Annual Report Growing responsibly

Annual Report Growing responsibly

Annual Report 2016 Preface by the management board Dear Ladies and Gentlemen, Our 2016 annual report for our Volksbank Bielefeld-Gütersloh is positive, and we can look back at strong credit growth. We took matters into our own hands proactively and, with well-wrought corporate decisions, seized our opportunities in a challenging market environment. In so doing, as always, our focus remains firmly on our members and customers at all times. The positive growth figures in all business areas confirm that our customers approve of this partnership-based strategy. Volksbank Bielefeld-Gütersloh successfully completed the financial year with a total balance sheet increase of 6.3 % and an increase of balance sheet-recognised customer credits by 9.9 % in comparison to the previous year s value. At the same time, the current low-interest environment has resulted in a changed approach on the part of our customers when it comes to investments, and this is confirmed by a plus of 6.9 % in the securities business. Vibrant cooperative bank In 2016, Unesco determined the cooperative idea to be a World Cultural Heritage. With our 105,867 members, we are proud to be a part of this future-oriented type of enterprise. 5,250 new bank partners decided to become a member of Volksbank Bielefeld-Gütersloh. This impressively demonstrates how popular and vital our cooperative bank is. Constructive cooperation We would like to thank all members and customers for the trust placed in us also in 2016. In particular, we would like to extend a special word of thanks to our representatives and members of the Advisory Board and Supervisory Board for their close and constructive cooperation. Thanks to their support, we were able to further extend our strong position in the regional banking market. We would also like to thank our committed employees. With their great dedication and motivation, they provided a key contribution to our successful business result. Thomas Sterthoff Michael Deitert Reinhold Frieling

Annual Report 2016 Supervisory Board Report The 2016 financial year was accompanied by changes, new topics and regulatory requirements. For us as the supervisory board, the preparatory decisions were not always easy. In the year under review, the supervisory board was regularly informed by the bank management regarding the questions incumbent on it under the statutes, articles of association and rules of procedure, and it assumed its monitoring functions and took decisions within its field of competence. With regard to the development of business as well as significant transactions and future-securing projects, the management board informed the supervisory board in six mutual meetings. Decisions of the management board were transparent and comprehensible for the supervisory board at all times, thanks to in-depth information and exhaustive consultation. The information requested was always provided in full, and decisions were taken in separate votes. During the regular meetings, the chairman always provided the supervisory board with information regarding the course of business, assets and the profit and risk situation of the bank. In this regard, the bank-internal evaluations were discussed in detail and in an appropriate manner. The management board informed the supervisory board regarding all key business-political operations. In addition to this, the committees of the supervisory board (12 credit, 4 risk, 2 personnel and 4 audit committee) met regularly and took the required decisions in compliance with the statutes. Among others, the audit committee is responsible for monitoring the annual accounts auditing; in particular with regard to the independence of the annual auditor and the non-audit services provided by the annual auditor. Within the framework of self-assessment, in accordance with 25d Par. 11 p. 2 no. 3 and 4 Credit Services Act, the supervisory board audited these requirements. What is more, the supervisory board is free of any conflicts of interests. As such, the statutory requirements in accordance with 36 par. 4 GenG are satisfied. We, as a supervisory organ, have convinced ourselves that the annual closure has been developed accurately on the foundation of accounting and the inventories of our bank. We took into receipt the report regarding the statutory annual audit and audited it critically. Within the framework of the mutual final audit meeting, the supervisory board intensively busied itself with the audit findings regarding the monitoring of the financial reporting process as well as the effectiveness of the internal control system and the risk management system. What is more, we informed ourselves regarding the particularities and, as the case may be, arising inconsistencies within the framework of the annual audit; these did not occur. The Rheinisch-Westfälische Genossenschaftsverband e. V. confirmed toward us the independence of the employees involved in the final audit. In the final analysis, the supervisory board convinced itself to a sufficient degree regarding the proper creation and audit of the annual accounts and, as such, has contributed toward ensuring proper accounting. The supervisory board would like to thank the management board and all employees for their commitment and dedicated work in the past financial year. Gütersloh, April 2017 As a whole, on the foundation of its knowledge and experience, the supervisory board has sufficient industry and specialist knowledge as well as expertise in the areas of financial reporting and closure audits. Michael Mersch (Chairman)

The Financial Year 2016 Management Board Report The Financial Year 2016 Management Board Report Growing responsibly The past financial year of Volksbank Bielefeld-Gütersloh was exceptionally successful. First and foremost, the credit and real estate financing business was the engine for this good development. Our Volksbank s total assets increased by 231.5 million to 3.93 billion (previous year: 3.7 billion). As such, the good growth of the previous year was even exceeded. This means growth of 6.3 % (previous year: + 5.9 %) and, as a result, a new peak. Volksbank Bielefeld-Gütersloh continued to extend and solidify its position on the local financial market in 2016. Thanks to the good operating result, we will once again stock up the bank s equity and pay out an appropriate dividend to our members. The strong member bank in the region On 31.12.2016, Volksbank Bielefeld-Gütersloh counted 165,348 customers. Of these, about two-thirds, or a total of 105,867 of the Volksbank customers, are also members. In 2016, 5,250 people decided to become members at their Volksbank Bielefeld-Gütersloh (+ 2.3 %). Thank you for your trust. Positive credit development With 2.66 billion (previous year: 2.42 billion) and an increase of 9.9 % or 240.8 million, Volksbank Bielefeld-Gütersloh attained a new all-time high with the satisfaction of customer requirements. We provided the local economy as well as private investors new credits in the amount of 858.7 million (previous year: 784.5 million). This increase confirms the extremely investment-friendly climate and strong business environment in our region. The bandwidth of medium-sized businesses responsible for the requests for investments covers everything from craftsmen up to global players and family-run businesses. In 2016, with the so-called programme credits, we utilised numerous possibilities for grants for our customers and mediated numerous programme credits for them, totalling to the amount of 136.4 million (+ 22.4 %). In addition to this, we accompanied 100 grant applications for business start-ups with a total credit volume of 11.9 million. We could further expand the building finance business, despite the introduction of the residential property credit guideline in March 2016, and satisfy building financing wishes in the amount of 324 million. These refer to homebuyers, investors and capital investors who are seizing the current low-interest environment for their goals. As such, the new commitments toward building owners were increased by 13.7 % in 2016. Customer deposits The customer deposits were slightly higher than the previous year s level. With an amount of 2.8 billion, Volksbank Bielefeld-Gütersloh managed 24.8 million more in 2016 than in the previous year (+ 0.9 %). The sustained low interest has an influence on customer behaviour, in particular in the deposits area, and this is expressed in the strong shifts in the individual business areas. Here, the amount of term deposits and saving deposits dropped to 252.3 million (- 21.9 %) or 472.2 million (- 4.9 %). Instead, the customers relied on diversified products that promise higher yield levels in the long term. This is also reflected by strong growth by 6.9 % in the securities business. The portfolios on the custody and assets accounts amounted to 916.2 million (previous year: 857.1 million). The total capital assets of our customers (incl. life insurances and building loan contracts) added up to 4.21 billion on 31.12.2016 (previous year 4.11 billion). This corresponds with a growth figure of 2.4 %.

The Financial Year 2016 Management Board Report The changed customer behaviour is also reflected in the keen demand for fund savings plans. The volume of the new savings plans in 2016 was at 9.2 million corresponding to a growth figure of 151.4 %. The assets of the Union Investment society s investment accounts, which belongs to the cooperative FinanzGruppe, increased by 10.4 %. There also was a strong demand for our own Volksbank Bielefeld-Gütersloh NachhaltigkeitsInvest. By 31.12.2016, the investors invested a total of 83.02 million. What is more, our fund convinces with a good performance of 3.71 %. The good development of our in-house portfolio management has continued and further strengthened our market position. In total, managed customer assets the sum of customers deposits and the securities business grew by 2.3 % to 3.71 billion (previous year: 3.63 billion). Positive development in international business The international business area is still characterised by growth. In 2016, the consultants managed 11,538 foreign trade transactions (+ 12.2 %). First and foremost, the companies in the region intensified their export business. Accordingly, the increase of the export letters of credit business was very strong at 17.5 %, and the export collections increased by 39.8 %. GENO Immobilien GmbH The Volksbank subsidiary GENO Immobilien GmbH benefitted from the continuing trend of purchasing own property and concluded 322 contracts in 2016, which was a plus of 36.4 % in comparison to the previous year. In so doing, it attained sales prices in the amount of 51.9 million (+ 9.7 %). Apart from the marketing of the objects, GENO also participated in city development projects such as at Bielefelder Neumarkt and Ostmarkt and continues to promote property development in the region such as in Gütersloh-Kattenstroth along the Südring. Cooperative FinanzGruppe Apart from the successful cooperation with Union- Investment, 2016 was characterised by particular growth with life insurances. Many people still concluded a life insurance prior to the upcoming guaranteed interest rate cut by 1.1.2017. In total, 3,306 contracts were signed for life insurances (+ 10.9 %) with a total volume of 44 million (+ 31.3 %). The total repurchase value is now 267 million (+ 0.6 %) with a total portfolio of 23,322 contracts (+ 2.2 %). The development with the home savings business was completely different. The number of contracts concluded dropped by 26.9 % to 3,482. Within the context of the low-interest rate environment, the offers of Bausparkasse Schwäbisch Hall, aimed at interest rate hedging, are currently used to a smaller extent. Cooperation We will not pursue the cooperation with Volksbank eg, which has its headquarters in Warendorf, any further. This cooperation was entered into in autumn of 2016 with the objective of a fusion in 2018. The project was good and right, however the approaches regarding the future alignment of the bank were too different. We would like to continue our cooperation in already existing fields. Employees On 31.12.2016, Volksbank Bielefeld-Gütersloh employed 805 persons. Owing to retirement schemes, partial retirement plans and the normal fluctuation, the number of employees decreased by 48. Of these, 59 employees were undergoing training (previous year: 73). Proposal for the appropriation of profits Our members have contributed to our commercial success. The management board and supervisory board suggest toward the representative assembly a basic dividend of 2.5 % as well as a bonus of 0.5 %. In addition to this, via the VR members bonus, our members can attain a total income of up to 10 %. The amount is aligned to the number of bonus points, thus the intensity of the business relation as well as the number of subscribed shares. 2,5 % Basic dividends 818,631.19 0,5 % Bonus payment 163,722.77 Transfer to other revenue reserves 3,790,000.00 Carried forward to new account 785.94 All in all 4,773,139.90

Outlook 2017 Outlook 2017 Modern solutions Also in 2017, our sector will be characterised by increasing regulatory and cost pressure as well as intensive competition. Although the economic forecast anticipates continued positive economic development, many people believe these times to be uncertain and hard to predict. Here, we support our members and customers with appropriate and modern solutions as a partner. Further development of the business strategy Volksbank Bielefeld-Gütersloh is a strong cooperative bank. It is well-positioned and on a sound economic footing. Our successful business figures and the positive development with new members impressively underscores that the strategy we have selected is the right one. For this reason we will continue to develop this sustainable corporate alignment in the future. Open communication We will continue with open and trust-based dialogue with our representatives as well as with the members of the supervisory board and the committees in 2017 and inform them in detail regarding all relevant topics. We believe that we are well-positioned for the future. In this regard, proximity and direct contact with our members and customers remain at the centre of our corporate activity. Actively contributing to future developments is and remains our drive. We are convinced that Volksbank Bielefeld- Gütersloh will also master the future challenges and once again report on successful development in the future. New operating system All credit unions are facing profound changes as regards the entire IT infrastructure. With the merger of the two cooperative computing centres Fiducia and GAD, the changeover of our complete EDP operating system is planned for the start of 2019. The far-reaching, personnel-intensive preparations will already be starting this year and represent an important project.

Balance Sheet Profit and Loss Account (abbr. form) Balance Sheet 2016 (abbr. form) 2016 previous year change Assets T T T Cash reserves 55,428 58,708-3,280 Receivables from credit institutes 59,153 56,978 2,175 Receivables from customers 2,661,828 2,420,980 240,848 Securities and shareholdings 1,072,681 1,112,256-39,575 Fixed assets (incl. software) 43,245 38,691 4,554 Active latent taxes 30,851 0 30,851 Other assets 9,154 13,235-4,081 Total assets 3,932,340 3,700,848 231,492 Liabilities T T T Liabilities toward credit institutes 628,277 495,261 133,016 Liabilities toward customers 2,793,027 2,768,132 24,895 Securitised liabilities 5,065 5,168-103 Accruals 48,001 51,888-3,887 Other liabilities 5,104 4,777 327 Fund for general bank risks 188,300 119,400 68,900 Equity capital 264,566 256,222 8,344 Balance sheet total 3,932,340 3,700,848 231,492 Profit and Loss Account (short form) 2016 previous year Effect on profit and loss T T T Interest earnings 92,259 97,625-5,366 Interest expenses -14,119-17,425 3,306 Ongoing income from securities and share-holdings 2,656 2,090 566 Commission income 25,854 25,198 656 Other operating income 4,985 3,756 1,229 Personnel expenses -42,485-43,959 1,474 Other administrative expenses -22,601-22,391-210 Depreciation and value adjustments on tangible assets -3,770-3,959 189 Other operating expenses -2,594-5,637 3,043 Assessment result 17,991 22,064-4,073 Surplus from normal business activities 58,176 57,362 814 Extraordinary income -322 1,614-1,936 Taxes thereof: income from deferred taxes 19,780 30,851-10,308 0 Additions to funds for general banking risks -68,900-40,000-28,900 Annual net profit 8,734 8,668 66 Profit brought forward from previous year 1 0 1 Withdrawals from profit reserves -3,962-3,972 10 Balance sheet profit 4,773 4,696 77 30,088 30,851 Relevant Auditing Association RWGV Rheinisch-Westfälischer Genossenschaftsverband e. V. Mecklenbecker Straße 235 239 48163 Münster The complete annual financial statement (balance sheet, profit and loss account and attachment) as well as the situation report will be issued with the unqualified auditor's opinion from the Rheinisch- Westfälischen Genossenschaftsverband e. V. Münster in April 2017. The complete annual financial statement and the situation report will be published in the electronic Federal Gazette following the approval by the representative assembly.

Balance sheet total in billion Appropriation of earnings and VR bonus for employees 2016 3.93 3.90 3.80 Basic dividends 818,631.19 Bonus payment 163,722.77 2015 3.70 3.70 VR member bonus 1,203,000.00 6.0 million Transfer to other retained revenue reserves 3,790,000.00 3.60 3.50 Carried forward to new account 785.94 New credits in Branch network Business customer mortgages 528.2 34 Branch offices Leasing 11.5 858.7 million easycredit 20.0 Mortgages 87.7 20 self-service branch offices Private customer mortgages 211.3 Funding for the Region in Volksbank Foundation 68,000 Donations 286,000 557,000 Regional Commitment 203,000 Legal Notice Volksbank Friedrich-Ebert-Str. 73 75 33330 Gütersloh Telefon 05241 104-0 Telefax 05241 104-204 info@volksbank-bi-gt.de www.volksbank-bi-gt.de Concept and Design: www.identitygroup.de Print and Production: www.eusterhusdruck.de