dal 1859 LA BANCA DEL TERRITORIO Cassa di Risparmio di Cento spa ANNUAL REPORT AND FINANCIAL STATEMENTS 2009 FINANCIAL YEAR Approved by the Board of Directors on 23 March 2010 Draft of the Board of Directors to be submitted for shareholder approval 1 CASSA DI RISPARMIO DI CENTO SPA CHAIRMAN Vilmo Ferioli GENERAL MANAGER Ivan Damiano BOARD OF DIRECTORS Vilmo Ferioli Chairman Mauro Manuzzi Deputy Chairman Antonino Balboni Director Luigi Chiari Director Ugo Poppi Director Aproniano Tassinari Director Vincenzo Tassinari Director BOARD OF AUDITORS Domenico Livio Trombone Chairman Massimo Calanchi Auditor Dario Alessio Taddia Auditor MANAGEMENT Ivan Damiano General Manager INDEPENDENT AUDITORS RECONTA ERNST & YOUNG SpA 2 Shareholders at 31 December 2009 no. of shares % Fondazione Cassa di Risparmio di Cento 6,714,291 51.33 % Cassa di Risparmio di Cento Holding 2,046,000 15.64 % Individual shareholders (about 6,350) 4,320,902 33.03 % ----------------------------- Total 13,081,193 100.00% 3 BRANCH NETWORK at 31 December 2009 REGISTERED OFFICE AND Cento (FE) - via Matteotti, 8/b HEADQUARTERS tel. 051/6833111 - fax 051/6833443 www.crcento.it [email protected] BRANCHES (48) Province of Ferrara (21) Cento – headquarters branch office Cento – city branch no. 1 Cento – city branch no. 2 Cento – city branch no. 3 Alberone Bondeno Casumaro Coronella Dodici Morelli Dosso Ferrara Ferrara Est Ferrara Sud Ferrara4 Ferrara5 Mirabello Poggio Renatico Renazzo Sant'Agostino San Carlo Vigarano Mainarda Province of Bologna (17) Bologna Bologna DueTorri Bologna Murri Castello d'Argile Casalecchio di Reno Castel Maggiore Crevalcore Galliera - San Venanzio Lippo di Calderara di Reno Ozzano dell’Emilia Pieve di Cento Stiatico San Giovanni in Persiceto San Lazzaro di Savena San Matteo della Decima San Pietro in Casale Venezzano Province of Modena (10) Modena ModenaDue ModenaTre Castelfranco Emilia Campogalliano Finale Emilia Massa Finalese Nonantola Rami-Ravarino Sassuolo 4 NOTICE OF SHAREHOLDERS’ MEETING Published in the daily newspaper Il Resto del Carlino on 3 April 2010 Shareholders are called to the Ordinary and Extraordinary Shareholders’ Meeting to be held at the convention center of the Grand Hotel Bologna in Pieve di Cento (FE), Via Ponte Nuovo 42, on Thursday 29 April 2010 at 3:30 p.m. at first calling and, if necessary, on the following day at second calling, at the same time and place to resolve the following: Agenda: Ordinary business: 1) Financial statements at 31 December 2009 and related resolutions; 2) Appointment of members of the Board of Directors, determining the number of members of the Board and setting compensation, in accordance with Article 19 of the articles of association; appointment of the Chairman and Deputy Chairman (or Deputy Chairmen); 3) Appointment of the Board of Auditors and its chairman; establishing related compensation; 4) Auditing of the accounts: engagement of independent auditor for 2010, 2011 and 2012; 5) Treasury share purchasing fund and procedures for transactions in such shares; 6) Approval (in accordance with Article 6 of the articles of association) of the compensation policies for 2010 for the members of the Board of Directors, employees and other non-employee associates of the Company. Discussion of the implementation of the compensation policies adopted for 2009. Extraordinary business: 1) Amendment of Articles 6, 12 and 20 of the articles of association. Cento, 26 March 2010 for THE BOARD OF DIRECTORS THE CHAIRMAN Vilmo Ferioli SUMMARY OF RESOLUTIONS 5 Contents Highlights pag. 7 Directors' Report on Operations pag. 10 Proposed distribution of income pag. 38 Financial statements pag. 39 Notes to the financial statements pag. 47 Annexes pag. 159 Certification of financial statements pag. 170 Report of the Board of Auditors pag. 171 Report of the independent auditors pag. 6 Highlights The Bank closed 2009 with a net profit of €7.145 million, a highly positive result given the severe economic crisis and a financial market that remains mired in uncertainty. The year featured an increase in direct funding, which rose 13.4% over 2008 to reach €1,987.8 million, representing an effective response to the needs of our customers, who, made uneasy by the high degree of volatility on the financial markets, sought out safe, liquid financial instruments. Within this context, the composition of the Bank’s funding shifted towards demand and short-term instruments (up €80.3 million or 7.7%), along with a significant increase in term funding (up €154.3 million or 21.6%). This improved in the Bank’s already “safe” level of liquidity, with the ratio of lending to funding now at a reassuring level of less than 1. Indirect funding came to €1,792.9 million (down €71.2 million or 3.8%), a decline attributable to the reduction in assets under administration due in part to the general decline in the prices of many securities (down €168.5 million or 13.9%), whereas assets under management posted a significant increase (€97.3 million or 14.9%). Lending to ordinary customers totaled €1,843.2 million (-2.4%). Short-term borrowing declined by €107.6 million or 20.0%, whereas the medium/long-term component posted an increase of €60.6 million or 4.7% to a total of €1,357.7 million at year-end, accounting for 73.7% of all loans to customers. The decline in revenues for businesses and the need to consolidate debt had a significant impact on these aggregates. As a result of the particularly adverse economic environment, gross impaired assets reached €114.3 million, increasing by €68.8 million in 2009. Half of this increase (€35.6 million) was due to the recent changes in regulations introduced by the Bank of Italy, which broadened the concept of “impaired assets” by including over-limit positions past due by 90-180 days. The ratio of problem exposures to total lending rose to 6.09% (but would have been 4.20% without the regulatory change), up from the 2.37% of 2008 under the previous rules. As regards the income statement at 31 December 2009, net interest income amounted to €53.9 million, a decline of 8.0% from 2008 due mainly to the significant reduction in interest rates, eroding much of the spread on funding, which was only partially offset by an increase in the spread on lending. Net fee and commission income came to €20.3 million, a slight decline (-1.3%) from 2008 based on uniform classification criteria. 7 Business in the “finance” segment generated net revenues of €4.85 million, compared with the loss of €4.47 million in 2008, a change of €9.32 million. This improvement was due in part to the performance of the financial markets, which made it possible to recoup much of the losses posted in 2008. As a result, gross income reached €80.0 million (up €4.9 million over 2008, an increase of 6.6%). Developments in economic conditions generated an increase of €3.34 million in net losses on impaired loans (up 33.7% over 2008) due mainly to the worsening in the stock of problem loans, partially mitigated by an improvement in the risk of performing loans due primarily to the strong shift towards secured forms of lending, underscoring the good quality and low risk of the Bank’s assets. Personnel expenses came to €31.6 million, an increase of €2.6 million (+8.9%) over 2008 due to non-recurring charges in the amount of €2.7 million. Conversely, administrative expenses declined by 4.2% to €20.2 million, even after the extraordinary expenses related to the Bank’s 150th anniversary. The good performance achieved underscores the Bank’s constant focus on controlling administrative expenses, which increased by €1.7 million on the whole (+3.4% over 2008) due entirely to the non-recurring expenses incurred during the year in the amount of €3.3 million. After income tax expense for the year (with the tax rate rising from 45.5% to 49.4%), net profit came to €7.145 million, a decline of €1.54 million (-17.8%) from the previous year. Without the non-recurring charges mentioned above, net profit would have been appreciably higher than in 2008. The financial performance described above produced a cost-to-income ratio of 64.6% (vs. 65.6% in 2008), with return on equity (ROE) amounting to 4.0% (compared with 5.0% in 2008). In approving the draft financial statements discussed above, the Board of Directors also decided to recommend that shareholders, at their meeting of 29 April, approve a dividend of €0.20 per share (compared with €0.30 for 2008), thereby achieving the twofold objective of self-financing our core business and strengthening capital as required of banks by the supervisory authorities. The Bank pays especially close attention to capital levels, as our capital ratios demonstrate: the core Tier 1 ratio rose from 8.44% to 9.54% and the total capital ratio rose from 10.56% to 11.70%, both of which are well above regulatory minimums and even enough for the levels expected to be introduced with Basel III. The following are the main indicators: 8 31/12/2009 31/12/2008 31/12/2007 Profitability ratios ROE 3.98% 5.00% 8.82% Net interest income/operating income 64.74% 73.93% 66.25% Net fee and commission income/operating income 24.39% 25.96% 26.10% Structural ratios Equity/total assets 7.40% 7.42% 7.61% Equity/direct funding 9.03% 9.92% 8.99% Loans/direct funding (excluding repos) 97.35% 117.58% 106.90% Gross lending/total assets 77.29% 81.78% 80.93% Risk ratios Bad debts/loans (net) 1.17% 0.57% 1.52% Bad debts/ loans (gross) 1.74% 0.84% 2.53% Loan-loss provisions/gross loans 1.75% 1.42% 2.24% Bad debts (net)/equity 11.99% 6.17% 15.77% Efficiency ratios Admin.