FULLTEXT DEL 2 AV 2

Kvartalsrapport Q1 2026

Kvika banki hf. Amounts are in ISK millions
Notes to the Condensed Interim Consolidated Financial Statements
52
Financial assets and financial liabilities
53. Accounting classification of financial assets and financial liabilities
Manda-
31.3.2026 Fair value torily at Total
Financial assets Amortised through fair value carrying
cost OCI through P/L amount
28,540 - - 28,540
5,336 - - 5,336
212,615 - 4,318 216,933
- 34,140 5,806 39,947
- - 22,739 22,739
- - 5,329 5,329
- - 3,885 3,885
- 353 - 353
13,609 - - 13,609
Total 260,100 34,493 42,077 336,670
Manda-
Fair value torily at Total
Financial liabilities Amortised through fair value carrying
cost OCI through P/L amount
189,678 - - 189,678
7,378 - - 7,378
72,714 - - 72,714
6,080 - - 6,080
- - 616 616
- - 493 493
- - 548 548
14,992 - 293 15,285
Total 290,842 - 1,951 292,794
Manda-
31.12.2025 Fair value torily at Total
Financial assets Amortised through fair value carrying
cost OCI through P/L amount
20,145 - - 20,145
8,154 - - 8,154
203,683 - 3,877 207,560
- 38,867 5,655 44,522
- - 20,663 20,663
- - 6,695 6,695
- - 3,094 3,094
- 156 - 156
8,513 - - 8,513
Total 240,494 39,023 39,984 319,501
Manda-
Fair value torily at Total
Financial liabilities Amortised through fair value carrying
cost OCI through P/L amount
172,787 - - 172,787
6,806 - - 6,806
73,249 - - 73,249
5,841 - - 5,841
- - 433 433
- - 432 432
- - 773 773
12,958 - 641 13,599
Total 271,642 - 2,278 273,920
Derivatives ..................................................................................................................
Other liabilities ............................................................................................................
The accounting classification of financial assets and financial liabilities is specified as follows:
Fixed income securities ...............................................................................................
Shares and other variable income securities ..............................................................
Securities used for hedging .........................................................................................
Loans to customers .....................................................................................................
Derivatives ..................................................................................................................
Other assets ................................................................................................................
Loans to credit institutions .........................................................................................
Cash and balances with Central Bank .........................................................................
Fixed income securities ...............................................................................................
Shares and other variable income securities ..............................................................
Securities used for hedging .........................................................................................
Loans to customers .....................................................................................................
Derivatives ..................................................................................................................
Other assets ................................................................................................................
Deposits ......................................................................................................................
Borrowings ..................................................................................................................
Derivatives used for hedge accounting ......................................................................
Issued bonds ...............................................................................................................
Subordinated liabilities ...............................................................................................
Sho
rt positions used for hedging ................................................................................
Short positions used for hedging ................................................................................
Short positions held for trading ..................................................................................
Loans to credit institutions .........................................................................................
Derivatives ..................................................................................................................
Other liabilities ............................................................................................................
Cash and balances with Central Bank .........................................................................
Deposits ......................................................................................................................
Borrowings ..................................................................................................................
Issued bonds ...............................................................................................................
Subordinated liabilities ...............................................................................................
Short positions held for trading ..................................................................................
Derivatives used for hedge accounting ......................................................................
Condensed Interim Consolidated Financial Statements 31 March 2026 - Unaudited 41

===== SIDA 45 =====

Kvika banki hf. Amounts are in ISK millions
Notes to the Condensed Interim Consolidated Financial Statements
52
54. Financial assets and financial liabilities measured at fair value
a.
-
-
-
b.
c.
d.
31.3.2026
Financial assets Carrying
Level 1 Level 2 Level 3 amount
Mandatorily measured at fair value through profit and loss
4,698 95 1,013 5,806
19,084 1 3,654 22,739
5,329 - - 5,329
- - 4,318 4,318
- 3,885 - 3,885
Measured at fair value through other comprehensive income
34,140 - - 34,140
Derivatives used for hedge accounting - 353 - 353
Total 63,251 4,334 8,985 76,570
Inputs are quoted market prices (unadjusted) in active markets for identical instruments.
Level 1
Level 2
Fixed income securities ............................................................................................
Inputs are not observable or unobservable inputs have a significant effect on the valuation. This category includes instruments that are
valued based on quoted prices for similar instruments for which significant unobservable adjustments are required to reflect th e differences
between the instruments.
Inputs are not quoted market prices but are observable either directly, i.e. as prices, or indirectly, i.e. derived from prices. This category
includes financial instruments valued using quoted prices in active markets for similar instruments, quoted prices for similar or identical
instruments in markets that are considered less than active and other instruments which are valued using techniques which rely primarily
on inputs that are directly or indirectly observable from market data.
Level 3
The fair value of financial assets and liabilities that are traded in active markets are based on quoted market prices. For other financial
instruments the Group determines fair value using various valuation techniques. IFRS 13 specifies a fair value hierarchy based on whether the
inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources
whereas unobservable inputs reflect the Group's market assumptions. These two types of inputs result in the following fair valu e hierarchy:
The Group uses widely recognised valuation techniques, including net present value and discounted cash flow models, comparison with similar
instruments for which market observable prices exist, Black-Scholes and other valuation models.
Fixed income securities ............................................................................................
Shares and other variable income securities ...........................................................
Fair value hierarchy
Fair value hierarchy classification
The fair value of financial assets and financial liabilities measured at fair value in the statement of financial position is classified into the fair
value hierarchy as follows:
Valuation process
The Bank's Credit committee is responsible for fair value measurements of financial assets and financial liabilities classified as level 2 or level 3
instruments. The valuation is carried out by personnel from respective departments under supervision from Risk. The valuations are revised at
least quarterly, or when there are indications of significant changes in the underlying inputs.
Valuation techniques
For more complex instruments, the Group uses proprietary models, whic h usually are developed from recogn ised valuation models. Some or all
of the inputs into these models may not be market observable and are derived from market prices or rates or are estimated based on
assumptions. When entering into a transaction, the financial instrument is recognised initially at the transaction price, which is the best
indicator of fair value, although the value obtained from the valuation model may differ from the transaction price. This initial difference,
usually an increase in fair value, indicated by valuation techniques is recognised in income depending upon the individual facts and
circumstances of each transaction and no later than when the market data becomes observable.
The value produced by a model or other valuation technique is adjusted to allow for a number of factors as appropriate, because valuation
techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Valuation
adjustments are recorded to allow for model risks, bid-ask spreads, liquidity risks, as well as other factors. Management believes that these
valuation adjustments are necessary and appropriate to fairly state financial instruments carried at fair value in the statement of financial
position.
Valuation techniques include recent arm's length transactions between knowledgeable, willing parties, if available, reference to the current fai r
value of other instruments that are substantially the same, the discounted cash flow analysis and option pricing models. Valuation techniques
incorporate all factors that market participants would consider in setting a price and are consistent with accepted methodologies for pricing
financial instruments. Periodically, the Group calibrates the valuation technique and tests it for validity using prices from any observable curre nt
market transactions in the same instrument, without modification or repackaging, or based on any available observable market da ta.
Derivatives ................................................................................................................
Loans to customers ..................................................................................................
Securities used for hedging ......................................................................................
Condensed Interim Consolidated Financial Statements 31 March 2026 - Unaudited 42

===== SIDA 46 =====

Financial liabilities Carrying
Level 1 Level 2 Level 3 amount
Mandatorily measured at fair value through profit and loss
433 - - 433
432 - - 432
- 773 - 773
- - 641 641
Total 865 773 641 2,278
e.
Shares and
Fixed other var.
income income Loans to Other
31.3.2026 securities securities customers Derivatives liabilities Total
Balance as at 1 January 2026 767 3,594 3,877 (0) (641) 7,596
30 60 106 - 8 205
217 0 396 - - 613
- - (61) - 340 278
Balance as at 31 March 2026 1,013 3,654 4,318 - (293) 8,692
Shares and
Fixed other var.
income income Loans to Other
31.12.2025 securities securities customers Derivatives liabilities Total
Balance as at 1 January 2025 611 3,456 874 (939) (320) 3,682
(69) 589 224 17 (18) 742
778 1,937 1,325 (580) (6) 3,454
- - (922) 990 216 283
- (2,388) - - - (2,388)
(553) - 2,376 513 (513) 1,823
Balance as at 31 December 2025 767 3,594 3,877 (0) (641) 7,596
Fixed income securities ............................................................................................
Additions ..........................................................................
Repayments ......................................................................
Disposals ...........................................................................
Derivatives ................................................................................................................
Derivatives ................................................................................................................
Other liabilities .........................................................................................................
Other liabilities .........................................................................................................
Short positions held for trading ...............................................................................
Reconciliation of changes in Level 3 fair value measurements
Short positions used for hedging .............................................................................
Derivatives ................................................................................................................
Short positions held for trading ...............................................................................
Short positions used for hedging .............................................................................
Fixed income securities ............................................................................................
Shares and other variable income securities ...........................................................
Loans to customers ..................................................................................................
Securities used for hedging ......................................................................................
Reclassification .................................................................
Tota
l gains and losses in profit or loss .............................
Additions ..........................................................................
Repayments ......................................................................
Total gains and losses in profit or loss .............................
Condensed Interim Consolidated Financial Statements 31 March 2026 - Unaudited 43

===== SIDA 47 =====

Kvika banki hf. Amounts are in ISK millions
Notes to the Condensed Interim Consolidated Financial Statements
52
54. Financial assets and financial liabilities measured at fair value (cont.)
f.
Book value
Range 31.3.2026
0-95% 1,013
- 3,654
- 4,318
Total 8,985
Book value
Range 31.12.2025
0-95% 767
- 3,594
- 3,877
Total 8,237
g.
+10% -10%
101 (101)
365 (365)
432 (432)
Total 899 (899)
Value of assets
Significant unobservable input
Unlisted bonds
Fair value measurements for Level 3 financial assets
Level 3 assets consist primarily of unlisted bonds, shares and share certificates and loans measured at fair value. Each asset is evaluated
separately but assets within an asset group share a valuation method. The following valuation methods are in use:
Expert modelLoans to customers
Asset class Method Significant unobservable input
Unlisted bonds Expected recovery Value of assets
Unlisted variable income securities Market price Recent trades
The Group believes its estimates represent appropriate approximations of fair value and that the use of different valuation methodologies and
reasonable changes in assumptions or unobservable inputs would not significantly change the estimates.
A 10% change in the estimates would have the following effect on profit before taxes:
Shares and other variable income securities ................................................................................................................
Loans to customers ........................................................................................................................................................
Given the methods used, the possible range of the significant unobservable inputs is wide. When determining the values used the Group
considers the financial strength of the entity in question, recent trades if any and multipliers for comparable instruments.
The effect of unobservable inputs in Level 3 fair value measurements
Loan to customers Expert model Value of assets and collateral
Fixed income securities .................................................................................................................................................
Market price Recent trades
Value of assets and collateral
Asset class Method
Expected recovery
Unlisted variable income securities
Condensed Interim Consolidated Financial Statements 31 March 2026 - Unaudited 44

===== SIDA 48 =====

Kvika banki hf. Amounts are in ISK millions
Notes to the Condensed Interim Consolidated Financial Statements
54
Other information
55. Pledged assets
Settlement and Securities
31.3.2026 committed facilities borrowing Total
9,006 - 9,006
14,380 107 14,488
Total 23,387 107 23,494
Settlement and Securities
31.12.2025 committed facilities borrowing Total
9,045 - 9,045
13,659 324 13,984
- 47 47
Total 22,704 372 23,076
56. Related parties
a. Definition of related parties
b. Arm's length
c. Balances with related parties
31.3.2026 Assets Liabilities
128 275
- 23
Total 128 298
31.12.2025 Assets Liabilities
130 243
- 39
Total 130 283
d. Transactions with related parties
Interest Interest Other Other
3m 2026 income expense income expense
3 2 0 -
- - - 76
Total 3 2 0 76
Interest Interest Other Other
3m 2025 income expense income expense
- 1 1 0
- - - 76
Total - 1 1 76
Associates ..........................................................................................................................................................................
Associates .........................................................................................................................
Management ......................................................................................................................................................................
Management ....................................................................................................................
Associates .........................................................................................................................
Management ......................................................................................................................................................................
Associates ..........................................................................................................................................................................
Loans to customers ...................................................................................................................................
Fixed income securities .............................................................................................................................
Loans to customers ...................................................................................................................................
Fixed income securities .............................................................................................................................
Other assets ...............................................................................................................................................
Transactions with related parties are carried out at arm's length and subject to an annual review by the Bank's internal auditor.
The Group has pledged assets, in the ordinary course of banking business, to the Central Bank of Iceland to secure general settlement in the
Icelandic clearing system. Cash pledged to secure the borrowing of securities from other counterparties than the Central Bank of Iceland is
classified as loans to credit institutions.
The Group has a related party relationship with the board members of the Bank, the CEO of the Bank and key employees (together referred to as
management), associates as disclosed in note 23, shareholders with significant influence over the Bank, close family members of individuals
identified as related parties and entities under the control or joint control of related parties.
Management ....................................................................................................................
Condensed Interim Consolidated Financial Statements 31 March 2026 - Unaudited 45

===== SIDA 49 =====

Kvika banki hf. Amounts are in ISK millions
Notes to the Condensed Interim Consolidated Financial Statements
54
57. Other matters
Tax treatment of warrants sold by the Bank
58. Events after the reporting date
Merger with Arion banki hf. will not take place
As the Iceland Revenue and Customs has not yet concluded its review, the Bank has not charged any amount to its income statement nor made
any changes to the tax returns for the respective years.
The Bank is aware of that the Iceland Revenue and Customs ("Skatturinn") is currently reviewing the tax treatment of warrants that the Bank sold
during the years 2017 to 2019. The Iceland Revenue and Customs is looking into whether the warrants should be taxed as perquisites instead of
as a financial instrument. Should that be the case, then the Bank would be required to pay the respective social security tax and tax on financial
activity. The Bank would however be able to deduct the amount of salary related expenses, as well as the amount of the perquisites, from its tax
base for the respective years in question, and thereby increase its deferred tax losses.
On 15 April the preliminary discussions between Kvika banki hf. and Arion banki hf. with the Competition Authority regarding the proposed
merger concluded. On that day representatives of Kvika banki and Arion banki met with representatives of the Competition Authority, during
which the authority presented its position following the completion of the preliminary discussions process. In light of the position expressed by
the Competition Authority at the meeting, the Boards of Directors of Kvika banki and Arion banki concluded that the proposed merger cannot
proceed. The Boards of Directors therefore decided to discontinue the merger plans that were announced in a Stock Exchange notice dated 6 July
2025.
Condensed Interim Consolidated Financial Statements 31 March 2026 - Unaudited 46