EARNINGS RELEASE ST QUARTER

Transcription

1 EARNINGS RELEASE ST QUARTER

2 Highlights Consolidated net income rose 7.6% year-over-year to R$ 33.3 million in. Profitability of the loan portfolio (ROAA) was 3.6% in, up 0.5 p.p. compared to. Return on average equity (ROAE, ex-interest in subsidiaries) increased by 2.9 p.p. in year-over-year to 14.2%. Net interest income (ex-provision for loan losses) was up 1.4% in year-over-year, totaling R$ million. NIM was of 11.4% in, 0.9 p.p. higher than in. The Efficiency Ratio (ex-provision for loan losses) improved 3.1 p.p. in year-over-year, closing the quarter at 49.1%. JM Seguradora s net income increased 115.4% to R$ 15.5 million in year-over-year, and JM Resseguradora s net income rose 3.3% to R$ 13.9 million in the same period. Earnings Conference Call (Portuguese) May 15, :00 A.M. (Brasilia time) 10:00 A.M. (New York time) Phones Brazil: (11) or (11) United States: Follow the Webcast at: /ri bra Rating Low Credit Risk February/ Rating Low Risk in the Medium Term 1 December/2016 AA-(bra) Rating Low Credit Risk June/2016 The analyses contained herein have been prepared based on the financial statements disclosed under Central Bank resolution No. 4,403 of March 26, 2015, which does not require the preparation of consolidated financial statements. Therefore, non-financial institutions jointly controlled by Paraná Banco, that is JM Seguradora, JM Resseguradora, and JM Latam, have been recognized using the equity pickup methodology based on Paraná Banco s 50.5% interest. 2

3 Summary Letter from the Management 4 Key Indicators 5 Profitability 6 Financial Performance 7 Operating Expenses 9 Operating Performance 11 Insurance Group 24 Appendix I Statement of Income 28 Appendix II Balance Sheet 29 3

4 Letter from the Management After challenging years, we started 2017 in an even more complex political scenario, but expecting the disclosure of the first quarter GDP to point to of a reversal in the economic recession we saw in previous years. In the first quarter, Paraná Banco recorded consolidated net income of R$ 33.3 million, up 7.6% year-over-year, and down 30.6% compared to. The result in benefited from the fiscal effect of the payment of interest on equity in the period, though. The Insurance Group contributed R$ 17.5 million to Paraná Banco's result, which represents 53% of the net income for the quarter. The Bank s loan portfolio closed at R$ 3.8 million, down 4.9% year-over-year and 0.9% sequentially. This reduction is in line with our strategy of focusing on payroll-deductible loans to government employees, and on discontinuing the corporate loan and home equity portfolios. Paraná Banco s payroll-deductible loan portfolio closed representing 87.3% of the overall portfolio. Return on average assets (ROAA) was 2.4% for, up 0.3 of a percentage point year-over-year. Considering the loan portfolio alone, return was of 3.6%, up 0.5 p.p. in the same period. Net interest margin was 11.4% in, 0.9 p.p. higher than in. In the first quarter, our expense with the provision for loan losses totaled R$ 40.9 million, up 14.7% year-overyear, and down 37.7% compared to. The efficiency ratio closed at 49.1%, an improvement of 3.1 p.p. compared to. Our available cash totaled R$ 1.1 billion in, representing 26.2% of our overall funding, which is an appropriate liquidity level. Our Capital Adequacy Ratio remained at a high 20.2% in the first quarter, down 1.7 p.p. compared to due to the deduction of an installment of the investment made in the Insurance Group from the reference equity, under Central Bank Resolution 4,192/13. Paraná Banco is currently undergoing a tender offer (OPA). On April 11, 2017, it received the stock Appraisal Report prepared by PricewaterhouseCoopers Corporate Finance & Recovery Ltda, and on April 18, 2017, the prospective acquirer (our Controlling Group) filed the relevant documents with the CVM, setting the price at R$ per share in the offer. At the Insurance Group, direct premiums written by J. Malucelli Seguradora in amounted to R$ 45.3 million, a decrease of 44.9% year-over-year due to seasonal effects in the period. J. Malucelli Resseguradora s retained premiums added up to R$ 8 million in, a decrease of 15.7% year-over-year. With the expected resumption of the growth in the country s economy, Paraná Banco has maintained its strategy of seeking efficiency by continually improving processes or capturing opportunities through new trends, focusing on results and business perpetuity. 4

5 Key Indicators Balance Sheet (R$ thousand) Total Assets (1,5%) (10,8%) Loan Operations (0,9%) (4,9%) Total Deposits (4,5%) (11,8%) Shareholders' Equity ,8% (12,5%) Income Statement (R$ thousand) Net interest income (ex PDD) ,1% ,4% Personnel Expenses (11.357) (15.013) (24,4%) (14.052) (19,2%) Administrative Expenses (49.990) (49.901) 0,2% (49.415) 1,2% Net Income (30,6%) ,6% Adjusted Net Income (30,6%) ,6% Performance Indicators (%) ROAE - adjusted 11,5 15,4 (3,9 p.p.) 9,2 2,3 p.p. ROAA - adjusted (Total Assets) 2,4 3,3 (0,9 p.p.) 2,1 0,3 p.p. ROAA - adjusted (Loan Portfolio) 3,6 5,1 (1,5 p.p.) 3,1 0,5 p.p. Net Interest Margin - NIM 11,4 10,7 0,7 p.p. 10,5 0,9 p.p. Basel Ratio 20,2 21,9 (1,7 p.p.) 26,3 (6,1 p.p.) Efficiency Ratio (ex PDD) 49,1 52,2 (3,1 p.p.) 52,2 (3,1 p.p.) Loan Portfolio Quality (%) Allowance for Doubtful Accounts (PDD)/Loan Portfolio 4,64 4,63 0,01 p.p. 2,65 1,90 p.p. NPL (overdue > 60 days / loan portfolio) 4,0 4,9 (0,9 p.p.) 3,6 0,4 p.p. Delinquency Index (> 90 days / loan portfolio) 3,4 3,9 (0,5 p.p.) 2,1 1,3 p.p. Delinquency Index (> 180 days / loan portfolio) 1,63 1,56 0,07 p.p. 1,01 0,62 p.p. Loss coverage (written-off credits / loan portfolio) 0,9 0,4 0,6 p.p. 0,2 0,7 p.p. *Ex Consumer Finance Partnership JM Seguradora & JM Resseguradora (R$) JM Seguradora - Direct premiuns (DPVAT + surety bond) (80,4%) (44,9%) JM Seguradora - Loss Ratio 2,2 79,8 (77,6 p.p.) 67,2 (65,0 p.p.) JM Resseguradora - Retained premiums (59,4%) (15,7%) Performance per Share (R$) Total Number of Shares ,0% (2,0%) Treasury Shares 0 0 nd nd Net Earnings per Share (adjusted) 0,40 0,58 (30,6%) 0,37 9,9% Equity value per share 14,90 14,50 2,8% 17,04 (12,5%) Dividends/Net Interest on Equity per Share - 3,56 nd 0,10 nd 5

6 Profitability As illustrated below, consolidated net income rose 7.6% year-over-year and dropped 30.6% sequentially to R$ 33.3 million in. It is important to note that the payment of interest on equity in contributed to this result due to the effect of the reduction in income tax. The Insurance Group contributed 53% of our recurring consolidated net income in, an increase of 57.1% year-over-year. Our profitability indicators are illustrated below. Return on average assets (ROAA) was 2.4% for, up 0.3 of a percentage point year-over-year, and down 0.9 p.p. sequentially. ROAA of the loan portfolio alone was 3.6% in, an increase of 0.5 p.p. year-over-year, and down 1.5 p.p. sequentially. Return on average equity ex-interest in subsidiaries increased by 2.9 p.p. in year-over-year to 14.2%. Sequentially, it dropped 7,7 p.p. mainly due to the payment of interest on equity in. Performance Indicators (a) (%) ROAE Adjusted 11,5 15,4 (3,9 p.p.) 9,2 2,3 p.p. ROAE Adjusted (Ex non-financial controlled institutions) (b) 14,2 21,9 (7,7 p.p.) 11,3 2,9 p.p. ROAA Adjusted (Total Assets) 2,4 3,3 (0,9 p.p.) 2,1 0,3 p.p. ROAA Adjusted (Credit Loan) (c) 3,6 5,1 (1,5 p.p.) 3,1 0,5 p.p. (a) ROAE: Annualized calculation uses the present quarter's net income divided by the average of the shareholders' equity of the present and previous quarter. ROAA: Annualized calculation uses the present quarter's net income divided by the average of the assets of the current and previous quarter. (b) Excluding 50.5% participation on Insurance Group. (c) Loan Portfolio exclusing Cash (investments and equivalents). 6

7 Financial Performance Net interest income and Net interest margin (NIM) Interest income amounted to R$ million in, a decrease of 5.6% year-over-year and of 3.7% sequentially. This decrease can mostly be explained by the reduction in cash and the cut in the Selic benchmark rate in the period. Interest expense totaled R$ million in, down 6.7% year-over-year and 18.1% sequentially, boosted by the decrease of 10.5% and 9.4%, respectively, in the cost of funding, which in turn is a consequence of the cut in the Selic benchmark rate and the reduction of 37.7% in the provision for loan losses in versus. Therefore, net interest income amounted to R$ 96.7 million in, an increase of 42.7% sequentially and down 3.4% year-over-year (impacted by the increase in the provision for loan losses). Ultimately, net interest income ex-provision for loan losses amounted to R$ million in, up 1.4% year-over-year and 3.1% sequentially. Net Interest Income (R$ thousands) Interest Income (3,7%) (5,6%) Loan Operations (1,8%) (1,7%) Result from marketable securities operations (15,3%) (26,1%) Interest Expenses ( ) ( ) (18,1%) ( ) (6,7%) Funding operations in the market ( ) ( ) (9,4%) ( ) (10,5%) Result from derivate financial instruments % (1.441) (136,7%) Allowance for doubtful loans (40.914) (65.712) (37,7%) (35.654) 14,8% Net Interest Income ,7% (3,4%) Net Interest Income (ex LLP) ,1% ,4% 7

8 The table below breaks down the provision for loan losses by loan portfolio. Year-over-year, the increase was of 14.7% due to the increase in the provision for loan losses of the corporate loan portfolio. On the other hand, our overall expense with provisions dropped 37.7% in versus, showing an improvement in the quality of our loan portfolio. It is worth noting the decrease in the provision for loan losses of the payroll-deductible loan portfolio, which fell 15.5% year-over-year and 41% sequentially in. In we had an impact from the late payment of some state-government agreements. PDD Expenses (R$ thousand) Payroll-Deductible Loan (41,0%) (15,5%) Corporate Loan (43,2%) ,5% Consumer finance partnerships ,4% (38,1%) Home Equity (35,4%) ,3% Total (37,7%) ,7% Total ex Consumer finance partnerships (41,8%) ,6% Paraná Banco s net interest margin (NIM) reached 11.4% in, up 0.9 p.p. year-over-year and 0.7 p.p. sequentially. This improvement derived from a lower cost of funding in the period caused by the cut in the Selic benchmark rate. (R$ thousands) Net interest income before LLP ,1% ,4% Interbank funds invested (average) (5,4%) (4,9%) Marketable securities and derivatives (average) (21,7%) (35,7%) Average performing assets (1,2%) (3,9%) Loan operations (average) (3,3%) (6,4%) Net Interest Margin (%) 11,4% 10,7% 0,7 p.p. 10,5% 0,9 p.p. 8

9 Operating Expenses Expenses Personnel, Administrative, and Commissions The table below shows Paraná Banco's administrative expenses breakdown. Personnel expenses totaled R$ 11.4 million in, a decrease of 19.2% year-over-year and of 24.4% sequentially, resulting from the revision in processes and structures in 2015 and Other administrative expenses totaled R$ 50 million in, up a slight 1.2% year-over-year and 0.2% sequentially. Expenses (R$ thousand) Personnel Expenses (11.357) (15.013) (24,4%) (14.052) (19,2%) Other Administratives Expenses (49.990) (49.901) 0,2% (49.415) 1,2% Commission Expenses (29.037) (26.961) 7,7% (27.307) 6,3% Profit Sharing (12.098) (12.266) (1,4%) (6.561) 84,4% Others Commissions (16.939) (14.695) 15,3% (20.746) (18,4%) Specialized Technical Services (11.256) (10.099) 11,5% (10.259) 9,7% Others (9.697) (12.841) (24,5%) (11.849) (18,2%) Under Circular Letter BACEN 3,738/2014E, in 2017 commissions paid started being fully recognized as commission expense (the recognition rule changed in 2015, as follows): a) In 2015: 1/3 of the commission paid is fully recognized as expense, and the remainder is activated and recognized in profit or loss for 36 months. b) In 2016: 2/3 of the commission paid is fully recognized as expense, and the remainder is activated and recognized in profit or loss for 36 months. c) In 2017: The commission paid is fully recognized as expense. Therefore, the expense with commission accounts for 2017 and 2016 are not comparable. Also, according to the table below, the balance of expenses with commission to be deferred reduced by 55.5% in versus. Commission Expenses (R$ thousands) Recognised as a result ,3% (18,4%) Prepaid expenses (balance sheet) (21,3%) (55,5%) 9

10 Efficiency According to the table below, Paraná Banco s overall expenses were R$ 68 million in, down 3.2% yearover-year and 5.3% sequentially, which shows our expenses are efficiently controlled. Revenues were up 2.8% in year-over-year and 0.7% sequentially. This increase was driven by a better net interest income, which in turn reflects a lower cost of funding following the cut in the Selic benchmark rate. Therefore, the Efficiency Ratio improved by 3.1 p.p. in year-over-year, reaching 49.1%, one of the lowest ratios in Paraná Banco s history. Efficiency Ratio (R$ thousands) Personnel Expenses (11.357) (15.013) (24,4%) (14.052) (19,2%) Other administrative expenses (49.990) (49.901) 0,2% (49.415) 1,2% Taxes expenses (6.630) (6.841) (3,1%) (6.728) (1,5%) Total Expenses (67.977) (71.755) (5,3%) (70.195) (3,2%) Net interest income (ex LLP) ,1% ,4% Other operating income/expenses (1.781) (249,0%) (4.687) (62,0%) Labor-related contingencies (1.655) (1.628) 1,7% (1.006) 64,5% Other operating income/expenses (126) (104,4%) (3.681) (96,6%) Service fee income (8,4%) (28,0%) Total Income ,7% ,8% Efficiency Ratio without LLP 49,1% 52,2% (3,1 p.p.) 52,2% (3,1 p.p.) 10

11 Operating Performance Loan Portfolio Paraná Banco s overall loan portfolio reached R$ 3.8 billion by the end of, a decrease of 4.9% year-overyear and of 0.9% sequentially, according to the graph below. As mentioned before, this reduction is in line with our strategy of focusing exclusively on payroll-deductible loans to government employees, and no longer operating corporate credit and home equity. The table below shows Paraná Banco's loan portfolios breakdown. The payroll-deductible loan portfolio rose 3.7% in year-over-year, and the corporate portfolio decreased by 60.6% in the same period. Loan Portfolio (R$ thousands) Loan Portfolio (0,9%) (4,9%) Payroll-Deductible Loans ,0% ,7% Corporate Loans (20,1%) (60,6%) Consumer finance partnerships ,2% ,5% Home Equity (7,0%) (20,0%) 11

12 The graph below shows the breakdown of Paraná Banco s loan portfolio. By the end of, the payrolldeductible loan portfolio accounted for 87.3% of the overall portfolio, corporate loans, for 5.6%, and the consumer finance and home equity portfolios represented 5.7% and 1.4% respectively. The provision for loan losses rose 43.5% in the fourth quarter year-over-year, closing at R$ million, as illustrated in the table below, and fell 1.9% sequentially. Losses reached 1.01% in, up a slight 0.59 p.p. year-overyear and 0.49 p.p. sequentially, deriving from losses in the corporate loan portfolio. Due to the provisions made during 2016, coverage levels were higher in than in. Loan Portfolio Quality (R$ thousands) LLP (1,9%) ,5% Overdue (> 60 days) (16,5%) (1,6%) Overdue (> 90 days) (13,3%) ,4% Overdue (> 180 days) ,2% ,7% Total Portfolio* (a) (0,9%) (4,6%) Coverage Index (LLP / > 60 days) 111,4% 94,8% 16,6 p.p. 76,4% 35,0 p.p. Coverage Index (LLP / > 90 days) 132,9% 117,5% 15,4 p.p. 118,9% 14,0 p.p. Coverage Index (LLP / > 180 days) 264,8% 270,3% (5,5 p.p.) 228,3% 36,5 p.p. LLP / Total Portfolio 5,0% 5,1% (0,1 p.p.) 3,3% 1,7 p.p. Losses recovered (b) ,2% ,5% Loss level (b/a) 1,01% 0,52% 0,49 p.p. 0,42% 0,59 p.p. 12

13 Below is the same table seen above but without consumer finance partnerships, which have different dynamics compared to other transactions. Loan Portfolio Quality (*Ex Consumer Finance Partnership) (R$ thousands) Below is the loan portfolio classified according to Central Bank Resolution 2682/99, net of the partnership with retailers for consumer finance. In, 94.2% of our loan portfolio was rated A to C. LLP (1,5%) ,3% Overdue (> 60 days) (19,2%) ,8% Overdue (> 90 days) (14,8%) ,5% Overdue (> 180 days) ,9% ,4% Total Portfolio* (1,57%) (5,41%) Coverage Index (LLP / > 60 days) 115,7% 94,8% 20,9 p.p. 73,3% 42,4 p.p. Coverage Index (LLP / > 90 days) 136,9% 118,5% 18,4 p.p. 125,4% 11,5 p.p. Coverage Index (LLP / > 180 days) 284,2% 296,9% (12,7 p.p.) 262,0% 22,2 p.p. LLP / Total Portfolio 4,6% 4,6% 0,0 p.p. 2,7% 1,9 p.p. Losses recovered ,3% ,7% Loss level 0,92% 0,37% 0,55 p.p. 0,24% 0,68 p.p. * Excluding guarantees Status A to H Rating Loan Portfolio Ex Consumer Finance Partnership Portfolio % of Portfolio Total Allowance Portfolio % of Portfolio Total Allowance A ,6% ,4% ,2% B ,2% ,8% ,1% C ,5% ,9% D ,8% ,4% E ,8% ,0% F ,8% ,6% G ,5% ,4% H ,0% ,5% Total ,0% ,0%

14 Including consumer finance partnerships, 93.5% of the loan portfolio was rated A to C in the same period, according to the table below. Status Portfolio % of Portfolio A to H Rating Loan Portfolio Total Allowance Portfolio % of Portfolio Total Allowance A ,7% ,7% ,5% B ,3% ,9% ,4% C ,5% ,8% D ,9% ,6% E ,9% ,1% F ,9% ,6% G ,5% ,5% H ,2% ,8% Total ,0% ,0% Payroll-Deductible Loans As mentioned before, Paraná Banco has started operating exclusively with payroll-deductible loans, especially for the INSS production. The payroll-deductible loan portfolio closed at R$ 3.3 billion, up 3.7% year-over-year and unchanged from the previous quarter. The market of payroll-deductible loans to government employees grew 2.3% in March 2017 year-over-year and 1.1% compared to December 2016, according to data by the Central Bank of Brazil. 14

15 The graph below illustrates the payroll-deductible loan production, which reached R$ million in. Production through own stores and franchised correspondents accounted for 83% of the overall production in the quarter. Lower production in the quarter is in line with our strategy of decreasing the concentration in stategovernment agreements, which pose a higher fiscal risk. Of the total amount produced in, nearly 69% are refinancing transactions and 31% are new contracts. By the end of, Paraná Banco s priority channel had 32 own stores and 112 franchised correspondents. The graph below shows the payroll-deductible loan portfolio broken down by agreement. Agreements with state governments corresponded to 41% of the overall portfolio in, INSS represented 26%, and city and federal governments accounted for 23% and 10% respectively. The 2 p.p. decrease in the state-government portfolio is partly due to Paraná Banco's strategy of reducing exposure in state government agreements and increasing the INSS production, which we believe has lower risk given the fiscal imbalance the States have faced. 15

16 As mentioned before, during 2016 the provision for the Rio de Janeiro State Agreement was increased due to the delay in the transfer of payroll-deductible loan installments following the State s fiscal imbalance. According to the lower graph on the right, Rio de Janeiro s portfolio was fully rated H in, which increased this indicator. The graph below, on the left, shows the changes in the payroll-deductible portfolio for loans rated D to H. Loans rated D to G dropped 0.7 p.p. year-over-year and 1.3 p.p. sequentially, closing at 1.5% of the overall portfolio, while loans rated H rose 0.7 p.p. year-over-year and 0.5 p.p. sequentially, closing the quarter at 1.7% of the overall portfolio. The lower right graph is the portfolio broken down by days past due. Loans past due 90 days or more were up 0.4 p.p. year-over-year, and down 0.2 p.p. sequentially. Loans past due 60 days or more closed at 2.9%, down 0.1 p.p. year-over-year and 0.4 p.p. sequentially. For comparison, in the Brazilian Financial System, delinquency for loans past due 90 days or more in payrolldeductible loans for government employees reached 2.3% in March 2017, according to data by the Central Bank of Brazil. The table below shows the payroll-deductible loan portfolio broken down by levels A to H, and their relative provisions. Loans rated A to C correspond to 96.7% of the overall portfolio. 96,7% A to H Rating Payroll-deductible loans Status % of Total % of Total Portfolio Portfolio Allowance Portfolio Portfolio Allowance A ,0% ,8% B ,1% ,2% 719 C ,6% ,0% D ,6% ,0% E ,4% ,5% F ,3% ,0% G ,3% ,4% H ,7% ,2% Total ,0% ,0% ,0% 16

17 Corporate Loans Paraná Banco s corporate loan portfolio closed the quarter at R$ million, down 60.6% year-over-year and 20.1% sequentially. This decrease is in line with the strategy we have adopted and which we have mentioned in previous reports. (R$ millions) Corporate Loans (20,1%) (60,6%) Loan Operations (21,4%) (60,0%) Sureties ,0% (85,7%) Trade Finance ,4% (56,6%) The table below shows the corporate loan portfolio, without sureties, broken down by levels A to H, and their relative provisions. In, the provision totaled R$ 64.5 million, down 2.8% sequentially. A to H Rating Corporate Loans Status % of Total % of Total Portfolio Portfolio Allowance Portfolio Portfolio Allowance A ,2% ,5% 84 58,9% B ,5% ,9% ,5% C ,1% ,2% D ,6% ,8% E ,5% ,1% F ,4% ,5% G ,9% ,7% H ,8% ,3% Total ,0% ,0%

18 The lower left graph shows loans rated D to G closed the quarter at 19.4%, while loans rated H closed at 21.8%. The graph to the right shows loans past due 60 days or more closed at 17%, and past due 90 days or more, at 16.9%. These indicators reflect the discontinuation of this portfolio. Level (R$ thousand) Total portfolio (20,3%) (59,8%) D - G (30,4%) ,4% % D - G a 19,4 22,2 (2,8 p.p.) 5,0 14,4 p.p. H ,4% ,8% % H á 21,8 17,3 4,5 p.p. 2,1 19,7 p.p. a % of the total portfolio Overdue (R$ thousand) Total portfolio (20,3%) (59,8%) Overdue > 60 days (33,8%) ,3% % Overdue > 60 days a 17,0 20,5 (3,5 p.p.) 5,9 11,1 p.p. Overdue > 90 days (26,7%) ,4% % Overdue > 90 days a 16,9 18,4 (1,5 p.p.) 2,5 14,4 p.p. a % of the total portfolio 18

19 Home Equity Because we have discontinued the home equity operation, this portfolio closed with a balance of R$ 54.3 million, down 7% sequentially and 20% year-over-year. The table below shows this portfolio broken down by levels A to H, and their relative provisions. A to H Rating Home Equity Status % of Total % of Total Portfolio Portfolio Allowance Portfolio Portfolio Allowance A ,2% ,9% ,2% B ,5% ,6% 15 77,5% C ,6% ,0% 210 D ,3% ,4% 198 E 862 1,6% ,4% F ,0% ,6% 475 G ,3% ,1% H ,6% ,0% Total ,0% ,0%

20 Asset and Liability Management (ALM) We recorded total assets of R$ 5.6 billion in, down 1.5% sequentially and down 10.8% year-over-year, especially due to the reduction in the loan portfolio. Loans corresponded to 69% of total assets in, followed by interbank investments (19%), other financial investments (9%), and income from securities (3%), as illustrated below. Liquidity Our cash balance was of R$ 1.1 billion by the end of, a decrease of 34.6% year-over-year of 12.8% sequentially. This reduction is in line with the lower growth of Paraná Banco s loan portfolio. The available cash balance represented 26.2% of our overall funding in. (R$ thousands) Repurchase Agreement (1,1%) (27,8%) Brazilian Federal Bond - Fixed Rate nd (100,0%) Brazilian Federal Bond - Floating Rate ,4% ,7% Brazilian Federal Bond in Guarantee (BM&FBovespa) (17,3%) (90,8%) Investment (48,8%) (70,5%) Reserve Balance (94,1%) 519 (93,3%) Final Balance (12,8%) (34,6%) 20

21 Funding The table below shows Paraná Banco's funding portfolio. Our funding balance was of R$ 4.2 billion in, down 11.8% year-over-year and 4.5% sequentially. This decrease is in line with our lower loan production, reducing our funding needs. The increase in time deposits by Individuals increased by 88.4% in year-over-year, and Corporate time deposits rose 66.9% in the same period. Funding (R$ thousands) Total Funding (4,5%) (11,8%) Total Deposits (4,7%) ,9% Institutional Investors (8,4%) (11,5%) Financial Institutions (41,8%) (49,3%) Other Companies ,0% ,9% Related Parties ,8% (3,3%) Individuals ,1% ,4% Demand Deposits (57,0%) (49,2%) Financial Bills (1,7%) (44,9%) LCI/LCA (7,8%) ,2% BNDES/Finame onlending (21,7%) (54,2%) The graphs below show our funding broken down by product. In, time deposits (CDB and CDI) and financial bills accounted for 91% of the overall funding, followed by DPGE II with 7%, and BNDES onlending and LCI with 1% each. 21

22 According to the tables below, 49% of the total assets will mature in 12 months, and 47% of the liabilities have the same maturity. Assets % on Total Assets up to 12 months % above 12 months % Subtotal (a) % Permanent Asset (b) % Total Assets (a+b) % Capitalization The Capital Adequacy ratio, pursuant to requirements of the Central Bank of Brazil (Basel III), closed at 20.2%, down 1.7 p.p. sequentially. This decrease is mostly explained by Central Bank of Brazil s Resolution 4,192/13 coming into force, setting a schedule for reference equity deductions, referring to direct and indirect investments higher than 10% of the shareholders equity Paraná Banco holds at the Insurer and the Reinsurer. 22

23 Corporate Governance On April 11, 2017, Paraná Banco received the Appraisal report for its shares, prepared by PricewaterhouseCoopers Corporate Finance & Recovery Ltda. The Appraiser determined that the economic value of the shares ranges between R$ and R$ On April 18, 2017, a notice to the market informed that the offeror of the tender offer had filed the relevant documents with the CVM, setting the price at R$ per share in the offer. The next steps will be disclosed soon, and include the publication of the tender offer call, the auction, and settlement. Shareholding structure Paraná Banco s shareholding structure is as follows: Shareholders Common Preferred Shares Shares Total % Control Group and Related Person ,5% Board of Directors ,0% Management ,7% Free float ,8% Base: april/2017 Total % 23

24 Insurance Group s Performance J. Malucelli Seguradora J. Malucelli Seguradora's net income was up 115.4% in year-over-year and down 32.2% sequentially, closing the quarter at R$ 15.5 million, benefiting from the lower loss ratio in the period. Net equity increased 2% year-over-year and 4.8% sequentially, totaling R$ million in. J. Malucelli Seguradora (R$ thousands) Net Income (32,2%) ,4% Shareholders' Equity ,8% ,0% * Represents 100% of net assets and net income not adjusted. Direct premiums written by J. Malucelli Seguradora closed the quarter at R$ 45.3 million. The lower production was partly due to the seasonality of the period (the Judiciary was in recess), which impacted the writing of judicial surety bond premiums. The decrease of 80.4% in sequentially is due to the issue of material and non-recurring policies in December

25 below. The loss ratio (surety bond claims retained divided by premiums earned) was 2.2% in, as illustrated In March 2017, J. Malucelli Seguradora ranked 5 th in market share in the production of direct premiums, with 9% in surety bonds, in Susep s ranking. 25

26 J. Malucelli Resseguradora J. Malucelli Resseguradora closed with net income of R$ 13.9 million, up 3.3% year-over-year and down 41.7% sequentially. Net equity totaled R$ million in, down 8.7% year-over-year, due to the payment of extraordinary dividends in September Quarter-over-quarter, it increased 2.2%. J. Malucelli Resseguradora (R$ thousands) Net Income (47,7%) ,3% Shareholders' Equity ,2% (8,7%) * Represents 100% of net assets and net income not adjusted. Premiums retained by J. Malucelli Resseguradora, according to the graph below, decreased compared to and due to the issue of material and non-recurring policies in December

27 In March 2017, J. Malucelli Resseguradora ranked 2 nd in market share in surety bonds, with 16.2% of the production of reinsurance premiums in the financial risk category, in Susep s ranking, according to the graph below. J. Malucelli Investimentos (DTVM) J. Malucelli Investimentos is committed to long-term investments, exclusively based on a deep fundamentals analysis. Its investment products are designed for individuals, corporations or institutions. It currently manages four open-ended investment funds, two in equities and two in fixed income, and 18 exclusive investment fund and managed portfolio products. The company closed with R$ 3 billion in assets under management, up 68.7% year-over-year and 9.4% sequentially. 27

28 Appendix I Statement of Income Statement of Income (R$ thousands) Interest Income Loan operations Income from marketable securities operations Income from trade finance operations (5) Interest Expenses ( ) ( ) ( ) Funding operations in the market ( ) ( ) ( ) Income from derivative financial instruments (1.441) Allowance for loans losses (40.914) (65.712) (35.654) Net interest income Other operating income (expenses) (49.630) (50.882) (60.109) Services fee income Change in insurance technical allowances (11.357) (15.013) (14.052) Personnel expenses (49.990) (49.900) (49.415) Other administrative expenses (6.630) (6.841) (6.728) Tax expenses Other operating income Other operating expenses (2.827) (2.929) (5.769) Operating Income Income Tax - current (13.025) (8.951) Social contribution - current (12.727) (6.446) Social contribution - current (10.319) (5.312) Deferred Income tax and social contribution Profit Sharing (690) (6.098) - Net Income

29 Appendix II Balance Sheet Balance Sheet (R$ thousand) Assets 31/03/ /12/ /03/2016 Current Cash and equivalents Interfinancial liquidity investments Marketable securities Interfinancial relations Loan operations Loan operations Allowance for losses with loan operations ( ) ( ) (77.662) Other loans Other values and assets Long-term assets Interfinancial liquidity investments Marketable securities Loan operations Loan operations Allowance for losses with loan operations (15.956) (22.336) (45.816) Other loans Other values and assets Permanent Investments Property, plant and equipment in use Intangible Total Balance Sheet (R$ thousand) Liabilities 31/03/ /12/ /03/2016 Current Deposits Open market funding Proceeds from acceptances and issues of securities Domestic onlendings Interfinancial relations 1-2 Interdependences relations Currency Borrowings Other liabilities Long-term liabilities Deposits Proceeds from acceptances and issues of securities Domestic onlendings Derivative financial instruments Other liabilities Income from future years Shareholder's equity Capital stock Capital reserve Profits reserve Adjustments to market value - marketable securities (379) Earnings/Losses accumulated Treasury Shares - - (15.509) Total