Financial Statements

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2012 Report and Financial Statements Iccrea BancaImpresa S.p.A.

Iccrea BancaImpresa S.p.A. Via Lucrezia Romana 41/47 – 00178 Rome Tax ID 02820100580 - R.E.A. No. 417224 – VAT Reg. no. 01122141003 Share capital €474.765.250,50 authorized, entirely subscribed and paid in Subject to management and coordination by Iccrea Holding S.p.A. Rome

INDEX

Shareholders ...... 1

Corporate Officers ...... 3

Calling of Ordinary and Extraordinary Shareholders’ Meeting ...... 4

Report on operations ...... 6

Balance Sheet...... 33

Income Statement...... 35

Statement of changes in shareholders' equity...... 37

Statement of cash flows (Indirect method) ...... 39

Part A – Accounting Policies ...... 42

Part B – Information on the Balance Sheet ...... 67

Part C – Information on the Income Statement ...... 120

Part D – Comprehensive Income ...... 149

Part E – Risks and Risk Management Policies ...... 151

Part F – Information on Capital ...... 210

Part H – Information on Related Parties ...... 219

Part L – Operating Segments ...... 223

Report of The board of Auditors on the Financial Statements as at December 31, 2012 ...... 229

Independent Auditor’s Report ...... 231

SHAREHOLDERS

NOT FEDERATION MEMBERS B.C.C. DEI CASTELLI DI MAZZARINO E BUTERA SCRL MAZZARINO CL B.C.C. DI CONVERSANO SCRL CONVERSANO BA BANCA DI BOLOGNA CREDITO COOPERATIVO SC BOLOGNA BO BANCA POPOLARE DELL'EMILIA ROMAGNA SCRL MODENA MO BANCA POPOLARE DI VICENZA S.C.P.A. VICENZA VI BANCA POPOLARE SANT'ANGELO SCRL LICATA AG ICCREA BANCA S.P.A. ROMA RM ICCREA HOLDING S.P.A. ROMA RM PROMOCOOP TRENTINA SPA TN

CASSA CENTRALE BANCA - CREDITO COOPERATIVO DEL NORD EST SPA C. R. DI - B.C.C. - SCRL LEDRO TN C.R. CENTROFIEMME - B.C.C. SCRL CAVALESE TN C.R. DELLA -B.C.C. SCRL PADERGNONE TN C.R. DI -B.C.C. SCRL BRENTONICO TN C.R. DI B.C.C. SCRL CALDONAZZO TN C.R. DI -B.C.C. SCRL ISERA TN C.R. DI -B.C.C. SCRL MEZZOCORONA TN C.R. DI E SAN MICHELE ALL'ADIGE-B.C.C. SCRL MEZZOLOMBARDO TN C.R. DI SAONE-B.C.C. S.C.R.L. TN C.R. DON LORENZO GUETTI DI QUADRA - FIAVE' - LOMASO BCC FIAVE' TN C.R.ALTA DI , CALLIANO, NOMI, BESENELLO TN CASSA RURALE ADAMELLO BRENTA BANCA DI CRED. COOP. SOC. COOP. TIONE DI TRENTO TN CASSA RURALE BASSA VALLAGARINA - B.C.C. SCRL ALA TN CASSA RURALE DI SCRL FOLGARIA TN CASSA RURALE DI - B.C.C. - SC LEVICO TERME TN CASSA RURALE DI MORI-VAL DI GRESTA B.C.C. SCPARL MORI TN CASSA RURALE DI RONCEGNO-B.C.C. SCARL RONCEGNO TN CASSA RURALE DI ROVERE' DELLA LUNA-B.C.C. SCARL ROVERE' DELLA LUNA TN CASSA RURALE DI - BANCA DI CREDITO COOPERATIVO - SC ROVERETO TN CASSA RURALE VALSABBIA TN CASSA RURALE VALLI DI E VANOI BCC TRANSACQUA TN CASSA RURALE VALSUGANA E TESINO - BCC - SC TN

CASSA CENTRALE RAIFFEISEN DELL'ALTO ADIGE SPA CASSA RAIFFEISEN LANA SC LANA BZ

FEDERAZIONE CALABRESE DELLE BANCHE DI CREDITO COOPERATIVO CREDITO COOPERATIVO CENTRO CALABRIA SCRL LAMEZIA TERME CZ

FEDERAZIONE CAMPANA DELLE BANCHE CRED. COOP. SCRL B.C.C. ALTO CASERTANO E BASSO FRUSINATE SCRL MIGNANO MONTE LUNGO CE B.C.C. DEI COMUNI CILENTANI SCRL MOIO DELLA CIVITELLA SA B.C.C. DI SCAFATI E CETARA SCRL SCAFATI SA B.C.C. IRPINA SCRL MONTEMILETTO AV B.C.C."SAN VINCENZO DE' PAOLI" DI CASAGIOVE S.C.P.A. CASAGIOVE CE

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FEDERAZIONE DELLE B.C.C. DELL'ABRUZZO E DEL MOLISE B.C.C. SANGRO TEATINA DI ATESSA CASTIGLIONE GIULIANO SCRL ATESSA CH

FEDERAZIONE DELLE B.C.C. DELL'EMILIA ROMAGNA SCRL B.C.C. DI SALA DI CESENATICO SC CESENATICO FC B.C.C. VALMARECCHIA SC RIMINI RN

FEDERAZIONE MARCHIGIANA B.C.C. SCRL B.C.C. DI CIVITANOVA MARCHE E MONTECOSARO SCRL CIVITANOVA MARCHE MC B.C.C. DI GRADARA SCARL GRADARA PU B.C.C. PICENA SC CASTIGNANO AP C.R.A. SAN GIUSEPPE CRED.COOP. CAMERANO SCRL CAMERANO AN

FEDERAZIONE SICILIANA DELLE B.C.C. SCRL B.C.C. DELLA VALLE DEL FITALIA SCRL LONGI ME B.C.C. LA RISCOSSA DI REGALBUTO SCARL REGALBUTO EN B.C.C. SAN FRANCESCO DI CANICATTI' SCRL CANICATTI' AG BANCA DEL NISSENO - CRED. COOP. DI SOMMATINO E SERRADIFALCO SC CALTANISSETTA CL

FEDERAZIONE TOSCANA B.C.C. B.C.C. DI MASIANO SC PISTOIA PT BANCA AREA PRATESE CREDITO COOPERATIVO -SOC.COOP. CARMIGNANO PO BANCA CRAS - CRED. COOP. CHIANCIANO TERME-SOVICILLE SC SOVICILLE SI BANCA DI PISTOIA - CREDITO COOPERATIVO SC PISTOIA PT CHIANTIBANCA - CREDITO COOPERATIVO - S. C. MONTERIGGIONI SI

FEDERAZIONE VENETA DELLE B.C.C. SCRL B.C.C. DI CAMPIGLIA DEI BERICI SCRL CAMPIGLIA DEI BERICI VI B.C.C. DI MARCON-VENEZIA SCRL MARCON VE BANCA ADRIA CREDITO COOPERATIVO DEL DELTA - SOC. COOP. ADRIA RO BANCA ATESTINA DI CREDITO COOP. SC ESTE PD BANCA DI MONASTIER E DEL SILE - CREDITO COOPERATIVO SCRL MONASTIER DI TREVISO TV BANCA VERONESE CREDITO COOPERATIVO DI CONCAMARISE SCRL CONCAMARISE VR

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CORPORATE OFFICERS

BOARD OF DIRECTORS BOARD OF AUDITORS

Serafino Bassanetti * Chairman Fernando Sbarbati Chairman

Florio Faccendi * Vice Chairman

Marcello Cola Mauro Camelia Standing auditor

Federico Marafini Anna Maria Fellegara Standing auditor

Roberto Mazzotti *

Giovanni Pontiggia * Augusto Bagnoli Alternate auditor

Pietro Roman Luigi Gaspari Alternate auditor

Nicola Valentini

Patrizio Vincenzi *

* Member of the Executive Committee

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heard the director’s report on operations, the

ICCREA BANCAIMPRESA S.p.A. report of the Board of Auditors and the report

Registered office in Rome, Via Lucrezia Romana of the independent auditors; allocation of net no. 41/47 profit for the year and consequent

Share capital €474,565,250.50 fully paid-up; resolutions;

Company Register of Rome and tax ID no. 2. Appointment of members of the Board of

02820100580, VAT registration number Directors, subject to determination of their

01122141003; entered in the Register of number; appointment of the Chairman of the pursuant to Article 13 of Legislative Decree Board of Directors; determination of the

385/1993 at no. 5405, ABI code 3123.7 remuneration of the directors;

Company subject to the management and control 3. Appointment of members of the Board of of Iccrea Holding S.p.A. of Rome – Iccrea Banking Auditors, comprising standing auditors and

Group alternate auditors; appointment of the

Chairman of the Board of Auditors;

CALLING OF ORDINARY AND determination of the remuneration of the EXTRAORDIANRY standing auditors; SHAREHOLDERS’ MEETING 4. Remuneration and incentive policies Shareholders are called to the Ordinary and pursuant to the instructions of the of Extraordinary Shareholders’ Meeting to be ; held at the registered office in Rome, Via 5. Directors and officers civil liability Lucrezia Romana no. 41/47, at 12:00 noon at insurance. first call on April 23, 2013 and, if necessary, at second call on April 24, 2013, at the same Extraordinary business place and time, to discuss and resolve the 1. Amendments of the By-laws – proposed following: amendment of Article 20 of the By-laws.

AGENDA Ordinary business Participation is open to shareholders whose

1. Examine and approve the financial shares are deposited at least five days prior statements at December 31, 2012, having

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to the Meeting at the registered office or with Iccrea Banca S.p.A., Rome office.

For the Board of Directors

The Chairman Serafino Bassanetti

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Report on operations

1. Report on Operations

1.1. Iccrea Banking Group

The Iccrea Banking Group is formed by a group of companies working in partnership to provide products and services, consulting and active support to about 400 mutual banks, helping them cover the territory in which they operate. The Iccrea Group companies offer advanced financial tools, investment and pension management products, insurance products, credit solutions for businesses, corporate finance and, in the international segment, import/export assistance and support for international expansion. Iccrea Holding is the parent company of the Iccrea Banking Group, and its capital is in turn held by the mutual banks.

The structure of the Iccrea Banking Group.

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2. The macroeconomic According to the latest OECD estimates, after environment slowing to an average of 2.9% in 2012, world GDP growth will pick up to 3.4% in 2013 (Table 1). Activity is projected to expand unevenly in the World economic activity remained weak in the different economies. Growth is forecast at 2.0% in second half of 2012. Despite signs of strengthening the United States and at just under 1.0% in Japan in some emerging countries in the final months of and the United Kingdom, while the euro area is the year, the outlook for global growth is still expected to experience further stagnation. By subject to considerable uncertainty, above all in contrast, in the main emerging economies the connection with the crisis in the euro area and the expansion should be brisker than in the advanced management of government fiscal imbalances in economies and stronger than last year. The world the United States, where risks remain despite economic outlook remains subject to downside avoiding the so-called fiscal cliff at the start of this risks, particularly in connection with the year. During 2013, the recovery is likely to remain management of imbalances and reforms in the euro fragile and to be marked by substantial differences area and with developments in the United States. between regions and countries, although the consensus among analysts is that the world economic expansion will gain pace in 2014. 2.1. The Euro Area Table 1 Selected macroeconomic projections Economic activity in the euro area contracted in (percentage changes on the previous year) the summer for the second consecutive quarter, Consensus although less sharply than forecast. The OCSE contraction continued in the last quarter of the GDP Economics year, reflecting the weakness of domestic demand. 2012 2013 2014 2012 2013 After the ECB’s announcement of outright World 2.9 3.4 4.2 - - monetary transactions in the summer and the progress made at European level in managing fiscal Advanced countries imbalances and developing a single supervisory Euro area -0.4 -0.1 1.3 -0.5 -0.1 mechanism for banks, sovereign debt tensions Japan 1.6 0.7 0.8 1.8 0.6 subsided significantly, helping to ease monetary United Kingdom -0.1 0.9 1.6 -0.1 1.1 conditions. The GDP of the euro area contracted by United States 2.2 2.0 2.8 2.2 1.9 0.1% in the third quarter compared with the second, reflecting weak domestic demand, which Emerging economies has been falling since the middle of 2011. Gross Brazil 1.5 4.0 4.1 1.1 3.4 fixed investment diminished by 0.6% and household China 7.5 8.5 8.9 7.7 8.1 consumption stagnated. India (1) 4.5 5.9 7.0 5.5 6.5 Russia 3.4 3.8 4.1 3.6 3.4 The available information points to a further broad contraction in euro-area economic activity in the World trade (2) 2.8 4.7 6.8 - - last quarter of the year, most likely affecting the Source: OECD, Economic Outlook , no. 92, November 2012; leading countries as well. Consensus Economics, December 2012. (1) Data refer to fiscal year (2) Goods and services. In December the €-coin indicator, which provides an estimate of the three-month change in euro- In the United States GDP grew by 3.1% on an area GDP net of the most volatile components, annualized basis in the third quarter compared stood at the negative values recorded since the with the second, while in Japan GDP contracted summer (around -0.3%; Figure 1). Confirmation of sharply again, falling by 3.5% on an annualized persistence of weak domestic demand came from basis in the third quarter (as against a 0.1% the renewed decline in new car registrations in the contraction in the second). autumn and in retail sales, which remained slack. Economic activity in the main emerging economies continued to slow, reflecting the negative impact of global economic developments, in some cases partly offset by the resilience of domestic demand. The Chinese economy grew by 7.4% in the third quarter year on year, compared with 7.6% in the second. In India the deceleration in activity was more pronounced (from 3.9% to 2.8%). In Brazil the rate of GDP growth remained low but improved from 0.5% to 0.9% thanks to higher net exports and consumption.

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ISTAT data published in February show the €-coin indicator and euro-area GDP Fig. 1 industrial production index (average value for (January 2013) 2012) falling by 6.7% compared with the previous year, the worst result since 2009. There was an even more dramatic decline in orders, which fell by 9.8%. In the fourth quarter, inflation (measured by the twelve-month change in the national consumer price index) fell steadily to 2.3% in December. The reduction in inflationary pressures reflected both the deceleration in energy prices and the dissipation of the impact of the indirect tax increases introduced in autumn 2011.

Sources: and Eurostat Table 2

Macroeconomic conditions in Italy (percentage changes on the previous period, unless otherwise On the supply side, industrial production indicated) contracted by 2.3% on average in October and 2011 2012 November, continuing the trend under way for Q4 (1) Q1 Q2 Q3 about a year. Signals coming from recent business surveys are less gloomy, however: indicators of GDP -0.7 0.4 -0.8 -0.7 -0.2 confidence in the industrial sector and the Total imports -2.6 0.6 -3.5 -0.5 -1.4 purchasing managers’ index in the service sector National demand (2) -1.6 -1.0 -1.7 -1.2 -0.8 improved slightly. National consumption -1.0 -0,1 -1.1 -0.8 -0.8 household spending -1.2 0.1 -1.4 -1.2 -1.0 The cyclical weakness overtook even the other (3) -0.6 -0.8 -0.1 0,1 -0.3 supposedly sturdiest economies, such as France and Gross fixed investment -2.6 -1.8 -4.1 -2.0 -1.4 Germany, where industrial production declined in construction -0.7 -2.6 -3.6 -1.2 -1.4 October-November by an average of 1.7% and 2.7%, other investment goods -4.6 -1.0 -4.8 -2.9 -1.4 respectively. The professional forecasters surveyed Changes in December by Consensus Economics project a in stocks decline in euro-area GDP growth of 0.1% on and average in 2013, compared with that of 0.4% in valuables 2012, although, confirming the uncertainty over (4) -0.3 -0.5 0.0 -0.1 0.2 the economic outlook for the area, the dispersion Total exports 0.5 6.0 -0.5 1.0 0.5 of projections is very wide. Broadly similar Source: Istat forecasts were released in December by the (1) Data not adjusted for calendar effects - (2) Includes the change in stocks Eurosystem experts, with GDP growth projected in and valuables - (3) Expenditure of general government and non-profit institutions a range between -0.9% and +0.3% in 2013. serving households. - (4) Contributions to GDP growth on previous period.

2.2. The Italian Economy 2.3. The Outlook for 2012 - 2013

Although the recession in the Italian economy Compared with those published in July, the growth continued into the second half of last year, projections presented in the Economic Bulletin of although it became less severe. There are still no the Bank of Italy reflect a downward revision of the signs of a reversal in the early months of 2013 and expansion in world trade, in line with the the economy is expected to remain weak in the projections of the leading professional forecasters. first quarter of 2013, with a return to modest The lowered expectations for world trade reflect growth only in the second half of the year. the adjustment process under way in the euro In the third quarter of 2012, Italy’s GDP diminished area, the uncertainty that surrounded US fiscal at a much more modest pace, contracting by 0.2% policy until December – which has still not been (Table 2), compared with the quarterly contraction dispelled entirely - and the sharper than forecast of approximately one percentage point in the slowdown in the emerging countries. previous three quarters. Domestic demand fell, Analysts agree, however, that world economic reflecting the persistent weakness of household growth will gain strength in 2014. A positive consumption and gross fixed investment. The contribution to the prospects for economic growth recession persisted in the fourth quarter as well, in Italy comes from the more favorable outlook for with the economic indicators showing a renewed yields on Italian government securities. Their fall in GDP, the sixth in succession, of around half a reduction reflects the ECB’s announcement of percentage point. outright monetary transactions, the progress made at the European level in managing the sovereign debt crises and the Greek situation, which is slowly

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improving, as well as the credibility of national it is convinced that lending conditions appear adjustment programs. The yield on ten-year BTPs satisfactory. According to the ECB, inflation should has fallen from around 600 basis points in July to fall below 2% in 2013. below 450 points. The hypothesis adopted in this The average for 3-month Euribor in December 2012 scenario is that these improvements will be came to 0.19%, the same as the average for consolidated and will gradually spread to the credit October 2012 (-124 basis points from December market, which is expected to return slowly to 2011 – Fig. 3). normality during the course of this year.

Developments in Euribor Table 3 1 month 3 months 12 months Macroeconomic conditions in Italy (percentage changes on previous year, unless otherwise 2.50% indicated) 2.00%

2012 2013 2014 1.50% Val% 1.00%

GDP (1) -2.1 -1 0.7 0.50%

0.00%

Household consumption -4.1 -1.9 0.2 Collective consumption -1 -1.8 -0.4 Fig. 3 Gross fixed investment -8.9 -2.3 2.5 Source: Euribor.it website, historic monthly averages for 1-month, 3-month Total exports 1.8 2.2 4.7 and 1-year rates.

Total impoarts -8.1 -0.3 4.3

Chagne in stocks (2) -0.5 0.1 0 HICP (3) 3.3 1.8 1.7 Competitiveness of exports (4) 4 -1.2 -0.2 3. Performance of mutual Sources: Bank of Italy and Istat

(1) Change estimated on basis of seasonally adjusted quarterly data. (2) Contribution to GDP banks within the banking growth - percentages. (3) Harmonized Index of Consumer Prices. (4) Comparison with prices of foreign manufactured goods. system

According to Bank of Italy estimates published in the January Economic Bulletin, GDP contracted by At December 31, 2012, there were 394 mutual banks (55.7% of all banks operating in Italy), with 2.1% on average in 2012, which is essentially in line with the forecasts made in July (Table 3). GDP in 4,448 branches (13.6% of the national banking system). Over the last twelve months, the number 2013 is projected to contract by 1.0% on average and to resume growth in 2014 (0.7%). The forecast of branches increased by 37 (+0.8%). Mutual banks can be found in 101 provinces and 2,718 for 2013 has been revised downwards by 0.8 municipalities. percentage points with respect to the scenario presented in July, mainly to reflect the The number of shareholders totaled 1,135,096, an deterioration in the international economic increase of 3.5% for the year. The number of situation as well as the effects of uncertainty and mutual bank employees at December 31, 2012 persistently tight credit conditions. In this scenario, at the end of the forecasting totaled around 37,000, essentially unchanged from the previous year. period output will still be almost 7 percentage points below the 2007 peak. 3.1. Lending

2.4. Monetary and Financial Markets The year 2012 was a relatively positive one for the mutual banks, which posted growth in lending and At its January 10, 2013 meeting, the Governing funding. At December 31, 2012, gross lending to Council of the European elected to mutual bank customers amounted to €138.9 billion, leave the policy rate at 0.75% (after reducing it last essentially unchanged year-on-year, which is better summer as from July 11, 2012). It also decided to than the performance of the banking system as a keep the interest rate on the marginal lending whole (-0.9%), with the mutual banks having a facility at 1.50% and that on overnight deposits at market share of 7.1%. Taking second-level banks 0%. The Federal Reserve policy rate remained into account, lending for the category totaled unchanged within a range of between 0% and €151.8 billion, representing a market share of 7.7%. 0.25%. The clarified that it As of December 31, 2012, lending to business has no further plans to inject liquidity into customers by mutual banks totaled €91.4 billion, European banks (LTROs) since the banks are not down 1.3% year-on-year (-3.5% for the banking currently experiencing liquidity problems and that system as a whole). The mutual banks’ market share of lending to businesses came to 9.5% as of

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December 2012. If loans to businesses by second- of December 2012). Within customer funding, level banks are included, lending to businesses current accounts, CDs and bonds account for a exceeded €102 billion, with a market share of significantly larger share than they do in the 10.7%. system average.

As concerns loan recipients, loans to consumer The capital of mutual banks (share capital and households rose by 0.5%, compared with a 0.9% reserves) at September 2012 came to €19.7 billion, decline in the banking system average. The market a 0.9% increase year-on-year. share of the mutual banks in this area came to 8.6%. By contrast, loans to producer households, In September 2012, the tier 1 ratio and the capital fell by 1.4% (-3.3% banking system average); the ratio for mutual banks came to 13.9% and 14.9%, market share of the mutual banks came to 17.5%. respectively. Lending to non-financial companies fell by 1.2% (- 3.5% system average) for a market share of 8.6%. Comparative data for the banking system is only available through September 2012 and reveal a Once again in 2012, there was a gradual significant gap in favor of the mutual banks. deterioration in credit quality, as seen in the previous year. At December 31, 2012, bad debts had risen by 25% for the year, substantially higher MUTUAL BANKS BANKING SYSTEM Capital position than the increase for the banking system as a Dec-09 Dec-10 Dec-11 Sep-12 Dec-09 Dec-10 Dec-11 Sep-12 whole (+16.5%). Substandard loans for mutual CAPITAL RATIO 15.0% 15.2% 15.1% 14.9% 12.0% 12.4% 13.0% 14.3% banks increased at a slightly slower pace, rising by TIER 1 RATIO 14.1% 14.1% 14.0% 13.9% 8.9% 9.3% 10.0% 11.5% 24.2% for mutual banks versus 29.8% for the system average (source: Federcasse.)

The ratio of risk-weighted assets to non-risk- In December 2011, the ratio of gross bad debts to total lending for the mutual banks was 6.5%, in weighted assets came to 49.6% in September, slightly down from twelve months earlier (50.3%), line with the banking system average (6.4%). whereas the ratio between on-balance-sheet, risk- weighted assets and on-balance-sheet, non-risk- The ratio of gross substandard loans to total lending at December came to 6.1%, compared with weighted assets came to 57.3%, also a slight decline from a year earlier(61.2%). 3.9% for the banking system as a whole.

Regarding business customers specifically, the ratio of bad debts to total lending came to 8% for mutual banks, sharply up in in recent months but still nearly two percentage points lower than the ratio for the banking system (9.7%). 4. Market developments

The rapid increase in restructured loans (+44.2% year-on-year) and in loans past due or overlimit 4.1. The Credit Market (+57.6%) continued into the fourth quarter of 2012. In 2012, bank lending (source: ABI) stabilized. Total impaired loans at December 31, 2012 equaled Initial estimates indicate that total lending to 14.4% of total gross lending (12.1% for the system Italian residents (the private sector plus general average). government) amounted to €1,923 million, a year- on-year decline of 1.3%. More specifically, lending 3.2. Funding and Capital to the private sector fell by 2%, compared with a rise of 1.8% in 2011. A breakdown by maturity Total funding by mutual banks exceeded €183 shows medium/long-term lending (i.e. beyond 1 billion at the end of 2012, an increase of 9.8% on year) falling by 2.8%, while short-term lending (up the previous year, compared with a decrease of to 1 year) declined by 1.2%. 0.8% for the banking system as a whole. The strong growth remains primarily attributable to interbank Loans to non-financial companies posted a year-on- funding, which reflects the exceptional expansion year decline of around 3.4% at the end of in early 2012 and which rose 75.2% for the year (- November 2012, compared with growth of 4.3% in 3.5% banking system average). 2011. Customer funding (including bonds) rose by 2.4% (0.4% for the banking system). At the end of November 2012, gross bad debts Of total mutual bank funding 83.9% was totaled €122 billion, sharply higher than in 2011 represented by customer funding and 16.1% by (+16.8%). As a percentage of total lending, bad interbank funding. This composition differs from debts came to 6.1% at the end of November 2012. the system average, where funding from banks At the end of November 2012, bad debts net of accounts for a considerably larger share (30.4% as writedowns came to €62.2 billion (+22.9%). The

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ratio of net bad debts to total lending came to increasingly oriented on the development of 3.23%, compared with 2.62% at November 2011 manufacturing, commercial and service firms. (source: ABI). The commercial targets for 2012 were established based on a growth matrix that places emphasis on 4.2. The Leasing Market the products that make the greatest contribution and that have a profile capable of ensuring an Assilea reports that the leasing market plunged in appropriate risk/return balance. This strategy has been put into action through new lending policies 2012: the volume of new contracts amounted to €16.2 billion, down 34.7% from 2011. The number and greater customer selection capacity, which has been achieved by refining the evaluation process of contracts fell as well, although less dramatically, decreasing by 14.3%. The overall and the rating system. performance of the industry reflects the significant contraction in real estate and energy leasing, In 2012, given the difficult condition of the where contract values are well above the average. interbank market that began in the summer of 2011 and the resulting difficulties in transferring the The industry is feeling the effects of the prolonged greater cost of funding on to customers, the Bank economic recession, which has led to a decline in decided to pursue a non-expansionary strategy for consumption and a gradual contraction in industrial business growth, particularly in the first half of the output, which has translated to an estimated fall in year. In 2012, the Bank reported new credit of gross capital expenditure of 8.2% in 2012. The €821.8 million (signed contracts), €791.2 million of situation was made even more complicated by the which related to loans and €30.6 million related to crisis in the real estate sector and the lapsing of guarantees. many incentives connected with renewable energy. Loans declined by 44.5% from the previous year in value terms and by 48.3% in terms of number of transactions. ASSILEA MARKET 2011 2012 2011 % comp. % change 2012/11 Product No. Amt. No. Amt. No. Amt. No. Amt. Vehicles 134,422 4,436,845 157,334 5,679,334 52.1% 27.3% -14.6% -21.9% Total lending Equipment 117,766 5,673,308 112,439 7,092,267 45.6% 35.0% 4.7% -20.0% 2012 2011 % comp. 2012 Annual change Air, marine and rail 397 385,155 1,224 783,155 0.2% 2.4% -67.6% -50.8% Product line Real estate 3,848 3,577,353 9,974 7,024,415 1.5% 22.0% -61.4% -49.1% No. Amt. No. Amt. % No. % Val. % No. % Val.

Renewable energy 1,577 2,153,980 2,163 4,027,195 0.6% 13.3% -27.1% -46.5% Leasing 3,206 392,550 6,413 948,239 92.1% 49.6% -50.0% -58.6% Total Leasing 258,010 16,226,641 283,134 24,606,366 100.0% 100.0% -8.9% -34.1% Ordinary lending 183 244,401 259 298,195 5.3% 30.9% -29.3% -18.0% Other M/L-term lending 69,671 1,446,567 76,524 1,630,015 21.3% 8.2% -9.0% -11.3% Leasing + Other lending 327,681 17,673,208 359,658 26,236,381 100.0% 100.0% -8.9% -32.6% Corporate finance 36 108,901 31 146,664 1.0% 13.8% 16.1% -25.7% International 56 45,380 34 33,479 1.6% 5.7% 64.7% -35.5% Total 3,481 791,232 6,737 1,426,577 100.0% 100.0% -48.3% -44.5% In 2012, there was a decline in volumes and new Thousands of euros lending in all the leasing segments, with the following macro-trends observed:

The contraction in new lending was generalized • a 17.5% decline in the number of vehicle leases and a 23.5% reduction in the value of those and concerned, to varying extents, all segments: leases. • leasing, with €392.6 million in new • a 7.1% reduction in the number of equipment leases and a 21.4% decline in the value of those contracts (€948.2 million in 2011), fell by leases. 58.6%; • corporate finance, with €109 million (€147 • very large reductions in the real estate (-52.6% in number and -49.1% in value) and energy (- million in 2011), saw volumes contract by 25.7%; 25.1% in number and -46.5% in value) segments. • ordinary financing, which posted €244 • a decline of about 52% in leasing by the leading banking groups. million in new lending, with an 18% decrease in value and a 29.3% decline in

the number of transactions, is the segment that saw the least decline; 5. The development of • the international segment, launched in 2011 with the goal of providing financing, Iccrea BancaImpresa consulting and other services to assist the business customers of mutual banks in import/export transactions and in 5.1. New Lending developing their businesses internationally, is the only area to buck The performance of lending for the Bank in 2012 the downward trend, generating €45.4 reflects both the changing economic and financial million in loans in 2012 (€33.5 million in landscape and the repositioning of the product 2011) and growing 35.5% in terms of portfolio that has been under way in recent years volume. with the goal of providing a service that is

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The Bank’s market share at December 31, 2012, Ordinary lending fell by 18.0%, compared with was 4.1%, putting us in 8th place in the Assilea 2011. This result is due to the generalized decline ranking for the leasing industry. in demand in business investment and the mentioned commercial decisions made in the first 5.2. Leasing half of the year. Mortgage lending went against the trend in other products, posting slight growth In 2012, leasing accounted for 49.6% of all new (1.5%) over 2011. Conversely, real estate credit business, compared with 66.5% in 2011. This lines declined by 78.8% during the year due mainly decline is attributable to the successful expansion to greater selectiveness in approving transactions in the range and diversification of products offered and the Bank’s decision to reduce lending in undertaken by the Bank in recent years. The Bank construction and real estate generally. offers lease options for all the usual product areas:

real estate, energy, equipment, vehicles and marine. Ordinary lending 2012 2011 Comp. % 2012 Annual change Leasing Product line 2012 2011 % comp. 2012 Annual change No. Amt. No. Amt. % No. % Val. % No. % Val. Product line No. Amt. No. Amt. % No. % Val. % No. % Val. Mortgage loans 166 229,015 209 225,591 90.7% 93.7% -20.6% 1.5% Auto 1,118 32,031 2,499 74,186 34.9% 8.2% -55.3% -56.8% Real estate credit lines 17 15,386 50 72,604 9.3% 6.3% -66.0% -78.8% Industrial vehicles 309 31,062 605 56,978 9.6% 7.9% -48.9% -45.5% Total 183 244,401 259 298,195 100.0% 100.0% -29.3% -18.0% Equipment 1,372 176,977 2,247 289,263 42.8% 45.1% -38.9% -38.8% Thousands of euros Marine 10 1,945 30 8,219 0.3% 0.5% -66.7% -76.3% Real estate 383 121,306 982 440,401 11.9% 30.9% -61.0% -72.5% Renewable energy 14 29,229 50 79,192 0.4% 7.4% -72.0% -63.1% 5.4. Corporate Finance Total Leasing 3,206 392,550 6,413 948,239 100.0% 100.0% -50.0% -58.6% Thousands of euros The corporate finance segment posted a decline in

2012 (-25.7%). The decrease was in large part As mentioned above, the year closed with a attributable to the sudden halt in operations in the decrease of 58.6%, continuing the trend seen in energy sector and to the uncertainty surrounding 2011. The decline in volumes was due in part to the the legislative changes related to the fourth strategy of concentrating lending to customers “Energy Account” (subsidies for renewables), which through the mutual bank corporate channel, had a noticeable impact on the commercial thereby essentially abandoning, in accordance with performance of project finance operations. The the parent company’s policy, third-party channels, poor outlook for the domestic economy had a which in 2012 accounted for just 4.4% of total negative impact on the acquisition finance volumes. segment. The lack of strong demand is prompting The contraction in volumes impacted all product companies to be more cautious in terms of business lines, with the greatest reduction in percentage growth and increasing production capacity, which terms in real estate (existing and to be built) and obviously led to a decline in transactions. By in energy leasing. Real estate leasing posted a contrast, financing for the public sector (both decline of 61% due to the national crisis in the leasing and project finance operations) posted industry and to the decision to reduce the Bank’s satisfactory results thanks to the strengthening of exposure to longer-term transactions. Leasing in the organization and the success of this business the energy sector posted a drop of 72% due to the with the enterprises and government entities of lapse of many incentives for renewable energy. interest to the mutual banks. This was followed by slightly smaller declines for the auto (-55.3%), industrial vehicles (-48.9%), equipment (-38.9%) and marine (-66.7%) segments. 5.5. International Commercial performance in the leasing segment, which remains the main financial tool used by SMEs This new area of business, which was started in in making investments, was certainly affected by 2011 in order to meet the financial and advisory the economic crisis, which has severely impacted needs of the business customers of the mutual the entire productive system and, therefore, banks in relation to international expansion, posted investment in durable goods. The Bank has an increase in volumes over the previous year. This continued to closely monitor counterparty risk, is due to a variety of factors: the business line is particularly in the industry segments most affected the newest and in 2012 it began to see the results by the crisis, which has resulted in more rigorous of marketing and development efforts under way selectiveness in terms of both transactions and the since its establishment. Furthermore, exporters categories of products financed (equipment in represented the best and healthiest part of the particular), and this has resulted in a restriction in domestic economy. the potential market. During the year, the segment posted €45.4 million in transactions, up 35.5% over 2011 in terms of volumes. In addition to outright lending, the 5.3. Ordinary Lending segment also comprised €30.6 million in guarantees and €131.1 million in documentary credit in 2012.

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A total of 283 mutual banks were operational in agreement signed between CDP and the this segment. ABI, Iccrea BancaImpresa, in its capacity as agent bank, disbursed around €1.4 billion in funding to SMEs;

• Guarantee Fund: as servicer for the International guarantee fund established to support 2012 2011 % comp. 2012 Annual change SMEs and managed by Mediocredito No. Amt. No. Amt. % No. % Val. % No. % Val. Ordinary lending 40 38,750 24 27,410 71.4% 85.4% 66.7% 41.4% Centrale, Iccrea BancaImpresa entered Bill discounting 6 2,691 9 5,899 10.7% 5.9% -33.3% -54.4% into agreements with around 94 mutual Discounting of letters of 10 3,939 1 170 17.9% 8.7% 900.0% 2,217.1% credit banks and handled 1,265 requests Total 56 45,380 34 33,479 100.0% 100.0% 64.7% 35.5% submitted during the year, 480 of which Thousands of euros were approved by the Fund for a total of

€42.8 million in guaranteed loans. 5.6. Hedge Derivatives Activities related to managing and disbursing the The Bank’s offering of derivatives is intended to subsidies for leasing transactions fell from the help customers hedge their interest rate risk, both previous year, due both to the crisis in the market for direct financing and financing provided by the and the decrease in domestic subsidies. In 2012, mutual banks. there were 117 new transactions totaling €40 The derivatives that the Bank provides have been million. designed to protect businesses from risks related to changes in interest rates and come with the following options: locking in interest costs in advance; setting a specified level of protection 6. Organizational against a rise in interest rates while also offering the benefit of lower costs if interest rates fall; or developments limiting the range of fluctuation in borrowing costs. Our derivatives business involves executing transactions with the customer with a matching 6.1. Organizational Initiatives transaction of the opposite sign with Iccrea Banca. This process essentially eliminates the Bank's exposure to market risk. The effects of the crisis have engendered During 2012, 94 derivatives transactions were considerable uncertainty that, as perhaps never carried out with a total notional value of €150.8 before, requires businesses to be able to respond million, a decline of 42. quickly and, above all, to adapt to the various 3% in notional value on 2011. scenarios that could arise in the future. This has prompted the Bank to revisit our organizational Total Bank arrangements in order to adapt our business model 2012 2011 % change Product Initial Initial Initial to the new challenges of the market, profitability No. Margins No. Margins No. Margins notional notional notional Certezza 64 112,314 1,788 42 135,083 1,442 52.4% -16,9% 23.9% and risk. Versatilità 12 15,782 255 17 27,382 193 -29.4% -17.0% 31.7% Stabilità 18 22,728 403 81 98,847 1,772 -77.8% -84.0% -77.3% Total 94 150,824 2,445 140 261,312 3,408 -32.9 -42.3% -28.2% Thousands of euros On this basis, the Bank sought to adjust the model adopted in 2010 to meet the demands of this new 5.7. Facilitated Credit environment, the new strategic approach and our business needs, without undermining the pillars The integrated, comprehensive management of all that supported the previous reorganization (i.e. aspects of subsidies seeks to continue increasing making the individual business units more directly the effectiveness of the Bank’s contribution to accountable for operating performance, developing the system to which we belong. specialization, simplification, integration and cross-selling). The service involves providing servicing for others (the mutual banks) and managing/disbursing local These organizational changes, implemented in April and national subsidies in support of the Bank’s 2012, resulted in the reformulation of the areas of leasing and lending products. responsibility of the various lines of business, a redefinition of the areas, and a new allocation of Servicing related to: roles and responsibilities to a number of corporate and support units. The criterion adopted in • Cassa Depositi e Prestiti (CDP): the fourth segmenting the market into these two new Business tranche in which 150 mutual banks are Areas is size by revenues. expected to take part by December 31,

2013. At present, 76 of the mutual banks have signed on. Under the previous The Corporate Business Area serves larger businesses (with revenues of more than €20

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million), which typically need to engage in development of new lending and, in keeping with corporate finance and other transactions to support our service mission, the expansion of the mutual their internationalization efforts, in addition to banks’ customer portfolio. more traditional financing transactions (e.g. loans, leasing and guarantees). The efforts of the Bank through the mutual banks, This refinement of the organization has led to a as demonstrated by the “mission” indicator, which strengthening the Corporate Relationship Manager’s measures the quality of the relationship between role as a single, highly qualified liaison, charged the Bank and the mutual banks, stood at 94.6% in with building a closer relationship with larger terms of the number of contracts and 91.5% in the customers by revenues and export orientation. volume of lending in 2012, essentially the same as in 2011. The number of mutual banks active in developing lending (275) was stable compared with The Enterprise Business Area offers all “basic” 2011. Around 50% of the ordinary lending agreed in products (e.g. ordinary lending, leasing and 2012 was originated by the top 35 mutual banks, guarantees) to smaller companies. It also handles while 80% of loans agreed originated with 84 residential construction loans, farm credit, and mutual banks. relations with Fondo Sviluppo. In order to expand the partnership with the mutual banks while ensuring continuity, marketing, new 6.2. The Bank Network product development, communication and training initiatives were undertaken in 2012 that stirred renewed interest and rising participation on the Despite its effects on the organization of the part of the mutual banks. More specifically, info- commercial network, the revision of the business training on new financial tools and products model left the number of branch offices unchanged offered by the Bank (international operations, at 15, so as to continue providing effective factoring, the Jessica project) generated coverage of the territory for both the mutual banks considerable interest; 80 training initiatives for a and their SME customers. The two representative total of 760 hours of in-class training were provided offices in Pescara and Rende (Cosenza) also remain to 1,150 employees of 150 mutual banks. active, as does the one in Tunis. With a view to strengthening synergies with the mutual banks, in 20,12 the Bank began to offer With the overhaul of the business model, the Bank internships at its headquarters for younger mutual also made changes to the organization of bank employees assigned to the corporate areas of distribution in order to adapt it to the new range of those mutual banks. products and services on offer. As usual, in 2012, there were numerous opportunities to meet with the mutual banks, through the established collegial bodies, to 6.3. Marketing and the Mutual Bank conduct a productive discussion of processes, Network development initiatives and product range.

The revision of the business model also involved the Bank’s marketing efforts. The marketing organizational structure cuts across all Business 6.4. 2012 Projects, Initiatives and Areas so as to provide a unified vision and the Other Activities support needed to achieve strategic targets. Usually, the activity of a strategic nature The projects and other initiatives completed in conducted by the Marketing unit focuses on the 2012 also reflect the current state of the economy mutual bank system with direct marketing and the consequent strategies adopted by the initiatives aimed at attracting, jointly with the Bank. As such, projects aimed at improving the mutual banks, new business customers. organization and rationalization of processes were the ones on which the greatest emphasis was In 2012, a year characterized by difficulties in the placed. capital market, the Bank’s marketing activity During the year, design efforts focused on the need focused on developing products more consistent to: with the maturity of funding available on the • improve the application architecture to market and on developing the customer base in support the new way of monitoring the order to continually improve the quality of the business as the company shifts “from leasing portfolio. During the year, the Bank undertook company to corporate bank”; targeted campaigns focused on strategic products • strengthen IT processes and tools to manage and those most recently introduced, such as risks at all stages (acceptance, portfolio international and factoring products, as well as monitoring, management of non-performing campaigns targeted at the mutual banks’ top loans); customers, achieving excellent results in terms of redemption. These initiatives resulted in the direct

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• support the organizational transformation of activities (guidance, tools, policy and monitoring) the company. previous performed by the Risk Management and Credit Departments. The main projects completed during the year were: The Credit Risk Unit is organized around the • Mo.Cre, with the integration of more following functions. advanced monitoring tools, the development of a sophisticated customer file and the Application processing quality and policy integration of analysis processes with the Development and updating of the policy on management of recovery actions; assuming and managing risk, either acting on a • International (launch of Back-Office Finance direct proposal, i.e. on the basis of information and daily reporting) and Multi-currency gathered while conducting application processing Accounting development; quality activities, or at the request of other Bank • Front-end development, unifying the departments. Definition of development of new management of processing and decisions on methodologies and criteria for evaluating loans in the International segment with the counterparties (new and existing). AOL2 platform. Controlling the quality of processing activities with regard to verifying the adequacy, effectiveness and In October 2012, new Ge.FI procedure forms were compliance over time of the policies, processes and issued for inputting and managing new lending assignment of powers in the assumption of credit transactions (apart from opening overdrafts and risk. guarantees). Exposure performance monitoring The following long-term projects were begun in Monitoring the Bank’s asset portfolio and 2012 and are expected to be completed in 2013. supporting credit management and recovery activities based on information acquired during risk • New Loan Platform (Ge.Fi.) – Extending the use monitoring and quantitative analysis. of the application to all Iccrea BancaImpresa Second-level controls of the adequacy, loan contracts through the gradual release of effectiveness and compliance over time of the software updates by the supplier; policies, processes and assignment of powers in • CRG – Eliminating the use of the branch current credit management, classification and recovery accounts that Iccrea BancaImpresa holds at processes. other banks, through the use of the Daily Monitoring capital requirements and prudential Settlement Account and integration with the supervision indicators, producing the relevant interbank network; reports.

• EOG- Organizational Development of IT Governance – creation and adoption of a Assessment methodologies and models complete IT governance model; Management of risk assessment models, ensuring that they are appropriate and consistent with • Past Due and Overlimit Position Management - regulatory requirements, industry best practices, Integration and introduction of an application internal operational needs and the guidelines for classifying past due and overlimit positions, established by the Parent Company. Management shifting from a transaction-based approach to a and maintenance (updates/corrections) of expert counterparty-based approach; assessment systems (the rating system). Continual • Simplification and decentralization – Critical evaluation of the performance of measurement review of controls (processes and applications) models. and policies concerning exceptions and powers,

aimed at streamlining and decentralizing loan Strategic risk positioning approval and execution processes. Tracking developments in the macroeconomic

situation, the situation in the Bank’s markets and the competitive environment with a view to 7. Credit Risk Management prospective development and the associated risk. Analysis of the Bank’s business system and customer portfolio broken down by business sector The polices for assuming and managing credit risk and/or locations of the companies in order to have always been of utmost important for the define strategies and policies for geographical and Bank, so much so that in recent years the Bank has sectoral allocations of new business or to support gradually adopted rules that better reflect the credit risk measurement/management. changes that have occurred in the business areas. In parallel with the refinement of the Bank’s Following the reorganization undertaken in 2012, business model, shifting it from function-based the analysis of counterparty quality, in the form of structure to one based on the size and needs of the monitoring the most significant positions in terms customer, in 2012, the “Credit Risk” unit was of amount and rating and/or classification issues, created, grouping all those risk management which was previously assigned to the Credit

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Department, was reassigned to the Bank’s business areas. 8. Developments in the With regard to the latter activity, at the end of Balance Sheet 2012, the project to implement a work-flow organization system and IT tools to support the activity (operational and control) was completed. At December 31, 2012, the Bank’s loan portfolio had contracted by 5% from 2011. Risk Management also intensified its ongoing analysis of the credit risk profile of the Bank’s loan As will be discussed below, net impaired assets portfolio. The Bank’s top management, Board of increased by 8.5%, although significant provisions Directors and control bodies were kept regularly were recognized. informed about the monitoring carried out and the 2012 2011 Change results of the analyses performed. The reporting Type of lending Net credit % share Net credit % share Amt. change % change system was further refined to improve the Current accounts 408,075 4.7% 439,266 4.7% - 31,191 -7.1% M ortgage loans 1,234,985 14.1% 1,169,286 12.6% 65,699 5.6% representation of the various drivers that underlie Leasing 5,300,959 60.4% 5,787,324 62.4% - 486,365 -8.4% developments in the credit risk assumed by the Other lending 765,304 8.7% 891,891 9.6% - 126,587 -14.2% Impaired assets 1,063,749 12.1% 980,457 10.6% 83,292 8.5% Bank and provide support for decision-making Total loans to customers 8,773,072 100.0% 9,268,224 100.0% - 495,152 -5.3% processes. Thousands of euros

In 2012, there was a further consolidation of the business credit rating system (Alvin Rating) with a As regards the composition by product of lending in new release to measure risk at the time the risk is the form of leases, which still represents 60% of assumed and over time (performance rating). the entire portfolio, the decline is due mainly to The assignment of an ongoing risk class is a key the Bank’s decisions on assuming risk, as well as element in the regular periodic monitoring of the the situation in the market. portfolio, making it possible to take action more quickly when the standing of a counterparty 2012 2011 Change deteriorates through the use of more modern Product Net credit % share Net credit % share Amt. change % change analysis and assessment tools and by constantly Auto 123,309 1.4% 171,408 1.8%- 48,099 -28.1% Equipment 1,163,796 13.3% 1,468,520 15.8%- 304,723 -20.8% monitoring the adequacy of the system of rules Real estate 4,999,223 57.0% 5,225,803 56.4%- 226,579 -4.3% adopted in order to assess credit ratings. Industrial vehicles 187,136 2.1% 247,479 2.7%- 60,343 -24.4% Residential 0.0% - 0.0% - M arine 75,797 0.9% 93,011 1.0%- 17,214 -18.5% In this area, Risk Management was involved in Non-leasing lending 2,223,810 25.3% 2,062,005 22.2% 161,805 7.8% implementing the New Credit Control System. It Total loans to customers 8,773,071.28 100.0% 9,268,224.39 100.0%- 495,153.11 -5.3% Thousands of euros involves the integration of the expert system for measuring credit risk (ALVIN), already used in the loan origination process and in the process of 8.1. Loan Risk Developments monitoring the overall portfolio risk, within the loan management and control processes. According to ABI, at November 2012 the banking system as a whole showed a further deterioration The constant monitoring of developments in the in credit quality and asset quality following the risk profile of the portfolio also gave rise to the already difficult 2011. ABI reported that, at the need at the end of the year to re-estimate the risk end of 2012, gross bad debts exceeded €122 billion, parameters, especially PD, in order to reflect around €15 billion more than at the end of current developments the actual risk level of December 2011 (+16.8%), bringing the ratio of gross customers more accurately. bad debts to total lending to 6.1%, compared with 5.4% at the end of 2011. If we focus on bad debts Special attention was focused on the integration of in respect of enterprises as a ratio to related risk metrics in the pricing system, implementing a lending, the ratio for the banking system is 8% system for monitoring the risk/return profile of (source: Federcasse). new lending. The continuous evolution of methods also went The Bank’s net bad debts came to €399 million at forward with activities to refine and enhance the December 31, 2012, increasing by about €17 million robustness of the system for simulating risk (+4.5%) over the previous year. The situation was developments that is integrated into planning and similar for substandard loans and restructured budgeting processes. loans, the total value of which came to €628.5 million, an increase of €31 million over 2011 (+5%), whereas performing loans decreased by 7%. This resulted in a worsening of the proportion of impaired positions within the portfolio net of provisions, with bad debts increasing to 4.5% versus the 4.1% of 2011 and substandard loans increasing to 6.9% from 6.2% the prior year.

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peripheral euro-area countries, with yields on 2012 2011 % change Classification government bonds similar to those seen during the Net credit % share Coverage ratio Net credit % share Coverage ratio Net credit % share Coverage ratio

Past due 180 days 36,493 0.4% -10.0% 1,271 0.0% 2.0% 2,771.7% 2,933.7% -613.3% worst of the crisis. Subsequently, thanks primarily Restructured 22,762 0.3% -5.0% 23,250 0.3% 5.8% -2.1% 3.4% -185.5% Substandard 605,616 6.9% -14.3% 574,214 6.2% 13.1% 5.5% 11.4% -208.9% to statements made by the ECB and to its Bad debts 398,877 4.5% -43.3% 381,722 4.1% 37.6% 4.5% 10.4% -215.3% announcement of the creation of the program to Total non-performing 1,063,748 12.1% 27.86% 980,457 10.6% 24.5% 8.5% 14.6% 13.8% Performing 7,709,323 87.9% 0.89% 8,287,767 89.4% 0.95% -7.0% -1.7% -6.3% buy the bonds of these countries, there was a Total loans 8,773,071 100.0% 9,268,224 100.0% -5.3% reversal of trend, which produced a reduction in Thousands of euros the interest rates on the bonds issued by those The Bank’s total gross bad debts reached €703.3 countries, as well as reopening the primary market million, equal to 8% of total lending and an to issuer banks without the highest credit ratings, increase of 15% from 2011. This result is essentially although still limited to the short-term segment of in line with the average for the banking system in the curve. the corporate segment (8). The banking system, which increasingly turned to the ECB throughout the year, benefitted from this At December 31, 2012, gross substandard loans and reversal, conducting significant bond issues during gross restructured loans came to €730.7 million, the second half of the year. accounting for 8.3% of total lending. The coverage ratio for substandard loans rose somewhat from the Within such a context, characterized by high 13.1% in 2011 to 14.3%, as did the coverage ratio volatility, management of the Bank’s funding for bad debts, which went from 37.6% in 2011 to requirements was, as usual, mainly handled 43% at the end of 2012. through the Group’s centralized finance system. Therefore, while it continues to take advantage of For information on individual adjustments to the initiatives promoted by specialized financial non-performing loan portfolio, please see section institutions, the Bank acted in response to funding 10.3. undertaken by Iccrea Banca within the mutual bank system and, to a much lesser extent, on the At the end of 2012, the portfolio of performing international markets. The difficulties in raising loans required a collective provision of €65.6 funds on the capital markets have had a direct million, €8.5 million less than in 2011, in part impact on the cost of funding, which has risen attributable to the change in the classification of significantly, contributing to the commercial loans past due by over 90 days among impaired slowdown. loans as required by applicable regulations. It was also due to an overall improvement in performing Overall volumes of funding reached €11.2 billion by loans thanks to a combination of factors and to an the end of 2012. adjustment in risk parameters. Increasingly careful In light of the situation described above, company management of positions in difficulty was followed strategies have focused on improving effectiveness by intensive efforts to classify as in default in terms of the volumes, maturities and costs of customers who, although shown as having the funds raised. For the reasons stated above, performing loans, had previously been assigned to funding efforts focused almost exclusively on short- lower internal risk grades (in terms of probability term lines of credit and medium and long-term of default), which improved the average risk credit granted by Iccrea Banca. The sole exceptions profile of the portfolio of performing loans (on to this rule were: which the calculation of collective provision is based). The tighter loan selection policies of recent • the use, in the amount of €47.9 million, of years have also led to a significant improvement in the resources provided by Cassa Depositi e the overall quality of new customers. Prestiti (CDP) within the scope of the agreement signed between CDP and the ABI to promote lending to SMEs; • a 2.5 year, €14 million privately placed Portfolio adjustments bond issue; 2012 2011 Amt. change % change • the issue and subscription of two bonds Collective provision - performing loans 65,628 74,150 -8,522 -11.5% Past due 180 days 4,070 25 4,045 15987.4% with maturities of 3 and 5 years that are Substandard loans not measured 281 251 30 12.0% separately guaranteed by the state for a total of €650 Derivatives with customers 3,130 1,000 2,131 213.2% million. They were used, through Iccrea Guarantees 1,781 1,135 646 57.0% Total 74,890 76,560 -1,670 -2.2% Banca, as collateral in the ECB’s long-term Thousands of euros refinancing operations (LTRO).

8.2. Funding and Financial The following are the highlights at December 31, Investments 2012, compared with the previous year.

During the first half of the year, the financial markets continued to reflect the considerable tensions buffeting the sovereign debt of the

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2012 2011 Annual change FUNDING BY CHANNEL completed, making it possible to manage the Stock % share Stock % share % Val. Bonds 4,374 38.9% 5,215 58.9% -16.1% activation of a number of ratings triggers Securitizations 1,007 9.0% 1,127 12.7% -10.6% Current accounts and short- connected with the downgrading of the Bank by 5,814 51.7% 1,771 20.0% 228.3% term bank funding Medium-term bank funding 47 0.4% 737 8.3% -93.6% Moody’s. Total 11,242 100.0% 8,850 100.0% 27.0% Millions of euros Finally, with regard to securitizations and the ABI

joint moratorium agreement, the Bank has

indicated that it is willing to continue extending During the year, 15 plain-vanilla senior bond issues payment suspensions to include customers whose were undertaken through the Group's centralized loans were securitized as part of the “AGRI3”, finance system for a total of €250 million, with a “AGRI4” and “AGRI5” transactions under the ad hoc view to accessing a volume of medium/long-term credit facilities granted to the two vehicles funding appropriately matching the maturity of concerned and who submitted requests by the loans to customers. deadline of March 31, 2013, in accordance with the

extension agreed on December 21, 2012 of the Again in 2012, the securitization sector was agreement between the MEF, ABI and business particularly active, above all with regard to associations of February 28, 2012. management of the six securitization transactions undertaken in previous years, for which the Bank With regard to financial investments, Italian acts as the servicer. government securities (Treasury bills and bonds As in previous years, operations proceeded and zero-coupon Treasury credit certificates) held smoothly, although the challenging economic to maturity amounted to a nominal €2,965 million circumstances continued to cause signs of tensions at December 31, 2012. The balance at December in the ratio of non-performing positions in a 31 includes securities maturing at short and number of securitization portfolios. The notes to medium term (by November 2014). They were the financial statements illustrate the individual acquired as part of a short-term investment securitization operations in greater detail. strategy aimed at generating extraordinary income

to be used primarily to reduce the cost of funding, The “AGRI2” transaction was closed by exercising enabling lending rates to be more competitive. The the contractually established “clean-up call” to earnings generated will go to supporting the repurchase the portfolio. The securities of the profitability of our core corporate lending business, mezzanine tranche (some €24.7 million) were which is currently suffering from the slowdown in redeemed as scheduled, as was the facility granted new loans and strains on portfolio quality. The for this operation to the special-purpose vehicle purchase of the securities was financed with funds Agri Securities regarding the ABI joint moratorium available from treasury management activities (about €5.3 million) and all related closing costs. carried out by the Bank in the final part of the The amount of the junior notes redeemed was period. The maturities of the securities are about €0.7 million lower than the nominal value essentially aligned with those of the treasury (about €17.4 million on a nominal value of about funding. €18.1 million). The asset portfolio also includes securities relating Amortization of A2 class notes in the “AGRI3” to a securitization involving collateralized bond transaction was completed, and that of the B class obligations undertaken by the mutual banks, for a notes began. At year-end, the residual total debt total of €35 million. on the notes outstanding was €98.2 million, compared with an initial amount of €103.5 million.

With regard to “AGRI4”, in accordance with the 8.2.1.Financial liabilities and derivatives agreed terms of the securitization, four revolving operations were conducted, comprising the assignment of around €104.1 million. The “AGRI5” The amounts recognized in the financial statements notes are still held by the Bank for use, in as at December 31, 2012, regarding operational agreement with the parent company, in refinancing hedging and hedging qualifying for hedge operations with the Eurosystem. The outstanding accounting break down as follows: debt of the senior tranche at year end was €266.4 • Financial assets held for trading €46.7 million; million, from an initial amount of €837.1 million. • Hedging derivatives (positive fair value) €10.6 With regard to “AGRI6”, in accordance with the million; agreed terms of the securitization, four revolving • Financial liabilities held for trading €47 operations were conducted, comprising million; assignments of around €147.6 million and resulting • Hedging derivatives (negative fair value) €32 in the closure of the revolving period as scheduled, million. with the amortization of the B class notes to start in March 2013. With regard to “AGRI7”, four For greater detail, please see the notes to the revolving operations were conducted, comprising financial statements. At the present time, the Bank assignments of around €167.9 million. is engaged in the following derivative instrument Renegotiation of the transaction was also

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transactions (for hedging and trading), as arising in respect of the issue of bonds or other summarized below. securities listed or expected to be traded in the future on any exchange or bond market whatsoever.

Hedge type No. Fair value Notional With regard to the negative pledge in respect of operational 1 0 9 syndicated loans, the Bank may not establish securitizations 13 1 3,001 mortgages, liens, security interests in real property, encumbrances or charges on its assets to bonds 3 11 286 guarantee any liability whatsoever arising in floating rate 3 0 290 respect of loans, deposits or the issue of bonds or fixed rate 20 - 30 173 other securities, nor pledge any guarantee or public leasing 5 - 2 11 obligation to indemnify with regard to such borrowing transactions. Standard exceptions to the Millions of euros clause apply to certain types of debt.

In addition to the above, there are 493 contracts Three private securitization transactions involving associated with operations in the investment performing lease receivables originated by the services sector intended for the sale of derivative Bank include a put option for the sale to the Bank instruments to customers, offset with analogous of the senior tranche securities for a total of transactions carried out with Iccrea Banca, with €964.6 million, which was granted to the subscriber fair values reported under assets and liabilities of of the notes. The main trigger events for exercise €33.1 million. of the option are a downgrade of the senior

tranche to a level below “AA” (related to two

transactions totaling €677 million) or to below Aa1

(related to one transaction in the amount of €287.6 8.2.2. Contractual clauses of financial million); events associated with the negative liabilities performance of the assigned portfolio; a

downgrade of the Bank below a rating of “BBB”; or The Bank provides the following information in serious contractual breaches by the Bank. fulfillment of requirements established under IAS Regarding the €287.6 million transaction, the rating 1.74 concerning medium and long-term financial set as the trigger event was reached when the liabilities and, more generally, under IFRS 7.31 security’s rating was set at “Aa2”. Nonetheless, the regarding risks associated with financial investor did not exercise the related option. instruments to which the Bank is exposed at the balance sheet date.

In line with contractual best practice on international markets, bonds issued by the Bank 8.3. The Real Estate Investment under our EMTN program and syndicated loans Fund taken on by the Bank – which are regulated under British law – include a series of negative pledge Since 2008, the Bank has subscribed the closed-end restrictions on the Bank. Securis Real Estate mutual fund established by Beni Stabili SGR. The units in the fund were subscribed The purpose of a negative pledge clause is to by Iccrea BancaImpresa and Banca di Credito ensure that holders of the Bank’s bonds and our Cooperativo dell’Alta Brianza. lenders are treated equally, thereby ensuring that no new bonds are issued or new loans are taken out The asset management company Beni Stabili SGR is that benefit from additional guarantees compared responsible for leveraging the real estate portfolio, with existing transactions of the same type. seeking opportunities for investment and/or divestment that match the fund's return objectives. As regards the negative pledge on bond issues, the The company’s search is therefore highly selective, Bank may not establish mortgages, liens, security taking account of the returns offered by the interests in real property or any other form of market. encumbrance on its assets, nor offer unsecured guarantees or indemnities to guarantee liabilities As of December 31, 2012, the Fund had invested a arising in respect of the issue of bonds or other total of €191,647 thousand in real estate. Changes securities listed or expected to be traded in the over the year were ascribable to contributions future on any exchange or bond market made in 2012 for ordinary fund management and whatsoever. Furthermore, no third party may writedowns of real estate. establish mortgages, liens, security interests in real property or any other form of encumbrance on its assets, nor offer unsecured guarantees or indemnities to guarantee the Bank’s liabilities

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Real Estate Investment Fund The fund’s investment policy is targeted at Amt. managing these variables in order to maximize Purchase price 208,791 returns on investment through: choice of tenants of the highest standing, long-term rental contracts, Impairment - 21,277 locations in large urban areas, low vacancy levels, Capitalized expenses 521 and yield maximization (the ratio between rents Ancillary purchase costs 3,611 and asset value). On the sales side, constant Total 191,647 monitoring of market prices makes it possible to Thousands of euros seize opportunities offered by contingent market developments. In fact, based in part on appraisals by independent experts, the asset management company Choosing tenants with high credit ratings tends to recognized a €9,572 thousand decrease in the value minimize credit risk. They are monitored during of its real estate and proceeded with a writedown the tenant screening process and during the term of the shares in order to realign the value of its of the rental contract in order to further reduce real estate with market developments. At the end the risks inherent in managing rental property. of 2012, the fund’s total net value amounted to €201,190 thousand. 8.4. Joint Agreement (Debt Moratorium) Real Estate Investment Fund 2012 2011 % change Number of units 2,648 2,496 6.09% Unit value 75,978 80,656 -5.80% On February 28, 2012, the Ministry for Economic Total value 201,190 201,317 -0.06% Development, the MEF, ABI and other business Thousands of euros associations signed the moratorium agreement that was signed by Iccrea BancaImpresa on June 1, and The gross operating loss from core operations became operational on June 12. amounted to € -10,314 thousand, after recognizing writedowns on real estate of €9,572 thousand and a In response to the requests submitted by the €63 thousand loss on sales. As at December 31, leading business associations, the deadline for the 2012, the fund closed the period with a net loss of “New lending measures for SMEs” was extended €12,074 thousand, compared with a loss of €8,271 from December 31, 2012 to March 31, 2013. thousand at December 31, 2011.

As of the balance sheet date, the unit value amounted to €75,978.252, down €4,678 (or 5.80%) 9. Bank Capitalization and compared with 2011. This net decrease is attributable to the loss for the year, which more Rating than offset the increase in capital in 2012 following the contributions made by Iccrea BancaImpresa.

The value of the fund's real estate assets as at 9.1. Capitalization December 31, 2012, corresponded to 94.25% of total assets. They consist of 264 properties, Regulations establish that capital management predominantly industrial properties located in within banking groups is a function performed by various provinces across Italy. the group’s parent company. For a number of years now, our parent company, Iccrea Holding, has To minimize the risks associated with real estate adopted a strategy of strict control of capital management, the asset management firm adopted requirements for the individual Group companies a corporate governance structure that is designed and has provided each company with the capital to make its decision-making process as visible and required in compliance with the regulatory 6% transparent as possible. minimum (the reduced ratio). Where necessary, the parent is prepared to allocate available capital The real estate market is exposed to cyclical where it is most appropriate to meet growth or changes in rents and sale prices in response to other support requirements. macroeconomic developments, affected by the economic conditions in the areas in which the real In order to calculate its capital requirement and estate is located. resulting prudent capital ratios, the Iccrea Banking The macroeconomic factors that have had the Group, and therefore the Bank as well, uses the greatest effect on real estate values are: changes Standardized Approach to assess credit and in interest rates; the performance of alternative counterparty risk, and the Basic Indicator Approach investments; and economic growth. to assess operational risks, pursuant to the indications contained in Bank of Italy Circular 263/2006 as amended.

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At December 31, 2012, the Bank's shareholders’ 9.2. The Bank’s Rating equity breaks down as follows:

As at December 31, 2012, the Bank had the 2012 2011 Change following ratings: Standard & Poor’s “BBB-”, Negative Outlook; Fitch Ratings “BBB+”, Negative Share capital 474,765 374,564 26.8% Reserves 87,179 166,688 -47.7% Outlook.

Share premium reserve 10,903 10,903 0.0% Valuation reserve 2,286 1,977 15.6% Net profit (loss) 1,598 1,970 -18.9% Total shareholders' equity 576,731 556,102 3.7% 10. Performance Shareholders’ equity came to €576.7 million (€556.1 million at December 31, 2011). The Income before tax for the Bank came to €15.4 increase in equity was mainly the result of a capital million, compared with €14.8 million in 2011 increase of €100 million, an operation begun at the (+4.6%). Net profit amounted to €1.6 million, end of 2011 and completed in May 2012. It involved essentially in line with the previous year, when it the issue of a total of 1,940,000 new shares with a came to €2.0 (down €0.4 million). par value of €51.65. At December 31, 2011, the Parent Company had paid an advance on this The tax burden rose from 86.7% of income before transaction in the amount of about €80 million in tax in 2011 to 89.7% in 2012. The increased tax the form of a contribution in respect of a future burden of €13.8 million was mainly attributable to capital increase. the non-deductibility of interest expense and the As a result of this capital increase, the Bank’s fact that personnel costs and negative components shareholders’ equity rose by 3.7% over 2011. The related to loan writedowns are not recognized for share capital amounted to €474.8 million (+26.8%), the purposes of the Italian regional business tax while total reserves came to €100.3 million. (IRAP).

Total As of December 31, 2012, total risk-weighted assets RECLASSIFIED INCOME STATEMENT % change came to €9,244.6 million, while the total 2012 2011 change prudential capital requirement for credit, market Interest and similar income 374,877.7 363,037.6 11,840.2 3.3% Interest and similar expense -170,869.9 -208,767.9 37,898.0 -18.2% and operational risks came to €575.8 million. With NET INTEREST INCOME 204,007.9 154,269.7 49,738.2 32.2% regulatory capital of €747.8 million and the capital Fee and commission income 6,304.3 5,665.9 638.5 11.3% requirements specified above, less 25% given that Fee and commission expense -2,940.0 -4,636.6 1,696.7 -36.6% the Bank is a part of a banking group, the Bank’s NET FEE AND COMMISSION INCOME (EXPENSE) 3,364.3 1,029.2 2,335.1 226.9% Dividends and similar income 0.9 0.7 0.2 23.9% total capital ratio comes to 10.4%, which is above Net gain (loss) on trading activities 1,612.3 4,132.2 -2,519.9 -61.0% the minimum established for banks that are a part Net gain (loss) on hedging activities -581.8 -3,693.4 3,111.6 -84.2% of a banking group. Tier 1 capital at the end of Net gain (loss) on disposal or repurchase 532.6 14.5 518,1 3,568.1% 2012 came to 7.9%: GROSS INCOME 208,936.2 155,752.9 53,183.3 34.1% Net losses/recoveries on impairment -134,459.9 -69,422.5 -65,037.4 93.7%

NET INCOME (LOSS) FROM FINANCIAL OPERATIONS 74,476.3 86,330.4 -11,854.1 -13.7% Capital requirements 2012 2011 Change Administrative expenses -64,931.4 -70,304.2 5,372.8 -7.6% Credit and counterparty risk 739,568 759,246 -2.6% Market risks 0 0,000 0.0% personnel expenses -37,896.5 -43,031.6 5,135.0 -11.9% Operational risks 28,231 26,390 7.0% other administrative expenses -27,034.9 -27,272.7 237.8 -0.9% Total risk requirements 767,799 785,636 -2.3% Net provisions for risks and charges 1,984.7 -1,914.9 3,899.6 -203.6% Reduction for banks belonging to groups -191,950 -196,409 -2.3% Net adjustments of property and equipment -225.9 -270.4 44.5 -16.4% Total capital requirements 575,849 589,227 -2.3% Net adjustments of intangible assets -2,311.6 -2,057.2 -254,4 -12.4%

'Other operating expenses/income 3,728.1 8,206.6 -4,478.5 -54.6%

Tier 1 capital 569,674 547,846 4.0% NET OPERATING EXPENSES -61,756.2 -66,340.2 4,584.0 -6.9% Tier 2 capital 178,118 188,382 5.4% Profit/loss on equity investments 2,726.1 -5,226.1 7,952.2 -152.2% Regulatory capital 747,793 736,228 1.6% PROFIT (LOSS) BEFORE TAX 15,446.2 14,764.1 628.1 -4.6%

Surplus/deficit 171,944 147,001 17.0% Income tax for the period -13,848 -12,794 -1,054 -8.2% NET PROFIT (LOSS) 1,598 -1,970 -372 -18.9% Tier 1 7.91% 7.4% 0.5% In thousands of euros Total capital ratio 10.39% 10.0% 0.4%

In the wake of ongoing regulatory changes, the Iccrea Banking Group has centralized its strategic 10.1. Net interest income risk management activities. In that regard, the parent company is steering the process of assessing how much capital is sufficient to permanently Net interest income amounted to €204.0 million, cover all risks to which it is exposed. Group banks up 32.2% compared with €154.3 million in 2011. are actively involved in this process.

The increase in net interest income was largely

attributable to the greater impact of minimum rates in the leasing contracts due to the sharp

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decline in interbank rates and the contribution of million in respect writedowns on participating the margins generated by the policy to invest in instruments in companies with loans undergoing government securities. restructuring (compared with €3.1 million in 2011).

In December, the Bank of Italy conducted an audit of the Iccrea Banking Group’s non-performing loans portfolio, which was completed in early 2013. 10.2. Gross income In preparing these financial statements, we took account of the inspectors’ findings, fully implementing the changes to the Bank’s portfolio agreed during the course of the audit. Gross income totaled €208.9 million, an increase of €53.2 million compared with 2011 (+34.1%).

Net fees and commissions, which include the 10.4. Net operating expenses profits on ancillary services related to lending transactions, was positive. Net income in this Net operating expenses, which include personnel segment amounted to €3.4 million, compared with expenses, overheads and other components more net income of €1 million in 2011. closely tied to the business, fell compared with the previous year (-6.9%), totaling €61.8 million. The net gain on the Bank’s trading activities came to €1.6 million (€4.1 million in 2011) and includes Personnel expenses amounted to €37.9 million, negative and positive differences on non-hedge IRS down from 2011 (-11.9%). This decrease is mainly transactions and the related changes in fair value attributable to the higher costs recognized the and net margins on derivatives operations for previous year in respect of early retirement customers. incentives and use of the employee solidarity fund, and to the lower costs this year resulting from the Hedging activities produced a net loss of €0.6 transfer of IT services to Iccrea Banca S.p.A.. million, the outcome of the positive and negative components of all hedging transactions. It Other administrative expenses remained essentially represents the ineffective portion of transactions in unchanged compared with the previous year at €27 which the hedging relationship was demonstrated million (-0.9%). within the corridor provided for under the The optimization of expenses and control of applicable accounting standards. This component operating costs prompted specific rationalization had amounted to a negative €3.7 million at and optimization initiatives. There was a reduction December 31, 2011. mainly in variable expenses relating to business functions (i.e. to ensure continuity of operations), The final component of gross income is gains on the while expenses associated with technological and repurchase of securities available for sale. In 2012, process innovation rose. the Bank realized €0.5 million in gains on partial Net depreciation of property and equipment and bond buy-backs. amortization of intangible assets, totaling €2.5 million compared with €2.3 million in 2011, rose due to higher amortization of investments in new 10.3. Net losses/recoveries on activities, while depreciation of owned assets remained virtually unchanged. impairment At the end of 2012, the net accruals to provisions for risks and charges for the period were a positive The net cost of risk management in 2012 amounted €2.0 million, compared with a negative €1.9 million to €134.5 million (€69.4 million in 2011). in 2011. The change was due to the offsetting of provisions in respect of unfavorable judgments and As regards credit risk, the sum of provisions and legal costs to be incurred and uses of previous writebacks in 2012 amounted to €121.3 million, provisions for legal costs that are no longer compared with €57.8 million for 2011. The increase expected to be incurred. is the direct result of the rise in non-performing positions reported in 2012, as described elsewhere. Other operating income and expenses showed net income of €3.7 million, although this was a steep Total writedowns on financial assets amounted to decline from the previous year (€8.2 million in €12.5 million, broadly unchanged with respect to 2011). There was a decrease in revenues from 2011 (€11.1 million). The total includes leasing and an increase in costs on leasing positions adjustments to units of collective investment in default. undertakings in the amount of €11.8 million (the writedown of the real estate investment fund, in As a result of the combined effect of the increase implementation of IAS 39, as reported above, in gross income and the decrease in net operating compared with €8.0 million in 2011)) and €0.7

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expenses, the Bank’s cost/income ratio fell from Within the framework of the new prudential 42.6% in 2011 to 29.6% in 2012. supervision rules, the management of compliance risk becomes particularly important, especially as regards those risk components (operational, legal and reputational) that cannot be quantified 10.5. Profit (loss) from equity directly, but may nevertheless impact the financial investments equilibrium of the bank. Recent experience has, in fact, underscored how legal and reputational risks, At December 31, 2012, based on the appraisal though hard to identify, are nonetheless very real. performed by an independent expert, the equity investment in BCC Factoring was written back by The Bank has therefore continued to promote a €2.7 million. In prior years, the investment in BCC corporate culture that enshrines principles of Factoring had been written down for a total of honesty, integrity and respect for internal and €18.9 million. As described in more detail in the external rules, and has set up specific notes to the financial statements (to which the organizational structures including a Compliance reader should refer for information on the specific Department, to ensure strict compliance with the methods and parameters used), equity investments law and its own internal rules. are measured annually through the application of estimation approaches recommended in the formal The Compliance Department, which now forms part literature and best practice (dividend discount of the general system of internal controls, helps model). More specifically, the value of the equity safeguard company capital, enhances the investment was determined on the basis of the efficiency and effectiveness of company operations results reported by it at December 31, 2012 and its and promotes respect for the law. forecast performance and financial position figures approved together with the multi-year business During the year, the Bank reorganized the plan. department, increasing the size of its staff and approving a new operational model that envisages the expansion of the regulatory scope and the 11. The internal control appointment of compliance officers within departments most affected by regulatory impact. system

11.1. Regulatory developments 11.3. Anti-Money Laundering

In the area of money laundering, in line with the In recent years, numerous new laws and regulations measure of the Bank of Italy concerning the have been enacted that have required banks to organizational requirements for financial and credit make major changes, given the need for close intermediaries of March 2011, Iccrea BancaImpresa regulation in view of the very nature of banking. has established an internal Anti-Money Laundering The common intent of the new rules (Basel 2, IAS, unit. The head of the function is also responsible Compliance, MiFID, the Third Anti-Money for reporting suspicious transactions and, in line Laundering Directive) is to preserve the stability of with external regulations, aggregate data. the financial system by enforcing sound and The structure of the unit was carefully designed prudent management practices using mechanisms and is described in detail in the project document designed to protect the financial system, which is examined and approved by the Board of Directors. one of the main components of the world economy. In parallel with the establishment of the unit, The aim is also to safeguard the interests of weaker General Rules governing the duties of top contracting parties, especially consumers, through management and control bodies and all company the adoption of more transparent procedures. units were issued.

Compliance with new rules should therefore be considered as a stimulus to action. Iccrea BancaImpresa, which wants to make the most of the opportunities inherent in the rules, is using the process of adopting its practices to them as a 12. Control arrangements means of developing its capacity to generate economic and social value. As part of the progressive strengthening of controls at various levels, the Bank, in addition to the ordinary structure and functioning of line controls, 11.2. Compliance also has an Audit Committee made up of non- executive directors and that was recently re- appointed. During the year it continued to carry out its activities, as follows:

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• it prepared fact-finding reports, also Internal audit activities have for some time been making use of the resources of the outsourced to the Parent Company and are carried functions responsible, for the Board of out by the Control Department mentioned above. Directors and the evaluated the risks In 2012, the function performed the ordinary associated with certain of the Bank’s scheduled audits and inspections of various activities and new projects; governance procedures, company processes and • it scrutinized the periodic reports of the production units, as well as of support processes Compliance Department, Risk Management and units. It also carried out audits and inspections and the Control Department, making specifically requested by the corporate bodies recommendations concerning control authorized to do so. objectives, including proposals made in The audits and inspections were followed by the planning the activities of the function; preparation of summary and detailed reports containing critiques and proposed solutions, which • at its own initiative, it examined the gave rise to corrective action and follow-ups by the general architecture of the control system company. of the Bank and its subsidiaries.

At the same time, the function provided full The Audit Committee examined the issues in detail assistance to Bank of Italy inspectors, carrying out and promoted the most important developments in any specific checks requested by them. the Bank's system of internal controls in 2012, namely: Control actions coordinated with the Compliance Department were carried out on an ongoing basis • the examination of the findings of the (for example, with regard to derivatives work of the Compliance Department and transactions for customers), as were activities with of the results of auditing and inspection the new Anti-Money Laundering unit, for which the activities; Control Department provided support in setting up the unit. • the development and the functioning of the unit in charge of line controls; The Control Department also maintained close • developments in organizational and contacts with the Board of Auditors and the Audit operational arrangements for anti-money Committee, as well providing them with laundering activities; information on matters of joint interest. • developments in the internal EVO project.

The Committee drafts periodic summary reports for 12.3. Risk Management the Board, which include the minutes of its meetings so that the considerations and proposals In 2012, the Group’s Risk Management and ALM made at its meetings may be known. Department continued to update the processes and tools used to mitigate credit, market and operational risks in response to regulatory changes and internal management and monitoring 12.1. The compliance model under requirements.

Legislative Decree 231/2001 Please refer to Section 7 for information on the handling of credit risk. During 2012, the Bank updated the general part, special part, code of ethics and protocols making The Risk Management unit was actively involved in up its Legislative Decree 231/2001 compliance preparing the capital adequacy self-assessment model to ensure it captures the various forms of report, for which it ran the analyses that are part lending performed by the Bank, developments in of this process, in compliance with Pillar II the organizational structure and developments in requirements. the external regulatory framework (with the extension of the ranges of offences covered) and to In respect of operational risks, the Bank proceeded revise the reporting flows to the 231 Supervisory with the continuous monitoring of events with Body. In particular, the Body, which is chaired by operational implications as well as the an independent expert, is made up of the head of simultaneous analysis of their underlying causes internal controls, the head of compliance and two with a view to identifying the actions to take to members of the Board of Directors. enhance the efficiency of its processes and mitigate the relevant risks (a process-oriented risk- based approach).

12.2. Internal auditing In the area of financial risk, too, support tools for decision making and the resources for risk

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management and monitoring were reinforced during the year. In addition, all the necessary activities for the preparation of information on all the different A key activity for market risks was ongoing types of risk for rating agencies for the annual maintenance of the application (RiskSuite) used in review of the Bank’s rating were carried out, as the assessment and reporting processes for were those regarding supervisory reporting with monitoring the risk position. This made it possible regard to regulatory duties for Pillar II and Pillar III to ensure the accurate monitoring of the Bank's requirements at the consolidated level. various portfolios on a daily basis.

The main activities included the following: 12.4. Main features of the risk and internal control management • daily reporting on all derivatives operations; system with regard to • strengthening short-term and structural liquidity monitoring systems at both the financial reporting (Art. 123– individual and consolidated levels, with bis, paragraph 2, point B) of ongoing verification of the adequacy and the Consolidated Law on matching of cash inflows and outflows, with Financial Intermediation. the production of daily monitoring reports; • revision of the methodologies used to run Control activities and processes involved in the periodic effectiveness and verification tests of generation of data necessary to draft public outcomes with regard to hedges of the fixed- financial reports (the annual and interim financial and average-rate loan portfolio; reports) form an integral part of the Bank's overall • providing support for new public leasing risk management-oriented control system. operations in terms of pricing hedges and performing monthly effectiveness tests; While no internal control system can wholly • providing support in preparing and reviewing eliminate the risk of error or fraud, only assess forecasts of financial requirements and the such risks and mitigate their likelihood and impact, funding plan; these elements are intended to provide reasonable • providing support in defining the assurance of the reliability, accuracy and characteristics of intercompany funding timeliness of financial reporting. transactions (timing, amount, maturity, indexing type and parameters, and pricing); The relevant control system is based on two • definition of intercompany credit exposure general principles summarized as follows. limits. 1 - Back office: The Bank continued to monitor the structural characteristics of its assets and liabilities with The accounting system is automatically and semi- regard to ALM and liquidity risk. Specifically, in automatically fed data by a large number of order to fulfill regulatory and operational organizational units at the Bank, where requirements, two Group policies were prepared, transactions are handled through a range of setting out the guidelines and principles for subsystems. As a result, line control processes are prudent management, the roles and responsibilities built into transaction management IT procedures of the corporate bodies and operating structures, themselves. Organizational procedures allocate and the control processes both for interest rate risk responsibility for verification of the accounting in the banking book and liquidity risk. records for all transactions to the heads of the back office units with regard to the individual data The most important project relating to interest generated, in compliance with specified rate risk in the banking book was the consolidation procedures and deadlines. of the Group’s ALM project to improve the instruments, methods and reports provided, since Second-level controls are carried out by the ALM system serves as the basis for prospective organizational units in charge of overseeing the analysis conducted for planning purposes. Finally, general accounts and drafting the annual and for the performance of stress tests, circumstances interim financial reports. or factors that could have a serious impact on the Bank’s financial equilibrium were identified using a All of these controls have been mapped and are combination of assumptions established by the currently being integrated into a control dashboard Bank of Italy and internally-developed scenarios tool viewable and managed by an ad hoc (projects based on the Bank’s own risk characteristics. and controls) organizational unit. Controls are To address liquidity risk, daily monitoring was carried out on a daily, weekly or monthly basis introduced to provide support for risk analysis and depending upon the type of data handled and the short-term and structural liquidity position at transaction frequencies. the individual and consolidated levels.

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Particularly complex and effective control routines have been developed for the lease cycle. The parent company has carefully analyzed the application of these rules, giving the Group 2 - Group-level competence centers: companies precise instructions, defining three layers of protection that each was required to Assessments which have the greatest impact on the implement by December 31, 2012, specifically: accounts are delegated to specialist offices. • prudential limits (consolidated and individual) Data regarding the fair value of financial items and for exposures; those concerning hedges and their associated • adoption and formalization of appropriate effectiveness tests are supplied by specialist decision-making procedures; offices equipped with appropriate calculation • definition of appropriate internal control tools. The Group has centralized these offices structures. Iccrea Banca. This data is additionally examined by Group Risk Management and the Bank's General At its meeting of December 13, 2012, the Bank’s Accounting unit before being used. Board of Directors adopted a set of provisions that form the “policies for handling transactions with Data on the classification and measurement of non- Related Persons”, identifying the exact scope of performing loans is supplied by duly separated, such persons, defining the various categories of highly specialized offices where operations are transactions (greater and lesser importance), undertaken on the basis of detailed procedures indicating the exceptions and the procedures for approved by the Board of Directors. coordinating with the rules set out in Art. 136 of the Banking Act, which overlaps in part with the This part of the control system's processes, new provisions. activities and key procedures are subject to ongoing monitoring by Internal Auditing. At that meeting, to supplement the decisions The annual and interim financial statements made, the Board designated the existing Audit undergo independent auditing by Reconta Ernst & Committee to serve as the body responsible for Young S.p.A., which is also charged with performing the specific duties required under the monitoring the accounts in general pursuant to supervisory regulations in relation to such Article 14, paragraph 1b) of Legislative Decree 39 transactions. Therefore, the Audit Committee also of January 27, 2010. serves as the “Committee for Related-Person Transactions”, whose duties are governed by With regard to the "Transparency Directive", the specific Rules approved by the Board at that same Bank has selected Luxembourg as its home member meeting. state, as the majority of its securities are issued on that market. Accordingly the Bank has not appointed a financial reporting manager pursuant 13. Security Policy to Italy's Consolidate Law on Financial Intermediation, given that applicable regulations in Document Luxembourg do not require such an officer. The Security Policy Document was updated 12.5. Rules on transactions with pursuant to rule 19 of the Technical Annex – related parties Attachment B – contained in Legislative Decree 196 of June 30, 2003, which governs the protection of personal data. The document has also been In early 2012, the Bank of Italy issued rules on published on the Bank’s intranet for better internal “exposures and conflicts of interest in respect of distribution. related parties”, contained in Title V, Chapter 5, of the New Regulations for the Prudential Supervision of Banks.

The rules, which came into effect on January 1, 14. Consolidated tax 2013, seek to manage the risk that the objectivity and impartiality of decisions concerning the mechanism granting of loans and other transactions with certain persons could be compromised by the close Since 2004, the Bank has participated in the relationship of these persons with the Bank’s consolidated tax mechanism, for which it has decision makers. drawn up a specific agreement with its Parent Company, Iccrea Holding S.p.A.. With that These persons are those expressly defined as participation (subsequently renewed), the Bank Related Parties and Connected Persons. They are transfers both its taxable income and tax credits to collectively referred to as Related Persons. the Parent Company, which settles the IRES

26

corporate tax liability for all participating agricultural leasing, biomass and the primary companies. All financial assets and liabilities sector in general and international. transferred to the Parent Company are therefore In order to foster the change management process recognized in these financial statements under for company employees in the corporate segment, “other assets” and “other liabilities.” Specifically, specific training courses were continued in order to the item “other assets” includes advances paid, ensure that their professional development is in taxes withheld at source and tax credits for 2010, line with the current needs of the business and of as well as the income recognized in respect of the human resources. Training also continued on partial neutralization of the non-deductible portion facilitating change by way of flexible individual and of interest expense originating from intercompany team coaching mechanisms. financing, governed by the most recent version of the agreement, as amended; "other liabilities" Mandatory training also continued for all personnel includes the overall IRES liability. involved in issues including security, money laundering legislation, transparency, usury and similar matters.

15.3. Human resources in figures 15. Human resources and At the end of 2012, Iccrea BancaImpresa had 472 organization employees, distributed as follows: professional areas 52%, middle management 45%, senior 15.1. Organization management 3%. The break down by gender is: 47% female and 53% male.

As discussed previously, in 2012, the organizational Furthermore, the distribution by functional area is model was adjusted, focusing business on the basis as follows: of the size of the customer. This led to the adoption of a model that segments the market into • 51% Enterprise and Corporate Business two business areas: the Enterprise Business Area, Areas focused on the mutual banks, which offers ordinary • 6% Multi-sector activities (insurance, financing and leasing products for businesses with subsidized lending, financing and less than €20 million in revenues, and the derivatives) Corporate Business Area, which offers business • 14% Non-performing loans and credit risk customers with more than €20 million in revenues, • 19% Support (Administration and IT) ordinary financing, corporate finance, and • 10% Staff. international financing services. Furthermore, the management of non-performing loans (through to the phase of termination of the contract) was decentralized at the level of the local structures, maintaining the policy-making, governance and monitoring functions for the portfolio at the 16. Subsidiaries central level.

15.2. Human resources 16.1. BCC Factoring

At times of sweeping change, training is the key In the early months of 2012, the company felt the tool both in adapting skills and in helping people to impact of changing conditions in the financial understand how to manage change individually and market, which led to an increase in the cost of as a group. Therefore, following the reorganization funding with an inevitable impact on lending. In in 2012, a training program, aimed mainly at the the months that followed, thanks in part to the two business areas, was implemented with the goal measures adopted by the parent company, the of enhancing staff expertise in the area of credit situation took a positive turn, leading to significant ratings and to provide a deeper understanding of operational and financial results, influenced in part the features of the financing tools used, together by the effectiveness of actions undertaken over the with training on the new credit collection process. last three years to regain efficiency and structural soundness. The year ended with a return to Training efforts continued in order to develop the profitability, thanks to an enhanced presence in its skills needed to meet the corporate banking needs market, more selective development of its business of the mutual banks and business customers on the and constant strengthening of organizational following topics: sectoral analysis, risk control and processes for controlling and monitoring risks. The the improvement of credit quality, insurance, year 2012 thus ended in the black, with growth in lending in the energy sector, public-sector and revenues above the industry average and a marked decline in the cost of credit risk.

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16.2. BCC Lease On the commercial level, the company carefully selected assets instead of simply chasing greater In an especially difficult economic and financial volumes. As a result, turnover came to €1.1 billion, environment, such as that in 2012, the company up 7.7% over the previous year, compared with an chose to consolidate its position in its market, approximate 5% increase in the market. At the end which expanded slightly in 2011, while at the same of 2012, the company had outstanding positions time posting higher profits. amounting to €520.6 million, a decrease of 5.3% from the previous year. Thanks to these results, which have remained fairly Investments amounted to €433 million, down 11% in stable in recent years, and a certain consolidation value on 2011, due to a decline in period-end of its structure, Iccrea BancaImpresa was able to transactions. consider expanding the responsibilities and scope of operations of BCC Lease. BCC Factoring business This gave rise to the “Auto project”, now at the dic-12 dic-11 % change implementation stage, to enter the auto and light Turnover 1,105,127 1,026,177 7.7% industrial vehicle leasing segment, in support of Outstanding 520,6120 549,494 -5.3% the mutual banks.

% financed 83.1% 88.6% -6.1% This project will involve the company in two Investment 432,730 486,611 -11.1% different, but very important, segments in the In thousands of euros leasing market, both characterized by small/medium-sized transactions, in order to improve the Group’s market penetration and to 16.1.1. Performance allow Iccrea BancaImpresa to focus more sharply on its core corporate business. The preliminary The company closed 2012 with a net profit of €1.2 analysis, authorization and planning phase was million. Developments in loan writedowns, equal to completed in December and attention has now €2.1 million, were one of the decisive factors in shifted to implementation. We expect this to be the result. completed and the progressive commercial roll-out to begin in early 2013. It should be noted that BCC Lease has been in the business of providing equipment leasing of up to 16.1.2. Gross income €50 thousand since 2011. In 2012, BCC Lease also began providing specific The company posted gross income of €11.1 million, purpose loans, a product for associated suppliers to an increase on the €8.6 million achieved in 2011 help them complete their product range, including (+30%). The positive performance was essentially consumables and services (in particular, loans for attributable to the increase net interest income software packages). The distribution focuses on (+54.6% in 2011) and to a lesser extent to net fee tightly targeted product category guidelines with a and commission income, thanks to the increase in limit of €25 thousand. The company entered the volumes handled (+7%). market cautiously, in part to break in the It should be recalled that the increase in lending in associated general IT and technical support 2012 was achieved despite more rigorous selection systems. The business is now up and running, at of customers, which penalized returns. least on a technical level, while the commercial side still has considerable room for growth. During 2012, organization and planning work 16.1.3. Cost of risk largely reflected the consolidation of the company’s operational and administrative On the risk management front, the company processes to ensure compliance with the refined its processes for containing the regulations associated with the company’s new deterioration in credit quality and, consequently, status of financial intermediary governed by Article reduced the overall cost of risk compared with past 107 of the Banking Act. years. Net writedowns for the year amounted to However, there was no lack of additional €2.1 million, compared with €4.8 million in 2011. procedural improvements, designed to optimize Writedown policies took due account of the timing activities and efficiently manage the rising volume and likelihood of collection on impaired positions. of operations. The coverage ratio for bad debts was 85%, while As to the former, the central part of the work the ratio for all impaired assets was 64% (87% and involved the set-up and launch of supervisory 69% respectively in 2011). reporting as required by Article 107, and the consolidation of organizational safeguards provided for by the regulations, particular those concerning money laundering.

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The company was also involved is various projects launched by the parent company relating to a Income before taxes for the year came to €1.1 variety of issues, mainly regulatory and million, compared with €0.9 million in 2011, an organizational, taking part in numerous initiatives increase of about 20.8%. and activities over the course of the year. During the year, the company addressed, along The effective tax rate amounted to 44.4%, with the business network and with the assistance especially high because of the non-deductibility of of the industry association, numerous problems many items of the income statement for the related to compliance with the new rules purposes of Italian regional business tax (IRAP), (Legislative Decree 141), involving the formation of especially the cost of risk (writedowns). Therefore, the associated body and adoption and after income taxes, the year closed with net renegotiation of the new positions, as required income of €638 thousand, compared with €335 under the new rules. thousand the previous year.

At the end of 2012, the company had entered into 7,384 transactions worth €77.6 million, compared with 6,693 transactions valued at €73 million the 17. Associations previous year, for an overall increase of 6.4%. This performance was achieved in part by improving the Iccrea BancaImpresa is a member of the Italian average return on the transactions. Federation of Mutual Banks (Federazione Italiana delle Banche di Credito Cooperativo: Federcasse) The portfolio of lease agreements, net of and the Italian Banking Association (Associazione depreciation for the period, came to about €158.6 Bancaria Italiana: ABI). It is an active member of million, an increase of 11% over the previous year. the National Association of Leasing Agencies Total gross customer credit, including receivables (Assilea) where it is represented on the board of already invoiced and the portfolio of direct debit directors as well on various technical committees, orders and other bills, came to €176.2 million at some of which it chairs. the end of the year, compared with €157.6 million for 2011, an increase of 11.7%. As a bank, Iccrea BancaImpresa is also a member of the Interbank Deposit Protection Fund. Since 2008, Interest income for the company, net of costs for in order to start offering investment services, the services included in the lease payments, came to Bank has been a member of the National Guarantee €12.4 million, compared with €10.3 million the Fund (Fondo Nazionale di Garanzia). previous year. This is an increase of 20%, greater than that of assets under management, reflecting Internationally, the company remains active in the rising cost of money over the last two years. Leaseurope, the federation of European national Total interest expense came to €5.1 million, associations of finance lease companies. It is also compared with €3.5 million in 2011, an increase of an active member the International Finance & 46%, which partly reflects higher debt, particularly Leasing Association (IFLA), where it is represented the cost of funding. on the advisory committee. Along with the parent company, it is an active participant in the UNICO As a result, gross income on financial Banking Group. intermediation grew at a faster pace than total lending, coming to €7.2 million, compared with The subsidiary BCC Factoring is a member of €6.7 million the previous year (+7%), thereby Assifact, the Italian trade association of factoring confirming the improvement in margins on new companies, while BCC Lease is a member of business. Assonolo, the Italian association of industrial equipment lessors. The cost of risk for the year rose to €4.3 million, compared with €3.8 million for the previous year, but remained unchanged at 2.6% as a ratio of total lending. 18. Outlook for operations

Overhead costs for the company totaled €3.6 During the second half of 2012, there was an million, compared with €3.3 million for 2011, a rise improvement in conditions in the financial markets, of 11%, and include €1.5 million in personnel the deterioration of which had been an obstacle to expenses, €2.1 million in other administrative the recovery in the area. expenses, and €67 thousand in depreciation and amortization on investments (primarily In Italy, economic developments combined with the management software). recessionary effects of the public finance measures (estimated at four-tenths of a point of GDP), led For the first time, the cost/income ratio fell to recession in 2012, with substantial stagnation below 40%, an improvement on the 41.4% posted in expected for 2013. However, there were a few 2011.

29

signs of stabilization, with the end of the prolonged of the year and on the outlook for the company as phase of decline in business confidence about the well as information on financial risk management prospects for the economy. Foreign demand has goals and polices (price risk, credit risk, liquidity continued to make a positive contribution to risk and cash flow risk). The report also provides economic activity and the increase in exports in information on key indicators and the main factors recent months was driven by sales to non-EU and conditions that could affect profitability. countries. As stated in Section 10.3, in December 2012, the Over the year, credit conditions benefited from the Bank of Italy conducted an audit of the Iccrea gradual easing of the liquidity squeeze that had Banking Group’s non-performing loans portfolio, been burdening Italian banks, thanks in part to new which was completed in early 2013. Eurosystem policies. However, the ability to offer In preparing these financial statements, we took credit has been further hampered by account of the inspectors’ findings, fully intermediaries’ perception of a high level of risk, implementing the changes to the Bank’s portfolio associated with the effects of the recession on agreed during the course of the audit. corporate balance sheets. Impaired loans have increased significantly and, therefore, the first As required by law, we provide below a summary of priority remains monitoring risks. transactions at December 31, 2012, with other However, there have been positive signs: retail Group companies, divided between the Parent funding has grown and liquidity conditions have Company, subsidiaries and subsidiaries of the improved. Parent Company. There are no companies subject This scenario, however, suggests that growth will to significant influence: resume in the second half of the year, albeit at a modest pace and with considerable uncertainty. Intercompany transactions INCOME The turnaround would be made possible by a COMPANY ASSETS LIABILITIES STATEMENT gradual recovery in investment, following the Parent company Iccrea Holding S.p.A. 19,087 26,748 - 1,808 Bcc Lease S.p.A. 13,379 225 1,181 normalization of lending conditions and a recovery Subsidiaries in demand in the euro area, as well as some BCC Factoring S.p.A. 495 218 282 Iccrea Banca 68,432 9,428,688 - 147,783 improvement in confidence. Immicra 2 - 173 Companies under BCC Risparmio&Previdenza - 142 Expanding the supply of credit is a crucial common control BCC Gestione Crediti 335 - 831 Banca Sviluppo Spa 2,762 6 28 prerequisite for a return to growth, which is why it BCC Solutions 274 2,129 - 6,299 is important for Iccrea BancaImpresa to support the In thousands of euros mutual banks in developing their business customers with high quality products and services, in order to contribute to rekindling investment and boosting economic activity in their local areas. In the first few months of 2013 there have been signs of recovery in terms of expansion in credit, 20. Proposed allocation of although we do not expect to significantly increase the overall level of lending for 2013. As a result, profit for the year and considering the capital increase undertaken and the decline in outstanding subordinated debt, no further capital needs are expected for 2013. We recommend that you approve the financial statements at December 31, 2012, accompanied by the Report on Operations, prepared by the Board of Directors and audited by Reconta Ernst & Young. 19. Other mandatory We recommend allocating net income as follows: information

Share capital at December 31, 2012, consisted of 9,191,970 shares with a par value of €51.65 each. The company does not hold treasury shares or shares in its Parent Company, either directly or through trustees or other third parties. During the financial year, the company neither bought nor sold own shares or shares of its Parent Company, either directly or indirectly through trustees or other third parties.

The report on operations gives ample information on any significant events occurring after the close

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Net income 1,598,131.00 Shareholders,

To the legal reserve 159,813.10 Developments in the year just ended presented To the extraordinary reserve 30,883.00 considerable levels of operational complexity due Distribution of dividends for to developments in economic conditions. 7,251,970 shares bearing full 1,232,834.90 dividend rights The challenges faced by small and medium-sized companies have already and will continue to Distribution of dividends for impact the Bank and mutual banking. Iccrea 1,940,000 shares bearing 174,600.00 BancaImpresa has performed its role in supporting dividend rights starting from the business community with care, recasting the June 1, 2012 commitments of firms with balance, and will continue to do so in 2013. The Bank, having the Italian productive system as its market, in direct support of the actions of the The Shareholders’ Meeting to approve the financial mutual banks in their territories, aware of the statements has been called for April 24, 2013. challenges lying ahead, has continued in its major process of evolving into the role of corporate bank No significant event has occurred subsequent to for the mutual banks. the balance sheet date that would require a Despite market difficulties, the policies of the material change in the amounts and results parent company, Iccrea Holding, have been reported. implemented in terms of the strategic vision and development alongside the mutual banks. The financial statements are authorized for The Bank’s action has and will increasingly focus on publication and no longer modifiable following contributing to improving the relationships that the approval by the Shareholders’ Meeting. mutual banks have with the business communities of their areas. The tools and policies adopted at this stage have therefore been chosen with a view towards * * * * * fostering greater agreement with the mutual banks of actions to develop a business clientele with a greater focus on manufacturing, innovation and international expansion. As stated at the conclusion of the report for the previous year and at the end of their term of office, the directors firmly assert that the Bank’s collaboration with the mutual banking system will be the key for supporting the continued development of that system. The Board of Directors would like to thank all of the mutual banks and their associations for their support and for the trust they have always placed in Iccrea BancaImpresa. We also thank the Governor and the Directorate of the Bank of Italy, and the inspectors who conducted their inspection at the Bank at the end of last year for their constructive relationships, as well as the entire Banking and Financial Supervision Area of the Head Office of the Bank of Italy. We would further like to thank the Board of Auditors for the work they have done and to express our appreciation to the General Manager, the rest of the management team, and all of the Bank’s employees for their dedication and commitment throughout the year. A final word of thanks also goes to the parent company, Iccrea Holding, for its guidance and coordination efforts and for its continued encouragement to pursue the major changes we have undertaken.

The Board of Directors

ROME, February 28, 2013

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Note prepared subsequently to the Shareholders Meeting resolution

In resolving the distribution of dividends, the Shareholders' Meeting, voting on a proposal of the majority shareholder, Iccrea Holding, resolved to not distribute any net income for the year, which as a result was allocated in its entirety to reserves

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Balance Sheet as at December st 31 2012

at 31/12/2012 at 31/12/2011 ASSETS partial total partial total

10. Cash and cash equivalents 26,347 30,440 20. Financial assets held for trading 46,656,058 38,840,098 40. Financial assets available for sale 199,524,765 198,021,055 50. Financial assets held to maturity 3,006,285,440 60. Due from banks 147,542,689 267,978,581 70. Loans to customers 8,773,071,277 9,268,223,672 80. Hedging derivatives 10,560,913 10,326,484 100. Equity investments 33,250,000 30,523,888 110. Property and equipment 4,220,479 2,155,995 120. Intangible assets 3,363,324 4,537,487 of which:

- goodwill

130. Tax assets 143,854,838 122,026,889 a) current 38,923,519 38,175,938 b) deferred 104,931,319 83,850,951 150. Other assets 142,672,371 139,648,419 Total assets 12,511,028,501 10,082,313,008

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LIABILITIES AND SHAREHOLDERS’ at 31/12/2012 at 31/12/2011 EQUITY partial total partial total

10. Due to banks 5,861,019,545 2,508,421,814 20. Due to customers 1,366,879,811 1,486,414,575 30. Securities issued 4,373,650,623 5,214,749,879 40. Financial liabilities held for trading 47,020,444 37,461,398 60. Hedging derivatives 32,051,770 29,805,042 80. Tax liabilities 22,233,036 18,470,012 a) current 21,040,373 17,381,254 b) deferred 1,192,663 1,088,758 100. Other liabilities 202,118,421 198,355,746 110. Employee termination benefits 5,419,537 5,530,441 120. Provisions for risks and charges: 23,904,008 27,002,429 a) post-employment benefits

b) other provisions 23,904,008 27,002,429 130. Valuation reserves 2,286,208 1,977,292 160. Reserves 87,179,216 166,687,699 170. Share premium reserve 10,902,500 10,902,500 180. Share capital 474,765,251 374,564,251 200. Net profit (loss) for the period 1,598,131 1,969,932 Total liabilities and shareholders’

equity 12,511,028,501 10,082,313,008

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at 31/12/2012 at 31/12/2011 INCOME STATEMENT partial total partial total

10. Interest and similar income 374,877,730 363,037,578 20. Interest and similar expense (170,869,866) (208,767,908) 30. Net interest income 204,007,864 154,269,670 40. Fee and commission income 6,304,326 5,665,856 50. Fee and commission expense (2,939,989) (4,636,645) Net fee and commission income 60. (expense) 3,364,337 1,029,211 70. Dividends and similar income 907 732 80. Net gain (loss) on trading activities 1,612,297 4,132,172 90. Net gain (loss) on hedging activities (581,803) (3,693,441) Net gain (loss) on the disposal or 100. repurchase of: 532,606 14,520 a) loans

b) financial assets available for sale

3,400 c) financial assets held to maturity

d) financial liabilities 529,206 14,520 120. Gross income 208,936,208 155,752,864 130. Net losses/recoveries on impairment: (134,459,899) (69,422,491) a) loans (121,270,011) (57,767,332) b) financial assets available for sale (12,543,551) (11,135,367) c) financial assets held

to maturity d) other financial activities (646,337) (519,792) Net income (loss) from financial 140. operations 74,476,309 86,330,373 150. Administrative expenses: (64,931,441) (70,304,246) a) personnel expenses (37,896,538) (43,031,565) b) other administrative expenses (27,034,903) (27,272,681) 160. Net provisions for risks and charges 1,984,691 (1,914,940) Net adjustments of property and 170. equipment (225,926) (270,395) 180. Net adjustments of intangible assets (2,311,626) (2,057,179) 190. Other operating expenses/income 3,728,129 8,206,609 200. Operating expenses (61,756,173) (66,340,151) 210. Profit (loss) from equity investments 2,726,112 (5,226,112) Profit (loss) before tax on continuing 250. operations 15,446,248 14,764,110 Income tax expense from continuing 260. operations (13,848,117) (12,794,178) Profit (loss) after tax on continuing 270. operations 1,598,131 1,969,932 290. Net profit (loss) for the period 1,598,131 1,969,932

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STATEMENT OF COMPREHENSIVE INCOME

31/12/2012 31/12/2011

10. Net profit (loss) for the period 1,598,131 1,969,932 Other comprehensive income net of taxes 20. Financial assets available for sale 30. Property and equipment 40. Intangible assets 50. Hedging of investments in foreign operations 60. Cash flow hedges 308,916 3,006,753 70. Foreign exchange differences 80. Non-current assets held for sale 90. Actuarial gains (losses) on defined benefit plans 100. Share of valuation reserves of equity investments accounted for using equity method 110. Total other comprehensive income net of taxes 308,916 3,006,753 120. Comprehensive income (Item 10+110) 1,907,047 4,976,685

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Statement of changes in shareholders' equity

Changes in the period

Change in opening balance Allocation of net profit of Comprehensive income for for income Comprehensive previous period Equity transactions as at equity Shareholders' As at 31/12/2011 As at 01/01/2012 Change in reserves in Change 31/12/2012 Purchase of treasury Issue of new shares Changes in equity equity in Changes treasury shares 2012 Derivatives on on Derivatives Extraordinary Stock options Stock other allocation other

instruments Dividends and dividends shares Reserves

Share capital: 374,564,250 374,564,250 100,201,000 474,765,250 a) ordinary shares 374,564,250 374,564,250 100,201,000 474,765,250 b) other shares Share premium reserve 10,902,500 10,902,500 10,902,500 Reserves: 166,687,699 166,687,699 229,459 -79,737,941 87,179,217 a) earnings 69,828,857 69,828,857 229,459 70,058,316

b) other 96,858,841 96,858,841 -79,737,941 17,120,900 Valuation reserves 1,977,292 1,977,292 308,916 308,916 2,286,208 Equity instruments Treasury shares Net profit (loss) for the year 1,969,932 1,969,932 -229,459 -1,740,473 1,598,131 1,598,131 Total shareholders' equity 556,101,674 556,101,674 0 -1,740,473 -79,429,025 100,201,000 1,907,047 576,731,306

(1) Other reserves include the negative FTA reserve of €1.5 million. The decrease in “Reserves: other” in the period is entirely attributable to use of the payment by ICCREA Holding of €79.7 million in respect of a future capital increase, following the capital increase approved on March 29, 2012 by the Bank’s Board in a total nominal amount of €100,201,000. (2) For information on changes in the valuation reserves, please see Part F of the notes to the financial statements.

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Statement of changes in shareholders' equity

Changes in the period

Change in opening balance Allocation of net profit of Comprehensive income for for income Comprehensive previous period Equity transactions as at equity Shareholders' As at 31/12/2010 As at 01/01/2011 Change in reserves in Change 31/12/2011 Purchase of treasury Issue of new shares Changes in equity equity in Changes treasury shares 2011 other allocations other on Derivatives Extraordinary Stock options Stock

instruments Dividends and dividends shares Reserves

Share capital: 335,466,750 335,466,750 39,097,500 374,564,250 a) ordinary shares 335,466,750 335,466,750 39,097,500 374,564,250 b) other shares Share premium reserve 10,902,500 10,902,499 Reserves: 86,701,976 86,701,976 247,781 79,737,941 0 166,687,699 a) earnings 69,581,076 69,581,076 247,781 69,828,857 b) other 17,120,900 17,120,900 79,737,941 0 96,858,841 Valuation reserves -1,029,461 -1,029,461 3,006,753 3,006,753 1,977,292 Equity instruments Treasury shares Net profit (loss) for the year 2,093,372 2,093,372 -247,781 -1,845,590 1,969,932 1,969,932 Total shareholders' equity 423,232,637 423,232,637 0 -1,845,590 82,744,695 50,000,000 4,976,686 556,101,674

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Statement of cash flows (Indirect method)

Amount

31/12/2012 31/12/2011

A. OPERATING ACTIVITIES 1. Operations 148,761,829 95,313,578 - net profit (loss) for the period 1,598,131 1,969,932 - gains (losses) on financial assets held for trading and on financial assets/liabilities at fair value through profit or loss 10,931,254 7,003,195 - gains (losses) on hedging activities 581,803 3,693,441 - net losses/recoveries on impairment 118,543,899 57,767,332 - net adjustments of property and equipment and intangible assets 2,537,552 2,327,574 - net provisions for risks and charges and other costs/revenues 721,073 4,531,814 - taxes and duties to be settled 13,848,117 12,794,178 - net adjustments of disposal groups held for sale net of tax effects - other adjustments 5,226,112 2. Net cash flows from/used in financial assets -2,557,887,126 -615,950,742 - financial assets held for trading -6,203,663 -9,037,732 - financial assets at fair value through profit or loss - financial assets available for sale -14,047,261 -39,742,932 - due from banks: repayable on demand 122,012,314 -56,076,868 - due from banks: other - loans to customers 372,305,055 -511,093,210 - other assets -3,031,953,571 3. Net cash flows from/used in financial liabilities 2,393,825,584 402,928,737 - due to banks: repayable on demand 3,352,597,731 186,282,622 - due to banks: other - due to customers -119,534,764 375,614,100 - securities issued -841,099,256 -102,585,756 - financial liabilities held for trading 9,559,046 13,177,255 - financial liabilities at fair value through profit or loss - other liabilities -7,697,172 -69,559,484 Net cash flows from/used in operating activities -15,299,714 -117,708,427 B. INVESTING ACTIVITIES 1. Cash flow from 907 4,732 - sales of equity investments - dividends on equity investments 907 732 - sales of financial assets held to maturity - sales of property and equipment 4,000 - sales of intangible assets - sales of subsidiaries and business units 2. Cash flow used in -3,427,874 -10,186,055 - purchases of equity investments -8,000,000 - purchases of financial assets held to maturity - purchases of property and equipment -2,290,411 -69,686 - purchases of intangible assets -1,137,463 -2,116,369 - purchases of subsidiaries and business units Net cash flow from/used in investing activities -3,426,966 -10,181,323 C. FINANCING ACTIVITIES - issues/purchases of own shares 20,463,059 129,737,942 - issues/purchases of equity instruments - dividend distribution and other -1,740,473 -1,845,590 Net cash flow from/used in financing activities 18,722,585 127,892,352 NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS -4,093 2,602

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Reconciliation

Amount

31/12/2012 31/12/2011

Cash and cash equivalents at beginning of period 30,440 27,838 Net increase/decrease in cash and cash equivalents -4,093 2,602 Cash and cash equivalents: net foreign exchange difference Cash and cash equivalents at end of period 26,347 30,440

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NOTES TO THE FINANCIAL STATEMENTS

41

PART A – ACCOUNTING POLICIES

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A.1 – GENERAL INFORMATION December 22, 2005 on the format and rules for preparation of bank financial statements, 1st update of November 18, 2009, issued by the Bank of Italy in Section 1 – Declaration of conformity with the the exercise of the powers established by Article 9 of International Accounting Standards Legislative Decree 38/2005. These instructions contain binding formats for the financial statements In compliance with the provisions of Legislative and the procedures for completing the schedules, as well as the content of the notes to the financial Decree 38 of February 28, 2005, the financial statements at December 31, 2012 of Iccrea statements. BancaImpresa S.p.A. have been prepared in accordance with the International Financial Reporting The IASs/IFRSs applied in preparing the financial Standards and International Accounting Standards statements were those in force at December 31, 2012 (IFRSs/IASs) issued by the IASB, and the related IFRIC as endorsed by the European Commission (including interpretations, endorsed by the European the interpretations issued by the SIC and the IFRIC). Commission in accordance with the procedures referred to in Article 6 of Regulation (EC) no. The following table sets out the new international 1606/2002 of July 19, 2002, as amended. accounting standards and amendments to existing accounting standards, with the related endorsement The financial statements at December 31, 2012 have regulations of the European Commission, that took been prepared on the basis of Circular no. 262 of effect as from the 2012 financial year.

Table of new IASs/IFRSs in effect for 2012:

Endorsement regulation Title

Amendments of IFRS 7 – Financial instruments: Disclosures – The changes regard additional 1205/2011 disclosures on assets transferred but not fully derecognized and assets transferred and fully derecognized.

IAS 12 Income taxes – Deferred tax: additional examples are provided concerning the tax treatment of the recovery of underlying assets, with the deletion of the interpretation SIC 21. 1255/2012 IFRS 1 – First-time adoption of International Financial Reporting Standard: Severe Hyperinflation and removal of fixed dates for first-time adopters.

Amendment of IFRS 7 – Art. 1 c. 4: deletion of paragraph 13 in accordance with the amendments 1256/2012 of IFRS 7 adopted with the adoption of Regulation (EU) 1205/2011.

Regulation 1205/2011 adopted the amendment of The amendments of IAS 12 and IFRS 1 did not have an IFRS 7 issued by the IASB on 7 October 2010. The impact on the financial statements of Iccrea amendment required the disclosure of more BancaImpresa. information concerning the transfer of financial assets, which in accordance with the instructions of The following table reports new international the Bank of Italy were included in Part E of the notes accounting standards and amendments to existing to the financial statements. standards issued by the IASB that have not yet entered force:

Table of new IASs/IFRSs issued but not yet in effect:

Endorsement IAS/IFRS Short description Entry into regulation force

475/2012 IAS 19 Employee Among other things, the amendments of IAS 19 provide for the Annual benefits - elimination of the corridor approach, with the recognition of reporting amendments actuarial gains and losses only under Other Comprehensive periods Income, the improvement of disclosures concerning risks beginning on associated with defined benefit plans, the introduction of a or after

43

specific time period (12 months) in the definition of short-term January 1, benefits and a number of clarifications concerning termination 2013 benefits

1255/2012 IFRS 13 Fair value The standard establishes a new definition of fair value, Annual measurement providing criteria for the measurement of the fair value of reporting financial and non-financial instruments where called for in periods another accounting standard beginning on or after January 1, 2013

1256/2012 IFRS 7 Financial Amendments of IFRS 7 - Offsetting financial assets and financial Annual instruments: liabilities: they require more extensive disclosures on the reporting Disclosures effect of offsetting of financial instruments if the netting periods arrangement meets the requirements established by IAS 32 beginning on or after January 1, 2013

1256/2012 IAS 32 Financial Amendments of IAS 32 - Offsetting financial assets and financial Annual instruments: liabilities: they establish procedures and criteria for offsetting reporting Presentation financial assets and liabilities and their presentation in the periods financial statements beginning on or after January 1, 2014

1254/2012 IFRS 10 The new standard establishes the criteria for the preparation Annual Consolidated and presentation of the consolidated financial statements. It reporting financial defines new concepts of control, replacing those set out in IAS periods statements 27 and SIC 12 beginning on or after January 1, 2014

1254/2012 IFRS 11 Joint Establishes principles for the accounting treatment of joint Annual arrangements arrangements, replacing IAS 31 and SIC 13 reporting periods beginning on or after January 1, 2014

1254/2012 IFRS 12 Disclosure The standard establishes the disclosures that must be provided Annual of interests in concerning equity investments and, among others, SPVs reporting other entities (“structured entities”). The objective is to provide disclosures periods on the nature of the risks associated with interests in other beginning on entities or after January 1, 2014

1254/2012 IAS 27 Separate As a consequence of the introduction of IFRS 10 and IFRS 12, Annual financial the standard limits its scope to defining criteria for the reporting statements treatment in the separate financial statements of subsidiaries, periods associates and joint ventures beginning on or after January 1,

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2014

1254/2012 IAS 28 Investments As a consequence of the introduction of IFRS 11 and IFRS 12 the Annual in associates and standard was renamed “Investments in associates and joint reporting joint ventures ventures”, setting out the accounting treatment of such periods entities beginning on or after January 1, 2014

Date to be IFRS 9 Financial The standard establishes criteria for the classification and Annual determined instruments measurement of financial assets and liabilities. However, re- reporting exposure is expected for 2013. Re-exposure in 2013 is also periods expected for the criteria for impairment, while a new standard beginning on is expected for the first quarter of 2013 covering general hedge or after accounting concepts. A Discussion Paper on macro hedge January 1, accounting is expected to be issued in 2103. 2015

As required by paragraph 30 of IAS 8, the Bank balance sheet and income statement contain items, announces that the impact of the upcoming sub-items and further information (the “of which” for application of IAS 19 can be estimated at a negative items and sub-items). €0.3 million, to be recognized in a specific equity reserve, while as regards the application of IFRS 13, Items without values for the reference period and the analysis activities have already begun but the previous period are not included. In the income financial impact cannot be quantified at this time. statement, revenues are shown without indicating The accounting policies discussed below were applied their sign, while cost figures are shown within in the preparation of the accounting schedules for all parentheses. the periods presented here. The notes include the information required under the The euro has been used as the presentation currency provisions of Circular 262/2005, 1st update of in the preparation of the financial statements. The November 18, 2009, of the Bank of Italy and any balance sheet, the income statement, the statement additional information required under international of cash flows and the statement of changes in accounting standards. shareholders’ equity are expressed in euros, while the explanatory notes to the financial statements are Specific disclosure is provided of any reclassifications expressed in thousands of euros, unless otherwise made to improve the representation of the accounts. indicated. These financial statements contain forecasts and estimates (including those underlying impairment Section 2 – General preparation principles tests) that reflect management's current assessment of future events. These forecasts and estimates The financial statements have been prepared in include, but are not limited to, all information other accordance with the principles described in the than facts, including, without limitation, those Framework for the Preparation and Presentation of concerning the future financial position and all future Financial Statements. Accordingly, the financial operating results, strategies, plans, objectives and statements have been prepared on an accruals and other developments. The forecasts and estimates going-concern basis. The general principles of the used here are based on the information available to materiality and significance of information and the the Bank as of today. prevalence of substance over form have also been taken into account. Each material class of similar The ability of the Bank to achieve the forecast results items is reported separately in the financial depends on numerous factors outside the control of statements. Items of a different nature or function management. Actual results may differ significantly are shown separately, if material. Assets and from those forecast or implied in forward-looking liabilities and revenues and costs have not been information. Such forecasts and estimates are offset except where expressly required or permitted exposed to risks and uncertainties that can have a by an accounting standard or interpretation. significant impact on expected results and are based on underlying assumptions. The financial statements consist of the balance sheet, the income statement, the statement of The estimates and assumptions are reviewed comprehensive income, the statement of changes in regularly. Any changes made as a result of such shareholders’ equity, the statement of cash flows, reviews are recognized in the period in which the and the explanatory notes to the financial review was conducted where such review involved statements, along with the report on operations. The only that period. Where the review affects both

45 current and future periods, any changes are On November 5, 2012, the Group companies involved recognized in the period in which the review was in the settlement signed a framework agreement for conducted and in the related future periods. the full and final settlement of the entire position of the Group in respect of the tax authorities. The agreement with the tax authorities involved a settlement payment of €2.8 million, compared with a total exposure of €19.3 million. Section 3 – Events subsequent to the balance sheet date In 2008 the Bank participated in the formation of a No significant event occurred subsequent to the closed-end real estate investment fund denominated balance sheet date that would have materially “Securis Real Estate”, to which buildings from altered the figures and results reported. terminated lease contracts awaiting sale were transferred. The fund was established by Beni Stabili These financial statements are authorized for Spa – SGR and is restricted to qualified investors. The publication and may no longer be amended following units in the fund were subscribed by the Bank and approval by the Shareholders’ Meeting. BCC Alta Brianza Alzate Brianza. As envisaged in the applicable regulations governing the operations of In resolving the distribution of dividends, the investment funds, the transferred buildings were Shareholders' Meeting, voting on a proposal of the appraised individually by an independent expert majority shareholder, Iccrea Holding, resolved to not appointed by the asset management company. distribute any net income for the year, which as a result was allocated in its entirety to reserves The assets of the fund were set at a maximum of €160 million, which can be raised to €400 million. Following the transfers to the fund on June 28, as of the reporting date for these financial statements the Section 4 – Other information Bank had subscribed a total of 2,588 units of the fund with a carrying amount of €196.6 million. The In June, the Bank took advantage of an investment remaining units, totaling about €4.6 million, were opportunity to purchase securities (mainly subscribed by BCC Alta Brianza Alzate Brianza. government securities) with a short/medium-term residual maturity in a number of installments on the Finally, other than the securitizations that, as market. The transaction, which was carried out in discussed in the specific section of the accounting cooperation with the Parent Company and with the policies, did not give rise to the derecognition of the operational support of the Group company Iccrea financial assets assigned, in application of Banca, involved the acquisition of securities with a international accounting standards, the Bank does not value of about €3 billion at December 31, (classified have exposures to high-risk instruments (such as as financial assets held to maturity, in line with the collateralized debt obligations, mortgage backed purpose of the investment, with the exception of €34 securities, other special purposes vehicles, exposures million in collateralized bond obligations originated to subprime mortgages and leveraged positions). Note by mutual banks, classified under loans to customers, that the €34 million in collateralized bond obligations as the securities are listed on markets that are not acquired in implementation of the investment considered liquid). strategy discussed above were originated by mutual banks and were redeemed in full at their contractual This investment strategy is aimed at generating non- maturity in March 2013. The Bank’s transactions in recurring income to be used primarily to reduce the derivatives classified as financial assets and liabilities cost of funding, enabling lending rates to be more held for trading mainly regard, as discussed in the competitive, with a view to permitting the Bank to relevant sections of the notes, hedging activities that support its lending to meet the loan demand of the have not undergone testing for effectiveness. The companies who are customers of the mutual banks. same items also comprise activity in the investment services sector involving the sale of derivatives to The purchase of the securities was financed with customers, which are matched against corresponding funds available from treasury management activities. transactions with ICCREA Banca. The maturities of the securities are essentially aligned with those of the treasury funding. As regards the valuation process used to measure equity interests through the application of widely As regards the disputes that arose in connection with accepted estimation approaches (dividend discount the audit of the Bank in 2007 concerning the years model), as well as the specific methods and 2003, 2004 and 2005, with the subsequent issue of an parameters used, please see the more detailed assessment on March 13, 2007, in view of the information in the discussion of Table 10.2. favorable ruling of the judges of the Provincial Tax Commission of Rome concerning the first tax period involved, in 2012 discussions were initiated with the Revenue Agency – Regional Department for Lazio and with the Provincial Departments involved in order to assess the possibility of an out-of-court resolution of the dispute, which also involved other entities of the Group.

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A.2 – NOTES TO THE MAIN ITEMS OF THE FINANCIAL value, including those resulting from the separation STATEMENTS of embedded derivatives, that are not deemed to be effective for hedging purposes. This section sets out the accounting policies adopted in preparing the financial statements. The 1.2 Recognition presentation of these accounting policies is broken down into stages - recognition, classification, Debt and equity securities are initially recognized at measurement and derecognition - for the various the settlement date, while derivative contracts are asset and liability items. A description of the impact recognized at the date they are signed. Financial on profit or loss, if any, is provided for each stage. assets held for trading are initially recognized at fair value, which is usually the amount paid or received. As required under the amendments of IFRS 7 issued Where the price is different from the fair value, the by IASB in March 2009, endorsed by the European financial asset is recognized at its fair value and the Commission with Regulation (EC) no. 1165/2009 on difference between the two amounts is recognized November 27, 2009 and incorporated by the Bank of through profit or loss, subject to compliance with the Italy in Circular 262/2005 with the 1st amendment of conditions specified in IAS 39. November 18, 2009, to ensure proper disclosure Iccrea BancaImpresa reports the quality of the inputs Derivative contracts embedded in other financial used to determine the fair value of financial instruments or contracts that have financial and risk instruments (the “fair value hierarchy”). Specifically, characteristics that are not correlated with the host the fair value assigned to one of three levels that instrument or which meet the requirements to be reflect the quality of the inputs: classified independently as derivative contracts are recognized separately among financial assets held for Level 1: fair value derived from active markets trading. After separating the embedded derivative, (unadjusted listed prices); the host contract is then treated in accordance with Level 2: fair value derived from valuation techniques the accounting rules for its category. whose inputs are directly or indirectly observable market parameters ; 1.3 Measurement Level 3: fair value derived from valuation techniques whose inputs are not all observable on the market. Financial assets held for trading are measured at fair value following initial recognition. For financial In addition, entities must provide a reconciliation of instruments listed on active markets, the fair value of the initial and final balances of the fair value financial assets or liabilities is determined on the measurement for Level 3 measurements, as well as basis of the official prices observed at the balance for material transfers between the different levels of sheet date. For financial instruments, including the hierarchy. Details on the breakdown of financial equity securities, that are not listed on active instruments by fair value levels are given in the markets, fair value is determined using valuation specific sections of the notes to the financial techniques and market information, such as the price statements. of listed instruments with similar features, calculation of discounted cash flows, option pricing As regards paragraph 27 of IFRS 7, Iccrea models and prices registered in recent similar BancaImpresa has reported fair values for each class transactions. of financial asset and liability in order to enable comparison with the related carrying amount. The For equity securities and related derivative primary methodological assumptions adopted in instruments, if the fair value obtained using such determining the market value of financial liabilities valuation techniques cannot be reliably determined, are: 1) neutrality with respect to any early the financial instruments are measured at cost and repayment clauses; 2) use of credit-risk-adjusted adjusted for any impairment losses. valuations using the spread curves provided by Bloomberg. As regards financial assets, credit risk is 1.4 Derecognition reflected by reducing fair value through specific and collective allowance accounts for the assets. Financial assets held for trading are derecognized when the contractual rights to the cash flows expire, or a disposal transfers all the risks and rewards connected with ownership to a third party. Conversely, when a prevalent share of the risks and rewards associated with ownership of the financial asset are retained, the asset continues to be Section 1 – Financial assets held for trading recognized even if legal title has been transferred.

1.1 Classification Where it is not possible to ascertain whether substantially all the risks and rewards of ownership have been transferred, financial assets are derecognized when no form of control over the instrument has been retained. Conversely, if the Bank This category includes financial assets, regardless of their technical form, held for short-term trading retains even a portion of control, the asset continues to be recognized to the extent of the continuing purposes. It includes derivatives with a positive

47 involvement, measured by exposure to changes in the 2.4 Derecognition value of the assets transferred and to changes in the related cash flows. Available-for-sale financial assets are derecognized when the contractual rights to the cash flows expire 1.5 Criteria for recognizing gains or losses or a disposal transfers all the risks and rewards connected with ownership to a third party. The results of the measurement of financial assets Conversely, when a prevalent share of the risks and held for trading are recognized through profit or loss. rewards associated with ownership of the financial Dividends from available-for-sale equity instruments asset are retained, the asset continues to be are recognized in the income statement when the recognized even if legal title has been transferred. right to receive payment accrues. Where it is not possible to ascertain whether Interest income and dividends are recognized, substantially all the risks and rewards of ownership respectively, in the income statement under “interest have been transferred, financial assets are income and similar revenues” and “dividends and derecognized when no form of control over the similar revenues”. Gains and losses from trading, as instrument has been retained. Conversely, if the Bank well as capital gains and losses resulting from retains even a portion of control, the asset continues measurement are recognized in the income statement to be recognized to the extent of the continuing under “Net gain (loss) on trading activities”. involvement, measured by exposure to changes in the value of the assets transferred and to changes in the related cash flows. Section 2 – Financial assets available for sale Financial assets sold are derecognized in the event in which the contractual rights to receive the related 2.1 Classification cash flows are retained with the simultaneous assumption of an obligation to pay such flows, and This category includes financial assets, other than only such flows, to other third parties. derivatives, that are not classified in the balance sheet as “financial assets held for trading”, “financial 2.5 Criteria for recognizing gains or losses assets at fair value through profit or loss”, “financial assets held to maturity”, “due from banks” or “loans to customers”. Gains and losses from changes in the fair value are recognized in a special equity reserve until the asset Specifically, the item includes: shareholdings not held is derecognized. The value corresponding to the for trading and not qualifying as a subsidiary, amortized cost of available-for-sale financial assets is recognized through profit or loss. associate or joint venture, units in investment funds that are not listed or are traded infrequently, specific bonds, identified on a case-by-case basis with respect Available-for-sale financial assets are subject to to the purpose for which they are purchased/held. impairment testing to determine whether there is objective evidence of impairment. Where impairment is found, the cumulative loss directly recognized in 2.2 Recognition equity is reversed to the income statement. The amount of this loss is measured as the difference Available-for-sale financial assets are initially between the purchase cost (net of any amortization recognized at the settlement date for debt and and repayments of principal) and the fair value, less equity securities and the disbursement date in the any impairment loss previously recognized in the case of loans. income statement.

Financial assets are initially recognized at fair value, Where the reasons for the impairment should cease which is generally the amount paid or received. to obtain subsequent to the recognition of the Where the price is different from the fair value, the impairment loss, writebacks are recognized in the financial asset is recognized at its fair value and the income statement for loans or debt securities and in difference between the two amounts is recognized an equity reserve in the case of equity instruments. through profit or loss. The initial recognition value The value of the asset after the writeback shall not in includes direct transaction costs or revenues any event exceed the amortized cost that the determinable at the recognition date, even if settled instrument would have had in the absence of the at a later time. prior writedown.

2.3 Measurement In addition to the recognition of impairment losses, the cumulative gains or losses in the equity reserve Following initial recognition, financial assets are, as mentioned above, recognized in the income available for sale are measured at fair value. Fair statement at the time of the sale of the asset. value is determined using the criteria adopted for financial assets held for trading. Equity instruments, for which the fair value cannot be reliably determined, are carried at cost and adjusted for any impairment losses. Section 3 – Financial assets held to maturity

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3.1 Classification amount of the assets and the present value of estimated future cash flows, discounted at the This category comprises listed debt instruments with original effective interest rate. The amount of the fixed or determinable payments and a fixed maturity loss is recognized in profit or loss. for which the Bank has the positive intention and ability to hold until maturity. If the reasons for the impairment loss should no longer obtain following an event occurring after the In the circumstances permitted by the applicable impairment was recognized, the impairment loss is accounting standards, such assets may only be reversed through profit or loss. The reversal shall not reclassified as financial assets available for sale. If result in a carrying amount that exceeds what the more than an insignificant amount of such amortized cost would have been in the absence of the instruments should be sold or reclassified during the previously recognized impairment losses. year before their maturity, the remaining financial assets held to maturity would be reclassified as 3.4 Derecognition financial assets available for sale and the Bank would not be permitted to classify instruments in this The financial assets are derecognized only when a category for the subsequent two years, unless the disposal transfers substantially all the risks and sales or reclassifications: rewards connected with ownership to a third party. Conversely, when a prevalent share of the risks and – are so close to maturity or the financial asset’s call rewards associated with ownership of the financial date that changes in the market rate of interest asset are retained, the assets continue to be would not have a significant effect on the financial recognized even if legal title has been transferred. asset’s fair value; Where it is not possible to ascertain whether – occur after the entity has collected substantially all substantially all the risks and rewards of ownership of the financial asset’s original principal through have been transferred, financial assets are scheduled payments or prepayments; or derecognized when no form of control over the instrument has been retained. Conversely, if the Bank – are attributable to an isolated event that is beyond retains even a portion of control, the asset continues the entity’s control, is non-recurring and could not to be recognized to the extent of the continuing have been reasonably anticipated by the entity. involvement, measured by exposure to changes in the value of the assets transferred and to changes in the 3.2 Recognition related cash flows.

Financial assets held to maturity are recognized at Finally, financial assets sold are derecognized in the the settlement date. event in which the contractual rights to receive the related cash flows are retained with the simultaneous Such financial assets are initially recognized at fair assumption of an obligation to pay such flows, and only such flows, to other third parties. value, including any directly attributable costs and income.

If the financial assets are recognized in this category Section 4 – Loans and receivables as a result of reclassification from financial assets available for sale or, in the case of unusual events, 4.1 Classification from financial assets held for trading, the fair value of the assets at the reclassification date is deemed to “Loans to banks” and “loans to customers” includes be the new amortized cost of the assets. loans, whether disbursed directly or acquired from third parties, with fixed or determinable payments, 3.3 Measurement that are not listed on an active market and that are not classified as: “Financial assets held for trading”; Subsequent to initial recognition, financial assets “Financial assets at fair value through profit or loss”; held to maturity are measured at amortized cost, “Financial assets available for sale”. This category using the effective interest rate method. includes any securities with characteristics similar to loans and receivables. Gains or losses in respect of financial assets held to maturity are recognized through profit or loss at the The category also includes trade receivables, time the assets are derecognized or impaired and repurchase transactions and receivables recognized through the amortization of the difference between by the lessor in respect of finance leasing the carrying amount and the amount repayable at transactions. maturity. Loans and receivables include assets acquired through Assets held to maturity are evaluated for objective non-recourse factoring contracts, for which the risks evidence of impairment. and rewards relating to the asset have been transferred. If such evidence is found, the amount of the loss is measured as the difference between the carrying 4. 2 Recognition

49

Loans and receivables are initially recognized in the The loan portfolio undergoes periodic testing for balance sheet at the disbursement date or, in the impairment. Impaired positions include bad debts, case of debt securities, at the settlement date. The substandard loans, restructured loans or loans past initial amount recognized is equal to the amount due or overlimit for more than 90 days, in accordance disbursed or subscription price, including costs and with the Bank of Italy’s current rules. Impairment loss revenues directly attributable to the transaction and is recognized only when, subsequent to initial determinable from the inception of the transaction, recognition, events have occurred that give rise to even if settled at a later time. The initially objective evidence of impairment such as to cause a recognized amount does not include costs to be change in the reliably estimated cash flows. reimbursed by the debtor or that can be characterized as normal administrative overhead Loans for which there is objective evidence of costs. possible impairment are measured individually. The amount of the loss is the difference between the Specifically, leasing receivables are recognized in an asset’s carrying amount and the present value of amount equal to the lower of the fair value of the expected future cash flows, calculated by applying asset and the present value of the minimum the original effective interest rate. Measurement payments, which are equal to the installments due takes account of the “maximum recoverable” under the lease agreement and the purchase option, amount, which corresponds to the greatest estimate since the latter’s value is significantly lower than the of expected future cash flows in respect of principal fair value of the asset upon expiry of the lease, and interest payments. Also taken into consideration meaning that it is reasonably certain that the option is the realizable value of any guarantees excluding will be exercised. The receivables are initially recovery costs, recovery times estimated based on recognized at the inception date of the contract, contractual maturities, if any, and on reasonable which corresponds to the delivery date of the asset. estimates in the absence of contractual provisions, and the discount rate, which is the original effective All assets related to customer leases that are not interest rate. For impaired positions at the transition settled and closed are recognized among other loans. date, where determining this figure would be Conversely, all assets related to customer leases that excessively burdensome, the Bank has adopted are settled and closed are measured pursuant to IAS 2 reasonable estimates, such as the average rate of (Inventories) at the lower of cost (impaired implicit loans for the year in which the loan was first credit) and net market value. classified as a bad debt, or the restructuring rate.

The initial recognition amount of loans disbursed at In measuring loans individually, cash flows from loans non-market conditions is equal to the fair value of for which short-term recovery is expected are not the loans, determined using valuation techniques. discounted. The original effective interest rate of The difference between the fair value and the each loan remains unchanged unless the position amount disbursed or the subscription price is undergoes a restructuring that involves a change in recognized through profit or loss, subject to the contractual interest rate, including when it compliance with the conditions specified in IAS 39. becomes an interest-free loan.

Securities repurchase transactions are recognized as Loans for which no objective evidence of impairment funding or lending transactions. Transactions has been found, usually performing loans, undergo involving a spot sale and a forward repurchase are collective impairment testing, with the creation of recognized as payables in the amount received spot, groups of positions with uniform credit risk profiles. while those involving a spot purchase and a forward The writedown is determined based on historic loss sale are recognized as receivables in the amount paid rates for each group. In determining the time series, spot. individually measured positions are removed from the group of loans being measured. Writedowns 4. 3 Measurement determined collectively are taken to the income statement. Following initial recognition, loans are measured at amortized cost. Guarantees also undergo impairment testing in a manner analogous to collective impairment testing. The amortized cost equals the amount at which a financial asset is measured at initial recognition 4. 4 Derecognition decreased by principal repayments, plus or minus the cumulative amortization using the effective interest Loans are derecognized when they fall due or are method of any difference between the initial amount transferred. Loans transferred are derecognized only and the maturity amount, minus any reduction when substantially all the risks and rewards of (directly or through the use of a provision) due to ownership of the loans are transferred. If a significant impairment or non-recoverability. portion of the risks and rewards of ownership of a transferred loan has been retained, the loan Amortized cost is not used for very-short-term loans, continues to be recognized even though legal title to loans without a specified maturity or revocable loans, the loan has been transferred. Where it is not for which the impact of this method can be possible to determine whether substantially all the considered not material. These positions are risks and rewards have been transferred, the loan is measured at cost. derecognized if no form of control over it is retained. Conversely, where even a portion of control is

50 retained, the loan continues to be recognized to the Impairment losses, as defined in the preceding sub- extent of the continuing involvement in the asset, section on measuring loans, are recognized in the measured by the exposure to changes in value of the income statement. If the reasons for the impairment transferred loans and changes in their cash flows. should cease to obtain subsequent to the recognition of the impairment loss, a writeback is taken to the Transferred loans are derecognized in the event in income statement. The value of the asset after the which the contractual rights to receive the related writeback shall not in any event exceed the cash flows are retained with the simultaneous amortized cost that the instrument would have had in assumption of an obligation to pay such flows, and the absence of the prior writedown. only such flows, to other third parties. Writebacks connected with the passage of time, IFRS 1 established a specific exemption to the corresponding to interest accrued during the period application of derecognition rules for transfers of based on the original effective interest rate financial assets, including securitization operations, previously used to calculate impairment losses, are occurring prior to 1 January 2004. By virtue of this recognized among writebacks for impairment. exemption, for securitizations carried out before that date, the company may elect to continue to apply the previous accounting rules or to adopt the provisions Section 5 – Financial assets at fair value through of IAS 39 retrospectively, starting from a date profit or loss selected by the entity, provided that the information required to apply IAS 39 to assets previously As the Bank has not exercised the fair value option, it derecognized was available at the time of initial does not currently have a portfolio of financial assets recognition of the these operations. Therefore, the designated as at fair value through profit or loss. ICCREA Group has decided to apply the current accounting rules for securitization operations carried out before 1 January 2004. Section 6 - Hedging 4. 5 Criteria for recognizing gains or losses 6.1 Classification Following initial recognition, loans are measured at amortized cost, which equals the amount at which Derivatives contracts for hedging purposes are used the assets are measured at initial recognition to protect against one or more types of risk (interest decreased by principal repayments, plus or minus the rate risk, exchange rate risk, price risk, credit risk, cumulative amortization using the effective interest etc.). method of any difference between the initial amount and the maturity amount (usually attributable to The items “hedging derivatives” among assets and costs and revenues directly attributable to the liabilities include the positive and negative values of individual position) and plus or minus any derivatives that are part of effective hedging writedowns/writebacks. The effective interest rate is relationships. the rate that exactly discounts the estimated future cash flows generated by the loan in respect of The hedge portfolio contains derivatives contracts principal and interest to the amount disbursed used to reduce the market risks that affect the including costs and revenues attributable to the loan. underlying financial assets or liabilities. The Bank’s This accounting treatment makes it possible to existing hedging operations are intended to hedge the distribute the economic impact of costs and revenues fair value (interest rate risk and price risk) of bond over the expected remaining life of the loan. issues (ordinary and structured).

Under the definition provided in IAS 17, the indexing 6.2 Recognition and derecognition component (contingent rent) is not included in the recognition of minimum lease payments, but is Hedging derivatives and the hedged financial assets recognized separately over the term of the lease. The and liabilities are reported in accordance with hedge upward or downward adjustments are recognized on accounting rules. an accruals basis in the income statement. These are not included in discounting since the minimum Where there is formal documentation of the payments do not include contingent rents. relationship between the hedged item and the hedging instrument, a hedge is considered effective For contracts covering multiple assets, revenues for if, at inception and throughout its life, the changes in the entire lease contract are recognized at the the fair value of the hedged item or the related moment of delivery of the last asset. As a result, pre- expected cash flows are almost entirely offset by lease interest is recognized. those of the hedging instrument. Effectiveness is measured at every balance sheet date through The amortized cost method is not used for short-term prospective and retrospective tests and the hedge is loans where the impact of discounting can be deemed effective when the changes in value are considered negligible. Short-term loans are valued at within the established interval of 80% to 125%. cost. The same approach is adopted for loans without a specified maturity or those subject to revocation. 6.3 Measurement

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Hedging derivatives and the hedged positions (limited Only factors that exist at the level of the separate to the change in value caused by hedged risks) are financial statements (percentage of ownership, measured at fair value. The fair value of derivative effective and potential voting rights, de facto instruments listed on active (efficient) markets are situations of significant influence) are used in based on the official closing prices, while the fair determining whether a holding is classified as an value of unlisted instruments corresponds to the equity investment. Subsidiaries, joint ventures and present value of expected future cash flows, associates held for sale are reported separately in the calculated by taking into account the various risk financial statements as a disposal group and are profiles inherent in the instruments being measured. measured at the lower of the carrying amount and the fair value excluding disposal costs. The fair value of hedged positions is measured using the above techniques only with respect to changes in 7.2 Recognition value caused by the risks being hedged, sterilizing the risk components that are not directly correlated with Equity investments are initially recognized at cost at the hedge. the settlement date including costs and revenues that are directly attributable to the transaction. 6.4 Criteria for recognizing gains or losses 7.3 Measurement The differences accrued on derivative instruments hedging interest rate risk are recognized under the Investments in subsidiaries, associates and joint income statement items “interest income and similar ventures are measured at cost. Where there is revenues” or “interest expense and similar charges” evidence that the value of an equity investment may (in step with interest accrued on the hedged items). be impaired, its recoverable value is determined, taking account of both its market value and the Gains and losses resulting from the measurement of present value of future cash flows. If this value is hedging derivatives and hedged items are reported in lower than the carrying amount, the difference is the income statement under “Net gain/(loss) from recognized in the income statement as an impairment hedging activities”. loss.

7.4 Derecognition Section 7 – Equity investments Equity investments are derecognized when the 7.1 Classification contractual rights to the cash flows from the activities expire or when substantially all the risks The item includes equity investments in subsidiaries, and rewards connected with ownership of the equity associates and joint ventures. investment are transferred.

Subsidiaries are companies in which the Bank holds, 7.5 Criteria for recognizing gains or losses either directly or indirectly, more than half of the voting rights unless it can be shown that possessing Dividends received from equity investments measured these rights does not constitute control. Control also at cost are recognized in the income statement when exists where the Bank exercises the power to the right to receive the payment accrues. determine financial and operating policies. The consolidated financial statements are prepared by Impairment losses on subsidiaries, associates and the parent company. joint ventures valued at cost are recognized in the income statement. If the reasons for the impairment Joint ventures are companies in which control is should cease to obtain subsequent to the recognition shared with other parties by contract. of the impairment loss, a writeback is taken to the income statement. Associates are companies in which the Bank holds, either directly or indirectly, at least 20% of the voting rights or, independently of the proportion of voting Section 8 – Property and equipment rights, companies over which the Bank exercises a significant influence, which is defined as the power 8.1 Classification to participate in determining financial and operating policies, but without exercising either control or joint Property and equipment includes land, buildings used control. in operations and held for investment, technical plant, furniture and equipment. This item includes Control, joint control and significant influence cease assets are used in providing goods and services, in cases in which the power to determine financial rented to third parties or used for administrative and operating policies of the company is removed purposes for a period of more than one year. from the governance bodies of the company and transferred to a governmental body, a court and in 8.2 Recognition similar cases. The equity investment in these cases is subject to the treatment of IAS 39, as provided for financial instruments.

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Property and equipment is initially recognized at Intangible assets are recognized as such if they are cost, which includes all costs directly attributable to identifiable and are based on legal or contractual the transaction and placing the asset in service. rights. They include software applications and licenses. Extraordinary maintenance expenses that increase the future economic benefits of such assets are The costs of improving leased property with no allocated as an increase in the value of the assets, independent function and use are conventionally while ordinary maintenance costs are recognized in classified among other assets, as provided for by Bank the income statement. of Italy Circular no. 262. The related amortization, which is carried out over a period that does not This item also includes assets held under finance exceed the length of the lease, is reported among leases for which substantially all the risks and other operating expenses. rewards of ownership have been assumed. These assets are initially recognized at a value equal to the 9.2 Recognition lesser of the fair value and the present value of the minimum payments provided for under finance lease. Intangible assets are recognized at cost, adjusted for This amount is subsequently subject to depreciation. any incidental expenses, only if it is probable that the future economic benefits attributable to the asset 8.3 Measurement will be realized and if the cost of the asset can be reliably determined. Otherwise, the cost of the Property and equipment, including investment intangible asset is recognized in the income property, is measured at cost less depreciation and statement in the period in which it is incurred. impairment. Depreciation is determined systematically over the remaining useful life of the 9.3 Measurement asset. The depreciable value is represented by the cost of the assets since the remaining value at the Intangible assets recognized at cost are amortized on end of the depreciation process is considered a straight-line basis over the estimated remaining negligible. Buildings are depreciated at a rate of 3% useful life of the asset. per year, which is considered to appropriately represent the deterioration of the assets over time 9.4 Derecognition due to use, taking account of any extraordinary maintenance costs, which increase the value of the Intangible assets are derecognized upon disposal or assets. when no future economic benefits are expected to be generated by the use or disposal of the asset. Land, whether purchased individually or incorporated into the value of a building, is not depreciated. 9.5 Criteria for recognizing gains or losses 8.4 Derecognition Amortization is recognized through profit or loss. Where there is evidence of possible impairment of Property and equipment is derecognized when the asset and, for goodwill, at each reporting date, a disposed of or when the asset is permanently comparison is made between the asset’s carrying withdrawn from use and no future benefits are amount and any difference between its carrying expected from its disposal. amount and recoverable value. If the reasons for the impairment of intangible assets other than goodwill 8.5 Criteria for recognizing gains or losses should cease to obtain, a writeback is recognized in the income statement. The value of the asset after Depreciation is recognized through profit or loss. If the writeback shall not exceed the value that the there is evidence of possible impairment of the asset, asset would have had, net of amortization, in the the asset’s carrying amount is compared against its absence of the prior writedowns for impairment. recoverable value, which is equal to the greater of the value in use of the asset, meaning the present value of future cash flows originated by the asset and Section 10 – Non-current assets held for sale its fair value, net of any disposal costs. Any negative difference between the carrying amount and the The Bank does not currently have non-current assets recoverable value is recognized in the income held for sale. statement. If the reasons for the impairment should cease to obtain, a writeback is recognized in the income statement. The carrying amount following the writeback shall not exceed the value that the asset Section 11 – Current and deferred taxation would have had, net of depreciation, in the absence of the prior writedowns. 11.1 Classification

Deferred tax assets and liabilities are recognized in Section 9 - Intangible assets equity separately without offsetting, under “Tax assets” and “Tax liabilities”, respectively. 9.1 Classification

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In accordance with the balance sheet liability constructive obligation resulting from a past event for method, current and deferred taxation items include: which performance of the obligation is likely onerous and the loss associated with the liability can be a) current tax assets: amounts paid that exceed reliability estimated. the amounts due under applicable corporate income tax regulations; The amount recognized is the best estimate of the amount required to discharge the obligation or to b) current tax liabilities: amounts due under transfer it to third parties as of the close of the applicable corporate income tax regulations; period. When the financial impact of the passage of time is significant and the dates of payment of the c) deferred tax assets: amounts of income taxes obligation can be estimated reliably, the provision is recoverable in future periods in respect of discounted at market rates as of the balance sheet deductible timing differences (mainly date. represented by expenses deductible in the future under existing corporate income tax 12.2 Derecognition regulations); Provisions are only used when the charges for which d) deferred tax liabilities: amounts of income they were originally established are incurred. When taxes payable in future periods in respect of the use of resources to fulfill the obligation is no taxable timing differences (mainly longer deemed to be probable, the provision is represented by the deferral in taxation of reversed through profit or loss. revenues or the advance deduction of expenses under applicable corporate income 12.3 Criteria for recognizing gains or losses tax regulations). The amounts recognized are reviewed at every 11.2 Recognition and derecognition balance sheet date and are adjusted to reflect the best estimate of the expense required to fulfill the Income taxes are recognized in the income statement obligations existing at the close of the period. The except for those referring to items directly debited or impact of the passage of time and that of changes in credited to equity. Deferred tax assets are recognized interest rates are reported in the income statement when their recovery is deemed likely. Deferred tax under net provisions for the period. liabilities are recognized in all cases in which it is likely that the relative payable will accrue. Section 13 – Debt and securities issued When the results of transactions directly affect shareholders’ equity, current taxes, deferred tax 13.1 Classification assets and deferred tax liabilities are also recognized in shareholders’ equity. Debt and securities issued includes financial liabilities not held for trading in the short term, comprising all 11.3 Measurement technical forms of interbank and customer funding and funding through certificates of deposit and Deferred tax assets and liabilities are periodically outstanding bond issues, excluding any amounts measured to take account of any regulatory changes repurchased. or changes in tax rates. Debt also includes payables recognized by the lessee 11.4 Criteria for recognizing gains or losses in respect of finance leasing transactions.

Current income taxes are calculated based on taxable Financial liabilities towards transferors for non- income for the period. Current tax payables and recourse purchases of receivables in factoring receivables are recognized at the value that payment transactions are also recognized under debt. to or recovery from the tax authorities is expected by applying current tax rates and regulations. Deferred 13.2 Recognition income tax assets and liabilities are calculated on the basis of timing differences between the value The liabilities are initially recognized at fair value, attributed to the assets and liabilities in the financial which is normally equal to the amounts received or statements and the corresponding values recognized the issue price, plus or minus any additional costs or for tax purposes. revenues directly attributable to the transaction that are not reimbursed by the creditor. Internal administrative costs are excluded. Financial liabilities Section 12 – Provisions for risks and charges issued on non-market terms are recognized at estimated fair value and the difference with respect 12.1 Recognition and classification to the amount paid or the issue price is taken to the income statement. The provisions for risks and charges are recognized in the income statement and reported under liabilities Structured liabilities (combinations of securities or on the balance sheet and relate to a present legal or loans and derivatives) are separated into their

54 constituent parts - which are recognized individually - value, and the difference between the amount paid if the embedded derivatives have different financial and the fair value is recognized through profit or loss. and risk characteristics from those of the underlying financial instrument and can be treated as Derivative contracts embedded in other financial autonomous derivative contracts. instruments or contracts and which have financial and risk characteristics that are not correlated with the 13.3 Measurement host instrument or which meet the requirements to be classified themselves as derivative contracts, are Following initial recognition, financial liabilities are recognized separately among financial liabilities held measured at amortized cost using the effective for trading. This is not done in cases in which the interest rate method, excluding short-term liabilities, compound instrument containing the derivative is which are recognized in the amount received in measured at fair value through profit or loss, subject keeping with the general principles of materiality and to compliance with the conditions specified in IAS 39. significance. Refer to the section on loans and receivables for information on the criteria for 14.3 Measurement determining amortized cost. Subsequent to initial recognition, the financial Bonds that are part of hedging operations are subject liabilities are recognized at fair value. Refer to the to the accounting and measurement criteria section on measuring financial assets held for trading applicable to hedges (see Section 6 - Hedging). for information on determining the fair value.

13.4 Derecognition 14.4 Derecognition

In addition to cases of extinguishment and expiration, Financial liabilities held for trading are eliminated financial liabilities are derecognized when previously upon being extinguished or upon maturity. issued securities are repurchased. In this case, the difference between the carrying amount of the 14.5 Criteria for recognizing gains or losses liability and the amount paid to repurchase it is recognized in the income statement. If the Gains and losses from the measurement of financial repurchased security is subsequently placed again on liabilities held for trading are recognized through the the market, this is treated as a new issue and is income statement. recognized at the new placement price, with no impact on the income statement. Section 15 – Financial liabilities at fair value 13.5 Criteria for recognizing gains or losses through profit or loss Interest expense is reported in the income statement As the Bank has not exercised the fair value option, it under “interest expense and similar charges”. does not currently have a portfolio of financial liabilities designated as at fair value through profit or Any gains or losses arising from repurchases are loss. recognized in the income statement under “Gains/(losses) from the sale or repurchase of: financial liabilities”. Section 16 – Foreign currency transactions

16.1 Classification Section 14 – Financial liabilities held for trading Foreign currency transactions are represented by all 14.1 Classification assets and liabilities denominated in currencies other than the euro. The item includes the negative value of trading derivatives that are not part of hedging relationships 16.2 Recognition as well as the negative value of derivatives embedded in compound contracts. Transactions in a foreign currency are initially recognized in euros by translating the amount in the 14.2 Recognition foreign currency into the functional currency at the exchange rate prevailing on the date of the Debt and equity securities representing financial transaction. liabilities are initially recognized at the settlement date, while derivative contracts are recognized at the 16.3 Criteria for recognizing gains or losses date they are signed. The financial liabilities are initially recognized at fair value, which generally equals the amount received. At the balance sheet date, foreign currency items are measured as follows: In cases in which the amount paid differs from the fair value, the financial liability is recognized at fair - monetary items are translated at the exchange rate prevailing at the balance sheet date;

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- non-monetary items measured at historic cost are Therefore, starting January 1, 2007, the Bank: translated at the exchange rate prevailing at the transaction date; • continues to recognize the obligation accrued at December 31, 2006 in accordance - non-monetary items measured at fair value are with the rules for defined-benefit plans. It translated using the exchange rate prevailing at the shall measure the obligation for benefits balance sheet date. accrued by employees using actuarial techniques and shall calculate the total Exchange rate differences resulting from the amount of actuarial gains and losses and the settlement of monetary items or from the translation portion of these to be recognized using the of monetary assets/liabilities at exchange rates other previously applied corridor method. than the initial translation rate, or the translation of previous financial statements, are recognized in the • recognizes the obligation for portions income statement in the period in which they accrued starting January 1, 2007, payable to emerge. When gains or losses relating to a non- a supplementary pension scheme or to the monetary item are recognized in equity, the treasury fund managed by INPS, on the basis exchange rate difference for the item is also of the contributions owed in each period, as recognized in equity. Likewise, when a gain or less is a defined-contribution plan. Specifically, recognized in the income statement, the this treatment starts, for contributions corresponding exchange rate difference is also allocated to a supplementary pension recognized in the income statement. scheme, when the election is made or from July 1, 2007 for those employees who do not exercise any option 2007. Section 17 – Other information

Accruals and deferrals Recognition of revenues Accruals and deferrals reporting costs and revenues to the period on assets and liabilities are recognized Revenues are recognized when realized or, in the as adjustments to the assets and liabilities to which case of the sale of goods or products, when it is they refer. probable that future benefits will be received and these future benefits can be reliably determined, and in the case of services, when the services are performed. Specifically: Pensions, termination benefits and seniority bonuses • interest is recognized on an accruals basis Following the reform of supplementary pension using the contractual interest rate or the schemes introduced by Legislative Decree 252 of 5 effective interest rate where the amortized December 2005, changes were made to the way in cost method is applied; which employee termination benefits are recognized. The portion of termination benefits accrued through • default interest, if any, is recognized in the December 31, 2006 is treated as a defined-benefit income statement only upon receipt; plan, since the company is required under law to pay the employee an amount determined pursuant to • dividends are recognized in the income Article 2120 of the Italian Civil Code. The change statement when their distribution is with respect to the situation prior to December 31, authorized; 2006 relates to the actuarial assumptions of the model, which must incorporate the rate of salary increases provided for by Article 2120 of the Civil • commissions for revenues from services are Code (application of a rate equal to 1.5% plus 75% of recognized, in accordance with the terms of the change in the ISTAT inflation index) and not that the contract, in the period in which the estimated by the company. As a result, the service is rendered; termination benefit provision at December 31, 2006 was measured using the new model, which no longer • revenues from the placement of funding takes account of a number of variables such as the instruments, calculated on the basis of the average annual rate of salary increases, pay grades difference between transaction price and based on seniority, and the percentage increase in the fair value of the financial instrument, salary due to promotion. are recognized in the income statement when the transaction is recognized if the fair The portion of termination benefits accrued from value can be determined with reference to January 1, 2007 allocated to a supplementary pension parameters or transactions recently scheme or to the treasury fund managed by INPS observed in the same market in which the (Italy’s National Social Security Institute) are treated instrument is traded. If these amounts as a defined-contribution plan since the company’s cannot be easily determined or the obligation towards the employee ceases upon transfer instrument is not highly liquid, the financial of the portions accrued to the fund. instrument is recognized in an amount equal to the transaction price, excluding the

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commercial margin. The difference between • valuation models commonly used by market this amount and the fair value is taken to participants that have been demonstrated to profit or loss over the duration of the provide reliable estimates over time of transaction through the gradual reduction in prices obtained in current market conditions the valuation model of the corrective factor (“mark-to-model”). reflecting the reduced liquidity of the instrument. Revenues from the sale of non- The choice between these methods is not optional, as financial assets are recognized upon they must be applied in accordance with the fair completion of the sale, unless the Bank has value hierarchy: in the absence of active markets retained most of the risks and rewards (effective market quotes – Level 1), we employ connected with the asset. valuation techniques using inputs that are directly or indirectly observable on the market other than the prices of financial instruments (comparable approach – Level 2) or, in the absence of such inputs or in the Determination of fair value presence of inputs that are only partially based on parameters observable on the market, fair value is Fair value is the amount for which an asset (or calculated on the basis of valuation techniques liability) could be exchanged between commonly used by market participants and, knowledgeable, willing parties in an arm's length therefore, are more discretionary in nature (mark-to- transaction. In the definition of fair value, a key model approach – Level 3). assumption is that an entity is fully operational (the assumption that an entity is a going concern) and Under the definition given in the IAS/IFRS, the does not have the intention or the need to liquidate, concept of active market regards the individual significantly reduce its operations or undertake financial instrument and not the market involved. As transactions on unfavorable terms. In other words, a result: fair value is not the amount an entity would receive or would pay in a forced transaction, an involuntary • a regulated market does not necessarily ensure liquidation or a distress sale. Nevertheless, the fair the formation of meaningful prices for all value reflects the credit quality of the instrument as quoted instruments; it incorporates counterparty risk. • multilateral trading facilities (MTF) are considered active markets if they provide a continuous, meaningful volume of trades that Financial instruments can ensure the formation of prices that effectively represent the fair value of the instrument; The fair value of financial instruments is determined on the basis of prices on financial markets in the case of instruments quoted on active markets and through • electronic over-the-counter (OTC) trading the use of internal valuation techniques for other systems can be considered active markets to the financial instruments. A financial instrument is extent that the quotes they provide effectively considered to be quoted on an active market if the represent the price at which a normal quoted prices are readily and regularly available from transaction would be concluded; an exchange, dealer, broker, industry group, pricing service, authorized agency, regulatory authority or • quotes from brokers can represent fair value if multilateral trading facility (MTF) and those prices the reflect the effective price of the instrument represent actual and regularly occurring market in a liquid market (i.e. not indicative prices but transactions on an arm’s length basis. In the absence rather binding offers). of a quoted price on an active market or a regularly functioning market, i.e. when the market does not For the purposes of determining fair value, the have a sufficient and continuous number of meaningfulness of the price observed on the market transactions, bid-ask spreads and volatility are not is especially important. To assess this aspect, the sufficiently low, the fair value of financial criteria considered include: bid-ask spreads, the instruments is mainly determined using valuation breadth and depth of transactions, the number of techniques that seek to establish what the contributors, the availability of information on the transaction price would have been on the terms and conditions of transactions, and the measurement date in an arm’s length exchange volatility of prices. motivated by normal business considerations. The most appropriate market price for an asset held Valuation techniques consider: or a liability to be issued is the current price offered by the purchaser (bid), while for an asset to be purchased or a liability held it is the current price • prices in recent market transactions in requested by the seller (ask), on the most similar instruments, if available, corrected advantageous market available, at the close of the appropriately to reflect changes in market reporting period. In the case of financial instruments conditions and technical differences for which the bid-ask spread is not significant or for between the instrument being valued and financial assets and liabilities whose characteristics the similar instrument (the ‘comparable give rise to offsetting positions in market risk, a mid- approach’);

57 market price is used (once again as at the last day of factors to the instrument being measured. The the reporting period) rather than the bid or ask price. valuation techniques used in the comparable approach make it possible to replicate the prices of The following are considered to be quoted on an financial instruments quoted on active markets active market (Level 1): (calibration of the model) without using discretionary inputs - i.e. inputs whose value cannot be drawn from • shares quoted on a regulated market or on the quotations of financial instruments on active NASDAQ, which, despite not being markets or that cannot be set at a level that would regulated, has daily trading volumes replicate quotations on an active market – that would comparable to those of the world’s main have a decisive impact on the final valuation. markets. For securities traded on a regulated market, the main price source is Level 2 inputs for use under the comparable approach the reference exchange, which generally are: corresponds to the official price published by the regulated market on which the • quoted prices for similar assets or liabilities in security is traded. active markets;

• bonds actively quoted on regulated markets • quoted prices for identical or similar or MTF. To this end, the calculation of fair instruments in markets that are not active; value uses closing bid-ask prices or, where these are not available, the official closing • observable market inputs (e.g. interest rates prices provided by the markets for each and yield curves observable at commonly quoted security. In the case of “multilisted” intervals, volatilities, credit spreads, etc.); securities, i.e. those quoted on more than one market at the same time, the main In line with the provisions of the IAS/IFRS, the risk market is used; factors to be taken into consideration in using a valuation technique include: the time value of money • government securities of EU Member States (i.e. the risk-free rate), default risk, exchange rates, that are listed or unlisted but with prices commodity prices, share prices, volatility (i.e. the regularly contributed by counterparties scale of future changes in the price of the financial where bid-ask prices provided by the instrument following changes in the price of other counterparties through information financial instruments), early repayment and providers are used; redemption risk, servicing costs for financial assets and liabilities. • investment funds, SICAVs and ETFs if a net asset value (NAV) calculated daily is Valuation techniques to determine fair value should available; make maximum use of observable inputs, should not require significant price adjustments and should not • spot foreign exchange transactions; be based on assumptions specific to the entity performing the valuation. • derivatives for which prices on an active market are available (for example, The valuation techniques used provide for: exchange-traded futures and options); • the use of current market prices of substantially similar instruments where they are considered • hedge funds for which the fund manager provides, with the frequency established in highly comparable (on the basis of the country the subscription contract, the NAV, assuming and sector involved, the rating, the maturity that no valuation adjustments of the and the seniority of the securities) such as to underlying assets are needed for liquidity or avoid significant changes in the prices counterparty risk. themselves;

By exclusion, all other financial instruments that do • the use of prices of instruments with similar not belong to the above categories are not considered calibration characteristics; to be quoted on an active market. • discounted cash flow models; In the absence of prices observable on active markets, the fair value of financial instruments is • option pricing models. determined using the “comparable approach” (Level 2), which involves the use of valuation techniques The concept of “similar instruments” calls for an that use inputs directly observable on the market. In assessment of various factors, including: the timing of this case, the valuation is not based on quotations for the implicit cash flows of the instrument, the the financial instrument being measured but rather discount rate used, the amount and structure of cash on prices or credit spreads drawn from the official flows (especially for derivatives), other contractual prices of instruments with substantially similar risk- terms (e.g. the presence of a call clause), and the return factors, using a pricing model. The use of this currency in which the cash flows are paid. approach involves finding transactions on active markets in financial instruments with comparable risk

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Financial instruments classified as Level 2 in the fair • the elements underlying the valuation value hierarchy are: techniques reasonably reflect market expectations and the measurement of the risk • Collective investment undertakings and factor incorporated in the yield of the financial hedge funds or closed-end funds with a instrument; published NAV and for which the NAV is reasonably representative of the fair value. • the model undergoes prior validation and periodic reassessment to adjust it to changing • Bonds that do not have an active market but conditions in the market for the instrument which can be priced using the prices of (calibrating the technique on the basis of comparable securities as inputs in a current observable prices). valuation model. The fair value of bonds without official prices set in an active It is also necessary to assess whether it is necessary market is determined on the basis of an to modify the technique to ensure that the estimate appropriate credit spread, identified on the of fair value reflects the current terms of the basis of contributed prices of liquid financial instrument and/or the market. This assessment can instruments with similar characteristics. The be based on the following factors: sources of credit spreads are liquid securities with contributed prices of the • current conditions (financial condition) of the same issuer, credit default swaps on the financial assets/liabilities; same reference entity, liquid securities with contributed prices of issuers with the same • their comparability; rating and in the same sector. Account is also taken of differences in the seniority of • the volume and level of activity on the market the security to be prices with respect to the in which they are traded. debt structure of the issuer. Adjustments that substantially modify the value • OTC derivatives with observable parameters require the Bank to reclassify the instrument to Level and market models. For derivatives, in view 3. of their variety and complexity, a systematic reference framework has been developed To determine the fair value of certain types of that represents the common elements financial instrument, it is necessary to use valuation (calculation algorithms, valuation models, techniques that employ inputs that are not directly market data used, underlying assumptions of observable in the market and therefore require the model) on which the valuation of each estimates and assumptions on the part of the person category of derivative is based. Derivatives measuring the instrument (Level 3). In particular, the on interest rates, exchange rates, equities, financial instrument is valued using a given inflation and commodities not traded on calculation technique based on specific hypotheses regulated markets are over-the-counter regarding: instruments. In other words, they are negotiated bilaterally with market counterparties and their fair value is • developments in future cash flows, possibly determined with specific pricing models that affected by future events that can be use inputs (such as yield curves, exchange assigned a probability on the basis of rates and volatility) observed on the market. historical data or behavioral assumptions; In addition, in order to determine fair value, account is also taken of the credit quality of • the level of certain inputs that are not the counterparty. The fair value reflects quoted on an active market, the estimation counterparty credit risk and the future of which still gives precedence to exposures of the contract using a credit risk information drawn from prices and spreads adjustment (CRA). observed on the market. If this is not available, recourse is made to historical • Credit relationships (assets and liabilities). data on the specific underlying risk factor or More specifically, for medium and long-term specialized research in the field (for assets and liabilities, the valuation discounts example, reports produced by rating future cash flows. This is based on the agencies or leading market players). discount rate adjustment approach, which calls for the risk factors associated with the For financial instruments measured using a mark-to- position to be considered in determining the model approach, prices on active markets are used rate used to discount the future cash flows. but different valuation techniques are involved, including the use of theoretical pricing models that Different valuation techniques can be used if: comply with the requirements set down in the IAS with regard to the valuation of financial instruments. Pricing may be conducted on the basis of internal • they produce reliable estimates of the prices models certified by the Group Risk Management and formed in transactions, reflecting market ALM department present: expectations for those prices;

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• directly in the front-office application in modified only in response to material changes in which the instrument is loaded; market conditions or the condition of the issuer of the financial instrument. • in other company valuation systems. The process of measuring financial instruments (“fair Financial instruments classified as Level 3 in the fair value policy”) involves a number of stages, value hierarchy are: summarized briefly as follows.

• Unlisted shares. Unlisted shares carried at cost • for each category, the processes necessary are also included in Level 3 by convention; to estimate the market inputs and the procedures with which that data is to be • Funds with unpublished NAV or for which the acquired and used are specified; published NAV is not adequately representative of the potential realizable value; • certification and processing of market data for valuation: this consists in detailed checks • Bonds not listed on an active market for which of the market inputs used (verification of no comparable instruments exist or which the integrity of the data stored on the require the use of considerable assumptions; proprietary platform compared with the source of the contribution), likelihood testing (consistency of each piece of data • OTC derivatives valued using: with similar or comparable data) and verification of the specific application • market models that use a significant procedures. unobservable parameter; • certification of pricing models and model • non-market models. risk assessment: in this phase, the consistency of the various valuation Level 3 also includes financial instruments for which techniques with current market practice is the Bank is not able to perform an independent assessed, in order to identify any problems pricing and has to make a specific request for a quote in the pricing models used and to determine from external counterparties. any adjustments to the valuation. The validation process is especially important In order to determine the fair value of all Level 3 when transactions in a new financial instruments, the mark-to-model approach is adopted instrument are introduced, which requires for all unlisted financial instruments whose fair value the development of additional pricing is estimated using valuation techniques that rely on: models, and when it is decided to use a new model to measure payoffs previously • inputs that are not observable in the market; handled with models now considered less appropriate. • assumptions specific to the Bank; • monitoring of the consistency of pricing • prices for recent transactions in similar products models over time: the periodic monitoring of that, nevertheless, require adjustments to the consistency of the pricing model with account for supervening adverse changes in market developments makes possible the market conditions that have a substantial timely identification of divergences and take impact on prices. any necessary corrective action.

If a parameter is not observable (directly or indirectly) in the market and the valuation of the instrument uses entity-specific parameters and/or For the purpose of reporting for financial instruments techniques not supported by market practice, the at fair value, the above hierarchy adopted in financial instrument is classified as Level 3. determining fair value is used consistently for the allocation of the portfolio to the fair value input If internal assumptions are required, two approaches levels (see section A.3). can be used: Determination of amortized cost • the use of stress tests for the inputs used by the model in order to assess the impact that they The amortized cost of a financial asset or liability is may have on the fair value determined using the the amount at which it is measured at initial valuation techniques; recognition minus principal repayments, plus or minus the cumulative amortization using the effective • the use of the most prudent assumptions interest method of any difference between that possible in determining the unobservable initial amount and the maturity amount, and minus parameters used as inputs in the model. any reduction for impairment.

The valuation technique used for a financial The effective interest rate is the rate that exactly instrument is adopted consistently over time and is discounts estimated future cash payments or receipts

60 through the expected life of the financial instrument independently of the subsequent financing of the or the next repricing date. In calculating the present transaction (e.g. facility and arrangement fees) and, value, the effective interest rate is applied to the finally, intercompany costs and revenues. future cash receipts or payments over the entire life of the financial asset or liability or to a shorter period With specific reference to loans and receivables, in the presence of certain conditions (for example, a costs considered directly attributable to the financial change in market rates). instrument include fees paid to distribution networks, fees paid for advisory/assistance services for the Subsequent to initial recognition, amortized cost origination and/or participation in syndicated loans makes it possible to allocate income and expense on and up-front commissions in respect of loans granted the instrument over its entire expected life through at rates exceeding market rates. Revenues considered the amortization process. The determination of in the calculation of amortized cost include up-front amortized cost differs depending on whether the commissions in respect of loans granted at rates financial assets/liabilities being measured are fixed below market rates, revenues from participation in or floating rate instruments and, in the latter case, syndicated loans and brokerage fees received. on whether the variability of the rate is known or not a priori. For fixed-rate instruments or instruments For securities issued, the calculation of amortized whose rate is fixed over specified time periods, cost considers placement commissions on bond issues future cash flows are quantified on the basis of the paid to third parties, amounts paid to exchanges and known interest rate (single or variable) over the life fees paid to audit firms for the activities performed of the instrument. For floating-rate financial for each single issue. The calculation of amortized assets/liabilities for which the variability of the cost does not consider commissions paid to rating interest rate is not known a priori (e.g. because it is agencies, legal and advisory/audit expenses for the linked to an index)), cash flows are calculated on the annual update of prospectuses, the costs for the use basis of the last known rate. At each repricing date, of indices and commissions which originate during the the amortization schedule and the effective interest life of the bond issue. rate are recalculated for the entire useful life of the instrument, i.e. until the maturity date. the Amortized cost is also applied in measuring adjustment is recognized as an expense or income impairment losses on the financial instruments listed through profit or loss. above as well as for the recognition of instruments issued or purchased at an amount other than fair Measurement at amortized cost is used for loans, value. Instead of using the amount received or paid, financial asset held to maturity and available for sale the latter are measured at fair value by discounting and for debt and securities issued. expected future cash flows at a rate equal to the effective interest rate of similar instruments (in Financial assets and liabilities traded on market terms of credit rating, contractual expiry, currency, terms and conditions are initially measured at fair etc.), with the simultaneous registration in profit or value, which is normally equal to the amount loss of financial expense or income; subsequent to disbursed or paid including, for instruments measured initial recognition, these are measured at amortized at amortized cost, directly attributable transaction cost with the registration of higher or lower effective costs, fees and commissions. interest with respect to nominal interest. Lastly, structured assets and liabilities which are not Transaction costs include internal or external recognized at fair value through profit or loss for marginal costs and revenues attributable to the issue, which the embedded derivative has been separated the acquisition or the disposal of a financial from the financial instrument are measured at instrument which are not debited to the customer. amortized cost. Such commissions, which must be directly attributable to the individual financial asset or Amortized cost is not applied to hedged financial liability, modify the original effective yield. assets/liabilities for which fair value changes related Accordingly, the effective interest rate associated to the risk hedged are recognized through profit or with the transaction differs from the contractual loss. However, the financial instrument is again interest rate. Transaction costs do not include measured at amortized cost when the hedge costs/revenues regarding more than one transaction terminates. From that moment, fair value changes and components related to events which may occur recognized previously are amortized, calculating a during the life of the financial instrument but which new effective interest rate which considers the value are not certain at the time of the initial agreement, of the loan adjusted by the fair value of the hedged such as, for example: commissions for retrocession, portion until the natural expiry of the hedge. for non-use or for early repayment. Furthermore, the Furthermore, as already mentioned in the section on calculation of amortized cost does not include costs measurement criteria for loans and debts and that would be incurred independently of the securities issued, measurement at amortized cost is transaction (e.g. administrative costs, office supplies not applied to short-term assets/liabilities for which or communication expenses), costs that, while the time value is deemed to be immaterial and to directly attributable to the transaction, are part of loans without a specified maturity or which are standard practice for the management of the revocable. financing (e.g. activities related to the loan granting process), as well as fees and commissions for services collected in respect of structured finance activities which would in any case have been received Determination of impairment

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Financial assets regulations) with the supervisory approach set out under the New Capital Accord (Basel 2). At every reporting date, financial assets not classified as financial assets held for trading or financial assets The provision also takes into account corrective at fair value undergo impairment testing for the factors such as economic conditions and the purpose of assessing if there is objective evidence concentration of credit risks in respect of persons that the carrying amount of such assets is not fully who have a significant exposure to the Bank. recoverable. With regard to assets available for sale, the An impairment loss occurs if there is objective impairment testing process involves the verification evidence of a reduction in future cash flows with of the presence of impairment indicators and the respect to those originally estimated following determination of any writedown. Impairment specific events. The loss must able to be quantified indicators are essentially divided into two categories: reliably and must be associated with events that have indicators associated with internal factors relating to actually and are not merely expected. the company being assessed, and therefore qualitative in nature, and – for equities securities - Impairment is measured on an individual basis for external quantitative indicators deriving from the financial assets which present specific evidence of market values of the company. losses and collectively for financial assets for which individual measurement is not required or for which Within the first category of indicators, the following no writedown was recognized. Collective factors are considered significant: the posting of measurement is based on the identification of losses or in any case a significant divergence with uniform risk classes of financial assets in terms of the respect to budget targets or the objectives set out in characteristics of borrowers/issuers, economic the long-term plans announced to investors, the sector, geographical area, the presence of any announcement/start of composition with creditors or guarantees and other relevant factors. restructuring plans, and the downgrading by more than two grades of the rating issued by a specialist With regard to loans to customers and amounts due agency. As regards the second category, a significant from banks, positions classified as bad debts, or prolonged reduction in fair value below the initial substandard, restructured or past due in accordance recognition value is considered evidence of with the definitions of the Bank of Italy, consistent impairment. More specifically, a reduction in fair with IAS/IFRS, undergo individual testing. value of over 30% is considered significant and a continuous reduction for a period of over 18 months Such impaired positions undergo an individual is considered prolonged. If one of these thresholds is measurement process, or the expected loss for exceeded, impairment loss is recognized on the uniform categories is calculated and allocated security. If these thresholds are not exceeded but specifically to each position. The amount of the other impairment indicators are present, recognition adjustment of each position is the difference of an impairment loss must also be corroborated by between its carrying amount at the time of the result of specific analyses of the security and the measurement (amortized cost) and the present value investment. of expected future cash flows, discounted using the original effective interest rate. The amount of the impairment is calculated with reference to the fair value of the financial asset. Expected cash flows consider expected recovery periods, the estimated realizable value of guarantees For an illustration of the valuation techniques used to and the costs expected to be incurred for the determine fair value, please see the relevant section. recovery of the credit exposure. Cash flows related to loans which are deemed to be recoverable in the short term are not discounted, since the time value is immaterial. Equity investments

Loans for which no objective evidence of impairment At each reporting date the equity investments in has emerged from individual measurement undergo associates undergo impairment testing to determine collective measurement. Collective measurement is whether there is objective evidence that the carrying conducted for uniform loan categories in terms of amount of such assets is not fully recoverable. credit risk and the related loss percentages are estimated on the basis of time series, based on The identification of any impairment involves the observable evidence at the measurement date, that verification of the presence of evidence of possible permit an estimation of the value of the latent loss impairment and the determination of any writedown. for each loan category. Measurement also considers Impairment indicators are essentially divided into two the risk associated with the counterparty’s country of categories: qualitative indicators, such as the posting residence. of losses or in any case a significant divergence with respect to budget targets or the objectives set out in The determination of provisions for performing the long-term plans announced to investors, the positions is carried out by identifying the greatest announcement/start of composition with creditors or possible synergies (as permitted under the various restructuring plans, and the downgrading by more than two grades of the rating issued by a specialist

62 agency; and quantitative indicators consisting of a process to assess the recoverability of the carrying reduction in fair value below the carrying amount of amounts. Recoverable value is determined on the over 30%, or a market capitalization lower than the basis of value in use, namely the present value company’s book equity for more than 18 months, for estimated using a rate representing the time value of securities listed quoted on active markets, or a money and the asset’s specific risks of the income carrying amount for the equity investment in the generated by the existing relations as at the valuation separate financial statements greater than the date over a period which expresses their expected carrying amount in the consolidated financial residual life. statements of the company’s net assets and goodwill, or the distribution by the latter of a dividend greater than its comprehensive income. Financial guarantees The presence of evidence of impairment results in the recognition of a writedown to the extent that the As part of its ordinary banking operations, the Bank recoverable value is lower than the carrying amount. grants financial guarantees in the form of letters of credit, acceptances and other guarantees. The value The recoverable value is the greater of fair value less of guarantees at the time of initial recognition is costs to sell and the value in use. equal to the commission received and is reported under “Other liabilities”. Commission income earned For an illustration of the valuation techniques used to on guarantees, net of the portion representing the determine fair value, please see the relevant section recovery of costs incurred in issuing the guarantee, above. are recognized on an accruals basis under “Fee and commission income”, taking account of the duration Value in use is the present value of expected future and residual value of the guarantees. cash flows from the asset. It reflects estimated expected future cash flows from the asset, the Following initial recognition, the liability in respect of estimate of possible changes in the amount and/or each guarantee is measured as the greater of the timing of cash flows, the time value of money, the initial recognition amount less cumulative risk premium on the asset and other factors that amortization recognized in profit or loss and the best could affect the assessment by market participants of estimate of the expense required to settle the expected future cash flows from the asset. financial obligation that arose following the granting of the guarantee. Value in use is determined by discounting future cash flows. Any losses and value adjustments on such guarantees are reported under “value adjustments”. Writedowns Other non-financial assets for impairment of guarantees are also reported under “Other liabilities”. Property, equipment and intangible assets with a finite useful life undergo impairment testing if there Guarantees are off-balance-sheet transactions and are reported under “Other information” in Part B of is evidence that the carrying amount of the asset may no longer be recovered. The recoverable value is the notes to the financial statements. determined with reference to the fair value of the property and equipment or intangible assets less costs to sell or the value in use if it is determinable and is higher than fair value.

For other property, equipment and intangible assets (other than those recognized following business combinations) it is normally assumed that the carrying amount corresponds to value in use, since it is determined by a process of depreciation or amortization estimated on the basis of the effective contribution of the asset to the production process and since the determination of fair value is extremely subjective. The two values diverge, giving rise to impairment, in the case of damage, exit from the production process or other similar non-recurring circumstances.

Intangible assets recognized following a business combination, and in application of IFRS 3, undergo impairment testing at each reporting date to assess whether there is objective evidence that the asset may be impaired.

In the presence of evidence of impairment, intangible assets with a finite life undergo a new valuation

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A.3 – FAIR VALUE DISCLOSURES

A.3.1 Transfers between categories

A.3.1.1 Reclassified financial assets: Carrying amount, fair value and impact on comprehensive income

The table has not been completed because there were no such positions as of the balance sheet date.

A.3.1.2 Reclassified financial assets: impact on comprehensive income before transfer

The table has not been completed because there were no such positions as of the balance sheet date.

A.3.1.3 Transfers of financial assets held for trading

The table has not been completed because there were no such positions as of the balance sheet date.

A.3.1.4 Effective interest rate and expected cash flows of reclassified assets

The table has not been completed because there were no such positions as of the balance sheet date.

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A.3.2 Fair value hierarchy

A.3.2.1 Portfolios: breakdown by fair value input level

31/12/2012 31/12/2011 Financial assets and liabilities measured at fair value L1 L2 L3 L1 L2 L3

1. Financial assets held for trading 46,241 415 38,227 613 2. Financial assets designated as at fair value 3. Financial assets available for sale 196,632 2,893 196,479 1,542 4. Hedging derivatives 10,561 10,326 Total 253,434 3,308 245,032 2,155 1. Financial liabilities held for trading 47,021 37,461 2. Financial liabilities designated as at fair value 3. Hedging derivatives 32,051 29,805 Total 79,072 67,266

Key: L1 = Level 1 L2 = Level 2 L3 = Level 3

For more information on the "fair value hierarchy” set out above, please see Part A.2 on accounting policies in these notes.

“Financial assets held for trading” classified under Level 3 regard past due differences in respect of derivatives with customer counterparties originated by investment services operations.

“Financial assets available for sale” classified under Level 3 regard equity investments of the Bank in companies other than subsidiaries, joint ventures or associates measured at cost and, as such, are classified under Level 3 by convention.

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A.3.2.2 Change for the period in financial assets designated at fair value (Level 3)

FINANCIAL ASSETS

held available designated as for for hedging at fair value trading sale 1. Opening balance 613 1,542 2. Increases 1,371 2.1. Purchases 1,371 2.2. Profits recognized in: 2.2.1. Income statement - of which: capital gains 2.2.2. Shareholders’ equity 2.3. Transfers from other levels 2.4. Other increases 3. Decreases 20 3.1. Sales 20 3.2. Redemptions 3.3. Losses recognized in: 3.3.1. Income statement - of which: capital losses 3.3.2. Shareholders’ equity 3.4. Transfers to other levels 3.5. Other decreases 198 4. Closing balance 415 2,893

A.3.2.3 Change for the period in financial liabilities at fair value (Level 3)

The table has not been completed because there were no such positions as of the balance sheet date.

A.3.3 Disclosures on “day one profit/loss”

Pursuant to paragraph 28 of IFRS 7, there were no differences between the fair value at the time of initial recognition and the amount recalculated at the same date using valuation techniques in accordance with IAS 39, paragraphs AG 74 - AG 79 and IFRS 7, paragraph IG 14.

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PART B - INFORMATION ON THE BALANCE SHEET

Assets

Section 1 - Cash and cash equivalents - item 10

1.1 Cash and cash equivalents: composition

Total Total

31/12/2012 31/12/2011 a) Cash 26 30 b) Demand deposits with central banks Total 26 30

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Section 2 - Financial assets held for trading - item 20

2.1 Financial assets held for trading: composition by type

Total Total 31/12/2012 31/12/2011

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

A. On-balance-sheet assets 1. Debt securities 1.1 structured securities 1.2 other debt securities 2. Equity securities 3. Units in collective investment undertakings 4. Loans 4.1 repurchase agreements 4.2 other Total A B. Derivatives 1. Financial derivatives 46,241 415 38,227 613 1.1 trading 38,343 415 28,332 613 1.2 associated with fair value option 1.3 other 7,898 9,895 2. Credit derivatives 2.1 trading 2.2 associated with fair value option 2.3 other Total B 46,241 415 38,227 613 Total (A+B) 46,241 415 38,227 613

Financial assets (and liabilities) held for trading report the market value (about €38 million) of derivatives originated by the Bank's business in the investment services sector. These operations involve the sale of derivatives to customers, with matching transactions with Iccrea Banca. The value in respect of customer counterparties amounted to €35 million.

The item "other" includes the positive fair value of "operating" hedging derivatives that either did not undergo or did not pass testing for effectiveness (€7.9 million).

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2.2 Financial assets held for trading: composition by debtor/issuer

Total Total

31/12/2012 31/12/2011

A. ON-BALANCE-SHEET ASSETS 1. Debt securities a) Governments and central banks b) Other government agencies c) Banks d) Other issuers 2. Equity securities a) Banks b) Other issuers - insurance undertakings - financial companies - non-financial companies - other 3. Units in collective investment undertakings 4. Loans a) Governments and central banks b) Other government agencies c) Banks d) Other Total A B. DERIVATIVES a) Banks 11,190 17,546 - fair value 11,190 17,546 b) Customers 35,466 21,294 - fair value 35,466 21,294 Total B 46,656 38,840 Total (A+B) 46,656 38,840

2.3 On-balance-sheet financial assets held for trading: change for the period

The table has not been completed because there were no such positions as of the balance sheet date.

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Section 3 – Financial assets at fair value – item 30

The Bank had no such financial assets as of the balance sheet date.

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Section 4 - Financial assets available for sale - item 40

4.1 Financial assets available for sale: composition by type

Total Total 31/12/2012 31/12/2011

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

1. Debt securities 1.1 Structured securities 1.2 Other debt securities 2. Equity securities 2,893 1,542 2.1 At fair value 2.2 Carried at cost 2,893 1,542 3. Units in collective investment undertakings 196,632 196,479 4. Loans

Total 196,632 2,893 196,479 1,542

Equity securities include the Bank's holdings in companies other than subsidiaries, joint ventures and companies subject to significant influence (associates). More specifically, the item includes the following holdings in Group companies (% stake): BCC Gestione Crediti S.p.A. (15%), and Immobiliare Milanese CRA S.r.l. (10%). The item also reports participating financial instruments in a customer company acquired as part of a loan restructuring in the amount of €5.2 million, written down by €3.8 million.

“Units in collective investment undertakings” includes the value of the unlisted Securis Real Estate closed- end real estate investment fund restricted to qualified investors and managed by "Beni Stabili Gestioni S.p.A. Società di Gestione del Risparmio". Through a series of contributions, the Bank has transferred buildings from terminated finance leases awaiting sale. The Bank has subscribed a total of 2,588 units in the fund with a value of €196.6 million as of the reporting date, paid in part in cash. At December 31, 2012, the fund showed a net loss of €12 million. As a result, and as done in the previous year, the Bank recognized an impairment loss of about €11.8 million on the units in the fund.

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4.2 Financial assets available for sale: composition by debtor/issuer

Total Total

31/12/2012 31/12/2011

1. Debt securities a) Governments and central banks b) Other government agencies c) Banks d) Other issuers 2. Equity securities 2,893 1,542 a) Banks 66 66 b) Other issuers 2,827 1,476 - insurance undertakings - financial companies 385 405 - non-financial companies 2,442 1,071 - other 3. Units in collective investment undertakings 196,632 196,479 4. Loans a) Governments and central banks b) Other government agencies c) Banks d) Other Total 199,525 198,021

4.3 Financial assets available for sale: assets hedged specifically

The table has not been completed because there were no such positions as of the balance sheet date.

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4.4 Financial assets available for sale: change for the period

Units in Debt Equity collective Loans Total securities securities investment undertakings A. Opening balance 1,542 196,479 198,021 B. Increases 2,121 11,947 14,068 B1. Purchases 2,121 11,947 14,068 B2. Fair value gains B3. Writebacks - recognized through income statement - recognized through equity B4. Transfers from other portfolios B5. Other changes C. Decreases 770 11,794 12,564 C1. Sales 20 20 C2. Redemptions C3. Fair value losses 11,794 11,794 C4. Writedowns for impairment - recognized through income statement 750 750 - recognized through equity C5. Transfers to other portfolios C6. Other changes D. Closing balance 2,893 196,632 199,525

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Section 5 – Financial assets held to maturity – item 50

5.1 Financial assets held to maturity: composition by type

Total Total 31/12/2012 31/12/2011 Carrying Fair value Carrying Fair value amount amount Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 3,006,285 3,023,775 - Structured securities - Other debt securities 3,006,285 3,023,775

2. Loans Total 3,006,285 3,023,775

As discussed in section 4 of the general information section, this item reports government securities with a short/medium-term residual maturity acquired as part of an investment transaction. More specifically, the Bank acquired €931 million in Italian Treasury bills (BOTs), €1,371 million in Italian Treasury bonds (BTPs) and the remainder, equal to €633 million, in Italian zero-coupon Treasury credit certificates (CTZs).

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5.2 Financial assets held to maturity: composition by debtor/issuer

Total Total 31/12/2012 31/12/2011

1. Debt securities 3,006,285 a) Governments and central banks 3,006,285 b) Other government agencies c) Banks d) Other issuers 2. Loans a) Governments and central banks b) Other government agencies c) Banks d) Other Total 3,006,285

5.3 Financial assets held to maturity: assets hedged specifically

The table has not been completed because there were no such positions as of the balance sheet date.

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5.4 Financial assets held to maturity: change for the period

Debt securities Loans Total

A. Opening balance 0 B. Increases 6,060,932 6,060,932 B1. Purchases 5,983,000 5,983,000 B2. Fair value gains B3. Transfers from other portfolios B4. Other changes 77,932 77,932 C. Decreases 3,054,647 3,054,647 C1. Sales 3,018,000 3,018,000 C2. Redemptions C3. Writedowns for impairment C4. Transfers to other portfolios C5. Other changes 36,647 36,647 D. Closing balance 3,006,285 3,006,285

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Section 6 – Due from banks - item 60

6.1 Due from banks: composition by type

Total 31/12/2012 Total 31/12/2011

A. Claims on central banks 1. Fixed-term deposits 2. Reserve requirement 3. Repurchase agreements 4. Other B. Due from banks 147,543 267,979 1. Current accounts and demand deposits 10,218 130,505 2. Fixed-term deposits 8,205 9,356 3. Other financing: 129,120 128,117 3.1 Repurchase agreements 0 3.2 Finance leases 21,901 23,915 3.3 Other 107,219 104,203 4. Debt securities 0 4.1 Structured securities 4.2 Other debt securities Total (carrying amount) 147,543 267,979 Total (fair value) 162,269 279,190

The change in “Current accounts and demand deposits” is associated with the ordinary management of the Bank’s liquidity.

As already the case in previous years, the item “Other financing: other” reflects the reclassification of loans assigned by mutual banks but counter-guaranteed by them in the amount of €95 million (€99.3 million at December 31, 2011), essentially leaving the risk with the assignor banks even though the Bank manages relationships involving ordinary customers.

The item “fixed-term deposits” reports the balance of the reserve requirement complied with indirectly in the amount of €0.1 million (€0.3 million at December 31, 2011).

6.2 Due from banks: assets hedged specifically

The table has not been completed because there were no such positions as of the balance sheet date.

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6.3 Finance leases

31/12/2012 Minimum payments Gross investment Principal

Explicit of which of which credit guaranteed Interest unguaranteed

residual residual value value

Demand 95 66 160 160 Up to 3 months - 190 - 130 321 321

From 3 months to 1 year - 870 - 571 1,441 1,441

From 1 to 5 years - 6,033 - 2,404 8,437 8,437

More than 5 years - 14,656 - 3,543 18,199 18,199 Unspecified maturity 8,630 - - - - -

Gross total 8,630 21,844 - 6,714 28,558 28,558 Writedowns ------

Net total 8,630 21,844 - 6,714 28,558 28,558

Explicit credit includes €8.6 million for orders property and equipment leases for which principal payments fall due upon the start of the leases.

78

Section 7 - Loans to customers - item 70

7.1 Loans to customers: composition by type

Total 31/12/2012 Total 31/12/2011

Impaired Impaired Performing Performing Purchased Other Purchased Other

408,075 1. Current accounts 88,868 439,266 51,153 2. Repurchase agreements

1,234,985 3. Medium/long-term loans 115,748 1,169,286 114,788 4. Credit cards, personal loans and loans repaid by automatic

deductions from wages

5. Finance leases 5,300,959 721,741 5,787,324 648,418 6. Factoring

730,959 7. Other 137,392 891,891 166,098

34,345 8. Debt securities - 8.1 Structured securities 8.2 Other debt securities 34,345

Total (carrying amount) 7,709,322 1,063,749 8,287,767 980,457

Total (fair value) 8,303,155 1,145,687 8,792,249 1,040,138

Loans to customers decreased by 5% compared with 2011.

Net impaired assets rose by 8.5%, the direct consequence of economic conditions and the resulting market developments, as noted in the report on operations. For an analysis of developments in loans and related provisions, please see the section on risk management.

The item “Current accounts” mainly regards lending secured by mortgages for residential and commercial building.

“Other” transactions includes €493 million (€695 million in 2011) for orders in respect of property and equipment leases for which principal repayment is subordinate to the start of the leases. The item also reports the change of €27.4 million in the fair value of fixed-rate loans for which the interest rate risk has been hedged (€23.3 million in 2011).

“Debt securities” regard senior securities (collateralized bond obligations) of securitization vehicles originated by mutual banks that were acquired as part of the investment strategy discussed in section 4 of the general information section of these notes to the financial statements. Those securities, maturing in March 2013, are listed on a market not considered active for the purposes of the Bank’s fair value policy (Luxembourg Stock Exchange) and are therefore classified under loans.

During 2012, the Bank modified the reference rate used in determining the present value of non-performing lease receivables, which had previously been the original interest rate of the loan at the time it was granted. The rate used to determine IAS values at December 31, was instead the contractual rate at the valuation date, using the minimum rate provided for in the lease, where present. The use of these updated parameters was more consistent with the provision of applicable accounting standards.

The average rate used for the entire lease portfolio was 4.4%, as against an average of 6.3% that would have been used under the previous approach. The refinement of the operating procedures for determining the time value represents a change in accounting estimate under the provisions of IAS 8, paragraphs 5 and 34. The change was agreed with the audit firm. That accounting standard states “A change in accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities.” In addition, “An estimate may need revision if changes occur in the circumstances on which the

79 estimate was based or as a result of new information or more experience. By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error.

7.2 Loans to customers: composition by debtor/issuer

Total 31/12/2012 Total 31/12/2011

Impaired Impaired

Performing Performing Purchased Other Purchased Other

1. Debt securities 34,345 a) Governments b) Other government agencies c) Other issuers 34,345 - non-financial companies - financial companies 34,345 - insurance undertakings - other 2. Loans to: 7,674,977 1,063,749 8,287,767 980,457 a) Governments 50 0 50 b) Other government agencies 34,527 13 20,358 8 c) Other 7,640,401 1,063,736 8,267,359 980,449 - non-financial companies 7,398,670 1,036,478 7,944,665 953,334 - financial companies 73,563 283 116,786 117 - insurance undertakings 812 0 353 27 - other 167,356 26,975 205,555 26,971 Total 7,709,322 1,063,749 8,287,767 980,457

7.3 Loans to customers: assets hedged specifically

Total Total

31/12/2012 31/12/2011 1. Loans with specific fair value hedges: 444,495 440,418 a) interest rate risk 444,495 440,418 b) exchange rate risk c) credit risk d) multiple risks 2. Loans with specific cash flow hedges: a) interest rate risk b) exchange rate risk c) other Total 444,495 440,418

The table reports the fair value of fixed-rate loans for which the interest rate risk has been hedged.

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7.4 Finance leases

31/12/2012 Principal Gross investment

of which Explicit of which guaranteed Interest credit guaranteed residual residual value value

Up to 3 months 203,569 74,776 61,808 265,378 190,602 From 3 months to 1 year 587,802 227,865 170,513 758,315 530,450 From 1 to 5 years 2,067,736 934,837 640,111 2,707,847 1,773,010 More than 5 years 2,756,966 1,574,831 632,948 3,389,914 1,815,083 Unspecified maturity 848,407 421,740 421,740 Gross total 848,407 6,037,814 2,812,309 1,505,380 7,543,194 4,309,145 Writedowns 160,776 209,355 370,131 Net total 687,631 5,828,459 2,812,309 1,505,380 7,173,063 4,309,145

Explicit credit includes €493 million in respect of orders on property and equipment leases for which principal payments fall due upon the start of the leases.

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Section 8 - Hedging derivatives - item 80

8.1 Hedging derivatives: composition by type of contract and level of inputs

FV 31/12/2012 FV 31/12/2011 NV NV

31/12/2012 31/12/2011 L1 L2 L3 L1 L2 L3

A. Financial derivatives 10,560 576,850 10,326 378,147 1) Fair value 10,532 286,250 10,100 87,547 2) Cash flows 28 290,600 226 290,600 3) Investments in foreign operations B. Credit derivatives 1) Fair value 2) Cash flows Total 10,560 576,850 10,326 378,147

Key NV=notional value L1=Level 1 L2= Level 2 L3= Level 3

The item reports the positive fair value of interest rate swaps used to hedge the interest rate risk on bonds issued in the amount of €10.5 million. Derivatives hedging liabilities include the corresponding value of contracts with a negative fair value at the end of the period. The net impact on performance of the measurement of derivatives and the underlying liabilities is reported at item 90 of the income statement. The change with respect to December 31, 2011 is due to the termination of 3 derivatives amounting to about €1.7 million and the change in fair value. The item also reports the positive fair value of derivatives hedging floating-rate loans with average indexing in the amount of €0.02 million.

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8.2 Hedging derivatives: composition by hedged portfolio and type of hedge

Fair value Cash flows Specific Investments in foreign Interest Exchange Multiple Generic Specific Generic operations Credit risk Price risk rate risk rate risk risks 1. Financial assets available for sale 2. Loans 3. Financial assets held to maturity 4. Portfolio 28 5. Other transactions Total assets 28 1. Financial liabilities 10,532 2. Portfolio Total liabilities 10,532 1. Forecast transactions 2. Portfolio of financial assets and liabilities

As indicated in the note to the previous table, the amount of €0.02 million regards the positive value of derivatives hedging interest-rate risk on floating-rate loans with average indexing.

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Section 9 – Value adjustments of financial assets hedged generically - item 90

The Bank had no such financial assets as of the balance sheet date.

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Section 10 - Equity investments - item 100

10.1 Equity investments in subsidiaries, joint ventures and companies subject to significant influence: information on investments

Registered % holding % of votes office

A. Wholly-owned subsidiaries 1. BCC FACTORING SPA ROME 100% 100% 2. BCC LEASE SPA ROME 100% 100%

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10.2 Equity investments in subsidiaries, joint ventures and companies subject to significant influence: accounting data

Total Total Net profit Shareholde Carrying Fair value assets revenues (loss) rs’ equity amount

A. Wholly-owned subsidiaries 1. BCC FACTORING SPA 406,354 17,849 1,188 16,997 18,500 n/a 2. BCC LEASE SPA 168,591 15,138 638 13,410 14,750 n/a Total 33,250

In the light of the net profit posted by BCC Factoring, the first in a number of years, and in line with forecasts for future growth set out in the three-year business plan, in conducting the annual valuation of the subsidiary the Bank recognised a writeback of the carrying amount of the equity investment. The estimated economic value was about €18.5 million, on the basis of the financial and economic outlook set out in the company’s growth plans. Similarly to previous years, the value of the equity investment was determined on the basis of the results reported by the subsidiary as at December 31, 2012 and its forecast performance and financial position figures approved by the Board on February 27, 2013 together with the "2013-2015 plan", adopting estimation criteria recommended in the formal literature and best professional practice (Dividend Discount Model). The underlying assumptions adopted in developing the plan refer to the following strategic objectives: • Containing risks in respect of the Group liquidity profile and the quality of loans to customers • Maintaining an adequate level of capital • Seeking additional partnership agreements and increasing cross-selling • Updating the service model and organizational arrangements as well as revising production processes to curb costs • Containing overheads through economies of scale, rationalization and simplification of the corporate structure.

The parameters used to determine the discount rate for the future cash flows expected on the basis of the above assumptions consider an estimated cost of capital of 9.6%, considering a risk-free yield equal to the average yield on 10-year Italian Treasury bonds at February 27, 2013 (4.4%) and a risk premium of 5% weighted by a factor for the correlation between the actual yield of a stock and the overall performance of the benchmark market. The Tier 1 capital ratio was also taken to be 8%. The growth rate used to extrapolate the forecast of cash flows beyond the three-year time horizon used by the Bank for the calculation of terminal value was 2%, in line with market practice.

As a result of the writeback of €2.7 million, the carrying amount, originally equal to €34.7 million, is now €18.5 million. The total net writedowns of the investment amount to €16.2 million.

As regards BCC Lease S.p.A., there was again no evidence of any impairment loss.

The data in the table regard the 2012 financial year.

The Bank, in accordance with the provisions of Legislative Decree 87/92, elected the option envisaged in IAS/IFRS 27.10, point d) to not prepare consolidated financial statements as the ultimate parent company ICCREA Holding produces annual consolidated financial statements for public use that comply with International Financial Reporting Standards.

86

10.3 Equity investments: change for the period

Total Total

31/12/2012 31/12/2011

A. Opening balance 30,524 27,750 B. Increases 8,000 B.1 Purchases 8,000 B.2 Writebacks 2,726 B.3 Revaluations B.4 Other changes C. Decreases 5,226 C.1 Sales C.2 Writedowns 5,226 C.4 Other changes D. Closing balance 33,250 30,524 E. Total revaluations 2,726 F. Total writedowns 18,947 18,947

10.4 Commitments in respect of subsidiaries

At the balance sheet date, the Bank had €255 million in commitments in respect of BCC Factoring S.p.A. for sureties issued to secure exposures exceeding the limits set under the applicable prudential supervision regulations.

10.5 Commitments in respect of joint ventures

The table has not been completed because there were no such positions as of the balance sheet date.

10.6 Commitments in respect of companies subject to significant influence

The table has not been completed because there were no such positions as of the balance sheet date.

87

Section 11 – Property and equipment - item 110

11.1 Property and equipment: composition of assets carried at cost

Total Total

31/12/2012 31/12/2011

A. Operating assets 4,220 2,156 1.1 owned 4,220 2,156 a) land b) buildings 1,401 1,456 c) movables 129 191 d) electrical plant e) other 2,690 509 1.2 acquired under financial leases a) land b) buildings c) movables d) electrical plant e) other Total A 4,220 2,156 B. Investment property 2.1 owned a) land b) buildings 2.2 acquired under financial leases a) land b) buildings Total B Total (A + B) 4,220 2,156

Asset used in operations ("other") include assets from closed or terminated leases in the amount of €2,449 thousand (€180 thousand at December 31, 2011).

The amount is equal to the residual amount to be depreciated at the termination date for the lease, reduced further to take account of the recoverable value of the assets.

The depreciation rates used (only for assets used by the Bank) were 3% for buildings, 12% for movables, 20% for machinery, 15% for sundry equipment and 25% for communications systems. The rates are considered to represent the useful lives of the assets.

11.2 Property and equipment: composition of assets at fair value or revalued

The table has not been completed because there were no such positions as of the balance sheet date.

88

11.3 Operating property and equipment: change for the period

Electrical Land Buildings Movables Other Total plant

A. Opening gross balance 1,843 1,670 12,750 16,262 A.1 Total net writedown 386 1,479 12,241 14,106 A.2 Opening net balance 1,457 190 509 2,156 B. Increases: 2 2,387 2,389 B.1 Purchases 2 31 33 B.2 Capitalized improvement costs B.3 Writebacks 99 99 B.4 Fair value gains recognized in recognized in a) equity b) income statement B.5 Positive exchange rate differences B.6 Transfers from investment property B.7 Other changes 2,257 2,257 C. Decreases: 55 63 207 325

C.1 Sales C.2 Depreciation 55 63 117 235 C.3 Writedowns for impairment recognized in 90 90 a) equity b) income statement 90 90 C.4 Fair value losses recognized in a) equity b) income statement C.5 Negative exchange rate differences C.6 Transfers to: a) investment property

b) discontinuing operations C.7 Other changes D. Closing net balance 1,402 129 2,689 4,220 D.1 Total net writedowns 441 1,542 10,983 12,966 D.2 Closing gross balance 1,842 1,671 13,673 17,186 E. Measurement at cost 1,842 1,671 13,673 17,186

11.4 Investment property: change for the period

The table has not been completed because there were no such positions as of the balance sheet date.

11.5 Commitments to acquire property and equipment (IAS 16/74.c)

The table has not been completed because there were no such positions as of the balance sheet date.

89

Section 12 – Intangible assets – item 120

12.1 Intangible assets: composition by category

Total Total 31/12/2012 31/12/2011

Finite Indefinite Finite Indefinite life life life life

A.1 Goodwill A.2 Other intangible assets 3,363 4,537 A.2.1 Assets carried at cost: 3,363 4,537 a) internally-generated intangible assets

b) other assets 3,363 4,537 A.2.2 Assets designated at fair value: a) internally-generated intangible assets

b) other assets Total 3,363 4,537

The decrease in intangible assets on the previous year is attributable to normal amortization charges. The useful life considered for amortization purposes is 5 years for the “EVO Program” (the new accounting IT system) and 3 years for the other intangible assets. The costs capitalized at December 31, 2012 came to €12.2 million.

12.2 Intangible assets: change for the period

Other intangible assets: Other intangible assets: generated internally other Goodwill Total Finite Indefinite Finite Indefinite

A. Opening balance 11,289 11,289 A.1 Total net writedown 6,752 6,752 A.2 Opening net balance 4,537 4,537 1,138 B. Increases 1,138 B.1 Purchases 1,138 1,138 B.2 Increases in internally generated intangible assets

B.3 Writebacks B.4 Fair value gains recognized in - equity - income statement B.5 Positive exchange rate differences B.6 Other changes C. Decreases 2,312 2,312 C.1 Sales C.2 Writedowns 2,312 2,312 - Amortization 2,312 2,312 - Impairment + equity + income statement C.3 Fair value losses recognized in - equity - income statement C.4 Transfers to non-current assets held for sale C.5 Negative exchange rate differences C.6 Other changes D. Closing net balance 3,363 3,363 D.1 Total net writedowns 9,064 9,064 E. Closing gross balance 12,427 12,427 F. Measurement at cost 12,427 12,427

90

Section 13 - Tax assets and tax liabilities - item 130 of assets and item 80 of liabilities

The item “tax assets”, equal to €144 million (€122 million at December 31, 2011), ), is composed of “current tax assets” in the amount of €38.9 million (€38.2 million in 2011) and “deferred tax assets" in the amount of €104.9 million (€83.8 million in 2011). The receivables in respect of current tax assets in the amount of €38.9 million include €19.4 million for VAT credits for which reimbursement has been requested, plus associated interest and €19.5 million for tax receivables (€19.2 million in 2011).

The item “tax liabilities”, equal to €22.2 million (€18.5 million in 2011) , is composed of “current tax liabilities” in the amount of €21 million (€17,4 million at December, 31 2011) and “deferred tax liabilities” in the amount of €1.2 million (€1.1 million in 2011).

The determination of these assets and liabilities reflects, among other things, the impact of the adoption of the consolidated taxation mechanism introduced with Legislative Decree 344 of December 12, 2003; Accordingly, the tax result for IRES purposes for the year was immediately partially offset with the taxable income of the consolidating company, ICCREA Holding S.p.A.. The corresponding items are classified under item 150 “other assets” and item 100 “other liabilities”.

Current tax assets mainly regard advance payments (€7.1 million) in respect of IRAP (the regional business tax) and the VAT credits and associated interest for which reimbursement has been requested (€19.4 million); current tax liabilities regard the IRAP liability for the period and the one-off tax pursuant to Article 1, paragraphs 137 and 140 of Law 296/2006 detailed under Table 18.1.

13.1 Deferred tax assets: composition

Total 31/12/2012 Total 31/12/2011

Deferred tax assets (recognized in equity) 0 22 Deferred tax assets (recognized in the income statement) 104,931 83,829 Total 104,931 83,851

The recognition of deferred tax assets for IRES purposes is based on the consolidated taxation mechanism noted earlier, taking account of expected consolidated performance in coming years. The recognition of such assets main regarded the following items: loan writedowns exceeding limits on deductibility pursuant to Article 106 of the Uniform Income Tax Code, provisions, units of CIUs (IRAP only), adjustment for IRAP rates and the realignment (fourth installment) pursuant to Article 15 of Decree Law 185/2008 (realignment of values reported for tax purposes with those used for statutory reporting purposes), for 2008 the Bank recognized deferred tax assets that are deductible in equal installments of €1.2 million in five years as from 2009.

91

13.2 Deferred tax liabilities: composition

Total 31/12/2012 Total 31/12/2011

1. Deferred tax liabilities (recognized in equity) 1,130 999 2. Deferred tax liabilities (recognized in the income statement) 63 90 Total 1,193 1,089

The stock of deferred tax liabilities recognized in the income statement regards the misalignment between the statutory reporting value and tax reporting value of employee termination benefits compared with their IAS value, for which it was decided not to exercise the realignment option, while deferred tax liabilities recognized in equity regard the decrease in taxes on the negative value of the derivative hedging the cash flows on the Agrisecurities 3 securitization and the increase in taxes on the positive fair value of derivatives hedging the interest rate risk on floating-rate loans with average indexing.

Deferred tax assets and liabilities were calculated on the basis of the prevailing IRES rate of 27.5% and the IRAP rate of 5.57%.

92

13.3 Changes in deferred tax assets (recognized in income statement)

Total Total

31/12/2012 31/12/2011

1. Opening balance 83,329 72,500 2. Increases 28,246 16,542 2.1 Deferred tax assets recognized during the period 28,246 16,270 a) in respect of previous periods b) due to change in accounting policies c) writebacks d) other 28,246 16,270 2.2 New taxes or increases in tax rates 272 2.3 Other increases 3. Decreases 7,144 5,214 3.1 Deferred tax assets derecognized during the period 7,144 5,123 a) reversals 7,144 5,123 b) writedowns for supervening non-recoverability c) due to changes in accounting policies d) other 3.2 Reduction in tax rates 3.3 Other decreases 91 4. Closing balance 104,931 83,829

The main changes in deferred tax assets recognized in the income statement regard loan writedowns, provisions for risks and charges, and, for IRAP purposes only, the writedown of the units of the “Securis Real Estate” investment fund.

Pursuant to the provisions of Article 15, paragraph 3, of Decree Law 185/2008, the Bank realigned the statutory reporting and tax values of prior transactions that, until December 31, 2007, were characterized, classified, measured and recognized for tax purposes in a different manner than that used to characterize, classify, measure and recognize those components for financial reporting purposes. The deferred tax assets recognized at December 31, 2008 (about €6.2 million) as a result of the exercise of the option in respect of remaining misalignments at that date produced a negative balance deductible in equal installments over four years beginning in 2009. (see table 13.1).

93

13.4 Changes in deferred tax liabilities (recognized in income statement)

Total Total

31/12/2012 31/12/2011

1. Opening balance 90 99 2. Increases 2.1 Deferred tax liabilities recognized during the period a) in respect of previous periods b) due to change in accounting policies c) other 2.2 New taxes or increases in tax rates 2.3 Other increases 3. Decreases 27 9 3.1 Deferred tax liabilities derecognized during the period 27 9 a) reversals 27 9 b) due to change in accounting policies c) other 3.2 Reduction in tax rates 3.3 Other decreases 4. Closing balance 63 90

The change in deferred tax liabilities regarded the release of taxes correlated with the greater IAS accrual to the termination benefit provision.

94

13.5 Changes in deferred tax assets (recognized in shareholders' equity)

Total Total

31/12/2012 31/12/2011

1. Opening balance 22 852 2. Increases 292 2.1 Deferred tax assets recognized during the period a) in respect of previous periods b) due to change in accounting policies c) other 291 2.2 New taxes or increases in tax rates 1 2.3 Other increases 3. Decreases 22 1,122 3.1 Deferred tax assets derecognized during the period 22 1,122 a) reversals 22 1,122 b) writedowns for supervening non-recoverability c) due to changes in accounting policies 3.2 Reduction in tax rates 3.3 Other decreases 4. Closing balance 0 22

The decreases in deferred tax assets recognized in equity regarded reversal of all of the tax assets in respect of the valuation reserve for derivatives hedging the cash flows of securitized receivables.

95

13.6 Changes in deferred tax liabilities (recognized in shareholders' equity)

Total Total

31/12/2012 31/12/2011

1. Opening balance 999 360 2. Increases 181 830 2.1 Deferred tax liabilities recognized during the period 181 826 a) in respect of previous periods b) due to change in accounting policies c) other 181 826 2.2 New taxes or increases in tax rates 4 2.3 Other increases 3. Decreases 50 191 3.1 Deferred tax liabilities derecognized during the period 50 191 a) reversals 50 191 b) due to change in accounting policies c) other 3.2 Reduction in tax rates 3.3 Other decreases 4. Closing balance 1,130 999

Deferred tax liabilities recognized in equity increased owing to the positive fair value of the derivatives hedging the interest rate risk on floating-rate securities with average indexing, while those in respect of the negative fair value of the derivatives hedging the cash flows of securitized receivables (Agrisecurities 3) were reversed.

96

Section 14 – Non-current assets and disposal groups held for sale and associated liabilities – item 140 of assets and item 90 of liabilities

There were no such positions as of the balance sheet date.

97

Section 15 - Other assets - item 150

15.1 Other assets: composition

Total 31/12/2012 Total 31/12/2011

Sundry receivables 71,084 107,378 Receivables from consolidating company 18,768 32,270 Financial assets in respect of loans for a specific operation 52,820 0 Total 142,672 139,648

The item “Sundry receivables” essentially includes: - VAT for which reimbursement has not yet been requested, and therefore not recognized under financial assets, on invoices falling due after December 31, 2012 in the amount of €18.3 million (€24.8 million at December 31, 2011); - premiums to be collected for derivatives business with customers in the amount of €20.1 million (€20.8 million at December 31, 2011); - accrued income and prepaid expenses other than those that can be capitalized in the value of the related financial assets in the amount of €0.9 million (€1.2 million at December 31, 2011); - receivables in respect of principal and interest reimbursed on a quarterly basis by the vehicle for securitizations in the amount of €18.2 million (€42 million at December 31, 2011);

“Receivables from consolidating company” include receivables arising in respect of participation, as from 2004, in the Group’s consolidated taxation mechanism. They mainly regard the IRES payments on account for 2012 in the amount of €14.8 million (€30.3 million at December 31, 2011).

As regards “Financial assets in respect of loans for a specific operation”, the item “Other liabilities” reports an equal amount in respect of a loan of €52.8 million from the EIB pursuant to Art. 2447 bis letter b and 2447 decies of the Italian Civil Code, to be used for lending activities under the “J.E.S.S.I.C.A.” initiative in favor of urban development projects in the energy efficiency and renewable generation sectors located in Sicily. the loan forms part of the resources of the Sicily Regional Operating Project EFRD 2007-2013 Axis II Energy. As at December 31, 2012 the loan funds were entirely segregated from other assets with the opening of a specific current account with Iccrea Banca, which is acting as the Depositary Bank for the initiative. As of the reporting date no loans had been granted.

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Liabilities

Section 1 Due to banks - item 10

1.1 Due to banks: composition by type

Total Total 31/12/2011 31/12/2012 1. Due to central banks 2. Due to banks 5,861,019 2,508,422 2.1 Current accounts and demand deposits 462,092 273,546 2.2 Fixed-term deposits 2.3 Loans 5,398,927 2,234,876 2.3.1 Repurchase agreements 3,795,712 927,433 2.3.2 Other 1,603,215 1,307,443 2.4 Liabilities in respect of commitments to repurchase own equity instruments 2.5 Other payables Total 5,861,019 2,508,422 Fair value 5,861,201 2,510,834

The change in "loans" is attributable to short and medium/long-term funding transactions and derives from the funding strategies developed by the centralized Group Finance unit at Iccrea Banca. The cost of funding is settled on market terms and conditions, which reflect the average cost of funding incurred by Iccrea Banca plus a spread to remunerate the service. Taking advantage of the possibility permitted under specific legislation, in 2011 the Bank carried out (through Iccrea Banca) a refinancing operation with the European Central Bank in the amount of €607 million, pledging as collateral securities issued and repurchased by it and guaranteed by the Italian government pursuant to Article 8 of Decree Law 201 of December 6, 2011, ratified with Law 214 of December 22, 2011. The amount is reported in the item for repurchase agreements in the above table.

In addition, as reported in section 4 of the general information section, the Bank invested in Italian government securities (see table 5.1 Financial assets held to maturity), which were financed with funding repurchase agreements with Iccrea Banca.

1.2 Breakdown of item 10 “Due to banks”: subordinated liabilities

There were no such positions as of the balance sheet date.

1.3 Breakdown of item 10 “Due to banks”: structured liabilities

There were no such positions as of the balance sheet date.

1.4 Due to banks: liabilities hedged specifically

There were no such positions as of the balance sheet date.

1.5 Liabilities in respect of finance leases

There were no such positions as of the balance sheet date.

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Section 2 - Due to customers - item 20

2.1 Due to customers: composition by type

Total 31/12/2012 Total 31/12/2011

1. Current accounts and demand deposits 1 2. Fixed-term deposits 3. Loans 3.1 Repurchase agreements 3.2 Other 4. Liabilities in respect of commitments to repurchase own equity instruments 5. Other payables 1,366,880 1,486,414 Total 1,366,880 1,486,415 Fair value 1,289,531 1,414,076

“Other payables” are essentially represented, owning to the non-derecognition of securitized receivables of the ABSs issued by the vehicles as part of the securitization operations. The item is reported net of the ABSs repurchased, which at the reporting date amounted to €332.6 million, gross of ABSs redeemed in the amount of €277 million.

The decrease in "Other payables" is mainly attributable to the redemption of the notes in the second and third securitizations in the amount of €90 million.

2.2 Breakdown of item 20 “Due to customers”: subordinated liabilities

There were no such positions as of the balance sheet date.

2.3 Breakdown of item 20 “Due to customers”: structured liabilities

There were no such positions as of the balance sheet date.

100

2.4 Due to customers: liabilities hedged specifically

There were no such positions as of the balance sheet date.

2.5 Liabilities in respect of finance leases

There were no such positions as of the balance sheet date.

101

Section 3 - Securities issued - item 30

3.1 Securities issued: composition by type

Total Total 31/12/2012 31/12/2011

Fair value Fair value

Carrying Carrying amount amount Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

A. Securities 4,373,650 297,125 5,214,750 344,100 1. Bonds 5,214,750 344,100 1.1 structured 237,282 237,282 246,060 246,060 1.2 other 4,136,368 59,843 4,968,690 98,040 2. Other 2.1 structured 2.2 other Total 4,373,650 297,125 5,214,750 344,100

Bonds in effective hedging relationships are measured at fair value, while the others are recognized at amortized cost. In the case of structured bonds, the fair value of embedded derivatives is separated, where possible, and reported under financial assets or liabilities held for trading. The Bank has issued 43 bonds, of which 3, amounting to €297 million, are covered by fair value hedges (essentially structured equity linked notes and step-up bonds). As noted earlier, the cost of funding is settled on market terms and conditions, which reflect the average cost of funding incurred by Iccrea Banca plus a spread to remunerate the service. More specifically, the terms and conditions of the medium/long-term issues subscribed by Iccrea Banca are as follows:

• issue of 15/05/2009, nominal value €81 million, fixed rate 3.225%; • issue of 15/05/2009, nominal value €54 million, euribor plus spread of 50 basis points; • issue of 15/05/2009, nominal value €666 million, euribor plus spread of 50 basis points; • issue of 15/05/2009, nominal value €99 million, euribor plus spread of 50 basis points; • issue of 01/07/2009, nominal value €180 million, fixed rate 3.402% • issue of 01/07/2009, nominal value €720 million, Euribor plus spread of 50 basis points; • issue of 30/12/2009, nominal value €400 million, Euribor plus spread of 50 basis points; • issue of 02/08/2010, nominal value €245 million, Euribor plus spread of 95 basis points; • issue of 16/11/2010, nominal value €400 million, Euribor plus spread of 178 basis points; • issue of 01/01/2011, nominal value €17 million, fixed rate 3.6% • issue of 01/04/2011, nominal value €324 million, Euribor plus spread of 178 basis points; • issue of 06/05/2011, nominal value €321 million, Euribor plus spread of 145 basis points; • issue of 20/05/2011, nominal value €300 million, Euribor plus spread of 212 basis points. • issue of 16/04/2012, nominal value €35 million, Euribor plus spread of 298 basis points; • issue of 16/04/2012, nominal value €21 million, Euribor plus spread of 351 basis points; • issue of 10/05/2012, nominal value €8 million, Euribor plus spread of 298 basis points; • issue of 10/05/2012, nominal value €13 million, Euribor plus spread of 351 basis points; • issue of 12/07/2012, nominal value €20.8 million, Euribor plus spread of 279 basis points; • issue of 12/07/2012, nominal value €16.3 million, Euribor plus spread of 310 basis points; • issue of 12/07/2012, nominal value €11.5 million, Euribor plus spread of 352 basis points; • issue of 12/07/2012, nominal value €11.3 million, Euribor plus spread of 347 basis points; • issue of 23/10/2012, nominal value €31 million, Euribor plus spread of 239 basis points; • issue of 23/10/2012, nominal value €17 million, Euribor plus spread of 277 basis points; • issue of 23/10/2012, nominal value €14 million, Euribor plus spread of 333 basis points; • issue of 23/10/2012, nominal value €11.5 million, Euribor plus spread of 93 basis points. • issue of 21/11/2012, nominal value €17 million, Euribor plus spread of 110 basis points; • issue of 21/11/2012, nominal value €10 million, fixed rate 1.54%; • issue of 21/11/2012, nominal value €12.3 million, Euribor plus spread of 258 basis points; • issue of 28/12/2012, nominal value €14 million, fixed rate 2.5%.

The figures in the above table for the fair value calculated using Level 2 inputs specifically refer to the hedged bonds and, as such, are recognized at fair value.

The overall fair value of the item amounted to €5,209 million (€5,299 million at December 31, 2011).

102

3.2 Breakdown of item 30 "Securities issued": subordinated securities

Total Total

31/12/2012 31/12/2011

Opening balance 195,260 230,415 Issues in period Other changes 9,098 35,155 Closing balance 186,162 195,260

Other changes in the period are attributable to the net effect of the change in the amortized cost of -€1.3 million subordinated securities not hedged specifically and the change in the fair value (about -€8 million) of the only hedged security (ISIN XS0295539984).

3.2.1 Breakdown of item 30 "Securities issued": subordinated securities

Carrying Currency Maturity Interest rate amount

1) ISIN XS0203393730 18/10/2004 TV 10,015 EURO 18/10/2014 3m Euribor +0.65% 2) ISIN XS0222800152 27/06/2005 TV 14,972 EURO 27/06/2015 3m Euribor +0.55% 3) ISIN XS0287516214 19/02/2007 TV 50,661 EURO 19/02/2017 3m Euribor +0.50% 4) ISIN XS0287519663 20/02/2007 TV 50,671 EURO 20/02/2017 3m Euribor +0.50% 5) ISIN XS0295539984 11/04/2007 TF 59,843 EURO 11/04/2017 522% Total 186,162

3.3 Securities issued: securities hedged specifically

Total 31/12/2012 Total 31/12/2011

1. Securities covered by specific fair value hedges 297.125 344,100 a) interest rate risk 297.125 344,100 b) exchange rate risk c) multiple risks 2. Liabilities covered by specific cash flow hedges a) interest rate risk b) exchange rate risk c) other

103

Section 4 - Financial liabilities held for trading - item 40

4.1 Financial liabilities held for trading: composition by type

Total Total 31/12/2012 31/12/2011

FV FV NV FV* NV FV* L1 L2 L3 L1 L2 L3 A. On-balance-sheet liabilities 1. Due to banks 2. Due to customers 3. Debt securities 3.1 Bonds 3.1.1 Structured 3.1.2 Other bonds 3. Other 3.2.1 Structured 3.2.2 Other Total A B. Derivatives 1. Financial derivatives 47,020 37,461 1.1 Trading 39,707 29,227 1.2 Associated with fair value option 1.3 Other 7,313 8,234 2. Credit derivatives 2.1 Trading 2.2 Associated with fair value option 2.3 Other Total B 47,020 37,461 Total (A+B) 47,020 37,461

Key: FV = Fair value FV*= Fair value calculated excluding changes in the amount attributable to changes in the creditworthiness of the issue since the issue date NV = nominal or notional value

L1=Level 1 L2=Level 2 L3=Level 3

The item "Other" reports the negative value of derivatives associated with securitizations, in particular €1.9 million in respect of the Agri5 securitization, €0.8 million in respect of the Agri6 securitization and €4.6 million in respect of the Agri7 securitization. Liabilities (and assets) held for trading report the market value about €39.7 million) of derivatives originated by the Bank's business in the investment services sector. These operations involve the sale of derivatives to customers, with matching transactions with ICCREA Banca. The value in respect of customer counterparties is equal to €3.2 million.

4.2 Breakdown of item 40 “Financial liabilities held for trading": subordinated liabilities

There were no such positions as of the balance sheet date.

4.3 Breakdown of item 40 “Financial liabilities held for trading": structured liabilities

There were no such positions as of the balance sheet date.

4.4 On-balance sheet financial liabilities (excluding technical overdrafts) held for trading: change for the period

The table has not been completed because there were no such positions as of the balance sheet date.

104

Section 5 Financial liabilities at fair value – item 50

There were no such positions as of the balance sheet date.

105

Section 6 - Hedging derivatives - item 60

6.1 Hedging derivatives: composition by type of hedge and level of inputs

Fair value Fair value 31/12/2012 31/12/2011 NV NV

31/12/2012 31/12/2011

L1 L2 L3 L1 L2 L3

A. Financial derivatives 32,051 183,507 29,805 499,877 1) Fair value 32,051 183,507 29,805 499,877 2) Cash flows 3) Investments in foreign operations B. Credit derivatives 1) Fair value 2) Cash flows Total 32,051 183,507 29,805 499,877

Key: NV = notional value L1 = Level 1 L2 = Level 2 L3 = Level 3

As in the previous year, in this item the Bank has classified derivatives associated with the hedging of the fixed-rate portfolio and public sector leasing transactions for which a specific interest rate hedge was established. The item reports the negative fair value in the amount of €30.4 million of the derivatives hedging fixed-rate loans and the negative fair value in the amount of €1.6 million of the derivative hedging the public sector leasing operations.

6.2 Hedging derivatives: composition by hedged portfolio and type of hedge

Cash flow Fair value

Investments in Specific foreign Generic Specific Generic operations Interest Exchange Credit Multiple Price risk rate risk rate risk risk risks 1. Financial assets available for sale 2. Loans 1,637 3. Financial assets held to maturity 4. Portfolio 30,414 5. Other transactions Total assets 32,051 1. Financial liabilities 2. Portfolio Total liabilities 1. Forecast transactions 2. Portfolio of financial assets and liabilities

As noted for Table 6.1, the amount of €30.4 million regards the negative value of the derivatives hedging risk on fixed-rate loans. .

106

Section 7 Value adjustment of generically hedged liabilities – item 70

There were no such positions as of the balance sheet date.

107

Section 8 - Tax liabilities – item 80

See section 13 under assets.

108

Section 9 - Liabilities associated with assets held for sale – item 90

There were no such positions as of the balance sheet date.

109

Section 10 - Other liabilities - item 100

10.1 Other liabilities: composition

Total 31/12/2012 Total 31/12/2011

Trade payables 21,707 70,013 Invoices to receive for leased assets 6,955 1,962 Invoices to receive from suppliers 16,463 20,863 Other amounts due to customers 13,777 28,946 Customers for advances on sales 1,603 626 Grants to disburse to customers 4,313 5,558 Amounts due to employees for deferred additional monthly salaries 4,963 5,771 Amounts due to social security institutions 1,402 1,330 Amounts due to tax authorities 4,235 2,963 Amounts due to consolidating company 25,395 17,595 Amounts due to insurance undertakings 1,607 1,582 Other payables 46,878 41,147 Financial liabilities in respect of loans for a specific operation 52,820 0 Total 202,118 198,356

“Amounts due to consolidating company” are entirely accounted for by the tax payable arising from participation in the consolidated taxation mechanism.

“Other payables” is mainly composed of:

- premiums to be paid for derivatives transactions for customers in the amount of €18.9 (€14.8 million the previous year); - transit items in respect of securitizations in the amount of €20.1 million (€20.8 million the previous year).

As regards “Financial liabilities in respect of loans for a specific operation”, please see the comment to table 15.1 of assets.

110

Section 11 - Employee termination benefits - item 110

11.1 Employee termination benefits: changes for the period

The provision under this item regards the Bank’s liability as determined in compliance with the criteria established by IAS 19 concerning defined-benefit plans.

The following table reports movements in the provision for employee termination benefits with respect to the previous year.

Total Total

31/12/2012 31/12/2011

A. Opening balance: 5,530 5,789 B. Increases 294 1,183 B.1 Provision for the period 294 294 B.2 Other increases 889 C. Decreases 405 1,532 C1. Benefit payments 313 1,458 C.2 Other decreases 92 75 D. Closing balance 5,420 5,530 Total 5,420 5,530

At December 31, 2012 the actuarial loss not recognized in application of the corridor method amounted to €348 thousand, the net result of cumulative unrecognized actuarial losses of €364 thousand and gains of €16 thousand.

The provision for the period, equal to €294 thousand, includes the interest cost as determined on the basis of actuarial and financial estimates, as the Bank did not recognize any service cost as a result of the pension system reform, as discussed in detail in the annual report for previous years.

The provision for employee termination benefits, which under the reform continues to be recognized by the Bank, was calculated using the following actuarial and financial assumptions:

- regulatory parameters: all applicable regulations and interpretations;

- demographic parameters: mortality probabilities were drawn from ISTAT's 2004 mortality tables and the INPS disability tables; the annual rate of exit from the plan as a result of resignation or dismissal was set at 3.75%; the probability of employees requesting an advance on their benefit was set at 2.86% per year, with the average size of the advance equal to 43.00% of the benefit; the retirement age for general staff in service was assumed to be the earliest eligible age under the general compulsory pension system;

- economic and financial parameters: rate of increase in salaries 2.38% (used only for calculating the loyalty bonus); inflation rate 2.00%; average discount rate 3.30%. As regards the discount rate, in view of the high volatility in the financial markets and the discussions held in December with the national actuarial association, it was decided to use the Iboxx Obbligazioni Corporate AA for the euro area at December 31, 2012, as the benchmark index, with an average duration comparable to that of the group being measured. The valuation at December 31, 2012 takes account of the pension reform introduced with the “Rescue Italy Decree. In addition, since January 1, 2013, under the provisions of IAS 19 R (revised), the corridor method used to account for actuarial gains and losses is no longer permitted: gains and losses must the recognized under other comprehensive income).

11.2 Other information

Please see the comments to table 11.1.

111

Section 12 - Provisions for risks and charges - item 120

12.1 Provisions for risks and charges: composition

Total Total

31/12/2012 31/12/2011

1. Company pension plans 2. Other provisions for risks and charges 23,904 27,002 2.1 legal disputes 14,570 17,739 2.2 personnel expenses 2.3 other 9,334 9,263 Total 23,904 27,002

Legal disputes include legal expenses in the amount of about €4.9 million (about €8.6 million at December 31, 2011) for credit recovery, the amount of which is estimated at the end of each period. On the basis of past experience, the Bank estimates that most of this cost will be incurred in the subsequent 12 months.

The remainder of the item “Legal disputes” regards pending litigation for which the timing of any adverse rulings is estimated at an average of about 2 years.

The provision under “other” is mainly accounted for by contingent liabilities in respect of former tenants.

The large number and non-material individual amount of legal disputes and contingent liabilities in respect of former tenants means that a detailed analysis of payment forecasts for those disputes would not be significant.

The time value was estimated using listed IRS rates for equivalent maturities.

112

12.2 Provisions for risks and charges: change for the period

Retirement Other provisions provisions Total

A. Opening balance 27,002 27,002 B. Increases B.1 Provisions for the year B.2 Changes due to passage of time B.3 Changes due to changes in the discount rate B.4 Other increases C. Decreases 3,099 3,099 C.1 Use during the period 1,114 1,114 C.2 Changes due changes in the discount rate C.3 Other decreases 1,985 1,985 D. Closing balance 23,904 23,904

12.3 Defined-benefit company pension plans

There were no such positions as of the balance sheet date.

12.4 Provisions – other

The information is summarized in the changes reported in Table 12.2 for “Other provisions".

113

Section 13 – Redeemable shares – item 140

There were no such shares as of the balance sheet date.

114

Section 14 - Shareholders' equity - items 130, 150, 160, 170, 180, 190 and 200

14.1 "Share capital” and “Treasury shares": composition

Subscribed and Issued Treasury shares not paid up Ordinary 474,765,250 Savings shares Preference shares Total 474,765,250

As of the reporting date for these financial statements, the number of ordinary shares issued totaled 9,191,970. Note that the Extraordinary Shareholders’ Meeting of 15 July 2010 authorized the Board, pursuant to Art. 2443 of the Civil Code, to carry out a capital increase for consideration within three years in the amount of €100,201,000.00 with the issue of 1,940,000 new shares with a par value of €51.65 each. In implementation of the authorization, on March 29, 2012, the Board approved the issue of 1,940,000 new ordinary shares with a par value of €51.65, increasing share capital from €374,564,250.50 to the current €474,765,250.50.

115

14.2 Share capital – Number of shares: change for the period

Ordinary Other

A. Shares at start of the year 7,251,970 - fully paid 7,251,970 - partially paid A.1 Treasury shares (-) B.2 Shares in circulation: opening balance B. Increases 1,940,000 B.1 new issues 1,940,000 - for consideration: 1,940,000 - business aggregations - conversion of bonds - exercise of warrants - other 1,940,000 - bonus issues: - to employees - to directors - other B.2 Sale of own shares B.3 Other C. Decreases C.1 Cancellation C.2 Purchase of own shares C.3 Disposal of companies C.4 Other changes D. Shares in circulation: closing balance 9,191,970 D.1 Treasury shares (+) D.2 Shares at the end of the year - fully paid - partially paid

14.3 Share capital – Other information

See tables 14.1 and 14.2.

116

14.4 Earnings reserves: other information

Type Amount Possible uses Available amount

Share capital 474,765 Legal reserve 18,566 B Extraordinary reserve 27,932 A,B,C 27,932 Retained earnings - IAS 24,100 24,100 FTA reserve -1,507 Other reserves 18,628 A,B,C 18,964 Total 87,179 70,456 Amount not available 16,723 Remainder

Key: A: for capital increases B: for loss coverage C: for distribution to shareholders

No reserves have been released in the last three years.

14.5 Equity instruments: composition and change for the period

There were no such positions as of the balance sheet date.

117

Other information

1. Guarantees issued and commitments

Amount Amount

31/12/2012 31/12/2011

1) Financial guarantees issued 301,489 258,596 a) Banks b) Customers 301,489 258,596 2) Commercial guarantees issued 58,770 55,808 a) Banks 41,267 38,202 b) Customers 17,503 17,606 3) Irrevocable commitments to disburse funds 486,587 737,192 a) Banks 5,268 4,917 i) certain use 5,268 4,917 ii) uncertain use b) Customers 481,319 732,275 i) certain use 239,456 91,532 ii) uncertain use 241,863 640,743 4) Commitments underlying credit derivatives: sales of protection 5) Assets pledged as collateral for third-party debts 6) Other commitments Total 846,847 1,051,596

Guarantees issued regard guarantees with which the Bank undertook to discharge or guarantee the obligation of customers.

Irrevocable commitments to disburse funds concern loans that had not yet been disbursed as of the balance sheet date.

2. Assets pledged as collateral for own debts and commitments

As discussed in the comments to the table on amounts due to banks, in 2011 the Bank carried out (through Iccrea Banca) a refinancing operation with the European Central Bank in the amount of €607 million, pledging as collateral securities issued and repurchased by it and guaranteed by the Italian government pursuant to Article 8 of Decree Law 201 of December 6, 2011, ratified with Law 214 of December 22, 2011.

3. Information on operating leases

There were no such positions as of the balance sheet date.

118

4. Management and intermediation services

Amount

1. Order execution on behalf of customers a) Purchases 1. Settled 2. Not yet settled b) Sales 1. Settled 2. Not yet settled 2. Asset management a) Individual b) Collective 3. Securities custody and administration 3,040,577 a) Third-party securities held as part of depository bank services (excluding asset management) 1. Securities issued by reporting entity 2. Other securities b) Other third-party securities on deposit (excluding asset management): other 40,466 1. Securities issued by reporting entity 2. Other securities 40,466 c) Third-party securities deposited with third parties 40,466 d) Securities owned by bank deposited with third parties 3,000,111 4. Other transactions

119

PART C – INFORMATION ON THE INCOME STATEMENT

120

Section 1 - Interest - items 10 and 20

1.1 Interest and similar income: composition

Other Total Total Debt securities Loans transactions 31/12/2012 31/12/2011

1. Financial assets held for trading 2. Financial assets available for sale 3. Financial assets held to maturity 54,536 54,536 4. Due from banks 1,035 1,035 2,379 5. Loans to customers 1,521 317,431 318,952 359,771 6. Financial assets at fair value 7. Hedging derivatives 8. Other assets 354 354 888 Total 56,057 318,466 354 374,877 363,038

During the period, interest income in respect of finance leases came to €263 million (€284 million at December 31, 2011). Negative indexing adjustments amounted to €30 million (€17 million the previous year).

1.2 Interest and similar income: differences on hedging transactions

There is nothing to report here because differences on hedging derivatives (fair value hedges) generated interest expense for the period under review.

1.3.1 Interest income on foreign-currency financial assets

Interest income on foreign-currency financial assets amounted to €976 thousand (€748 thousand at December 31, 2011).

1.3.2 Interest income from finance leases

See information in tables 6.3 and 7.4 of assets concerning finance leases and the comments to table 1.1 of the income statement.

1.4 Interest and similar expense: composition

Total Total Debt Securities Other 31/12/2012 31/12/2011

1. Due to central banks 2. Due to banks 52,391 52,391 53,374 3. Due to customers 23,620 23,620 24,349 4. Securities issued 89,952 89,952 122,733 5. Financial liabilities held for trading 6. Financial liabilities carried at fair value 7. Other liabilities and provisions 8. Hedging derivatives 4,906 4,906 8,312 Total 76,011 89,952 4,906 170,869 208,768

121

1.5 Interest and similar expense: differences on hedging transactions

31/12/2012 31/12/2011

A. Positive differences on hedging transactions: 9,363 20,382 B. Negative differences on hedging transactions: 14,269 28,694 C. Balance (A-B) 4,906 8,312

1.6.1 Interest expense on foreign-currency liabilities

In Interest expense on foreign-currency financial assets amounted to €388 thousand in 2012 (€291 thousand in 2011).

1.6.2 Interest expense on liabilities in respect of finance leases

There were no such positions as of the balance sheet date.

122

Section 2 – Fees and commissions - items 40 and 50

2.1 Fee and commission income: composition

Total Total

31/12/2012 31/12/2011

a) guarantees issued 1,649 1,154 b) credit derivatives c) management, intermediation and advisory services: 1,849 1,406 1. trading in financial instruments 2. foreign exchange 3. asset management 3.1. individual 3.2. collective 4. securities custody and administration 5. depository services 6. securities placement 7. order collection and transmission 8. advisory services 693 1,056 8.1 concerning investments 8.2 concerning financial structure 693 1,056 9. distribution of third-party services 1,155 350 9.1. asset management 9.1.1. individual 9.1.2. collective 9.2. insurance products 1,155 350 9.3. other d) collection and payment services e) servicing activities for securitizations f) services for factoring transactions g) tax collection services h) management of multilateral trading systems i) holding and management of current accounts j) other services 2,807 3,106 Total 6,304 5,666

Commissions from the distribution of insurance products to lease customers amounted to €1.1 million (€0.4 million in at December 31, 2011).

2.2 Fee and commission income: distribution channels for products and services

Total Total 31/12/2012 31/12/2011

a) own branches: 1. asset management 2. securities placement 3. third-party services and products b) off-premises distribution: 1. asset management 2. securities placement 3. third-party services and products c) other distribution channels: 1,155 350 1. asset management 2. securities placement 3. third-party services and products 1,155 350

123

2.3 Fee and commission expense: composition

Total Total

31/12/2012 31/12/2011

a) guarantees received 1,460 1,707 b) credit derivatives c) management and intermediation services: 1. trading in financial instruments 2. foreign exchange 3. asset management: 3.1 own portfolio 3.2 third-party portfolio 4. securities custody and administration 5. placement of financial instruments 6. off-premises distribution of securities, products and services d) collection and payment services e) other services 1,480 2,930 Total 2,940 4,637

Commissions for “guarantees received” mainly regard commissions paid to mutual banks for loans assigned and counter-guaranteed by the latter, as noted in the comments to table 6.1 of assets in notes to the balance sheet.

“Other services” includes commissions paid to intermediaries for finance lease contracts that cannot be allocated to individual contracts. Commissions that can be allocated directly are reported under net interest income in application of the amortized cost method for determined the effective interest rate.

124

Section 3 - Dividends and similar revenues - item 70

3.1 Dividends and similar income: composition

Total Total 31/12/2012 31/12/2011 Income from Income from units in units in Dividends collective Dividends collective investment investment undertakings undertakings A. Financial assets held for trading B. Financial assets available for sale 1 1 C. Financial assets at fair value D. Equity investments Total 1 1

125

Section 4 - Net gain (loss) on trading activities - item 80

4.1 Net gain (loss) on trading activities: composition

Capital gains Trading Capital losses Trading losses Net gain [(A+B) -

(A) profits (B) (C) (D) (C+D)]

1. Financial assets held for trading 1.1 Debt securities 1.2 Equity securities 1.3 Units in collective investment undertakings 1.4 Loans 1.5 Other 2. Financial liabilities held for trading 2.1 Debt securities 2.2 Payables 2.3 Other 3. Other financial assets and liabilities: foreign exchange differences -245 4. Derivatives 27,830 50,580 4,686 71,867 1,857 4.1 Financial derivatives 27,830 50,580 4,686 71,867 1,857 - on debt securities and interest rates 27,830 50,580 4,686 71,867 1,857 - on equity securities and equity indices - on foreign currencies and gold - other 4.2 Credit derivatives Total 27,830 50,580 4,686 71,867 1,612

126

Section 5 - Net gain (loss) on hedging activities - item 90

5.1 Net gain (loss) on hedging activities: composition

Total Total

31/12/2012 31/12/2011

A. Gain on: A.1 Fair value hedges 2,229 4,020 A.2 Hedged financial assets (fair value) 4,077 4,790 A.3 Hedged financial liabilities (fair value) 4,843 5,068 A.4 Cash flow hedges 58 A.5 Assets and liabilities in foreign currencies Total income on hedging activities (A) 11,149 13,935 B. Loss on: B.1 Fair value hedges 9,866 11,316 B.2 Hedged financial assets (fair value) 0 B.3 Hedged financial liabilities (fair value) 1,166 1,922 B.4 Cash flow hedges 699 4,391 B.5 Assets and liabilities in foreign currencies Total expense on hedging activities (B) 11,731 17,629 C. Net gain (loss) on hedging activities (A-B) -581 -3,693

The table above reports the gains and losses on fair value hedges recognized by the Bank. They regard the fair value hedging of fixed-rate funding and fixed-rate loan portfolios, as well as the ineffective portion of cash flow hedges in respect of floating-rate funding and lending.

127

Section 6 - Gain (loss) on disposal or repurchase - item 100

6.1 Gain (loss) on disposal or repurchase: composition

Total Total 31/12/2012 31/12/2011

Net gain Net gain Gains Losses Gains Losses (loss) (loss) Financial assets 1. Due from banks 2. Loans to customers 3. Financial assets available for sale 3.1 Debt securities 3.2 Equity securities 3 3 3.3 Units in collective investment undertakings 3.4 Loans 4. Financial assets held to maturity Total assets 3 3 Financial liabilities 1. Due to banks 2. Due to customers 3. Securities issued 529 529 15 15 Total liabilities 529 529 15 15

128

Section 7 – Net adjustments of financial assets and liabilities at fair value – item 110

There were no such positions as of the balance sheet date.

129

Section 8 – Net losses/recoveries on impairment - item 130

8.1 Net losses/recoveries on impairment of loans: composition

Losses Recoveries (1) (2)

Specific Total

Portfolio 31/12/2012 Total

Writeoffs Specific Portfolio 31/12/2011 (1) - (2) Other

A B A B A. Due from banks - Loans - Debt securities B. Loans to customers 10,545 186,242 -36,049 -37,330 -2,138 121,270 57,767 Impaired receivables acquired - Loans - Debt securities Other receivables 10,545 186,242 -36,049 -37,330 -2,138 121,270 57,767 - Loans 10,545 186,242 -36,049 -37,330 -2,138 121,270 57,767 - Debt securities C. Total 10,545 186,242 -36,049 -37,330 -2,138 121,270 57,767

Key: A: Recoveries from interest B: Other recoveries

130

8.2 Net losses/recoveries on impairment of financial assets available for sale: composition

Losses Recoveries (1) (2)

Total Total

Specific Specific 31/12/2012 31/12/2011

Writeoffs Other A B

A. Debt securities B. Equity securities 750 750 3.087 C. Units in collective investment undertakings 11,794 11,794 8,048 D. Loans to banks E. Loans to customers F. Total 12,544 12,544 11,135

Key: A: Recoveries from interest B: Other recoveries

The item reports writedowns of units of CIUs as discussed in the comments to Table 4.1 under assets. The adjustment of €0.7 million regards participating financial instruments acquired as part of measures to recover creditor positions.

8.3 Net losses/recoveries on impairment of financial assets held to maturity: composition

The table has not been completed because there were no such positions as of the balance sheet date.

131

8.4 Net losses/recoveries on impairment of other financial instruments: composition

Losses (1) Recoveries (2)

Specific

Portfolio Total Total Specific Portfolio Writeoffs 31/12/2012 31/12/2011

Other

A B A B

A. Guarantees issued 646 646 520 B. Credit derivatives C. Commitments to disburse funds D. Other transactions E. Total 646 646 520

Key: A = From interest B = Other recoveries

The item includes adjustments for guarantees.

132

Section 9 - Administrative expenses - item 150

9.1 Personnel expenses: composition

Total Total

31/12/2012 31/12/2011

1) Employees 36,788 41,599 a) wages and salaries 25,430 29,603 b) social security contributions 6,538 6,960 c) termination benefits d) pensions e) allocation to employee termination benefit provision 294 294 f) allocation to provision for retirement and similar liabilities - defined contribution - defined benefit g) payments to external pension funds: 1,766 1,803 - defined contribution 1,766 1,803 - defined benefit h) costs in respect of agreements to make payments in own equity instruments i) other employee benefits 2,761 2,940 2) Other personnel 439 383 3) Board of Directors and members of Board of Auditors 645 674 4) Retired personnel 5) Recovery of expenses for employees seconded to other companies -868 -815 6) Reimbursement of expenses for third-party employees seconded to the Company 893 1,190 Total 37,897 43,032

Personnel expenses decreased on the previous year largely owning to the higher costs incurred in 2011 in respect of early retirement incentives and access to the solidarity fund by employees and the lower cost incurred in 2012 as a result of the transfer of the IT unit to Iccrea Banca S.p.A.

133

9.2 Average number of employees by category

Average Average

31/12/2012 31/12/2011

Employees 453 450 a) senior management 14 14 b) middle management 206 205 c) other employees 233 231 Other personnel Total 453 450

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9.3 Defined-benefit company pension plans: total costs

There were no such positions as of the balance sheet date.

9.4 Other employee benefits

The balance of €2,761 thousand (€2,940 thousand at December 31, 2011) mainly regards expenses for employee training (€196 thousand), supplementary pension fund contributions (€1,110 thousand), and staff cafeteria services (€651 thousand).

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9.5 Other administrative expenses: composition

Total Total

31/12/2012 31/12/2011

1) Overheads 26,837 26,928 a) data processing 4,083 3,847 b) travel expenses 2,333 2,723 c) facility rental and management 4,152 4,494 d) telephone, postal charges and couriers 983 1,391 e) miscellaneous services 11,490 10,266 f) association dues 1,502 1,343 g) advertising and entertainment expenses 684 930 h) maintenance 1,207 1,452 i) office supplies, printed material, print subscriptions, photocopying, etc. 175 271 j) miscellaneous 228 211 2) Taxes and duties 198 344 Total 27,035 27,273

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Section 10 – Net provisions for risks and charges - item 160

10.1 Net provisions for risks and charges: composition

Total Total

31/12/2012 31/12/2011

Legal disputes -3,169 1,343 Staff expenses Other 1,184 572 Total -1,985 1,915

The item “Legal disputes” regards provision for pending litigation and legal costs to be incurred. During the year the Bank recognized a writeback, attributable mainly to specific renegotiation of fees with legal counterparties.

The accrual for “other” regards contingent liabilities in respect of former tenants of the buildings involved in terminated lease contracts and sold.

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Section 11 – Net adjustments of property and equipment - item 170

11.1. Net adjustments of property and equipment composition

Writedowns Depreciation for Writebacks Net adjustments

(a) impairment (c) (a+b-c) (b)

A. Property and equipment 235 90 99 226 A.1 owned 235 90 99 226 - operating assets 235 90 99 226 - investment property A.2 acquired under finance leases - operating assets - investment property Total 235 90 99 226

The writedowns for impairment regard the writedown of the carrying amount of assets returned from lease contracts.

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Section 12 - Net adjustments of intangible assets - item 180

12.1 Net adjustments of intangible assets: composition

Writedowns for Net adjustments Amortization (a) Writebacks (c) impairment (b) (a+b-c)

A. Intangible assets 2,312 2,312 A.1 owned 2,312 2,312 - generated internally by the Bank - other 2,312 2,312 A.2 acquired under finance leases Total 2,312 2,312

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Section 13 – Other operating expenses/income - item 190

13.1 Other operating expenses: composition

Total Total Change % 31/12/2012 31/12/2011

Charges connected to leasing service 30,485 26,576 3,909 14.71% - consulting and other expenses connected to service 17,138 13,913 3,225 23.18% - insurance of leased assets 8,928 8,872 56 0.63% - taxes and duties connected to service 3,222 3,218 4 0.13% - losses on disposal of assets returned from finance leases 21 72 -51 -70.33% - other 1,175 501 674 134.56% Other charges 4,079 3,310 769 23.22% Total other operating expenses 34,564 29,887 4,677 15.65%

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13.2 Other operating income: composition

Total Total Change % 31/12/2012 31/12/2011

Income connected to leasing service 30,450 32,051 -1,602 -5% - recovery of expenses from customers (finance leasing) 10,216 9,822 393 -4% - recovery of expenses from others 625 596 29 -4.87% - other 19,608 21,632 -2,024 -9.36% Other income 7,843 6,042 1,801 29.80% Total other operating income 38,292 38,093 199 0.52%

The decline in income connected to the leasing service is offset by an increase in other income, which helped improve overall operating performance.

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Section 14 - Profit (loss) from equity investments - item 210

14.1 Profit (loss) from equity investments: composition

Total Total

31/12/2012 31/12/2011

A. Gains 2,726 1. Revaluations 2,726 2. Gains on disposals 3. Writebacks 4. Other income B. Losses 5,226 1. Writedowns 5,226 2. Impairments 3. Losses on disposals 4. Other expenses Net profit (loss) 2,726 5,226

The item reflects the writeback of the equity investment in BCC Factoring following the annual calculation of the economic value of the subsidiary (for more information, see the extensive discussion under table 10.2 of assets). The previous year, a writedown of €5.2 million was necessary.

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Section 15 – Net adjustment to fair value of property, plant and equipment and intangible assets – item 220

There were no such positions as of the balance sheet date.

143

Section 16 – Value adjustments of goodwill - item 230

There were no such positions as of the balance sheet date.

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Section 17 – Gains (losses) on disposal of investments – item 240

There were no such positions as of the balance sheet date.

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Section 18 – Income tax expense from continuing operations - item 260

18.1 Income tax expense from continuing operations: composition

Total Total

31/12/2012 31/12/2011

1. Current taxes (-) -34,347 -24,131 2. Changes in current taxes from previous periods (+/-) -630 -1 3. Reduction of current taxes for the period (+) 4. Change in deferred tax assets (+/-) 21,103 11,329 5. Change in deferred tax liabilities (+/-) 27 9 6. Income taxes for the period (-) (-1+/-2+3+/-4+/-5) -13,848 -12,794

As noted earlier, the liability in respect of current taxes is recognized under tax liabilities in the amount of €9.9 million (€7 million in 2011) for the liability in respect of IRAP and under other liabilities (payables to parent company) in the amount of €25.4 million (€17.6 million in 2011) for the liability in respect of IRES, gross of payments made on account in the amount of €14.8 million (€30.4 million in 2011) and net of revenues of €1.3 million from participation in the consolidated taxation mechanism.

Current taxes also include the special tax under Article 1, paragraphs 137 and 140, of Law 296/2006 provisioned in the amount of €0.3 million for gains realized on the transfer of buildings to the Securis Real Estate investment fund.

The €2.2 million increase in current taxes from previous periods regards the credit in respect of the consolidating company for the excess IRES paid as a result of not partially deducting IRAP in the 2007-2011 tax years, for which the Bank will apply for reimbursement in March 2013 (Art. 4, paragraph 12, of Decree Law 16/2012). The decrease in current taxes from previous periods includes €2.3 million in respect of the amount paid in the settlement agreement between Group companies and tax authorities to resolve the asset swap dispute arising after the audit of the Bank for the years 2003, 2004 and 2005 and €0.5 million in respect of the tax difference for 2011 following presentation of form UNICO 2012.

As regards changes in deferred tax assets and liabilities, please see the extensive discussion in the notes to tables in section 13 of the balance sheet.

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18.2 Reconciliation of theoretical tax liability and actual tax liability recognized

Taxable Tax rate Tax income IRES 27.50%

Net profit (loss) for the period before tax 15,446 4,248 Timing differences taxable in subsequent periods 0 0 Timing differences deductible in subsequent periods 100,387 27,607 Reversal of taxable timing differences of previous periods 0 0 Reversal of deductible timing differences of previous periods -24,472 -6,730 Permanent taxable differences 9,743 2,679 Permanent deductible differences -8,760 -2,409 Income taxable at subsidy rates 0 Actual taxable income and tax 92,344 25,395 IRAP 5.57% Gross income 208,936 11,638 Items reducing gross income -26,624 -1,483 Taxable income for IRAP purposes Timing differences taxable in subsequent periods Timing differences deductible in subsequent periods 10 1 Reversal of taxable timing differences of previous periods Reversal of deductible timing differences of previous periods Permanent taxable differences 13,705 763 Permanent deductible differences -17,514 -976 Income taxable at subsidy rates Actual taxable income and tax 178,513 9,943

Timing difference taxable or deductible in subsequent years are the tax base used for determining deferred tax assets and liabilities for the period, applying the tax rates that are expected to be in force when the items reverse. The IRES and IRAP amounts reported in the table differ from the amount reported in respect of current taxes owing to the recognition under the latter of the income (equal to €1.3 million) from participation in the tax consolidation mechanism and the special gains tax provisioned in the amount of €0.3 million on the gain realized following the transfer of property to the real estate investment fund.

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Section 19 – Profit (loss) after taxes from disposal groups – item 280

There were no such positions as of the balance sheet date.

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PART D – COMPREHENSIVE INCOME

149

DETAILED BREAKDOWN OF COMPREHENSIVE INCOME

Income taxes Net amount Gross amount

10. Net profit (loss) for the period 15,446 -13,848 1,598 Other comprehensive income 20. Financial assets available for sale a) fair value changes b) reversal to income statement - impairment adjustments - gain/loss on realization c) other changes 30. Property and equipment 40. Intangible assets 50. Hedging of investments in foreign operations: a) fair value changes b) reversal to income statement c) other changes 60. Cash flow hedges: 461 -152 309 a) fair value changes 546 - 180 366 b) reversal to income statement -85 28 -57 c) other changes 70. Foreign exchange differences: a) value changes b) reversal to income statement c) other changes 80. Non-current assets held for sale: a) fair value changes b) reversal to income statement c) other changes 90. Actuarial gains (losses) on defined benefit plans 100. Valuation reserves of equity investments accounted for with equity method (pro rata): a) fair value changes b) reversal to income statement - impairment adjustments - gain/loss on realization c) other changes 110. Total other comprehensive income 461 -152 309 120. Comprehensive income (Item 10+110) 15,907 -14,000 1,907

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PART E - RISKS AND RISK MANAGEMENT POLICIES

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INTRODUCTION: RISKS OF THE BANKING GROUP

The ICCREA Banking Group attaches great importance to controlling risks and to control systems, which are essential to ensuring the reliable and sustainable generation of value, preserving a sound financial position over time, and enabling effective management of assets and liabilities.

In recent years, the Group has undertaken a gradual process to upgrade its methods and tools for managing credit, market and operational risks, bringing the system into line with external regulations and operational and internal monitoring needs.

SECTION 1 – CREDIT RISK

QUALITATIVE DISCLOSURES

1. General aspects Iccrea BancaImpresa’s business has primarily involved lending in the form of leasing transactions for all typical product segments (real estate, equipment, auto, industrial vehicles, marine and, more recently, public sector leasing). The remainder of the Bank’s product range comprises ordinary loans in various forms (mortgage loans, unsecured loans, current account overdrafts, etc.) and corporate finance operations (acquisitions and LBOs, project financing in the renewable energy sector, public-sector project finance, shipping, real estate finance), begun in recent years. The range of products was expanded further with the International, Special Lending and Facilitated Credit business areas. Most of Iccrea BancaImpresa’s lending is directed at business customers and involves medium/long-term financing. Only a marginal part of our business is with banks or public entities. More than 90% of lending is with mutual bank customers. A major element of the risk management approach is represented by the Bank’s focus on lending to the customers of the mutual banks. This leverages the close relationships that these banks have with their customers, thereby ensuring careful customer selection. Although the Bank has undertaken a number of large- value transactions in recent years, it has maintained its policy of limiting exposures to individual counterparties within low ceilings; this generates benefits in terms of the diversification of risks and thus the overall quality of the portfolio. It should be noted that in 2012 the Bank completed the reorganization of its business model, with the creation of two business areas. The Enterprise business area focuses on businesses with revenues of less than €20 million. It also handles specific products such as farm and residential lending. The Corporate business area focuses on businesses with revenues of more than €20 million, while also managing certain specific products and areas such as corporate finance, international business and segments of tourism, hotels and healthcare.

2. Credit risk management policies

2.1 Organizational aspects

The adoption of a business model based on business areas involved the implementation of organizational arrangements that - while maintaining the methodologies and instruments already in use, which have gradually been refined - could ensure both maximum operating efficiency and effective management of credit risk. The new organizational structure for credit risk management is based on the following principles: • in general, each business area is responsible for the performance of its own operations in terms of the cost of risk; • in this context, the various business lines must possess the essential internal resources needed to achieve these objectives, obviously including credit activity in general and credit collection at the phone collection and home collection phases; • accordingly, responsibility for development, assessment, completion, disbursement and management of transactions lies with the business lines into which the activity of the Bank has been divided, each within its area of competence; • in line with this model, the Credit Department (which reports directly to the General Manager) will play a strategic guidance role in establishing the Bank's lending policies, acting through four units: Application Assessment Quality and Policy, Risk Monitoring, Strategic Risk Positioning, and Assessment Methods and Models;

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• in addition, partly in response to the current economic climate and the associated rise in non- performing positions, the Non-Performing Loan Department (which reports directly to the Deputy General Manager) has been created. This unit has expanded its control and monitoring of the loan portfolio and extended its tracking of problem positions, adopting a range of specialized actions by the various units: 1. Loan Collection; 2. Restructuring; 3. Litigation; 4. Equipment Sales; 5. Property Sales; 6. Classification; 7. Loan Assessment; 8. Asset Appraisal

The Loan Collection unit is responsible for monitoring and controlling the collection activities performed by the business areas and is directly responsible for second-level collection operations.

2.2 Measurement, management and control systems

Iccrea BancaImpresa has for many years taken on credit risk with the support of a creditworthiness assessment model based on the Alvin expert system. The model, which was designed internally, has been improved over the years by enlarging its knowledge base, integrating external databases and improving the level of automation. The model is integrated into the front-end sales process. With verification of the statistical validity of the model, the Bank transitioned from Alvin to “Alvin Rating”, with the definition of an internal rating scale. Since February 2005, Alvin Rating has been used in operations to assess all operations with the Bank's business counterparties. The Alvin model underwent a far-reaching review, culminating in a new release in early 2011 that gives the system more accurate predictive capacity. Accordingly, transactions approved over six years underwent reassessment, recalibrating the related PDs. The model, called AlvinStar Rating, currently uses 10 rating grades for counterparties. For finance leasing, the rating model and the front-end sales system permit extensive automation of the preliminary application assessment process (assignment of rating and assessment of transaction) and of the approval of operations (electronic processing of applications and approval), at the same time permitting control to be maintained over the process, data quality and the use of delegated powers (tracking every decision/change). The risk associated with exposures to counterparties is also assessed on an ongoing basis with the assignment of updated ratings reflecting the position's performance. The periodic assignment of ratings is carried out using the same internal rating system (AlvinStar Rating) used for the mass assessment of developments in the business loan portfolio on a monthly basis. To support the summary analyses of the Bank's risk positioning in its global loan portfolio, a company data warehouse is used to maintain key information on business counterparties, as well as all the rating assessments performed. The periodic monitoring of the portfolio focuses on risk components, expected loss, loan quality indices (problem loans) and the risk-return profile of operations. The analysis is conducted from the following perspectives: internal rating grade; geographical area; channel through which position acquired; product being financed; business unit. In the spring of 2011 the Bank adopted: • a risk-adjusted pricing model that incorporates, in line with the procedures used to determine budget targets, risk parameters in pricing transactions. This will make it possible to develop a pricing policy that is consistent with the Business Plan; • a commercial objective control system with risk-adjusted return metrics in order to govern and pursue profit targets corrected for the risk specified at the budget level.. The measures taken involved the introduction of the cost of risk (expected loss) into the final price, the management of guarantees to mitigate expected loss, and the revision of the fee structure adopted by the mutual banks. The new model, which incorporates risk as a component of price and makes both the rate and the commissions paid to our main acquisition channel, the mutual banks, a function of risk, seeks to encourage the mutual banks to send the Bank customers with stronger risk profiles (encouraging the use of guarantees as well) and

153 operation with higher rates, i.e. rates consistent with the risk represented by the customer and the transaction priced appropriately and explicitly by the model.

2.3 Credit risk mitigation techniques

An important risk mitigation tool is the use of guarantees for lending transactions. In addition to personal sureties, bank sureties also play an important role. The mutual banks, for certain individual transactions or under framework agreements, issue bank sureties to support the requests for financing presented to the Bank. This occurs in both the lease segment and, above all, the ordinary lending segment (in view of the fact that one of the Bank's policies is to involve the mutual banks in credit transactions, whether they regard loans or guarantees). In the leasing segment, ownership of the asset involved in the lease is the main security mitigating the risk of losses due to counterparty default. For this reason, valuation of the asset at the time the contract is acquired is one of the most important risk mitigation activities. The Bank has a specific risk policy for such assets, which among other features envisages the following measures: • a specific process for assessing the appropriateness of the value of the assets at the time of purchase. External appraisals are used to support the valuation of property. In this light, with a view to generating economies of scope and synergies in technical knowledge concerning assets and the network of relationships (outsourcers, vendors, etc.) and to optimizing and reducing the time for which assets are warehoused and the time required to sell the assets on the best market terms, for some time now the asset valuation and sales units have been incorporated within a single unit, the Non-Performing Loan Department. That unit is responsible for assessing the appropriateness of the valuation of assets in the equipment, auto, industrial vehicles and marine segments at the time of purchase and any resale. External appraisers provide assistance in the case of real estate, aircraft and ships; • the use of financing plans with a bargain purchase option; • contract durations that take account of asset obsolescence; • prior screening to identify assets that cannot be financed.

Similar attention is devoted to the assets provided as security (mortgages or liens) for loans, with the valuation of the assets involving a network of experienced appraisers at the time the position is being acquired.

2.4 Impaired financial assets

During the first half of 2011, a complete revision of the entire collection process in the pre-litigation phase was conducted, with the clustering of the portfolio by type and amount, accompanied by use of external companies (first and foremost BCC Gestione Crediti) for small-value positions, and complete internal handling (enterprise position managers/non-performing position managers) of large real estate/loan positions, in partial conformity with the new organizational model divided by business line. Since April 2011, all collection activities associated with first-time non-payment (phone collection) have been brought in-house and conducted on a coordinated basis by the Corporate Centers and Product Specialists in the various units in order to obtain an immediate picture of the customer situation, which may be facilitated using a variety of approaches. In April 2012, phone collection and home collection activities were entrusted to the Enterprise Centers in the Enterprise business area and to a specialist unit in the Corporate area. The review of the collection process was carried out together with the implementation of a more advanced information platform (GeCre 2.5) that can manage roles and collection activities flexibly and, at the same time, rigorously. The platform enables rapid modification of roles and collection actions, permitting the Bank to assign management of problem positions to its agents - internal and external - in an effective and efficient manner. If no agreement can be reached with customers and past due status continues, legal action is then proposed. The position is recommended for classification as a bad debt in the following circumstances: • counterparties in bankruptcy proceedings; • counterparties for which legal action has begun, and in any case with notification of the proceedings; • reports of bad debts from other credit institutions; • contract termination for breach; • counterparties considered irreversibly insolvent on the basis of other checks.

FACTORS ENABLING RECLASSIFICATION OF IMPAIRED EXPOSURES TO PERFORMING STATUS Only full resumption of normal payments in the agreed installments permits restoration of performing status to positions, with the return to full solvency on the part of the debtor: • elimination of the entire exposure or repayment of arrears;

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• regularization of the risk position.

ASSESSMENT OF THE ADEQUACY OF WRITEDOWNS Loans are recognized at estimated realizable value. This value is obtained by deducting specific and general writedowns of principal and interest, net of any repayments, from the total amount disbursed. On a half-yearly basis, the manager responsible for evaluating problem exposures carries out a detailed analysis of the recoverability of bad debts and substandard loans for the purpose of formulating recommendations for the Board of Directors concerning its decisions regarding doubtful positions. This analysis takes account of the status of legal action and the presence of guarantees and any other risk mitigation factors (in leasing transactions, the realizable value of the asset involved in the lease). The evaluation of restructured positions takes account of the provisions of the agreed workout plan. Positions past due by more than 90 days undergo specific valuation using an approach that takes account of: • the rate at which such positions migrate to more highly impaired classes (bad debts and substandard loans); • the rate at which such positions return to performing status together with the risk associated with the various forms of lending.

Writedowns are taken to the income statement, with the amount determined as the difference between the value at which the exposure is carried in the books and the present value of estimated recoverable cash flows, discounted at the effective interest rate of the impaired financial asset. The original value of the loan is fully or partly restored in subsequent years should the reasons for the writedown cease to obtain.

COLLECTIVE PROVISION The value of the portfolio of performing positions is measured on a statistical basis and a collective provision for risk is determined. The risk associated with the portfolio is estimated on the basis of internally estimated risk components, in particular the probability of default associated with the rating grade assigned to the counterparty and the LGD estimated internally on the basis of historical data or standard regulatory values.

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A. CREDIT QUALITY

A.1 IMPAIRED AND PERFORMING CREDIT EXPOSURES: STOCKS, WRITEDOWNS, CHANGES AND DISTRIBUTION BY SECTOR AND GEOGRAPHICAL AREA

A.1.1 Distribution of credit exposures by portfolio and credit quality (carrying amount)

Substandard Restructured Past due Bad debts Other assets Total loans positions positions

1. Financial assets held for 186 46,470 46,656 trading 2. Financial assets available 0 for sale 3. Financial assets held 3,006,285 3,006,285 to maturity 4. Due from banks 147,543 147,543 5. Loans to customers 398,878 605,616 22,762 36,493 7,709,322 8,773,071 6. Financial assets at 0 fair value 7. Financial assets held for sale 0

8. Hedging derivatives 10,561 10,561 Total (31/12/2012) 398,878 605,803 22,762 36,493 10,920,181 11,984,116 Total (31/12/2011) 382,072 575,351 23,250 1,270 8,603,427 9,585,369

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A.1.2 Distribution of credit exposures by portfolio and credit quality (gross and net values)

Impaired assets Performing

Total (net

Gross Specific Net Gross Portfolio Net exposure) exposure adjustments exposure exposure adjustments exposure

1. Financial assets held for trading 886 700 186 0 0 46,470 46,656 2. Financial assets available for sale 0 3. Financial assets held to 3,006,285 3,006,285 3,006,285 maturity

4. Due from banks 147,543 147,543 147,543 5. Loans to customers 1,476,550 412,801 1,063,749 7,774,951 65,628 7,709,322 8,773,071 6. Financial assets at fair value 0 0 0 7. Financial assets held for sale 0 8. Hedging derivatives 0 0 10,561 10,561

Total (31/12/2012) 1,477,436 413,501 1,063,935 10,928,779 65,628 10,920,181 11,984,116 Total (31/12/2011) 1,299,916 317,974 981,942 8,677,602 74,175 8,603,427 9,585,369

The following table reports the information on performing loans requested by the Bank of Italy in its letter no. 0142023/11 of February 16, 2011.

Exposures renegotiated as part Other exposures Total of collective agreements

Assets not past due 264,931 6,556,961 6,821,892 Assets past due by less than 3 49,766 837,664 887,431 months Total 314,697 7,394,625 7,709,322

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A.1.3 On-balance-sheet and off-balance-sheet credit exposure to banks: gross and net values

Specific Portfolio Gross exposure Net exposure writedowns writedowns

A. ON-BALANCE-SHEET EXPOSURES a) Bad debts b) Substandard loans c) Restructured positions d) Past due positions e) Other assets 147,543 147,543 TOTAL A 147,543 147,543 B. OFF-BALANCE-SHEET EXPOSURES a) Impaired b) Other 68,286 68,286 TOTAL B 68,286 68,286

TOTAL A+B 215,829 215,829

A.1.4 On-balance-sheet credit exposures to banks: changes in gross impaired positions and those exposed to country risk

There were no such positions as of the balance sheet date.

A.1.5 On-balance-sheet credit exposures to banks: changes in total adjustments of loans

There were no such positions as of the balance sheet date.

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A.1.6 On-balance-sheet and off-balance-sheet credit exposures to customers: gross and net values

Specific Portfolio Gross exposure Net exposure writedowns writedowns

A. ON-BALANCE-SHEET EXPOSURES a) Bad debts 704,970 306,093 0 398,878 b) Substandard loans 707,062 101,446 0 605,616 c) Restructured positions 23,954 1,192 0 22,762 d) Past due positions 40,563 4,070 0 36,493 e) Other assets 10,781,233 0 65,628 10,715,605 TOTAL A 12,257,783 412,801 65,628 11,779,353 B. OFF-BALANCE-SHEET EXPOSURES a) Impaired 886 700 0 186 b) Other 837,372 0 1,781 835,591 TOTAL B 838,258 700 1,781 835,777

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A.1.7 On-balance-sheet credit exposures to customers: changes in gross impaired positions

Substandard Restructured Past due Bad debts loans positions positions

A. Opening gross exposure 611,275 661,070 24,686 1,296 - of which: exposures assigned but not derecognized 105,684 89,091 605 111

272,158 478,299 B. Increases 3,887 117,006

76,822 421,723 B.1 from performing credit exposures 848 105,588 B.2 transfers from other categories of impaired positions 175,073 38,546 - 11,383

B.3 other increases 20,263 18,030 3,038 36

C. Decreases 178,463 432,307 4,618 77,739

C.1 to performing credit exposures 6,889 169,968 1,164 23,512

C.2 writeoffs 46,260 11,683 - 1

C.3 collections 121,802 66,037 535 3,963 C.4 assignments C.5 transfers to other categories of impaired positions 100 184,620 - 40,282

C.6 other decreases 3,413 - 2,919 9,981

D. Closing gross exposure 704,970 707,062 23,954 40,563 - of which: exposures assigned but not derecognized 86,075 108,575 356 12,437

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A.1.8 On-balance-sheet credit exposures to customers: changes in total adjustments of loans

Substandard Restructured Past due Bad debts loans positions positions

A. Total opening adjustments 229,553 86,856 1,437 25 - of which: exposures assigned but not derecognized 45,055 14,640 6 2 155,285 67,534 32 7,861 B. Increases B.1. writedowns 94,043 67,017 0 7,563 B.1. bis losses on disposal B.2. transfers from other categories of impaired positions 10,141 415 30 188 51,101 102 3 110 B.3. other increases C. Decreases 78,745 52,944 276 3,816 C.1. writebacks from valuations 27,021 16,599 0 0 C.2. writebacks from collections 5,049 6,558 0 0 C.2. bis gains on disposal C.3. writeoffs 46,260 11,683 0 1 C.4. transfers to other categories of impaired positions 414 10,358 0 1

C.5. other decreases 0 7,746 276 3,813

D. Total closing adjustments 306,093 101,446 1,192 4,070 - of which: exposures assigned but not derecognized 32,782 15,062 0 1,248

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A.2 Classification of exposures on the basis of external and internal ratings

A.2.1 Distribution of on-balance-sheet credit exposures and off-balance-sheet exposure by external rating grades

External rating grades Not Total rated Grade Grade Grade Grade Grade Other 1 2 3 4 5

A. On-balance-sheet exposures 3,006,285 216 8,920,398 11,926,899

B. Derivatives 838 13,774 10 42,595 57,217

B.1 Financial derivatives 838 13,774 10 42,595 57,217

B.2 Credit derivatives -

C. Guarantees issued 362,040 362,040 D. Commitment to disburse

funds 484,806 484,806 E. Other

Total 0 3,007,123 13,990 10 9,809,840 12,830,963

The following table maps the risk grades to the ratings of the reference ECAI (Fitch)

RISK GRADE FITCH

AAA AA+ GRADE 1 AA AA- A+ GRADE 2 A A-

BBB+

GRADE 3 BBB BBB- BB+ GRADE 4 BB BB-

B+

GRADE 5 B

B-

CCC

CC

DDD

DD OTHER DD

DD

DD DD

A.2.2 Distribution of on-balance-sheet exposures and off-balance-sheet exposure by internal rating grades

There were no such positions as of the balance sheet date.

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A.3 Distribution of secured exposures by type of guarantee

A.3.1 Secured credit exposures to banks

Unsecured guarantees Collateral (2) (1) Credit derivatives Guarantees

Other derivatives

Total (1)+(2)

CLN

Banks Other Mortgages Mortgages Properties Properties Securities banks Banks Other Value of net exposure

Other assets agencies Finance leases

Other government Other government agencies Governments and central Governments and central banks

1. Secured on-balance-sheet credit exposures: 33,283 4,255 29,442 0 367 0 0 0 0 0 0 0 0 34,065

1.1 fully secured 33,283 4,255 29,442 367 34,065

- of which: impaired

1.2 partially secured

- of which: impaired

2,959 0 0 10,057 0 0 0 0 0 0 0 0 0 10,057 2. Secured off-balance-sheet credit exposures:

10,005 2.1 fully secured 2,803 10,005

- of which: impaired

52 2.2 partially secured 156 52

- of which: impaired

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A.3.2 Secured credit exposures to customers

Unsecured guarantees Collateral (2) (1) Credit derivatives Guarantees

Other derivatives

Total

(1)+(2)

CLN

Banks Other Mortgages Mortgages Properties Properties Value of net exposure Securities Banks Other

Other assets Finance leases

Other government agencies Governments and central banks Other government agencies Governments and central banks

1. Secured on-balance-sheet credit exposures: 8,493,668 4,701,872 6,375,535 43,646 1,811,490 19,405 1,663 1,089,308 9,487,555 23,530,474

1.1 fully secured 8,416,356 4,696,251 6,375,535 43,039 1,811,490 18,108 1,663 1,080,009 9,461,803 23,487,899

- of which: impaired 1,033,532 714,647 782,031 20 323,982 1,103 943 129,439 1,941,753 3,893,918

1.2 partially secured 77,312 5,622 0 606 0 1,298 0 9,298 25,751 42,575

- of which: impaired 8,416 2,121 0 1 0 819 3,580 6,520

2. Secured off-balance-sheet credit exposures: 101,537 89 1,240 19,561 90,098

82,557 2.1 fully secured 82,549 1,240 15,815 65,502

9,137 - of which: impaired 9,140 730 8,407

7,541 2.2 partially secured 18,987 89 3,746 3,706

- of which: impaired

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B. Distribution and concentration of credit exposures

B.1 On-balance-sheet and off-balance-sheet credit exposures to customers by sector (carrying amount)

Governments Other government agencies Financial companies Insurance undertakings Non-financial companies Other Portfolio writedowns Portfolio writedowns Portfolio writedowns Portfolio writedowns Portfolio writedowns Portfolio writedowns Portfolio Specific writedowns Specific writedowns Specific writedowns Specific writedowns Specific writedowns Specific writedowns Specific

exposure Net exposure Net exposure Net exposure Net exposure Net exposure Net

A. On-balance-sheet A.1 Bad debts 144 297 384,625 299,486 14,109 6,310 A.2 Substandard loans 13 3 139 13 593,520 99,656 11,944 1,774 A.3 Restructured positions 22,589 1,168 172 25 A.4 Past due positions 35,743 3,986 750 84 A.5 Other 3,006,335 34,527 473 107,911 52 812 7,398,667 0 64,212 167,356 0 882

404,296 Total A 3,006,335 34,540 3 473 108,194 310 52 812 8,435,144 64,212 194,331 8,192 882 B. Off-balance-sheet B.1 Bad debts B.2 Substandard loans 186 700 B.3 Other impaired assets B.4 Other 56,426 34,023 731,016 1,781 14,125 TOTAL B 56,426 34,023 731,203 700 1,781 14,125

404,996 TOTAL (A + B) (31/12/2012) 3,006,335 90,966 3 473 142,217 310 52 812 9 9,166,347 65,993 208,456 8,192 882 TOTAL (A + B) (31/12/2011) 50 74,217 171 136,121 413 64 380 65 9,835,008 307,852 73,952 252,221 9,638 1,123

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B.2 On-balance-sheet and off-balance-sheet credit exposures to customers by geographical area (carrying amount)

OTHER REST ITALY EUROPEAN AMERICAS ASIA OF THE COUNTRIES WORLD

exposure Net exposure Net exposure Net exposure Net exposure Net writedowns writedowns writedowns writedowns writedowns Total Total Total Total Total

A. On-balance-sheet A.1 Bad debts 398,878 305,813 280 A.2 Substandard loans 605,616 101,446 A.3 Restructured positions 22,762 1,192 A.4 Past due positions 36,493 4,070 A.5 Other 10,677,714 65,427 25,229 119 6,788 77 5,519 358 5

TOTAL 11,741,463 477,948 25,229 119 6,788 77 5,519 - 358 284 B. Off-balance-sheet B.1 Bad debts B.2 Substandard loans 186 700 B.3 Other impaired assets B.4 Other 834,827 1,781 720 44 TOTAL 835,013 2,481 720 - - - - - 44 -

TOTAL (31/12/2012) 12,576,476 480,430 25,949 119 6,788 77 5,519 - 403 284 TOTAL (31/12/2011) 10,254,793 392,303 24,675 217 8,609 51 1,500 8,419 714

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B.3 On-balance-sheet and off-balance-sheet credit exposures to banks by geographical area (carrying amount)

OTHER REST ITALY EUROPEAN AMERICAS ASIA OF THE COUNTRIES WORLD

Net exposure Net exposure Net exposure Net exposure Net writedowns writedowns writedowns writedowns writedowns Total Total Total Total Total exposure

A. On-balance-sheet A.1 Bad debts A.2 Substandard loans A.3 Restructured positions A.4 Past due positions A.5 Other 147,478 53 12 TOTAL 147,478 53 12 B. Off-balance-sheet B.1 Bad debts B.2 Substandard loans B.3 Other impaired assets B.4 Other 62,853 5,084 350 TOTAL 62,853 5,084 350 TOTAL (31/12/2012) 210,331 5,137 362 TOTAL (31/12/2011) 301,266 23,316 1,017 11,026 2,345

B.4 Large exposures

As regards disclosures in the notes to the financial statements following the changes introduced with the 6th update of Circular 263 of December 27, 2010, the following figures refer to the most recent information available (December 31, 2011). The company has three large exposures: the units of the “Securis Real Estate” fund with a carrying amount of €196,631,716 (weighted value of €196,631,716), the exposure in government securities with a carrying amount of €3,006,285,440 (weighted value of €0) and the exposure to Iccrea Holding Group companies with a carrying amount of €158,563,150 (weighted value of €0).

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C. SECURITIZATIONS AND ASSET DISPOSALS C.1 SECURITIZATIONS Qualitative disclosures

Agrisecurities 2006 (Agri#3) On November 8, 2006 the Agri#3 securitization was finalized, with Iccrea BancaImpresa as originator. The transaction involved the assignment of future receivables in an initial portfolio of €1,150,000,000 of performing contracts, with the concomitant payment of the assignment price of €1,148,574,250 (including €23,000,000 in respect of the junior notes subscribed by Iccrea BancaImpresa).

The operation was carried out to replace the Agri#1 transaction (€520 million), for which the clean-up call option was exercised. The new operation also made it possible to broaden and diversify sources of funding, as well as extending and expanding the amount of capital freed up. The junior securities account for 2.0% of the total.

Features of the operation The transaction involved the participation of UBS Investment Bank as Sole Arranger and S.p.A., Royal and UBS Investment Bank, as Joint Bookrunners.

Securities The term of the ABSs issued as part of the securitization, which are listed on the Luxembourg stock exchange in the amount of €1,150,000,000, took effect on November 8, 2006. At that date they had the following characteristics:

Series Rating Amount Amount Expected weighted Expected (Fitch – S&P) (€/millions) (% of average life maturity total) - years 1-A1 AAA/AAA 200.0 17.39 2.07 6/2009

1-A2 AAA/AAA 823.5 71.61 4.98 6/2015

1B A/A- 103.5 9.00 6.80 6/2015

1C NR-JUNIOR 23.0 2.00 NA NA

Repayment of the securities began at the end of the revolving period, with the first amortization payment in June 2008. The 1-A1 Series and the 1-A2 Series have been fully amortized. At the end of the period under review, the ABSs issued by Agrisecurities S.r.l. as part of the third securitization, repurchased by the Bank on the secondary market, amounted to €25.6 million.

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Assigned portfolio The portfolio of performing leasing receivables was selected on the basis of criteria agreed with the Arranger and the rating agencies, in an amount equal to the value of the securities issued, broken down into four pools. At the initial assignment date, they had the following composition:

Pool Amount (€) % 1) – Industrial vehicles 93,871,969 8.16 2) – Equipment 396,133,990 34.45 3) – Real estate 613,111,098 53.31 4) – Auto 46,882,943 4.08 Total 1,150,000,000 100.00

Revolving operations were conducted on a quarterly basis (except for the first period), beginning in March 2007 and ending in March 2008 (inclusive), with five assignments of subsequent portfolios. The selection criteria for the subsequent portfolios were essentially analogous to those used for the initial portfolio. In line with other securitizations in recent years, the redemption amount was not assigned.

Repurchase option In accordance with supervisory instructions, the transaction provides for the exercise of a clean-up call where the value of the portfolio at the time of repurchase does not exceed 10% of the nominal value of the initial portfolio. In concomitance with the exercise of the repurchase option, the vehicle will carry out the early redemption of the securities.

Trigger events The trigger events envisaged in the contract are in line with market practice and consistent with the assignment of a performing portfolio.

Servicing Like the previous securitizations, servicing activities are performed by Iccrea BancaImpresa, which carries out monitoring, collection and recovery activities using the same procedures adopted for the company portfolio. The contract provides for the termination of servicer activities by Iccrea BancaImpresa and the transfer of the Servicer role to another party to be selected where Iccrea BancaImpresa should no longer be available to continue performing the role.

Credit enhancement Redemption of the notes is secured by the cash flow expected from the assigned portfolio, with no additional guarantees. The transaction makes no provision for credit derivatives to secure the transaction or for the granting of subordinated liquidity facilities. As in the previous operations, the contract provides for a Debt Service Reserve Account, which is made available by the vehicle on a quarterly basis with payments received, as well as the excess spread covering first losses.

ABI Moratorium Notice Iccrea BancaImpresa expressed its willingness to extend the suspension of debt payments announced in the ABI Moratorium Notice to include customers whose receivables were securitized. To this end, the vehicle was granted an ad hoc facility in the amount of €152 million to offset the suspension of principal payments in respect of contracts on which the suspension was granted. This willingness was subsequently extended to cover any further postponements agreed between the Ministry for the Economy and Finance, the ABI and trade associations of the deadline (by March 31, 2013 under the most recent postponement) for customers to apply to participate in the moratorium. The amount disbursed by the Bank under the facility amounted to €18.8 million at December 31, 2012.

Agricart 4 Finance 2007 (Agri#4) On November 15, 2007 the Agri#4 securitization was finalized, with Iccrea BancaImpresa as originator. The transaction involved the assignment of future receivables in an initial portfolio of €500,000,416 of performing lease contracts, with the concomitant payment of the assignment price of €498,828,800 (including €150,000,000 in respect of the A2, B and junior notes subscribed by Iccrea BancaImpresa). The operation was carried out to acquire new funding for lease financing with small and medium-sized enterprises, thereby diversifying funding sources with an attractive maturity (an expected average life of about 8.8 years). The transaction did not pursue capital objectives, as under the provisions of the relevant supervisory regulations the presence of a repurchase option for more than 10% of the total value of the assigned portfolio does not permit any reduction in capital requirements for the assignor bank.

Features of the operation The transaction involved BNP Paribas, Finanziaria Internazionale and ICCREA Banca as Arrangers and BNP Paribas as Lead Manager.

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Securities The term of the €500 million in ABSs issued as part of the securitization, which are not listed on any regulated market, took effect on November 15, 2007. At that date they had the following characteristics:

Class Rating Amount Amount Quarterly Expected Expected (Fitch) (€/millions) (%) interest rate weighted maturity average life – years A1 AAA 350.0 70.00 3ME + 0.06% 8.8 9/2016

A2 AAA 58.5 11.70 3ME + 0.35% 8.8 9/2016

B BBB 65.0 13.00 3ME + 0.50% 8.8 9/2016

Residual C NR 26.5 5.30 8.8 9/2016 remuneration

At the end of the period under review, the ABSs issued by Agricart 4 Finance S.r.l. as part of the fourth securitization, repurchased by the Bank on the secondary market, amounted to €30.0 million.

Assigned portfolio The portfolio of performing leasing receivables was selected on the basis of criteria agreed with the Arrangers and the rating agency, in an amount equal to the value of the securities issued, broken down into four pools. At the assignment date, they had the following composition:

Pool Amount (€) % 1) – Industrial vehicles 31,240,593 6.2 2) – Equipment 126,288,768 25.3 3) – Real estate 328,759,532 65.7 4) – Auto 13,711,523 2.8 Total 500,000,416 100.00

Revolving operations are conducted on a quarterly basis, with the exception of the first period, which was four months long. They began in March 2008 and will end in September 2016, with 34 assignments of subsequent portfolios. The selection criteria for the subsequent portfolios were essentially analogous to those used for the initial portfolio. In line with the previous securitization carried out in 2006 (Agri#3) and with the trend in market practice, the value of the bargain purchase option was not assigned.

Repurchase option The assignment contract gives Iccrea BancaImpresa an option for the repurchase of the entire portfolio, which can be exercised on a quarterly basis as from September 2016 as long as the purchase price of the receivables, determined in accordance with the procedures set out in the assignment contract, enables full redemption of the securities and priority payment of all expenses and Iccrea BancaImpresa has obtained the necessary authorizations pursuant to Article 58 of the Banking Act. In concomitance with the exercise of the repurchase option, the vehicle will carry out the early redemption of the securities. Iccrea BancaImpresa sold a put option to the subscriber of the entire Class A1 equal to €350,000,000, exercisable if the rating of the securities falls below “AA", if the rating of the Bank should fall below “BBB” and in the case of adverse events associated with the performance of the assigned portfolio or in the event of significant breaches of contract.

Trigger events The trigger events envisaged in the contract are in line with market practice and consistent with the assignment of a performing portfolio.

Servicing Like the previous securitizations, servicing activities are performed by Iccrea BancaImpresa, which carries out monitoring, collection and recovery activities using the same procedures adopted for the company portfolio. The contract provides for the termination of servicer activities by Iccrea BancaImpresa and the transfer of the Servicer role to another party to be selected where Iccrea BancaImpresa should no longer be available to continue performing the role.

Credit enhancement

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Redemption of the notes is secured by the cash flow expected from the assigned portfolio. For the A1 notes and a number of expenses with priority reimbursement rights, Iccrea BancaImpresa has provided a subordinated liquidity facility in the event the funds available to the vehicle are not sufficient to pay principal and interest on the securities. As in the previous operations, the contract provides for a Debt Service Reserve Account, which is made available by the vehicle on a quarterly basis with payments received, as well as the excess spread covering first losses.

ABI Moratorium Notice Iccrea BancaImpresa expressed its willingness to extend the suspension of debt payments announced in the ABI Moratorium Notice to include customers whose receivables were securitized. To this end, the vehicle was granted an ad hoc facility in the amount of €67.8 million to offset the suspension of principal payments in respect of contracts on which the suspension was granted. This willingness was subsequently extended to cover any further postponements agreed between the Ministry for the Economy and Finance, the ABI and trade associations of the deadline (by March 31, 2013 under the most recent postponement) for customers to apply to participate in the moratorium. The amount disbursed by the Bank under the facility amounted to €11.69 million AT December 31, 2012.

Agrisecurities 2008 (Agri#5) On July 30, 2008 the Agri#5 securitization was finalized, with Iccrea BancaImpresa as originator. The transaction involved the assignment of future receivables in an initial portfolio of €1,014,000,129 of performing lease contracts, with the concomitant payment of the assignment price of €1,013,900,000, which was fully offset against the subscription price due from Iccrea BancaImpresa as the subscriber of all the securities issued by the securitization.

The transaction was carried out to enable to participate directly or indirectly in funding operations with the Eurosystem, using eligible collateral for repurchase transactions with the European Central Bank. The transaction made it possible to diversify funding sources while obtaining funds on competitive terms, especially in the light of market conditions. During the year, funding repurchase transactions were carried out with the securities from the Agri#5 securitization used as the underlying asset, for a total of €2,658 million, with an impact of €2.6 million on the income statement.

Features of the operation The transaction involved UBS Ltd as Arranger.

Securities As part of the transaction, ABSs amounting to €1,014 million were issued with effect as from July 30, 2008. The securities are listed on the Irish stock exchange. At that date they had the following characteristics:

Class Rating Amount Amount Quarterly interest Expected Expected (Fitch) (€/millions) (%) rate weighted maturity average life – years A AAA/AAA 837.1 82.55 3ME + 0.35% 4.89 12/2020

B BBB/BBB- 136.35 13.45 3ME + 0.50% 8.84 12/2020 Residual C NR-JUNIOR 40.55 4.00 8.84 12/2020 remuneration

Redemption of the Class A securities began at the end of the revolving period, with the first amortization payment in March 2010.

Assigned portfolio The portfolio of performing leasing receivables was selected on the basis of criteria agreed with the Arranger and the rating agency, in an amount equal to the value of the securities issued, broken down into four pools. At the assignment date, they had the following composition:

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Pool Amount (€) % 1) – Industrial vehicles 60,890,594 6.0 2) – Equipment 333,840,448 32.9 3) – Real estate 577,696,362 57.0 4) – Auto 41,572,725 4.1 Total 1,014,000,129 100.00

Revolving operations are conducted on a quarterly basis, with the exception of the first period, which was five months long. They began on December 2008 and ended in December 2009 (inclusive), with 5 assignments of subsequent portfolios. The selection criteria for the subsequent portfolios were essentially analogous to those used for the initial portfolio. In line with the securitization carried out in 2006 and 2007 (Agri#3 and Agri#4, respectively) and with the trend in market practice, the value of the bargain purchase option was not assigned.

Repurchase option In accordance with supervisory instructions, Iccrea BancaImpresa has been granted a clean-up call option that can be exercised where: i) the value of the portfolio at the time of repurchase does not exceed 10% of the lower between the nominal value of the initial portfolio and the assignment price of the portfolio; ii) the purchase price of the receivables, equal to the sum of the residual debt in respect of performing positions and the fair value of non-performing positions, enables full redemption of the securities and priority payment of all expenses; and (iii) Iccrea BancaImpresa has obtained the necessary authorizations pursuant to Article 58 of the Banking Act. In concomitance with the exercise of the repurchase option, the vehicle will carry out the early redemption of the securities.

Trigger events The trigger events envisaged in the contract are in line with market practice and consistent with the assignment of a performing portfolio.

Servicing Like the previous securitizations, servicing activities are performed by Iccrea BancaImpresa, which will carry out monitoring, collection and recovery activities using the same procedures adopted for the company portfolio. The contract gives the vehicle the power to terminate servicer activities by Iccrea BancaImpresa and to transfer the Servicer role to another party to be selected where Iccrea BancaImpresa should be in significant breach of the provisions of the contract.

Credit enhancement Redemption of the notes is secured by the cash flow expected from the assigned portfolio, with no additional guarantees. The transaction makes no provision for credit derivatives to secure the transaction or for the granting of subordinated liquidity facilities. As in the previous operations, the contract provides for a Debt Service Reserve Account, which is made available by the vehicle on a quarterly basis with payments received, as well as the excess spread covering first losses.

ABI Moratorium Notice Iccrea BancaImpresa expressed its willingness to extend the suspension of debt payments announced in the ABI Moratorium Notice to include customers whose receivables were securitized. To this end, the vehicle was granted an ad hoc facility in the amount of €107 million to offset the suspension of principal payments in respect of contracts on which the suspension was granted. This willingness was subsequently extended to cover any further postponements agreed between the Ministry for the Economy and Finance, the ABI and trade associations of the deadline (by March 31, 2013 under the most recent postponement) for customers to apply to participate in the moratorium. The amount disbursed by the Bank under the facility amounted to €17.6 million at December 31, 2012.

Agricart 4 Finance 2009 ("Agri#6") On December 22, 2009 the Agri#6 securitization was finalized, with Iccrea BancaImpresa as originator. The transaction involved the assignment of future receivables in an initial portfolio of €500,000,730 of performing lease contracts, with the concomitant payment of the assignment price of €499,670,000 (including €173,000,000 in respect of the B (junior) notes subscribed by Iccrea BancaImpresa). The operation, in line with that carried out in 2007 through the same vehicle (Agri#4), was carried out to acquire new funding for lease financing with small and medium-sized enterprises, thereby diversifying funding sources with an attractive maturity (an expected average life of about 5.8 years). The transaction did not pursue capital objectives, as under the provisions of the relevant supervisory regulations the presence of a repurchase option for more than 10% of the total value of the assigned portfolio does not permit any reduction in capital requirements for the assignor bank.

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Features of the operation The transaction involved ICCREA Banca and JP Morgan as Arrangers.

Securities As part of the transaction, ABSs amounting to €500 million were issued with effect as from December 22, 2009. The securities are listed on the Luxembourg stock exchange. At that date they had the following characteristics:

Class Rating Amount Amount Quarterly Expected Expected (Fitch) (€/millio (%) interest rate weighted maturity ns) average life – years A AAA 327.0 65.40 3ME + 0.43% 5.8 12/2019

Residual B NR - JUNIOR 173.0 34.60 10.0 12/2019 remuneration

On July 29, 2011, the agreements were signed for the contractual amendments necessary for the assignment of a second rating to the Class A securities from S&P in order to make them eligible for refinancing operations with the European Central Bank. Redemption of the Class A securities will begin at the end of the revolving period, with the first amortization payment in March 2013.

Assigned portfolio The portfolio of performing leasing receivables was selected on the basis of criteria agreed with the Arranger and the rating agencies, in an amount essentially equal to the value of the securities issued, broken down into four pools. At the assignment date, they had the following composition:

Pool Amount (€) % 1) – Industrial vehicles 41,863,543 8.37 2) – Equipment 187,185,070 37.44 3) – Real estate 243,716,317 48.74 4) – Auto 27,235,800 5.45 Total 500,000,730 100.00

Revolving operations will be conducted on a quarterly basis, beginning in March 2010 and ending in September 2012, with 12 assignments of subsequent portfolios. The selection criteria for the subsequent portfolios were essentially analogous to those used for the initial portfolio. In line with the latest securitizations carried out by Iccrea BancaImpresa and with the trend in market practice, the value of the bargain purchase option was not assigned.

Repurchase option The assignment contract gives Iccrea BancaImpresa an option for the repurchase of the entire portfolio, which can be exercised on a quarterly basis as from September 2011 as long as the purchase price of the receivables, determined in accordance with the procedures set out in the assignment contract, enables full redemption of the securities and priority payment of all expenses and Iccrea BancaImpresa has obtained the necessary authorizations pursuant to Article 58 of the Banking Act. In concomitance with the exercise of the repurchase option, the vehicle will carry out the early redemption of the securities. Iccrea BancaImpresa sold a put option to the subscriber of the entire Class A equal to €327,000,000, exercisable if the rating of the securities falls below “AA", if the rating of the Bank should fall below “BBB” and in the case of adverse events associated with the performance of the assigned portfolio or in the event of significant breaches of contract. On August 3, 2012, the threshold level for the Bank’s rating enabling exercise of the option was reached, as the Bank was downgraded to BBB-. Nevertheless, the subscriber did not exercise that option.

Trigger events The trigger events envisaged in the contract are in line with market practice and consistent with the assignment of a performing portfolio.

Servicing

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Like the previous securitizations, servicing activities are performed by Iccrea BancaImpresa, which carries out monitoring, collection and recovery activities using the same procedures adopted for the company portfolio. The contract provides for the termination of servicer activities by Iccrea BancaImpresa and the transfer of the Servicer role to another party to be selected where Iccrea BancaImpresa should no longer be available to continue performing the role.

Credit enhancement Redemption of the notes is secured by the cash flow expected from the assigned portfolio. For the sole benefit of payments to be made with priority with respect to interest on the A notes, Iccrea BancaImpresa has provided a subordinated liquidity facility in the event the funds available to the vehicle are not sufficient to pay those expenditure items. For the sole benefit of the A notes, ICCREA Banca has provided a subordinated liquidity facility of up to €100 million in the event the funds available to the vehicle are not sufficient to pay principal and interest on the A notes themselves. As in the previous operations, the contract provides for a Debt Service Reserve Account, which is made available by the vehicle on a quarterly basis with payments received, as well as the excess spread covering first losses.

Iccrea SME Cart 2011 (Agri#7) On November 14, 2011 the Agri#7 securitization was finalized, with Iccrea BancaImpresa as originator. The transaction involved the assignment of future receivables in an initial portfolio of €599,222,394 of performing lease contracts, with the concomitant payment of the assignment price of €599,052,000 (including €311,622,000 in respect of the Z (junior) notes subscribed by Iccrea BancaImpresa). The operation, in line with those carried out in 2007 and 2009 through the vehicle Agricart 4 Finance (Agri#4 and Agri#6), was carried out to acquire new funding for lease financing with small and medium-sized enterprises, projects in the energy, environmental and corporate social responsibility field or projects undertaken by mid-caps, thereby diversifying funding sources with an attractive maturity (an expected average life of about 3.6 years). The transaction did not pursue capital objectives, as under the provisions of the relevant supervisory regulations the presence of a repurchase option for more than 10% of the total value of the assigned portfolio, as in the case of this transaction, does not permit any reduction in capital requirements for the assignor bank.

Features of the operation The transaction involved ICCREA Banca and UBS Ltd as Arrangers.

Securities As part of the transaction, ABSs amounting to about €607.7 million were issued with effect as from November 14, 2011. Class A notes are listed on the Irish stock exchange. At that date they had the following characteristics:

Class Rating Amount Amount Quarterly Expected Expected (Moody’s/DBRS) (€/millio (%) interest rate weighted maturity ns) average life – years “Aaa (sf)” / A 287.6 47.3 3ME + 2.00% 3.6 3/2017 “AAA (sf)”

B NR 8.5 1.4 3ME + 2.10% 5.3 3/2017

Residual Z NR - JUNIOR 311.622 51.3 5.3 3/2017 remuneration

Redemption of the Class A securities will begin at the end of the revolving period, with the first amortization payment in March 2014. Redemption of the Class B securities will begin in June 2013 if and to the extent the vehicle has sufficient funds solely in respect of interest to use for such purpose after having paid all costs in the priority order that must be paid before redemption can begin.

Assigned portfolio The portfolio of performing leasing receivables was selected on the basis of criteria agreed with the Arrangers and the rating agencies, in the amount of about €599.2 million, broken down into four pools. At the assignment date, they had the following composition:

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Pool Amount (€) % 1) – Industrial vehicles 26,417,190 4.41 2) – Equipment 160,019,212 26.70 3) – Real estate 380,660,754 63.53 4) – Auto 32,125,238 5.36 Total 599,222,394 100.00

Revolving operations will be conducted on a quarterly basis, with the exception of the first period of about 4 months, beginning in March 2012 and ending in December 2013, with 8 assignments of subsequent portfolios. The selection criteria for the subsequent portfolios were essentially analogous to those used for the initial portfolio. In line with the latest securitizations carried out by Iccrea BancaImpresa and with the trend in market practice, the value of the bargain purchase option was not assigned.

Repurchase option The assignment contract gives Iccrea BancaImpresa an option for the repurchase of the entire portfolio, which can be exercised on a quarterly basis as from March 2014 as long as the purchase price of the receivables, determined in accordance with the procedures set out in the assignment contract, enables full redemption of the securities and priority payment of all expenses and Iccrea BancaImpresa has obtained the necessary authorizations pursuant to Article 58 of the Banking Act. In concomitance with the exercise of the repurchase option, the vehicle will carry out the early redemption of the securities. Iccrea BancaImpresa sold a put option to the subscriber of the entire Class A equal to €287,600,0000, exercisable if the rating of the securities falls below “Aa1, if the rating of the Bank should fall below “BBB/Baa3” and in the case of adverse events associated with the performance of the assigned portfolio or in the event of significant breaches of contract. On February 21, 2012, the rating level of the Class A securities reached the threshold allowing exercise by the subscriber as the securities were downgraded to Aa2 (subsequently lowered to A2), while on May 14, 2012, the threshold level for the Bank’s rating enabling exercise of the option was also reached, as the Bank was downgraded to Ba1. Despite these developments, the subscriber did not exercise the option

Trigger events The trigger events envisaged in the contract are in line with market practice and consistent with the assignment of a performing portfolio. During the year the operation was renegotiated, making it possible to manage the trigger events connected with the downgrade of the Bank by Moody’s. Under the terms of the renegotiation, the rating thresholds associated with the termination of revolving operations were modified and the Bank, in its capacity of Servicer, made a deposit of €5.1 million in favor of the vehicle as an alternative to the requirement to notify the assigned debtors to make a direct payment on an account in the name of the vehicle.

Servicing Like the previous securitizations, servicing activities are performed by Iccrea BancaImpresa, which carries out monitoring, collection and recovery activities using the same procedures adopted for the company portfolio. The contract provides for the termination of servicer activities by Iccrea BancaImpresa and the transfer of the Servicer role to another party to be selected where Iccrea BancaImpresa should no longer be available to continue performing the role.

Credit enhancement Redemption of the notes is secured by the cash flow expected from the assigned portfolio. For the sole benefit of payments to be made with priority with respect to interest on the A notes, Iccrea BancaImpresa has provided a subordinated liquidity facility of up to €500,000 in the event the funds available to the vehicle are not sufficient to pay those expenditure items. For the sole benefit of the A notes, ICCREA Banca has provided a subordinated liquidity facility of up to €100 million in the event the funds available to the vehicle are not sufficient to pay principal and interest on the A notes themselves. As in the previous operations, the contract provides for the excess spread covering first losses and a Debt Service Reserve, which is made available by the vehicle on a quarterly basis in the amount of €5 million with payments received and in the amount of €8.5 million from the proceeds of the subscription of the Class B notes by Iccrea BancaImpresa.

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C. Securitizations and asset disposals C.1 SECURITIZATIONS

C.1.1 Exposures in respect of securitizations by quality of securitized assets

On-balance-sheet exposures Guarantees issued Credit lines

Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Gross Gross Gross Gross exposure Gross Gross exposure Gross exposure Gross exposure Gross exposure Gross exposure Gross Netexposure Netexposure Netexposure Netexposure Netexposure Netexposure Net Net Net exposure Net exposure

exposure

exposure exposure exposure

A. With own underlying assets: 30,000 30,000 157,617 157,617 534,122 534,122 a) impaired b) other 30,000 30,000 157,617 157,617 534,122 534,122 B. With third-party underlying assets: a) impaired b) other

The table reports exposures assumed by the Bank in respect of its own securitizations in which the assigned assets were retained on the balance sheet in their entirety as they do not qualify for derecognition pursuant to IAS 39 . The exposure is equal to the retained risk measured as the difference between the assigned assets and the corresponding liabilities as of the balance sheet date.

The exposure in respect of the Agri5 securitization, in which the Bank, as Originator, subscribed all the ABSs issued by the vehicle Agrisecurities S.r.l. at issue, has not been recognized.

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C.1.2 Exposures in respect of main own securitizations by type of securitized assets and type of exposure

On-balance-sheet exposures Guarantees issued Credit lines

Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying

A. Fully derecognized A.1 name of securitization 1 – type of assets A.2 name of securitization 2 – type of assets A.3 name of securitization … – type of assets B. Partially derecognized

B.1 name of securitization 1 – type of assets B.2 name of securitization 2 – type of assets B.3 name of securitization … – type of assets C. Not derecognized 30,000 157,617 534,122 C.1 AGRI 2 25,617 23,000 – Lease receivables 25,617 23,000 C.2 AGRI 3 30,000 123,500 26,500 – Lease receivables 30,000 123,500 26,500 C.3 AGRI 4 173,000 – Lease receivables 173,000 C.4 AGRI 6 8,500 311,622 – Lease receivables 8,500 311,622

The table reports the exposure of the Bank in respect of each of its own securitizations, also indicating the contractual form of the assets assigned. As indicated in the note to table C.1.1. above, the notes issued as part of the AGRI5 securitization were fully subscribed. Accordingly, the exposures assumed by the Bank are not reported in the table.

177

C.1.3 Exposures in respect of main third-party securitizations by type of securitized assets and type of exposure

On-balance-sheet exposures Guarantees issued Credit lines

Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Writedowns/Writebacks Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying amount Carrying

A.1 Credito funding 3 srl 34,345 – Loans & receivables A.2 Name of securitization … – type of assets A.3 Name of securitization … – type of assets

C.1.4 Exposures in respect of securitizations by portfolio and type

Financial assets Financial assets Financial assets available for Financial assets Loans & receivables Total Total held for trading at fair value trade held to maturity 31/12/2012 31/12/2011 1. On-balance-sheet exposures 34,345 34,345 0 - senior 34,345 34,345 0 - mezzanine - junior

178

C.1.5 Total amount of securitized assets underlying junior securities or other forms of credit support

Traditional Synthetic

securitizations securitizations

A. Own underlying assets: 721,739 A.1 Fully derecognized 1. Bad debts 2. Substandard loans 3. Restructured positions 4. Past due positions 5. Other assets A.2 Partially derecognized 1. Bad debts 2. Substandard loans 3. Restructured positions 4. Past due positions 5. Other assets A.3 Not derecognized 721,739 1. Bad debts 16,955 2. Substandard loans 29,752 3. Restructured positions 113 4. Past due positions 3,560 5. Other assets 671,359 B. Third-party underlying assets: B.1 Bad debts B.2 Substandard loans B.3 Restructured positions B.4 Past due positions B.5 Other assets

The table reports, in proportion to the securities subscribed, the amount of the securitized portfolio at the balance sheet date, broken down by the quality of the securitized assets.

As in the previous tables, this table does not report the exposure in respect of the Agri5 securitization, in which the Bank, as Originator, subscribed all the ABSs issued by Agrisecurities S.r.l. at issue.

C.1.6 Involvement in special purpose vehicle

The Bank has no involvement in the special purpose vehicles Agrisecurities S.r.l. and Agricart 4 Finance S.r.l.

179

C.1.7 Servicer activities - collections on securitized assets and redemption of securities issued by vehicle

Securitized assets Collections % of securities redeemed in the year (end-period figure)

Senior Mezzanine Junior

Impaired Performing Impaired Performing Impaired Performing Impaired Performing Impaired Performing

AGRI 3 - AGRISECURITIES S.r.l. 34,011 142,104 9,714 89,684 100% 5.12% AGRI 4 - AGRICART 4 FINANCE S.r.l. 35,107 480,449 12,663 101,247 AGRI 6 - AGRICART 4 FINANCE S.r.l. 15,034 477,130 3,646 161,699 AGRI 7 - ICCREA SME CART SRL 7,551 582,135 4,187 166,199 Total 91,703 1,681,818 30,210 518,829

180

C.2.1 Financial assets assigned but not derecognized: carrying amounts and full values

Financial assets held Financial assets Financial assets available Financial assets held Loans to banks Loans to customers Total for trading at fair value for sale to maturity

A B C A B C A B C A B C A B C A B C 31/12/2012 31/12/2011

A. On-balance-sheet assets 3,006,285 1,773,522 4,779,807 1,873,000 1. Debt securities 3,006,285 3,006,285 2. Equity securities 3. Units in collective investment undertakings 4. Loans 1,773,522 1,773,522 1,873,000 B. Derivatives Total (31/12/2012) 3,006,285 1,773,522 4,779,807 of which: impaired 92,837 92,837 Total (31/12/2011) 1,873,000 1,873,000 of which: impaired 83,443 83,443

Key:

A= Assigned financial assets fully recognized (carrying amount)

B= Assigned financial assets partially recognized (carrying amount)

C=Assigned financial assets partially recognized (full value)

181

C.2.2 Financial liabilities in respect of financial assets assigned but not derecognized: carrying amounts

Financial assets Financial Financial Financial Loans held for assets Loans assets assets held to Total trading available for to banks at fair value to maturity customers sale

1. Due to customers 1,004,538 1,004,538 a) in respect of assets fully recognized 1,004,538 1,004,538 b) in respect of assets partially recognized 2. Due to banks 2,994,281 2,994,281 a) in respect of assets fully recognized 2,994,281 2,994,281 b) in respect of assets partially recognized Total (31/12/2012) 2,994,281 1,004,538 3,998,819 Total (31/12/2011) 0 1,446,086 1,446,086

Amounts due to banks regard repurchase agreements involving securities classified as financial assets held to maturity.

C.2.3 Disposals involving liabilities with recourse only on divested assets: fair value

Financial assets Financial Financial Loans Financial Loans held for assets assets held to assets to banks Total trading available for to maturity customers at fair value (fair value) sale (fair value) (fair value)

A. On-balance-sheet assets 176,115 176,115 1. Debt securities 2. Equity securities 3. Units in collective investment undertakings 4. Loans 176,115 176,115 B. Derivatives Total assets 176,115 176,115 C. Associated liabilities 72,366 72,366 1. Due to customers 72,366 72,366 2. Due to banks 3. Securities issued Total liabilities 72,366 72,366 Net value (31/12/2012) 103,749 103,749 Net value (31/12/2011)

182

D. MODELS FOR MEASURING CREDIT RISK

183

SECTION 2 MARKET RISKS

Iccrea BancaImpresa’s finance operations are directed at supporting its lending activities by raising adequate funds, seeking both to minimize the cost of funding, contain liquidity, interest-rate and exchange-rate risks, maintain an appropriate correlation indexing mechanisms and the maturity of assets and liabilities and comply with the limits established by supervisory or internal Group regulations.

Appropriate financial management is therefore based on the three-year planning of funding needs, in relation to forecast developments in lending and funding costs; the definition of the annual funding requirement, which is used to prepare the company and Group Funding Plan; the periodic review of the funding requirement; the definition and periodic review of limits on exposures to interest and exchange rate risk; the systemic monitoring of the financial position and compliance with risk exposure limits. Asset & Liability Management techniques are used to support decision-making processes and to monitor and measure the equilibrium of the structure of the Bank's assets and liabilities.

In order to further strengthen operating activities and internal control with regard to managing and monitoring market risks, the Bank has established a committee that, in addition to performing coordination and control duties, also provides support to decision-making bodies in assessing the characteristics and risks associated with individual innovative transactions and new products; It also supplies the data, analysis and assessments needed for rational decision-making by the bodies responsible for financial transactions.

2.1 INTEREST RATE RISK AND PRICE RISK – SUPERVISORY TRADING BOOK

Qualitative disclosures

A. General aspects

The trading book comprises plain vanilla interest rate derivatives, mainly interest rate swaps. These transactions are mainly linked to the transformation of indexing mechanisms on funding operations. The overall market risk that can be assumed under the trading book, measured in accordance with supervisory regulations, is subject to a stringent ceiling calculated as a percentage of Tier 1 capital as reported in the most recently approved annual or interim financial statements. The trading book also includes derivatives on interest rates entered into with customers in respect of lease contracts and mortgage loans. These transactions are matched against corresponding contracts with Iccrea Banca.

Within the framework of the system of internal limits, equity risk is highly contained.

B. Management and measurement of interest rate risk and price risk

Within the organizational structure of Iccrea BancaImpresa, the Finance and Derivatives Department is responsible for minimizing market risk in conformity with the strategic objectives of the Bank and in collaboration with the Group-level coordinating bodies.

The Group Risk Management function is responsible for monitoring the risk profile of positions in the trading book, using metrics in line with market best practices: sensitivity analysis, estimation of value at risk and stress testing. The monitoring of operational limits provides for the measurement and systematic control of exposures in the various portfolios and verification of the limits on VaR and other in-house operating restrictions.

184

QUANTITATIVE DISCLOSURES

1. Supervisory trading book: distribution by residual maturity (repricing date) of on-balance-sheet financial assets and liabilities and financial derivatives

More More than than Up to 3 More than More than On 6 More than Unspecified 3 months 1 year to 5 years to demand months 10 years maturity months to 5 years 10 years to 6 1 year months 1. On-balance-sheet assets 415 1.1 Debt securities - with early redemption option - other 1.2 Other assets 415 2. On-balance-sheet liabilities 2.1 Repurchase agreements 2.2 Other liabilities 3. Financial derivatives 169,972 750,820 711,782 854,246 8,025,138 9,884,664 2,539,466 3.1 With underlying security - Options + long positions + short positions - Other derivatives + long positions + short positions 3.2 Without underlying security 169,972 750,820 711,782 854,246 8,025,138 9,884,664 2,539,466 - Options 168,014 234,428 420,382 773,914 7,646,106 9,640,750 2,392,800 + long positions 84,007 117,214 210,191 386,957 3,823,053 4,820,375 1,196,400 + short positions 84,007 117,214 210,191 386,957 3,823,053 4,820,375 1,196,400 - Other derivatives 1,958 516,392 291,400 80,332 379,032 243,914 146,666 + long positions 979 258,196 145,700 40,166 189,516 121,957 73,333 + short positions 979 258,196 145,700 40,166 189,516 121,957 73,333

2. Supervisory trading book: distribution of exposures in equity securities and equity indices by main countries of listing

There were no such positions as of the balance sheet date.

3. Supervisory trading book: internal models and other sensitivity analysis methodologies

With regard to interest rate risk, the table has not been completed because there were no such positions as of the balance sheet. Operations in derivatives in respect of lease transactions or loans with customers were perfectly offset, while the remaining derivatives were traded for hedging purposes.

With regard to price risk, the table has not been completed because there were no such positions as of the balance sheet date.

185

2.2 INTEREST RATE RISK AND PRICE RISK – BANKING BOOK QUALITATIVE DISCLOSURES

A. General aspects, management and measurement of interest rate risk and price risk

The Bank’s operations are mainly at medium and long term, organized on the basis of annual and three-year programs. Funding in the market is carried out with a view to minimizing the cost of funds in a manner compatible with prudent risk management while correlating the maturity structure of assets and liabilities.

In this regard, in monitoring market developments, structured funding solutions are accompanied by strict hedging of the composite risk factors (mainly equity risk) in order to identify exposures exclusively associated with interest rate risk.

In the reporting generated through the company ALM system, the Risk Management & Group ALM function includes position information and risk data for the banking book. Attention is paid to basis risk in respect of differences in the timing of the repricing of indexed assets and liabilities and/or differences in the parameters used for indexing assets and liabilities. The exposure to basis risk is measured by analyzing the repricing gap and monitored using a specific limit.

In its monitoring activity, the Risk Management & Group ALM function uses sensitivity analyses of net interest income and economic value in response to different scenarios of changes in the yield curve. In particular, as regards the sensitivity analyses associated with changes in market rates, limits were set on the prospective change in net interest at 12 months and on the market value of the Bank's equity. Both limits are calculated on the basis of a parallel shift of +/- 100 basis points in the yield curve. In addition, stress tests are conducted to identify events or factors that could have a severe impact on the Bank's financial equilibrium. In order to capture the specific features of its portfolio, the Bank identified highly adverse stress situations: more specifically, the Bank used a combination of the stress tests specified by the Bank of Italy with those developed internally in relation to its own risk characteristics.

The risk in respect of fixed-rate positions is hedged using bond funding or derivatives on interest rates.

The overall exposure to interest rate risk is concentrated in euro-denominated transactions, and therefore the correlation effects between developments in the yield curves of other currency areas are marginal.

B. Fair value hedging

Positions exposed to interest rate risk are hedged in accordance with the IAS rules for fair value hedges.

At December 31, 2012, the effectiveness tests for the loan portfolio were carried out using the Volatility Risk Reduction Method (VRR) for the macro-hedge of assets totaling €173 million. On the liability side, the effectiveness tests were performed using the dollar-offset method for individual Iccrea BancaImpresa bond issues in euros for a total of €303.2 million.

The Bank also entered into 5 swap transactions to hedge specific credit operations (public-sector leases) which is tested for effectiveness using the dollar-offset method, in the total amount of €10.5 million.

C. Cash flow hedging

Since 2009 a portfolio of derivatives was established to hedge floating-rate loans using the Volatility Risk Reduction Method. At December 31, 2012, the hedged portfolio of loans amounted to €291 million.

186

QUANTITATIVE DISCLOSURES

1. Banking book: distribution of financial assets and liabilities by residual maturity (repricing date) - currency: euro

More than More than More than More than Up to 3 months 6 months More than Unspecified On demand 1 year to 5 years to 3 months to to 10 years maturity 5 years 10 years 6 months 1 year

1. On-balance-sheet assets 2,844,947 2,123,165 3,263,430 989,634 2,384,290 166,212 98,521 1.1 Debt securities 0 34,345 92,891 916,756 1,996,639 0 0 - with early redemption option 0 0 0 0 0 0 0 - other 0 34,345 92,891 916,756 1,996,639 0 0 1.2 Loans to banks 110,446 13,214 14,018 440 3,457 3,186 2,781 1.3 Loans to customers 2,734,502 2,075,606 3,156,521 72,439 384,193 163,025 95,740 - current accounts 408,093 0 0 0 42,485 46,366 0 - other loans 2,326,409 2,075,606 3,156,521 72,439 341,709 116,660 95,740 - with early redemption option 1,258,283 127,395 50,006 20,507 145,989 12,160 5,041 - other 1,068,126 1,948,211 3,106,516 51,932 195,720 104,499 90,698 2. On-balance-sheet liabilities 1,796,727 5,962,887 535,269 917,208 3,004,066 5,859 8,402 2.1 Due to customers 1,008,443 2,076 330,128 1,874 12,343 5,859 8,402 - current accounts - other payables 1,008,443 2,076 330,128 1,874 12,343 5,859 8,402 - with early redemption option 0 0 0 0 0 0 0 - other 1,008,443 2,076 330,128 1,874 12,343 5,859 8,402 2.2 Due to banks 462,092 2,367,830 95,484 912,253 1,992,974 0 0 - current accounts 14,648 0 0 0 0 0 0 - other payables 447,444 2,367,830 95,484 912,253 1,992,974 0 0 2.3 Debt securities 326,191 3,592,981 109,657 3,081 998,749 0 0 - with early redemption option - other 326,191 3,491,649 109,657 3,081 998,749 0 0 2.4 Other liabilities 0 101,332 0 0 0 0 0 - with early redemption option 101,332 - other 0 0 0 0 0 0 0 3. Financial derivatives 10,508 8,413,817 30,233 570,806 156,704 67,762 128,872 3.1 With underlying security 0 0 0 0 0 0 0 - Options + long positions 0 0 0 0 0 0 0 + short positions 0 0 0 0 0 0 0 - Other derivatives 0 0 0 0 0 0 0 + long positions 0 0 0 0 0 0 0 + short position 0 0 0 0 0 0 0 3.2 Without underlying security 10,508 8,413,817 30,233 570,806 156,704 67,762 128,872 - Options 0 6,242 0 0 0 0 6,242 + long positions 0 3,121 0 0 0 0 3,121 + short positions 0 3,121 0 0 0 0 3,121 - Other derivatives 10,508 8,407,576 30,233 570,806 156,704 67,762 128,872 + long positions 10,508 4,535,875 8,782 13,759 97,914 13,400 5,992 + short positions 0 3,871,701 21,451 557,048 58,789 54,362 122,879 4. Other off-balance-sheet transactions 776,515 24,411 43,994 40,126 6,887 879 0 + long positions 289,928 24,411 43,994 40,126 6,887 879 0 + short positions 486,587 0 0 0 0 0 0

187

1. Banking book: distribution of financial assets and liabilities by residual maturity (repricing date) - currency: US dollar

More than More than More than More than Up to 3 months 6 months More than Unspecifie On demand 1 year to 5 years to 3 months to to 10 years d maturity 5 years 10 years 6 months 1 year

1. On-balance-sheet assets 19,229 1.1 Debt securities - with early redemption option - other 1.2 Loans to banks 1.3 Loans to customers 19,229 - current accounts - other loans 19,229 - with early redemption option - other 19,229 2. On-balance-sheet liabilities 18,957 2.1 Due to customers - current accounts - other payables - with early redemption option - other 2.2 Due to banks 18,957 - current accounts - other payables 18,957 2.3 Debt securities - with early redemption option - other 2.4 Other liabilities - with early redemption option

- other 3. Financial derivatives 3.1 With underlying security - Options + long positions + short positions - Other derivatives + long positions + short position 3.2 Without underlying security - Options + long positions + short positions - Other derivatives + long positions + short positions 4. Other off-balance-sheet transactions + long positions + short positions

188

1. Banking book: distribution of financial assets and liabilities by residual maturity (repricing date) - currency: yen

More than More than More than More than Up to 3 months 6 months More than Unspecifie On demand 1 year to 5 years to 3 months to to 10 years d maturity 5 years 10 years 6 months 1 year

1. On-balance-sheet assets 62 4,440 1 1.1 Debt securities - with early redemption option - other 1.2 Loans to banks 1.3 Loans to customers 62 4,440 1 - current accounts - other loans 62 4,440 1 - with early redemption option - other 62 4,440 1 2. On-balance-sheet liabilities 4,378 2.1 Due to customers - current accounts - other payables - with early redemption option - other 2.2 Due to banks 4,378 - current accounts - other payables 4,378 2.3 Debt securities - with early redemption option - other 2.4 Other liabilities - with early redemption option

- other 3. Financial derivatives 3.1 With underlying security - Options + long positions + short positions - Other derivatives + long positions + short position 3.2 Without underlying security - Options + long positions + short positions - Other derivatives + long positions + short positions 4. Other off-balance-sheet transactions + long positions + short positions

189

1. Banking book: distribution of financial assets and liabilities by residual maturity (repricing date) - currency: Swiss franc

More than More than More than More than Up to 3 months 6 months More than Unspecifie On demand 1 year to 5 years to 3 months to to 10 years d maturity 5 years 10 years 6 months 1 year

1. On-balance-sheet assets 44 7,110 1.1 Debt securities - with early redemption option - other 1.2 Loans to banks 1.3 Loans to customers 44 7,110 - current accounts - other loans 44 7,110 - with early redemption option - other 44 7,110 2. On-balance-sheet liabilities 7,051 2.1 Due to customers - current accounts - other payables - with early redemption option - other 2.2 Due to banks 7,051 - current accounts - other payables 7,051 2.3 Debt securities - with early redemption option - other 2.4 Other liabilities - with early redemption option

- other 3. Financial derivatives 3.1 With underlying security - Options + long positions + short positions - Other derivatives + long positions + short position 3.2 Without underlying security - Options + long positions + short positions - Other derivatives + long positions + short positions 4. Other off-balance-sheet transactions + long positions + short positions

190

2. Banking book: internal models and other sensitivity analysis methodologies

With regard to interest rate risk on the banking book, the following table reports the results of the sensitivity analysis of the impact on prospective net interest income at 1 year of a +/- 100 b.p. shift in the yield curve for the currencies in the position.

Impatto sul margine di interesse Impatto sul risultato di esercizio Impatto sul patrimonio netto

+ 100 bp - 100 bp + 100 bp - 100 bp + 100 bp - 100 bp Iccrea BancaImpresa - 39.33 + 13.60 - 26.33 + 9.10 - 3.04 + 1.05

Figures in millions of euros at December 31, 2012

Impatto sul margine di interesse Impatto sul risultato di esercizio Impatto sul patrimonio netto

+ 100 bp - 100 bp + 100 bp - 100 bp + 100 bp - 100 bp Iccrea BancaImpresa - 21.31 + 35.71 - 14.27 + 23.90 - 1.61 + 2.70

Figures in millions of euros at December 31, 2011 Compared with December 31, 2011, the differences in the sensitivity analysis at December 31, 2012, are attributable to the decline in interest rates, which for 3-month Euribor amounted to about 115 basis points, with a primary impact on the level of the minimum rates in the lease contracts (floors and rounding).

With regard to price risk, the table has not been completed because there were no such positions as of the balance sheet date.

191

2.3 EXCHANGE RATE RISK

Qualitative disclosures

A. General aspects, management and measurement of exchange rate risk

The Bank’s operations are conducted largely in euros. Transactions denominated in other currencies are of marginal significance.

B. Exchange rate risk hedging

The Bank ensures that positions in currencies other than the euro are constantly offset.

192

QUANTITATIVE DISCLOSURES

1. Distribution by currency of assets, liabilities and derivatives

Currency

Pound Canadian US dollar Yen Swiss franc Other sterling dollar

A. Financial assets 19,135 4,483 7,132

A.1 Debt securities

A.2 Equity securities

A.3 Loans to banks

A.4 Loans to customers 19,135 4,483 7,132

A.5 Other financial assets

B. Other assets

C. Financial liabilities 18,957 4,378 7,051

C.1 Due to banks 18,957 4,378 7,051

C.2 Due to customers

C.3 Debt securities

C.4 Other financial liabilities

D. Other liabilities 47

E. Financial derivatives

- Options

+ long positions

+ short positions

- Other derivatives

+ long positions

+ short positions

Total assets 19,135 4,483 7,132

Total liabilities 19,004 4,378 7,051

Difference (+/-) 131 104 81

193

2.4 Derivatives

A. Financial derivatives

A.1 Supervisory trading book: end-period and average notional amounts

Total 31/12/2012 Total 31/12/2011

Over the Central Over the Central counter counterparties counter counterparties

1. Debt securities and interest rates 1,792,981 1,636,592 a) Options 963,134 937,967 b) Swaps 829,847 698,625 c) Forwards d) Futures e) Other 2. Equity securities and equity indices a) Options b) Swaps c) Forwards d) Futures e) Other 3. Foreign currencies and gold a) Options b) Swaps c) Forwards d) Futures e) Other 4. Commodities 5. Other underlyings Total 1,792,981 1,636,592 Average values 1,714,787 1,430,421

194

A.2 Banking book: end-period and average notional amounts

A.2.1 Hedging

Total 31/12/2012 Total 31/12/2011

Over the Central Over the Central counter counterparties counter counterparties

1. Debt securities and interest rates 777,358 878,024 a) Options b) Swaps 777,358 878,024 c) Forwards d) Futures e) Other 2. Equity securities and equity indices a) Options b) Swaps c) Forwards d) Futures e) Other 3. Foreign currencies and gold a) Options b) Swaps c) Forwards d) Futures e) Other 4. Commodities 5. Other underlyings Total 777,358 878,024 Average values 827,691 1,643,087

195

A.2.2 Other derivatives

Total 31/12/2012 Total 31/12/2011

Over the Central Over the Central counter counterparties counter counterparties

1. Debt securities and interest rates 3,484,552 4,284,855 a) Options 49,935 2,187 b) Swaps 3,434,617 4,282,668 c) Forwards d) Futures e) Other 2. Equity securities and equity indices a) Options b) Swaps c) Forwards d) Futures e) Other 3. Foreign currencies and gold a) Options b) Swaps c) Forwards d) Futures e) Other 4. Commodities 5. Other underlyings Total 3,484,552 4,284,855 Average values 3,884,703 4,219,822

196

A.3 Financial derivatives: gross positive fair value - breakdown by product

Positive fair value

Total 31/12/2012 Total 31/12/2011

Over the Central Over the Central counter counterparties counter counterparties

A. Supervisory trading book 38,343 28,331 a) Options 3,719 7,848 b) Interest rate swaps 34,624 20,483 c) Cross currency swaps d) Equity swaps e) Forwards f) Futures g) Other B. Banking book – hedging 10,561 10,326 a) Options b) Interest rate swaps 10,561 10,326 c) Cross currency swaps d) Equity swaps e) Forwards f) Futures g) Other C. Banking book – Other derivatives 7,898 9,895 a) Options 927 1,902 b) Interest rate swaps 6971 7,993 c) Cross currency swaps d) Equity swaps e) Forwards f) Futures g) Other Total 56,802 48,552

197

A.4 Financial derivatives: gross negative fair value – breakdown by product

Negative fair value

Total 31/12/2012 Total 31/12/2011

Over the Central Over the Central counter counterparties counter counterparties

A. Supervisory trading book 39,707 29,227 a) Options 3,719 7,848 b) Interest rate swaps 35,988 21,379 c) Cross currency swaps d) Equity swaps e) Forwards f) Futures g) Other B. Banking book – hedging 32,051 29,805 a) Options b) Interest rate swaps 32,051 29,805 c) Cross currency swaps d) Equity swaps e) Forwards f) Futures g) Other C. Banking book – Other derivatives 7,313 8,234 a) Options 927 1,902 b) Interest rate swaps 6,386 6,332 c) Cross currency swaps d) Equity swaps e) Forwards f) Futures g) Other Total 79,072 67,266

198

A.5 Over-the-counter financial derivatives – supervisory trading book: notional values, gross positive and negative fair values by counterparty - contracts not covered by netting arrangements

Other government agencies Other government Non Insurance undertakings Financial companies Financial Governments and Governments - financial companies financial central banks central Banks Other

1) Debt securities and interest rates 940,138 1,550 935,547 1,675 - notional value 896,490 1,536 893,354 1,600 - positive fair value 3,292 7 34,983 60 - negative fair value 36,416 3,287 5 - future exposure 3,940 7 3,923 10 2) Equity securities and equity indices - notional value - positive fair value - negative fair value - future exposure 3) Foreign currencies and gold - notional value - positive fair value - negative fair value - future exposure 4) Other assets - notional value - positive fair value - negative fair value - future exposure

A.6 Over-the-counter financial derivatives – supervisory trading book: notional values, gross positive and negative fair values by counterparty - contracts covered by netting arrangements

There were no such positions as of the balance sheet date.

199

A.7 Over-the-counter financial derivatives – banking book: notional values, gross positive and negative fair values by counterparty - contracts not covered by netting arrangements

Other government agencies Other government Non Insurance undertakings Financial companies Financial Governments and Governments - financial financial central banks central Banks Other

companies

1) Debt securities and interest rates 3,828,478 - notional value 3,770,654 - positive fair value 18,459 - negative fair value 39,365 - future exposure 2) Equity securities and equity indices - notional value - positive fair value - negative fair value - future exposure 3) Foreign currencies and gold - notional value - positive fair value - negative fair value - future exposure 4) Other assets - notional value - positive fair value - negative fair value - future exposure

A.8 Over-the-counter financial derivatives – banking book: notional values, gross positive and negative fair values by counterparty - contracts covered by netting arrangements

There were no such positions as of the balance sheet date.

200

A.9 Residual life of over-the-counter financial derivatives: notional values

More than Up to More than 5 1 year and Total 1 year years up to 5 years

A. Supervisory trading book 93,824 639,905 1,059,252 1,792,981 A.1 Financial derivatives on debt securities and interest rates 93,824 639,905 1,059,252 1,792,981 A.2 Financial derivatives on equity securities and equity indices A.3 Financial derivatives on exchange rates and gold A.4 Financial derivatives on other assets B. Banking book 3,895,808 143,233 222,869 4,261,910 B.1 Financial derivatives on debt securities and interest rates 3,895,808 143,233 222,869 4,261,910 B.2 Financial derivatives on equity securities and equity indices B.3 Financial derivatives on exchange rates and gold B.4 Financial derivatives on other assets Total 31/12/2012 3,989,632 783,138 1,282,121 6,054,891 Total 3112/2011 4,274,948 1,311,580 1,212,942 6,799,470

201

B. CREDIT DERIVATIVES

There were no credit derivatives outstanding at the reporting date.

C. FINANCIAL AND CREDIT DERIVATIVES

C.1 Over-the-counter financial and credit derivatives: net fair value and future exposure by counterparty

There were no such positions as of the balance sheet date.

202

SECTION 3 – LIQUIDITY RISK QUALITATIVE DISCLOSURES

A. General aspects, management and measurement of liquidity risk

Liquidity risk is defined as the risk that the Bank will not be able to fulfill its obligations at maturity (see Circular no. 263, Title III, Chapter 1, Annex D). The Iccrea Group does not hold internal capital against liquidity risk, but has developed and implemented a series of policies and tools that allow it to control such risk appropriately. In compliance with the provisions of the 4th update of Circular no. 263/2006 of December 13, 2010, with which the Bank of Italy transposed into Italian law the changes introduced by Directive 2006/48/EC on the capital adequacy of banks and investment firms concerning the governance and management of liquidity risk for banks and banking groups, the Bank has updated its rules for managing liquidity risk and modified its system of delegated powers to incorporate the specified indicators and limits.

The main changes regard the formalization by the Board of Directors: • of the liquidity risk tolerance threshold, represented by the maximum exposure considered sustainable in both normal operating conditions and under stress conditions. The tolerance threshold is explicated by way of: o two indicators for the short and medium/long term respectively, at the consolidated level for the Group and the individual level solely for Iccrea Banca, which is responsible for operational management of liquidity risk. The indicators adopted are those envisaged under the new Basel 3 rules: LCR and NSFR. For the short-term indicator, the limit is set at 1.2 in the baseline scenario and 1.0 in the stress scenario. For the medium/long-term indicator, there is a single limit of 0.8; o the minimum survival period, which is the number of consecutive days in which liquidity reserves must exceed the sum of net negative cash flows. The minimum level for this indicator has been set at 30 days at the consolidated level; o an increase in the minimum liquidity buffer from €1 billion to €1.5 billion, specifying first and second line reserves; • of a new operational indicator for the Finance unit of Iccrea Banca, which is measured using a minimum survival period at the individual level; • of two new systemic risk monitoring indicators as part of the Contingency Funding Plan; • of criteria for the determination of intercompany transfer rates in order to take account of systemic risk, issuer risk, interest rate risk, the maturity of loans and the direct and indirect costs of funding; • of the extension of the scope of application of the rules to Banca Sviluppo; • of methodologies for determining the aggregates and for calculating the indicators included in the technical annexes that are an integral part of the liquidity policy.

A system of limits has been established as the main instrument for mitigating liquidity risk. It is made up of indicators for monitoring sources of vulnerability associated with liquidity risk in line with the tolerance threshold and commensurate with the nature, objectives and operational complexity of the Group and Iccrea Banca. The overall system of limits is based on the following limit categories: • Risk Appetite Limits, which represent the maximum exposure considered sustainable in both normal operating conditions and under stress conditions; these limits explicate the tolerance threshold, the specification of which is required under supervisory regulations; • Management Operational Limits, which represent the “operational” implementation of the strategic decisions taken by the Board; • Warning Limits, which represent the value or assessment of an indicator that enables prompt warning that an operational limit is being approached. Breach of this threshold activates a situation of heightened attention but does not necessarily dictate action to return the position below the threshold.

Since October 2008, the liquidity position at the consolidated level has been subject to specific weekly reporting requirements for the Bank of Italy.

Liquidity risk is measured by identifying cash imbalances by maturity band, both in static terms (with a view to identifying actual liquidity strains seen from the characteristics of the account items, through the construction, for each specified time band, of the corresponding gap indicator) and in dynamic terms (using estimation and simulation techniques, aiming to develop the most likely scenarios following changes in the financial variables that can impact the time profile of liquidity).

Measurement and monitoring of the limits and indicators at the individual and overall Group level for short- term and structural liquidity are performed by the Group Risk Management unit, which on a daily basis monitors the indicators, the risk appetite limits, the individual management operational limits for Iccrea Banca

203 and the Group level, and the indicators envisaged in the CFP. The analyses and reports are transmitted to management at the Parent Company, Iccrea Banca and Iccrea BancaImpresa. In addition, on a weekly basis it monitors the 1-month liquidity coverage ratio (in both ordinary and stress conditions), the maturity ladder with a time horizon of 12 months and a time horizon of indefinite maturity and the net stable funding ratio.

The Group Risk Management unit participates in the Group Finance Committee and reports to it on developments in the liquidity position and compliance with the limits in place. If the limits are exceeded, Group Risk Management notifies the head of Iccrea Banca’s Finance unit to agree any corrective actions to restore balance, notifying management and the Group Finance Committee.

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Section 3 – Liquidity risk

QUANTITATIVE DISCLOSURES

1. Distribution of financial assets and liabilities by residual maturity - currency: euro

More than More than More than More than More than More than More than Unspecified 1 day 7 days 15 days 1 month 3 months 6 months 1 year More than On demand maturity to to to to to to to 5 years

7 days 15 days 1 month 3 months 6 months 1 year 5 years

On-balance-sheet assets 740,773 379 1,399 71,587 257,660 497,532 1,656,187 5,285,527 3,762,215 366 A.1 Government securities 93,000 931,000 1,941,000 A.2 Other debt securities 0 35,000 A.3 Units in collective investment undertakings 196,632 0 A.4 Loans 544,141 379 1,399 71,587 257,660 404,532 725,187 3,309,527 3,762,215 366 - banks 19,052 136 179 1,478 2,151 3,650 8,237 47,147 69,113 78 - customers 525,089 242 1,220 70,110 255,509 400,882 716,950 3,262,380 3,693,102 289 On-balance-sheet liabilities 489,910 8,554 801,154 71,914 1,563,919 2,353,891 5,861,434 482,783 B.1 Deposits 462,092 - banks 462,092 - customers B.2 Debt securities 672 8,550 503 849,530 269,954 3,172,839 47,060 B.3 Other liabilities 27,146 4 801,154 71,411 714,389 2,083,937 2,688,595 435,723 Off-balance-sheet transactions 499,656 185 1,097 14,499 36,644 59,380 72,637 61,355 210,926 20,302 C.1 Financial derivatives with exchange of principal - long positions - short positions C.2 Financial derivatives without exchange of principal 83,406 - long positions 41,021 - short positions 42,385 C.3 Deposits and loans to receive - long positions - short positions C.4 Irrevocable commitments to disburse funds 416,250 185 1,097 14,499 36,644 59,380 72,637 61,355 210,926 20,302 - long positions 89,466 157 1,097 7,250 19,582 28,873 35,498 49,497 165,173 10,095 - short positions 326,784 28 7,250 17,062 30,508 37,138 11,858 45,752 10,207 C.5 Financial guarantees issued C.6 Financial guarantees received

C.7 Credit derivatives with exchange of principal - long positions - short positions C.8 Credit derivatives without exchange of principal - long positions - short positions

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1. Distribution of financial assets and liabilities by residual maturity - currency: US dollar

More than More than More than More than More than More than More than Unspecified 1 day 7 days 15 days 1 month 3 months 6 months 1 year More than On demand maturity to to to to to to to 5 years

7 days 15 days 1 month 3 months 6 months 1 year 5 years

On-balance-sheet assets 451 234 685 1,373 5,993 11,734 A.1 Government securities A.2 Other debt securities A.3 Units in collective investment undertakings A.4 Loans 451 234 685 1,373 5,993 11,734 - banks - customers 451 234 685 1,373 5,993 11,734 On-balance-sheet liabilities 12,347 6,605 B.1 Deposits - banks - customers B.2 Debt securities B.3 Other liabilities 12,347 6,605 Off-balance-sheet transactions C.1 Financial derivatives with exchange of principal - long positions - short positions C.2 Financial derivatives without exchange of principal - long positions - short positions C.3 Deposits and loans to receive - long positions - short positions C.4 Irrevocable commitments to disburse funds - long positions - short positions C.5 Financial guarantees issued C.6 Financial guarantees received

C.7 Credit derivatives with exchange of principal - long positions - short positions C.8 Credit derivatives without exchange of principal - long positions - short positions

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1. Distribution of financial assets and liabilities by residual maturity - currency: yen

More than More than More than More than More than More than More than Unspecified 1 day 7 days 15 days 1 month 3 months 6 months 1 year More than On demand maturity to to to to to to to 5 years

7 days 15 days 1 month 3 months 6 months 1 year 5 years

On-balance-sheet assets 70 68 104 225 1,176 2,889 A.1 Government securities A.2 Other debt securities A.3 Units in collective investment undertakings A.4 Loans 70 68 104 225 1,176 2,889 - banks 0 - customers 70 68 104 225 1,176 2,889 On-balance-sheet liabilities 4,378 B.1 Deposits - banks - customers B.2 Debt securities B.3 Other liabilities 4,378 Off-balance-sheet transactions C.1 Financial derivatives with exchange of principal - long positions - short positions C.2 Financial derivatives without exchange of principal - long positions - short positions C.3 Deposits and loans to receive - long positions - short positions C.4 Irrevocable commitments to disburse funds - long positions - short positions C.5 Financial guarantees issued C.6 Financial guarantees received

C.7 Credit derivatives with exchange of principal - long positions - short positions C.8 Credit derivatives without exchange of principal - long positions - short positions

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1. Distribution of financial assets and liabilities by residual maturity - currency: Swiss franc

More than More than More than More than More than More than More than Unspecified 1 day 7 days 15 days 1 month 3 months 6 months 1 year More than On demand maturity to to to to to to to 5 years

7 days 15 days 1 month 3 months 6 months 1 year 5 years

On-balance-sheet assets 58 117 219 333 2,300 4,239 A.1 Government securities A.2 Other debt securities A.3 Units in collective investment undertakings A.4 Loans 58 117 219 333 2,300 4,239 - banks - customers 58 117 219 333 2,300 4,239 On-balance-sheet liabilities 7,051 B.1 Deposits - banks - customers B.2 Debt securities B.3 Other liabilities 7,051 Off-balance-sheet transactions C.1 Financial derivatives with exchange of principal - long positions - short positions C.2 Financial derivatives without exchange of principal - long positions - short positions C.3 Deposits and loans to receive - long positions - short positions C.4 Irrevocable commitments to disburse funds - long positions - short positions C.5 Financial guarantees issued C.6 Financial guarantees received

C.7 Credit derivatives with exchange of principal - long positions - short positions C.8 Credit derivatives without exchange of principal - long positions - short positions

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SECTION 4- OPERATIONAL RISKS

QUALITATIVE DISCLOSURES

A. General aspects, management and measurement of operational risks

Within the framework of the initiatives defined at the Group level in the Risk Management area, the Bank has implemented an integrated operational risk identification and analysis system which makes it possible to assess exposure to operational risk for each business area. The approach adopted also makes it possible to pursue the following specific objectives: − providing risk owners with greater awareness of the risks associated with their operations; − assessing the Bank’s positioning with respect to operational risk factors in corporate processes; − providing top management with an overall view of the Bank’s operational issues by period and area of observation; − providing information to improve the internal control system; − optimizing operational risk mitigation actions through a process that identifies risks, assesses their potential financial impact and identifies the internal problems underlying those risks, thereby enabling cost/benefit analysis of the initiatives to be taken in response.

The operational risk analysis system created through these initiatives is composed of:

− an overall framework for managing operational risks, setting out classification models, analytical methodologies, management processes and support tools; − a forward looking self-assessment process for determining exposures to operational risks. The results of the assessment are processed using a statistical model that makes it possible to translate the estimates for operational risk exposures into amounts of economic capital; − a loss data collection process; − an actuarial quantitative model to analyze time series of operational losses over a five-year time horizon.

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PART F – INFORMATION ON CAPITAL

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SECTION 1- COMPANY CAPITAL

A. QUALITATIVE DISCLOSURES

The Bank verifies the adequacy of its regulatory capital by way of constant monitoring of developments in risk- weighted assets and the underlying risks both retrospectively and prospectively (planning).

In assessing its overall capital adequacy, the Bank also takes account of specific measurements of credit risk, interest rate risk and operational risk, bearing in mind the capital targets set in the Group’s business plan.

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B. Quantitative disclosures

B.1 Company capital: composition

Total Total

(31/12/2012) (31/12/2011)

1. Share capital 474,765 374,564 2. Share premium reserve 10,902 10,902 3. Reserves 87,179 166,688 - earnings 70,058 69,829 a) legal 18,566 18,369 b) established in bylaws 27,392 27,360 c) treasury shares d) other 24,100 24,100 - other 17,121 96,859 4. Equity instruments 5. (Treasury shares) 6. Valuation reserves: 2,286 1,977 - Financial assets available for sale - Property and equipment - Intangible assets - Hedging of investments in foreign operations - Cash flow hedges 2,286 1,977 - Foreign exchange differences - Non-current assets held for sale - Actuarial gains (losses) on defined benefit plans - Share of valuation reserves of equity investments accounted for using equity method - Special revaluation laws 7. Net profit (loss) for the period 1,598 1,970 Total 576,731 556,102

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B.2 Valuation reserves for financial assets available for sale: composition

There were no such positions as of the balance sheet date.

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B.3 Valuation reserves for financial assets available for sale: change for the period

There were no such positions as of the balance sheet date.

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SECTION 2- REGULATORY CAPITAL AND CAPITAL RATIOS

2.1 Regulatory capital

A. Qualitative disclosures

Regulatory capital and capital ratios are calculated on the basis of the balance sheet data and performance figures determined using the IAS/IFRS and taking account of the Supervisory Instructions issued by the Bank of Italy with the most recent update of Circular no. 155/91 “Instructions for reporting on regulatory capital and capital ratios”. Regulatory capital is calculated as the sum of the positive and negative elements, on the basis of their quality as capital. Positive elements must be fully available to the Bank in order for them to be used in calculating capital requirements.

Regulatory capital totals €749,200,155. It is composed of Tier 1 capital, Tier 2 capital and Tier 3 capital (for the financial statements at December 31, 2012, there are no Tier 3 capital elements) , net of deductions. More specifically:

• Tier 1 capital comes to €571,081,774, and includes paid-up share capital of €474,765,250, the share premium of €10,902,500, earnings and capital reserves of €87,179,216, net profit for the period of €1,598,131, net of intangible assets equal to €3,363,324);

• Tier 2 capital includes subordinated liabilities in the amount of €126,319,769 and hybrid capital instruments equal to €51,798,613;

The latest provisions of the Bank of Italy circular seek to harmonize the criteria for determining regulatory capital and capital ratios with international accounting standards. In particular, they provide for the application of the “prudential filters” indicated by the Basel Committee in governing the criteria to be following by national supervisory authorities in harmonizing regulatory provisions with the new reporting standards. Prudential filters, which seek to preserve the quality of regulatory capital and reduce the potential volatility that the application of the new standards might generate, essentially take the form of a number of corrections to accounting data before their use for supervisory purposes.

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B. Quantitative disclosures

Total Total

31/12/2012 31/12/2011

A. Tier 1 capital before prudential filters 571,082 547,846 B. Tier 1 capital prudential filters: B.1 Positive IAS/IFRS prudential filters (+) B.2 Negative IAS/IFRS prudential filters (-) C. Tier 1 capital gross of deductible elements (A + B) 571,082 547,846 D. Elements to deduct from Tier 1 capital E. Total Tier 1 capital (C – D) 571,082 547,846 F. Tier 2 capital before prudential filters 178,118 188,382 G. Tier 2 prudential filters: G.1 Positive IAS/IFRS prudential filters (+) G.2 Negative IAS/IFRS prudential filters (-) H. Tier 2 capital gross of deductible elements (F + G) 178,118 188,382 I. Elements to deduct from Tier 2 capital L. Total Tier 2 capital (H – I) 178,118 188,382 M. Elements to deduct from total Tier 1 and Tier 2 capital N. Regulatory capital (E + L – M) 749,200 736,228 O. Tier 3 capital P. Regulatory capital including Tier 3 (N + O) 749,200 736,228

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2.2 Capital adequacy

A. Qualitative disclosures

Capital ratios at December 31, 2012 were determined, as they were in 2011, in accordance with the provisions of the Basel 2 Capital Accord, adopting the Standardized Approach for the calculation of capital requirements for credit and counterparty risk and the Basic Indicator Approach for operational risk.

As reported in the table indicating the composition of regulatory capital and capital adequacy ratios, at December 31, 2012 the Bank had a ratio of Tier 1 capital to risk-weighted assets of 7.93% while the ratio of regulatory capital to risk-weighted assets came to 10.41%, greater than the minimum requirement of 6% established under the new rules governing banks that belong to a banking group.

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B. Quantitative disclosures

Unweighted amounts Weighted amounts/requirements

31/12/2012 31/12/2011 31/12/2012 31/12/2011

A. EXPOSURES 13,617,419 11,756,297 9,244,597 9,490,576 A.1 Credit and counterparty risk 13,617,419 11,756,297 9,244,597 9,490,576 1. Standardized approach 13,617,419 11,756,297 9,244,597 9,490,576 2. IRB approach 2.1 Foundation 2.2 Advanced 3. Securitizations B. CAPITAL REQUIREMENTS B.1 Credit and counterparty risk 739,568 759,246 B.2 Market risks 0 0 1. Standardized method 0 0 2. Internal models 3. Concentration risk B.3 Operational risk 28,231 26,390 1. Basic indicator approach 28,231 26,390 2. Standardized approach 3. Advanced measurement approaches B.4 Other prudential requirements B.5 Other elements -191,950 -196,409 B.6 Total prudential requirements 575,849 589,227 C. EXPOSURES AND CAPITAL ADEQUACY RATIOS C.1 Risk-weighted assets 7,198,114 7,365,336 C.2 Tier 1 capital/risk weighted assets (Tier 1 capital ratio) 7.93% 7.44% C.3 Regulatory capital including Tier 3 /Risk- weighted assets (Total capital ratio) 10.41% 10.00%

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PART H – INFORMATION ON RELATED PARTIES

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1. Information on the remuneration of key management personnel

Total 31/12/2012

Short-term benefits 791 Post-employment benefits 63 Other long-term benefits 3 Employee termination benefits Share-based payments A) Total 857 Compensation of members of Board of Directors 414 Compensation of members of Board of Auditors 231 B) Total 645 A)+B) Total 2,280 Loans and guarantees granted - Members of Board of Directors - Members of Board of Auditors

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2. Information on transactions with related parties

Receivables Revenues Costs Losses Payables Guarantees Gross Net

a) Parent company 152 1,960 19,087 19,087 26,748

b) Entities under common control or with significant influence

c) Subsidiaries

d) Associates 1,976 513 13,874 13,874 443

e) Joint ventures 648 155,849 71,468 71,468 9,431,159

f) Key management personnel

a) Parent company

Total 2,776 158,322 104,429 104,429 9,458,350

Subsidiaries, parent companies and associates

Intercompany transactions regard ordinary internal operations. They are generally settled at arm’s length on the terms and conditions that would apply if the companies had operated independently.

The table summarizes transactions, with the associated revenues and costs at December 31, 2012, with the subsidiaries BCC Lease S.p.A. and BCC Factoring S.p.A., with the parent company ICCREA Holding S.p.A., and with subsidiaries of the parent company (ICCREA Banca S.p.A. BCC Gestione Crediti S.p.A., Immicra S.r.l., BCC Solutions, Aureo Gestioni and Banca Sviluppo).

Pursuant to the disclosures required under Article 2424, paragraph 16-bis, of the Civil Code, the following table reports the fees of the audit firm:

1 Audit services 66 2 Tax advisory 10 3 Certification services 0 4 Audit related services 26 TOTAL 102

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DISCLOSURE PURSUANT TO ARTICLE 2497 OF THE ITALIAN CIVIL CODE

As required under Article 2497 of the Italian Civil Code, the following table provides a summary of the key information reported in the most recently approved financial statements of the parent company ICCREA Holding S.p.A., with registered office in Rome, Via Lucrezia Romana 41/47.

Summary of key information in the financial statements at December 31, 2011 of the company that exercises management and coordination functions – ICCREA Holding S.p.A. (Amounts in euros)

ASSETS Cash and cash equivalents 1,624 Financial assets available for sale 77,994,589 Due from banks 141,789,742 Loans to customers 120,999,416 Equity investments 917,869,545 Property and equipment 317,229 Intangible assets 674,044 Tax assets 10,575,057 a) current 7,359,323 b) deferred 3,215,734 Non-current assets and disposal groups held for sale 0 Other assets 50,782,796 Total ASSETS 1,321,004,042

LIABILITIES AND SHAREHOLDERS’ EQUITY Due to banks 152,339,504 Tax liabilities 0 a) current 0 b) deferred 0 Other liabilities 52,748,329 Employee termination benefits 368,945 Provisions for risks and charges 9,165,431 b) other provisions 9,165,431 Valuation reserves 2,544,421 Reserves 74,646,121 Share capital 1,012,420,109 Treasury shares (-) (328,302) Net profit (loss) for the period (+/-) 17,099,484 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,321,004,042

INCOME STATEMENT Net interest income 529,837 Net fee and commission income (expense) 1,618,070 Gross income 38,828,274 Net income (loss) from financial operations 35,866,817 Operating expenses (19,742,193) Profit (loss) before tax on continuing operations 16,575,400 Profit (loss) after tax on continuing operations 20,893,186 Net profit (loss) for the period 20,893,186

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Part L – OPERATING SEGMENTS

The Bank operates exclusively in the medium/long-term credit sector, offering a broad range of credit products primarily to the small and medium-sized companies that are mutual bank customers.

Accordingly, pursuant to IFRS 8, the Bank has only one operating segment represented by the performance and financial data reported in the financial statements.

In addition, the Bank operates exclusively in Italian territory and, for disclosure purposes, has only one geographical segment.

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ANNEXES

FINANCIAL STATEMENTS OF SUBSIDIARIES

-BCC Factoring S.P.A. -BCC Lease S.P.A.

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Financial statements at December 31, 2012 of BCC Factoring S.p.A. (in euros)

Assets 2012

10. Cash and cash equivalents 525

40. Financial assets available for sale 9,914

60. Receivables 398,352,917

100. Property and equipment 26,509

110. Intangible assets 67,477

120 Tax assets 7,574,542

a) current 236,782

b) deferred 7,337,760

140. Other assets 321,933

Total assets 406,353,817

Liabilities and shareholders’ equity 2012

10. Payables 384,806,870

70. Tax liabilities 110,156

a) current 108,381

b) deferred 1,775

90. Other liabilities 3,055,552

100. Employee termination benefits 113,354

110. Provisions for risks and charges 1,270,993

b) other provisions 1,270,993

120. Share capital 18,000,000

160. Reserves (2,191,104)

180. Net profit (loss) for the period 1,187,996 Total liabilities and shareholders’ equity 406,353,817

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Income statement 2012

10. Interest and similar income 11,992,889

20. Interest and similar expense (5,566,623)

Net interest income 6,426,266

30. Fee and commission income 5,680,670

40. Fee and commission expense (964,423)

Net fee and commission income (expense) 4,716,247

50. Dividends and similar revenues 164

60. Net gain (loss) on trading activities (10,047)

Gross income 11,132,630

100. Net losses/recoveries on impairment: (2,109,343)

a) financial assets (2,109,343)

110. Administrative expenses: (5,864,307)

a) personnel expenses (3,151,185)

b) other administrative expenses (2,713,122)

120. Net adjustments of property and equipment (8,822)

130. Net adjustments of intangible assets (203,514)

150. Net provisions for risks and charges (909,379)

160. Other operating expenses/income 160,273 Operating result 2,197,538

Profit (loss) before tax on continuing operations 2,197,538 210. Income tax expense from continuing operations (1,009,542)

Profit (loss) after tax on continuing operations 1,187,996

Net profit (loss) for the period 1,187,996

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Financial statements at December 31, 2012 of BCC Lease S.p.A. (in euros)

Assets 2012

10. Cash and cash equivalents 1,917

60. Receivables 162,901,814 100. Property and equipment 155,296 110. Intangible assets 128,324 120. Tax assets 4,002,450 a) current 319,272 b) deferred 3,683,178 140. Other assets 1,401,040

Total assets 168,590,840

Liabilities and shareholders’ equity 2012

10. Payables 150,244,270

70. Tax liabilities 657,941 a) current 337,343 b) deferred 320,598 90. Other liabilities 4,163,929

100. Employee termination benefits 114,539

120. Share capital 9,000,000 160. Reserves 3,771,994 180. Net profit (loss) for the period (+/-) 638,167 Total liabilities and shareholders’ equity 168,590,840

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Income statement 2012

10. Interest and similar income 12,397,790

20. Interest and similar expense (5,153,596) Net interest income 7,244,194

30. Fee and commission income 25,849

40. Fee and commission expense (264,776) Net fee and commission income (expense) (238,927) Gross income 7,005,267 100. Net losses/recoveries on impairment: (4,344,801) a) loans (4,344,801)

d) other financial activities

110. Administrative expenses: (3,589,665) a) personnel expenses (1,522,365) b) other administrative expenses (2,067,300) 120. Net adjustments of property and equipment (2,519) 130. Net adjustments of intangible assets (64,976) 160. Other operating expenses/income 2,145,166 Operating result 1,148,472 Profit (loss) before tax on continuing operations 1,148,472 190. Income tax expense from continuing operations (510,305) 200. Profit (loss) after tax on continuing operations 638,167

Net profit (loss) for the period 638,167

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Report of the

Board of Auditors

following the adoption of initiatives necessary ICCREA BANCAIMPRESA SPA to resolve any issues that we found. We REPORT OF THE BOARD OF conducted similar activities with respect to the AUDITORS ON THE FINANCIAL Compliance Department and the Risk STATEMENTS Management and ALM Department, both of AS AT DECEMBER 31, 2012 which underwent profound functional and (Art. 2429, second paragraph, of the Italian organizational changes in 2012 to allow them Civil Code) to carry out their work more effectively. We took part in all the meetings of the Audit To the shareholders’ meeting of ICCREA Committee, agreeing the overall framework BANCAIMPRESA S.p.A. for identifying and handling risks for the company and basic issues connected with Shareholders, management control; The draft annual report and financial 4. we assessed and monitored the statements, which the Board of Directors adequacy of the administrative and accounting submits for your approval, regard the year system, as well as the accuracy of the latter in ended December 31, 2012. representing operations, based on information During the year, we conducted our work in received from and meetings held with the accordance with the provisions of the Italian head of the Administrative Department. We Civil Code, the regulations issued by the have no particular comments; supervisory authority for banks and the 5. we verified that transactions with principles of conduct for Boards of Auditors related parties were carried out as part of recommended by the National Council of the normal operations and were undertaken on Italian Accounting Profession. market terms and conditions and we monitored Specifically: the gradual implementation of the associated 1. we monitored compliance with the regulations; law and the By-laws and observance of the 6. we worked with the audit firm rules of sound administration; engaged to conduct the statutory audit, 2. we participated in the Shareholders’ exchanging information needed for the Meetings and the meetings of the Board of performance of our respective duties and we Directors, which were conducted in were made aware of the results of the regular accordance with the By-laws, the law and checks of the accounts and the accurate regulations, and we can reasonably ensure you recognition of operational events in the that the actions resolved complied with the accounts. The audit firm did report any law and the By-laws and did not appear material issues during the year that would manifestly imprudent, risky, or raise potential require mention in this report; conflicts of interest or jeopardize the financial 7. we did not receive any complaints integrity of the company; pursuant to Article 2408 of the Italian Civil 3. during the year, we followed the Code. activities of the Control Unit, carrying out specific meetings and examinations addressing With regard to our functions as the Internal the various issues, receiving and analyzing the Control and Audit Committee under Article 19 reports concerning the audits conducted,

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of Legislative Decree 39/2010, it should be 2012 report, they took due account of the specified that the audit firm: instructions issued by the Bank of Italy during a. presented to the Board of Auditors the the recent audit it conducted of the Iccrea report on the material issues found in the Banking Group with regard to assessing those course of the statutory audit pursuant to positions examined by inspectors; Article 19, paragraph 3, of Legislative Decree - to the extent of our knowledge, the 39/2010, which did not identify any significant directors, in preparing the financial difficulties encountered during the audit, statements, did not have recourse to important issues to report to the control bodies departures from statutory requirements; or significant deficiencies in the internal - we discussed with the audit firm the control system as it relates to the financial results of their audit of the financial reporting process; statements performed and we were informed b. published on its Internet site the that no material issues were found. report on transparency required by Article 18, paragraph 1, of Legislative Decree 39/2010; While we are not responsible for issuing an c. confirmed in writing to the Board of opinion on the form and content of the Auditors, as required by Article 19, paragraph financial statements, we feel that the draft 9, letter a), of Legislative Decree 39/2010, that financial statements at December 31, 2012 of no circumstances arose such as would Iccrea BancaImpresa SpA have been prepared compromise its independence and no clearly and provide a true representation of circumstances occurred that would give rise to the performance and financial position of the incompatibility pursuant to Article 10 of said Bank. In view of the foregoing, we recommend decree. that the Shareholders’ Meeting approve the The financial statements as at December 31, financial statements of Iccrea BancaImpresa 2012 have been prepared in accordance with SpA for the year ended December 31, 2012 as international accounting standards and the prepared by the directors, as well as the instructions for preparing financial statements allocation of net profit for the year proposed issued by the Bank of Italy. The financial by the Board of Directors. statements are accompanied by the report on Finally, the term of office of this Board of operations, and were made available by the Auditors ends with the approval of the 2012 Board of Directors as required by law. We have financial statements and we invite the the following comments with regard to the shareholders to appoint a new Board of financial statements: Auditors. - we monitored the preparation of the financial statements and their general Rome, April 3, 2013 compliance with the law as to their format and structure, and have no specific comments in The Board of Auditors that regard; (Fernando Sbarbati - Chairman) - we reviewed the report on operations (Annamaria Fellegara - Auditor) prepared by the Directors to ensure that it (Mauro Camelia – Auditor) complies with the law and that the disclosures were full and accurate. In the report, the Directors also indicated that, in preparing the

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Independent

Auditor’s Report

231 232 233