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FINANCIAL STATEMENTS BNB and FNE in R

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FINANCIAL STATEMENTS BNB and FNE in R FINANCIAL STATEMENTS BNB and FNE In R$ thousand Position:12.31.2020 ANNUAL MANAGEMENT REPORT 2020 2020 1 ANNUAL MANAGEMENT REPORT 2020 SUMMARY 1. A WORD FROM THE CEO ............................................................................................................. 3 1.1 HIGHLIGHTS................................................................................................................................... 5 2. BUSINESS MODEL ........................................................................................................................ 8 3. BUSINESS STRATEGY .................................................................................................................. 9 3.1 BUSINESS PLANNING ........................................................................................................................ 9 3.2 STRATEGIC PROJECTS ................................................................................................................... 10 3.3 PLANNING THE FUTURE IN 2021 ...................................................................................................... 11 3.4 CONSTITUTIONAL FUND FOR FINANCING IN THE NORTHEAST (FNE) .................................................. 12 3.4.1 FNE assets ........................................................................................................................... 12 3.4.2 FNE performance in 2020 .................................................................................................... 12 3.4.3 FNE 2020: Estimated Economic Impacts ............................................................................. 16 3.4.4 FNE challenges in 2021 ....................................................................................................... 16 4. STRATEGIES FOR DEVELOPMENT .......................................................................................... 17 4.1 SCIENTIFIC , TECHNOLOGICAL AND DEVELOPMENT FUNDS ................................................................ 17 4.2 SUSTAINABILITY ............................................................................................................................. 18 4.3 TERRITORIAL DEVELOPMENT POLICY .............................................................................................. 19 5. ECONOMIC AND FINANCIAL PERFORMANCE ........................................................................ 22 5.1 BNB TOTAL ASSETS ...................................................................................................................... 22 5.2 NET INCOME .................................................................................................................................. 22 5.3 OPERATIONAL EFFICIENCY ............................................................................................................. 23 5.4 EQUITY .......................................................................................................................................... 24 5.5 CAPITAL ADEQUACY RATIO .............................................................................................................. 24 6. PERFORMANCE OF OPERATIONS ........................................................................................... 25 6.1 VOLUME OF TRANSACTIONS CONTRACTED ....................................................................................... 25 6.2 PERFORMANCE BY SEGMENT .......................................................................................................... 28 6.3 CREDIT RECOVERY ......................................................................................................................... 34 7. CORPORATE GOVERNANCE ..................................................................................................... 35 7.1 AUDIT ............................................................................................................................................ 36 7.2 INTERNAL CONTROLS ...................................................................................................................... 36 8. RISK MANAGEMENT ................................................................................................................... 37 9. RELATIONSHIPS ......................................................................................................................... 41 9.1 CUSTOMER RELATIONSHIP .............................................................................................................. 41 9.2 DIGITAL EXPERIENCE , AND INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ........................ 42 9.3 RELATIONSHIP WITH THE SOCIETY .................................................................................................. 44 9.4 RELATIONSHIP WITH EMPLOYEES .................................................................................................... 46 10. ENTITIES OF PENSION PLAN AND HEALTH CARE FOR EMPLOYEES ................................ 48 10.1 CAMED ........................................................................................................................................ 48 10.2 CAPEF ......................................................................................................................................... 48 11. LEGAL INFORMATION ................................................................................................................ 49 2 ANNUAL MANAGEMENT REPORT 2020 1. A WORD FROM THE CEO Committed to protecting life, keeping jobs and the well-being of the region's population, Banco do Nordeste (“BNB”) faced the challenges of 2020, a year marked by the global health crisis, and contracted 5.1 million transactions, corresponding to the amount of R$ 40.07 billion. At the end of the year, it had recurring net income of 1.44 billion, 12.8% higher than that recorded in the same prior-year period. Noteworthy are the contracts under the Bank’s main funding, Fundo Constitucional de Financiamento do Nordeste (“FNE”) through which in year 2020 more than 711 thousand transactions were carried out, equivalent to R$ 25.84 billion, exceeding by 25.7% the volume contracted in 2019. Of this total, the Fund's resources injected R$ 19.08 billion in the Rural, Industrial, Agroindustrial, Tourism and Trade and Services sectors throughout the Bank’s area of operation, consisting of 1,990 municipalities located in the nine states of the Northeast and the North Minas Gerais (MG) and Espírito Santo (ES) states. Also with funds from the Fund and in an effort to make “FNE better and better”, Banco do Nordeste contracted infrastructure projects amounting to R$ 6.63 billion, and totaled investments in the FNE Verde Pessoa Física (Individuals) Program, aimed at microgeneration of energy, totaling R$ 112.9 million. The Student Financing Program (Fies), also with funds from FNE, totaled R$ 11.7 million, allowing students to enter university education. Of the total volume of FNE funds invested in the Region, 54.5% were contracted with entrepreneurs located in the Semi-Arid region, corresponding to R$ 14.08 billion; this is an expressive result of the spatial de-concentration guideline of the Fund’s credit facilities. Also worth noting is the investment of R$ 3 billion through the FNE Emergency line, created by the Federal Government to minimize the effects of the economic crisis generated by the pandemic, the creation of FNE Saúde (for health purposes) and the launch of FNE Startup, the first credit line of Latin America for startups. Even in a complex and unprecedented scenario, BNB took another leap toward “Being the Bank of the micro and small company in the Northeast” and reached in 2020 a record contracting of R$ 4.61 billion in the segment. This amount is equivalent to 49.4 thousand credit transactions, reaching a growth of 26.7% compared to 2019. Likewise, Banco do Nordeste proposed “Advancing its leadership position in microcredit”, disbursing, in 2020 a total amount of R$ 12.11 billion, distributed in 4.4 million transactions in Crediamigo, a facility that marks the Bank’s leadership in urban microfinance. With the largest microcredit program in South America, Banco do Nordeste has an operational capacity to carry out an average of 17.7 thousand disbursements per day, maintaining 2.2 million active customers in its portfolio at the end of the year. Within the scope of rural microcredit, in 2020, Banco do Nordeste contracted 564.8 thousand financing operations amounting to R$ 2.91 billion, benefiting family farmers in the Region and registering growth of 15.5% compared to 2019. In 2020, Agroamigo facility celebrated 15 years of creation, reaching R$ 20 billion invested, and having 1.3 million active customers at the end of the year, of which 76.17% are in the Semi-Arid and 85% are in the low-income bracket. In addition to regularizing more than R$ 3.00 billion in non-performing loans, corresponding to 160.9 thousand transactions, Banco do Nordeste effectively joined the national effort to combat the effects caused by Covid-19, promoting emergency renegotiation of debts as a way of mitigating the financial difficulties faced by entrepreneurs in the Region. To this end, it 3 ANNUAL MANAGEMENT REPORT 2020 relied on digital and automated instruments, streamlining the renegotiation process without customers having to go to the Bank’s units. In compliance with the most modern practices of compliance and integrity, as a guarantee of exemplary corporate governance, the Bank expanded its control and risk mechanisms, aware that the efficiency and
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