Interim Report January – March 2023 Summary of Results

Q1 2023 in comparison with Q4 2022

Net profit EUR 33.1 m (EUR 24.3 m), of which EUR 32.7 m (EUR 24.1 m) is attributable to owners of the parent
Earnings per share EUR 0.01 (EUR 0.08)
Net income EUR 68.4 m (EUR 56.6 m)
Operating expenses EUR 30.6 m (EUR 26.9 m)
Loan and bond provisions EUR -1.6 m (EUR 0.3 m)
Income tax expenses EUR 6.3 m (EUR 5.1 m)
Return on equity 30.4% (24.0%)
Capital adequacy 22.2% (20.8%)

Q1 2023 in comparison with Q1 2022

Net profit EUR 33.1 m (EUR 12.4 m), of which EUR 32.7 m (EUR 11.9 m) is attributable to owners of the parent
Earnings per share EUR 0.1 (EUR 0.04)
Net income EUR 68.4 m (EUR 34.8 m)
Operating expenses EUR 30.6 m (EUR 18.9 m)
Loan and bond provisions EUR -1.6 m (EUR 0.7 m)
Income tax expenses EUR 6.3 m (EUR 2.8 m)
Return on equity 30.4% (14.7%)
Capital adequacy 22.2% (19.5%)

Earnings per share and return on equity ratios are based on the profit attributed to the shareholders and equity of AS LHV Group and do not include non-controlling interest.

Summary of financial results 3
Operating Environment 7
The Group's Liquidity, Capitalisation and Asset Quality 9
Overview of AS LHV Pank Consolidation Group 11
Overview of AS LHV Varahaldus 14
Overview of AS LHV Kindlustus 16
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 17
Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income17
Condensed Consolidated Interim Statement of Financial Position18
Condensed Consolidated Interim Statement of Cash Flows19
Condensed Consolidated Interim Statement of Changes in Equity20
Notes to the Condensed Consolidated Interim Financial Statements 21
NOTE 1 Accounting Policies 21
NOTE 2 Business Segments21
NOTE 3 Risk Management 24
NOTE 4 Breakdown of Financial Assets and Liabilities by Countries24
NOTE 5 Breakdown of Assets and Liabilities by Contractual Maturity Dates 25
NOTE 6 Open Foreign Currency Positions26
NOTE 7 Fair Value of Financial Assets and Liabilities27
NOTE 8 Breakdown of Loan Portfolio by Economic Sectors and by Stages 28
NOTE 9 Net Interest Income29
NOTE 10 Net Fee and Commission Income30
NOTE 11 Operating Expenses30
NOTE 12 Balances with the Central Bank, Credit Institutions and Investment Companies 31
NOTE 13 Deposits of Customers and Loans Received 31
NOTE 14 Accounts payable and other liabilities32
NOTE 15 Contingent Liabilities 33
NOTE 16 Basic Earnings and Diluted Earnings Per Share33
NOTE 17 Capital Management 33
NOTE 18 Transactions with related parties 34
NOTE 19 Tangible and intangible assets 35
NOTE 20 Subordinated debts 36
NOTE 21 Changes in impairments36
Supervisory Boards and Management Boards of AS LHV Group and its Subsidiaries 38
Signatures of the Management Board to the Condensed Consolidated Interim Report 39

Summary of financial results

The Group's Q1 2023 consolidated net profit was EUR 33.1 million, which increased by EUR 8.7 million compared to Q4 2022 and by EUR 20.7 million compared to Q1 2022. The profit for the Group's shareholders was EUR 32.7 million in Q1 2023, which was EUR 8.6 million more than in Q4 2022.

In Q1 2023, the Group's net interest income rose by 25% compared to Q4 2022 and stood at EUR 55.1 million (EUR 44.1 million in Q4 2022).

The Group's Q1 2023 consolidated net income was EUR 68.4 million, which increased by EUR 11.8 million compared to Q4 2022 and by EUR 33.6 million compared to Q1 2022. Operating expenses were EUR 30.6 million in Q1, which increased by EUR 3.7 million compared to Q4 2022 and by EUR 11.8 million compared to Q1 2022. Write-downs were reduced by EUR 1.6 million in Q1. Income tax expense on future disbursements of dividends by subsidiaries at the consolidated level was EUR 0.2 million in Q1.

Return on equity owned by LHV shareholders was 30.4% in Q1 2023, which increased by 6.3 percentage points from Q4 2022 (24.0%) and by 15.7 percentage points compared to Q1 2022 (14.7%).

The Group's consolidated net loan portfolio decreased by EUR 59 million during the quarter (EUR 114 million in Q4 2022) and consolidated deposits shrank by EUR 34 million (a decrease of EUR 268 million in Q4 2022). Deposits associated with payment intermediaries decreased by EUR 98 million (a decrease of EUR 241 million in Q4 2022). The Group's volume of deposits amounted to EUR 4,867 million at the end of Q1 (EUR 4,901 million in Q4 2022). Of that, EUR 4,340 million (EUR 4,645 million in Q4 2022) were call deposits and EUR 524 million (EUR 255 million in Q4) term deposits.The Group's loan volume decreased to EUR 3,149 million by the end of Q1 (EUR 3,209 million in Q4 2022), having decreased by 2% in the quarter. Compared to Q1 2022, the Group's deposit volume has decreased by 10% and the volume of loans has grown by 14%.

The bank's net profit at the consolidated level was EUR 37.3 million in Q1 2023, which is EUR 7.4 million more than the result in the previous quarter (EUR 29.9 million in Q4 2022) and EUR 22.5 million more than the net profit of Q1 2022. The number of the Bank's customers grew by 13,100 during the quarter (13,500 in Q4 2022) and the total number of the Bank's customers is 391,000.

The Bank's loan portfolio decreas by EUR 60 million in Q1 due to two large loan repayments (EUR 92 million in Q4 2022), reaching EUR 3,127 million. Of loans, housing loans and refinancing loans grew the most.

The deposits of the Bank's customers decreased by EUR 38 million in Q1, with the payment intermediaries' deposit balance decreasing by EUR 98 million, while the deposits of the rest of the customers grew by EUR 60 million. The total volume of deposits was EUR 4,919 million at the end of Q1.

The net profit of LHV Varahaldus was EUR 0.1 million in Q1 2023 (EUR 0.5 million in Q4 2022). The service fee income of LHV Varahaldus was EUR 2.1 million, which is at the same level as in the previous quarter. The operating expenses of LHV Varahaldus amounted to EUR 1.3 million in Q1 2023 (EUR 1.2 million in Q4 2022). Expenses related to non-current assets (including depreciation on customer agreements) were EUR 0.4 million in Q1 2023, which is at the same level as in the previous quarter.

The total volume of funds managed by LHV grew by EUR 119 million in the quarter (a growth of EUR 66 million in Q4 2022). The number of active 2nd pillar customers decreased by 900 in a quarter (a growth of 1,700 in Q4 2022).

The net loss of LHV Kindlustus was EUR 0.5 million in Q1 2023 (a loss of EUR 0.5 million in Q4 2022). The volume of gross premiums increased by EUR 1.7 million in the quarter, reaching EUR 7.7 million. Income from insurance activities at LHV Kindlustus increased by EUR 0.2 million in the quarter, to EUR 0.6 million.

As at the end of Q1 2023, the net loan portfolio of LHV UK amounted to EUR 23 million. The net loss of LHV UK was EUR 2.5 million in Q1 2023 (a loss of EUR 5.1 million in Q4 2022). The net income of LHV UK amounted to EUR 3.5 million in Q1 2023 (EUR 0.2 million in Q4 2022). Since March, LHV Pank and LHV UK started to share the income of UK Banking service customers, and now this income is reflected on the side of LHV UK.

By business units, AS LHV Pank's consolidated net profit amounted to EUR 37.3 million in Q1 and that of AS LHV Varahaldus amounted to EUR 0.1 million. AS LHV Kindlustus reported a net loss of EUR 0.5 million. The net loss of LHV UK was EUR 2.5 million. The net loss of EveryPay AS was EUR 0.2 million. Viewed separately, LHV Group earned a net profit of EUR 3.7 million.

AS LHV GROUP TARTU MNT 2, 10145 TALLINN 6 802 670 [email protected] LHV.EE

There is only one class of shares issued by LHV, each share gives 1 voting right. The shares of LHV Group is traded on NASDAQ Tallinn main list since May 2016. Graph below presents LHV Group share performance against OMX Tallinn index and OMX Baltics banchmark index. LHV Group share has outperformed both indexes and has raised 275%, when comparison indexes have increased by 86% and 91% respectively.

Group share price was 3.605 euros in the end of Q1 and based on the stock price, LHV's market value was EUR 1 137 million. When monitooring the share price, it should be taken into account that a 1/10 share split was carried out in the middle of 2022.

Business volumes			Quarter		Year
EUR million	Q1 2023	Q4 2022	over quarter	Q1 2022	over year
Loan portfolio	3 149.2	3 208.6	-2%	2 752.5	14%
Financial investments	297.0	373.6	-21%	475.8	-38%
Deposits of customers	4 866.9	4 900.5	-1%	5 410.4	-10%
incl. deposits of financial intermediates	1 435.6	1 500.4	-4%	1 096.5	31%
Equity (including minority interest)	453.9	420.8	8%	335.9	35%
Equity (owners' share)	446.9	412.9	8%	329.2	36%
Volume of funds managed	1 451.0	1 332.2	9%	1 362.0	7%
Client securities	3 459.6	3 208.4	8%	3 531.0	-2%

Income statement			Quarter	Q1	Year			Year
EUR million	Q1 2023	Q4 2022	over quarter	2022	over year	3M 2023	3M 2022	over year
Net interest income	55.11	44.10	25%	25.79	114%	55.11	25.79	114%
Net fee and commission income	11.88	11.55	3%	10.35	15%	11.88	10.35	15%
Other financial income	1.39	0.84	65%	-1.31	NA	1.39	-1.31	NA
Total net operating income	68.38	56.49	21%	34.83	96%	68.38	34.83	96%
Other income	0.01	0.08	-88%	-0.04	NA	0.01	-0.04	NA
Operating expenses	-30.63	-26.88	14%	-18.87	62%	-30.63	-18.87	62%
Loan and bond portfolio gains/(-losses)	1.58	-0.25	NA	-0.74	NA	1.58	-0.74	NA
Income tax expenses	-6.28	-5.11	23%	-2.80	124%	-6.28	-2.80	124%
Net profit	33.06	24.33	36%	12.38	167%	33.06	12.38	167%
Including attributable to owners of the parent	32.65	24.08	36%	11.88	175%	32.65	11.88	175%

Ratios			Quarter over		Year over			Year over
EUR million	Q1 2023	Q4 2022	quarter	Q1 2022	year	3M 2023	3M 2022	year
Average equity
(attributable to owners of the parent)	429.9	400.5	29.4	322.8	107.1	429.9	322.8	107.1
Return on equity (ROE), %	30.4	24.0	6.4	14.7	15.7	30.4	14.7	15.7
Return on assets (ROA), %	2.2	1.6	0.6	0.7	1.5	2.2	0.7	1.5
Interest-bearing assets, average	6 044.9	6 139.5	-94.6	6 644.2	-599.3	6 044.9	6 644.2	-599.3
Net interest margin (NIM) %	3.65	2.87	0.78	1.55	2.1	3.65	1.55	2.1
Price spread (SPREAD) %	3.59	2.84	0.75	1.53	2.06	3.59	1.53	2.06
Cost/income ratio %	44.8	47.5	-2.7	54.2	-9.4	44.8	54.2	-9.4
Profit attributable to owners before income tax	39.1	29.1	10.0	14.6	24.5	39.1	14.6	24.5

Explanations to ratios (quarterly ratios have been expressed on an annualised basis)

Average equity (attributable to owners of the parent) = (equity as at the end of the reporting period + equity as at the end of the previous reporting period) / 2 Return on equity (ROE) = net profit for the quarter (share of owners of the parent) / average equity (attributable to owners of the parent) *100 Return on assets (ROA) = net profit for the quarter (share of owners of the parent) / average assets*100 Net interest margin (NIM) = net interest income / interest-bearing assets, average *100 Price spread (SPREAD) = interest yield from interest-bearing assets – cost of external capital Interest yield from interest-bearing assets = interest income / interest-bearing assets, average *100 Cost of external capital = interest expenses / interest-bearing liabilities, average *100 Cost/income ratio = total operating cost / total income *100

Operating Environment

The last quarter of the year ushered in continuing economic contraction in Europe, Asia and America. The easing of inflation did not occur at the hoped-for pace, which has forced central banks to tighten up monetary policy increasingly and raise interest rates. For the business community, this meant uncertainty since loan servicing costs will become increasingly burdensome and the return on investments will decrease. The purchasing power of households, which is also encumbered by the drop in real wages and increased borrowing costs, will also decrease. As a result, demand has become more modest and overall economic activity is weaker. Purchasing Managers' Indices (PMI) around the world fell 50 points below the level that qualifies as an economic contraction. In the first months of this year, the indices have recovered slightly, since the most pessimistic scenarios were not realized at year's end. In April, the IMF forecasted that the global economy would grow by 2.9% but as of October the forecast was upgraded 0.2 percentage points. Eurozone economic growth this year is forecasted by the central bank to be 1% and it will increase to 1.6% over the next two years.

Similarly to the rest of the world, the European economy avoided the bleakest scenarios at the end of the year. Quarterly GDP growth slowed from 0.4% in Q3 to 0% in Q4. Overall, the Eurozone economy grew 3.5% last year. Of larger countries, Spain and France were positive surprises, as their economic growth pace was positive while the German and Italian economies shrank compared to the previous quarter. The first survey data from this year suggest that the reopening of the Chinese economy have made the Eurozone's business sector more optimistic and concerns related to availability of energy have been now resolved in the production sector thanks to sufficient supplies. As such, activity has staged a strong recovery, especially in the services sector, as demand for various services is still being supported by the lifting of pandemic restrictions last year.

Eurozone inflation peaked in October, when it reached 10.6% year-over-year. In recent months, growth rate has slowed markedly and in March, the average consumer basket increased year over year "only" 6.9%. In the last few months of 2022, the Eurozone had a deflationary environment – the average consumer basket become less expensive in monthly comparison, but in February and March, the price rise sped up again somewhat. A faster easing of price growth is prevented by the energy prices carrying over to other prices, something that shows up after a lag time and is only now peaking. This is particularly visible in food prices, which grew close to 18% in December. Country by country, rising prices are unevenly distributed – in Spain and Luxembourg, inflation was around 3% in March, while it was around 15% year-over-year in Estonia, Latvia, Lithuania and Luxembourg.

The European Central Bank continued tightening monetary policy at the start of 2023. In both February and March, all three monetary policy interest rates were hiked by 0.5%. Thus, the main refinancing operations reached 3.5%, and It is still a bit lower compared to other larger central banks. A moderate decrease of the asset purchasing programme was also launched. Starting in March, the reinvested part of repayments of principal from purchased securities will drop an average of 15 billion euros per month. The central bank´s decisions were not swayed by the fluctuations in the banking sector in mid-March, as the more heavily impacted banks were operating in the US and Switzerland – i.e., Eurozone banks were unscathed by this wave of shaken confidence.

Leading persons at the European Central Bank have maintained a tough line in their statements, emphasizing that interest hikes are still to come and, in any case, the outlook is for interest rates to remain high for some time to come. However, the events that impacted the banking sector affected market participants' expectations regarding further development of the interest rate curve. The market participants' expectations culminated at 4.5% in regard to the six-month Euribor but over a few weeks, they fell approximately a percentage point lower. The actual Euribor rate also fell by 0.5% over just a few days. The latest estimates are that the Euribor should peak at 3.5% in October of this year.

The Estonian economy shrank by 1.3% in 2022. The economic difficulties that started mid-year intensified in Q4 and drove the GDP for the year as a whole into a deeper decline than expected. In the last quarter, GDP dropped 4.1% compared to the same period a year earlier. For the year as a whole, half of the areas of activity managed to increase value added, but unfortunately, most of these areas have a small share of the economic structure. The greatest positive influence came from the HoReCa area of activity, which appears to finally have overcome the pandemic ills. The logistics and construction sector and various business services also grew. Growth was slowed by real estate activity and retail and, in something of a surprise, the agriculture and energy sector. One of the bulwarks of the economy, the processing industry, remained on par with the year before.

The worsening of the economic situation at the end of the year was certainly not a surprise. The development was consistent with all of the previously released economic indicators. The volume of industrial output and export of goods decreased 10% in Q4, construction decreased 9% and retail sales, 5%. The larger than expected economic contraction was largely due to technical reasons, however – Statistics Estonia adjusted retail statistics for the Q1 of 2022, with the volume of imported services being estimated at about 200 million euros higher; this worsened both the state's trade balance and the influence of net export on GDP.

The rapid growth of consumer prices has started slowing, little by little, both in Estonia and Europe. In Estonia, the average consumer basket rose 15.3% in March; by 6.9% in Europe. The inflation figures are still high and reflect the leap in price seen in the first half of the last year. Prices have developed in quite a stable fashion since then – compared to August 2022, the CPI has risen only 1.9% in Estonia. True, price increase from one month to the next has been somewhat faster than at year's end. Transport costs for March remained at the same level as a year ago, and the rise in housing costs slowed similarly to previous months. Modest optimism can be seen in the fact that even the rise in food prices seems to have peaked already – inflation is slowing in this category of goods. Unfortunately, base inflation has not shown signs of slackening, as characterized by the fact that the consumer basket minus the more volatile categories of foodstuffs and fuels has increased in price.

The recently released economic forecasts for the Estonian economy also point to a small contraction this year. Depending on the source, the contraction may be around 1% (-0.6% according to Eesti Pank; -1.5% according to the Ministry of Finance). The contraction is largely due to the weak second half of 2022, which led to an exceptionally low starting point for this year. Comparing the quarters of the current year, economic conditions should improve. Hopefully the contraction will not be keenly felt for most, since forecasts suggest unemployment will not increase significantly, wages will rise an average of 10% and measured in euros, the economy will grow 6-7%.

The Group's Liquidity, Capitalisation and Asset Quality

As at 31 March 2023, the Group's own funds stood at EUR 495.6 million (31 December 2022: EUR 495.0 million). LHV Group own funds are calculated based on regulative requirements.

Compared to Group's internal capital adequacy ratio target 19.2%, the Group is capitalised good enough as at the end of the reporting period, with the capital adequacy ratio is an all-time high, amounting to 22.2% (31 December 2022: 21.7%). In addition to total capital adequacy targets the Group has also set internal targets for the core Tier 1 capital adequacy ratio to 14.20% and Tier 1 capital adequacy ratio to 16.35%. The internal targets were approved in December 2022 by the Group's Supervisory Board, after the completion of the annual supervisory assessment by the Financial Supervision Authority.

The minimum requirement for own funds and eligible liabilities (MREL) is a building block of the resolution plan and LHV has to maintain sufficient own funds and qualifying liabilities which can be used to cover losses in resolution planning. On 21st of June 2021 Estonian FSA set two separate MREL ratios on the consolidation group level for LHV Group. MREL-TREA is calculated based on total risk weighted assets. MREL-LRE is calculated based on total assets. On 26th of June 2022 the Estonian FSA applied new MREL target levels that are applicable for LHV Group. The final targets for the MREL ratios have been applied with a transitional period until 1st of January 2024. The final target levels of the ratios have been set at 24.57% for MREL-TREA and 5.91% for MREL-LRE. The current interim targets are 19.08% (MREL-TREA) and 5.91% (MREL-LRE). LHV Group issued EUR 100 milion of MREL eligible bonds in September 2021 in order to fulfil the MREL target ratios. LHV Group issued in Q4 2022 additional MREL eligible unsecured bonds in the amount of EUR 88 milion, to fulfil MREL targets.

The Group's liquidity coverage ratio (LCR), as defined by the Basel Committee, stood at 146.2% as at the end of March (31 December 2022: 139.7%). Financial intermediates' deposits in Bank are covered 100% with liquid assets. Excluding the financial intermediates deposits the Groups LCR is 260.8% (31.12.2022: 231.5%). The Group recognises cash and bond portfolios as liquidity buffers. These accounted for 47% of the balance sheet (31 December 2022: 46%). The ratio of loans to deposits stood at 61% as at the end of the fourth quarter (31 December 2022: 61%). Group's maturity structure is presented in Note 5.

The Group's credit quality was good. As at the end of March, provisions for estimated loan losses amounted to EUR 18.4 million in the balance sheet, i.e. approximately 0.6% of the loan portfolio (31 December 2022: EUR 20.6 million, 0.7%). Estimated loan losses make up 1 771.1% (31 December 2022: 1 399.4%) of the portfolio of loans overdue for more than 90 days.

In the first quarter 2023 LHV Pank repaid the TLTRO loan taken from European Central Bank ahead of schedule in the amount of EUR 50 000 thousand.

EUR thousand	31.03.2023	Proportion	31.12.2022	Proportion
Loans to customers	3 167 568		3 229 214
including overdue loans:	21 546	0.7%	22 023	0.6%
1-30 days	17 727	0.6%	17 770	0.5%
31-60 days	2 225	0.1%	2 207	0.1%
61-90 days	555	0.0%	570	0.0%
91 and more days	1 038	0.0%	1 475	0.0%
Impairment of loans	-18 384	-0.6%	-20 642	-0.7%
Impairment % of loans overdue for more than 90 days	1 771.1%		1 399.4%

Capital base	31.03.2023	31.12.2022	31.12.2021
Paid-in share capital	31 542	31 542	29 864
Share premium	141 186	141 186	97 361
Statutory reserves transferred from net profit	4 713	4 713	4 713
Other reserves	-1 145	-1 441	47
Retained earnings	229 664	216 189	179 746
Intangible assets (subtracted)	-23 322	-23 333	-14 473
Net profit for the reporting period (COREP)	0	0	0
Other adjustments	-287	-369	-128
CET1 capital elements or deductions	-13 629	0	-12 209
CET1 instruments of financial sector entities where the institution has a significant investment	-2 917	-3 351	-4 328
CET1 instruments of financial sector entities where the institution has not a significant investment	-180	-180	-5 236
Tier 1 capital	365 625	364 956	275 357
Additional Tier 1 capital	55 000	55 000	35 000
Total Tier 1 capital	420 625	419 956	310 357
Subordinated debt	75 000	75 000	75 000
Total Tier 2 capital	75 000	75 000	75 000
Net own funds for capital adequacy	495 625	494 956	385 357
Capital requirements
Central governments and central bank under standard method	0	0	0
Credit institutions and investment companies under standard method	8 852	11 553	10 465
Companies under standard method	1 086 750	1 204 523	1 141 853
Retail claims under standard method	239 130	219 031	212 860
Public sector under standard method	0	0	6
Housing real estate under standard method	531 754	513 483	291 338
Overdue claims under standard methods	8 242	8 004	19 332
Investment funds' shares under standard method	187	186	190
Other assets under standard method	93 536	102 697	93 939
Total capital requirements for covering the credit risk and counterparty credit risk	1 968 451	2 059 477	1 769 983
Capital requirement against foreign currency risk under standard method	4 272	18 324	3 489
Capital requirement against interest position risk under standard method	0	0	0
Capital requirement against equity portfolio risks under standard method	1 385	740	2 079
Capital requirement against credit valuation adjustment risks under standard method	2 203	2 228	1 211
Capital requirement for operational risk under base method	259 437	197 920	152 778
Total capital requirements for adequacy calculation	2 235 748	2 278 689	1 929 540
Capital adequacy (%)	22,17	21.72	19.97
Tier 1 capital ratio (%)	18,81	18.43	16.08
Core Tier 1 capital ratio (%)	16,35	16.02	14.27

Overview of AS LHV Pank Consolidation Group

Net profit EUR 37.3 million
Dream Employer

EUR million	Q1 2023	Q4 2022	Change %	Q1 2022	Change %	From the beginning of 2023	From the beginning of 2022	Change %
Net interest income	52.90	44.39	19%	25.88	104%	52.90	25.88	104%
Net fee and commission income	7.55	8.26	-9%	7.79	-3%	7.55	7.79	-3%
Other financial income	1.18	0.69	71%	-1.42	NA	1.18	-1.42	NA
Total net operating income	61.63	53.34	16%	32.25	91%	61.63	32.25	91%
Other income	0.03	0.10	-70%	-0.02	NA	0.03	-0.02	NA
Operating expenses Loan and bond portfolio	-20.78	-18.10	15%	-14.37	45%	-20.78	-14.37	45%
gains/(-losses)	1.59	-0.43	NA	-0.74	NA	1.59	-0.74	NA
Income tax expenses	-5.15	-4.99	3%	-2.27	127%	-5.15	-2.27	127%
Net profit	37.32	29.92	25%	14.85	151%	37.32	14.85	151%
Loan portfolio	3 127	3 187	-2%	2 753	14%
Financial investments	281	365	-23%	467	-40%
Deposits of customers incl. deposits of financial	4 919	4 957	-1%	5 437	-10%
entities	1 488	1 557	-4%	1 850	-20%
Subordinated liabilities	114	114	0%	104	10%
Equity	423	388	9%	293	44%

Q1 was successful in terms of income and net profit. In Q1, LHV Pank earned net interest income of EUR 52.9 million and EUR 7.5 million in net service fee income. Financial income amounted to EUR 1.2 million in Q1. In total, the Bank's income was EUR 61.7 million and expenses were EUR 20.8 million. Net income rose by 91% and expenses increased by 45% over the year. The discounts of loans and bonds decreased by EUR 1.6 million. We made forward-looking discounts, although their impact was reduced by a decrease in the volume of the portfolio and the strong position of customers, as the share of arrears in the loan portfolio continues to be low. We are keeping a very close eye on developments in the credit portfolio.

LHV Pank calculates a 14% advance income tax, the tax expense on which was EUR 5.5 million in Q1. Income tax expense on future disbursements of dividends by subsidiaries at the consolidated level was EUR 0.1 million in Q1.

The Bank's Q1 profit amounted to EUR 37.3 million, which is 25% more than in Q4 2022 (29.9) and 151% more than in Q1 2022 (14.9).

Of the various categories of service fee income, income from settlements and currency exchange along with income from bank cards contributed the largest amount.

The growth of net interest income stems from the rise in interest rates. The total volume of the Bank's loan portfolio reached EUR 3,127 million by Q1 end (Q4 2022: EUR 3,187 million). The volume of the portfolio grew by 2% during the quarter. The volume of loans grew by EUR 60 million in Q1 (EUR 92 million in Q4 2022). The net retail loan portfolio grew by 1% during the quarter, reaching EUR 1,466 million (Q4 2022: EUR 1,456 million). The net corporate loan portfolio decreased by 4% during the quarter, amounting to EUR 1,661 million (Q4 2022: EUR 1,731 million).

The volume of deposits at the Bank decreased by EUR 38 million from the previous quarter and stood at EUR 4919 million (Q4 2022: EUR 4,957 million). The volume of payment intermediaries' deposits dropped by EUR 98 million during the quarter. Of the deposits, EUR 4,390 million were call deposits and EUR 527 million term deposits. The volume of individuals' deposits was EUR 1 148 million as at the end of the quarter, having grown by 1.7% since the previous quarter.

The Bank's expense-income ratio was 33.7% in Q1, decreasing by 10.9 percentage points from Q1 2022 (44.6%).

The corporate credit portfolio, which includes loans and guarantees, grew EUR 160.4 million over the year (+10%) with a quarter-over-quarter decrease of EUR 70.6 million (-4%). The greatest source of the growth was loans for real estate activities, which traditionally is the field that receives the most financing from commercial banks, growing EUR 96.4 million during the year (+15%). The bulk of the growth came from the financing of commercial real estate projects with a strong income stream. Next came loans to the agricultural, forestry and fishery sectors, which grew EUR 56.0 million from the year before (+247%) and loans issued to the power, gas, steam and conditioned air sector, which grew EUR 51.7 million (+97%) over the year.

Compared to Q4 2022, the corporate credit portfolio was at the beginning of the current year influenced by cautiousness with regard to the future of the business environment and the continued cooling of the Estonian economy. LHV's financial plan, published in February, took such trends into account and foresaw no significant growth at the beginning of the year. In Q2, the companies' interest in investments is already recovering, facilitated by the expected stabilisation of interest rates.

The majority of corporate loans were granted to the real estate sector, which makes up 43% of the Bank's corporate loan portfolio. Of real estate loans, the principal part was issued to projects with high-quality rental streams, with real estate developments making up a much smaller share. Most of the financed real estate developments are located in Tallinn, while projects located in other major Estonian cities and in the vicinity of Tallinn made up about 30% of developments. LHV's market share in the financing of new development projects in Tallinn made up about one-fifth at the end of Q1 2023. The LHV real estate development portfolio is well-positioned in case market trends should change – the financed developments are in good locations and the risk to planned sales price ratio averages 51%.

After the real estate sector, the largest amount of credit has been issued to companies in the manufacturing industry (9%) and to companies engaged in financial and insurance activities (8%). Of sectors that usually run a higher credit risk, HoReCa made up 3%, construction 3% and transport and warehousing 1% of the total volume of the portfolio.

During the quarter, the number of the bank's customers grew by over 13,000. Client activity remained at a good level. Deposits decreased by EUR 38 million over the quarter and loans grew by EUR 60 million.

Ordinary clients' deposits grew by EUR 60 million during the quarter and financial intermediaries' deposits decreased by EUR 98 million. The high inflation economic environment has significantly changed the dynamics of deposits, but growth can again be noticed after the period of decline. The buffers of both individuals' and companies' deposits have started growing, and active engagement of new clients supports the more positive trend compared to the market. The active provision of interest on term deposits is changing the long-term trend in the direction of more stable deposits balance – over one quarter, the balance of term deposits has doubled and reached 14% of the ordinary clients' deposits base. Financial intermediaries with larger deposits are impacted by the more modest activity on the market, volatility has decreased but clients are diversifying their deposits among different banks.

Loans to companies grew by EUR 70 million and retail loans by EUR 10 million. The decrease in the loan portfolio is affected by the unstable economic environment and consumers' low confidence. The growth in the loan portfolio planned this year was modest and essentially meets Q1 expectations. We see that companies' interest in making investments is however increasing once again and individuals will follow through more often on home buying plans once interest rate levels stabilize. In late March, the Green Home Loan interest rate campaign began, during which a 0% + EUR6 interest rate will apply to loan agreements concluded for buying A energy class real estate for the first year and from that point on, the ordinary Green Home Loan interest rate of 1.7%+EUR6. The campaign will run until late May and we hope that the offer will encourage clients to make sustainable decisions in today's unstable environment.

Net profit for the quarter was EUR 37 million. The strong result for Q1 was influenced mainly by the higher interest income. Due to the higher interest income and lower write-downs, net profit for the Q1 outstripped planned target by EUR 11.5 million. Service fee income and expenses were as planned.

Loan impairments dropped by EUR 1.6 million during Q1. Since the macroeconomic environment has changed somewhat compared to the last quarter, we made model-based forwardlooking write-downs in Q1, but these were offset by the stronger position of clients in the portfolio and the on-time repayment of several larger loans. As a whole, the quality of the bank's loan portfolio has remained strong and the share of overdue loans continues to be very low. We see some growth in consumer loans and loans issues to small enterprises.

Although the Euribor has a positive impact on the bank's revenue base, we must curb our expectations in the changed macroeconomic environment. The very rapid and high inflation in the autumn has slackened, but the price level is expected to remain high. In addition, higher Euribor levels are now being reflected in loan agreements, and this has increased the size of clients' loan payments. Overall, both business people and consumers must factor in significantly higher expenditures, which will impact consumers' ability to make ends meet as well as the well-being of companies. Companies will adjust, but planned investments into energy performance will not give quick relief and expense on input prices cannot always be passed on fully to clients. The industrial sector is most impacted, and lay-offs have taken place. For now, unemployment remains at a reasonable level, and this is the best protection for individuals' loan portfolio.

Based on a cooperation agreement signed in early March between LHV UK Ltd and the Estonian bank, approximately 50 employees were transferred under the UK company and they will be engaged in providing daily service to clients in the Banking Services business area. This is the planned first step to move the Banking Services area to the incipient UK bank, with which we will share the income earned in this area.

LHV Pank was selected a Dream Employer and as a result of the annual assessment of customer service in the banking sector conducted by Dive Group, the bank with the best customer service. A recommendation index survey conducted each year by Kantar Emor resulted in LHV placing fifth overall (an improvement from 6th last year). In the banks category, we maintain a strong leader position with an NPS score of 47. With a recommendation index of 49 among internet banks, we placed first. In open comments, LHV was praised for good functioning, convenience and expertise.

Overview of AS LHV Varahaldus

Profit before income tax in Q1 EUR 0.6 million
Net profit EUR 0.1 million, largely due to the EUR 0.5 million income tax expense paid on EUR 3 million dividends
Number of active second-pillar customers at the end of the quarter – 130 thousand
Volume of assets in second-pillar funds more than EUR 1.4 billion, increase of EUR 113 million in a quarter
Third-pillar net assets continue to grow, an increase of EUR 6 million in three months

			Change		Change			Change
EUR million	Q1 2023	Q4 2022	%	Q1 2022	%	3M 2023	3M 2022	%
Net fee and commission income	2.13	2.01	6%	2.01	9%	2.13	2.01	6%
Net financial income	0.17	0.14	21%	0.10	70%	0.17	0.10	21%
Operating expenses Depreciation of non-current	-1.32	-1.21	9%	-1.35	-2%	-1.32	-1.35	9%
assets	-0.40	-0.40	0%	-0.53	-25%	-0.40	-0.53	0%
Profit	0.58	0.54	7%	0.18	222%	0.58	0.18	7%
Financial investments	8.0	8.0	0%	8.0	0%
Equity	20.0	23.0	-13%	22.0	-9%
Assets under management	1 451.0	1 332.0	9%	1 362.0	7%

In Q1, LHV Varahaldus had operating income of EUR 2.1 million, financial income EUR 0.2 million, a profit before income tax of EUR 0.6 million. Net profit was affected by the dividend payment in March and the related income tax expense. The results largely correspond to the financial plan – thanks to good results in January, the revenue was somewhat higher than expected thanks to higher fund volumes and the management fees charged on that, while the cost base has been positively influenced by lower than expected personnel expenses. Compared to the last quarter of the previous year, both the operating income and the profit before income tax have grown by EUR 0.1 million. The financial results continue to be affected by the amortisation of intangible assets caused by the exit from the 2nd pillar, although the expense is 10% smaller than a year ago.

Q1 was favourable for stock markets. After a very strong January, there was more volatility and uncertainty across sectors in February and March, but the quarter as a whole was positive. In euros, MSCI World, SP500 and Euro Stoxx 50 rose 5.8%, 5.5% and 14.2% in value, respectively. The main keywords continue to include inflation and the interest rate movements of central banks, a strong labour market in the US and Europe, as well as the fear of a potential economic decline.

LHV's largest actively managed pension funds showed stable positive results throughout the three months. The values of M, L and XL shares grew in Q1 by 1.5%, 2.0% and 2.3%, respectively. Primarily on the backdrop of the strong January, the quarter was positive for pension funds with a higher equity risk – LHV pension fund Index grew by 4.3% and LHV pension fund Green by 5.0%. The conservative funds S and XS rose by 1.1% and 1.0%, respectively. Growth in social tax revenue – which serves as a comparison index – saw rapid growth in Q1, remaining more than 10% higher than the same period in the previous year in each month. The labour market continues to be very strong also in Estonia, with Eesti Pank forecasting a slight increase in unemployment, but a salary growth of nearly 11% compared to the previous year.

There were no major changes in the portfolios in Q1. Across sectors, we continue to invest more in precious metals and energy, and in the growing interest rate environment we increasingly look at the bonds of strong listed companies as a good-yield alternative to share market.

LHV's number of active second-pillar customers at the quarter's end was slightly more than 130 thousand, having dropped by slightly less than a thousand in the three months. The drop was

caused by the customers who withdrew from the 2nd pillar at the beginning of January – of LHV's pension fund customers, nearly 1900 customers left as a result of exiting the 2nd pillar. The market share did not change much in terms of customers, still around 25%. March also marked the end of the four-month period for submitting applications for leaving the second pillar; the disbursements will be in September. For the third consecutive season, the number of withdrawals as well as the amount paid out remained lower than the organic addition of customers and the customers' contributions in four months, with LHV's second-pillar funds growing organically again. The volume of assets managed by LHV Varahaldus was EUR 1450 million at the end of the quarter, with the growth in the volume of assets strongly influenced by the state's compensation of the temporarily suspended second-pillar payments together with the yield in the second half of January. The effect of the compensation of the suspended payments on the volumes of the second-pillar funds was EUR 73 million.

The portfolio of all actively managed funds and distribution of asset classes largely correspond to the long-term goal, where M, L and XL portfolio are mainly invested in unlisted asset classes less dependent on stock markets. We keep a close eye on developments on the stock market and are prepared to quickly adjust our positions depending on the conditions. We also devote extra attention to liquidity to ensure capability to more aggressively invest and naturally make disbursements to customers if they change or exit funds.

Overview of AS LHV Kindlustus

AS LHV Kindlustus continued to grow the volumes of its insurance portfolio in Q1 2023. Gross insurance premiums grew by 27.9% and net earned premiums by 44.6% compared to Q4 2022. During the quarter, 39.3 thousand new insurance contracts were concluded, with premiums totalling EUR 9.0 million. The volume of insurance premiums from the health insurance production solution launched in cooperation with Confido in Q4 2022 was EUR 2.6 million in Q1. The number of insurance contracts and the volume of premiums continues to grow across insurance products in all the sales channels. The company is exceeding the goals for growth set in the 2023 financial plan.

The company continued to develop an insurance information system and introduced a number of new functionalities that help make the contract management process more efficient. Preparations also continued to introduce new claims handling software.

As at 31 March 2023, LHV Kindlustus had 220 thousand valid insurance contracts and 155 thousand customers.

The volume of gross insurance premiums was EUR 7 711.8 thousand and the net earned insurance premiums totalled EUR 4498.5 thousand in Q1. Vehicle and motor TPL insurance made up 50.9% and health insurance 33.3% of the volume of insurance premiums in Q1.

During Q1, 8 233 new loss events were registered and claims adjustment was completed for 7 537 events. As at the end of the quarter, a total of 2 279 claim files were open. The net losses incurred in the period together with indirect claims adjustment costs were EUR 3 508.6 thousand. Loss provisions stood at EUR 2 973.9 thousand at the end of the period.

As is characteristic of winter months, vehicle and motor TPL insurance events were more frequent in Q1. There was also one big home insurance fire loss. The company suffered a loss of EUR 450.1 thousand. The result falls short of the financial forecast primarily due to the accumulation of losses in March and the big fire claim. The company's volume of operating expenses met expectations.

EUR thousand	Q1 2023	Q4 2022	Change %	Q1 2022	Change %
Gross insurance premiums	7 712	6 028	28%	1 748	341%
Net earned insurance premiums	4 499	3 111	45%	1 263	256%
Net losses incurred	3 509	2 428	45%	1 030	241%
Total net operating expenses	1 505	1 212	24%	731	106%
Underwriting result	-515	-529	-3%	-498	3%
Net profit	-450	-527	-15%	-497	-9%
Actuarial reserves at the end of the period	15 613	12 564	24%	4 976	214%
Equity at the end of the period	4 403	5 078	-13%	6 159	-29%

As of the end of Q1, LHV Kindlustus employed 39 people.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income

(in thousands of euros)	Note	Q1 2023	3M 2023	Q1 2022	3M 2022
Interest income		64 477	64 477	32 850	32 850
Interest expense		-9 369	-9 369	-7 063	-7 063
Net interest income	9	55 108	55 108	25 787	25 787
Fee and commission income		15 644	15 644	14 815	14 815
Fee and commission expense		-3 767	-3 767	-4 468	-4 468
Net fee and commission income	10	11 877	11 877	10 347	10 347
Net gains from financial assets measured at fair value		-115	-115	-1 467	-1 467
Foreign exchange rate gains/losses		1 500	1 500	153	153
Net gains from financial assets		1 385	1 385	-1 314	-1 314
Other income		20	20	55 55	55 55
Other expense		-7	-7	-90	-90
Total other income		13	13	-35	-35
Staff costs		-15 667	-15 667	-10 248	-10 248
Administrative and other operating expenses		-14 955	-14 955	-8 618	-8 618
Total expenses	11	-30 622	-30 622	-18 866	-18 866
Profit before impairment losses		37 761	37 761	15 919	15 919

Impairment losses on loans and bonds	21	1 583	1 583	-735	-735
Profit before income tax		39 344	39 344	15 184	15 184
Income tax expense		-3 395 -6 281	-6 281	-2 785 -2 801	-2 801 -2 801
Net profit for the reporting period	2	33 063	33 063	12 383	12 383
Other comprehensive income/loss:	0	1 038 3 324	39 846 78	561	27 092
Items that may be reclassified subsequently to profit or loss: Unrealized exchange differences arising on the translation of the financial statements of foreign
operations		296	296	-44	-44
Total profit and other comprehensive income for the
reporting period		33 359	33 359	12 339	12 339
Total profit of the reporting period attributable to:
Owners of the parent		32 654	32 654	11 880	11 880
Non-controlling interest		409	409	503	503
Total profit for the reporting period	2	33 063	33 063	12 383	12 383
Total profit and other comprehensive income attributable to:
Owners of the parent		32 950	32 950	11 836	11 836
Non-controlling interest		409	409	503	503
Total profit and other comprehensive income for the reporting period		33 359	33 359	12 339	12 339
Basic earnings per share (in euros)	16	0.10	0.10	0.04	0.04
Diluted earnings per share (in euros)	16	0.10	0.10	0.04	0.04

The Notes on pages 21 to 36 are an integral part of the condensed consolidated interim financial statements.

(in thousands of euros)	Note	31.03.2023	31.12.2022

Assets
Due from central bank	4, 5, 6, 12	2 464 384	2 390 964
Due from credit institutions	4, 5, 6, 12	105 445	87 933
Due from investment companies	4, 6, 12	4 348	3 391
Financial assets at fair value through profit or loss	4, 6, 7	14 391	9 354
Financial assets at amortized cost	7	282 622	364 230
Loans and advances to customers	4, 6, 8, 21	3 149 183	3 208 572
Receivables from customers		19 737	21 019
Other financial assets		124	124
Other assets		8 311	6 775
Financial investment		1 180	1 180
Tangible assets	19	16 258	16 859
Intangible assets	19	13 809	13 853
Goodwill		10 748	10 748
Total assets	2	6 090 540	6 135 002
Liabilities
Loans received from Central Banks (TLTRO)	13	99 144	147 841
Deposits of customers	13	4 866 899	4 900 515
Loans received and debt securities in issue	13	440 859	438 642
Financial liabilities at fair value through profit or loss	7	3 701	3 850
Accounts payable and other liabilities	14	94 979	92 462
Subordinated debt	6, 20	131 070	130 843
Total liabilities	2	5 636 652	5 714 153
Owner's equity
Share capital		31 542	31 542
Share premium		141 186	141 186
Statutory reserve capital		4 713	4 713
Other reserves		7 120	5 683
Retained earnings		262 318	229 817
Total equity attributable to owners of the parent		446 879	412 941
Non-controlling interest		7 009	7 908
Total equity		453 888	420 849
Total liabilities and equity		6 090 540	6 135 002

Condensed Consolidated Interim Statement of Financial Position

The Notes on pages 21 to 36 are an integral part of the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Cash Flows

(in thousands of euros)	Note Q1 2023	3M 2023	Q1 2022	3M 2022
Cash flows from operating activities
Interest received	62 652	62 652	32 755	32 755
Interest paid	-5 732	-5 732	-6 291	-6 291
Fees and commissions received	15 646	15 646	14 940	14 940
Fees and commissions paid	-3 767	-3 767	-4 468	-4 468
Other income received	-323	-323	-170	-170
Staff costs paid	-13 563	-13 563	-8 719	-8 719
Administrative and other operating expenses paid	-12 122	-12 122	-6 896	-6 896
Income tax	-6 801	-6 801	-4 896	-4 896
Cash flows from operating activities before change in operating
assets and liabilities	35 990	35 990	16 255	16 255
Net increase/decrease in operating assets:
Net increase/(decrease) in financial assets at fair value through profit or
loss	-2 401	-2 401	-109	-109
Loans and advances to customers	70 363	70 363	-76 369	-76 369
Mandatory reserve at central bank	-251	-251	3 576	3 576
Security deposits	0	0	2 112	2 112
Other assets	-6 560	-6 560	4 851	4 851
Net increase/decrease in operating liabilities:
Demand deposits of customers	-305 383	-305 383	-401 565	-401 565
Term deposits of customers	269 947	269 947	3 695	3 695
Loans received	-48 591	-48 591	0	0
Prepayments of loans received	0	0	-221	-221
Financial liabilities held for trading at fair value through profit and loss	-149	-149	-124	-124
Other liabilities	1 220	1 220	58 195	58 195
Net cash generated from/used in operating activities	14 185	14 185	-389 704	-389 704
Cash flows from investing activities
Purchase of non-current assets	-1 288	-1 288	-2 399	-2 399
Net changes of investment securities at fair value through profit or loss and
of investment securities at amortized cost	-78 873	-78 873	-341 346	-341 346
Net cash flows from/used in investing activities	77 585	77 585	-343 745	-343 745
Cash flows from financing activities
Dividends paid	-1 225	-1 225	-2 100	-2 100
Repayments of the principal of lease liabilities	-523	-523	-364	-364
Net cash flows from/used in financing activities	-1 748	-1 748	-2 464	-2 464
Effect of exchange rate changes on cash and cash equivalents	6 1 616	1 616	97	97
Net increase/decrease in cash and cash equivalents	91 638	91 638	-735 816	-735 816
Cash and cash equivalents at the beginning of the period	2 433 599	2 433 599	3 930 012	3 930 012
Cash and cash equivalents at the end of the period	12 2 525 237	2 525 237	3 194 196	3 194 196

The Notes on pages 21 to 36 are an integral part of the condensed consolidated interim financial statements

						Total equity
						attributable
			Statutory			to owners	Non
	Share	Share	reserve	Other	Retained	of LHV	controlling	Total
(in thousands of euros)	capital	premium	capital	reserves	earnings	Group	interest	equity

Balance as at 01.01.2022	29 864	97 361	4 713	4 733	179 746	316 417		8 384 324 801
Paid in share capital	0	0	0	0	0	0	-2 100	-2 100
Dividends paid	0	0	0	904	0	904	0	904
Share options	0	0	0	0	11 880	11 880	503	12 383
Profit for the reporting period	0	0	0	-44	0	-44	0	-44
Other comprehensive
income/loss	0	0	0	-44	11 880	11 836	503	12 339
Total profit and other
comprehensive income for the
reporting period	29 864	97 361	4 713	5 593	191 626	329 157		6 787 335 944
Balance as at 31.03.2022	29 864	97 361	4 713	4 733	179 746	316 417		8 384 324 801

Balance as at 01.01.2023	31 542	141 186	4 713	5 683	229 817	412 941		7 908 420 849
Dividends paid	0	0	0	0	0	0	-1 225	-1 225
Share options	0	0	0	1 141	0	1 141	0	1 141
Profit for the reporting period	0	0	0	0	32 654	32 654	409	33 063
Other comprehensive
income/loss	0	0	0	296	0	296	0	296
Total profit and other
comprehensive income for the
reporting period	0	0	0	296	32 654	32 950	409	33 359
Balance as at 31.03.2023	31 542	141 186	4 713	7 120	262 318	446 879		7 009 453 888

Condensed Consolidated Interim Statement of Changes in Equity

The Notes on pages 21 to 36 are an integral part of the condensed consolidated interim financial statements

Notes to the Condensed Consolidated Interim Financial Statements

NOTE 1 Accounting Policies

The condensed consolidated interim financial statements have been prepared in accordance with the international financial reporting standard IAS 34 "Interim Financial Reporting", as adopted by the European Union, and consists of condensed consolidated financial statements and selected explanatory notes.

The accounting policies and methods of computation used in the preparation of the interim report are the same as the accounting policies and methods of computation used in the annual report for the year ended 31 December 2022, which comply with the International Financial Reporting Standards, as adopted by the European Union (IFRS EU).

These condensed consolidated interim financial statements have been reviewed, not audited and do not contain the entire range of information required for the preparation of complete financial statements. The condensed consolidated interim financial statements should be read in conjunction with the Annual Report prepared for the year ended 31 December 2022, which has been prepared in accordance with the International Financial Reporting Standards (IFRS EU).

The applicable accounting policies have not changed compared to the previous financial year, except for the treatment of the liquidity portfolio treated at the market price. We reclassified this portfolio to accounting at amortized cost at the beginning of the second quarter. It was a fundamental change in the risk taken by the business line.

The financial figures of the condensed consolidated interim financial statements have been presented in thousands of euros, unless otherwise indicated. The interim financial statements have been consolidated and include the results of AS LHV Group and its subsidiaries AS LHV Varahaldus (100% interest), AS LHV Pank (100% interest), LHV UK Ltd (100% interest), AS EveryPay (100% interest) and AS LHV Finance (65% interest) and AS LHV Kindlustus (65% interest).

NOTE 2 Business Segments

The Group divides its business activities into segments according to its legal structure, except LHV Pank divides its business activities by 3 main business segments: retail banking, corporate banking and financial intermediates. The business segments form a part of the Group, with a separate access to financial data and which are subject to regular monitoring of operating profit by the Group's decision-maker. The Management Board of AS LHV Group has been designated as the decision-maker responsible for allocation of funds and assessment of the profitability of the business activities. The result posted by a segment includes revenue and expenditure directly related to the segment.

The revenue of a reported segment includes gains from transactions between the segments, i.e. loans granted by AS LHV Pank to other group companies. The division of interest income and fee and commission income by customer location has been presented in Notes 9 and 10. The breakdown of interest income by customer location does not include the income from current accounts, deposits and investments in securities. The Group does not have any customers, whose income would account for more than 10% of the corresponding type of revenue.

Q1 2023	Retail banking	Corporate banking	Asset manage ment	Hire purchase and consumer finance in Estonia	Financial intermediates	Insura nce	UK LHV Ltd	Other activities	Total
Interest income	17 410	27 518	0	3 795	-2 209	25	2 832	15 106	64 477
Interest expense	11 270	-11 551	0	-1 246	7 094	-26	-69	-14 841	-9 369
Net interest income	28 681	15 967	0	2 549	4 884	-1	2 763	265	55 108
Fee and commission income Fee and commission	7 424	1 295	2 125	246	3 481	552	724	-203	15 644
expense	-3 809	-702	0	-184	-241	0	-24	1 193	-3 767
Net fee and commission income	3 616	593	2 125	62	3 239	552	700	989	11 877
Other income	-1	3	0	0	0	-3	0	14	13
Net income	32 295	16 563	2 125	2 611	8 124	548	3 463	1 269	66 998

Net gains from financial assets Administrative and	-37	0	172	0	1	33	-1	1 218	1 385
other operating expenses, staff costs	-9 722	-4 426	-1 722	-942	-3 978	-1 031	-5 964	-2 837	-30 622
Operating profit Impairment losses on	22 537	12 137	575	1 669	4 146	-450	-2 502	-351	37 761
loans and advances	-263	2 739	0	-829	0	0	-9	-55	1 583
Income tax	-1 766	-2 113	-488	-166	-104	0	0	-1 644	-6 281
Net profit	20 508	12 762	87	674	4 042	-450	-2 511	-2 049	33 063

3M 2023	Retail banking	Corporate banking	Asset manage ment	Hire purchase and consumer finance in Estonia	Financial intermediates	Insurance	UK LHV Ltd	Other activities	Total
Interest income	17 410	27 518	0	3 795	-2 209	25	2 832	15 106	64 477
Interest expense	11 270	-11 551	0	-1 246	7 094	-26	-69	-14 841	-9 369
Net interest income	28 681	15 967	0	2 549	4 884	-1	2 763	265	55 108
Fee and commission income Fee and commission	7 424	1 295	2 125	246	3 481	552	724	-203	15 644
expense	-3 809	-702	0	-184	-241	0	-24	1 193	-3 767
Net fee and commission income	3 616	593	2 125	62	3 239	552	700	989	11 877
Other income	-1	3	0	0	0	-3	0	14	13
Net income	32 295	16 563	2 125	2 611	8 124	548	3 463	1 269	66 998
Net gains from financial assets Administrative and	-37	0	172	0	1	33	-1	1 218	1 385
other operating expenses, staff costs	-9 722	-4 426	-1 722	-942	-3 978	-1 031	-5 964	-2 837	-30 622
Operating profit Impairment gains/(- losses) on loans and	22 537	12 137	575	1 669	4 146	-450	-2 502	-351	37 761
bond portfolio	-263	2 739	0	-829	0	0	-9	-55	1 583
Income tax	-1 766	-2 113	-488	-166	-104	0	0	-1 644	-6 281
Net profit	20 508	12 762	87	674	4 042	-450	-2 511	-2 049	33 063
Total assets 31.03.2023	2 559 201	3 280 893	21 469	93 140	0	35 159	39 847	60 831	6 090 540
Total liabilities 31.03.2023	3 624 712	551 628	1 156	77 009	1 342 054	30 756	6 318	3 019	5 636 652

Q1 2022	Retail banking	Corporate banking	Asset manage ment	Hire purchase and consumer finance in Estonia	Financial inter mediates	Insurance	LHV UK Ltd	Other activities	Total
Interest income	8 945	16 984	0	2 866	3 457	0	0	598	32 850
Interest expense Net interest	-1 783	-3 621	0	-473	-2 480	0	0	1 294	-7 063
income Fee and commission	7 162	13 364	0	2 393	976	0	0	1 892	25 787
income Fee and commission	6 517	1 186	1 959	198	5 150	142	0	-337	14 815
expense Net fee and commission	-3 521	-1 033	0	-183	-528	0	0	797	-4 468
income	2 996	154	1 959	15	4 622	142	0	460	10 347
Other income	-83	31	0	0	1	0	0	16	-35
Net income	10 074	13 548	1 959	2 408	5 599	142	0	2 368	36 099
Net gains from financial assets
Administrative and other operating expenses, staff	-47	2	102	0	1	1	-1	-1 372	-1 314
costs	-7 268	-3 942	-1 877	-683	-2 922	-641	-1 637	104	-18 866
Operating profit Impairment gains/(-losses) on loans and bond	2 759	9 608	184	1 725	2 678	-498	-1 638	1 100	15 919
portfolio	-102	-851	0	220	0	0	0	-2	-735
Income tax	-629	-860	-830	-132	-216	0	0	-133	-2 801
Net profit	2 028	7 897	-646	1 813	2 462	-498	-1 638	965	12 383

3M 2022	Retail banking	Corporate banking	Asset manage ment	Hire purchase and consumer finance in Estonia	Financial intermediates	Insurance	Other activities	Total
Interest income	8 945	16 984	0	2 866	3 457	0	598	32 850
Interest expense	-1 783	-3 621	0	-473	-2 480	0	1 294	-7 063
Net interest income Fee and commission	7 162	13 364	0	2 393	976	0	1 892	25 787
income	6 517	1 186	1 959	198	5 150	142	-337	14 815
Fee and commission expense	-3 521	-1 033	0	-183	-528	0	797	-4 468
Net fee and commission income	2 996	154	1 959	15	4 622	142	460	10 347

Other income	-83	31	0	0	1	0	0	16	-35
Net income	10 074	13 548	1 959	2 408	5 599	142	0	2 368	36 099
Net gains from financial assets Administrative and	-47	2	102	0	1	1	-1	-1 372	-1 314
other operating expenses, staff costs	-7 268	-3 942	-1 877	-683	-2 922	-641	-1 637	104	-18 866
Operating profit Impairment losses on	2 759	9 608	184	1 725	2 678	-498	-1 638	1 100	15 919
loans and advances	-102	-851	0	220	0	0	0	-2	-735
Income tax	-629	-860	-830	-132	-216	0	0	-133	-2 801
Net profit	2 028	7 897	-646	1 813	2 462	-498	-1 638	965	12 383
Total assets 31.03.2022	2 610 710	3 726 218	23 494	72 656	0	15 997	7 575	59 768	6 516 418
Total liabilities 31.03.2022	3 405 739	647 847	1 492	58 959	2 105 755	9 838	369	-49 525	6 180 474

NOTE 3 Risk Management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the group's annual financial statements as at 31 December 2022. There have been no major changes in the risk management department or in any risk management policies since the year end. The impact of COVID-19 on the Group's operations needs to be reported separately. The crisis mainly affects three risks: personnel risk, liquidity risk and credit risk.

Fortunately, the impact on personnel risk has been minimal, LHV was ready to work in home offices and almost all employees worked for two months from home offices. This reduced social interaction and the chances of being exposed to the virus.

To reduce liquidity risk, LHV Pank has issued mortgage bonds.

They made it possible to reduce the share of expensive platform deposits in financing and, together with the increased funding from the TLTRO III program, to finance the purchase of Danske's portfolio of local governments and companies at the beginning of the fourth quarter.

The escalated conflict in Ukraine in early 2022, did not have direct impact to LHV credit portfolio, because of historical restrictive lending to customers exposed to risks outside EU. However, increasing energy prices need to be considered, when issuing credits both to corporates and retail clients going forward. For example, some business models need to change and both commercial and residential buildings need to become more energy efficient.

During the second half of the year 2022, the Estonian economy has entered a mild recession. So far, the cooling economy has had no negative impact on the credit portfolio quality. As opposite, both the forborne and the overdue portfolio have been continuously shrinking throughout the year 2022. LHV is continuously monitoring credit portfolio quality and is in close dialog with customers, so that in case of a need, potential risks could be mitigated.

NOTE 4 Breakdown of Financial Assets and Liabilities by Countries

31.03.2023	Estonia	Germany	Other EU	USA	UK	Other	Total
Due from banks and investment companies	2 055 857	0	314 711	15 112	188 381	116	2 574 177
Financial assets at fair value	144 777	9	147 657	39	4 524	7	297 013
Loans and advances to customers	3 097 677	812	21 322	593	24 008	4 771	3 149 183
Receivables from customers	19 737	0	0	0	0	0	19 737
Other financial assets	24	0	0	100	0	0	124

Total financial assets	5 318 072	821	483 690	15 844	216 913	4 894	6 040 234
Loans received from Central Banks (TLTRO)	99 144	0	0	0	0	0	99 144
Deposits of customers and loans received	3 666 827	5 149	768 994	73 747	326 019	26 163	4 866 899
Loans received and bonds issued	440 859	0	0	0	0	0	440 859
Subordinated debt	131 070	0	0	0	0	0	131 070
Financial liabilities at fair value	3 701	0	0	0	0	0	3 701
Accounts payable and other financial liabilities	77 722	0	0	0	5 287	0	83 009
Total financial liabilities	4 419 323	5 149	768 994	73 747	331 306	26 163	5 624 682

Unused loan commitments in the amount of EUR 597 886 thousand are for the residents of Estonia.

31.12.2022	Estonia	Germany	Other EU	USA	UK	Other	Total
Due from banks and investment
companies	1 938 118	0	329 496	24 727	189 847	101	2 482 288
Financial assets at fair value	244 845	4 973	123 735	21	3	6	373 584
Loans and advances to customers	3 161 803	612	17 867	622	22 974	4 694	3 208 572
Receivables from customers	21 019	0	0	0	0	0	21 019
Other financial assets	24	0	0	100	0	0	124
Total financial assets	5 365 809	5 585	471 098	25 470	212 823	4 801	6 085 587
Loans received from Central Banks (TLTRO)	147 841	0	0	0	0	0	147 841
Deposits of customers and loans received	3 617 636	5 292	794 100	14 890	439 714	28 883	4 900 515
Loans received and bonds issued	438 642	0	0	0	0	0	438 642
Subordinated debt	130 843	0	0	0	0	0	130 843
Financial liabilities at fair value	3 850	0	0	0	0	0	3 850
Accounts payable and other financial liabilities	84 125	0	0	0	0	0	84 125
Total financial liabilities	4 422 937	5 292	794 100	14 890	439 714	28 883	5 705 816

Unused loan commitments in the amount of EUR 601 093 thousand are for the residents of Estonia.

NOTE 5 Breakdown of Assets and Liabilities by Contractual Maturity Dates

	On	0-3	3-12	1-5	Over 5
31.03.2023	demand	months	months	years	years	Total
Liabilities by contractual maturity dates
Loans received from Centrral Banks (TLTRO)	0	0	0	100 635		100 635
Deposits from customers	4 340 929	231 214	259 103	41 113	0	4 872 359
Loans received and bonds issued	0	250	1 750	452 250	0	454 250
Subordinated debt	0	2 406	46 094	103 731	0	152 231
Accounts payable and other financial liabilities	0	83 009	0	0	0	83 009
Unused loan commitments	0	597 886	0	0	0	597 886
Financial guarantees by contractual amounts	0	46 808	0	0	0	46 808
Foreign exchange derivatives (gross settled)	0	166 526	0	0	0	166 526
Financial liabilities at fair value	0	3 701	0	0	0	3 701
Total liabilities	4 340 929	1 131 800	306 947	697 729	0	6 477 405

Maturity gap from financial assets and liabilities	-1 766 628	-784 652	295 389	1 644 590	1 375 264	763 963
Total financial assets	2 574 301	347 148	602 336	2 342 319	1 375 264	7 241 368
Other financial assets	124	0	0	0	0	124
Foreign exchange derivatives (gross settled)	0	166 526	0	0	0	166 526
Receivables from customers	0	19 737	0	0	0	19 737
Loans and advances to customers	0	160 885	462 404	2 196 807	1 374 798	4 194 894
Financial assets at fair value (debt securities)	0	0	139 932	145 512	466	285 910
Due from banks and investment companies	2 574 177	0	0	0	0	2 574 177
Financial assets by contractual maturity dates

	On	0-3	3-12	1-5	Over 5
31.12.2022	demand	months	months	years	years	Total
Liabilities by contractual maturity dates
Loans received from Centrral Banks (TLTRO)	0	0	0	150 082		150 082
Deposits from customers	4 643 310	95 807	143 740	18 082	0	4 900 939
Loans received and bonds issued	0	0	2 000	452 250	0	454 250
Subordinated debt	0	2 406	46694	105538	0	154 638
Accounts payable and other financial liabilities	0	84 125	0	0	0	84 125
Unused loan commitments	0	601 093	0	0	0	601 093
Financial guarantees by contractual amounts	0	52 577	0	0	0	52 577
Foreign exchange derivatives (gross settled)	0	171 694	0	0	0	171 694
Financial liabilities at fair value	0	3 850	0	0	0	3 850
Total liabilities	4 643 310	1 011 552	192 434	725 952	0	6 573 248

Financial assets by contractual maturity dates
Due from banks and investment companies	2 428 288	0	0	0	0	2 428 288
Financial assets at fair value (debt securities)	0	236 130	4 966	123 519	471	365 086
Loans and advances to customers	0	186 547	487 298	2 115 010	1 258 430	4 047 285
Receivables from customers	0	21 019	0	0	0	21 019
Foreign exchange derivatives (gross settled)	0	171 694	0	0	0	171 694
Other financial assets	124	0	0	0	0	124
Total financial assets	2 428 412	615 390	492 264	2 238 529	1 258 901	7 033 496

Maturity gap from financial assets and liabilities -2 214 898 -396 162 299 830 1 512 577 1 258 901 460 248 It is possible to take a short-term loan from the central bank against the security of the majority of instruments in the bond portfolio. All cashflows from financial assets and –liabilities except derivatives include all contractual cash flows.

NOTE 6 Open Foreign Currency Positions

31.03.2023	EUR	CHF	GBP	SEK	USD	Other	Total
Assets bearing currency risk
Due from banks and investment companies	2 358 450	1 654	195 605	3 344	8 388	6 736	2 574 177
Financial assets at fair value	292 442	1	4 524	1	43	2	297 013
Loans and advances to customers	3 119 719	30	23 324	520	5 375	216	3 149 183
Receivables from customers	13 530	2	549	198	4 736	722	19 737
Other financial assets	124	0	0	0	0	0	124
Total assets bearing currency risk	5 784 265	1 687	224 002	4 063	18 543	7 675	6 040 234
Liabilities bearing currency risk
Loans received from Central Banks (TLTRO)	99 144	0	0	0	0	0	99 144

Deposits from customers	4 484 983	6 596	190 929	9 400	166 248	8 742	4 866 899
Loans received and bonds issued	440 859	0	0	0	0	0	440 859
Financial liabilities at fair value	3 701	0	0	0	0	0	3 701
Accounts payable and other financial liabilities	65 781	-3	10 968	648	5 408	207	83 009
Subordinated debt	131 070	0	0	0	0	0	131 070
Total liabilities bearing currency risk	5 225 538	6 593	201 897	10 048	171 656	8 949	5 624 681
Open gross position derivative assets at contractual value	0	4 916	0	5 984	154 272	1 354	166 526
Open gross position derivative liabilities at contractual value	166 526	0	0	0	0	0	166 526
Open foreign currency position	392 201	10	22 104	-1	1 159	80	415 553
31.12.2022	EUR	CHF	GBP	SEK	USD	Other	Total
Assets bearing currency risk
Due from banks and investment companies	2 255 128	1 466	197 580	2 538	17 806	7 769	2 482 288
Financial assets at fair value	373 514	0	2	1	26	42	373 584
Loans and advances to customers	3 180 499	74	22 306	385	5 068	241	3 208 572
Receivables from customers	25 865	5	751	241	-4 512	-1 330	21 019
Other financial assets	124	0	0	0	0	0	124
Total assets bearing currency risk	5 835 130	1 545	220 639	3 164	18 388	6 721	6 085 587
Liabilities bearing currency risk
Loans received from Central Banks (TLTRO)	147 841	0	0	0	0	0	147 841
Deposits from customers	4 533 633	5 323	193 442	10 968	148 058	9 089	4 900 515
Loans received and bond issued	438 642	0	0	0	0	0	438 642
Financial liabilities at fair value	0	0	0	0	3 849	1	3 850
Accounts payable and other financial liabilities	65 099	19	9 757	172	8 987	91	84 125
Subordinated debt	130 843	0	0	0	0	0	130 843
Total liabilities bearing currency risk	5 316 058	5 343	203 199	11 140	160 895	9 182	5 705 817
Open gross position derivative assets at contractual value	9 403	3 757	0	8 001	148 162	2 371	171 694
Open gross position derivative liabilities at contractual value	162 291	0	0	0	9 403	0	171 694
Open foreign currency position	366 183	-40	17 440	25	-3 748	-89	379 770

NOTE 7 Fair Value of Financial Assets and Liabilities

The Management Board of the Group has determined the fair value of assets and liabilities recognised at amortised cost in the balance sheet. To determine the fair value, future cash flows are discounted based on the market interest curve.

The below table provides an overview of the assessment techniques, which depend on the hierarchy of assets and liabilities measured at fair value:

	Level 1	Level 2	Level 3	31.03.2023	Level 1	Level 2	Level 3	31.12.2022
Financial assets at fair value through profit and loss
Shares and fund units*	1 064	7 666	0	8 730	1 075	7 474	0	8 549
Bonds at fair value through profit and loss	3 205	0	0	3 205	765	0	0	765
Interest rate swaps and foreign exchange
forwards	0	2 456	0	2 456	0	40	0	40
Total financial assets	4 269	10 122	0	14 391	1 840	7 514	0	9 354
Financial liabilities at fair value through profit and loss
Interest rate swaps and foreign exchange	0	3 701	0	3 701	0	3 850	0	3 850
forwards Total financial liabilities	0	3 701	0	3 701	0	3 850	0	3 850

*Shares and fund units include the Group companies' AS LHV Varahaldus investment into pension fund units in the amount of EUR 7 666 (31.12.2022: 7 474) thousand. Pursuant to the Investment Funds Act, the mandatory shares of LHV Varahaldus as the management company is 0.5% of the number of units in each of the mandatory pension fund managed by it.

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As of March 31, 2023, the liquidity portfolio in the amount of EUR 282 622 thousand is reflected in the amortised cost and the loss from the revaluation of the portfolio is refleced in the income statement in the line Impairment losses on loans and bonds in the total amount of EUR 71 thousand.

Hierarchy levels:

1. Level 1 the price quoted on active market
1. Level 2 a technique which uses market information as input (rates and interest curves of arms-length transactions)
1. Level 3 other methods (e.g. discounted cash flow method) with estimations as input

Interest rate swaps are instruments, where the fair value is determined via the model-based approach by using the inputs available on the active market. The fair value of such non-market derivatives is calculated as a theoretical net present value (NPV), by using independent market parameters and without assuming the presence of any risks or uncertainties. The NPV is discounted by using the risk-free profitability rate available on the market.

As at 31.03.2023 the fair value of corporate loans and overdraft is EUR 18 363 thousand (1.05%) higher than their carrying amount (31.12.2022: 37 846 thousand, 2.11% higher). Loans are issued in the bank's business segments on market conditions. Therefore, the fair value of retail loans does not materially differ from their carrying amount as at 31 March 2023 and 31 December 2022. In determining the fair value of loans, considerable management judgements are used (discounted cash flow method with current market interest is used for the valuation). Loans issued are thus categorised under hierarchy level 3.

Lease interest rates offered to customers generally correspond to interest rates prevailing in the market for such products. Considering that the interest rate environment has been relatively stable since the Group started to provide leasing, consequently the fair value of lease agreements does not materially differ from their carrying amount. As significant management judgment is required to determine fair value, leases are classified as level 3 in the fair value hierarchy.

Leveraged loans, hire-purchase and credit cards granted to customers are of sufficiently short-term nature and they have been issued at market terms, therefore the fair market rate of interest and also the fair value of loans do not change significantly during the loan term. The fair value level of leveraged loans, hirepurchase, credit cards and consumer loans is 3 as significant judgmental assumptions are used for the valuation process.

Other receivables from customers, along with accrued expenses and other current receivables have been generated in the course of ordinary business and are subject to payment over a short period of time. Their fair value does not thus differ from the carrying amount. These receivables and payables do not bear any interest. The fair value of accounts payable, accrued expenses and other payables is determined based on hierarchy level 3.

Customer deposits with fixed interest rates are mostly short-term with the deposits priced pursuant to market conditions. The majority of the customer deposits include demand deposits. The fair value of the deposits determined via discounting future cash flows does not thus materially differ from the carrying amount. In determining the fair value of customer deposits, considerable management judgements are used. Customer deposits are thus categorised under hierarchy level 3.

Subordinated loans in the amount of EUR 20 000 thousand were received in 2022, subordinated loans in the amount of EUR 50 000 thousand were received in 2020 subordinated loans in the amount of EUR 40 000 thousand were received in 2019 and EUR 20 000 thousand were received in 2018. Subordinated loans were issued on market terms and considering the movements in loan and interest market, we can say that the market conditions are similar as they were when issuing the subordinated loans so that the fair value of the loans does not materially differ from their carrying value. In determining the fair value of loans, considerable management judgements are used. Subordinated debt are thus categorised under hierarchy level 3.

NOTE 8 Breakdown of Loan Portfolio by Economic Sectors and by Stages

31.03.2023	Stage 1	Stage 2	Stage 3	Provision	Total	%
Individuals	1 138 356	114 762	5 056	-3 596	1 254 578	39.8%
Agriculture	95 581	3 130	0	-234	98 477	3.1%
Mining and Quarrying	860	777	102	-58	1 681	0.1%
Manufacturing	117 700	40 475	37	-1 237	156 975	5.0%
Energy	49 021	1 373	0	-121	50 273	1.6%
Water and sewerage	28 440	313	0	-308	28 445	0.9%
Construction	116 910	4 984	527	-1 907	120 514	3.8%
Wholesale and retail trade	127 499	7 604	222	-945	134 380	4.3%
Transportation and storage	15 808	10 553	1	-698	25 664	0.8%
Accommodation and catering	11 626	23 362	164	-1 492	33 660	1.1%
Information and communication	12 596	1 350	41	-32	13 955	0.4%
Financial activities	108 075	9 406	0	-611	116 870	3.7%

Real estate activities	746 789	32 875	1 453	-3 247	777 870	24.7%
Professional, scientific and technical activities	81 022	5 692	24	-218	86 520	2.7%
Administrative and support service activities	87 049	3 039	27	-438	89 677	2.8%
Local municipalities	76 385	0	0	-131	76 254	2.4%
Education	5 006	557	0	-317	5 246	0.2%
Health care	14 379	816	0	-90	15 105	0.5%
Arts and entertainment	28 846	28 493	0	-2 652	54 687	1.7%
Other service activities	6 837	1 557	10	-52	8 352	0.3%
Total	2 868 785	291 118	7 664	-18 384
Provision	-8 313	-7 809	-2 262
Total loan portfolio	2 860 472	283 309	5 402		3 149 183	100%

31.12.2022	Stage 1	Stage 2	Stage 3	Provision	Total	%
Individuals	1 127 636	115 433	5 446	-3 157	1 245 358	38.8%
Agriculture	76 817	2 743	0	-112	79 448	2.5%
Mining and Quarrying	1 038	519	122	-49	1 630	0.1%
Manufacturing	126 670	28 626	81	-1 308	154 069	4.8%
Energy	92 186	1 305	0	-321	93 170	2.9%
Water and sewerage	29 314	90	0	-275	29 129	0.9%
Construction	106 356	5 243	58	-1 716	109 941	3.4%
Wholesale and retail trade	144 586	6 599	69	-924	150 330	4.7%
Transportation and storage	15 198	10 323	1	-691	24 831	0.8%
Accommodation and catering	11 844	23 446	44	-1 531	33 803	1.1%
Information and communication	10 839	3 004	1	-34	13 810	0.4%
Financial activities	119 436	9 337	0	-823	127 950	4.0%
Real estate activities	757 443	34 577	1 558	-3 269	790 309	24.6%
Professional, scientific and technical activities	68 001	7 313	30	-171	75 173	2.3%
Administrative and support service activities	115 072	4 563	32	-3 116	116 551	3.6%
Local municipalities	79 272	0	0	-127	79 145	2.5%
Education	5 151	596	0	-302	5 445	0.2%
Health care	14 312	541	0	-86	14 767	0.5%
Arts and entertainment	27 619	30 225	15	-2 588	55 271	1.7%
Other service activities	6 970	1 503	11	-42	8 442	0.3%
Total	2 935 760	285 986	7 468	-20 642
Provision	-10 938	-7 632	-2 072
Total loan portfolio	2 924 822	278 354	5 396		3 208 572	100%

NOTE 9 Net Interest Income

Interest income	Q1 2023	3M 2023	Q1 2022	3M 2022
From balances with credit institutions and investment	1 839	1 839	263	263
companies From central bank	13 554	13 554	500	500
From debt securities	530	530	-99	-99
Leasing	2 344	2 344	1 440	1 440
Leverage loans and lending of securities	367	367	435	435
Consumer loans	2 892	2 892	2 058	2 058
Hire purchase	904	904	808	808

Corporate loans	28 144	28 144	17 328	17 328
Credit card loans	232	232	195	195
Mortgage loans	12 428	12 428	5 531	5 531
Private loans	842	842	554	554
Other loans	404	404	3 837	3 837
Total	64 477	64 477	32 850	32 850
Interest expense
Deposits of customers and loans received	-4 676	-4 676	-1 162	-1 162
Balances with the central bank	0	0	-3 786	-3 786
Other interest expense	-218	-218	0	0
Subordinated liabilities	-4 475	-4 475	-2 115	-2 115
including loans between related parties	-89	-89	-81	-81
Total	-9 369	-9 369	-7 063	-7 063
Net interest income	55 108	55 108	25 787	25 787
Interest income on loans by customer location	19 893	68 492	13 270	47 388
(interest on bank balances and bonds excluded):	Q1 2023	3M 2023	Q1 2022	3M 2022
Estonia	48 137	48 137	32 186	32 186
UK	417	417	0	0
Total	48 554	48 554	32 186	32 186

NOTE 10 Net Fee and Commission Income

Fee and commission income	Q1 2023	3M 2023	Q1 2022	3M 2022
Security brokerage and commissions paid	1 108	1 108	1 422	1 422
Asset management and similar fees	3 674	3 674	3 276	3 276
Currency exchange fees conversion revenues	1 429	1 429	2 304	2 304
Fees from cards and payments	7 461	7 461	6 644	6 644
Other fee and commission income	1 972	1 972	1 294	1 294
Total	15 644	15 644	14 815	14 815
Fee and commission expense
Security brokerage and commissions paid	-604	-604	-639	-639
Expenses related to cards	-1 373	-1 373	-1 712	-1 712
Expenses related to acquiring	-1 703	-1 703	-1 643	-1 643
Other fee and commission expense	-87	-87	-474	-474
Total	-3 767	-3 767	-4 468	-4 468
Net fee and commission income	11 877	11 877	10 347	10 347
Fee and commission income by customer location:	Q1 2023	3M 2023	Q1 2022	3M 2022
Estonia	13 858	13 858	12 972	12 972
Great Britain	1 786	1 786	1 843	1 843
Total	15 644	15 644	14 815	14 815

NOTE 11 Operating Expenses

	Q1 2023	3M 2023	Q1 2022	3M 2022
Wages, salaries and bonuses	12 722	12 722	7 805	7 805
Social security and other taxes*	2 945	2 945	2 443	2 443
Total personnel expenses	15 667	15 667	10 248	10 248

Total operating expenses	30 622	30 622	18 866	18 866
Total other operating expenses	14 955	14 955	8 618	8 618
Other operating expenses	170	170	146	146
Operational lease payments	146	146	108	108
Depreciation of non-current assets	1 985	1 985	1 338	1 338
Other administrative expenses	4 489	4 489	1 103	1 103
Other outsourced services	2 715	2 715	2 195	2 195
Staff training and business trip expenses	351	351	255	255
Transportation and communication expenses	148	148	132	132
Office expenses	579	579	416	416
Marketing expenses	809	809	962	962
Information services and bank services	427	427	299	299
IT expenses	3 136	3 136	1 664	1 664

*lump-sum payment of social, health and other insurances

NOTE 12 Balances with the Central Bank, Credit Institutions and Investment Companies

	31.03.2023	31.12.2022
Demand and term deposits with maturity less than 3
months*	109 793	91 324
Statutory reserve capital with the central bank	48 940	48 689
Demand deposit from central bank*	2 415 444	2 342 275
Total	2 574 177	2 482 288
*Cash and cash equivalents in the Statement of Cash
Flows	2 525 237	2 433 599

The breakdown of receivables by countries has been presented in Note 4. Demand deposits include receivables from investment companies in the total amount of EUR 4 348 thousand (31 December 2022: EUR 3 391 thousand). All other demand and term deposits are held with credit institutions and the central bank. The minimum reserve requirement as at 31 March 2023 was 1% (31 December 2022: 1%) of all financial resources (customer deposits and loans received). The reserve requirement is to be fulfilled as a monthly average in euros or in the foreign financial assets approved by the central bank.

NOTE 13 Deposits of Customers and Loans Received

		Financial	Non-financial
Deposits/loans by type	Individuals	entities		entities Public sector	31.03.2023
Demand deposits	975 236	1 402 477	1 914 766	44 956	4 337 435
Term deposits	171 729	32 488	303 722	18 987	526 926
Accrued interest liability	689	648	1 120	81	2 538
Total	1 147 654	1 435 613	2 219 608	64 024	4 866 899

		Financial	Non-financial
Deposits/loans by type	Individuals	entities		entities Public sector	31.12.2022
Demand deposits	1 065 135	1 477 182	2 042 117	58 406	4 642 840
Term deposits	63 208	23 046	146 137	24 587	256 978
Accrued interest liability	336	192	156	13	697
Total	1 128 679	1 500 420	2 188 410	83 006	4 900 515

Loans received 31.03.2023	TLTRO	Covered bonds	Preferred senior bond	Total loans received and dept securities in issue
Loans received	100 000	249 356	190 325	439 681
Accrued interest liability	-856	203	975	1 178
Total	99 144	249 559	191 300	440 859

Loans received 31.12.2022	TLTRO	Covered bonds	Preferred senior bond	Total loans received and dept securities in issue
Loans received	150 000	249 284	188 672	437 956
Accrued interest liability	-2 159	141	545	686

In June 2020, LHV Pank made a successful debut issue of EUR 250 million in covered bonds to international investors. 31 institutional investors participated in the 5-year issue and the interest rate was 0.12%. The issue by LHV Pank was the first debut issue since the beginning of the COVID-19 crisis. The issue received an Aa1 rating from Moodys and was listed on the Dublin Stock Exchange.

In September 2021, LHV Group issued EUR 100 million of preferred bonds with a four-year maturity, which includes the option to call back the transaction after the third year. The issue received a Baa3 rating and was listed on the Dublin Stock Exchange.

In November 2022, LHV Group Carried out a tap issue of senior unsecured bonds with a maturity date in September 2025. As a result, LHV raised additional funds in the amount of EUR 88 million. The nominal value of the issued bonds increased by 100 million euros. Since it was an increase in the volume of previously issued bonds, the terms and conditions of the new bonds are identical to the previous issue.

In 2020, the Bank raised EUR 200 million in negative interest funds through the TLTRO III program offered by the European Central Bank. In the second quarter 2022, the Bank returned early loan of 50 million euros to the European Central Bank and the same amount was also returned in first quarter 2023.

The nominal interest rate of the deposits of customers and loans granted equals to their effective interest rate, as no other significant fees have been implemented.

NOTE 14 Accounts payable and other liabilities

Financial liabilities	31.03.2023	31.12.2022
Trade payables and payables to merchants	12 401	1 943
Other short-term financial liabilities	6 288	10 676
Lease liabilities	12 401	6 766
Payments in transit	31 414	40 101
Financial guarantee contracts issued	1 381	1 228
Liabilities from insurance services	29 832	23 411
Subtotal	83 009	84 125
Not financial liabilities
Performance guarantee contracts issued Non-financial liabilities	1 575	1 058
Tax liabilities	4 420	3 086
Payables to employees	4 711	3 457
Other short-term liabilities	1 264	736
Subtotal	11 970	8 337
Total	94 979	92 462

Payables to employees consist of unpaid salaries; bonus accruals and vacation pay accrual for the reporting period and the increase in liabilities is caused by the increase in the number of employees during the year. Payments in transit consist of foreign payments and payables to customers related to intermediation of securities transactions. All liabilities, except for financial guarantees, are payable within 12 months and are therefore recognised as current liabilities.

NOTE 15 Contingent Liabilities

Irrevocable transactions	Performance guarantees	Financial guarantees	Letter of credit	Unused loan commitments	Total
Liability in the contractual amount as at 31 March
2023	38 401	46 808	8 367	597 886	691 462
Liability in the contractual amount as at 31
December 2022	30 174	52 577	6 605	601 093	690 449

NOTE 16 Basic Earnings and Diluted Earnings Per Share

In order to calculate basic earnings per share, net profit attributable to owners of the parent has been divided by the weighted average number of shares issued. The dilution effect when calculating the Diluted earnings per share comes from the share options granted to management and key employees.

	Q1 2023	3M 2023	Q1 2022*	3M 2022*
Total profit (incl. discontinued operations) attributable to
owners of the parent (EUR thousand)	32 654	32 654	11 880	11 880
Weighted average number of shares (in thousands of units)	315 425	315 425	294 920	294 920
Basic earnings per share (EUR) Weighted average number of shares used for calculating the	0,10	0,10	0,04	0,04
diluted earnings per shares (in thousands of units)	321 411	321 411	301 740	301 740
Diluted earnings per share (EUR)	0,10	0,10	0,04	0,04

* 2022 data is adjusted according to share split carried out in Q3 2022.

NOTE 17 Capital Management

The goal of the Group's capital management is to:

✓ ensure continuity of the Group's business and ability to generate return for its shareholders;
✓ maintain a strong capital base supporting the development of business;
✓ comply with capital requirements as established by supervision authorities.

The amount of capital that the Group managed as of 31.03.2023 was 495 625 thousand euros (31.12.2022: 494 956 thousand euros). The goals of the Group's capital management are set based on both the regulative requirements and additional internal buffer.

The Group follows the general principles in its capital management:

The Group must be adequately capitalized at all times, ensuring the necessary capital to ensure economic preservation in all situations;
The main focus of the capital management is on tier 1 own funds, because only tier 1 own funds can absorb losses. All other capital layers in use are dependent of tier 1 own funds volume;
Capital of the Group can be divided in two: 1) regulative minimum capital and 2) capital buffer held by the Group. In order to reach its long-term economic goals the Group must on one hand strive towards proportional lowering of the regulative minimumcapital (through minimizing risks and high transparency). On the other hand, the Group must strive towards sufficient and conservative capital reserve, which will ensure economic preservation even in the event of severe negative risk scenario;
The risk appetite set by the Group is an important input to capital management planning and capital goal setting. Higher risk appetite requires marinating higher capital buffer.

Capital base	31.03.2023	31.12.2022
Paid-in share capital	31 542	31 542
Share premium	141 186	141 186
Reserves	4 713	4 713
Other reserves	-1 145	-1 447
Accumulated loss	229 664	170,010
Intangible assets (subtracted)	-23 322	-23 333
Profit for the reporting period (COREP)	0	49 179
Other adjustments	-287	-369
CET1 capital elements or deductions	-13 629	0
CET1 instruments of financial sector entities where the institution has a significant investment	-2 917	-3 351
CET1 instruments of financial sector entities where the institution has not a significant
investment	-180	-180
Total Core Tier 1 capital	365 625	364 956
Additional Tier 1 capital	55 000	55 000
Total Tier 1 capital	420 625	419 956
Subordinated liabilities	75 000	75 000
Total Tier 2 capital	75 000	75 000
Total net own funds	495 625	494 956

The Group has complied with all regulative capital requirements during the financial year and in previous year.

NOTE 18 Transactions with related parties

In preparing the financial statements of the Group, the following entities have been considered related parties:

owners that have significant impact on the Group and the entities related to them;
members of the management board and legal entities controlled by them (together referred to as management);
members of the supervisory board;
close relatives of the persons mentioned above and the entities related to them.

Transactions	Q1 2023	3M 2023	Q1 2022	3M 2022
Interest income	81	81	31	31
incl. management	46	46	13	13
incl. shareholders that have significant influence	35	35	18	18
Fee and commission income	58	58	3	3
Incl. management	8	8	2	2
incl. shareholders that have significant influence	50	50	1	1
Interest expenses from deposits	22	22	4	4
incl. management	2	2	1	1
incl. shareholders that have significant influence	20	20	3	3
Interest expenses from subordinated loans	89	89	81	81
incl. management	2	2	3	3
incl. shareholders that have significant influence	87	87	78	78

Balances	31.03.2023	31.12.2022
Loans and receivables as at the year-end	7 655	7 570
incl. management	3 875	3 901
incl. shareholders that have significant influence	3 780	3 669
Deposits as at the year-end	7 401	7 763
incl. management	1 615	765
incl. shareholders that have significant influence	5 786	6 998
Subordinated loans as at the year-end	4 434	4 434
incl. management	148	148
incl. shareholders that have significant influence	4 286	4 286

The table provides an overview of the material balances and transactions involving related parties. All other transactions involving the close relatives and the entities related to members of the management board and supervisory board and the minority shareholders of the parent company AS LHV Group have occurred according to the overall price list. The management and shareholders with significant influence include also their related entities and persons.

Loans granted to related parties are issued at market conditions.

In Q1, salaries and other compensations paid to the management of the parent AS LHV Group and its subsidiaries totalled EUR 690 thousand (Q1 2022: EUR 570 thousand), including all taxes. As at 31.03.2023, remuneration for March and accrued holiday pay in the amount of EUR 180 thousand (31.12.2022: EUR 214 thousand) is reported as a payable to management. The Group did not have any long-term payables or commitments to the members of the Management Board and the Supervisory Board as at 31.03.2023 and 31.12.2022 (pension liabilities, termination benefits, etc.). In Q1 2023, the remuneration paid to the members of the Group's Supervisory Board totalled EUR 30 thousand (Q1 2022: EUR 32 thousand).

Management is related to the share-based compensation plan. In Q1 2023 the share-based compensation to management amounted to EUR 482 thousand (Q1 2022: EUR 397 thousand).

The Group has signed contracts with the members of the Management Board, which do not provide for severance benefits upon termination of the contract. In any matters not regulated by the contract, the parties adhere to the procedure specified in the legislation of the Republic of Estonia.

(in thousands of euros)	Tangible assets	Right of use assets	Total tangible assets	Intangible assets	Costs incurred for the acquisition of customer contracts	Total intangible assets
Balance as at 31.12.2021
Cost	9 278	6 523	15 801	11 146	16 714	27 860
Accumulated depreciation and amortisation	-4 846	-2 481	-7 327	-7 382	-8 653	-16 035
Carrying amount 31.12.2021	4 432	4 042	8 474	3 764	8 061	11 825
Purchase of non-current assets	6 527	5 642	12 169	3 745	0	3 745
Depreciation/amortisation charge	-1 431	-2 377	-3 808	-1 990	-1 503	-3 493
Tangible and intangible assets added by
the acquisition of a subsidiary	23	0	23	896	0	896
Write-off of on-current assets	-13	0	-13	-366	0	-366
Capitalised selling costs	0	0	0	0	881	881
Balance as at 31.12.2022
Cost	15 815	12 165	27 980	15 421	17 595	33 016
Accumulated depreciation and amortisation	-6 264	-4 858	-11 122	-9 006	-10 156	-19 162
Carrying amount 31.12.2022	9 551	7 307	16 858	6 415	7 439	13 854
Purchase of non-current assets	256	0	256	838	0	838
Depreciation/amortisation charge	-374	-534	-908	-702	-375	-1 077

NOTE 19 Tangible and intangible assets

Carrying amount 31.03.2023	9 447	6 811	16 258	6 551	7 258	13 809
Accumulated depreciation and amortisation	-6 667	-5 404	-12 071	-10 245	-10 531	-20 776
Cost	16 114	12 215	28 329	16 796	17 789	34 585
Balance as at 31.03.2023
Capitalised selling costs	0	0	0	0	194	194
amortisation Write-off of on-current assets	-29	-12	-41	0	0	0
Recalculation of the accumulated	43	50	93	537	0	537

NOTE 20 Subordinated debts

Subordinated debts (in thousands of euros)

	Year of	Amount	Interest	Maturity date
	issue		rate

Subordinated Tier 2 liabilities	2018	20 000	6.0%	November 28 2028
Subordinated Tier 2 liabilities	2019	20 000	6.0%	November 28 2028

Subordinated Tier 2 liabilities	2020	35 000	6.0%	September 30 2030

Additional subordinated Tier 2 liabilites	2019	20 000	8.0%	Perpetual
Additional subordinated Tier 2 liabilites	2020	15 000	9.5%	Perpetual

Additional subordinated Tier 2 liabilites	2022	20 000	10.5%	Perpetual


Subordinated debt as at 31.12.2022		130 000
Subordinated debt as at 31.03.2023		130 000

NOTE 21 Changes in impairments

Changes in impairments	Balance as at 01.01	Impairment provisions/reversals set up during the year	Written off during the reporting perion	Balance as at 31.03
Corporate loans	-15 498	-1 796	4 556	-12 739
Consumer loans	-2 108	-1 042	667	-2 482
Investment financing	-13	-6	2	-17
Leasing	-2 009	-323	250	-2 081
Private loans	-1 014	-262	212	-1 064
Total 2023	-20 642	-3 429	5 688	-18 384

Changes in impairments	Balance as at 01.01	Impairment provisions/reversals set up during the year	Written off during the reporting perion	Balance as at 31.12
Corporate loans	-15 288	-5 426	5 216	-15 498
Consumer loans	-1 320	-2 092	1 303	-2 108
Investment financing	-130	-8	125	-13
Leasing	-1 250	-1 204	445	-2 009
Private loans	-1 061	-593	641	-1 014
Total 2022	-19 049	-9 323	7 730	-20 642

Shareholders of AS LHV Group

AS LHV Group has a total of 315 424 530 ordinary shares, with a nominal value of 0.1 euro.

As at 31 March 2023, AS LHV Group has 34 473 shareholders:

146 598 764 shares (46.5%) were held by members of the Supervisory Board and Management Board, and related parties.
168 825 766 shares (53.5%) were held by Estonian entrepreneurs and investors, and related parties.

Top ten shareholders as at 31 March 2023:

Number of	Participation	Name of shareholder
shares 37 162 070	11,8%	AS Lõhmus Holdings
33 910 370	10,8%	Viisemann Investments AG
25 449 470	8,1%	Rain Lõhmus
12 265 090	3,9%	Ambient Sound Investments OÜ
11 310 000	3,6%	Krenno OÜ
10 875 280	3,5%	AS Genteel
10 828 210	3,4%	AS Amalfi
7 188 990	2,3%	SIA Krugmans
6 691 020	2,1%	Bonaares OÜ
6 037 590	1,9%	OÜ Meroona Systems

Shares held by members of the Management Board and Supervisory Board

Madis Toomsalu holds 1 027 840 shares.

Martti Singi holds 775 980 shares and Unitas OÜ holds 77 540 shares.

Meelis Paakspuu holds 483 180 shares.

Jüri Heero holds 688 360 shares and Heero Invest OÜ holds 306 820 shares.

Rain Lõhmus holds 25 449 470 shares, AS Lõhmus Holdings 37 162 070 shares and OÜ Merona Systems 6 037 590 shares.

Andres Viisemann holds 545 840 shares. Viisemann Holdings OÜ holds 1 300 000 shares and Viisemann Investment AG holds 33 910 370 shares.

Tauno Tats does not hold shares. Ambient Sound Investments OÜ holds 10 828 210 shares.

Tiina Mõis holds 49 880 shares. AS Genteel holds 11 310 000 shares.

Heldur Meerits does not hold shares. AS Amalfi holds 10 875 280 shares.

Raivo Hein does not hold shares. OÜ Kakssada Kakskümmend Volti holds 5 000 370 shares, Astrum OÜ holds 3 890 shares and Lame Maakera OÜ holds 480 120 shares.

Sten Tamkivi holds 4 000 shares. OÜ Seikatsu holds 159 390 shares and OÜ Notorious 172 240 shares.

Supervisory Boards and Management Boards of AS LHV Group and its Subsidiaries

AS LHV Group

Supervisory board: Rain Lõhmus, Andres Viisemann, Tiina Mõis, Heldur Meerits, Raivo Hein, Tauno Tats, Sten Tamkivi Management board: Madis Toomsalu, Martti Singi, Meelis Paakspuu, Jüri Heero

AS LHV Varahaldus

Supervisory board: Madis Toomsalu, Andres Viisemann, Kadri Kiisel Management board: Vahur Vallistu, Joel Kukemelk

AS LHV Pank

Supervisory board: Madis Toomsalu, Rain Lõhmus, Andres Viisemann, Tiina Mõis, Heldur Meerits, Raivo Hein Management board: Kadri Kiisel, Jüri Heero, Andres Kitter, Meelis Paakspuu, Indrek Nuume, Martti Singi

AS LHV Finance

Supervisory board: Kadri Kiisel, Madis Toomsalu, Veiko Poolgas, Jaan Koppel Management board: Heidy Kütt

AS LHV Kindlustus

Supervisory board: Madis Toomsalu, Erki Kilu, Veiko Poolgas, Jaan Koppel Management board: Tarmo Koll, Martti-Sten Merilai

LHV UK Limited

Board of Directors: Madis Toomsalu, Erki Kilu, Andres Kitter

AS EveryPay

Supervisory board: Kadri Kiisel, Madis Toomsalu, Erki Kilu, Andres Kitter Management board: Lauri Teder

Signatures of the Management Board to the Condensed Consolidated Interim Report

The Management Board has prepared the summary of results for January to March 2023 period the condensed consolidated interim financial statements of AS LHV Group for the 3-months period ended 31 March 2023.

The management board confirms that according to their best knowledge the interim report presents a fair view of LHV Group AS's assets, liabilities, financial position and profit or loss of the issuer and the entities involved in the consolidation as a whole and contains a description of the main risks and doubts.

18.04.2023

Madis Toomsalu

Martti Singi

Meelis Paakspuu

Jüri Heero