Instabank : Interim Report Q3 23

INTERIM REPORT Q3 2023

Instabank ASA

Key highlights

Record-high net profit after tax: 28.2 MNOK

53 % increase from the same quarter last year

Record-high growth in net loans: 460 MNOK

Growth year to date: 1,013 MNOK

Successful launch of B2B Credit line product

37 MNOK in net lending

The Nordic challenger

About Instabank ASA

Instabank, the Nordic challenger, was established as a fully digital bank in the autumn of 2016. We are dedicated to improving the banking experience for both business and private customers. We believe in challenging established norms and finding agile solutions where others create complexity. Our goal is to make everyday life easier for our customers through better products, technology, and personal contact. In a short time, we have achieved a strong position in the Nordic market and are proud to have over 90,000 customers who have chosen us for their lending, payment and deposit needs.

Instabank operates in Norway, Finland and Sweden, offering competitive savings, insurance, point of sales (POS) financing, credit cards, mortgages and unsecured loan products to consumers

and small and medium-sized businesses. Instabank also offers deposits in Germany through a partnership with Raisin Bank.

The bank's products and services are distributed primarily through 26 agents, various retail partners and directly on the bank's website and mobile app.

At the end of Q3-23, Instabank had 44 full-time and 13 part-time employees.

Instabank is listed on Euronext Growth at Oslo Børs, ticker INSTA.

Operational Developments

Instabank reports a record-high growth in net loans of 466 MNOK in Q3-23. The growth comes from solid organizational performance, successfully delivering on the strategy, effective operations, distribution, and product offerings meeting customer demands.

+ 1,013 MNOK

Growth in net loans YTD-23

There is still a strong demand for the mortgage product representing an attractive yield, low risk and requiring less capital than unsecured loans. The growth in mortgage lending was 260 MNOK in the quarter, up from 120 MNOK in the previous quarter. At the end of Q3-23, mortgage lending

amounted to 2,335 MNOK, representing 41 % of total lending.

In Q3-23, Instabank successfully launched a new credit line product for Small & Medium Sized Enterprises (SME). At the end of the quarter, we had 48 customers and net loans of 37 MNOK. Instabank considers lending to SMEs an underserved market with attractive margins and volumes. When applying for a loan, SMEs often struggle to get attention in traditional banks and face a cumbersome onboarding and credit process that takes time and resources.

Instabank has, as in the previous quarters, continued to increase the interest rates for existing lending customers and new loans, resulting in increased loan yields. For mortgages, the loan yield increased to 8.5 % by the end of Q3-23 from 8.3 % by the end of the previous quarter, and for consumer loans, yield increased to 12.1 % from 12.0%.

The increase in market rates also triggered increased funding costs, and the average deposit rate was 3.6 % in Q3-23, up from 2.9 % in the previous quarter.

At the end of Q3-23, the bank had 90,388 customers, of which 59,601 were loan customers and 30,787 were deposit customers.

Balance Sheet

Instabank achieved a record-high growth in net loans of s 466 MNOK to 5,631 MNOK at the end of the quarter. Mortgages increased by 260 MNOK, and unsecured loans increased by 170 MNOK. In the first quarter, the B2B credit line product increased by 37 MNOK.

Growth in net loans:

Deposits from customers increased by 373 MNOK to 5,672 MNOK at the end of the quarter.

The Common Equity Tier 1 Capital (Cet1) ratio was 19.9 % at the end of the

quarter, 2.3 % points above the regulatory capital requirement.

Total assets at the end of Q3-23 were 6,771 MNOK.

Profit and Loss

Instabank reports a record-high profit before tax of 36.8 MNOK and after-tax of 28.2 MNOK, up 9.8 MNOK/ 53 % from the same quarter last year.

+ 53 %

Growth in net profit

Total interest income increased by 45.9 MNOK from the same quarter last year to 144.4 MNOK in Q3-23. The increase was driven by a 12-month net loan growth of 1,204 MNOK and increased loan yield to 10.6 % from 8.9 % in the same quarter last year.

Interest expenses came in at 56.7 MNOK, up from 45.1 MNOK in the previous quarter, following an increase in deposit volume and rates.

Net other income increased by as much as 16.5 MNOK from the same quarter last year to 22.3 MNOK in Q3-23 because of high yield on security holdings at 5.4 %.

+ 30 %

Growth in Total Income

Total income came in at 112.5 MNOK, up 26.8 MNOK / 30 % from the same quarter last year.

Operating expenses were 42.3 MNOK, up 2.5 MNOK from the previous quarter. Personnel costs increased by 1.8 MNOK because of the full effect of annual salary increases in Q2-23 and an increase in the number of employees. Administrative costs increased by 1.4 MNOK of which 1 MNOK was related to increases in marketing costs. Costs associated with the new B2B Credit line business amounted to 1.3 MNOK in the quarter.

The cost-to-income ratio was 37.6 % versus 44 % in the same quarter last year, demonstrating economy of scale.

Losses on loans came in at 33.4 MNOK or 2.3 % of average gross loans, representing an increase of only 0.4 MNOK and 0.2 % points lower than in the previous quarter.

Outlook

A flexible and scalable business model and a very competent group of employees who have demonstrated the ability to act fast on market conditions and pursue opportunities are the basis for Instabank's success story. The Instabank team is committed to continuing to develop Instabank as the leading Nordic challenger bank.

Instabank has entered the business lending market with a credit line product for Small & Medium Sized Businesses (SMEs) to help them achieve their growth targets and scale their businesses. This initiative will contribute to growth in volume and improved profits for Instabank.

We expect continued high demand for Instabank's existing lending products and reiterate the target for growth in total net loans to 1.2 billion NOK for 2023.

The bank's liquidity and capital situation are expected to remain satisfactory. It should be noted that there is typically uncertainty related to assessments of future conditions.

Other information

Regarding capital requirement, there has been a limited review of the accounts in accordance with ISRE 2410 as of September 30th, 2023 by the bank's auditors and the result after tax is added to retained earnings in full.

Oslo, November 1st, 2023

Board of Directors, Instabank ASA

Condensed statements of profit or loss and other comprehensive income:

NOK 1000	Note	Q3-2023	Q3-2022	YTD 2023	YTD 2022	Year 2022
Interest Income effective interest method		144,374	98,416	396,792	283,271	391,234
Other interest income		2,523	530	5,286	986	2,350
Interest expenses		56,717	18,456	138,935	45,938	73,890
Net interest income		90,180	80,490	263,143	238,318	319,694
Income commissions and fees		13,943	11,972	38,485	34,419	46,017
Expenses commissions and fees		3,119	2,901	8,142	6,977	9,213
Net gains/loss on foreign exchange and securities
classified as current assets		11,441	-3,334	22,502	-6,172	1,086
Net other income		22,265	5,737	52,845	21,270	37,889
Total income		112,445	86,227	315,988	259,588	357,584
Salary and other personnel expenses		17,814	14,048	49,028	43,906	55,498
Other administrative expenses, of which:		19,623	18,658	56,287	58,397	77,690
- direct marketing cost		3,852	3,596	9,404	14,881	7,275
Other expenses		1,664	1,966	5,790	5,875	7,789
Depreciation and amortisation		3,214	3,338	9,307	9,786	13,045
Total operating expenses		42,314	38,009	120,412	117,964	154,023
Losses on loans	2	33,364	23,658	97,149	68,177	100,230
Operating profit before tax		36,766	24,560	98,427	73,447	103,331
Tax expenses		8,587	6,140	22,728	16,611	21,091
Profit and other comprehensive income for the period		28,179	18,420	75,699	56,836	82,240
Earnings per share (NOK)		0.07	0.06	0.20	0.17	0.25
Diluted earnings per share (NOK)		0.07	0.05	0.19	0.16	0.23

Condensed statement of financial position:

NOK 1000	Note	30.09.2023	30.09.2022	31.12.2022
Loans and deposits with credit institutions	4	143,783	265,388	191,254
Loans to customers	2, 4	5,693,942	4,479,970	4,674,030
Certificates and bonds	4	811,153	755,391	867,806
Other intangible assets	5	25,575	21,567	21,197
Fixed assets		2,514	4,247	3,645
Derivatives		2,217	19,158	1,773
Other receivables	4	92,537	889	39,527
Total assets		6,771,721	5,546,610	5,799,233
Deposit from and debt to customers	4	5,671,957	4,702,782	4,852,281
Other debts	4	38,223	24,584	20,491
Accrued expenses and liabilities		14,378	17,979	17,844
Derivatives		2,776	2,188	543
Deferred tax		1,161	2,957	734
Tax payable		22,301	18,362	25,065
Subordinated loan capital	3, 4	96,000	56,000	96,000
Total liabilities		5,846,796	4,824,853	5,012,958
Share capital	3	378,262	332,642	332,642
Share premium reserve	3	200,430	178,192	178,192
Retained earnings	3	265,334	170,022	194,541
Additional Tier 1 capital	3	80,900	40,900	80,900
Total equity		924,925	721,757	786,275
Total liabilities and equity		6,771,721	5,546,610	5,799,233

Statement of changes in equity:

				Retained
				earnings
	Share	Share	Tier 1	and other	Total
NOK 1000	capital	premium	capital	reserves	equity
Equity per 01.01.2022	332,642	178,192	40,900	114,373	666,107
Profit for the period				82,240	82,240
Changes in warrants				2,352	2,352
Paid interest on Tier 1 Capital				-4,424	-4,424
Additional Tier 1 capital issued			40,000		40,000
Equity per 31.12.2022	332,642	178,192	80,900	194,540	786,275
Equity per 01.01.2023	332,642	178,192	80,900	194,540	786,275
Capital issuanse	45,619	22,238			67,857
Profit for the period				75,699	75,699
Changes in warrants				2,450	2,450
Paid interest on Tier 1 Capital				-7,356	-7,356
Equity per 30.09.2023	378,262	200,430	80,900	265,333	924,925

Notes

Note 1: General accounting principles

The interim report is prepared in accordance with chapter 8 in regulations for annual accounts of banks, credit companies and financial institutions, which means interim financial statement in accordance with IAS 34 and those exceptions included in the regulations for annual accounts of banks, credit companies and financial institutions, as presentation of statement of cashflows. For further information see note 1 accounting principles in the annual report of 2022. The interim report was approved by the board of directors on November 1st, 2023.

Note 2: Loans to customers

GROSS AND NET LENDING;

NOK 1000	30.09.2023	30.09.2022	31.12.2022
Unsecured consumer loans	3,542,186	2,955,501	3,060,236
Mortgages	2,349,860	1,641,644	1,758,131
B2B Credit Line	37,266	0	0
Prepaid agent commission	147,031	123,712	129,360
Establishment fees	-83,970	-70,844	-73,118
Gross lending	5,992,372	4,650,014	4,874,609
Impairment of loans	-298,430	-170,044	-200,579
Net loans to customers	5,693,942	4,479,970	4,674,030

CREDIT IMPAIRED AND LOSSES:

NOK 1000	30.09.2023	30.09.2022	31.12.2022
Gross credit impaired loans (stage 3)	556,318	305,934	366,475
Individual impairment of credit impaired loans (stage 3)	-238,613	-113,967	-146,922
Net credit impaired loans	317,705	191,967	219,553
Gross credit impaired loans are loans which are more than 90 days in arrear in relation to the agreed payment schedule.

AGEING OF LOANS:

NOK 1000	30.09.2023	30.09.2022	31.12.2022
Loans not past due	4,392,694	3,567,131	3,597,043
Past due 1-30 days	670,655	562,187	663,461
Past due 31-60 days	250,832	128,440	156,549
Past due 61-90 days	58,812	33,453	34,838
Past due 91+ days	556,318	305,934	366,475
Total	5,929,312	4,597,145	4,818,367

	30.09.2023	30.09.2022	31.12.2022
Loans not past due	74.1 %	77.6 %	74.7 %
Past due 1-30 days	11.3 %	12.2 %	13.8 %
Past due 31-60 days	4.2 %	2.8 %	3.2 %
Past due 61-90 days	1.0 %	0.7 %	0.7 %
Past due 91+ days	9.4 %	6.7 %	7.6 %
Total	100.0 %	100.0 %	100.0 %

GEOGRAPHIC DISTRIBUTION:

NOK 1000	30.09.2023	30.09.2022	31.12.2022
Norway	3,862,704	3,038,782	3,126,499
Finland	1,983,509	1,459,581	1,600,798
Sweden	83,100	98,782	91,070
Gross lending excl. prepaid agent provisions and establishment fees	5,929,312	4,597,145	4,818,367

LOAN LOSS PROVISIONS IN THE PERIOD:

NOK 1000	Q3-2023	Q3-2022	YTD 2023	YTD 2022	Year 2022
Loan loss provisions stage 1	-2,283	306	-1,180	-1,237	1,366
Loan loss provisions stage 2	-1,530	-1,883	-2,716	4,446	3,887
Loan loss provisions stage 3	-28,212	45,402	-88,557	-1,234	-34,420
Total loan loss provisions in the period	-32,026	43,825	-92,453	1,976	-29,168
Realised losses in the period	-1,339	-67,483	-4,696	-70,153	-71,062
Losses on loans in the period	-33,364	-23,658	-97,149	-68,177	-100,230