * Stage 1 Stage 2 Stage 3 POCI Total (2,681) (1,858) (5,323) (1) (9,863) (697) 561 136 - - 193 (350) 157 - - 63 189 (252) - - 644 (341) (3,373) - (3,070) (1,458) (408) (1,141) (186) (3,193) 731 363 1,527 - 2,621 30 27 688 - 745 (3,175) (1,817) (7,581) (187) (12,760) (7) - - - (7) (3,182) (1,817) (7,581) (187) (12,767) Impairment loss allowance for loans to customers Stage 1 Stage 2 Stage 3 POCI Total (2,282) (1,746) (5,323) (1) (9,352) (655) 519 136 - - 138 (295) 157 - - 61 183 (244) - - 532 (203) (3,308) - (2,979) (1,282) (373) (1,141) (186) (2,982) 625 337 1,527 - 2,489 30 27 688 - 745 (2,833) (1,551) (7,508) (187) (12,079) Impairment loss allowance for loans to customers - Individuals (545) (410) (1,538) (1) (2,494) (283) 199 84 - - 32 (58) 26 - - 12 54 (66) - - 254 (126) (381) - (253) (189) (82) (124) - (395) 78 66 151 - 295 30 25 231 - 286 (611) (332) (1,617) (1) (2,561) New financial assets, originated or purchased ................................................... Net remeasurement of loss allowance ** ........................................................... Transfers to Stage 3 (credit impaired financial assets) ................................ Transfers to Stage 1 (12-month ECL) ......................................................... Balance at the beginning of the year ................................................................. Write-offs *** ..................................................................................................... Impairment loss allowance **** ....................................................................... Write-offs ..................................................................................................... Transfers to Stage 2 (lifetime ECL) .............................................................. Transfers to Stage 3 (credit impaired financial assets) .......................... Transfers of financial assets: **** Loss allowance for all assets other than cash, bonds and loans to credit institutions. Derecognitions and maturities ........................................................................... Net remeasurement of loss allowance ......................................................... Derecognitions and maturities ..................................................................... Transfers to Stage 1 (12-month ECL) ................................................... Transfers to Stage 1 (12-month ECL) ............................................. Transfers of financial assets Transfers to Stage 2 (lifetime ECL) .................................................. Transfers to Stage 2 (lifetime ECL) ........................................................ Derecognitions and maturities ............................................................... Total loss allowance for loans to individuals .................................... Balance at the beginning of the year ..................................................... Total loss allowance for loans to customers ........................................... Write-offs ............................................................................................... Transfers to Stage 3 (credit impaired financial assets) .................... Total impairment loss allowance .................................................................... * These amounts are a combination of all impairments, including an allowance for loan commitments and guarantees presented as a liability in these Consolidated Financial Statements. The amounts represent the difference between the loss allowance at the beginning of the year and at the reporting date, ignoring other intra- period changes. *** During the year an amount of ISK 547 million was written off but is still subject to enforcement activities subject to Icelandic law. New financial assets, originated or purchased ....................................... Transfers of financial assets: Balance at the beginning of the year ........................................................... Impairment loss allowances for assets only carrying 12-month ECL .................. ** During the year the loss allowance balance for stage 3 loans was reduced by ISK 995 million due to unwinding of interest income. Net remeasurement of loss allowance ................................................... New financial assets, originated or purchased ............................................. 57
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Stage 1 Stage 2 Stage 3 POCI Total Impairment loss allowance for loans to customers - Corporates (1,737) (1,336) (3,785) - (6,858) (372) 320 52 - - 106 (237) 131 - - 49 129 (178) - - 278 (77) (2,927) - (2,726) (1,093) (291) (1,017) (186) (2,587) 547 271 1,376 - 2,194 - 2 457 - 459 (2,222) (1,219) (5,891) (186) (9,518) Impairment loss allowance for loan commitments, guarantees and unused credit facilities (399) (112) - - (511) (42) 42 - - - 55 (55) - - - 2 6 (8) - - 112 (138) (65) - (91) (176) (35) - - (211) 106 26 - - 132 (342) (266) (73) - (681) Macroeconomic forecast 2026 2027 2028 5.9% 4.8% 4.1% 2.5% 3.0% 5.3% 1.1% 1.9% 2.7% 1.5% 1.9% 2.3% 7.7% 7.3% 5.7% 2026 2027 2028 2026 2027 2028 5.5% 3.2% 3.2% 6.9% 6.7% 5.2% 3.4% 8.8% 8.6% 1.6% -1.3% 2.5% 2.7% 3.3% 3.1% -0.4% -0.6% 1.8% 3.3% 3.1% 2.7% -0.1% -0.2% 1.8% 7.6% 6.8% 5.2% 7.7% 7.7% 6.2% Sensitivity analysis The calculation of expected credit losses under IFRS 9 uses forward-looking information in the form of scenarios where the development of macro-economic variables is predicted. The expected credit loss is a probability-weighted average of the estimated forecasts over three scenarios: base case 60%, pessimistic 25% and optimistic 15% (31.12.2025: base case 60%, pessimistic 25% and optimistic 15%). The macroeconomic forecast and scenario probability weights is done by the Bank’s Chief Economist and approved by the Bank’s Executive Risk Committee. The following table shows values used for IFRS 9 impairment calculations. Transfers to 12-month ECL .................................................................. Balance at the beginning of the year ........................................................... Net remeasurement of loss allowance ................................................... Derecognitions and maturities ............................................................... Transfers to lifetime ECL ....................................................................... Write-offs ............................................................................................... Total loss allowance for loans to corporates ..................................... Transfers of financial assets Balance at the beginning of the year ..................................................... Transfers Transfers to credit impaired ................................................................... Total loss allowance for loan commit., guarantees, unused facilities ............... Optimistic Pessimistic Net remeasurement of loss allowance ......................................................... Unemployment rate ................................................................................................................................. Housing prices, year-on-year change ...................................................................................................... Transfers to Stage 2 (lifetime ECL) .................................................. New financial commitments originated ......................................................... Transfers to Stage 3 (credit impaired financial assets) .................... Key interest rate ...................................................................................................................................... Private consumption, growth ........................................................... GDP growth .................................................................................... Private consumption, growth ................................................................................................................... Derecognitions and maturities ..................................................................... Transfers to Stage 1 (12-month ECL) ............................................. Housing prices, year-on-year change .............................................. GDP growth ............................................................................................................................................ Key interest rate ............................................................................. Base case Regarding macroeconomic outlook, see Note 4, Material accounting estimates and judgements. The Group calculates loss for three different scenarios, optimistic, neutral and pessimistic and the loss allowance is the weighted average of the results. As a sensitivity analysis, it can be noted that the loss allowance in stage 1 and 2 for each of these scenarios separately is ISK 2.5 billion, ISK 4.5 billion and ISK 10.7 billion for the optimistic, base case and pessimistic scenarios, respectively (31.12.2025: ISK 2.2 billion, ISK 4.0 billion and ISK 9.1 billion, respectively). Unemployment rate ........................................................................ New financial assets, originated or purchased ....................................... 58
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 45. Credit risk, continued Forbearance Gross Gross Gross Gross carrying Loss carrying Loss carrying Loss carrying Loss 30.9.2026 amount allowance amount allowance amount allowance amount Loss allowance Individuals ................................................. 6,279 (34) 4,881 (123) 5,277 (642) 16,437 (799) Companies ................................................ 5,227 (26) 19,524 (262) 13,209 (3,014) 37,960 (3,302) Total ......................................................... 11,506 (60) 24,405 (385) 18,486 (3,656) 54,397 (4,101) 31.12.2025 Individuals ................................................. 5,566 (15) 3,350 (53) 5,963 (678) 14,879 (746) Companies ................................................ 4,322 (31) 16,552 (302) 11,420 (3,351) 32,294 (3,684) Total ......................................................... 9,888 (46) 19,902 (355) 17,383 (4,029) 47,173 (4,430) TotalStage 3Stage 2 The Group grants forbearance measures to facilities where the customer is facing temporary difficulties and needs measures which would not generally be available to customers. These forbearance measures include refinancing and renegotiations of loan terms, including loan extensions and adjustment of the payment schedule. After forbearance measures have been granted, the facility is classified as forborne for a period of at least 24 months. The forborne classification is not removed until the customer has demonstrated repayment capacity. Stage 1 59
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 46. Market risk Interest rate risk Interest rate risk 30.9.2026 Up to 3 3-12 1-5 5-10 Over 10 Assets months months years years years Total 107,895 - - - - 107,895 78,288 - - - - 78,288 922,120 204,011 269,442 630 8,555 1,404,758 100,357 41,733 35,740 9,947 5,030 192,807 - 194 3,235 2,304 1,934 7,667 191,925 16,137 228,200 - - 436,262 1,400,585 262,075 536,617 12,881 15,519 2,227,677 Liabilities 16,303 - - - - 16,303 1,004,600 9,189 - - - 1,013,789 415,447 11,291 4,000 - - 430,738 108,103 3,150 389,375 - 13,033 513,661 3,131 - 34,177 - 12,497 49,805 1,547,584 23,630 427,552 - 25,530 2,024,296 (146,999) 238,445 109,065 12,881 (10,011) 203,381 Loans to customers ........................................................................ Market risk arises from imbalances in the Group's statement of financial position as well as in market making activities and position taking in bonds, equities, currencies, derivatives and other commitments which are marked to market. Interest rate risk arises from the possibility that changes in market rates adversely affect net interest income and fair value of interest- bearing instruments on the Group's statement of financial position. The Group's operations are subject to interest rate risk due to mismatches in the fixing of interest rates between assets and liabilities, resulting in a repricing risk for the Group. The Group also faces interest basis risk between interest-bearing assets and interest-bearing liabilities due to different types of floating-rate indices in different currencies. The Group manages and limits market risk exposure in accordance with its risk appetite and strategic goals for net profit. The Group tracks market risk closely and separates its exposures for the trading book and the banking book. Market risk in the trading book arises from market making activities and non-strategic derivatives positions arising from the Group's operations of meeting customers' investment and risk management needs. Market risk in the banking book arises from various mismatches in assets and liabilities in e.g. currencies, maturities and interest rates. Market risk in the trading book and in the banking book is managed separately. The interest rate fixing profile for non-indexed assets and liabilities is largely matched and the duration of fixing has generally shortened as the bulk of fixed rate mortgages have been reset in 2024 to 2025 with the majority of customers refinancing to indexed loans as they offer lower monthly payments. The fixing duration of indexed liabilities is however greater than that of indexed assets, as covered bonds are fixed rate while indexed loans are predominantly floating rate. Market risk allowance is set by the Board in the Bank's risk appetite and limit frameworks are in place for each trading desk. The Asset and Liability Committee (ALCO) is responsible for managing the Bank's overall market risk. Risk Management is responsible for measuring and monitoring market risk exposure, and reporting the exposure, usage and limit breaches. Market risk is the current or prospective risk that changes in financial market prices and rates adversely affect the Group's earnings and equity due to changes to the value and cash flows of its assets and liabilities. Loans to credit institutions .............................................................. The Group's interest rate risk for foreign currencies is limited as foreign denominated assets predominantly have short fixing periods and the Group generally applies fair value hedging for its foreign denominated fixed rate borrowings. For domestic rates, longer fixing periods are more common. The following table shows the Group's interest-bearing assets and liabilities by interest fixing periods. The figures for loans to customers and borrowings are shown on a fair value basis, see Note 26, and are therefore different from the amounts shown in these Consolidated Financial Statements. Defaulted loans are presented at book value, which is based on the value of the underlying collateral, and are therefore assumed to be independent of interest adjustment periods and placed in the 'Up to 3 months' category. Balances with Central Bank ............................................................ Due to credit institutions and Central Bank ..................................... Bonds and debt instruments ........................................................... Bonds and debt instruments used for hedging ................................ Derivatives ...................................................................................... Net interest gap ............................................................................ Deposits ......................................................................................... Subordinated liabilities .................................................................... Assets ............................................................................................ Derivatives ...................................................................................... Liabilities ....................................................................................... Borrowings ..................................................................................... 60
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 46. Market risk, continued 31.12.2025 Up to 3 3-12 1-5 5-10 Over 10 Assets months months years years years Total 150,111 - - - - 150,111 22,567 - - - - 22,567 914,513 158,023 242,825 5,328 8,515 1,329,204 56,829 56,544 45,016 7,406 5,190 170,985 451 41 328 627 285 1,732 139,972 131,248 110,295 44,184 - 425,699 1,284,443 345,856 398,464 57,545 13,990 2,100,298 Liabilities 12,003 - - - - 12,003 912,492 8,690 - - - 921,182 329,767 83,102 9,138 - - 422,007 31,840 159,158 243,888 53,241 13,084 501,211 3,535 - 34,327 868 11,731 50,461 1,289,637 250,950 287,353 54,109 24,815 1,906,864 (5,194) 94,906 111,111 3,436 (10,825) 193,434 NPV change in the banking book -100 bps +100 bps -100 bps +100 bps (1,636) 1,589 (1,781) 1,728 1,397 (1,342) 638 (610) 278 (272) 45 (35) NPV change in the trading book 238 (217) 215 (194) 369 (347) 339 (317) (26) 26 (37) 37 30.9.2026 Subordinated liabilities .................................................................... Borrowings ..................................................................................... Bonds and debt instruments used for hedging ................................ Bonds and debt instruments ........................................................... Loans to customers ........................................................................ Derivatives ...................................................................................... Liabilities ....................................................................................... ISK, Non index-linked ........................................................................................................... Assets ............................................................................................ The following table shows the sensitivity of the Group's net present value (NPV) of interest-bearing assets and liabilities, due to changes in interest rates by currencies. The variation is calculated on the basis of simultaneous parallel shifts upwards or downwards of yield curves. The choice of shifts is not an estimate of risk likelihood. Behavioral maturities are taken into account in the NPV calculations, including prepayment likelihood and expected behavior of non-maturing deposits. The Bank's behavioral models were last updated in Q4 2025. ISK, Non index-linked ........................................................................................................... Sensitivity analysis of interest rate risk 31.12.2025 Due to credit institutions and Central Bank ..................................... ISK, CPI index-linked ........................................................................................................... Derivatives ...................................................................................... ISK, CPI index-linked ........................................................................................................... Deposits ......................................................................................... Net interest gap ............................................................................ Loans to credit institutions .............................................................. Balances with Central Bank ............................................................ Foreign currencies ............................................................................................................... Foreign currencies ............................................................................................................... 61
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 46. Market risk, continued Indexation risk 30.9.2026 Up to 1 1 to 5 Over 5 Assets, CPI index-linked year years years Total 28,523 153,700 386,935 569,158 4,509 9,270 4,879 18,658 - 3,043 - 3,043 33,032 166,013 391,814 590,859 Liabilities, CPI index-linked 125,033 12,576 4,608 142,217 14,261 152,583 10,496 177,340 - - 23,292 23,292 - - 1,273 1,273 139,294 165,159 39,669 344,122 (106,262) (2,189) 352,145 243,694 - 3,043 - 3,043 (106,262) 854 352,145 246,737 (106,572) (7,988) 347,345 232,785 31.12.2025 Assets, CPI index-linked 24,567 119,753 376,058 520,378 6,335 8,772 5,137 20,244 30,902 128,525 381,195 540,622 Liabilities, CPI index-linked 118,029 12,687 4,371 135,087 20,522 118,169 18,782 157,473 - - 21,803 21,803 - - 1,243 1,243 4,241 - - 4,241 142,792 130,856 46,199 319,847 (107,649) (2,331) 334,996 225,016 (4,241) - - (4,241) (111,890) (2,331) 334,996 220,775 (114,555) (10,663) 329,939 204,721 Liabilities, CPI index-linked ............................................................................................... Other .................................................................................................................................... Net off-balance sheet position .............................................................................................. Net off-balance sheet position .............................................................................................. Assets, CPI index-linked .................................................................................................... Subordinated liabilities ......................................................................................................... CPI balance ......................................................................................................................... A significant part of the Group's statement of financial position is linked to the Icelandic Consumer Price Index (CPI). For index-linked instruments, principal and interest payments are adjusted proportionally to the CPI. The Group is exposed to indexation risk as indexed assets exceed indexed liabilities. Financial instruments held for liquidity or market making purposes are assumed to be on demand. A difference of -0.1pp between the expected and actual change in CPI from one month to the next would negatively affect the net interest income by ISK 243 million. Off-balance sheet position .................................................................................................... Financial instruments ........................................................................................................... CPI balance for prudential consolidation, excluding insurance operations * ................ Borrowings ........................................................................................................................... Assets, CPI index-linked .................................................................................................... Other .................................................................................................................................... Loans to customers .............................................................................................................. Book value and maturity profile of indexed assets and liabilities Financial instruments ........................................................................................................... Deposits ............................................................................................................................... * Consolidated situation as per EU Regulation No 575/2013 (CRR) CPI balance for prudential consolidation, excluding insurance operations * ................ Liabilities, CPI indexed linked ........................................................................................... Off-balance sheet position .................................................................................................... Deposits ............................................................................................................................... CPI balance ......................................................................................................................... Subordinated liabilities ......................................................................................................... Loans to customers .............................................................................................................. Net on-balance sheet position .............................................................................................. Borrowings ........................................................................................................................... Net on-balance sheet position .............................................................................................. 62
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 46. Market risk, continued Currency risk Breakdown of assets and liabilities by currency 30.9.2026 Financial assets ISK EUR USD GBP DKK NOK Other Total 107,255 293 170 88 - 21 68 107,895 Loans to credit institutions ......................... 240 48,944 23,905 1,484 1,068 554 2,093 78,288 Loans to customers ................................... 1,136,917 180,599 51,175 2,476 32,114 3,731 7,762 1,414,774 Financial instruments ................................ 151,674 69,764 10,031 1,104 76 9,081 233 241,963 Other financial assets ............................... 15,972 289 422 124 243 - 14 17,064 Financial assets ...................................... 1,412,058 299,889 85,703 5,276 33,501 13,387 10,170 1,859,984 Financial liabilities Due to credit inst. and Central Bank .......... 10,177 5,139 238 731 - - 18 16,303 Deposits .................................................... 894,728 46,389 59,899 5,701 2,288 3,460 1,324 1,013,789 Financial liabilities at fair value .................. 1,211 6,201 716 276 609 50 82 9,145 Other financial liabilities ............................ 8,109 3,385 10,338 254 642 186 337 23,251 Borrowings ................................................ 209,726 231,513 5,886 - - 32,349 30,299 509,773 Subordinated liabilities .............................. 25,593 - 14,215 - - - 2,732 42,540 Financial liabilities .................................. 1,149,544 292,627 91,292 6,962 3,539 36,045 34,792 1,614,801 Net on-balance sheet position ................... 262,514 7,262 (5,589) (1,686) 29,962 (22,658) (24,622) FX assets with underlying ISK bonds ........ 7,242 (7,242) - - - - - Net off-balance sheet position ................... (26,094) 2,381 4,576 2,083 (29,595) 22,585 24,064 Net position * ........................................... 243,662 2,401 (1,013) 397 367 (73) (558) Non-financial assets Investment property .................................. 7,651 - - - - - - 7,651 Investments in associates ......................... 870 - - - - - - 870 Intangible assets ....................................... 7,166 - - - - - - 7,166 Tax assets ................................................ 2 - - - - - - 2 Assets and disposal groups held for sale ........................................... 298 - - - - - - 298 Other non financial assets ......................... 6,055 218 104 32 1 18 (8) 6,420 Non-financial assets ............................... 22,042 218 104 32 1 18 (8) 22,407 Non-financial liabilities and equity Tax liabilities ............................................. 16,167 - - 34 - - - 16,201 Other non-financial liabilities ..................... 34,664 138 71 1 13 - 4 34,891 Shareholders' equity .................................. 216,427 - - - - - - 216,427 Non-controlling interest ............................. 71 - - - - - - 71 Non-financial liabilities and equity ......... 267,329 138 71 35 13 - 4 267,590 Management reporting of currency risk ** ................................ (1,625) 2,481 (980) 394 355 (55) (570) * The net position of the currency risk is presented in accordance with IFRS. ** Management monitors currency risk with more assets and liabilities underlying as it is considered to be a more accurate measurement of the Group's currency exposure. The net position, as seen by management, is the position used for managing the currency imbalance. Cash and balances with CB ....................... Currency risk is the risk of loss due to adverse movements in foreign exchange rates. The Group is exposed to currency risk through a currency mismatch between assets and liabilities. Net exposures per currency are monitored centrally in the Bank. 63
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 46. Market risk, continued 31.12.2025 Financial assets ISK EUR USD GBP DKK NOK Other Total 149,766 167 56 52 - 21 49 150,111 Loans to credit institutions ......................... 643 7,912 9,351 1,722 1,313 278 1,348 22,567 Loans to customers ................................... 1,066,903 181,591 42,317 2,250 31,848 2,729 1,418 1,329,056 Financial instruments ................................ 123,312 51,321 4,205 242 78 19,952 16,706 215,816 Other financial assets ............................... 15,611 324 990 103 2 1 - 17,031 Financial assets ...................................... 1,356,235 241,315 56,919 4,369 33,241 22,981 19,521 1,734,581 Financial liabilities Due to credit inst. and Central Bank .......... 6,075 3,556 1,560 770 - - 42 12,003 Deposits .................................................... 829,869 37,421 40,081 5,024 5,106 2,640 1,041 921,182 Financial liabilities at fair value .................. 1,289 1,720 18 17 7 63 15 3,129 Other financial liabilities ............................ 6,277 3,023 1,781 181 245 66 219 11,792 Borrowings ................................................ 188,973 251,999 5,908 - - 21,347 26,596 494,823 Subordinated liabilities .............................. 24,052 753 15,635 - - - 3,078 43,518 Financial liabilities .................................. 1,056,535 298,472 64,983 5,992 5,358 24,116 30,991 1,486,447 Net on-balance sheet position ................... 299,700 (57,157) (8,064) (1,623) 27,883 (1,135) (11,470) Net off-balance sheet position ................... (52,267) 58,964 7,865 1,881 (28,441) 1,101 10,897 Net position * ........................................... 247,433 1,807 (199) 258 (558) (34) (573) Non-financial assets Investment property .................................. 7,305 - - - - - - 7,305 Investments in associates ......................... 760 - - - - - - 760 Intangible assets ....................................... 7,533 - - - - - - 7,533 Tax assets ................................................ 2 - - - - - - 2 Assets and disposal groups held for sale ........................................... 98 - - - - - - 98 Other non financial assets ......................... 4,981 311 63 104 - 27 - 5,486 Non-financial assets ............................... 20,679 311 63 104 - 27 - 21,184 Non-financial liabilities and equity Tax liabilities ............................................. 12,894 - - 89 - - - 12,983 Other non-financial liabilities ..................... 38,827 103 12 - - - 2 38,944 Shareholders' equity .................................. 217,327 - - - - - - 217,327 Non-controlling interest ............................. 64 - - - - - - 64 Non-financial liabilities and equity ......... 269,112 103 12 89 - - 2 269,318 Management reporting of currency risk ** ................................ (1,000) 2,015 (148) 273 (558) (7) (575) Cash and balances with CB ....................... ** The management monitors currency risk with more assets and liabilities underlying as it is considered to be a more accurate measurement of the Group's currency exposure. The net position, as seen by the management, is the position used for managing the currency imbalance. * The net position of the currency risk is presented in accordance with IFRS. 64
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 46. Market risk, continued Sensitivity analysis for currency risk Currency -10% +10% -10% +10% (248) 248 (202) 202 98 (98) 15 (15) (39) 39 (27) 27 (36) 36 56 (56) 6 (6) 1 (1) 57 (57) 58 (58) Equity risk Sensitivity analysis for equity risk Equity -10% +10% -10% +10% (281) 281 (367) 367 (698) 698 (759) 759 (499) 499 (594) 594 Derivatives 31.12.2025 USD ..................................................................................................................................... Banking book - listed ............................................................................................................ Equity risk is the risk that the fair value of equities decreases. For information on assets seized and held for sale and equity exposures, see Notes 31 and 25 respectively. DKK ..................................................................................................................................... Other .................................................................................................................................... 30.9.2026 30.9.2026 GBP ..................................................................................................................................... 31.12.2025 EUR ..................................................................................................................................... The table below indicates the currencies to which the Group had significant exposure at the end of the period. The analysis calculates the effect of a reasonably possible movement of the currency rate against the ISK, with all other variables held constant, on the Consolidated Income Statement (due to the fair value of currency sensitive non-trading monetary assets and liabilities). A negative amount in the table reflects a potential net reduction in the Consolidated Income Statement or equity, while a positive amount reflects a net potential increase. An equivalent decrease in each of the below currencies against the ISK would have resulted in an equivalent but opposite impact (+10% denotes a depreciation of the ISK). The analysis below calculates the effect of a reasonable possible movement in equity prices that affect the Consolidated Financial Statements. A negative amount in the table reflects a potential net reduction in the Consolidated Income Statement or equity, while a positive amount reflects a potential net increase. Investments in associates are excluded. The result of value-at-risk calculations for the trading book are shown in the Group's Pillar 3 Risk Disclosures. Banking book - unlisted ........................................................................................................ Trading book - listed ............................................................................................................. NOK ..................................................................................................................................... Derivatives are a part of the Group's customer product offering. The types of derivatives currently offered are forward contracts, swaps and options. Eligible underlying market factors are interest rates, foreign exchange rates, equities and commodities. Exposure limits, hedging requirements and collateral requirements are determined in accordance with the Group's risk appetite and monitored by Risk Management on a daily basis. The Group also uses derivatives to hedge market risk on its statement of financial position. Note 26 provides a breakdown of the Group's derivative positions by type. 65
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 47. Liquidity and Funding risk Maturity analysis of assets and liabilities Contractual cash flow of assets and liabilities 30.9.2026 On Up to 3 3-12 1-5 Over 5 With no Book Financial assets demand months months years years maturity Total value Cash and balances with CB ...................... 15,985 58,090 33,820 - - - 107,895 107,895 Loans to credit institutions ......................... 31,276 47,005 - 7 - - 78,288 78,288 Loans to customers ................................... 11,616 223,475 239,598 631,529 1,271,031 - 2,377,249 1,414,774 Financial instruments ................................ 20,692 106,859 14,662 67,298 8,469 33,905 251,885 241,963 Derivatives - assets leg ................................. - 47,224 2,302 31,952 - - 81,478 72,826 Derivatives - liabilities leg ............................. - (39,343) (3,318) (28,091) - - (70,752) (65,242) Other financial instruments ........................... 20,692 98,978 15,678 63,437 8,469 33,905 241,159 234,379 Other financial assets ............................... 397 13,010 891 2,557 209 - 17,064 17,064 Financial assets ...................................... 79,966 448,439 288,971 701,391 1,279,709 33,905 2,832,381 1,859,984 Financial liabilities 10,427 5,879 - - - - 16,306 16,303 Deposits .................................................... 675,195 299,705 23,974 13,225 5,738 - 1,017,837 1,013,789 Financial liabilities at fair value .................. - 3,256 620 7,392 - - 11,268 9,145 Derivatives - assets leg ................................. - (50,746) (9,206) (68,504) - - (128,456) (99,179) Derivatives - liabilities leg ............................. - 53,967 9,826 75,896 - - 139,689 108,289 Short pos. in bonds ....................................... - 35 - - - - 35 35 Other financial liabilities ............................ 140 21,064 692 1,355 - - 23,251 23,251 Borrowings ................................................ - 57,934 16,216 481,250 15,399 - 570,799 509,773 Subordinated liabilities .............................. - 1,135 2,018 23,174 33,298 - 59,625 42,540 Financial liabilities .................................. 685,762 388,973 43,520 526,396 54,435 - 1,699,086 1,614,801 Net position for assets and liab. ............ (605,796) 59,466 245,451 174,995 1,225,274 33,905 1,133,295 245,183 Off-balance sheet items Financial guarantees ................................. - 964 7,097 6,004 9,527 - 23,592 23,592 Unused overdraft ...................................... - 88,829 - - - - 88,829 88,829 Undrawn loan commitments ...................... - 36,175 22,624 8,283 - - 67,082 67,082 Off-balance sheet items .......................... - 125,968 29,721 14,287 9,527 - 179,503 179,503 Net contractual cash flow ....................... (605,796) (66,502) 215,730 160,708 1,215,747 33,905 953,792 65,680 The Group's strategy in relation to liquidity risk is to actively manage its liquidity positions and risks to meet payment and settlement obligations on a timely basis under both normal and stressed conditions. The Group seeks to maintain a stable funding profile which supports its business strategy and liquidity profile, ensuring that the Group can withstand periods of market turbulence, without reliance on volatile funding or external support. The maturity analysis is based on contractual cash flows. The amounts are not discounted and include future interest payments, but CPI- linked amounts do not include accrued indexation due to future inflation. The total amount for each item is higher than the corresponding amount on the Group's statement of financial position, since the amounts on the balance sheet are either at amortized cost and do not contain future interest payments, or at fair value where future cash flows have been discounted. Liquidity risk is the risk that the Group, though solvent, either does not have sufficient financial resources available to meet its liabilities when they fall due, or can secure them only at excessive cost. Liquidity risk arises from the inability to manage unplanned decreases or changes in funding sources. Contractual cash flows differ in many ways from expected cash flows. The difference is most significant for deposits on the liability side and bonds on the asset side. Deposits are always assumed to be withdrawn at the earliest possible date, despite the fact that a large part of the deposit base is considered to be stable funding where behavioral maturity considerably exceeds contractual maturity. Furthermore, although contractual cash flows are presented for bonds held by the Bank, a large portion of the bonds are a part of the Bank's liquidity buffer and are considered to be highly liquid and can be sold or pledged to the Central Bank of Iceland and thus converted into cash at very short notice. Due to credit inst. and Central Bank .......... Liquidity risk is one of the Group's most significant risk factors and a great deal of emphasis is placed on managing it. The Asset and Liability Committee (ALCO) is responsible for managing liquidity and funding risk within the risk appetite set by the Board of Directors. The Bank's Treasury manages liquidity positions on a day-to-day basis. Risk Management measures, monitors and reports the Bank's liquidity and funding risk on a daily basis. A primary source of funding for the Group is deposits from individuals, businesses and financial undertakings. The Group's liquidity risk stems from the fact that the maturity of loans exceeds the maturity of deposits, of which 69% is on-demand or has a term of less than 30 days. 66
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 47. Liquidity and Funding risk, continued 31.12.2025 On Up to 3 3-12 1-5 Over 5 With no Book Financial assets demand months months years years maturity Total value Cash and balances with CB ...................... 31,371 85,137 33,603 - - - 150,111 150,111 Loans to credit institutions ......................... 20,222 2,342 3 - - - 22,567 22,567 Loans to customers ................................... 6,193 194,928 206,108 606,114 1,213,624 - 2,226,967 1,329,056 Financial instruments ................................ 11,733 58,312 42,035 71,729 7,049 34,475 225,333 215,816 Derivatives - assets leg ................................. - 54,751 38,482 38,081 - - 131,314 107,477 Derivatives - liabilities leg ............................. - (50,757) (33,310) (35,221) - - (119,288) (98,853) Other financial instruments ........................... 11,733 54,318 36,863 68,869 7,049 34,475 213,307 207,192 Other financial assets ............................... 689 12,358 413 3,232 339 - 17,031 17,031 Financial assets ...................................... 70,208 353,077 282,162 681,075 1,221,012 34,475 2,642,009 1,734,581 Financial liabilities 6,405 5,602 - - - - 12,007 12,003 Deposits .................................................... 615,915 174,863 115,497 13,319 5,441 - 925,035 921,182 Financial liabilities at fair value .................. - 1,960 2,065 (187) (115) - 3,723 3,129 Derivatives - assets leg ................................. - (65,157) (5,397) (7,097) (10,138) - (87,789) (78,261) Derivatives - liabilities leg ............................. - 67,117 7,462 6,910 10,023 - 91,512 81,390 Short position in bonds used for hedging ..... - - - - - - - - Other financial liabilities ............................ 183 9,545 900 1,164 - - 11,792 11,792 Borrowings ................................................ - 6,366 162,564 315,285 66,226 - 550,441 494,823 Subordinated liabilities .............................. - 1,071 2,103 25,566 33,759 - 62,499 43,518 Financial liabilities .................................. 622,503 199,407 283,129 355,147 105,311 - 1,565,497 1,486,447 Net position for assets and liab. ............ (552,295) 153,670 (967) 325,928 1,115,701 34,475 1,076,512 248,134 Off-balance sheet items Financial guarantees ................................. - 2,344 10,034 3,865 9,207 - 25,450 25,450 Unused overdraft ...................................... - 90,187 - - - - 90,187 90,187 Undrawn loan commitments ...................... - 38,891 29,913 16,525 - - 85,329 85,329 Off-balance sheet items .......................... - 131,422 39,947 20,390 9,207 - 200,966 200,966 Net contractual cash flow ....................... (552,295) 22,248 (40,914) 305,538 1,106,494 34,475 875,546 47,168 Net Stable Funding Ratio 30.9.2026 31.12.2025 1,399,320 1,319,265 1,194,769 1,115,682 117% 118% The Net Stable Funding Ratio (NSFR) measures the amount of available stable funding (ASF) with the Group against the required stable funding (RSF) as per the definition of the Central Bank of Iceland rules No. 750/2021. In general, RSF is determined by applying different weights to different asset classes depending on the level of liquidity. ASF however is calculated by applying weights to the Group's liabilities depending on maturity and stickiness. The NSFR in total shall exceed 100%. Due to credit inst. and Central Bank .......... Net stable funding ratio .......................................................................................................................................... Available stable funding ............................................................................................................................................ Required stable funding ............................................................................................................................................ The NSFR calculations are based solely on figures for the parent company. The Bank's subsidiaries have negligible impact on the funding ratio. 67
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 47. Liquidity and Funding risk, continued Liquidity coverage ratio Total all 30.9.2026* ISK EUR currencies 186,014 68,676 266,242 14,337 - 14,337 200,351 68,676 280,579 152,710 17,865 199,993 14,845 27,412 42,715 7,215 6,888 11,299 174,770 52,165 254,007 - 41,874 63,183 36,661 3,724 46,743 36,661 45,598 109,926 145% 527% 195% 31.12.2025 205,171 47,836 290,759 11,898 - 11,898 217,069 47,836 302,657 146,016 11,987 180,284 376 - 598 9,395 9,014 16,668 155,787 21,001 197,550 - 4,874 18,089 24,805 2,917 31,822 24,805 7,791 49,911 166% 362% 205% Cash inflows .......................................................................................................................................... Short-term deposits with other banks *** ................................................................................................ Deposits ................................................................................................................................................. Liquid assets ......................................................................................................................................... Cash inflows .......................................................................................................................................... Liquid assets level 1 ** ........................................................................................................................... Other cash outflows ............................................................................................................................... Borrowings ............................................................................................................................................. The Liquidity Coverage Ratio (LCR) is one of the standards introduced in the Basel III Accord. The LCR is the result of a stress test that is designed to ensure that banks have the necessary assets on hand to withstand short-term liquidity disruptions. More precisely, LCR represents the balance between highly liquid assets and the expected net cash outflow of the Group in the next 30 days under stressed conditions. * Due to the reclassification of deposits (see LCR categorization - amounts and LCR outflow weights), comparability with the prior period is affected. ** Level 1 assets include the Group's cash and balances with the Central Bank, domestic bonds eligible as collateral at the Central Bank, CIUs with domestic bonds underlying and foreign government bonds which receive 95-100% weight. Liquidity coverage ratio (LCR) **** ...................................................................................................... Liquid assets level 2 .............................................................................................................................. Liquid assets level 2 .............................................................................................................................. To qualify as highly liquid assets under the LCR rules, assets must be non-pledged, liquid and easily priced on the market, traded on an active market and not issued by the Group or related entities. The minimum requirement for the total LCR is 100%, while the requirement for the LCR in ISK is 50% and 80% in EUR. There is no minimum requirement for the aggregate position in all foreign currencies. The following table shows the breakdown for the Group's LCR calculations. Liquid assets level 1 ** ........................................................................................................................... Other cash inflows ................................................................................................................................. Cash outflows ....................................................................................................................................... Cash outflows ....................................................................................................................................... Liquidity coverage ratio (LCR) **** ...................................................................................................... *** Short-term deposits with other banks are defined as cash inflows in LCR calculations. Other cash outflows ............................................................................................................................... Borrowings ............................................................................................................................................. Other cash inflows ................................................................................................................................. Deposits ................................................................................................................................................. Liquid assets ......................................................................................................................................... Short-term deposits with other banks *** ................................................................................................ **** LCR is defined as: LCR = Weighted liquid assets / (weighted cash outflows - weighted cash inflows) where weighted cash inflows are capped at 75% of weighted cash outflows. 68
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 47. Liquidity and Funding risk, continued Composition of liquid assets 30.9.2026 ISK USD EUR Other Total 107,255 170 293 177 107,895 - 17,182 41,874 4,127 63,183 95,626 - 7,252 - 102,878 - 4,225 61,494 6,980 72,699 202,881 21,577 110,913 11,284 346,655 31.12.2025 149,766 56 167 122 150,111 - 9,271 4,874 3,944 18,089 69,404 - - - 69,404 - 3,762 47,669 33,811 85,242 219,170 13,089 52,710 37,877 322,846 LCR deposit categorization LCR categorization - amounts and LCR outflow weights Less Weight Weight Term Total 30.9.2026* stable % Stable % deposits** deposits 247,495 11% 157,291 5% 225,951 630,737 3,117 25% - - - 3,117 197,858 41% 19,431 21% 63,365 280,654 13,717 40% 9 20% 463 14,189 49,339 100% - - 19,714 69,053 13,185 100% - - 3,160 16,345 10,118 100% - - - 10,118 534,829 176,731 312,653 1,024,213 31.12.2025 142,436 12% 136,146 5% 200,648 479,230 119,944 12% 19,563 5% 30,998 170,505 4,950 25% - - - 4,950 102,657 41% 17,125 20% 28,642 148,424 16,229 40% 15 20% 1,051 17,295 62,076 100% - - 18,442 80,518 23,521 100% - - 1,069 24,590 2,071 100% - - - 2,071 473,883 172,849 280,850 927,583 Cash and balances with Central Bank .............................................................. Domestic bonds eligible as collateral with Central Bank and CIUs .................... Short-term deposits with financial institutions ................................................... The following table shows the composition of the Group's liquidity buffer. Operational relationship .................................................................. Individuals ...................................................................................... Small and medium enterprises ........................................................ Cash and balances with Central Bank .............................................................. Operational relationship .................................................................. Total ............................................................................................... Pension funds ................................................................................. Foreign financial entities ................................................................. Domestic financial entities .............................................................. As per the LCR methodology, the Group's deposit base is split into different categories depending on customer type. A second categorization is used where term deposits refer to deposits with residual maturity greater than 30 days. Deposits that can be withdrawn within 30 days are marked stable if the customer has a business relationship with the Group and the amount is covered by the Deposit Insurance Scheme. Other deposit funds are considered less stable. A weight is attributed to each category, representing the expected outflow under stressed conditions, i.e. the level of stickiness. Corporations ................................................................................... Sovereigns, central banks and PSE ................................................ Pension funds ................................................................................. The table below shows the breakdown of the Group's deposit base according to the LCR categorization, with the associated weighted average of the stressed outflow weights. Total ............................................................................................... ** Here term deposits refer to deposits with maturities greater than 30 days. Foreign government bonds ............................................................................... Liquidity reserve .............................................................................................. * The Small and medium enterprises category has been removed, with the associated deposits reclassified under Retail deposits and Corporations in accordance with Art. 411(2) of Regulation (EU) No 575/2013 (CRR), affecting comparability with the prior period. Deposits maturing within 30 days Foreign financial entities ................................................................. Retail deposits ................................................................................ Corporations ................................................................................... Sovereigns, central banks and PSE ................................................ Liquidity reserve .............................................................................................. Domestic financial entities .............................................................. Foreign government bonds ............................................................................... Domestic bonds eligible as collateral with Central Bank and CIUs .................... Short-term deposits with financial institutions ................................................... 69
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 48. Capital management Capital adequacy 30.9.2026 31.12.2025 Own funds 216,498 217,391 (8,706) - (71) (64) 207,721 217,327 (6,920) (7,273) (260) (228) (7,686) (20,313) (304) (314) 192,551 189,199 14,215 15,635 206,766 204,834 28,325 27,883 (1,443) (1,355) 26,882 26,528 233,648 231,362 Risk-weighted exposure amount (REA) 899,002 862,862 61,799 59,140 3,150 4,222 - 2,309 14,513 13,516 1,429 2,501 84,635 84,635 1,064,528 1,029,185 Capital ratios 18.1% 18.4% 19.4% 19.9% 21.9% 22.5% 238,001 231,362 18.5% 18.4% 19.8% 19.9% 22.4% 22.5% Total equity ................................................................................................................................................................ The Group's consolidated situation as stipulated in CRR is the Group's accounting consolidation excluding insurance subsidiaries, in particular Vördur. Unaudited interim profit .............................................................................................................................................. The Group's capital ratios are calculated in accordance with the Icelandic Financial Undertakings Act No. 161/2002 with later changes, through which CRD V and CRR III have been adopted. The Group applies the standardized approach to calculate capital requirements for credit risk, including counterparty credit risk, and market risk and the basic approach for credit valuation adjustment risk. Total own funds ....................................................................................................................................................... Additional Tier 1 capital ............................................................................................................................................. Tier 1 ratio ................................................................................................................................................................. Non-controlling interest not eligible for inclusion in CET1 capital ............................................................................... The focus of capital management at the Group is to normalize the capital structure in the medium term and consequently maintain the Group's capitalization comfortably above regulatory requirements, including the Pillar 2 and combined capital buffer requirements. Common Equity Tier 1 capital before regulatory adjustments .............................................................................. Credit risk, securities and other ................................................................................................................................. Insufficient coverage for non-performing exposures .................................................................................................. * On 30 September 2026, the deduction consists of 50% of reviewed profits as per the Bank's dividend policy. On 31 December 2025, the deduction consists of 50% of audited profits as per the Bank's dividend policy and ISK 5 billion buyback program approved by the Board (in December 2025) and the FSA (in January 2026, after the accounting period end). Capital adequacy ratio ............................................................................................................................................... Market risk due to trading book positions ................................................................................................................... Credit risk, loans and off-balance sheet items ........................................................................................................... Additional value adjustments ..................................................................................................................................... Foreseeable dividend and buyback * ......................................................................................................................... Tier 1 capital ............................................................................................................................................................ Operational risk ......................................................................................................................................................... Intangible assets ....................................................................................................................................................... Tier 2 capital ............................................................................................................................................................ Common Equity Tier 1 capital ................................................................................................................................. Tier 2 instruments ...................................................................................................................................................... Tier 2 instruments of financial sector entities (significant investments) ...................................................................... Market risk due to currency imbalance ...................................................................................................................... Credit valuation adjustment ....................................................................................................................................... Credit risk, derivatives and repos ............................................................................................................................... Capital adequacy ratio, including interim profit not eligible for inclusion ..................................................................... CET1 ratio, including interim profit not eligible for inclusion ....................................................................................... Tier 1 ratio, including interim profit not eligible for inclusion ....................................................................................... Total own funds, including interim profit not eligible for inclusion ............................................................................... Total risk-weighted exposure amount .................................................................................................................... CET1 ratio ................................................................................................................................................................. 70
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 48. Capital management, continued 30.9.2026 31.12.2025 Capital ratios of the parent company 18.0% 18.3% 19.3% 19.8% 21.9% 22.4% Icelandic Effective Icelandic Effective Capital buffer requirement, % of REA buffer buffer buffer buffer 2.5% 2.5% 2.5% 2.5% 3.0% 3.0% 3.0% 3.0% 2.0% 1.8% 2.0% 1.8% 2.5% 2.4% 2.5% 2.4% 10.0% 9.7% 10.0% 9.7% Capital requirement, % of REA CET1 Tier 1 Total 4.5% 6.0% 8.0% 1.1% 1.5% 2.0% 9.7% 9.7% 9.7% 15.3% 17.2% 19.7% 18.1% 19.4% 21.9% Leverage ratio 30.9.2026 31.12.2025 1,827,739 1,696,618 13,526 12,582 11,440 11,181 62,294 71,258 1,914,999 1,791,639 206,766 204,834 10.8% 11.4% Off-balance sheet exposures ..................................................................................................................................... Tier 1 capital ............................................................................................................................................................ Capital adequacy ratio ............................................................................................................................................... The Pillar 1 and Pillar 2R capital requirements may comprise 56.25% CET1 capital, 18.75% AT1 capital and 25% Tier 2 capital. CET1 ratio ................................................................................................................................................................. Capital conservation buffer ................................................................................................... Capital buffer for systematically important institutions .......................................................... Systemic risk buffer * ........................................................................................................... Countercyclical capital buffer * ............................................................................................. Combined capital buffer requirement ............................................................................... Leverage ratio ........................................................................................................................................................... 31.12.202530.9.2026 Total exposure ......................................................................................................................................................... Pillar 2R capital requirement ** ............................................................................................................... Available capital ..................................................................................................................................... Pillar 1 capital requirement ...................................................................................................................... ** The SREP result based on the Group's Financial Statement at 31 December 2025. The Pillar 2R requirement is 2.0% of risk-weighted exposure amount based on the Group's prudential consolidation under CRR, which excludes Vördur. Combined capital buffer requirement * .................................................................................................... * The effective countercyclical capital buffer is the weighted average of the countercyclical capital buffer applicable for each country, the weights being the total own funds requirements for relevant credit exposures against counterparties residing in those countries. The systemic risk buffer only applies to domestic exposures and is calculated using the same weighting method. The leverage ratio is seen as a complementary measure to the risk-based capital ratios. The ratio is calculated on the basis of the Group's consolidated situation as per the CRR, which excludes the Group's insurance subsidiaries. The minimum leverage ratio requirement is 3% as stated in the Icelandic Financial Undertakings Act No. 161/2002. Repos ........................................................................................................................................................................ Derivative exposures ................................................................................................................................................. On-balance sheet exposures ..................................................................................................................................... Regulatory capital requirement ............................................................................................................ Tier 1 ratio ................................................................................................................................................................. The following table outlines the implementation of the capital buffer requirements in accordance with the Icelandic Financial Undertakings Act No. 161/2002, as prescribed by the Financial Stability Committee and approved by the FSA. The Bank carries out an ongoing process, the Internal Capital Adequacy Assessment Process (ICAAP), with the aim to ensure that the Group has in place sufficient risk management processes and systems to identify, manage and measure the Group's total risk exposure. The ICAAP is aimed at identifying and measuring the Group's risk across all risk types and ensure that the Group has sufficient capital in accordance with its risk profile. The FSA supervises the Group, receives the Group's internal estimation on the capital adequacy and sets the Pillar 2R capital requirements for the Group as a whole following the Supervisory Review and Evaluation Process (SREP). The Group's own funds exceed the FSA's SREP requirements. 71
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 48. Capital management, continued MREL 30.9.2026 31.12.2025 Minimum requirement for own funds and eligible liabilities 233,648 231,362 246,319 201,513 479,967 432,875 103,259 99,831 376,708 333,044 1,064,528 1,029,185 35.4% 32.4% 19.8% 19.8% 1,914,999 1,791,639 25.1% 24.2% 6.0% 6.0% Solvency II for insurance subsidiary Vördur 14,881 14,228 1,431 1,372 (775) - 15,537 15,600 9,746 10,049 159.4% 155.2% 167.4% 155.2% 49. Operational risk SCR ratio before foreseeable dividends ..................................................................................................................... SCR ratio ................................................................................................................................................................... The Group must fulfil a minimum requirement for own funds and eligible liabilities (MREL) in accordance with the Act on Resolution of Credit Institutions and Investment Firms, no. 70/2020, as amended, which transposes BRRD I/II into Icelandic law. Own funds which are not used to fulfil the combined buffer requirement can be used towards the MREL requirements. In October 2025, the Icelandic Resolution Authority presented the Group with the MREL requirements based on year-end 2024 financials. The requirements are expressed as a fraction of total REA, and as a fraction of the total exposure measure. Both ratios are shown in the table below. An MREL subordination requirement of 13.5% REA will apply to the Bank from Q3 2027. Risk-weighted exposure amount (REA) ..................................................................................................................... Own funds and eligible liabilities not used for CBR (% REA) ...................................................................................... MREL requirement (% REA) .................................................................................................................................... Subordinated liabilities ............................................................................................................................................... Excess of assets over liabilities in accordance with Solvency II ................................................................................. Own funds and eligible liabilities (% TEM) ................................................................................................................. Own funds and eligible liabilities ............................................................................................................................ The Group uses the standardized approach for the calculation of capital requirements for operational risk. Operational risk is the risk of direct or indirect loss, or damage to the Group's reputation resulting from inadequate or failed internal processes or systems, from human error or external events. Each business unit within the Group is responsible for managing their own operational risks. Risk management and Compliance support the first line through monitoring, complementary expertise, and by challenging the adequacy and effectiveness of risk management practices. The second line is responsible for developing and maintaining a framework for identifying, measuring, and reporting the Group's operational risk. Foreseeable dividends ............................................................................................................................................... MREL requirement (% TEM) .................................................................................................................................... Own funds ................................................................................................................................................................ Solvency capital requirements (SCR) ........................................................................................................................ Own funds and eligible liabilities not used for CBR .............................................................................................. Own funds ................................................................................................................................................................. Eligible liabilities ........................................................................................................................................................ Combined buffer requirement (CBR) .......................................................................................................................... The solvency capital requirement for the subsidiary Vördur is calculated in accordance with the Icelandic Insurance Companies Act No 100/2016. Total exposure measure (TEM) ................................................................................................................................. 72
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Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2026 Amounts are in ISK millions Notes to the Condensed Consolidated Interim Financial Statements 50. Sustainability risk Sustainable financing framework 30.9.2026 31.12.2025 Sustainable Financing Instruments 21,899 24,755 98,173 38,272 120,072 63,027 Identified eligible sustainable assets by category 24,066 18,000 580 534 388 545 5,586 8,875 100,330 97,512 7,519 7,914 1,663 - 140,131 133,380 18,333 20,958 2,946 1,637 388 424 12,917 14,447 34,584 37,465 174,715 170,844 Sustainable book value ........................................................................................................................................... Sustainable waste and wastewater management ....................................................................................................... Green buildings ......................................................................................................................................................... Sustainable marine value chains and marine ecosystem management ..................................................................... Renewable energy ..................................................................................................................................................... Sustainable forestry and agriculture ........................................................................................................................... Green book value ..................................................................................................................................................... Green deposits .......................................................................................................................................................... Employment generation and alleviate unemployment ................................................................................................ Social book value .................................................................................................................................................... Green borrowings ...................................................................................................................................................... Clean transportation .................................................................................................................................................. Education .................................................................................................................................................................. Healthcare ................................................................................................................................................................. Circular economy ....................................................................................................................................................... Book value ............................................................................................................................................................... Affordable housing ..................................................................................................................................................... The Bank’s Sustainability Financing Framework applies to the Bank’s financing, deposits and loans which are classed as environmentally and/or socially sustainable. The Sustainability Financing Framework includes social categories which define projects having a positive impact on society. Special importance is also given to the circular economy, and the classification of green projects has also been refined. Under this framework the Bank can issue Sustainable Financing Instruments including, but not limited to, covered bonds, bonds, loans, commercial paper, repurchase agreements and deposits. The use of proceeds from these instruments is restricted to the financing of eligible assets as defined in the Framework. Eligible assets are divided into several eligible categories with inclusion and exclusion criteria. The Framework details the processes for identifying eligible assets, for reporting on the use of the framework and for external review. The following table excludes committed green exposures. Sustainability risk is a driver of other risk types, such as credit risk and market risk. It can materialize in the short term, the medium term and the long term. The Bank assesses both inside-out risks (negative impact from the Bank’s operations on people and/or the environment) and outside-in risks (negative materialization of ESG factors on the Bank through their counterparties or invested assets). The Bank’s Executive Committee is responsible for reviewing the Bank’s performance with respect to its commitments and policies in relation to environmental, social and governance (ESG) factors and aligning the Bank’s strategy and risk appetite with them. 73
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Arion Bank Borgartun 19 105 Reykjavik Iceland Id.: 581008-0150