for the nine month period ended 30 September 2017

Transcription

1 INTERIM INFORMATION for the nine month period ended 30 September 2017 Tilžės 149, LT Šiauliai Tel. (8 41) , fax (8 41) / 38

2 I N T E R I M I N F O R M A T I O N for the nine month period ended 30 September 2017 C O N T E N T S CONDENSED INTERIM FINANCIAL STATEMENTS CONDENSED STATEMENTS OF FINANCIAL POSITION... 4 CONDENSED INCOME STATEMENTS... 5 CONDENSED INCOME STATEMENTS FOR THE QUARTER... 6 CONDENSED STATEMENTS OF COMPREHENSIVE INCOME... 7 CONDENSED STATEMENTS OF COMPREHENSIVE INCOME FOR THE QUARTER... 7 CONDENSED STATEMENTS OF CHANGES IN EQUITY... 8 CONDENSED STATEMENTS OF CASH FLOWS... 9 NOTES TO THE FINANCIAL STATEMENTS GENERAL INFORMATION...10 RESTATEMENT OF FINANCIAL INFORMATION...11 NOTE 1 LOANS TO CUSTOMERS AND FINANCE LEASE RECEIVABLES...12 NOTE 2 SECURITIES...15 NOTE 3 SIGNIFICANT INFORMATION ON CHANGES IN OTHER ASSET ITEMS...17 NOTE 4 DUE TO CUSTOMERS...18 NOTE 5 SIGNIFICANT INFORMATION ON CHANGES IN OTHER LIABILITY ITEMS...18 NOTE 6 CAPITAL...18 NOTE 7 NET INTEREST INCOME...19 NOTE 8 NET FEE AND COMMISSION INCOME...20 NOTE 9 OTHER OPERATING EXPENSES...20 NOTE 10 IMPAIRMENT LOSSES...21 NOTE 11 SIGNIFICANT INFORMATION ON OTHER INCOME STATEMENT ITEMS...21 NOTE 12 RELATED-PARTY TRANSACTIONS...22 NOTE 13 LIQUIDITY, MARKET AND OPERATIONAL RISKS...23 NOTE 14 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE...26 NOTE 15 SEGMENT INFORMATION...28 NOTE 16 SELECTED INFORMATION OF FINANCIAL GROUP...30 PAPILDOMA INFORMACIJA INFORMATION ON THE PERFOMANCE RESULTS AUTHORIZED CAPITAL AND SHAREHOLDERS BANK'S SHARE PRICE AND TURNOVER BANK'S MANAGEMENT OTHER INFORMATION, PUBLISHED INFORMATION AND THE MAJOR EVENTS CONFIRMATION FROM THE RESPONSIBLE PERSONS / 38

3 CONDENSED INTERIM FINANCIAL STATEMENTS (unaudited) for the nine month period ended 30 September 2017 Tilžės 149, LT Šiauliai Tel. (8 41) , fax (8 41)

4 T H E G R O U P S A N D T H E B A N K S C O N D E N S E D S T A T E M E N T S O F F I N A N C I A L P O S I T I O N Notes ASSETS Cash and cash equivalents 164, , , ,111 Securities at fair value through profit or loss 2 48,364 17,441 57,427 26,103 Due from other banks 1,800 1,800 5,337 5,337 Derivative financial instruments 4,110 4,086 8,983 8,687 Loans to customers 1 1,064,756 1,069, , ,155 Finance lease receivables 1 86,841 83,964 69,807 48,170 Investment securities: available-for-sale ,364 9,198 19,168 17,504 held-to-maturity , , , ,054 Investments in subsidiaries and associates 2-25,460-26,665 Intangible assets 4,246 1,375 4,180 1,210 Property, plant and equipment 10,919 10,014 11,469 10,532 Investment property 9,705 1,055 16,804 1,112 Current income tax prepayment Deferred income tax asset Other assets 3 34,693 12,604 35,838 7,999 Total assets 1,997,456 1,954,036 1,861,278 1,823,639 LIABILITIES Due to other banks and financial institutions 90,136 90,895 89,793 92,079 Derivative financial instruments 3,237 3, Due to customers 4 1,613,575 1,614,559 1,495,087 1,495,478 Special and lending funds 5 7,512 7,512 28,326 28,326 Subordinated loan 12 32,581 32,581 22,064 22,064 Current income tax liabilities 3,837 3,419 4,790 4,650 Deferred income tax liabilities Liabilities related to insurance activities 26,535-25,515 - Other liabilities 17,080 7,361 15,543 7,894 Total liabilities 1,794,962 1,759,564 1,681,761 1,650,696 EQUITY Share capital 6 131, , , ,472 Share premium Reserve capital Statutory reserve 6 7,177 7,071 4,157 4,157 Financial assets revaluation reserve Retained earnings 62,665 54,965 64,821 58,281 Non-controlling interest Total equity 202, , , ,943 Total liabilities and equity 1,997,456 1,954,036 1,861,278 1,823,639 The notes on pages 10 to 31 constitute an integral part of these financial statements. Chief Executive Officer Deputy Chief Accountant acting as Chief Accountant Vytautas Sinius Žaneta Bytautienė 6 November / 38

5 T H E G R O U P S A N D T H E B A N K S C O N D E N S E D I N C O M E S T A T E M E N T S for the nine month period ended 30 September September 2016 Notes (restated) (restated) Interest and similar income 7 50,153 43,101 50,070 44,494 Interest expense and similar charges 7 (8,049) (8,046) (9,253) (9,257) Net interest income 42,104 35,055 40,817 35,237 Fee and commission income 8 11,489 11,146 10,014 9,717 Fee and commission expense 8 (3,607) (3,504) (3,478) (3,233) Net fee and commission income 7,882 7,642 6,536 6,484 Net gain from operations with securities 2,128 1,358 6,291 5,284 Net gain from foreign exchange and related derivatives 3,467 4,076 2,828 2,963 Net loss from other derivatives (1,972) (1,700) (540) (404) Net loss from changes in fair value of subordinated loan 12 (10,520) (10,520) Net gain from derecognition of financial assets 11 2,936 2,822 11,868 11,868 Net gain from disposal of tangible assets 2, (92) 544 Revenue related to other activities of Group companies 11 8,552-10,380 - Other operating income 1, , Salaries and related expenses (14,196) (11,765) (13,909) (11,815) Depreciation and amortization expenses (1,461) (1,117) (1,292) (972) Expenses related to other activities of Group companies 11 (6,905) - (9,742) - Other operating expenses 9 (7,469) (5,541) (6,778) (4,837) Operating profit before impairment losses 28,453 20,623 47,987 45,099 Allowance for impairment losses on loans and other assets 10 2,040 2,207 (5,396) (6,041) Allowance for impairment losses on investments in subsidiaries and loss on remeasurement of subsidiaries classified as held for sale 2,10 - (2,261) - (1,300) Dividends from investments in subsidiaries and subsidiaries classified as held for sale - 7,681-5,632 Profit before income tax 30,493 28,250 42,591 43,390 Income tax expense (5,848) (4,871) (5,568) (5,036) Net profit for the period 24,645 23,379 37,023 38,354 Net profit attributable to: Owners of the Bank 24,645 23,379 37,023 38,354 Non-controlling interest Basic earnings per share (in EUR per share) attributable to owners of the Bank Diluted earnings per share (in EUR per share) attributable to owners of the Bank The notes on pages 10 to 31 constitute an integral part of these financial statements. 5 / 38

6 T H E G R O U P S A N D T H E B A N K S C O N D E N S E D I N C O M E S T A T E M E N T S F O R T H E Q U A R T E R for the three month period 1 July - 30 September 1 July - 30 September (restated) (restated) Interest and similar income 16,839 14,857 16,444 14,572 Interest expense and similar charges (2,223) (2,223) (2,933) (2,935) Net interest income 14,616 12,634 13,511 11,637 Fee and commission income 3,941 3,830 3,290 3,194 Fee and commission expense (1,090) (1,072) (1,230) (1,152) Net fee and commission income 2,851 2,758 2,060 2,042 Net gain from operations with securities 1, ,349 2,501 Net gain from foreign exchange and related derivatives 1,378 1,547 1,117 1,177 Net loss from other derivatives (913) (730) (866) (749) Net loss from changes in fair value of subordinated loan (4,814) (4,814) Net gain from derecognition of financial assets Net gain from disposal of tangible assets 1, Revenue related to other activities of Group companies 2,115-3,335 - Other operating income Salaries and related expenses (4,581) (3,871) (4,608) (3,959) Depreciation and amortization expenses (492) (381) (448) (337) Expenses related to other activities of Group companies (1,915) - (3,765) - Other operating expenses (2,929) (2,199) (2,382) (1,621) Operating profit before impairment losses 8,123 5,836 13,613 12,630 Allowance for impairment losses on loans and other assets (125) 89 (1,033) (1,306) Allowance for impairment losses on investments in subsidiaries and loss on remeasurement of subsidiaries classified as held for sale - (1,225) - - Dividends from investments in subsidiaries and subsidiaries classified as held for sale - 1, Profit before income tax 7,998 5,934 12,580 11,410 Income tax expense (2,590) (2,332) (1,798) (1,662) Net profit for the period 5,408 3,602 10,782 9,748 Net profit attributable to: Owners of the Bank 5,408 3,602 10,782 9,748 Non-controlling interest The notes on pages10 to 31 constitute an integral part of these financial statements. 6 / 38

7 T H E G R O U P S A N D T H E B A N K S C O N D E N S E D S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E for the nine month period ended 30 September September 2016 Net profit for the period 24,645 23,379 37,023 38,354 Other comprehensive income Items that may be subsequently reclassified to profit or loss: Gain from revaluation of financial assets (76) (76) Deferred income tax on gain from revaluation of financial assets (39) (7) Other comprehensive income, net of deferred tax (65) (65) Total comprehensive income for the period 24,864 23,416 36,958 38,289 Total comprehensive income (loss) attributable to: Owners of the Bank 24,864 23,416 36,958 38,289 Non-controlling interest ,864 23,416 36,958 38,289 T H E G R O U P S A N D T H E B A N K S C O N D E N S E D S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E F O R T H E Q U A R T E R for the three month period 1 July - 30 September July - 30 September 2016 Net profit for the period 5,408 3,602 10,782 9,748 Other comprehensive income (loss) Items that may be subsequently reclassified to profit or loss: Gain (loss) from revaluation of financial assets Deferred income tax on gain (loss) from revaluation of financial assets (14) (15) (11) (11) Other comprehensive income (loss), net of deferred tax Total comprehensive income for the period 5,486 3,684 10,913 9,879 Total comprehensive income (loss) attributable to: Owners of the Bank 5,486 3,684 10,913 9,879 Non-controlling interest ,486 3,684 10,913 9,879 The notes on pages 10 to 31 constitute an integral part of these financial statements. 7 / 38

8 T H E G R O U P S C O N D E N S E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y Notes Share capital Reserve capital Financial assets revaluation reserve Statutory reserve Retained earnings Total Non-controlling interest Total equity Attributable to the owners of the Bank 1 January , ,468 41, , ,064 Increase in share capital through bonus issue of shares 6 18, (18,246) Transfer to/from statutory reserve ,689 (1,689) Payment of dividends (628) (628) - (628) Total comprehensive income - - (65) - 37,023 36,958-36, September , ,157 58, , ,394 Total comprehensive income - - (520) - 6,643 6,123-6, December , ,157 64, , ,517 Increase in share capital through bonus issue of shares 6 21, (21,894) - - Transfer to statutory reserve ,020 (3,020) Payment of dividends (1,887) (1,887) - (1,887) Total comprehensive income ,645 24,864-24, September , ,177 62, , ,494 T H E B A N K S C O N D E N S E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y Notes Share capital Reserve capital Financial assets revaluation reserve Statutory reserve Retained earnings Total 1 January , ,290 37, ,513 Increase in share capital through bonus issue of shares 6 18, (18,246) - Transfer to statutory reserve ,867 (1,867) - Payment of dividends (628) (628) Total comprehensive income - - (65) - 38,354 38, September , ,157 54, ,174 Total comprehensive income - - (554) - 3,323 2, December , ,157 58, ,943 Increase in share capital through bonus issue of shares 6 21, (21,894) - Transfer to statutory reserve ,914 (2,914) - Payment of dividends (1,887) (1,887) Total comprehensive income ,379 23, September , ,071 54, ,472 The notes on pages 10 to 31 constitute an integral part of these financial statements. 8 / 38

9 T H E G R O U P S A N D T H E B A N K S C O N D E N S E D S T A T E M E N T S O F C A S H F L O W S for the nine month period ended Notes 30 September September 2016 Operating activities Interest received on loans and advances 39,532 33,766 42,191 36,992 Interest received on debt securities at fair value through profit or loss ,349 1,037 Interest paid (7,655) (7,652) (10,243) (10,247) Fees and commissions received 11,489 11,146 10,014 9,717 Fees and commissions paid (3,607) (3,504) (3,478) (3,233) Net cash inflows from trade in securities at fair value through profit or loss 10,011 9,781 21,810 23,497 Net inflows from foreign exchange operations 9,379 9,988 3,892 4,027 Net inflows from derecognition of financial assets 2,936 2,822 16,826 16,826 Net inflows from derecognition of non-financial assets 6, ,908 2,366 Cash inflows related to other activities of Group companies 9, , Cash outflows related to other activities of Group companies (6,905) - (9,742) - Recoveries on loans previously written off 1, Salaries and related payments to and on behalf of employees (14,206) (11,775) (13,922) (11,828) Payments related to operating and other expenses (11,852) (8,321) (2,953) (4,123) Income tax paid (7,101) (6,536) (2,508) (1,493) Net cash flow from operating activities before change in operating assets and liabilities 40,385 31,521 69,513 64,012 Change in operating assets and liabilities: Decrease (increase) in due from other banks 3,722 3,537 1,639 1,357 (Increase) in loans to customers and finance lease receivables (127,714) (108,916) (129,542) (141,815) Decrease (increase) in other assets (5,886) (4,970) (7,285) (10,322) Decrease (increase) in due to banks and financial institutions 10,284 (1,763) (796) (2,908) Increase (decrease) increase in due to customers 118, ,263 44,476 52,039 Increase in special and lending funds (20,814) (20,814) 10,094 10,094 Increase (decrease) in other liabilities 2,583 (507) 6,274 2,734 Change (19,155) (14,170) (75,140) (88,821) Net cash flow from (used in) from operating activities 21,230 17,351 (5,627) (24,809) Investing activities Acquisition of property, plant and equipment, investment property and intangible assets (1,808) (1,045) (1,883) (1,236) Disposal of property, plant and equipment, investment property and intangible assets 6,872 1,491 2,967 2,643 Acquisition of held-to-maturity securities (130,435) (130,435) (134,431) (134,431) Proceeds from redemption of held-to-maturity securities 99,430 99, , ,828 Interest received on held-to-maturity securities 8,686 8,686 15,278 15,278 Dividends received - 8, ,047 Acquisition of available-for-sale securities (3,000) (3,000) (3,172) (3,166) Sale or redemption of available-for-sale securities 11,252 11,644 5,678 5,596 Interest received on available-for-sale securities Disposal of subsidiaries Inflows from subsidiaries held for sale ,414 Business acquisition Instalments to cover losses and to strengthen the capital of subsidiaries - (1,000) - (550) Net cash flow (used in) from investing activities (8,616) (5,161) (12,184) 6,904 Financing activities Payment of dividends (1,876) (1,876) (625) (625) Net cash flow (used in) financing activities (1,876) (1,876) (625) (625) Net increase (decrease) in cash and cash equivalents 10,738 10,314 (18,436) (18,530) Cash and cash equivalents at 1 January 153, , , ,286 Cash and cash equivalents at 30 September 164, ,425 86,576 85,756 The notes on pages 10 to 31 constitute an integral part of these financial statements. 9 / 38

10 G E N E R A L I N F O R M A T I O N Šiaulių Bankas AB was registered as a public company in the Enterprise Register of the Republic of Lithuania on 4 February The Bank is licensed by the Bank of Lithuania to perform all banking operations provided for in the Law on Banks of the Republic of Lithuania and the Charter of the Bank. In this document, Šiaulių Bankas AB is referred to as the Bank, Šiaulių Bankas AB and its subsidiaries - the Group. The Head Office of the Bank is located in Šiauliai, Tilžės str. 149, LT At the end of the reporting period the Bank had 65 customer service outlets (31 December 2016: 68 outlets). As at 30 September 2017 the Bank had 707 employees (31 December 2016: 722). As at 30 September 2017 the Group (except subsidiaries held for sale) had 812 employees (31 December 2016: 829 employees). The Bank accepts deposits, issues loans, makes money transfers and documentary settlements, exchanges currencies for its clients, issues and processes debit and credit cards, is engaged in trade finance and is investing and trading in securities, as well as performs other activities set forth in the Law on Banks of the Republic of Lithuania and the Charter of the Bank. The Bank s shares are listed on the Baltic Main List of the Nasdaq Stock Exchange. As of 30 September 2017 the Bank owned the following directly controlled subsidiaries: 1. Bonum Publicum GD UAB (life insurance activities), 2. Minera UAB (real estate management activities), 3. Pavasaris UAB (development of the area of multi-apartment residential houses), 4. SB Lizingas UAB (consumer financing activities), 5. SBTF UAB (real estate management activities), 6. Šiaulių Banko Investicijų Valdymas UAB (investment management activities), 7. Šiaulių Banko Lizingas UAB (finance and operating lease activities), 8. Šiaulių Banko Turto Fondas UAB (real estate management activities). As of 30 September 2017 the Bank owned the following indirectly controlled subsidiaries: 9. Apželdinimas UAB (real estate management activities), 10. Sandworks UAB (real estate management activities), 11. ŽSA 5 UAB (activities of head offices). As of 30 September 2017 the Bank owned directly controlled subsidiaries held for sale: ŽSA 1 UAB, ŽSA 2 UAB, ŽSA 3 UAB, ŽSA 4 UAB (real estate management activities). As of 31 December 2016 the Bank owned the following directly controlled subsidiaries: 1. Bonum Publicum GD UAB (life insurance activities), 2. Minera UAB (real estate management activities), 3. Pavasaris UAB (development of the area of multi-apartment residential houses), 4. SB Lizingas UAB (consumer financing activities), 5. SBTF UAB (real estate management activities), 6. Šiaulių Banko Investicijų Valdymas UAB (investment management activities), 7. Šiaulių Banko Lizingas UAB (finance and operating lease activities), 8. Šiaulių Banko Turto Fondas UAB (real estate management activities). As of 31 December 2016 the Bank owned the following indirectly controlled subsidiaries: 9. Apželdinimas UAB (real estate management activities), 10. Sandworks UAB (real estate management activities), As of 31 December 2016 the Bank owned directly controlled subsidiaries held for sale: ŽSA 1 UAB, ŽSA 2 UAB, ŽSA 3 UAB, ŽSA 4 UAB, ŽSA 5 UAB (real estate management activities). Investments in subsidiaries are described in more detail in Note 2 Securities. As of 31 December 2016 the Bank had the indirectly controlled subsidiary held for sale: 16. Žalgirio Sporto Arena UAB (real estate management activities). This condensed interim financial information for the nine month period ended 30 September 2017 has been prepared in accordance with with IAS 34, "Interim Financial Reporting" as adopted by the EU. The condensed interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by EU. Except for the points described below, all the accounting policies applied in the preparation of this condensed interim financial information are consistent with those of the annual financial statements of the Bank for the year ended 31 December Income tax Income tax in the interim periods is accrued using the tax rate that would be applicable to expected total annual earnings. New and amended standards, and interpretations There are no new standards, amendments and interpretations that are mandatory for the Bank with effect from 2017, and that would have a material impact on the Bank s financial information. The Bank s management do not believe the newly published standards, amendments and interpretations that are mandatory for the Bank s reporting periods beginning on or after 1 January 2018 will have a material impact on the Bank s financial statements except for IFRS9, which is effective for annual periods beginning on or after 1 January The impact of IFRS9 is described in the annual financial statements of the Bank for the year ended 31 December The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management s best knowledge of current event and actions, actual results ultimately may differ from those estimates. In preparing these condensed interim financial statements, the significant judgements made in applying Group s accounting policies and the key sources of estimation uncertainty were the same as those applied to the financial statements as at and for the year ended 31 December / 38

11 G E N E R A L I N F O R M A T I ON ( c o n t i n u e d ) These financial statements combine the consolidated financial statements for the Group and stand-alone financial statements of the Bank. Such format of reporting was adopted to ensure consistency of presentation with the format prescribed by the Bank of Lithuania and applied for statutory reporting. No significant amounts of the Group s and the Bank s income or expenses are of a substantial seasonal nature. R E S T A T E M E N T O F F I N A N C I A L I N F O R M A T I O N The amounts presented in the interim financial statements for the nine month period ended 30 September 2016 were restated in order to eliminate the presentation error related to the accounting treatment of payments received from non-performing loans. Before restatement, payments received from non-performing loans were allocated according to the legal principles set in the civil code therefore in some cases upon the reception of payments from non-performing loans, both delinquency income (included in interest income) and impairment expenses were recognized. The Bank restated the amounts in its financial statements so that upon reception of payments from non-performing loans no additional impairment would be recognized. The amount of assets and net profit were not affected by the restatements. The impact of restatements on the financial statements: - income statement - interest income and impairment expenses reduced by the same amount (the amount of delinquency penalties recognized in interest income which caused the increase in impaiment expenses); - statement of financial position no changes; - information presented in the notes to the financial statements gross value of loans and allowance for loan impairment reduced by the same amount. The impact of the restatements on the Group s and Bank s financial statements is presented in the table below: As previously presented The Group Nine month period ended 30 September 2016 Restatement As restated adjustment As previously presented The Bank Nine month period ended 30 September 2016 Restatement As restated adjustment Income statement for the period: Interest and similar income 56,365 (6,295) 50,070 50,789 (6,295) 44,494 Allowance for impairment losses on loans and other assets (11,691) 6,295 (5,396) (12,336) 6,295 (6,041) Information presented in the notes to the financial statements: Gross value of loans at the end of the period 1,004,379 (5,145) 999,234 1,052,590 (5,145) 1,047,445 Allowance for loan impairment at the end of the period (48,817) 5,145 (43,672) (43,591) 5,145 (38,446) Loans written-off during the period (6,785) 1,150 (5,635) (6,785) 1,150 (5,635) 11 / 38

12 NOTE 1 LOANS TO CUSTOMERS AND FINANCE LEASE RECEIVABLES Credit risk is defined as the risk for the Group to incur losses due to the Group s customers failure to fulfil their financial obligations towards the Group. Credit exposures arise principally in lending activities and it is the most significant risk in the Group s banking activities. There is also credit risk in investment activities that arise from debt securities and in the Group s asset portfolio as well as in the off-balance sheet financial instruments, such as loan commitments, guarantees and letters of credit. The Bank regularly reviews its credit risk management policies which include lending policies, credit risk limit control, other credit risk mitigation measures as well as the internal control and internal audit of credit risk management. The Bank takes risks only in the fields, which are well known to it and where it has long-term experience, trying to avoid excessive risk in transactions that can have negative influence to the big portion of shareholders equity but seeks the sufficient profitability which, in terms of increasing competition, would ensure the stable Bank s position in the market and would increase the Bank s value. In assessing exposure to credit risk, the Bank adheres to the principle of prudence. The aim of the Bank s credit risk management policy is to ensure that the conflict between interests of staff or structural units is avoided. With respect to provision of credits to clients, the principle stating that profit should not be earned at the expense of excessive credit risk is observed. Maximum exposure to credit risk before collateral held or other credit enhancements: Loans and advances to banks 1,800 1,800 5,337 5,337 Loans and advances to customers: 1,064,756 1,069, , ,155 Loans and advances to financial institutions 18 41, ,862 Loans to individuals (Retail) 131,557 76, ,564 67,458 Loans to business customers 933, , , ,835 Finance lease receivables 86,841 83,964 69,807 48,170 Debt securities at fair value through profit or loss 30,317 16,878 39,785 25,658 Derivative financial instruments 4,110 4,086 8,983 8,687 Debt securities available for sale 9,207 8,662 17,034 16,631 Debt securities held to maturity 555, , , ,054 Other assets subject to credit risk 7,185 4,012 4,136 3,078 Credit risk exposures relating to off balance sheet items are as follows: Financial guarantees 26,580 26,647 21,253 21,320 Letters of credit ,185 2,185 Loan commitments and other credit related liabilities 187, , , ,416 Total 1,973,517 1,981,534 1,762,586 1,789, / 38

13 Loans to customers Loans and advances are summarised as follows: NOTE 1 LOANS TO CUSTOMERS AND FINANCE LEASE RECEIVABLES (continued) Loans to business customers 961,020 1,020, , ,018 Loans to individuals 137,830 78, ,056 69,577 Gross 1,098,850 1,099, ,411 1,026,595 Less: allowance for impairment (34,094) (29,866) (36,802) (32,440) of which: for individually assessed loans (32,859) (29,107) (35,435) (31,500) of which: for collectively assessed loans (1,235) (759) (1,367) (940) Net 1,064,756 1,069, , ,155 Neither past due nor individually impaired 974, , , ,637 Past due but not individually impaired 70,393 63,409 60,372 52,930 Individually impaired 54,076 46,238 58,559 51,028 Gross 1,098,850 1,099, ,411 1,026,595 Less: allowance for impairment (34,094) (29,866) (36,802) (32,440) of which: for individually assessed loans (32,859) (29,107) (35,435) (31,500) of which: for collectively assessed loans (1,235) (759) (1,367) (940) Net 1,064,756 1,069, , ,155 Loans and advances neither past due not impaired are loans which are not impaired and payments of which are not past due. Past due but not impaired loans are loans for which principal or interest is past due but no allowance for impairment is recognized. Impaired loan is a loan to which a loss event is recognized and allowance for impairment is made. The list of loss events: 1. significant financial difficulties of the debtor or issuer, i.e. the borrower s financial status is evaluated as poor or bad; 2. violation of the loan agreement (non-payment of the periodic loan payments (the part of the loan or interest)) for more than 30 days; 3. the loan is being recovered; 4. funds granted to the borrower are used not according to the loan purpose and the implementation terms of investment project are violated or decrease in collateral value, when repayment terms of the evaluated loans directly depend on the value of the object of security measure; 5. third parties related to the borrower do not fulfil their obligations, which impacts the borrower s ability to fulfil its financial obligations; 6. other loss events (termination or cancellation of the licence validity of the borrower or issuer engaged in licensed activity; the death of the borrower or issuer). Loans and advances past due but not impaired Past due up to 7 days 32,477 30,467 23,608 21,506 Past due 8 to 30 days 16,043 11,482 17,333 13,374 Past due days 1,404 1,404 2,812 2,803 Past due days 2,321 2, Past due more than 90 days 18,148 17,735 15,842 14,472 Total 70,393 63,409 60,372 52,930 Allowance for impairment of collectively assessed loans (293) (48) (179) (54) Fair value of collateral 55,368 55,368 48,812 48, / 38

14 Loans and advances individually impaired NOTE 1 LOANS TO CUSTOMERS AND FINANCE LEASE RECEIVABLES (continued) Impaired loans 54,076 46,238 58,559 51,028 Allowance for impairment of individually assessed loans (32,859) (29,107) (35,435) (31,500) Allowance for impairment of collectively assessed loans (13) (13) (197) (197) Fair value of collateral 33,332 33,332 44,626 44,626 Unsecured loans also include loans secured by other types of collateral (e.g. future inflow of funds into the borrowers Bank accounts (controlled by the Bank), third party warrantees, bills of exchange, etc.). Finance lease receivables Segment information Business customers 72,939 69,182 58,904 41,044 Individuals 15,329 15,157 12,211 7,327 Gross 88,268 84,339 71,115 48,371 Neither past due not impaired 62,746 60,784 53,104 35,661 Past due but not impaired 23,603 22,795 16,188 12,469 Impaired 1, , Gross 88,268 84,339 71,115 48,371 Subtract: Allowance for impairment (1,427) (375) (1,308) (201) of which: for individually assessed finance lease receivables (1,363) (311) (1,256) (150) of which: for collectively assessed finance lease receivables (64) (64) (52) (51) Net 86,841 83,964 69,807 48,170 Group Individuals Business Business Total Individuals customers customers Total Unsecured finance lease receivables 214 4,280 4, ,453 3,799 Finance lease receivables secured by: transport vehicles - 14,098 32,782 46,880 10,924 23,729 34,653 real estate ,839 26, ,047 24,867 airplanes production equipment ,437 1,437 other equipment ,509 8, ,569 5,624 other assets Total 15,329 72,939 88,268 12,211 58,904 71,115 Bank Individuals Business Business Total Individuals customers customers Total Unsecured finance lease receivables 133 4,074 4, ,585 2,710 Finance lease receivables secured by: transport vehicles - 14,060 32,657 46,717 6,501 18,014 24,515 real estate ,977 24, ,463 17,145 airplanes production equipment other equipment ,474 8, ,982 4,001 other assets Total 15,157 69,182 84,339 7,327 41,044 48, / 38

15 NOTE 2 SECURITIES Securities at fair value through profit or loss Debt securities: 30,317 16,878 39,785 25,658 Government bonds 15,105 7,552 27,090 18,131 Corporate bonds 15,212 9,326 12,695 7,527 Equity securities 18, , Total securities at fair value through profit or loss 48,364 17,441 57,427 26,103 Trading securities: Debt securities 28,837 16,878 38,314 25,658 from AA- to AAA 1,218 1,218 4,356 4,356 from A- to A+ 10,639 7,923 12,897 11,023 from BBB- to BBB+ 12,053 5,293 15,231 7,580 from BB- to BB+ 3,969 1,486 5,313 2,315 lower than BB no rating Equity securities listed unlisted units of investment funds Total trading securities 29,400 17,441 38,759 26,103 Securities designated at fair value through profit or loss at initial recognition: Debt securities 1,480-1,471 - from AA- to AAA from A- to A from BBB- to BBB from BB- to BB lower than BB no rating Equity securities 17,484-17,197 - listed unlisted units of investment funds 17,484-17,197 - Total securities designated at fair value through profit or loss at initial recognition 18,964-18,668 - TOTAL 48,364 17,441 57,427 26,103 Group's securities designated at fair value through profit or loss at initial recognition portfolio consists of securities that cover technical insurance provisions under unit-linked insurance contracts of life insurance subsidiary. Investment securities Securities available for sale: Debt securities: 9,207 8,662 17,034 16,631 Government bonds Corporate bonds 9,207 8,662 17,034 16,631 Equity securities 2, ,454 2,209 Total securities available for sale 11,364 9,198 19,488 18,840 Held-to-maturity securities: Debt securities: 555, , , ,054 Government bonds 390, , , ,755 Corporate bonds 164, , , ,299 Total held-to-maturity securities 555, , , , / 38

16 NOTE 2 SECURITIES (continued) Securities available for sale: Debt securities 9,207 8,662 17,034 16,631 from AA- to AA from A- to A+ 3,328 3,328 4,350 4,350 from BBB- to BBB+ 5,168 5,168 9,715 9,715 from BB- to BB ,083 2,083 lower than BB no rating Equities 2, , listed unlisted 1, , units of investment funds 1, , Total securities available for sale 11,364 9,198 19,168 17,504 Held-to-maturity securities: Debt securities 555, , , ,054 from AA- to AA+ 14,206 14,206 10,349 10,349 from A- to A+ 379, , , ,509 from BBB- to BBB+ 157, , , ,236 from BB- to BB+ 3,164 3,164 8,295 8,295 lower than BB ,665 2,665 no rating Total held-to-maturity securities 555, , , ,054 During the nine month periods ended 30 September 2017 and 2016, no reclassifications between portfolios of securities were performed. Investments in subsidiaries Share in equity, % Carrying Share in Acquisition Carrying amount equity, % cost amount Acquisition cost Bank Investments in consolidated directly controlled subsidiaries: Bonum Publicum GD UAB % 8,399 8, % 8,399 8,399 Minera UAB % 6,166 3, % 5,165 2,566 Pavasaris UAB % 10, % 10,456 3,084 SB lizingas UAB % 8,862 8, % 8,862 8,862 SBTF UAB % 1, % 1, Šiaulių Banko Investicijų Valdymas UAB % 5, % 5, Šiaulių Banko Lizingas UAB % 4, % 4, Šiaulių Banko Turto Fondas UAB % 3,999 3, % 3,999 2,794 Total 48,415 25,460 47,414 26,665 Share in equity Acquisition cost Carrying Share in Acquisition Carrying amount equity cost amount Investments in consolidated indirectly controlled subsidiaries: Sandworks UAB * % % 3 3 ŽSA5 UAB * % Apželdinimas UAB ** % % * Indirectly controlled by subsidiary Šiaulių Banko Investicijų Valdymas UAB ** Indirectly controlled by subsidiary Šiaulių Banko Turto Fondas UAB During the second quarter of 2017, the Bank transfered ŽSA 5 UAB from the subsidiaries held for sale to the consolidated subsidiaries. The subsidiary did not perform active operations and had no material assets or liabilities, the reason for this transfer was that the Šiaulių Bankas group needed an entity to be used as a special purpose vehicle therefore its management decided to save the costs of setting up an entity by using one of the existing entities that performed no active operations. The Bank increased its share capital by asset contibution (equities with a value of EUR 297 thousand) and during the third quarter of 2017 sold the entity to the subsidiary Šiaulių Banko Investicijų Valdymas UAB. During the first quarter of 2017 Žalgirio Sporto Arena UAB, a subsidiary held for sale, was liquidated. The remaining subsidiaries held for sale do not perform active operations and have no material assets or liabilities, the liquidation process for these entities was started in the second quarter of / 38

17 NOTE 2 SECURITIES (continued) During the nine month period ended 30 September 2017, the Bank recognized EUR 2,966 thousand impairment to investment in Pavasaris UAB (value of the investment reduced by EUR 2,966 thousand after the dividends from the subsidiary of EUR 3,116 thousand were received), the Bank reversed an EUR 760 thousand impairment to investment in Šiaulių Banko Turto Fondas UAB (due to the improved financial performance of subsidiary). The Bank incurred a loss of EUR 55 thousand on revaluation of subsidiaries held for sale (the book value of these subsidiaries was reduced to nil). During the nine month period ended 30 September 2016, the Bank recognized impairment losses to the following investments in subsidiaries: EUR 550 thousand investment in Šiaulių Banko Lizingas UAB (Bank covered losses of the subsidiary), EUR 750 thousand investment in Pavasaris UAB (value of the investment reduced by EUR 750 thousand after the dividends from the subsidiary of EUR 1,500 thousand were received). Other assets NOTE 3 SIGNIFICANT INFORMATION ON CHANGES IN OTHER ASSET ITEMS Amounts receivable 7,185 4,012 4,136 3,078 Inventories 17,304-24,936 - Deferred charges Assets under reinsurance and insurance contracts Prepayments 4,182 3,652 3,979 3,428 Foreclosed assets Assets classified as held for sale Other 3,804 3, Total 34,693 12,604 35,838 7, / 38

18 NOTE 4 DUE TO CUSTOMERS Special and lending funds Demand deposits: National government institutions 13,662 13,662 10,543 10,543 Local government institutions 112, ,648 42,682 42,682 Governmental and municipal companies 16,937 16,937 5,780 5,780 Corporate entities 229, , , ,591 Non-profit organisations 10,595 10,595 10,602 10,602 Individuals 291, , , ,241 Unallocated amounts due to customers 57,432 57,814 29,445 29,460 Total demand deposits 732, , , ,899 Time deposits: National government institutions 8,742 8, Local government institutions 1,080 1,080 1,067 1,067 Governmental and municipality companies Corporate entities 42,906 42,906 37,690 37,690 Non-profit organisations 2,631 2,631 2,455 2,455 Individuals 825, , , ,393 Total time deposits 881, , , ,579 Total 1,613,575 1,614,559 1,495,087 1,495,478 NOTE 5 SIGNIFICANT INFORMATION ON CHANGES IN OTHER LIABILITY ITEMS The special funds consist of the funds from the mandatory social and health insurance funds. The special funds have to be returned to the institutions which have placed them upon the first requirement of the latter. The decrease in special and lending funds from EUR 28,326 thousand in the beginning of the year to EUR 7,512 thousand in the end of the reporting period is attributable to routine fluctuations in these funds. NOTE 6 CAPITAL As of 30 September 2017 the Bank s share capital amounted to EUR 131,365,989.88, it comprised 452,986,172 ordinary registered shares with par value of EUR 0.29 each. As of 31 December 2016 the Bank s share capital amounted to EUR 109,471,658.33, it comprised 377,488,477 ordinary registered shares with par value of EUR 0.29 each. The ordinary meeting of shareholders of Šiaulių bankas that took place on 30 March 2017 passed a resolution to increase Bank's share capital by EUR 21,894 thousand (20.0%) using Bank's own resources (retained earnings). The amended Charter of the Bank with an increased authorised capital was registered in the Register of Legal Entities on 6 June 2017, the bonus shares were distributed among Bank's shareholders using the proportion of their stakes at the end of accounting date of the shares (13 April 2017). The ordinary meeting of shareholders of Šiaulių bankas that took place on 30 March 2016 passed a resolution to increase Bank's share capital by EUR 18,245 thousand (20.0%) using Bank's own resources (retained earnings). The amended Charter of the Bank with an increased authorised capital was registered in the Register of Legal Entities on 26 May 2016, the bonus shares were distributed among Bank's shareholders using the proportion of their stakes at the end of accounting date of the shares (13 April 2016). 18 / 38

19 NOTE 6 CAPITAL (continued) The shareholders holding over 5% of the Bank s shares are listed in the table below: Share of the authorized capital held, % 30 September 2017 Share of the authorized capital held, % 31 December 2016 European Bank for Reconstruction and Development Invalda INVL AB Gintaras Kateiva Shareholders of the Bank that have signed shareholders agreement - European Bank for Reconstruction and Development, Prekybos namai Aiva UAB, Mintaka UAB, Įmonių Grupė Alita AB, Arvydas Salda, Sigitas Baguckas, Vigintas Butkus, Vytautas Junevičius, Gintaras Kateiva, Kastytis Jonas Vyšniauskas, Algirdas Butkus, - and other shareholders votes of which are calculated together based on the legal acts of Republic of Lithuania, form a group of acting together shareholders. As of 30 September 2017, this group possessed 38.82% of the authorised capital and votes of the Bank (31 December 2016: 39.10%). As at 30 September 2017, the Bank had 4,467 (as at 31 December 2016: 3,401) shareholders. Dividends: On 30 March 2017 the ordinary general meeting of shareholders made a decision to pay EUR (i.e. 1.72%) dividends per one ordinary registered share with EUR 0.29 nominal value each. On 30 March 2016 the ordinary general meeting of shareholders made a decision to pay EUR (i.e. 0.69%) dividends per one ordinary registered share with EUR 0.29 nominal value each. Statutory Reserve: According to the Law of the Republic of Lithuania on Banks, allocations to the statutory reserve shall be compulsory and shall not be less than 1/20 of the profit available for appropriation. The statutory reserve may, by a decision of extraordinary general or annual meeting of the shareholders, be used only to cover losses of the activities. NOTE 7 NET INTEREST INCOME 1 January - 30 September January - 30 September 2016 Interest income: (restated) (restated) on loans to other banks and financial institutions and placements with credit institutions 234 2, ,062 on loans to customers 37,252 29,640 37,388 31,621 on debt securities 9,444 9,129 9,516 9,152 on finance leases 3,223 2,320 2, Total interest income 50,153 43,101 50,070 44,494 Interest expense: on financial liabilities designated at fair value through profit or loss (741) (741) (1,068) (1,068) on financial liabilities measured at amortised cost (7,139) (7,136) (8,175) (8,179) on other liabilities (169) (169) (10) (10) Total interest expense (8,049) (8,046) (9,253) (9,257) Net interest income 42,104 35,055 40,817 35, / 38

20 NOTE 8 NET FEE AND COMMISSION INCOME 1 January - 30 September January - 30 September 2016 Fee and commission income: for administration of loans of third parties 2,663 2,663 2,828 2,828 for settlement services 2,817 2,823 2,639 2,663 for cash operations 2,360 2,360 1,847 1,847 for account administration 1,632 1, for guarantees, letters of credit, documentary collection for collection of utility and similar payments for services related to securities other fee and commission income Total fee and commission income 11,489 11,146 10,014 9,717 Fee and commission expense: for payment cards (2,129) (2,129) (1,972) (1,972) for cash operations (636) (636) (562) (562) for correspondent bank and payment system fees (284) (185) (380) (147) for services of financial data vendors (130) (130) (130) (130) for services related to securities (285) (285) (203) (203) other fee and commission expenses (143) (139) (231) (219) Total fee and commission expense (3,607) (3,504) (3,478) (3,233) Net fee and commission income 7,882 7,642 6,536 6,484 NOTE 9 OTHER OPERATING EXPENSES 1 January - 30 September January - 30 September 2016 Rent of buildings and premises (1,050) (907) (1,070) (923) Utility services for buildings and premises (475) (433) (523) (475) Other expenses related to buildings and premises (179) (177) (297) (276) Transportation expenses (313) (297) (297) (328) Legal costs (40) (40) (38) (38) Personnel and training expenses (128) (113) (102) (79) IT and communication expenses (1,493) (1,338) (1,462) (1,339) Marketing and charity expenses (1,541) (936) (870) (194) Service organisation expenses (893) (794) (748) (707) Non-income taxes, fines (419) (25) (541) (59) Costs incurred due to debt recovery (310) (217) (245) (126) Other expenses (628) (264) (585) (293) Total (7,469) (5,541) (6,778) (4,837) 20 / 38

21 NOTE 10 IMPAIRMENT LOSSES 1 January - 30 September January - 30 September 2016 (restated) (restated) (Impairment losses)/reversal of impairment losses on loans 1,610 1,748 (6,680) (6,140) Recoveries of loans previously written-off (Impairment losses) on finance lease receivables (120) (51) (18) (3) Recovered previously written-off finance lease receivables Impairment losses on subsidiaries - (2,206) - (1,300) Revaluation of subsidiaries classified as held for sale - (55) - - (Impairment losses)/reversal of impairment losses on other assets (518) Recoveries of other assets previously written-off Reversal of provisions for off-balance sheet items Total 2,040 (54) (5,396) (7,341) 1 January - 30 September January - 30 September 2016 Allowance for impairment of loans (restated) (restated) As at 1 January 36,802 32,440 42,666 37,940 Change in allowance for loan impairment (1,610) (1,748) 6,680 6,140 Loans written off during the period (1,101) (829) (5,635) (5,635) Other factors (reclassification, FX rate shift, etc.) 3 3 (39) 1 As at 30 September 34,094 29,866 43,672 38,446 Allowance for impairment of finance lease receivables As at 1 January 1, , Change in allowance for impairment of finance lease receivables Finance lease receivables written off during the period Other factors (reclassification, FX rate shift, etc.) (1) As at 30 September 1, , NOTE 11 SIGNIFICANT INFORMATION ON OTHER INCOME STATEMENT ITEMS Net gain from derecognition of financial assets Net gain from derecognition of financial assets of EUR 2,936 thousand during the nine month period ended 30 September 2017 (nine month period ended 30 September 2016: EUR 11,868 thousand) is mainly attributable to the derecognition of the acquisition value adjustment (i.e. the difference between acquisition value and the gross value) for the fully or partially repaid/refinanced or sold loans. Revenues and expenses related to other activities of Group companies 1 January - 30 September January - 30 September 2016 Revenue related to insurance activities 4,676-4,461 - Revenue from sale of apartments 3,876-5,900 - Profit from discontinued operations Total revenue related to other activities of Group companies 8,552-10,380 - Part of the change of the technical insurance provisions that covers the result of investment of assets under unit-linked contracts* (270) - (613) - Other changes of the technical insurance provisions and other expenses related to insurance activities (3,189) - (3,530) - Cost of apartments sold (3,436) - (5,599) - Loss from discontinued operations (10) Total expenses related to other activities of Group companies (6,905) - (9,742) - * The investment result of the insurance company assets under unit-linked contracts is included in the following income statement lines: 1 January - 30 September January - 30 September 2016 Interest and similar income Net gain (loss) from operations with securities Net gain (loss) from foreign exchange (586) - (129) - Total / 38

22 NOTE 12 RELATED-PARTY TRANSACTIONS Related parties with the Bank are classified as follows: a) members of the Bank s Supervisory Council and Board (which also are the main decision makers of the Group), their close family members and companies that are controlled, jointly controlled or significantly influenced over by these related parties. For some companies the presumed significant influence threshold of 20% voting rights has been reduced if other evidence shows that a person/ entity can exercise significant influence by additional means (e.g. by holding a seat in the Board of Directors of a particular entity); b) subsidiaries of the Bank and subsidiaries held for sale; c) the shareholders holding over 5 % of the Bank s share capital. During 2017 and 2016, a certain number of banking transactions were entered into with related parties in the ordinary course of business. These transactions include settlements, loans, deposits and foreign currency transactions The balances of loans granted to and deposits accepted from the Bank s related parties, except for subsidiaries, were as follows: Balances of deposits Balances of loans Balances of Balances of loans (incl.off-balance deposits and debt securities sheet credit (incl.off-balance commitments) sheet credit commitments) Members of the Council and the Board 2,119 1, ,009 Other related parties (excluding subsidiaries of the Bank) 18,683 55,320 14,770 53,447 Total 20,802 56,324 15,722 54,456 The Group and the Bank held debt securities of one entity attributable to related parties. On 30 September 2017 debt securities attributable to related parties exposure amounted to EUR 570 thousand for the Group and EUR 25 thousand for the Bank (31 December 2016: EUR 617 thousand and EUR 214 thousand, respectively). Transactions with EBRD: The Group/Bank has a subordinated loan received from European Bank for Reconstruction and Development (hereinafter EBRD), book value of which was EUR 32,581 thousand as of 30 September 2017 (31 December 2016: EUR 22,064 thousand). The agreement for the loan was signed at the end of February Loan amount is EUR 20 million, term 10 years. Loan agreement provides a conversion option to EBRD, under which EBRD has a right to convert a part of or the whole loan to ordinary shares of the Bank at a price, which at certain scenarios could be more favourable than the market price (but in any case, not less than the nominal value of the share). Because of this option, which is an embedded derivative, the Bank chose to account for the whole instrument as a financial liability at fair value through profit or loss. Subordinated loan related interest expenses amounted to EUR 741 thousand, a loss of EUR 10,520 thousand related to revaluation of the liability to fair value was recorded in profit (loss) statement for the nine month period ended 30 September 2017 (nine month period ended 30 September 2016: interest expenses EUR 1,068 thousand, revaluation gain EUR 345 thousand). Increased price of Bank s shares is the main driver of revaluation loss and increase in the liability during the nine month period ended 30 September The price of Bank s shares, which increased by 52% during the nine month period ended 30 September 2017 and caused an appreciation of the conversion option, is the main driver of subordinated loan value increase and revaluation loss. 22 / 38