Central Cooperative Bank : Consolidated financial statement for the second quarter of 2021

2021' SECOND QUARTER INTERIM FINANCIAL REPORT

ON THE ACTIVITIES OF

CENTRAL COOPERATIVE BANK /CCB/,

ON A CONSOLIDATED BASIS

Banking group on a consolidated basis include Central Cooperative Bank AD, Sofia and its controlled subsidiaries Central Cooperative Bank AD Skopje (Subsidiary) and AMC CCB Assets Management JSC (Subsidiary) as a reporting entity (the Group).

At the end of the second quarter of 2021, the parent Bank owns 87.35% of the capital of Central Cooperative Bank AD Skopje and investments of BGN 3,200 thousand in the subsidiary AMC "CCB Assets Management" JSC as well.

ASSETS

At the end of the second quarter of 2021, CCB's balance sheet total assets were BGN 7,157,708 thousand. Compared to a year ago, the assets grew by 9.41% or by BGN 615,895 thousand and from the end of the previous quarter they recorded a decrease by -0.01% or by BGN -1,030 thousand in absolute terms.

Cash and cash balances with central banks formed 25.73% of the total assets of the Group, against 25.51% a year ago and 28.91% at the end of the previous quarter. Loans and receivables to banks are 3.23% of total assets, against 3.06% a year ago and 2.98% at the end of the previous quarter. Investments in financial assets held for trading, available-for-sale,held-to-maturity, measured at fair value through other comprehensive income and measured at amortized cost include government bonds of Republic of Bulgaria, bonds issued by Government of Republic of Macedonia and NBRM bonds, government bonds of countries in the EU and other European countries, corporate bonds, stocks and compensatory tools which are used to improve the profitability of the Group, and represented 21.85% of its assets against 20.20% a year ago and 20.23% at the end of the previous quarter.

At the end of 2021' second quarter the amount of granted loans and advances reached 41.04% share in the structure of balance sheet assets on consolidated basis, compared to a 41.84% a year ago and 39.57% at the end of the previous quarter.

The tangible assets of Group are 2.32% of total amount of the assets as of the end of the second quarter of 2021.

LIABILITIES

At the end of 2021' second quarter, total liabilities of the Group on a consolidated basis were BGN 6,552,907 thousand. They increased by 9.98% compared to a year ago and decreased by -0.16%, compared to the end of previous quarter.

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The majority of these liabilities - over 98% - are liabilities due to individuals, businesses and non-financial institutions. The increase, compared to a year ago is 9.84% and compared to the end of the previous quarter they decreased by -0.23%. The Group maintains a stable structure of borrowings, which allows independence from external funding in the time of fluctuations on the global financial markets.

The equity of the Group totaled BGN 604,801 thousand and includes shareholders' equity of the parent Bank - BGN 599,352 thousand and minority interest amounted at BGN 5,449 thousand. Compared to a year ago, the equity increased by 3.60% and to the end of the previous quarter, the equity increased by 1.58%.

FINANCIAL RESULTS

At the end of second quarter of 2021, the Group' net profit amounted to BGN 21,068 thousand. There is an increase by 86.77% compared to year ago.

The operating expenses of the Group in the second quarter of 2021 decreased by 1%, compared to a year ago and reached absolute amount of BGN 67,441 thousand.

At the end of 2021' second quarter, the Bank was able to meet all regulatory compliance requirements and has complied with all applicable minimum regulatory requirements during the period. Historically, adequacy of the capital of CCB has been significantly above the minimal regulatory requirements, moreover the Own funds position was regularly strengthen by retaining the Earnings of the bank. In compliance with Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, minimal Total capital adequacy ratio for the banks is 8%.

The capital adequacy ratios of CCB on consolidated basis as of 30.06.2021 are:

∙	Common equity Tier 1 ratio	14.59%;
∙	Total equity ratio	15.24%;

The liquidity ratio of the Group on consolidated basis as of 30.06.2021 is:

∙ LCR

452.29%.

1. Information related to significant events that occurred during the reported period of financial 2020, accumulated and its impact on the financial result.

There is a high degree of uncertainty about the next wave of coronavirus pandemic that has taken place all over, the quarantine measures imposed and the actions taken by the various governments, the ECB and national regulators, and therefore the impact of all these events on activity for 2021.

Following the issuance of a certain guidelines by the European Banking Authority, the BNB approved the application of a debt moratorium allowing for the deferral of liabilities of clients affected by the coronavirus pandemic, without affecting the classification of loans in terms of their restructuring. The moratorium has a limited validity period (up to 6 months) and provides an opportunity for clients of banks that have serviced their obligations (performing exposures - overdue up to 90 days) as of March 1, 2020 to use a grace period for loan payments, which increases the final maturity of the instruments. The term in which the clients can claim their rights under the Moratorium is until June 22, 2020. Later on this term was extended to 22.09.2020.

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In compliance with Guidelines on management of non-performing and forborne exposures, issued by the European banking authority, Central cooperative bank was actively managing the NPL portfolio of the bank and in the Q4 the all year round process of disposal of historic default portfolios was completed and the NPL ratio was lowered beyond the EBA threshold of 5% on portfolio, sub-portfolio and on individual basis for the bank. Following this approach, the bank will benefit in 2021 in compliance with EBA and BNB Guidelines and best industry practices, maximizing the support of its clients in the tough process of recovering their economic activities in the times of Covid lockdowns and restrictions.

Taking into account the dynamic measures taken by various governments to restrict the movement of people and the changes imposed by it, directly affecting the development of the economic sectors of the Republic of Bulgaria and the EU and other trading partners of the Bulgarian companies, the Bank's management is not able to assess the impact of the coronavirus pandemic on the future financial condition and performance of the Bank, but considers that the impact could lead to volatility in market and price risk associated with the bank's financial assets and may have a negative effect on the activity of borrowers and respectively the net results of the bank.

At the General Meeting of the Shareholders of Central Cooperative Bank AD, that took place on 29.06.2021, a decision was taken the accumulated profit in the amount of BGN

20 380 300,09 (twenty million three hundred eighty thousand three hundred leva and nine stotinkas) to be transferred to the Reserve fund.

II.Information about major risks and instability during the next quarter.

During the second wave of coronavirus pandemic, partial and/or full lockdowns and declining economic activity, the Group will strive to continue its development while maintaining its results and market share. Potential negative effects would occur if the lock- downs in the EU continue for too long and the economies do not recover by the Q2 2021.

Potential differences between observed and expected results are the major source of risks and uncertainties during the next quarter. Therefore, the most significant risks are detailed in the following list:

1. Credit risk - the possibility that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Detailed policies are applied in process of lending, concerning the assessment of the creditworthiness of Bank's clients, and the control over the use of the advanced funds and the associated administration. In accordance with the credit risk mitigation policy, CCB accepts different types of collaterals and guarantees depending on the internal rules, the approach applied in the calculation of minimum required capital and the effective banking legislation. Evaluation of the risk exposures in the portfolio is done once per month, by classifying and making provisions for loans in the portfolio. The exposures treated as big exposures are subject to constant supervision and reporting. The Bank has adopted and keeps the credit exposure in the limits set by sector and by regional level. The above limits aim at avoidance of concentration, either geographically or by sector, in loan portfolios, which could lead to an increased credit risk.
2. Liquidity risk - the risk of having difficulties in meeting payment obligations due to a mismatch in maturity and amount between anticipated cash inflows and outflows. The Bank manages its assets and liabilities so as to address regularly and without any delay its daily liquidity obligations, under both normal and potentially adverse market conditions.

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1. Market risk - the probability for the Bank to experience losses from fluctuations in stock prices, interest rates and foreign exchange rates.
2. Operational risk - the probability of direct or indirect losses resulting from inadequate or failed internal processes, people and systems.

The levels of CCB' risk ratios and indicators are similar to the average values of the Bulgarian bank system. The Bank's management does not expect any adverse negative movement in the above mentioned levels of risks in the next quarter of the year.

1. CCB's Governing Body opinion on the forecasts implementation for this year results, taking into account the results of the current quarter.

CCB's results on a consolidated basis at the end of 2021' second quarter represent the Bank's performance in comparison with the last year corresponding period.

CCB's Management does not have non-public information that might have a significant adverse influence on the Group performance during the year.

IV.	Transactions with related parties

The Group concluded transactions with related parties. The Group regards as related parties the persons, where one person can control another or exercise considerable influence on the other person upon taking financial and operative decisions, as well as in the cases, when the two persons are under common control. The Group performed transactions with the following related parties: mother company, companies under common control, key management staff of the Group or of the main shareholder, whereas the performed transactions are related to the granting of loans, the issuance of guarantees, attracting funds, performance of repo transactions, etc. All transactions have been concluded under ordinary commercial conditions in the course of the activity of the Group and do not differ from the market conditions, when the loans were granted, and the guarantees were issued only against sufficient collateral.

GEORGI KOSTOV	TIHOMIR ATANASOV
EXECUTIVE DIRECTOR	PROCURATOR

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CENTRAL COOPERATIVE BANK AD

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF 30 JUNE 2021

All amounts are in thousand Bulgarian Levs

		As at		As at
ASSETS	30.06.2021	31.12.2020
Cash and balances with the Central Bank	1,841,908	1,912,743
Placements with and advances to banks	231,226	188,068
Receivables under repurchase agreements	341,292	359,672
Financial assets, recorded at fair value in the profit or loss	276,570	267,652
Loans and advances to customers, net	2,937,430	2,784,460
Other assets	58,229	49,404
Financial assets, recorded at fair value in other
comprehensive income	762,954	716,006
Debt instrument, recorded at amortised value	524,369	463,289
Fixed assets and assets related to use right	166,305	172,184
Investment properties	11,764	11,310
Noncurrent assets, held for sale	31	-
Good will	5,630		5,630
TOTAL ASSETS	7,157,708	6,930,418
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits from banks	51,292	66,052
Amounts owed to other depositors	6,412,539	6,190,947
Issued bonds	26,777	25,451
Provisions for liabilities	955	1,003
Other liabilities	61,344		61,160
TOTAL LIABILITIES	6,552,907	6,344,613
SHAREHOLDERS' EQUITY
Issued capital	127,130	127,130
Premium reserve	110,470	110,470
Reserves, including retained earnings	326,293	305,339
Revaluation reserve	14,550	16,702
Reserve from recalculation of foreign activity	(135)	(133)
Current year profit	21,044	20,880
Total shareholders' equity of the shareholders of the
mother Bank	599,352		580,388
Non-control participation	5,449		5,417
TOTAL SHAREHOLDERS' EQUITY	604,801		585,805
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY		7,157,708		6,930,418

Georgi Kostov	Tihomir Atanasov
Executive Director	Procurator
	Yordan Hristov
	Chief accountant