Interim Financial Statement 30.09.2022

Condensed Interim

Consolidated Financial Statements

30 September 2022

Kvika banki hf. ∙ Katrínartún 2 ∙ 105 Reykjavík ∙ Iceland ∙ Reg. no. 540502‐2930

Kvika banki hf.

Table of Contents

	Page
Endorsement and Statement by the Board of Directors and the CEO .......................................	1
Condensed Interim Consolidated Income Statement ................................................................	3
Condensed Interim Consolidated Statement of Comprehensive Income ...............................	4
Condensed Interim Consolidated Statement of Financial Position ...........................................	5
Condensed Interim Consolidated Statement of Changes in Equity ...........................................	6
Condensed Interim Consolidated Statement of Cash Flows ......................................................	8
Notes to the Condensed Interim Consolidated Financial Statements .......................................	9
‐ General information ................................................................................................................	10
‐ Segment information ..............................................................................................................	12
‐ Income statement ...................................................................................................................	14
‐ Statement of Financial Position ..............................................................................................	17
‐ Risk management ....................................................................................................................	27
‐ Financial assets and financial liabilities ..................................................................................	42
‐ Other information ...................................................................................................................	46

Condensed Interim Consolidated Financial Statements 30 September 2022 ‐ Unaudited

Kvika banki hf.

Endorsement and Statement

by the Board of Directors and the CEO

These are the Condensed Interim Consolidated Financial Statements of Kvika banki hf. ("Kvika" or the "Bank") and its subsidiaries (together the "Group") for the period 1 January to 30 September 2022. The Condensed Interim Consolidated Financial Statements have not been audited or reviewed by the Bank's independent auditors.

Following the acquisition of Ortus Secured Finance ltd. ("Ortus"), the Group operates five business segments, Insurance, Asset Management, Commercial Banking, Investment Banking and UK operations. The Group provides businesses, investors and individuals with comprehensive investment banking, insurance services and asset management services, as well as selected banking services. At the end of September 2022 the Group had ISK 460 billion of assets under management, compared to ISK 528 billion at year end 2021. The decrease is mainly caused by divestments of funds (ISK 38 bn.) and poor market performance in the period. The Bank is listed on the main list of Nasdaq OMX Iceland.

The Bank's Annual General Meeting ("AGM") approved a motion from the Board of Directors ("BOD") permitting the Bank to purchase up to 10% of own shares subject to regulatory approvals. This authorisation applies until the next annual general meeting in 2023. In May, the BOD authorised a buy‐ back programme for the repurchase of up to 418,730,531 shares, or up to ISK 3 billion in total consideration. In September 2022, the Bank announced that the buy‐back programme had been completed, as shares for ISK 3 billion had been bought. The AGM also approved a motion from the BOD to, subject to approval from the Financial Supervisory Authority of the Central Bank of Iceland, decrease the share capital of the Bank by 117,256,300 shares by cancelling treasury shares held by the Bank. In April, the share capital reduction was carried out.

Acquisition of Ortus Secured Finance ltd.

In February 2022, the Group concluded the acquisition of Ortus. Ortus is a British alternative credit provider specialising in property backed lending to borrowers in the United Kingdom. Ortus' headquarters are in London, where it shares an office with Kvika Securities Ltd. The company also operates offices in Belfast, N‐Ireland and in Glasgow, Scotland. The transaction is a good strategic fit and allows for significant diversification of the Group's loan portfolio, as well as opportunities to generate synergies in terms of improved funding costs.

Deposit and issuer ratings assigned to Kvika

In May 2022 the international ratings agency Moody's Investors Service ("Moody's") assigned a first time Baa2 long‐term and Prime‐2 short‐term foreign and local currency bank deposit and issuer ratings to Kvika. The assigned long‐term deposit and issuer ratings carry a stable outlook. In June 2022 Moody's upgraded the Bank's long‐term deposit rate to Baa1 from Baa2 and affirmed Kvika's long‐term issuer ratings of Baa2, the Baa1 long‐term and P‐2 short‐term Counterparty Risk Ratings (CRRs) and Baa1(cr) long‐term and P‐2(cr) short‐term Counterparty Risk (CR) Assessment. The outlook on the deposit and issuer ratings remains stable.

The ratings reflect Kvika's robust capitalisation coupled with strong profitability and liquidity, reflective of the Group's diversified revenue streams and the increasing importance of non‐capital‐intensive banking operations as well as the profit contribution from its insurance operations via TM tryggingar hf. Kvika initiated the rating process in early 2022, following the publication of the Group's first EMTN Programme and inaugural foreign debt issuance, to support the Group's issuance of bonds and other funding efforts.

Decision to enter the acquiring market in Iceland

In May 2022, it was announced that the Group had signed an asset purchase agreement stating that Group will acquire part of Valitor hf.'s ("Valitor") merchant agreements. The Group will enjoy approx. 25% market share and will be a new and strong competitor on the acquiring market in Iceland. The Group currently provides various services with payment solutions and this agreement will further strengthen the Group's position in payment services in Iceland. According to the agreement it is envisaged that the Group will become a Payment Facilitator and will, in the coming months, acquire agreements with the relevant merchants according to provisions of the agreement, which from that point will become customers of the Group. The effects of the agreement on the Bank's capital base are negligible and the effect on this year's operating results is minor. Refer to note 62 for further information.

Results of a Supervisory Review and Evaluation Process of Kvika's capital requirement

In October 2022, Kvika was notified of the draft results of the Supervisory Review and Evaluation Process (SREP) carried out by the Financial Supervisory Authority of the Central Bank of Iceland on the assessment of the risk in Kvika's operations and capital requirements. Kvika has not objected to the results regarding capital requirements and therefore considers them final. Key conclusions of the assessment are that Kvika's total capital requirement, taking into account all capital buffers, will decrease from the current 22.6% to 17.7%, a 4.9% decrease from Kvika's last assessment which was completed in 2019. The decrease is mostly caused by the fact that the minimum capital requirement (Pillar 1 and 2) will amount to 11.5% of risk weighted exposures at any given time instead of 15.1%.

Operations during the first nine months of 2022

Profit before taxes for the period amounted to ISK 4,007 million (9m 2021: ISK 7,857 million), corresponding to an annualised 12.3% retuon weighted tangible equity, based on the tangible equity position at the beginning of the year adjusted for changes in share capital and transactions with treasury shares during the period. The Russian Federation's invasion into Ukraine has had a considerable global impact on the prices of securities, and as a result, it effected a number of assets held by the Group. The Group's net operating income during the period was ISK 13,694 million (9m 2021: ISK 15,423 million). Net interest income amounted to ISK 5,764 million (9m 2021: ISK 2,928 million). Net fee income amounted to ISK 4,905 million (9m 2021: ISK 5,094 million). Net premiums and claims amounted to ISK 3,026 million (9m 2021: ISK 2,922 million. Other operating expense amounted to ISK 2 million (9m 2021: income of ISK 4,479 million). Administrative expenses during the period amounted to ISK 9,492 million (9m 2021: ISK 7,686 million). The figures in the consolidated income statement for the period do not include the operations of Ortus for January and February as the business combination took place at end of February. Further, the figures in the consolidated income statement for the comparison period in 2021 are not directly comparable due to the number of business combinations which were effected during that period. Reference is made to the Consolidated Financial Statements for 2021 for further information on those business combinations.

According to the Consolidated Statement of Financial Position, equity at the end of the period amounted to ISK 78,843 million (31.12.2021: ISK 78,368

million) and total assets amounted to ISK 297,571 million (31.12.2021: ISK 246,240 million).

The Group's solvency ratio at 30.09.2022 was 1.34, (31.12.2021: 1.57) with a regulatory minimum requirement of 1.0.

Kvika banki hf.

Endorsement and Statement

by the Board of Directors and the CEO

Risk management

The objective of risk management is to promote a good and efficient culture of risk awareness within the Group and to increase the understanding of employees and management on the Group's risk taking, in addition to an assessment process related to risk and capital position. An emphasis is placed on being up to speed on the latest developments and adoption of rules related to risk management, such as regarding capital‐ and liquidity management. The Group is faced with various kinds of risk that relate to its operations as a financial conglomerate and arise from its day‐to‐day operations. An active risk management entails analysing risk, measuring it and taking actions to limit it, as well as monitoring risk factors across the Group. The Group's risk management, and its main operations, are described in the notes accompanying the Consolidated Financial Statements. Refer to notes 42‐57 on analysis of exposure to various types of risk.

Statement by the Board of Directors and the CEO

The Condensed Interim Consolidated Financial Statements of Kvika banki hf. for the period 1 January to 30 September 2022 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, and additional requirements, as applicable, in the Act on Annual Accounts no. 3/2006, the Act on Financial Undertakings no. 161/2002 and rules on accounting for credit institutions no. 834/2003.

To the best of our knowledge these Condensed Interim Consolidated Financial Statements give a true and fair view of the Group's assets, liabilities and financial position as at 30 September 2022 and the financial performance of the Group and changes of cash flows for the period 1 January to 30 September 2022. Furthermore, in our opinion the Condensed Interim Consolidated 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.

The Board of Directors and the CEO of the Bank have today discussed the Condensed Interim Consolidated Financial Statements for the period 1 January to 30 September 2022, and confirm them by the means of their signatures.

Reykjavík, 10 November 2022.

Board of Directors

Sigurður Hannesson

Chairman

Chief Executive Officer

Marinó ÖTryggvason

The condensed interim consolidated financial statements of Kvika banki hf. for the period ended 30 September 2022 are electronically certificated by the Board of Directors and the CEO.

Condensed Interim Consolidated Income Statement

For the period 1 January 2022 to 30 September 2022

The notes on pages 10 to 47 are an integral part of these Condensed Interim Consolidated Financial Statements.