Hrvatska Poštanska Banka d.d.

Annual Report • Feb 28, 2018

Consolidated financial statements for the period from Jan 01 to Dec 31 2017 Unaudited

Zagreb, February 28 2018

In accordance with Capital Markets Act, HPB p.l.c. (Bank) as the parent company of HPB Group (Group), publishes unaudited consolidated financial statements for the period from Jan 01 to Dec 31 2017.

This report includes:

• Management report of HPB Group,
• statement by persons accountable for compiling the report of Group,
• unaudited set of consolidated financial statements (balance sheet, profit or loss statement, statement of changes in equity, cash flow statement), and
• notes to financial statements.

Financial statements and notes were made in accordance with the TFI-KI reporting methodology by Croatian Financial Services Supervisory Agency. Items in the profit or loss statement are complied in accordance with IFRS.

Management Report of HPB Group

HPB Group is, apart from the parent company – HPB p.l.c., comprised of HPB Stambena štedionica (savings bank), HPB Invest (investment fund management) and HPB Nekretnine (real estate agency).

Group has recorded a net profit of HRK 7,1M in 2017, as opposed to HRK 183,5M of net profit in prior year. Loss is a cosequence of deteriorated creditworthiness of Agrokor and group of related parties, i.e. is a result of impairment losses that the Bank recognized on these exposures (HRK 281M of impairments on exposures towards this group of economically and legally related parties as per Dec 31 2017).

In spite of 2017 reporting period being marked with adverse effects of Agrokor on Group profitability, the parent company as well as subisidiaries recorded a net profit. Apart from HRK 7,1M of parent's profit, HPB Stambena štedionica made an after-tax profit of HRK 676K. HPB Invest made a net profit of HRK 1,6M, whilst HPB Nekretnine added a net profit of HRK 873K.

Apart from this, subisidiaries have contributed to the parent through a dividend payout. HPB Stambena štedionica has for the first time in its history paid out a dividend amounting to HRK 400K. Meahwhile, after paying out HRK 3,5M in 2016, HPB Invest paid out a dividend amounting to HRK 2,2M in 2017.

Statement by persons accountable for compiling the report of HPB Group

In accordance with the Capital Market Act, the Management Board of HPB p.l.c., the parent company of HPB Group, states that according to their best knowledge the set of consolidated unaudited financial statements for the period from Jan 01 to Dec 31 2017, compiled in accordance with the accounting regulation applicable to credit institutions in Croatia, presents complete and accurate view of assets and liabilities, losses and gains, financial position and results of HPB p.l.c., as well as companies included in consolidation as a whole.

HPB GROUP
Appendix 3. Reporting period:		Jan 01	to	Dec 31 2017
		Quarterly financial statements for credit institutions TFI-KI
Registration number (MB):	03777928
Registration number (MBS):	080010698
Personal identification number (OIB):	87939104217
Company:	HPB p.l.c.
Postal code and city	10000	ZAGREB
	Address: JURIŠIĆEVA 4
E-mail address: hpb@hpb.hr
Internet address: www.hpb.hr
City code and name:	133 ZAGREB
County code and name:	21 GRAD ZAGREB			# of employees:	1.160
Consolidated report:	YES			(as per reporting date) Industry code:	6419
Consolidated companies (in accordance with IFRS):		Headquarters:		Registration number:
HPB Stambena Štedionica d.d.		Savska 58, 10000 Zagreb			02068001
HPB Invest d.o.o.		Strojarska 20, 10000 Zagreb			01972278
HPB Nekretnine d.o.o.		Amruševa 8, 10000 Zagreb			01972260
Book-keeping service provided by:	n/a	n/a
Contact:	Tomašek David
	Phone: 014804900		Fax:	014804594
	E-mail address: david.tomasek@hpb.hr
Surname and name: Vuić Tomislav	(persons authorized for representation)
	Documentation to be made public:

1. Financial reports (balance sheet, profit or loss statement, cash flow statement, statement on changes

in equity and notes to financial statements)

1. Management report

2. Statement by persons accountable for compiling the report

BALANCE SHEET

as per Dec 31 2017 in HRK
Item	AOP label	Dec 31 2016	Dec 31 2017
1	2	3	4
ASSSETS
1. CASH AND DEPOSITS WITH THE CNB (002+003)	001	2.263.303.114	4.391.466.871
1.1.Cash	002	421.479.852	460.024.014
1.2.Deposits with the CNB	003	1.841.823.262	3.931.442.857
2. DEPOSITS WITH FINANCIAL INSTITUTIONS	004	774.135.009	473.376.331
3. SHORT-TERM TREASURY BILLS OF THE CROATIAN MINISTRY OF FINANCE	005	415.536.615	324.931.405
4. FINANCIAL ASSETS HELD FOR TRADING	006	696.314.398	654.815.717
5. FINANCIAL ASSETS AVAILABLE FOR SALE	007	2.630.574.528	2.461.015.121
6. FINANCIAL ASSETS HELD TO MATURITY	008	442.835.059	72.345.457
7. FINANCIAL ASSETS VALUED AT FAIR VALUE THROUGH PROFIT OR LOSS,
NOT ACTIVELY TRADED	009	0	0
8. DERIVATIVE FINANCIAL ASSETS	010	3.780.197	0
9. LOANS TO FINANCIAL INSTITUTIONS	011	81.579.680	61.203.264
10. LOANS TO OTHER CUSTOMERS	012	11.406.936.798	11.015.372.274
11. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES	013	7.930.000	20.000.000
12. REPOSSESSED ASSETS	014	0	0
13. TANGIBLE ASSETS (LESS DEPRECIATION)	015	155.541.052	143.728.742
14. OTHER ASSETS	016	827.552.055	454.528.247
A) TOTAL ASSETS (001+004 to 016)	017	19.706.018.505	20.072.783.429
LIABILITIES
1. BORROWINGS FROM FINANCIAL INSTITUTIONS (019+020)	018	620.995.448	651.970.981
1.1. Short-term	019	0	0
1.2. Long-term	020	620.995.448	651.970.981
2. DEPOSITS (022 to 024)	021	14.781.982.934	15.389.794.813
2.1. Transactional and current accounts	022	3.981.010.898	5.125.464.754
2.2. Savings deposits (demand)	023	1.486.719.761	1.538.006.561
2.3. Term deposits	024	9.314.252.275	8.726.323.498
3. OTHER BORROWINGS (026+027)	025	88.426.108	20.286.850
3.1. Short-term	026	0	0
3.2. Long-term	027	88.426.108	20.286.850
4. DERIVATIVE AND OTHER FINANCIAL LIABILITIES HELD FOR TRADING	028	3.640.667	0
5. ISSUED SECURITIES (030+031)	029	0	0
5.1. Short-term	030	0	0
5.2. Long-term	031	0	0
6. SUBORDINATED DEBT ISSUED	032	0	0
7. HYBRID INSTRUMENTS	033	0	0
8. OTHER LIABILITIES	034	2.317.559.985	2.100.222.122
B) TOTAL LIABILITIES (018+021+025+028+029+032+033+034)	035	17.812.605.142	18.162.274.766
EQUITY
1. SHARE CAPITAL	036	1.214.298.000	1.214.298.000
2. PROFIT/(LOSS) FOR THE PERIOD	037	183.486.624	7.099.293
3. RETAINED EARNINGS	038	41.154.765	130.368.702
4. REGULATORY RESERVES	039	6.160.835	15.708.724
5. STATUTARY AND OTHER CAPITAL RESERVES	040	363.623.023	448.347.821
6. FAIR VALUE RESERVE	041	84.690.116	94.686.123
7. RESERVES ARISING FROM HEDGING TRANSACTIONS	042	0	0
C) TOTAL EQUITY (036 to 042)	043	1.893.413.363	1.910.508.663
D) TOTAL LIABILITIES AND EQUITY (035+043)	044	19.706.018.505	20.072.783.429
ADDENDUM TO THE BALANCE SHEET (filled-in by the banks submitting consolidated financial statement)
1. TOTAL EQUITY	045	1.893.413.363	1.910.508.663
2. Equity attributable to the shareholders of the parent company	046	1.893.413.363	1.910.508.663
3. Minority interest (045-046)	047	0	0

6

PROFIT OR LOSS STATEMENT

Ja n 0 1 2 01 7 for th iod fr e p er om	to	De c 3 1 2	01 7				in H R K
Ite m		AO P lab el	Ja n 0 1 - De	c 3 1 2 01 7	Ju n 0 1 - De c 3 1 2 01 7
				Cu lat ive mu	Qu ly art er	Cu lat ive mu	Qu ly art er
1			2	3	4	5	6
. In t in 1 ter es co me			04 8	73 3.3 87 .78 4	18 4.6 30 .90 7	67 6.8 98 .41 1	16 5.3 64 .47 9
2 . In ter t e es xp en se			04 9	21 3.9 39 .60 2	45 .56 9.0 60	13 9.4 35 .67 4	31 .76 6.1 28
3 . N et int st inc e ( 04 8-0 49 ) ere om			05 0	51 9.4 48 .18 2	13 9.0 61 .84 7	53 7.4 62 .73 7	13 3.5 98 .35 1
4 . F d c mi ion in ee an om ss co me			05 1	50 5.5 77 .12 9	12 3.5 45 .57 2	53 7.4 17 .56 9	12 4.6 11 .27 1
5 . F d c mi ion ee an om ss ex pe ns e			05 2	31 0.0 83 .10 0	77 .92 8.7 18	32 9.1 40 .95 8	75 .83 6.4 49
6 . N fee d c mi ion in ( 05 1-0 52 ) et an om ss co me			05 3	19 5.4 94 .02 9	45 .61 6.8 54	20 8.2 76 .61 1	48 .77 4.8 22
. G ain s l s l ris ing fro inv in bs idi ari 7 tm ts es os se s a m es en su es , a ss jo int ntu ve res	iat ed oc co mp	ies d an an	05 4	0	0	0	0
8 . G ain s l s l s f din ctiv itie tra es os se rom g a s			05 5	69 .65 6.9 10	12 .78 2.6 92	48 .62 9.4 94	9.6 24 .37 3
9 . G ain s l s l s f bu ilt- in de riva tive es os se rom s			05 6	0	0	0	0
. G ain s l s l ris ing fro fin cia l a lue d a t fa ir v 10 ets es os se s a m an ss va ctiv ely de d t a tra no	alu hro h P e t ug	&L ,	05 7	0	0	0	0
11 . G ain s l s l ris ing fro riti ail ab le for le es os se s a m se cu es av sa			05 8	48 .59 5.4 43	6.8 97 .02 5	29 .78 3.7 08	24 .32 6.2 16
12 . G ain s l s l ris ing fro riti he ld ity to tur es os se s a m se cu es ma			05 9	0	0	0	0
13 . G ain s l s l ris ing fro he dg ing tivi tie es os se s a m ac s			06 0	0	0	0	0
14 . In fro inv in bs idi ari iat ed tm ts co me m es en su es , a ss oc co mp an	ies d j oin t ve an	ntu res	06 1	0	0	0	0
15 . In fro oth uit ins tru nts co me m er eq me y			06 2	82 6.6 26	32 .44 1	97 4.9 19	13 9.9 07
16 . G ain s l s l s f ch dif fer te es os se rom ex an ge ra en ce s			06 3	( 3.8 72 .48 4)	( 2.6 94 .91 6)	1.7 71 .37 3	( 35 0.0 17 )
17 . O the r in co me			06 4	7.7 51 .69 3	1.1 17 .25 1	5.3 91 .73 0	85 5.2 02
. O 18 the ing rat sts r o pe co			06 5	58 .30 5.5 66	14 .74 8.3 23	64 .55 6.3 39	21 .46 7.4 31
. G l a nd ad mi nis tive rtiz ati d d 19 tra en era ex pe ns es , a mo on an ep rec	iat ion		06 6	39 6.1 88 .81 7	10 3.7 69 .13 7	39 4.1 29 .85 2	10 1.0 31 .15 7
20 . O ing ofi t ( 05 0+ 05 3 t o 0 64 -06 5-0 66 ) rat pe pr			06 7	38 3.4 06 .01 6	84 .29 34 5.7	37 3.6 04 .38 1	94 0.2 66 .47
21 . Im irm t lo d p isi pa en ss es an rov on s			06 8	22 7.0 18 .64 8	75 .29 9.2 86	36 3.8 69 .24 3	87 .58 1.2 28
22 . P RO FIT /( LO SS ) BE FO RE TA X ( 06 7-0 68 )			06 9	6.3 87 .36 8 15	8.9 96 8 .44	9.7 35 .13 8	6.8 89 .03 8
23 . IN CO ME TA X E XP EN SE / D EF ER RE D T AX			07 0	( 27 .09 9.2 56 )	( 26 .63 ) 4.5 17	2.6 35 .84 5	76 6.5 51
24 . N ET PR OF IT/ ( LO SS ) FO R T HE PE RIO D ( 06 9-0 70 )			07 1	18 3.4 86 .62 4	35 .63 0.9 65	7.0 99 .29 3	6.1 22 .48 7
25 . E ing sh arn s p er are			07 2	91	18	4	3
TO AD DE ND UM TH E P &L ( fill ed -in by th e b ks bm itti oli an su ng co ns	da ted fin cia an	l s t) tat em en
PR OF IT FO R T HE PE RIO D 1.			07 3	18 3.4 86 .62 4	35 .63 0.9 65	7.0 99 .29 3	6.1 22 .48 7
2. Att rib ble th ha ho lde of the uta to nt e s re rs pa re co mp an y			07 4	18 3.4 86 .62 4	35 .63 0.9 65	7.0 99 .29 3	6.1 22 .48 7
3. Mi rity in t ( 07 3-0 74 ) ter no es			07 5	0	0	0	0

Consolidated financial statements for the period from Jan 01 to Dec 31 2017 (unaudited)

CASH FLOW STATEMENT - INDIRECT METHOD

Jan 01 2017 Dec 31 2017 for the period from to			in HRK
Item	AOP label		Jan 01 - Dec 31 2016 Jan 01 - Dec 31 2017
1	2	3	4
OPERATING ACTIVITIES
1. Cash flow from operating activities before changes in assets (002 to 007)	001	398.798.666	410.702.980
1.1. Profit/(loss) before tax	002	156.387.368	9.735.138
1.2. Impairment losses and provisions	003	227.018.648	363.869.243
1.3. Amortization and depreciation	004	45.487.838	44.073.387
1.4. Net unrealised gains less losses from financial assets valued at fair value through profit or loss	005	(25.665.095)	(7.085.744)
1.5. Gains / losses from sale of tangible assets	006	253.900	1.882.329
1.6. Other gains / losses	007	(4.683.993)	(1.771.373)
2. Net increase / decrease of operating assets (009 to 016)	008	(1.970.377.843)	(1.179.368.700)
2.1. Deposits with the CNB	009	(74.210.746)	(2.089.619.595)
2.2. Tresury bills of the Croatian Ministry of Finance	010	85.698.193	90.605.210
2.3. Deposits with and loans to financial institutions	011	206.811.979	300.758.678
2.4. Loans to other customers	012	(1.162.620.024)	391.973.064
2.5. Financial assets held for trading	013	44.627.605	48.584.425
2.6. Financial assets available for sale	014	(634.815.410)	159.563.400
2.7. Financial assets valued at fair value through profit or loss, not actively traded	015	-
2.8. Other operating assets	016	(435.869.440)	(81.233.882)
3. Net increase / decrease of operating liabilities (018 to 021)	017	1.825.357.435	518.513.020
3.1. Transactional accounts	018	1.044.424.666	1.144.453.856
3.2. Savings and term deposits	019	1.142.830.149	(536.641.977)
3.3. Derivative financial liabilities and other liabilities actively traded	020	3.640.667	(3.640.667)
3.4. Ostale liabilities	021	(365.538.047)	(85.658.192)
4. Net cash flow from operating activities before taxation (001+008+017)	022	253.778.258	(250.152.700)
5. Income tax paid	023	(857.558)	(1.172.733)
6. Net cash inflow / outflow from operating activities (022+023)	024	252.920.700	(251.325.433)
INVESTING ACTIVITIES
7. Net cash flow from investing activities (026 to 030)	025	82.057.602	326.217.128
7.1. Purchase of tangible and intangible assets	026	(42.125.587)	(45.247.393)
7.2. Investment in / disposal of subsidiaries, associated companies and joint ventures	027	-	-
7.3. Investment in / disposal of financial assets held to maturity	028	123.227.604	370.489.602
7.4. Dividends received	029	955.585	974.919
7.5. Other inflows / outflows from investing activities	030	-	-
FINANCIAL ACTIVITIES
8. Net cash flow from financial activities (032 to 037)	031	(326.508.925)	(37.163.725)
8.1. Net increase / decrease of borrowings	032	(295.746.710)	(37.163.725)
8.2. Net increase / decrease of issued debt securities	033	-
8.3. Net increase / decrease of subordinated debt and hybrid instruments	034	-
8.4. Share capital raised	035	-
8.5. Dividends paid	036	(30.762.215)
8.6. Other inflows / outflows from financial activities	037	-
9. Net increase / decrease of cash and cash equivalents
(024+025+031)	038	8.469.377	37.727.970
10. Effect of foreign exchange differences on cash and cash equivalents	039	813.257	816.192
11. Net increase/(decrease) in cash and cash equivalents (038+039)	040	9.282.634	38.544.162
12. Cash and cash equivalents at the beginning of the year	041	412.197.218	421.479.852
13. Cash and cash equivalents as per reporting date (040+041)	042	421.479.852	460.024.014

8

for th e p	eri od fro m	Jan 01	20 17	to	Dec 31	20 17			in H RK
	AO		Att	ribu tab le t o th har eho e s	lde f th nt c rs o e p are om	pan y
Item	P lab el	Sha api tal re c	Ow har n s es	Reg ula tor tatu tor y, s y and oth er res erv es	Ret ain ed nin ear gs	Pro fit/( he per los s) f or t iod	Fair lue va re ser ve	Min orit y in ter est	To tal ity equ
1	2	3	4	5	6	7	8	9	10
Bal er J 01 2 017 anc e a s p an	001	1.2 14. 775 .00 0	(47 7.0 00)	369 .78 3.8 58	86. 030 .54 2	190 .50 2.9 35	84. 690 .11 6	0	1.9 45. 305 .45 1
Effe cts of c han in a unti olic ies ges cco ng p and tion s of co rrec err ors	002	0	0	0	(44 .87 5.7 77)	(7.0 16. 311 )	0		(51 .89 2.0 88)
Res d b alan Ja n 0 1 20 17 ( 001 +00 2) tate ce as per	003	1.2 14. 775 .00 0	(47 7.0 00)	369 .78 3.8 58	41. 154 .76 5	183 .48 6.6 24	84. 690 .11 6		1.8 93. 413 .36 3
Disp l of fina ncia l as aila ble for sale sets osa av	004	0	0	0	0	0	(6.7 ) 44. 613		(6.7 ) 44. 613
Cha in t he f air v alue of fina ncia l as sets aila ble for sale nge av	005	0	0	0	0	0	18. 934 .86 5		18. 934 .86 5
Tax item nise d di tly on s re cog rec in/tr ferr ed f uity ans rom eq	006	0	0	0	0	0	(2.1 94. 245 )		(2.1 94. 245 )
Oth ains d (lo s) r gnis ed d irec tly i uity er g an sse eco n eq	007	0	0	0	0	0	0		0
Net ins /(lo s) r gni sed dir ect ly in uity ga sse eco eq (00 4+0 05+ 006 +00 7)	008	0	0	0	0	0	9.9 96. 007	0	9.9 96. 007
Los s fo r th riod e pe	009	0	0	0	0	7.0 99. 293	0		7.0 99. 293
Tot al r gni zed inc nd e fo r th erio d eco om e a exp ens e p (00 09) 8+0	010	0	0	0	0	7.0 99. 293	9.9 96. 007	0	17. 095 .30 0
Incr e/de in s har pita l eas cre ase e ca	011	0	0	0	0	0	0		0
Pur cha se/s ale of o sh w n are s	012	0	0	0	0	0	0		0
Oth han er c ges	013	0	0	0	(7.0 16. 311 )	7.0 16. 311	0		0
Tra nsf er t o re ser ves	014	0	0	94. 272 .68 7	96. 230 .24 8	(19 0.5 02. 935 )	0		0
Divi den ds paid	015	0	0	0	0	0	0		0
Pro fit a lloc atio n (0 015 ) 14+	016	0	0	94. 272 .68 7	96. 230 .24 8	(19 0.5 02. 935 )	0	0	0
Bal he ing da er t ort te anc e a s p rep (00 3+0 10+ 011 +01 2+0 13+ 016 )	017	1.2 14. 775 .00 0	(47 7.0 00)	464 .05 6.5 45	130 .36 8.7 02	7.0 99. 293	94. 686 .12 3	0	1.9 10. 508 .66 3

STATEMENT OF CHANGES IN EQUITY

NOTES TO FINANCIAL STATEMENTS

A) PROFIT OR LOSS ACCOUNT

1) INTEREST INCOME in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
Loans	600.916.177	153.622.929	579.734.596	142.452.730
Deposits	2.104.322	857.566	(1.125.442)	471.823
Securities	130.367.285	30.150.412	98.289.257	22.439.926
TOTAL	733.387.784	184.630.907	676.898.411	165.364.479

2) INTEREST EXPENSE in HRK
		Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
Borrowings	18.962.631	4.257.844	14.083.983	3.676.154
Deposits	194.976.971	41.311.216	125.351.691	28.089.974
TOTAL	213.939.602	45.569.060	139.435.674	31.766.128

3) FEE AND COMMISSION INCOME in HRK

		Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
Cash payment operations - channels	285.883.397	70.269.462	277.133.723	67.452.911
Retail and card operations	146.326.916	34.588.792	179.789.439	35.201.430
Corporate operations	57.004.832	15.463.556	59.486.631	16.697.514
Other fee and commission income	16.361.984	3.223.762	21.007.776	5.259.416
TOTAL	505.577.129	123.545.572	537.417.569	124.611.271

4) FEE AND COMMISSION EXPENSE in HRK

	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
Payment operations	284.852.560	70.035.927	278.084.072	66.133.786
Other fee and commission expense	25.230.540	7.892.791	51.056.886	9.702.663
TOTAL	310.083.100	77.928.718	329.140.958	75.836.449

5) GAINS LESS LOSSES FROM TRADING ACTIVITIES in HRK
	Jan 01 - Dec 31 2016			Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
Securities and equity instruments	27.643.005	3.159.032	9.891.502	(201.443)
FX transactions	43.408.098	9.847.033	38.157.579	9.693.413

6) OPERATING EXPENSES in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
General and administrative expenses	350.700.979	91.939.889	350.056.465	90.185.289
Amortization and depreciation	45.487.838	11.829.248	44.073.387	10.845.868
Savings deposit insurance costs	34.691.397	7.760.717	35.559.103	9.155.918
Other costs	23.614.169	6.987.606	28.997.236	12.311.513
TOTAL	454.494.383	118.517.460	458.686.191	122.498.588

HRK cash transactions 367.955 0 490.545 3.850 Derivatives (1.762.148) (223.373) 89.868 128.553 TOTAL 69.656.910 12.782.692 48.629.494 9.624.373

7) IMPAIRMENT LOSSES AND PROVISION EXPENSES in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2017
	Cumulative	Quarterly	Cumulative	Quarterly
Individually identified impairment losses
(risk group B i C)	172.323.158	59.755.286	352.336.877	72.962.444
Portfolio based provisions for identified losses (risk group A)	13.632.773	541.409	5.575.717	5.672.535
Other provisions	41.062.717	15.002.591	5.956.649	8.946.249
TOTAL	227.018.648	75.299.286	363.869.243	87.581.228

B) BALANCE SHEET

8) CASH AND DEPOSITS WITH THE CNB		in HRK
	Dec 31 2016	Dec 31 2017
CASH	421.479.852	460.024.014
DEPOSITS WITH THE CNB	1.841.823.262	3.931.442.857
Mandatory reserve	1.300.796.321	1.300.268.691
Account for transaction settlement	541.026.941	2.631.174.166
MANDATORY TREASURY BILLS	-	-
Portfolio based impairment allowance for identified losses	-	-
TOTAL	2.263.303.114	4.391.466.871

9) DEPOSITS WITH FINANCIAL INSTITUTIONS in HRK Dec 31 2016 Dec 31 2017 Deposits with foreign banking institutions 753.064.739 450.007.251 Deposits with domestic banking institutions 21.070.270 23.369.080 Portfolio based impairment allowance for identified losses - -

10) EQUITY INSTRUMENTS AND SECURITIES		in HRK
	Dec 31 2016	Dec 31 2017
Short term Treasury bills of the Croatian Ministry of Finance	415.536.615	324.931.405
Financial assets held for trading	696.314.398	654.815.717
Financial assets available for sale	2.630.574.528	2.461.015.121
Financial assets held to maturity	450.105.787	73.139.356
Portfolio based impairment allowance for identified losses	(6.771.524)	(775.376)
Deferred front-end fee	(499.204)	(18.523)
TOTAL	4.185.260.600	3.513.107.700

TOTAL 774.135.009 473.376.331

11) LOANS TO CUSTOMERS in HRK

	Dec 31 2016	Dec 31 2017
Gross loans
Loans to financial institutions	81.583.376	62.454.545
Loans to companies	3.831.863.830	3.902.668.309
Retail loans	4.966.265.650	5.335.152.504
therein: housing loans	1.608.068.882	1.907.219.052
Other loans	4.040.077.723	3.197.806.535
TOTAL GROSS LOANS	12.919.790.579	12.498.081.893
Impairment allowance	(1.280.732.419)	(1.263.653.239)
Portfolio based impairment allowance for identified losses	(104.459.180)	(118.397.993)
Deferred front-end fee	(46.082.502)	(39.455.123)
TOTAL	11.488.516.478	11.076.575.538

B) BALANCE SHEET (continued)

12) DEPOSITS		in HRK
	Dec 31 2016	Dec 31 2017
Financial institutions	1.153.448.334	1.116.060.761
Corporations	3.009.235.694	3.574.264.999
Retail	9.166.235.142	9.282.784.665
Other	1.453.063.764	1.416.684.388
TOTAL	14.781.982.934	15.389.794.813

13) BORROWINGS		in HRK
	Dec 31 2016	Dec 31 2017
Borrowings from HBOR	624.696.401	656.196.151
Borrowings from domestic banking institutions	-
Borrowings from domestic non-banking institutions	-
Borrowings from foreign banking institutions	88.426.109	20.286.850
Deferred front-end fee	(3.700.954)	(4.225.170)
TOTAL	709.421.556	672.257.831

14) OTHER LIABILITIES		in HRK
	Dec 31 2016	Dec 31 2017
Restricted deposits	1.715.292.949	1.786.812.843
Interest and fees payable	58.731.565	42.254.446
Provisions for off-balance sheet exposure	22.291.290	34.049.808
Other	521.244.181	237.105.025
TOTAL	2.317.559.985	2.100.222.122

Consolidated financial statements for the period from Jan 01 to Dec 31 2017 (unaudited)

C) Investments in subsidiaries

The Group's subsidiaries are as follows:

	Industry	Country	Ownership as per Dec 31 2017 (%)
HPB Invest d.o.o.	Investment Fund Management	Croatia	100,00
	Real Estate Agency and
HPB Nekretnine d.o.o.	Construction	Croatia	100,00
HPB-Stambena štedionica d.d.	Savings Bank	Croatia	100,00

Subsidiaries are consolidated in the Group's financial statements. HPB Invest d.o.o., HPB Nekretnine d.o.o., HPB-Stambena štedionica d.d. are fully consolidated.

D) Changes in accounting policies

There were no changes in accounting policies of the Group during the reporting period which might have impact on financial position or results of the Group.

E) Changes in presentation of financial reports

Group has carried out a correcton of prior period error with regard to certain items in financial statements. In line with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, prior period financial reports have been restated.

Correction is related to a deduction from retained earnings for erroneously booked income from FX translation differences arising from foreign payment operations for a foreign partner, over the course of the period from Jan 01 2011 to Dec 31 2015, as well as correction of 2016 net profit for erroneously booked FX translation differences arising from aforementioned operations.

Corrections with regard to prior periods have been carried out during the current reporting period, error in booking has been eliminated, and P&L presented in these reports reflects correct effects of these transactions.

Effects arising from correction are presented below:

Effects on statement on financial position as per Dec 31 2016(in HRK)

Ite m	r 3 1.1 2.2 01 6. as pe be for tat t e r es em en -	Re ffe sta tem t e cts en	31 .12 .20 16 as pe r aft tat t er res em en -
AS SE TS
Ot he ( AO P 0 16) ts r a sse	87 9.4 44 .14 3	( 51 .89 2.0 88 )	82 7.5 52 .05 5
EQ UIT Y
AO Pro fit/ ( los s) for th eri od ( P 0 37 ) e p	190 .50 2.9 35	( 7.0 16 .31 1)	183 .48 6.6 24
AO Re tai d e ing s ( P 0 38 ) ne arn	86 .03 0.5 42	( 44 .87 5.7 77 )	41 .15 4.7 65
Eff P& L s t fo r th eri od fr ts tat ec on em en e p om ( in HR K)	Ja n 0 1. – De 31 20 16 c :
Ite	01 .01 31 .12 .20 16 . -	Re sta tem t e ffe cts en	01 .01 31 .12 .20 16 . -
m	be for tat t e r es em en -		aft tat t er res em en -
Ga ins le lo fro ha di ffe ate ss ss es m ex ng e r ren ce	s
( AO P 0 63 )	4.6 83 .99 3	( 8.5 56 .47 7)	( 3.8 72 .48 4)
Inc e/d efe d t e t om ax ex pe ns rre ax
AO ( P 0 70 )	25 .55 9.0 90	1.5 40 .16 6	27 .09 9.2 56
Pro fit/ los s f the rio d or pe
AO ( P 0 71 )	19 0.5 02 .93 5	( 7.0 16 .31 1)	18 3.4 86 .62 4

Consolidated financial statements for the period from Jan 01 to Dec 31 2017 (unaudited)

F) Ownership structure of the HPB Group parent company

Ownership structure of HPB p.l.c., the parent company of Group, as per Dec 31 2017 was as follows:

Shareholder	Ownership stake
Republic of Croatia (Ministry of State Assets)	42,43%
HP Hrvatska pošta Plc	11,93%
State Agency for Deposit Insurance and Bank Resolution	8,98%
Croatian Pension Insurance Insitute (Ministry of State Assets)	8,76%
Prosperus Invest d.o.o., for Prosperus FGS	4,94%
PBZ CROATIA OSIGURANJE OMF (B category)	4,12%
ERSTE d.o.o. for ERSTE PLAVI OMF (B category)	3,90%
Allianz ZB d.o.o., for AZ OMF (B category)	2,88%
CROATIA osiguranje Plc	2,47%
Fund for Financing the Decommissioning of the Krško Nuclear Power Plant and the Disposal of NEK Radioactive Waste and Spent Nuclear Fuel	2,36%
RAIFFEISEN D.D., for Raiffeisen OMF (B category)	2,20%
Minorities	4,99%
Own shares	0,04%

G) HPB STOCK

HPB's share is listed on the Official Market of ZSE. The last price per share at the end of the reporting period was HRK 506,00 (Dec 29 2017) representing a decrease of 32,6% when compared to the last traded price in 2016 (HRK 751,00 on Dec 30 2016).

Trading during the reporting period was as follows: