The Board of Directors of Keflavik Savings Bank, Byr Savings Bank and Reykjavik Savings Bank have signed a letter of intent to prepare for the merger of the three savings banks. The Savings Banks have committed to only discussing a merger between these three savings banks while the merger discussions are ongoing. The aim is to reach a conclusion as quickly as possible. In the letter of intent it is stipulated that parties will work according to an action plan with the aim of presenting a proposal to primary capital market holders and shareholders in February and that the merger take effect from January 1. Geirmundur Kristinsson Director of Keflavik Savings Bank: “The Savings Bank looks positively to these merger discussions. These three savings banks have the most in common and if all parties reach an agreement to merge a new and stronger savings bank will emerge which will benefit all savings banks. In these difficult times a strong savings bank with a solid operational base will build customers trust as well as other stakeholders. The merged savings bank will continue to service its customers in its locality and in good cooperation with the community.” Ragnar Z. Guðjónsson Director of Byr Savings Bank: “The Board of Directors of Byr have decided to take part in these discussion in spite of Byrs strong position with the interests of its customers and primary capital holders in mind. With the discussion we will see whether there is a basis to merge the savings banks. If a conclusion is reach which all parties are in agreement with, a foundation for a strong company is set which is well equipped to meet future challenges. Furthermore a merged savings bank will be well positioned to take advantage of future opportunities when the financial markets reach an equilibrium. It is therefore interesting for us to look at this opportunity seriously and we enter these discussion head on with the aim of reaching a conclusion as soon as possible. Guðmundur Hauksson CEO of SPRON: “The purpose of the merger is to strengthen the savings banks in the difficult economic environment which lies ahead of us and support the further restructuring of the Icelandic financial market. With the merger a larger and stronger unit will emerge which is better equipped to meet new and challenging projects. The Savings Banks have traditionally placed great importance on quality customer service and with a merged Savings bank our service to customers can be improved further.” For further information please contact: Geirmundur Kristinsson Director of Keflavik Savings Bank, tel: +354 421 6605 Ragnar Z. Guðjónsson Director of Byr Savings Bank, tel: +354 575 4000 Guðmundur Hauksson CEO of SPRON, tel: +354 550 1213