PARETO BANKFinancial Results

Second Quarter 2020

TABLE OF CONTENTS

1 HIGHLIGHTS

2 FINANCIALS

3 BUSINESS AREAS

4 AMBITIONS

PAGE 3

SECOND QUARTER 2020 HIGHLIGHTS

1 Profit after tax NOK 127.9m (NOK 86.7m).

Return on equity after tax 15.7 % (13.0 %).

3Net interest income of NOK 183.8m (NOK 164.4m). Maintaining lending margin in a low interest rate environment.

4Growth in lending to both new and existing customers. Lending grew by NOK 732m (NOK 475m) to a total volume of NOK 14,235m (NOK 12,539m).

5Gains on financial instruments of NOK 21.8m (loss of NOK 1.2m) primarily due to gains on bonds in the surplus liquidity portfolio.

2

6Unchanged impairments and losses of NOK -0.1m (NOK 14.9m). Shift to a somewhat less negative macro outlook. No individual write-downs or losses as a direct result of Covid-19.

PAGE 4

KEY FIGURES

Profit after tax

Cost/income ratio

CET1 ratio

Net interest income (NOKm) Loss ratio

Return on Equity

Quarterly write-downs and losses over average net loans

86.7

71.0

127.9

Q2-19 Q1-20 Q2-20

NOKm

13.0%

8.8%

15.7%

Q2-19 Q1-20 Q2-20

17.8 %18.5 %

17.5 %

30.06.2019 31.03.2020 30.06.2020

164.4

183.9 183.8

Q2-19 Q1-20 Q2-20

21.0%19.8%

18.4%

Q2-19 Q1-20 Q2-20

0.12%0.30%

0.00%

Q2-19 Q1-20 Q2-20

Excluding AT1 capital and interest Standard model

NOKm

PAGE 5

COVID-19 UPDATE

1 Normalization of operations. Employees returning from home offices in two alternating shifts.

313 existing customers corresponding to NOK 372m have been granted loans under the state-guaranteed SME loan program.

4A comprehensive review of credit commitments has not resulted in significant changes in risk classifications or impairments.

5 No non-performing or impaired loans due to Covid-19.

Close follow-up of existing customers and lending under the state-guaranteed SME loan programhave been priorities.

2

PAGE 6

LENDING GROWTH HIGHER THAN EXPECTED

12,065

12,539

13,191 13,161

13,503

14,235

10,500

11,000

11,500

12,000

12,500

13,000

13,500

14,000

14,500

Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Lending to customers

NOKmLENDING GROWTH IN Q2-20Strong pipeline within all business areas combined with state-guaranteed SME loans to support existing customers have led to higher than expected lending growth in Q2-20.

ACTIVITY HOLDING UP IN H2-20Better deal flow within all business areas as markets are improving. Several banks are reluctant to do new business, creating profitable opportunities with good risk. New sales activity is gradually picking up.

Lending growth is expected to continue moderately in H2-20.

TABLE OF CONTENTS

1 HIGHLIGHTS

2 FINANCIALS

3 BUSINESS AREAS

4 AMBITIONS

PAGE 8

INCOME STATEMENT

P&L (NOKm)

Lending growth of NOK 732m contributed to growth in net interest income. Lower market rates put pressure on deposit margins and income from surplus liquidity.

Reversal in bond market contributed to gains of NOK 21.8m (negative change NOK 1.2m) in the surplus liquidity portfolio

Stable costs. Set off NOK 8.2m in Q2-20 for employee bonus.

Unchanged impairments of NOK -0.1m (NOK 14.9m). A less negative economic outlook outweighs changes in risk classification and migration to stage 2.

Q2-20 Q2-19 H1-20 H1-19

Net interest income 183.8 164.4 367.7 327.0

Net other operating income 23.9 0.9 7.0 7.1

Total net income 207.7 165.2 374.7 334.1

Total operating expenses 38.1 34.7 71.2 69.7

Operating profit before impairments and losses 169.5 130.5 303.5 264.4

Impairments and losses on loans and guarantees -0.1 14.9 40.1 15.9

Pre-tax operating profit 169.7 115.6 263.4 248.5

Tax expense 41.7 28.9 64.4 62.1

Profit for the period 127.9 86.7 198.9 186.4

Earnings per share (NOK) 1.79 1.23 2.77 2.64

Return on equity 15.7% 13.0% 12.3% 14.5%

Cost/income ratio 18.4% 21.0% 19.0% 20.9%

PAGE 9

DEVELOPMENT IN NET INTEREST MARGIN

5.9 %6.1 %

5.9 %5.7 % 5.8 % 5.7 %

5.4 %

5.9 %5.5 % 5.4 % 5.2 %

5.5 %

6.4 %

-0.3 % -0.3 % -0.3 %-0.1 % -0.1 % -0.2 % -0.1 % -0.1 % 0.0 % 0.2 % 0.4 % 0.3 %

-1.0 %

5.6 %5.9 %

5.5 % 5.6 % 5.7 % 5.5 %5.3 %

5.7 %5.5 % 5.6 % 5.6 % 5.8 %

5.4 %

Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Lending margin Deposit margin Net margin

5.5 %5.4 %

Net interest margin

Percent interest income including amortizations and fees over 3M Nibor;Cost of deposits of average volumes over average 3M Nibor in period

• Higher lending margin and lower deposit margin due to significantly lower Nibor.• Cut in lending and deposit rates to customers.• Net margin falls due to limited effect of rate cut on deposit margin.• Reduced market funding cost contributes positively to net interest income.

5.8 % 5.7 %5.4 %

5.9 %5.5 %5.7 %

PAGE 10

LENDING AND DEPOSIT RATE ADJUSTMENTS

6.20%

5.88%

0

0

0

0

0

0

0

0

Q1-20 Q2-20

• Lending rate cuts in two rounds on an individual basis coming into effect in May and June.

• Deposit rate reduced by 0.20 percentage points for corporate customers and by 0.40 percentage points for retail customers, coming into effect in June and July.

• Smaller change in deposit rate than in lending rate due to competition in deposit market and low nominal rate.

• Cut in lending rate has a relatively larger effect on net interest income due to larger lending volume than deposit volume.

• Nibor-based loans will automatically adjust with a lower lending rate.

• Nibor will also affect income on surplus liquidity and market funding cost.

Average lending rate

Interest rate income excluding fees as a percentage of average lending to customers

PAGE 11

MARKET FINANCING

2129

44

72

94

118

7488

122

169

201

224

7 1120

3955

82

0

50

100

150

200

250

0.25 0.5 1 2 3 5

June

February

March

Credit spreads on Pareto Bank senior debt

Basis points over 3M Nibor• Credit spreads on senior debt shot up in March due to Covid-19. A vicious cycle of increased collateral requirements triggered a sell-off.

• Central banks have poured liquidity into markets by cutting rates, buying bonds and offering unlimited lending to banks.

• Increased liquidity has driven down credit spreads significantly in Q2-20.

• Pareto Bank has NOK 5,2 billion outstanding in market debt with maturities up to 5 years.

• Senior bond with a maturity of approx. 4.25 years was extended by NOK 350m and short debt repurchased.

• No significant remaining net redemptions in H2-20.

Maturity (years)

PAGE 12

QUARTERLY CHANGE IN NET INTEREST INCOME

Net interest income

183,941 183,802

8,892

149

8,526

11,132 1,029 434 5,111

120,000

130,000

140,000

150,000

160,000

170,000

180,000

190,000Q2-20

Lending volume

Fee income

Deposit volume

Deposit rate

Q1-20

Lendingrate

Market Funding

Surplus Liquidity

Changes in net interest income (NOK 1,000)

PAGE 13

COVID-19 AND IFRS 9

MAIN COMPONENTS OF IFRS 9 MODEL• Review of risk classifications.• Migration of existing commitments from stage 1 to stage 2 or 3. • Changes in macroeconomic scenarios and their probabilities.• Individual write-downs in stage 3.

UPDATED RISK CLASSIFICATIONSCertain commitments have been assigned a higher ECL (expected credit loss) after a selective review of the portfolio.

MIGRATION TO STAGE 2 AND 3Close follow-up of payment default. Commitments are migrated to stage 2 and 3 if there is a significant increase in credit risk over the lifetime of the loan. Commitments under the state-guaranteed SME loan program are placed on the Watch List, but are divided between stage 1 and stage 2.

MACROECONOMIC SCENARIOS SHIFT TO MORE POSITIVE OUTLOOKGrowth forecasts have been revised upwards, markets have improved and housing prices have begun to rise during Q2-20. Probabilities for negative macroeconomic scenarios have been reduced for corporate financing and residential property, while they have been increased for commercial property and shipping. The net effect of changes to probabilities in macroeconomic scenarios is a reduction of impairments.

Credit exposure by stage

NOK million

30.06.2020

Stage 1 NOK 16,789m

(+ 913m)

Stage 2NOK 827m(+ 399m)

Stage 3NOK 125m

(- 97m)

PAGE 14

67.058.6

7.716.1

23.7 23.6

31.03.2020 30.06.2020

Stage 3

Stage 2

Stage 1

98.3

QUALITY OF LOAN PORTFOLIO

Impairments and losses on loans & guaranteesImpairments and losses according to IFRS 9

NOKm NOKm

-5.9

4.0

9.4

1.0

14.9

9.1

4.7

40.3

-0.1

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Impairments and losses NOK -0.1m

98.4

• Unchanged impairments overall. • Change in risk classification on selected

commitments.• Somewhat increased volume in stage 2.• Improved macroeconomic scenarios.• No change in individual write-downs.• No write-offs.

PAGE 15

CAPITAL

Key comments

31.12.2020

CET1 Pillar 111.0 %

Pillar 23.2 %

CET1 Min. Requirement

14.2 %16.1 %

17.4 %18.5 %

17.5 %

31.12.2018 31.12.2019 31.03.2020 30.06.2020

Core equity tier 1 ratio (CET1 ratio)

• Strong solidity which exceeds both the minimum capital requirement of 14.2 % and requirement before the reduction of the countercyclical capital buffer of 16.2 % including a management buffer.

• Profitability, capital reserves and a strong leverage ratio make the bank robust against potential losses and provide the capacity to meet customers’ needs in a challenging economic environment.

• Supervisory review of pilar 2 requirement (SREP) is postponed to 2021.

• The long-term capital target of 17.7 % will be reviewed following a clarification of future capital buffer requirements.

• The Board of Directors has been granted the authority to pay a dividend of up to NOK 2.80 for 2019 until the next AGM in 2021.

14.6 %15.7 %

16.5 %15.3 %

31.12.2018 31.12.2019 31.03.2020 30.06.2020 Leverage Ratio

Leverage Ratio Requirement

5 %

Leverage ratio

PAGE 16

QUARTERLY CHANGE IN CET1

CET1 Captial Ratio*

18.5 %

17.5 %0.4 %

0.8 % 0.3 %0.3 %

10.00%

CET1 31.03 Lending growth Growth off-balanceexposure

Surplus liquidity 50 % retainedearnings

CET1 30.06

Q2-20

Lending to customers

Surplus liquidity

Retained profits**

Q1-20

Off-balance exposure to customers

Notes: *Change in CET1 due to isolated factors based on internal estimates. **Profits include deduction for dividend of 50 % for 2020

TABLE OF CONTENTS

1 HIGHLIGHTS

2 FINANCIALS

3 BUSINESS AREAS

4 AMBITIONS

PAGE 18

A NICHE PLAYER FINANCING MEDIUM SIZED ENTERPRISES

Realestate

Corporate

BUSINESS AREAS CREDITS / CUSTOMERS EXPOSURE SWEET SPOT

Land acquisition financing

Property construction facilities

Commercial property financing

M&A financing

Bridge loans

Investment loans

Working capital facilities

Securities financing

NOKm 12,511

NOKm 4,059

NOKm 50-100

1-3 yrs

NOKm 20-50

1-3 yrs

FOCUS

The specialized real estate developer bank for Eastern Norway and larger Norwegian cities.

A provider of tailor-made financing solutions.

NOKm 1,017

Shipping First priority financing USDm 10-20

3-5 yrs

Norwegian ship owners, family offices and the investment project market.

71%

23%

6%

Mortgage lending are not included in this overview.

PAGE 19

7,007

4,320

3,143

699

6,834

4,880

3,093

834

6,644

5,044

3,316

782

7,178

4,725

3,551

889

7,499

5,012

4,059

1,017

Residential property Commercial property Corporate Shipping

Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

EXPOSURE PER BUSINESS AREA

Notes: *Corporate financing exposure includes securities financing exposure.

NOKm gross exposure*

PAGE 20

RESIDENTIAL PROPERTY | CREDIT UPDATE

Real estate credit exposure

67%

3,648

1,364

4,279

1,819

1,401

Commercial property

Commercial residential

Building facilities

Land with houses

Land without houses

NOKm of gross exposure

42%

Σ = NOK 12,511m Key comments residential property

• 165 customers with average commitment of NOK 45m.• 35 % residental exposure in Oslo, 53 % in Viken.

• Positive development in the housing market despiteCovid-19. Low interest rates seem to outweighunemployment so far.

• Newbuild market has gradually picked up after a complete standstill in March.

• Successful launch of some projects. Pre-sale requirements have been fulfilled and building facilitiesopened.

• Most projects on schedule. No major delays or challenges on site identified.

• A review of the portfolio has resulted in closer follow-up of 13 residential property commitments.

41 customers

59 customers

65 customers

46 customers

71 customers

PAGE 21

COMMERCIAL PROPERTY | CREDIT UPDATE

Real estate collateral exposure

67%

NOKm of gross exposure

28%

Σ = NOK 12,511m Key comments commercial property

• 117 customers with average commitment of NOK 43m.• 37 % commercial property exposure in Oslo and 19 % in

Rogaland.

• A review of the portfolio has resulted in closer follow-up of 11 commercial property commitments.

• Little exposure to segments that have been seriously hit by Covid-19 such as hotel, restaurant and retail.

• The office market in the greater Oslo area has not beensignificantly affected so far.

• A cautious approach to future asset value estimates is applied.

The category commercial residential comprises residential property for rent, while the category commercial property is made up of 1st

and 2nd priority financing of commercial real estate. No project risk associated with financing of commercial residential.

3,648

1,364

4,279

1,819

1,401

Commercial property

Commercial residential

Building facilities

Land with houses

Land without houses41 customers

59 customers

65 customers

46 customers

71 customers

PAGE 22

CORPORATE | CREDIT UPDATE 67%

NOKm of gross exposure

23%

Corporate financing exposure Σ = NOK 4,059m*

51%

18%

10%

8%

8%3% 2% Investment loans

Working capitalfacilitiesSecurities financing

M&A loans

GovernmentguaranteedGuarantees

Key comments

• 81 consolidated corporate customers with average commitment of NOK 44m.

• 59 consolidated securities financing customers with average commitment of NOK 6.7m.

• 13 consolidated receivables financing customers with average commitment of NOK 6.1m.

• Exposure is diversified on products and sectors.• Several customers are reporting that markets are

improving and revenue coming back. • Deal flow has been stronger than expected as other

banks seem reluctant to do new business, creating profitable opportunities for Pareto Bank.

30%

13%

12%

7%

7%

5%

5%

3%3%

3%

12%Real EstateIT/TelecommunicationsInvestment CompanyHotel ServicesHealth ServicesCruiseOil & OffshoreLogisticsPrivateFinancial ServicesOthers

Notes: *Corporate financing exposure includes securities financing exposure of NOK 396m.

PAGE 23

22

35

59

81

108

153

231

328

PCTC

Container

Crude

LPG

Product

Bulk

Industrial

Chemicals

SHIPPING | CREDIT UPDATE

Notes: *LTV is a volume weighted average including guarantees and uncalled capital.

Shipping credit exposure & loan to value

32%

6%

8%

11%

23%

3%

2%

LTV * Share

45%

56%

8%6%

NOKm

Key comments Σ = NOK 1,017m

• 17 customers and 29 vessels.

• Largest exposure USD 21.6m and average commitment size USD 5.5m.

• Only shipping, no offshore exposure.

• Average LTV of the portfolio is 52 %. All customers are compliant with minimum value clauses.

• 16 customers are compliant with minimum cash clauses.

• Impact on the portfolio related to Covid-19 has so far been manageable.

• Increased exposure to chemical segment.

56%

15%

TABLE OF CONTENTS

1 HIGHLIGHTS

2 FINANCIALS

3 BUSINESS AREAS

4 AMBITIONS

PAGE 25

MARKET ACTIVITY 67%

• A more restrictive credit practice was introduced in March.

• Close follow-up of Watch List and existing customerswith focus on liquidity is still our main priority.

• Sales activity is picking up. Markets are improving.

• Deal flow is stronger than expected within all business areas.

• Lending volume is expected to increase moderatelyin H2-20.

PAGE 26

MARKET OUTLOOK 67%

CORPORATE• Several customers are reporting that markets are

improving, and that revenue is coming back. • Stronger deal flow than expected. Profitable

opportunities with good risk.

SHIPPING• Signs of increased volumes and less effect on operation

of vessels as restrictions in several areas are slowly lifted. • Production cuts, lower demand and increased storage

has resulted in lower demand for transportation of oil and oil products resulting in rates coming under pressure.

• Still high uncertainty going forward and risk of further shutdowns and restrictions which can have negative effect on all segments.

• Moderate deal flow of both new and existing customers.

RESIDENTIAL PROPERTY• Housing prices have recovered and started to increase. Low

interest rates seem to outweigh the rise in unemployment. • Activity in the newbuild market is picking up, driven by a

strong secondary maket and expectation of rising propertyprices.

• Both markets are considered to be fragile and may be affected by negative news of increased infection rates and unemployment.

• Liquidity may be a challenge if the newbuild marketdeteriorates.

• Deal flow of new and existsing customers back to normal.

COMMERCIAL PROPERTY

• The office market in the greater Oslo area has held up well, while retail and hotel have been hit hard.

• The office market is expected to hold up unless newrestrictions are imposed and/or the economic developmentworsens. New restrictions will hurt liquidity as tenants willdemand reduction in rents and some will go bankrupt.

• Deal flow back to normal. Co-operation withEiendomskreditt is resumed.

PAGE 27

MAINTAINING LONG-TERM AMBITIONSC

AP

ITA

LA

DEQ

UA

CY

DIV

IDEN

DP

OLI

CY

17.7 %(min. require-ment 14.2 %)

50 % or more

15.0 %

RET

UR

N O

N

EQU

ITY

Long-term ROE ambition set aside in 2020. Profitability in Q2 supported by lending growth, stable lending margin and unchanged impairments.

Strong solidity despite growth. Exceeding requirements before and after reduction of the countercyclical capital buffer. Long-term target to be reviewed.

Unchanged dividend policy with the intention to pay out 50 % or more. The Board has been given authorization to distribute up to 50 % or NOK 2.80 per share of the 2019 profits.

Definitions of key figures and other alternative performance measures are available at the bank's website: www.paretobank.no/investor/rapporter/

LONG-TERMAMBITION

STATUS YTD

12.3 %

17.5 %

APPENDIX

PAGE 29

LARGEST SHAREHOLDERS AS OF 30 JUNE 2020

Source: Oslo Stock Exchange VPS ARENA

• The Company has 69,851,730 shares outstanding. One class of shares where each share carries one voting right.

• Diversified investor base with 3,261 shareholders.

• The top 10 and 20 investors hold 53 % and 64 % of the shares respectively.

• Employees in Pareto Bank own 1.7 %.

• Top management in the Pareto Group owns 3.0 %.

• All employees are covered by an annual bonus compensation scheme settled primarily in Pareto Bank shares.

# Investor 30.06.2020

# of shares % total

1 Pareto AS 13,423,610 19.22 %

2 AF Capital Management AS 6,943,049 9.94 %

3 Hjellegjerde Invest AS 2,800,000 4.01 %

4 K11 Investor AS 2,595,492 3.72 %

5 Rune Bentsen AS 2,595,491 3.72 %

6 Landkreditt Utbytte 2,550,000 3.65 %

7 Svemorka Holding AS 1,928,683 2.76 %

8 Kolberg Motors AS 1,725,000 2.47 %

9 Verdipapirfondet Holberg Norge 1,273,345 1.82 %

10 Dragesund Invest AS 1,146,564 1.64 %

11 OM Holding AS 1,140,351 1.63 %

12 Lombard Int Assurance S.A. 900,820 1.29 %

13 Sjøinvest AS 900,000 1.29 %

14 Profond AS 779,918 1.12 %

15 Hausta Investor AS 700,000 1.00 %

16 Verdipapirfondet Fondsfinans Norge 639,539 0.92 %

17 Salt Value AS 625,000 0.89 %

18 Bergen Kommunale Pensjonskasse 601,464 0.86 %

19 Belvedere AS 598,501 0.86 %

20 Catilina Invest AS 575,000 0.82 %

Sum TOP 20 44,441,827 63.62 %

Other shareholders 25,409,903 36.38 %

Total 69,851,730 100.00 %

PAGE 30

THE SHARE

1.23 0.97

1.79

Q2-19 Q1-20 Q2-20

40.85

44.74

46.54

Q2-19 Q1-20 Q2-20

7.53x 7.29x

4.49x

Q2-19 Q1-20 Q2-20

0.91x

0.63x0.69x

Q2-19 Q1-20 Q2-20

Earnings per share

NOK

Book equity per share

NOK

Price / Earnings

NOK, Share price 32.20

Price / Book

NOK, Share price 32.20

PAGE 31

QUARTERLY INCOME STATEMENT

P&L (NOKm)

Q2-20 Q1-20 Q4-19 Q3-19 Q2-19

Net interest income 183.8 183.9 180.5 173.0 164.4

Net other operating income 23.9 -16.9 7.6 -2.9 0.9

Total net income 207.7 167.1 188.2 170.1 165.2

Total operating expenses 38.1 33.1 36.1 32.2 34.7

Operating profit before impairments and losses 169.5 134.0 152.0 137.8 130.5

Impairments and losses on loans and guarantees -0.1 40.3 4.7 9.1 14.9

Pre-tax operating profit 169.7 93.7 147.3 128.7 115.6

Tax expense 41.7 22.7 32.6 32.2 28.9

Profit for the period 127.9 71.0 114.7 96.5 86.7

Earnings per share (NOK) 1.79 0.97 1.61 1.34 1.23

Return on equity 15.7% 8.8% 15.0% 12.9% 13.0%

Cost/income ratio 18.4% 19.8% 19.2% 19.0% 21.0%

PAGE 32

QUARTERLY BALANCE SHEET

BS (NOKm)

Q2-20 Q1-20 Q4-19 Q3-19 Q2-19

Loans to credit institutions 1,610 1,315 924 1,004 1,785

Loans to customers 14,235 13,503 13,161 13,191 12,539

Bonds and other securities 3,703 3,053 3,320 3,467 3,998

Shareholdings in associated companies 23 23 22 35 37

Other assets 75 71 83 66 76

Total assets 19,646 17,964 17,511 17,762 18,435

Deposits from customers and institutions 10,497 8,628 8,189 8,561 9,396

Senior securities issued 5,192 5,472 5,624 5,604 5,551

Other liabilities 237 269 171 183 124

Tier 2 subordinated securities issued 270 270 270 270 288

Additional tier 1 capital 200 200 200 200 239

Other equity 3,251 3,125 3,057 2,945 2,837

Total liabilities and equity 19,646 17,964 17,511 17,762 18,435

PAGE 33

REAL ESTATE | EXPOSURE 67%

NOKm of gross exposure

Geographical residential property exposure (NOKm) Σ = NOK 8,864m

52%

35%

4%3%

3% 3%

Viken

Oslo

Trøndelag

Vestfold & Telemark

Vestland

Sweden & Other

37%

19%

19%

11%

8%

6%

Oslo

Viken

Rogaland

Vestfold & Telemark

Vestland

Sweden & Other

Geographical commercial property exposure (NOKm) Σ = NOK 3,648m

PAGE 34

MARGINS AND INTEREST CONTRIBUTION

4.8 %

5.7 %

5.2 %

6.3 %

5.7 %

Retail(Mortgages)

Shipping

Securities

Corporate

Real Estate

Margins per business area

Estimated annualized margins including commissions, excluding front and back-end fees over 3M Nibor or similar rate

Interest contribution per business area

NOKm, estimated interest contribution including commissions, excluding front and back-end fees over 3M Nibor or similar rate

7

58

8

139

607

Retail(Mortgages)

Shipping

Securities

Corporate

Real Estate

Note segment margins are estimated on the basis of terms of existing loans and will therefore differ from reported total lending margins. Loans granted under the state guaranteed SMB loan program are excluded from this analysis.

Based on terms and 3M NIBOR as of 30.06.2020

PAGE 35

NUMBER OF CUSTOMERS

17

22

181

282

Shipping& Offshore

Retail(Mortgages)

Corporate

Real Estate

Number of customers per business area

PAGE 36

FUNDING

Sources

Key ratios

Deposits & senior debt

Deposits with liquidity restrictions 48 %

Corporate deposits 71 %

Deposit-to-loan ratio 65 %

NSFR 128 %

LCR 187 %

3,451

1,299

470

5,192

9,234

Equity capital

Other debt

T1 & T2 debt

Senior debt

Deposits

8,062 8,2217,623

8,5999,320

8,545 8,150 7,622

9,234

4,9155,207

5,011 5,279

5,5515,604

5,624 5,472

5,192

77% 77%

65%

71%74%

65%62%

56%

65%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Deposits Senior funding Deposit-to-loan ratio

NOKmNOKm,Percent customer deposits of net lending to customers

PAGE 37

CUSTOMER DEPOSITS

Deposits by type

Deposits by size

Deposits by product

9,215

1,406

3,253

1,155

2,819

583

9,300

1,782

2,727

2,886

680

1,225

Total

Client accounts

Fixed rate

Savings with restrictions

Floating rate corporate

Floating rate retail

Q2-19 Q2-20

NOKm NOKm

2,674

2,953

6,541

2,327

Amount (NOKm)

Depositors (#)

Retail Corporate

NOKm

NOK 0 - 2m

NOK 2 - 5m

NOK 5 - 10m

NOK 10 - 20m

> NOK 20m

Floating rate Fixed rate

3,214

844

875

2,217

2,065

PAGE 38

MARKET FUNDING

Credit spreadsMarket funding maturities

84

1,150

1,800

1,400

750

150

200

120

2020 2021 2022 2023 2024 2026

Senior Call on Subordinated Capital

NOKm, net of own holdings Basis points over 3M Nibor

2129

44

72

94

118

0,25 0,5 1 2 3 5

Years to Maturity

Source: Nordic Bond Pricing

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SURPLUS LIQUIDITY

Bond portfolio

• The bank’s liquidity is comprised of cash and highly liquid bonds

• High share of government & PSEs to reduce credit spread risk and increase short-term liquidity

• Large share of covered bonds, mainly short to medium maturities

Key comments

Market value of bonds and funds comprising surplus liquidity

31%

52%

15%

2%

Government & PSEs

Covered bonds

Senior financials

Utilities

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COMMITMENTS BY RISK CLASSIFICATION

Risk classification

NOKm

4

77

184

1,524

9,623

6,329

4

190

102

1,386

7,553

6,113

Very high risk

High risk

Some risk

Moderate risk

Low risk

None / very lowrisk

Q2-19 Q2-20

40%38% 36%

40%

36%

49%

55%

51%49%

54%

9%7%

11% 10%9%

Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

None/ very low risk Low risk Moderate risk

Some risk High risk Very high risk

Historical risk classification

NOKm

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COMMITMENTS BY SIZE

• Maximum size on a single customer NOK 300m

• Maximum size on group / consolidated basis NOK 400m

2,548

875

1,482

1,926

4,892

5,435

583

2,629

224

797

1,897

3,909

5,073

818

> 250

200 - 250

150 - 200

100 - 150

50 - 100

10 - 50

< 10

Q2-19 Q2-20

Commitment size per customer

NOKm

3%

31%

28%

11%

8%

5%

14%< 10

10 - 50

50 - 100

100 - 150

150 - 200

200 - 250

> 250

Distribution of commitments by size

Percent of NOKm

PAGE 42

REDUCED MINIMUM CET1 REQUIREMENTS

COUNTERCYCLICAL BUFFER LOWERED

The Department of Finance lowered the countercyclical capital buffer (CCyB) from 2.5 % to 1.0 % to support banks’ ability to give loans to customers affected by Covid-19.

MINIMUM REQUIREMENT 14.2 %

This lowers Pareto Bank’s minimum requirement for CET1 to 14.2 % including Pillar 2.

FUTURE REQUIREMENTS UNCERTAIN

A future increase in CCyB may not be announced before Q1-2021 and would normally not be put into force until Q1-2022. The planned increase to the systemic risk buffer is uncertain.

Min. req. ex. CCyB, 10.0%

Min. req. ex. CCyB, 10.0%

Countercyclical Buffer, 2.5% Countercyclical

Buffer, 1.0%

Pillar 2, 3.2 %

Pillar 2, 3.2 %

31.12.2019 30.06.2020

15.7 %

14.2%

PAGE 43