BANCO CRUZEIRO DO SUL REPORTS 1Q10 RESULTS HIGHLIGHTS IN 1Q10

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1 1Q10 Conference Calls May 18, 2010 Portuguese 11:00 a.m. (Brasília) 10:00 a.m. (New York) Dial-in: (+55 11) Replay: (+55 11) Code: Banco Cruzeiro do Sul BANCO CRUZEIRO DO SUL REPORTS 1Q10 RESULTS São Paulo, May 14, 2010 Banco Cruzeiro do Sul (BM&FBovespa - CZRS4), a privatesector multiple-service bank operating primarily in the personal credit segment through paycheckdeductible loans to public employees and social security beneficiaries, and with operations also in the corporate lending segment through short-term loans, usually secured by receivables, to small and midsized (middle-market) companies, announces its results for the first quarter of 2010 (1Q10). The Bank s audited financial statements are prepared in accordance with generally accepted accounting principles in Brazil, based on Brazilian Corporate Law, the rules and the regulations of the Securities and Exchange Commission of Brazil (CVM) and the accounting standards established by the Independent Auditors Institute of Brazil ( BR GAAP ). HIGHLIGHTS IN 1Q10 In the first quarter of 2010 our origination of credit assets remained in line with our strategy of quality and liquidity, with paycheck-deductible loan origination aligned with the product s trend; Net income in 1Q10 was R$39.67 million, down a slight 3.48% from 4Q09 (R$41.1 million) and reversing the loss of R$21.8 million in the first quarter of Recurring income in the period was R$28.2 million; English 12:30 p.m. (Brasília) 11:30 a.m. (New York) Dial-in: (+1 973) Replay: (+1 706) Code: Investor Relations Fausto Vaz Guimarães Neto IR Officer João de Lacerda Soares IR Manager Roberto Coutinho IR Manager Tel: +55 (11) ri@bcsul.com.br IR Web site: In 1Q10, paycheck-deductible loan origination ed R$ million, with a monthly average in the quarter of R$ million. Origination of paycheck-deductible loans in 1Q10 was 12.2% lower than in the previous quarter (R$903.1 million), in line with the product s historical seasonality. Our on-balance-sheet loan portfolio stood at R$4.82 billion, comprising paycheck-deductible personal loans of R$4.40 billion, paycheck-deductible credit card operations of R$116.7 million, and middle-market loans of R$306.0 million; Time deposits ed R$3,397.9 million, increasing by 1.3% from the fourth quarter of 2009 (R$3,354.3 million) and by 79.9% from the first quarter of 2009 (R$1,889.1 million). Our cash and cash equivalents reached R$737.6 million, equivalent to 67.5% of shareholders equity at the close of the quarter; Banco Cruzeiro do Sul s market capitalization on March 31, 2010 was R$1,639.4 million, with its stock (CZRS4) trading at R$11.99 per share. At the close of 1Q10, Banco Cruzeiro do Sul s shareholders equity amounted to R$1, million. 1

2 MANAGEMENT S COMMENTS In the first quarter of 2010, our origination of credit assets remained in line with our strategy of quality and liquidity, with the origination of paycheck-deductible loans aligned with the product's trend. Our origination of assets in both the paycheck-deductible loan and middle-market segments remained selective, with efforts concentrated in operations with more attractive returns. We continued to control our operating expenses as well as our funding costs in order to maximize spreads. In addition, we continued monitoring administrative and personnel expenses in order to adjust the Bank's operations to the new market conditions, achieving an efficiency ratio of 49.2% in the quarter. It is important to note that our administrative expenses were impacted by the nonrecurring expenses related to the issue of new shares in the Bank in the amount of R$1.0 million. Excluding these expenses, our efficiency ratio in the period was 48.4%. Funding through Time Deposits with Special Guarantee (DPGEs) continued to represent a consistent funding source in terms of volume as well as maturities and prices, which, combined with offshore funding operations, has reduced our dependence on asset assignments to other financial institutions. This higher funding in both local and foreign currency has made it possible to hold a higher volume of assets in the portfolio, though we still maintain relationships with partner financial institutions in order to assign credits as a funding source, with price and maturity levels that are compatible with our operations. The procedures for the accounting classification and disclosure of operations involving the sale or transfer of financial assets comply with Resolution 3,809 issued by the Central Bank. This new resolution postponed the compliance with Resolution 3,533 to January 2011 and requires banks that had adopted them to resume the accounting procedures used previously. Therefore, Banco Cruzeiro do Sul presents its first-quarter figures based on this new accounting methodology, with revenue and expenses from assignments with risk retention apportioned in advance instead of in accordance with the remaining duration of the operations. As a result, the accounting result is once again impacted by advance revenue from assignments. However, our strategy aims to keep assets on the balance sheet for as long as possible, maintaining assignments strictly within the volume required for our funding needs, thereby reducing this impact and consequently the variations in profitability resulting from when Resolution 3,533 is ultimately implemented. As a result of this practice, net income in the first quarter of 2010 was R$39.67 million, 3.48% lower than in the fourth quarter of 2009 (R$41.1 million), reversing the loss of R$21.8 million of the first quarter of 2009 due to the impacts from the international liquidity crisis and the early adoption of Central Bank Resolution 3,533. The comparison of the result posted in the first quarter of 2010 with the first and fourth quarters of 2009 is hindered due to the difference in accounting procedures (adoption of Resolution 3,533 as of November 2008 and adoption of Resolution 3,809 as of November 2009) adopted in the periods analyzed. Net income in 1Q10 was impacted by non-recurring revenues and expenses resulting from the marking to market of our securities portfolio and by expenses of R$ 11.5 million with the follow-on offering. As a result, recurring income in the period was R$28.2 million, in line with the R$28.3 million recorded in 4Q09. 2

3 Shareholders equity in the period was R$1, million, 2.3% higher than in 4Q09 (R$1,068.2 million) and 6.3% higher than in the same period of 2009 (R$1,028.0 million). Average shareholders equity was R$1,079.9 million, 3.41% higher than in the same period of In the first quarter of 2010, the Company s free float stood at 19.4%. On March 31, 2010, Banco Cruzeiro do Sul s market capitalization was R$1,639.4 million, with its stock (CZRS4) trading at R$11.99 per share. Market capitalization corresponded to 1.5 times shareholders equity in the fourth quarter. The Bank s stock gained 110% in the last 12 months. Note that these stock gains do not consider the dividends and shareholders equity paid in the periods mentioned. In 1Q10, paycheck-deductible loan origination ed R$ million, with a monthly average in the quarter of R$ million. Origination of paycheck-deductible loans in 1Q10 was 12.2% lower than in the previous quarter (R$903.1 million), in line with the product s historical seasonality. This loan origination in the quarter was 27.5% higher than in the same period last year (R$622.3 million). A highlight was the origination of paycheck-deductible personal loans in the last four quarters, which ed R$3,576 million, which a monthly average of R$298 million, an increase of 46.2% from the same period of 2008/2009 (R$2,446.3 million), confirming the recovery in our paycheck-deductible loan origination. The portfolio financed through our paycheck-deductible credit card reached R$116.7 million, 75.4% higher than in the first quarter of The number of cards issued stood at 370,162, down 3.42% from 4Q09 (383,300). Active clients financing their outstanding balances accounted for 76.2% of the. The middle-market segment ended 1Q10 with a loan portfolio of R$306.0 million, representing increases of 10.8% from 4Q09 (R$276.3 million) and of 7.7% from the same period of 2009 (R$284.1 million). The amounts in the middle-market portfolio are in line with the strategy adopted by the Bank for this business segment. In the first quarter of 2010, Banco Cruzeiro do Sul s foreign exchange desk maintained its operations in the interbank market, imports and exports, paper currency distribution, gold exports and the buying and selling of foreign currencies for financial and commercial fund transfers. This led our on-balance-sheet loan portfolio to reach R$4.82 billion, comprising R$4.40 billion in paycheck-deductible personal loans, R$116.7 million in paycheck-deductible credit card operations and R$306 million in loans in the middle-market segment. The overall portfolio grew by 6.0% from 4Q09 (R$4.553 billion) and by 40.0% from the same period of 2009 (R$3.447 billion). Gross income from financial intermediation came to R$202.0 million, 10.1% higher than in the fourth quarter of 2009 (R$183.5 million) and 232% higher than in the same period last year (R$60.8 million). Time deposits ed R$3,397.9 million, increasing by 1.3% from the fourth quarter of 2009 (R$3,354.3 million) and by 79.9% from the first quarter of 2009 (R$1,889.1 million). A highlight was the funding operation carried out in February 2010 in the amount of USD 250 million, with a 3

4 five-year term and a coupon of 8.5%. The treasury, market and foreign-exchange risks posed by offshore funding operations remained protected from the variations generated by market volatility. On March 31, 2010, our cash and cash equivalents stood at R$737.6 million, equivalent to 67.5% of shareholders equity at the close of the quarter. Period Highlights (R$ 'million) 1Q10 4Q09 1Q09 1Q10 x 4Q09 1Q10 x 1Q09 Paycheck deductible origination % 27.4% Net profit (21.8) -3.6% % Shareholders equity 1, , , % 6.3% Credit portfolio quality (AA-C) 96.3% 97.2% 98.5% -0,9 p.p. -2,2 p.p. Credit portfolio quality (D-H/Credit) 3.7% 2.8% 1.5% 0,9 p.p. 2,2 p.p. Active clients 1, , , % 9.3% Paycheck deductible credit portfolio¹ 4, , , % 42.8% SME's credit portfolio % 7.7% Average commission to bank correspondents 7.2% 8.2% 6.4% 0.0 p.p. 1.8 p.p. Capital adequacy ratio 15.1% 16.1% 18.5% - - ¹ Considers credit card COMMENTS ON PERFORMANCE Net Income The procedures for the accounting classification and disclosure of operations involving the sale or transfer of financial assets comply with Resolution 3,809 issued by the Central Bank. This new resolution postponed the compliance with Resolution 3,533 to January 2011 and requires banks that had adopted them to resume the accounting procedures used previously. Therefore, Banco Cruzeiro do Sul presents its first-quarter figures based on this new accounting methodology, with revenue and expenses from assignments with risk retention apportioned in advance instead of in accordance with the remaining duration of the operations. As a result, the accounting result is once again impacted by advance revenue from assignments. However, our strategy aims to keep assets on the balance sheet for as long as possible, maintaining assignments strictly within the volume required for our funding needs, thereby reducing this impact and consequently the variations in profitability resulting from when Resolution 3,533 is ultimately implemented. As a result of this practice, net income in the first quarter of 2010 was R$39.67 million, 3.48% lower than in the fourth quarter of 2009 (R$41.1 million), reversing the loss of R$21.8 million in the first quarter of 2009 caused by the effects from the international liquidity crisis and the early adoption of Central Bank Resolution 3,533. The comparison of net income in the first quarter of 2010 with that in the first and fourth quarters of 2009 is distorted by the different accounting procedures (adoption of Resolution 3,533 as of November 2008 and adoption of Resolution 3,809 as of November 2009) adopted in the periods analyzed. 4

5 NET INCOME (21.8) Recurring Net Income Q09 4Q09 1Q10 Net income in 1Q10 was impacted by non-recurring revenues and expenses resulting from the marking to market of our securities portfolio and by expenses of R$ 11.5 million with the follow-on offering. As a result, recurring net income in the period was R$28.2 million, in line with the R$28.3 million recorded in 4Q09. Net Income 39.7 Securities Results Derivative Results 2.1 Others Operating Expenses 1.2 Income tax and social contributions 7.4 Expenses and Income Non-Recurring Recurring Net Income 28.2 RECURRING NET INCOME Q09 2Q09 3Q09 4Q09 1Q10 (21.76) (24.90) Net Income Recurring Result 5

6 Future Net Income Our assets booked on the balance sheet have a market value of R$2.0 billion¹. Thus, our future net income is R$27.0 million up from 4Q09. R$ Carrying Value 4Q09 Market Value Gain or Loss Potencial Carrying Value 1Q10 Market Value Gain or Loss Potencial Credit 1,889,589 2,178, ,924 1,685,450 2,001, ,895 Portfolio ¹- Note 22 to the Financial Statements of March 31, This appreciation in the loan portfolio represents the potential gross income that could be added to net income in 1Q10 in the event of the assignment of all on-balance-sheet assets in the portfolio. In such a case, net income in 1Q10 would be R$58.5 million. Gross Income from Financial Intermediation Gross income from financial intermediation came to R$202.0 million, 10.1% higher than in the fourth quarter of 2009 (R$183.5 million) and 232% higher than in the same period last year (R$60.8 million). The higher gross income from financial intermediation was driven by the higher income from credit operations. INCOME FROM FINANCIAL INTERMEDIATION Securities Q09 4Q09 1Q10 The Bank s securities portfolio stood at R$4,626.7 million, 37.9% higher than in the same period of 2009 (R$3,354.7 million) and 14.0% higher than in 4Q09 (R$4,058.7 million). Of this, investments in the subordinated shares of receivables-backed investment funds (FIDCs) represented R$3,840.1 million, or 83.0% of the, and are included in our own portfolio, as shown below (4Q09 - R$3,498.0 million; 86.2% of ). Bonds Portfolio (R$ '000) 1Q10 4Q09 1Q09 1Q10 x 4Q09 1Q10 x 1Q09 Own Portfolio 431, ,538 64, % 569.2% Subordinated quotas FIDCs 3,840,068 3,498,025 3,051, % 25.9% Subject to repurchase commitments 151, ,673 41, % 261.7% Derivative Financial Instruments 51,358 49, , % -67.4% Subject to guarantees provided 152, ,561 39, % 285.6% Privatization Currency Total 4,626,742 4,058,654 3,354, % 37.9% 6

7 Origination of Paycheck-Deductible Loans In 1Q10, paycheck-deductible loan origination ed R$ million, with a monthly average in the quarter of R$ million. Origination of paycheck-deductible loans in 1Q10 was 12.2% lower than in the previous quarter (R$903.1 million), in line with the product s historical seasonality. Loan origination in the quarter was 27.5% higher than in the same period last year (R$622.3 million). 1,615 3, , , ,249 2,663 2,196 2, , Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 INSS Public Employees Note that the origination of paycheck-deductible personal loans in the last four quarters ed R$3,576 million, with a monthly average of R$298 million, up 46.2% from the same period of 2008/2009 (R$2,446.3 million), confirming the recovery in our paycheck-deductible loan origination. Our loan origination remains focused on developing operations with the most attractive agreements and maintaining strategic liquidity levels and demand for this type of personal loan. The government paycheck-deductible loan market has maintained the performance presented in recent quarters, increasing by 7.0% between December 2009 and March 2010 and by 39.1% between March 2009 and March 2010, which represents much stronger growth than the 25.1% recorded by the personal loan segment in the same period. This performance confirms that paycheck-deductible personal loans are currently an important instrument for growing this type of credit in Brazil, representing 60.8% of personal loans in the country (R$189.0 billion). 7

8 120,000 PAYCHECK-DEDUCTIBLE LOANS 60% 100,000 80,000 60,000 40,000 56,179 59,452 62,635 65,623 68, % 79,410 71, % 26.8% 87, % 92,961 99, % 39.1% 50% 40% 30% 20% 20,000 10% 0 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 0% Paycheck-deductible loan (R$ Billions) YOY PERSONAL CREDIT % 24.7% 24.7% 23.9% 25.1% % Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 40% 35% 30% 25% 20% 15% 10% 5% 0% Personnal Credit (R$ Billion) YoY The 20 main agreements for paycheck-deductible loan origination accounted for 73.9% of our direct production in 1Q10 and 61.38% in 4Q09, as shown below: Loan Portfolio 20 Major Production Codes 4Q09 1Q10 State 24.50% 25.94% Federal 17.07% 21.64% INSS 14.99% 23.63% Municipalities 4.82% 1.88% Total 61.38% 73.09% The loan portfolio, including guarantees, accounts receivable and subordinated shares in receivables-backed investment funds (FIDCs) booked under the item Securities, ed R$4.824 billion, of which R$4.402 billion was represented by paycheck-deductible loans, R$116.7 million by paycheck-deductible credit card operations and R$306.0 million by the middle-market segment. The overall portfolio grew 6.0% from 4Q09 (R$4.553 billion) and 40.0% from the same period of 2009 (R$3.447 billion). 8

9 Total loan volume, including the amounts assigned to other financial institutions and senior shares in FIDCs, reached R$6.146 billion, an increase of 9.2% from the same period of 2009 (R$5.626 billion). Credit assignments to other financial institutions and senior shares in FIDCs represented 21.5% of the portfolio in 1Q10, compared with 21.4% in 4Q09. Note that on-balance-sheet assets and subordinated shares in FIDCs under the item Securities are available for credit assignment to other financial institutions as an immediate liquidity alternative. Credit Portfolio (R$ '000) 1Q10 % of the 4Q09 % of the 1Q09 % of the 1Q10 x 4Q09 1Q10 x 1Q09 Paycheck Deductible Loans¹ 4,401, % 4,149, % 3,096, % 6.1% 42.1% Paycheck Deductible Credit Card 116, % 127, % 66, % -8.4% 75.4% Middle Market Companies Financing 306, % 276, % 284, % 10.8% 7.7% SubTotal On-balance 4,824, % 4,553, % 3,447, % 6.0% 40.0% Contracts of loans with co-obligation 702, % 617, % 1,295, % 13.7% -45.7% Contracts of loans without co-obligation ¹ 619, % 619, % 883, % 0.0% -29.9% SubTotal Off-balance 1,321, % 1,236, % 2,178, % 6.9% -39.3% Total 6,146, % 5,790, % 5,625, % 6.1% 9.2% Paycheck-Deductible Loan The portfolio of paycheck-deductible loans reached R$4.4 billion in 1Q10, increasing by 42.1% from the same period of 2009 and by 6.1% in relation to 4Q09. Paycheck-Deductible Credit Cards The on-balance-sheet portfolio of paycheck-deductible credit card operations decreased by R$10.7 million in 1Q10. The balance stood at R$116.7 million in the period, 75.4% higher than in the same period of The contraction in the loan portfolio is due to the payment and settlement of the revolving loan operations of the credit cards. The number of active cards stood at 370,162 down 3.42% from 4Q09 (383,300). Active clients financing their outstanding balances accounted for 76.2% of the, with an average cost of 4.12% per month on March 31, Banco Cruzeiro do Sul currently holds agreements for the origination of paycheck-deductible loans with more than 163 government entities as well as the INSS social security system. We continue to pursue new instruments for the distribution of paycheck-deductible credit in existing business segments, building on the success of the paycheck-deductible credit cards. Middle Market The middle-market segment ended 1Q10 with a loan portfolio of R$306.0 million, representing increases of 10.8% from 4Q09 (R$276.3 million) and of 7.7% from the same period of 2009 (R$284.1 million). The amounts in the middle-market portfolio are in line with the strategy adopted by the Bank for this business segment. The Bank maintains a conservative posture in relation to the origination of loans in the middle market. In 1Q10, we continued improving the quality of discounted receivables and maintaining the terms of operations at acceptable levels. 9

10 Middle Market Q09 4Q09 1Q10 Banco Cruzeiro do Sul maintains its focus on paycheck-deductible personal loans, both directly or through paycheck-deductible credit cards, where we have built a portfolio of high liquidity and quality, though without foregoing the middle-market segment, seeking to diversify the loan portfolio. Foreign Exchange In the first quarter of 2010, Banco Cruzeiro do Sul s foreign exchange desk maintained its operations in the interbank market, imports and exports, paper currency distribution, gold exports and the buying and selling of foreign currencies for financial and commercial fund transfers. In line with our high-volume and low-risk strategy, the operations target institutions authorized by the Central Bank of Brazil, and price variations are always covered by derivative markets in Brazil and abroad. The area's activities in the interbank market led Banco Cruzeiro do Sul to place 17 th in February 2010 in the ranking published by the Central Bank. Quality of the Loan Portfolio Security in the approval and execution of credit operations is fundamental for developing the business and maintaining the quality of the loan portfolio. This efficient loan portfolio management is demonstrated by the quality of the portfolio, with 96.3% of credit assets rated between AA and C, based on Central Bank Resolution 2,682. At the close of 1Q10, the provision for loan losses stood at R$38.1 million, decreasing by 1.3% in relation to 4Q09 (R$38.6 million) and increasing by 27.42% when compared with the same period of 2009 (R$29.9 million), representing 2.3% of the item Credit Operations (R$1,685.5 million). The reduction in provisioning for loan losses reflects the 10.8% decreasing in the amount booked in the item Loan operations between 1Q10 and 4Q09. 10

11 Quality of Loan Portfolio 6.5% 9.7% 18.2% 61.9% AA A B C Funding Banco Cruzeiro do Sul raises funds in the local market from institutional investors, individuals and companies. The instruments used are: time deposits with and without guarantee from Fundo Garantidor de Crédito (DPGEs), interbank deposits, credit assignments to other financial institutions and receivables-backed investment funds (FIDCs). In the international market, funding operations involve the issue of short and medium-term notes. In 1Q10, the Bank s funding sources were composed of: Time deposits from individuals and companies: 48.8% (4Q09: 52.6%); Credit assignments to other financial institutions: 12.3% (4Q09: 11.5%); Offshore funding operations (STN & MTN): 19.5% (4Q09: 13.9%); Credit assignments to FIDCs (senior shares): 14.8% (4Q09: 16.3%); Interbank deposits: 4.7% (4Q09: 5.7%). Funding (R$ '000) 1Q10 % of the 4Q09 % of the 1Q09 % of the 1Q10 x 4Q09 1Q10 x 1Q09 Time deposits¹ 3,397, % 3,354, % 1,889, % 1.3% 79.9% Interbank deposits² 327, % 363, % 423, % -9.6% -22.6% Securities issued abroad 1,354, % 888, % 967, % 52.4% 40.0% SubTotal On-balance 5,080, % 4,605, % 3,280, % 10.3% 54.9% Credit assingments 853, % 731, % 1,346, % 16.6% -36.6% FIDC's senior quotas 1,028, % 1,036, % 1,355, % -0.8% -24.1% SubTotal Off-balance 1,881, % 1,768, % 2,701, % 6.4% -30.4% Total 6,961, % 6,374, % 5,982, % 9.2% 16.4% ¹ Considers related party deposits of R$ million and R$2,061.0 million in DPGEs (deposits guaranteed by the government). ² Interbank deposits, Demand deposits and Other deposits. Time deposits ed R$3,397.9 million, increasing by 1.3% from the fourth quarter of 2009 (R$3,354.3 million) and by 79.9% from the first quarter of 2009 (R$1,889.1 million). The time deposits portfolio with and without guarantees from the FGC has a weighted average cost of 113% of the CDI rate and a weighted average term of 401 days. A highlight was the funding operation carried out in February 2010 in the amount of USD 250 million, with a five-year term and a coupon of 8.5%. 11

12 Cash and cash equivalents In the first quarter of 2010, Banco Cruzeiro do Sul maintained its policy adopted in the previous quarters of controlling liquidity and focusing on asset quality. We maintained our relationships with partner financial institutions, assigning credit assets that generated funds at prices and terms that are compatible with our operations. The increase in guarantees for time deposits through Fundo Garantidor de Crédito (FGC) authorized by the National Monetary Council as of April 1, 2009, enabled the issue of Time Deposits with Special Guarantee (DPGEs) at conditions adequate to the funding requirements of our paycheckdeductible loan operations. The table below presents our cash and cash equivalents, which on March 31, 2010 stood at R$737.6 million, equivalent to 67% of shareholders equity at the close of the quarter. R$ Million Sep-09 Dec-09 Mar-10 Local Currency 2,277 2,264 1,577 Foreign Investor 93,167 83, ,460 Cash and Gold 952 8,343 2,671 Cash equivalents 96,396 93, ,708 Interbank investments (1) 280, , ,611 Total of cash and cash equivalents 376, , ,319 Government Bonds Free Portfolio 125, , ,880 Saldo de Cixa FIDCs 17,437 41,941 18,655 TP Disponíveis na BM&F 9,316 16,933 81,741 Total 528, , ,595 (1) Refers to transactions with a maturity date of the actual application is less than 90 days. CAPITAL STRUCTURE Shareholders Equity Shareholders equity came to R$1,092.5 million, 2.27% higher than in 4Q09 (R$1,068.2 million), and 6.27% higher than the shareholders equity in the same period of 2009 (R$1,028.0 million). Average shareholders equity in the quarter was R$1,079.9 million, 3.41% higher than in the same period of The net income recorded in the first quarter of 2010 represents annualized return on average equity of 14.7%. SHAREHOLDER'S EQUITY 1,048 1,069 1,068 1,028 1,068 1, Q09 4Q09 1Q10 12

13 Banco Cruzeiro do Sul Stock (BM&FBovespa CZRS4) The capital stock of Banco Cruzeiro do Sul comprises 99,897,555 common shares and 36,829,923 preferred shares, for a of 136,727,478 shares, of which 26,498,021 shares (71.95% of the preferred shares) are held by the market (free float). The free float of Banco Cruzeiro do Sul (CZRS4) is distributed as follows: Position Quantity Preferred % Total % Foreign investor 30 9,564, % 9,564, % Brazilian Corporations 26 9,608, % 9,608, % Brazilian Individuals 403 7,324, % 7,324, % Total Free Float ,498, % 26,498, % Controllers 2 8,939, % 108,837, % Members of the Board 4 32, % 32, % Directors Treasury - 1,360, % 1,360, % Total Management 7 10,331, % 110,229, % Total Shares ,829, % 136,727, % The reduction in the number of preferred shares in relation to 3Q09 (38,414,146) is due to the cancelation of 1,584,223 shares that Banco Cruzeiro do Sul S.A. held in treasury, in accordance with the Board of Directors Meeting held on December 11, On March 31, 2010, Banco Cruzeiro do Sul s market capitalization was R$1,639.4 million, with its stock (CZRS4) trading at R$11.99 per share. Market capitalization corresponded to 1.5 times shareholders equity in 1Q10. The Bank s stock gained 110% in the last 12 months. Note that these stock gains do not consider the dividends and shareholders equity paid in the periods mentioned. The table below shows the amounts paid as interest on equity and dividends, which represent R$1.71 per share since the IPO: Date of approval Return Return value per share (R$) The Amount of Income (R$ 000) Date of Payment 08/23/2007 Interest on own capital , /04/07 1/21/2008 Interest on own capital , /01/08 3/12/2008 Dividends , /25/2008 5/14/2008 Interest on own capital , /15/2008 3/7/2008 Interest on own capital , /15/2008 3/4/2009 Dividends , /16/2009 7/17/2009 Interest on own capital , /14/ /14/2009 Interest on own capital , /27/09 1/29/2010 Interest on own capital , /22/10 7/5/2010 Interest on own capital , to be defined In the first quarter of 2010, the Company s free float stood at 19.4%. 13

14 Capital Adequacy Ratio (BIS) Banco Cruzeiro do Sul s capital adequacy ratio in 1Q10 stood at 15.1%. This ratio is significantly higher than the 11% minimum required by the Central Bank of Brazil and includes only tier 1 capital. 30.0% BIS 19.0% 14.7% 15.7% 20.4% 16.1% 18.5% 16.1% 15.1% Administrative Expenses Q09 4Q09 1Q10 In 1Q10, administrative and personnel expenses ed R$68.1 million, a reduction of 6.6% from 4Q09. Personnel expenses amounted to R$23.8 million, 23.2% lower than in 4Q09 and 27.4% higher than in 1Q09, due to modifications in the number of employees as a result of the adjustments made to align operations with the new market conditions. Personnel and Administrative Expenses (R$ '000) 1Q10 4Q09 1Q09 1Q10 x 4Q09 1Q10 x 1Q09 Personnel expenses 23,804 30,980 18, % 27.4% Administrative expenses 44,285-41,949-40, % 0.0% 9.8% 0.0% Total 68,089 72,929 59, % 15.3% As a result, our efficiency ratio stood at 49.2% in the period (56.2% in 4Q09). We continued to monitor administrative and personnel expenses in the period in order to adjust the Bank's operations to the new market conditions, achieving a return on efficiency ratio below 50% in the quarter. It is important to note that our administrative expenses were impacted by the non-recurring expenses of R$1.0 million related to the bank's new share issue. Excluding these expenses, our efficiency ratio in the period was 48.4%. Distribution Network For the origination of paycheck-deductible personal loans to government employees and INSS beneficiaries, in 1Q10, Banco Cruzeiro do Sul had a national network of 268 correspondent banks, as shown in the chart below, compared with 326 in 4Q09 and 397 in 1Q09. The 10 largest correspondent banks accounted for 27.8% of our direct origination of paycheck-deductible loans in 1Q10. 14

15 Q09 4Q09 1Q10 Correspondents Concentration per Region in Brazil 1Q % 32.1% 16.4% 15.7% 13.8% MIDDLE EAST NORTHEAST NORTHEAST SOUTHEAST SOUTHEAST The reduction in the number of correspondent banks in relation since 3Q09 is due to exclusions based on a review of their performance. These correspondent banks utilize third parties and employees to reach the target public. In 1Q10, this sales team had at its disposal 364 agreements, 155 of which were federal, 97 state and 112 municipal. These agreements involved the permission to offer paycheck-deductible loans to more than 2,800 government entities at the federal, state and municipal levels, including the INSS social security system Q09 4Q09 1Q10 The approval of new agreements with municipal, state and federal entities to offer paycheckdeductible loans to government employees is formalized with strict observance of all applicable regulations. The process includes all necessary measures to minimize any risks (legal, image and operational). These procedures aim to avoid any problems that could emerge related to the linking of loans to the payroll accounts of each government entity. 15

16 Accordingly, three pillars are observed in these processes: 1. If the entity falls under the scope of the fiscal responsibility law (Supplementary Law 101 of May 4, 2000); 2. If the entity is authorized by law to permit the linking of the obligations owed under the loan agreement to the payroll accounts of its employees, duly approving and encompassing paycheckdeductible loan operations to government workers; 3. If the entity has an IT platform compatible with the operation of loan agreements over the Internet. The average commission paid to correspondents in 1Q10 was 7.24%, versus 8.16% in 4Q09 and 6.35% in 1Q09. The slight decrease in average commission paid in 1Q10 reflects the process to improve the efficiency of the correspondent banks % 10.70% 12.74% 6.35% 5.85% 8.16% 6.75% 5.54% 7.24% INSS Other Agreement Average Commission 1Q10 4Q09 1Q10 In 1Q10, we had 1,324,511 active clients, a 9.2% increase over 1Q09. The chart below provides a breakdown of this client base among INSS Beneficiaries, Public Employees and Paycheck-Deductible Credit Cards , , , , , Q09 4Q09 1Q10 Cards Public Employees INSS 16

17 In the middle-market segment, the distribution network is organized in the form of own commercial platforms located in the cities of São Paulo, Ribeirão Preto, Rio de Janeiro, and Goiânia, and is composed of 110 active clients. People Management To advance our growth strategy, the People Management area works to ensure that attitude and postures are effectively aligned with the organization s values: Results-oriented focus with accountability Commitment to the client Efficiency and effectiveness Entrepreneurism and agility Professionalism Ethical behavior Team spirit Respect for individuals In this light, the area drafts and updates its policies with a view to valuing, motivating, retaining and attracting human capital, and developing experienced professionals in their various areas of specialization. To achieve this it developed, among other initiatives, the Internal Profit Sharing Program (PLR - PLUS), which is in addition to the profit-sharing program established under the collective bargaining agreement, and is based on: Performance evaluations; Recognizing and promoting competencies; Professional dedication; Identification of areas that require attention; During the quarter we launched the Health and Quality of Life Program for employees and their family members, and offered lectures, training sessions and a healthcare plan with 1,434 beneficiaries. In 1Q10, Banco Cruzeiro do Sul had 660 employees, 6.1% more than in 4Q09 (622) and 15.2% more than in 1Q09 (573). The increase in the number of employees is due to operational adjustments to the new market conditions. Operational Risk In compliance with CMN Resolution 3,380/06, Banco Cruzeiro do Sul has a special structure for managing operational risks. In addition, the Executive Board approved an Operational Risk Management Policy. The results of the studies conducted by the teams involved in the Operational Risk process are evaluated by the Risk and Liquidity Committee and by the Board of Directors. If applicable, corrective or preventative measures are implemented to remedy the points raised. 17

18 Management of Market Risk In compliance with CMN Resolutions 3,464/07 and 3,354/06, Banco Cruzeiro do Sul has a special structure for managing the market risks of its operations. In addition, the Executive Board approved a Market Risk Management Policy. We are also complying with CVM Instruction 474/08 by disclosing sensitivity analyses of our asset and liability positions and exposures, according to the Note to the Financial Statements - Sensitivity Analysis. The result of the market risk analyses are discussed periodically in the Risks and Liquidity Committee, evaluating primarily if the level of risk assumed by the operational areas are aligned with the operational limits pre-approved by Senior Management. Social Policies Aware of its social responsibility, Banco Cruzeiro do Sul participates in various collection drives and donation efforts and sponsors various sports and cultural events. Ombudsman Banco Cruzeiro do Sul created an Ombudsman Unit charged with representing clients who use the Bank s products and services. Accordingly, the Bank s Management assures all of the conditions needed for the department to operate guided by transparency, independence and impartiality in dealing with clients and accessing the required information. Audit Committee The Audit Committee of Banco Cruzeiro do Sul S.A., which was constituted under the terms of Article 34 of the Company s Bylaws, elected in accordance with minutes of the Annual and Extraordinary Shareholders Meetings held on April 23, 2008, and installed on November 3, 2008, is a statutory body composed of three independent members with a one-year term of office, as determined by the Resolution 3,198 issued on May 27, 2004 by the National Monetary Council - CMN. The members of the Audit Committee were reelected in accordance with the Minutes of the Board of Directors meeting held on July 16, 2009 and were installed on January 14, 2010 with a term of office lasting until the first Board of Directors to be held after the Annual Shareholders Meeting of The committee s composition, attributions and rules of conduct were established in accordance with the regulations issued by the Central Bank of Brazil and are governed by the Company s Bylaws and by the Operational Rules of the Audit Committee, which were approved by the Company s Board of Directors. The Company s Audit Committee is currently composed of the following members: Gilberto Braga, Miguel Vargas Franco Netto and Paulo Roberto Barral. 18

19 STATEMENTS OF INCOME (R$ 000) Statement of Income (R$ '000) 1Q10 4Q09 1Q10 x 4Q09 1Q09 1Q10 x 1Q x 2008 Financial operations income 375, , % 210, % 951,718 1,325, % Loans 86,662 35, % 42, % 175, , % Securities income 95, , % 116, % 489, , % Derivative financial instruments 5,306 (10,530) % (28,155) % (243,871) 229, % Foreign exchange operations 3, ,981 (1) Compulsory deposits % - 1,601 - Sale or trasfering of financial assets operations 184, , % 66, , Financial operations expenses (173,205) (141,471) 22.4% (149,396) 15.9% (427,321) (736,841) -42.0% Deposits, money market and interbank funds (135,441) (94,595) 43.2% (81,880) 65.4% (149,210) (689,731) -78.4% Borrowings and repass (262) (84) 2-0.0% (84) (7) % Foreign exchange operations - (2,988) (1) - - (18,443) (1,816) - Sale or trasfering of financial assets operations (27,668) (33,300) -16.9% (59,793) (1) (224,065) (25,073) - Allowance for doubtful loans (9,834) (10,504) -6.4% (7,723) 27.3% (35,519) (20,214) 75.7% Gross income on financial operations 202, , % 60, % 524, , % Other operating income/(expenses) (139,161) (127,007) 9.6% (84,902) 63.9% (395,595) (283,272) 39.7% Service income 2,972 2, % 2, % 10,789 9, % Bank fees income % % 3,043 3, % Personnel expenses (23,804) (30,980) -23.2% (18,689) 27.4% (96,909) (84,270) 15.0% Other administrative expenses (44,285) (41,949) 5.6% (40,343) 9.8% (158,598) (142,341) 11.4% Tax expenses (6,034) (5,091) 18.5% (4,685) 28.8% (21,363) (22,577) -5.4% Equity in income of subsidiaries (1,570) 4, % 4, % 15,263 22, % Other operating income 3,671 4, % 4, % 24,566 54, % Other operating expenses (70,356) (61,874) 13.7% (33,441) 110.4% (172,386) (124,776) 38.2% Operating results 62,839 56, % (24,058) % 128, , % Non operating results % 2,376 (1) 1,199 16, % Results before income taxes 62,861 56, % (21,682) % 130, , % Income tax and social contributions (21,486) (12,672) 69.6% 10, % (21,142) (112,038) -81.1% Provision for income tax (9,227) (15,005) -38.5% (16,999) -45.7% (68,116) (134,248) -49.3% Provision for social contribution (5,450) (9,002) -39.5% (10,199) -46.6% (40,869) (96,399) -57.6% Deferred tax assets (6,809) 11, % 37, % 87, , % Profit sharing - Employees (1,707) (2,717) -37.2% (10,816) -84.2% (26,998) (30,018) -10.1% Minority interest in subsidiaries Net profit/(loss) for the period 39,668 41, % (21,767) % 81, , % Interest on own capital 15,800 15, % ,400 31, % 19

20 EFFECT OF CVM REGULATIONS ON THE STATEMENT OF INCOME (R$ 000) EFFECT OF CVM CONSOLIDATED STATEMENT OF INCOME (R$ '000) 1Q10 4Q09 1Q10 x 4Q09 1Q09 1Q10 x 1Q x 2008 Financial operations income 362, , % 328, % 1,128, , % Loans 399, , % 249, % 658,161 1,147, % Loans - FIDCs Impact (55,993) (28,183) 98.7% 56,484 n.m. 23,124 (444,459) n.m. Securities income 23,423 22, % 36, % 158,399 57, % Derivative financial instruments 5,684 (9,923) n.m. (27,514) n.m. (241,135) 229,973 n.m. Foreign exchange operations 3,352 - n.m. 12,981 (1) Compulsory deposits % ,601 n.m. Sale or trasfering of financial assets operations (14,126) 15,100 n.m. 465 n.m. 530, Financial operations expenses (201,206) (143,327) 40.4% (181,977) 10.6% (517,154) (766,216) -32.5% Deposits, money market and interbank funds (152,951) (119,267) 28.2% (107,409) 42.4% (233,212) (721,225) -67.7% Borrowings and repass (262) % (1) (1) - (7) n.m. Foreign exchange operations - (2,988) n.m. - - (18,443) (1,816) - Sale or trasfering of financial assets operations (27,668) (33,300) -16.9% - (126,206) Allowance for doubtful loans (21,946) 11,431 n.m. (12,415) 76.8% (38,990) (26,861) 45.2% Allowance for doubtful loans - FIDCs Impact 1, % (2,360) n.m. (2,360) 8,766 n.m. Gross income on financial operations 160, , % 146, % 611, , % Other operating income/(expenses) (165,428) (139,315) 18.7% (117,779) 40.5% (434,036) (425,856) 1.9% Retained Premiums 9,136 4, % 7, % 23,188 17, % Retained Claims (7,972) (3,763) 111.9% (6,447) 23.7% (20,119) (14,817) 35.8% Service income 5,723 5, % 5, % 19,692 26, % Bank fees income % % 3,043 3, % Personnel expenses (27,104) (33,461) -19.0% (20,999) 29.1% (107,096) (91,705) 16.8% Other administrative expenses (57,926) (55,163) 5.0% (50,246) 15.3% (204,802) (183,677) 11.5% Tax expenses (6,984) (5,756) 21.3% (6,101) 14.5% (25,181) (24,238) 3.9% Other operating income 5,713 9, % 6, % 34,406 60, % Other operating expenses (73,376) (63,993) 14.7% (49,421) 48.5% (180,823) (131,101) 37.9% Other operating expenses - FIDCs Impact (12,883) 2,534 n.m. (4,371) 194.7% 23,656 (88,854) n.m. Operating results (4,484) 29,385 n.m. 28,458 n.m. 177,638 (200,348) n.m. Non operating results 22 (4) n.m. 2,376 (1) , % Results before income taxes (4,462) 29,381 n.m. 30,834 n.m. 178,526 (184,295) n.m. Income tax and social contributions 6, % (13,103) n.m. (44,035) 89,109 n.m. Provision for income tax 8,052 (8,698) n.m. (31,856) n.m. (84,152) (8,453) 895.5% Provision for social contribution 4,907 (4,707) n.m. (19,112) n.m. (50,022) (20,338) 146.0% Deferred tax assets (34,369) 3,136 n.m. 58,931 n.m. 108,941 (97,159) n.m. Deferred tax assets - FIDCs Impact 27,769 10, % (21,066) n.m. (18,802) 215,059 n.m. Profit sharing - Employees (1,716) (2,717) -36.8% (10,824) -84.1% (27,006) (33,866) -20.3% Minority interest in subsidiaries 1 (19) n.m. 13 (1) (6) (1,521) -99.6% Net profit/(loss) for the period (CVM) , % 6, % 107,479 (130,573) n.m. Interest on own capital 15,800 15, n.m. 63,400 31, % Reconciliation Loans Income 55,993 28, % (56,484) n.m. (23,124) 444,459 n.m. Allowance for doubtful loans (1,621) (881) 84.0% 2,360 n.m. 2,360 (8,766) n.m. Expenses of Loans commissions 12,883 (2,534) n.m. 4, % (23,656) 88,854 n.m. Income Tax (IR, CS, PIS e COFINS) (27,769) (10,369) 167.8% 21,066 n.m. 18,802 (215,059) n.m. Net profit/(loss) for the period (BACEN) 39,668 41, % (21,767) n.m. 81, , % 20

21 BALANCE SHEET - ASSETS (R$ 000) Assets (R$ '000) 1Q10 % of the 4Q09 % of the 1Q09 % of the 1Q10 x 4Q09 1Q10 x 1Q09 Current assets 6,569, % 5,786, % 4,661, % 13.5% 40.9% Bank and cash 120, % 93, % 56, % 28.8% 115.5% Interbank funds applied 206, % 199, % 215, % 3.6% -4.1% Securities and derivative financial instruments 4,626, % 4,027, % 3,235, % 14.9% 43.0% Interbank accounts 3, % % 2, % 767.1% 44.3% Loans 946, % 1,036, % 820, % -8.7% 15.2% Other receivable 572, % 323, % 263, % 77.0% 117.3% Other assets 93, % 105, % 67, % -11.9% 37.3% Non current assets 906, % 1,193, % 1,055, % -24.1% -14.2% Interbank funds applied 63, % 72, % 40, % -12.6% 55.8% Securities and derivative financial instruments % 31, % 119, % -99.9% % Loans 690, % 801, % 630, % -13.9% 9.5% Other receivable 134, % 277, % 257, % -51.4% -47.8% Other assets 17, % 11, % 7, % 57.0% 131.9% Permanent assets 202, % 204, % 234, % -0.7% -13.6% Investments 169, % 171, % 212, % -0.9% -20.0% Premises and equipment 21, % 21, % 9, % -0.3% 124.4% Deferred charges 10, % 10, % 12, % 1.5% -16.5% Intangible % % % 27.1% 237.3% Total Assets 7,678, % 7,184, % 5,952, % 6.9% 29.0% 21

22 BALANCE SHEET - LIABILITIES (R$ 000) Liabilities (R$ '000) 1Q10 % of the % of the % of the 4Q09 1Q09 1Q10 x 4Q09 1Q10 x 1Q09 Current Liabilities 3,909, % 3,902, % 3,153, % 0.2% 24.0% Deposits 2,734, % 2,911, % 2,089, % -6.1% 30.9% Money market repurchase commitments 150, % 132, % 139, % 14.1% 7.9% Acceptances and endorsements 342, % 260, % 249, % 31.7% 37.4% Interbank accounts % - - 1, % 0.0% 0.0% Interdepentmental 1 0.0% % 0.0% 0.0% Obligations due to loans 2, % 2, % Derivative financial instruments 17, % 19, % 11, % -9.8% 54.6% Other liabilities 661, % 576, % 662, % 14.7% -0.2% Non current liabilities 2,676, % 2,213, % 1,770, % 20.9% 51.1% Deposits 991, % 805, % 223, % 23.1% 342.7% Acceptances and endorsements 1,011, % 628, % 717, % 61.0% 40.9% Derivative financial instruments 57, % 55, % 20, % 5.2% 180.1% Other liabilities 614, % 724, % 808, % -15.1% -23.9% Deferred income % % % -22.5% 130.2% Shareholders' equity 1,092, % 1,068, % 1,027, % 2.3% 6.3% Total Liabilities 7,678, % 7,184, % 5,952, % 6.9% 29.0% 22

23 EFFECT OF CVM REGULATIONS ON THE BALANCE SHEET ASSETS (R$ 000) Assets (R$ '000) 1Q10 % of the 4Q09 % of the 1Q09 % of the 1Q10 x 4Q09 1Q10 x 1Q09 Bank and cash 122, % 99, % 56, % 23.2% 119.0% Interbank funds applied 269, % 271, % 268, % -0.7% 0.4% Securities and derivative financial instruments 1,090, % 855, % 565, % 27.4% 92.8% Interbank accounts 3, % % 2, % 767.1% 44.3% Loans 5,990, % 5,723, % 4,296, % 4.7% 39.4% FIDCs impact- reversal of credit results (957,494) -12.0% (901,500) -12.3% (868,105) -15.7% 6.2% 10.3% Allowance for doubtful loans - FIDCs Impact 13, % 11, % 11, % 13.7% 13.7% Other receivable 913, % 635, % 710, % 43.8% 28.6% FIDCs impact - constitution of tax credit 188, % 280, % 173, % -32.8% 8.7% Other assets (8,699) -0.1% 117, % (29,171) -0.5% % -70.2% FIDCs impact - reversal of commission expenses 308, % 201, % 278, % 53.0% 10.8% Permanent assets 56, % 56, % 48, % 0.0% 15.9% Total Assets 7,991, % 7,352, % 5,515, % 8.7% 44.9% 23

24 EFFECT OF CVM REGULATIONS ON THE BALANCE SHEET LIABILITIES (R$ 000) Liabilities (R$ '000) 1Q10 % of the 4Q09 % of the 1Q09 % of the 1Q10 x 4Q09 1Q10 x 1Q09 Deposits ,2% ,8% ,8% 0,7% 175,1% Money market repurchase commitments ,9% ,7% ,5% 21,1% 7,4% Acceptances and endorsements ,9% ,1% ,5% 52,4% 40,0% Interbank accounts 870 0,0% - 0,0% ,0% 0,0% Interdependent relations Obligations due to loans ,0% ,0% - 0,0% -26,9% 0,0% Derivative financial instruments ,9% ,0% ,6% 1,3% 135,9% Other liabilities ,9% ,3% ,1% 6,9% -11,8% Deferred income ,0% ,0% ,0% -5,5% 12,6% Minority interest in subsidiaries 455 0,0% 456 0,0% 438 0,0% -0,2% 3,9% Shareholders' equity ,1% ,0% ,3% -2,3% 3,5% Total Liabilities ,0% ,0% ,0% 8,7% 44,9% Effect of the elimination of sales of loans to the consolidated FIDC in the Shareholder's equity ,6% ,5% ,3% 9,7% 10,5% 24