TRANSLATION

Financial Statements for the Period from Jan 01 to Jun 30 2018

Unaudited

Zagreb, July 25 2018

In accordance with the Capital Markets Act, HPB p.l.c. publishes unaudited financial statements for the period from Jan 01 2018 to Jun 30 2018.

This report includes:

Management report of HPB p.l.c.,
statement by persons accountable for compiling the report of HPB p.l.c.,
unaudited set of unconsolidated 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 have been compiled in accordance with instructions defined in Rulebook on format and content of interim financial reports of issuers (NN 47/2011). Accordingly, there can be certain differences between reporting items outlined in the statement on financial position – with regard to new IFRS 9 classificiation. However, all the effects of transactions recognized since Jan 01 2018 are presented in the income statement, as well as through other comprehensive income, in compliance with IFRS 9.

Key highlights of results for the reporting period are as follows:

- in spite of limiting factors and competition on the credit market, due diligence process and Jadranska banka acquisition, HPB achieved excellent profitability during the first half of 2018 – net profit amounts to HRK 94,4 million,

- operating profit of HRK 137,9M, decreasing by HRK 34,5M or 20% in comparison with the same period 2017; due to decreasing interest margins, slight decrease in net fee income arising from higher prices that Bank pays to third parties on services rendered to clients, and due to absence of positive effects from securities trading,

significant ytd growth of loans to companies (+15,3%) and continued growth of retails loans (+4,5%),
addition of 4.000 new clients,
book value per share increased by 7,0% on y-o-y basis (+2,2% ytd),

- acquisition of Jadranska banka d.d. Šibenik closed after the balance sheet date. HPB commenced with merger activities.

Management report of HPB p.l.c.

2018 marks the beginning of new positive cycle after all the challenges we have went through last year. However, new year has brought new challenges – increase in liquidity surplus, new regulation that significantly impact credit institutions' operations, and loan demand that is growing slowly. We have simultaneously entered into comprehensive improvements process aimed at increasing quality of service and Bank's agility in order that excellence towards clients and shareholders can be achieved. Apart from this, we have also engaged in acquisition of Jadranska banka d.d. Šibenik and correspondingly – have made preparations for the merger.

Commentary on P&L movements

Interest margin decline was expected, as well as the need for service quality enhancement and initiative for general improvements of business operations. Accordingly, HPB has achieved the best 1H result since the Bank's foundation, with the profit amounting to HRK 94,4 million. At the same time, operating profit should have been better, and it will be after we finish with the projects that are under way.

Operating profit amounted to HRK 137,9M, representing a decrease of HRK 34,5M when compared to the same period of 2017. Decline in operating profit arises from lower income, consequent to interest rate trends and on the other hand – continuous growth in liquidity surplus. These trends might be nearing their end. Accordingly, net interest income is lower by 5,1 percent. As in previous periods, we have strived to mitigate the effects of interest income drop (by 8,9% or HRK 29,7 million) by slashing funding costs (by 23,3% or HRK 16,3 million) and optimizing funding structure.

Net income from commissions and fees decreased slightly (by 2,9%) in comparison with 1H 2017 even though income from services rendered is almost unchanged. However, cost of providing certain services to clients has increased, being a drag on income.

Other non-interest income is comprised of trading gains on securities and FX operations, dividends received and other income. These income categories have dropped by 29,8 percent in comparison with 2017, due to absence of one-off or non-recurring items relating to securities trading gains, dividendes received from subsidiaries following the retention of 2017 earnings.

Operating costs have been slightly increased (+4,0%), following a variety of initiated projects and activities that are driven by regulatory requirements (GDPR, IFRS9, AML, MIFID II). Bank's management continues to strive to optimize the business processes so that cost growth driven by regulation might be neutralized. On the other hand, the most important project in the coming period is the merger of Jadranksa banka d.d. Šibenik, which is also having effects on slight cost growth in the short term.

In the reporting period, the Bank recorded significantly lower impairment losses in comparison with 1H 2017 which was burdened by provisioning for Agrokor. By transitioning to the new IFRS 9 standard, the Bank recognized additional impairments amounting to HRK 57,3M as per January 1 2018, by charging capital reserves directly, mostly for performing loans. Effects in P&L account since the first application of the standard are not material for now. Such trends are resulting from solid collection and satisfactory NPL coverage ratio (65% as per Jun 30 2018).

Owing to the fact that Bank reported a net loss in 1H 2017, no tax expenses were recorded. On the other hand, due to pre-tax income of HRK 115,4M in 1H 2018, Bank has recognized a tax expense amounting to HRK 21 million. This expense does not represent nor it will represent cash outflow, because it relates to deferred tax assets, that can be utilized in the following period, based on past tax losses.

Commentary on balance sheet movements

In line with seasonal movements over the course of Q2, deposits received from clients have increased by HRK 897 million (+5,3%), reflecting the trust of our depositors. Assets have correspondingly increased by 4,7% and amount to HRK 20,7B. Assets' structure has improved – share of net loans in assets has increased from 55,1% to 57,7% owing to net loan growth (by 9,6%). Retail loans level continues to grow (+4,5%), but is eclipsed by strong loans to companies (+15,3%). After dropping in Q1, loans to other non-financial entities have increased by 8,5% due to demand by state units for short-term funding.

Kapital Banke na 30.06.2018. iznosi 1.947 milijuna kuna, te je u 2018. povećan za 2,2 posto. Najznačajniji doprinos rastu kapitala odnosi se na ostvarenu neto dobit razdoblja, dok su kako je prethodno spomenuto terećene rezerve kapitala za inicijalni efekt od uvođenja MSFI 9. Ostale promjene proizlaze iz pozitivne promjene vrijednosti financijskih instrumenata koji se vrednuju kroz ostalu sveobuhvatnu dobit (+4,7 milijuna kuna).

Bank's equity and reserves on Jun 30 2018 amount to HRK 1,947M, up by 2,2 percent ytd. Increase in capital refers mainly to the net profit achieved during the reporting period, while, as mentioned previously, capital reserves have been reduced for the effects of introduction of IFRS 9. Other changes relate to the positive change in the value of financial instruments valued through other comprehensive income (HRK +4,7M).

Although the Bank does not plan to expand the physical network of branches further, we do not miss favourable opportunities to extend the coverage of the Bank's network if there is a growing demand for banking services. Consequently, for our present and future clients in Dalmatia, we opened a new branch office in Zadar.

Business event of the year, that we are especially proud of, is the acquisition of Jadranska banka d.d. Šibenik. The transaction has been successfully closed post-balance sheet date. Ownership transfer has been completed on July 12 2018, while on July 13 2018 HPB has injected HRK 110 million of new capital to Jadranska banka in order to achieve full compliance with applicable capital demands. Acquisition of Jadranska banka will enable HPB to achieve stronger presence in prosperous mid-Dalmatia region, and will expand the HPB client base further. Merger activities have been initiated.

As opposed to the physical network, e-branch is increasingly recognized as the preferred channel. Digitalization and technology is a developmental direction for which we have chosen, and that we will continue to invest in.

We will continue to be dedicated to our clients, and will work on achieving adequate return for our shareholders.

Tomislav Vuić CEO

Statement by persons accountable for compiling the report of HPB p.l.c.

In accordance with the Capital Market Act, the Management Board of HPB p.l.c., states that according to their best knowledge the set of unaudited financial statements for the period from Jan 01 to Jun 30 2018, 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.

Tea Bažant Head of Finance Division Tomislav Vuić CEO

HPB p.l.c.
Appendix 3. Reporting period:		Jan 01		to	Jun 30 2018
	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: [email protected]
Internet address: www.hpb.hr
City code and name:	ZAGREB 133
County code and name:	GRAD ZAGREB 21				# of employees:	1.137
Consolidated report:	NO				(as per reporting date) Industry code:	6419
Consolidated companies (in accordance with IFRS):			Headquarters:			Registration number:







Book-keeping service provided by:	n/a		n/a
Contact:	Bažant Tea
Phone: 014804670				Fax:	014804594

	E-mail address: [email protected]
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)

Management report
Statement by persons accountable for compiling the report

BALANCE SHEET

Jun 30 2018 as per			in HRK
Item	AOP label	Dec 31 2017	Jun 30 2018
1	2	3	4
ASSSETS
1. CASH AND DEPOSITS WITH THE CNB (002+003)	001	4.391.466.489	3.973.300.998
1.1.Cash	002	460.023.632	656.730.597
1.2.Deposits with the CNB	003	3.931.442.857	3.316.570.401
2. DEPOSITS WITH FINANCIAL INSTITUTIONS	004	473.302.324	487.110.594
3. SHORT-TERM TREASURY BILLS OF THE CROATIAN MINISTRY OF FINANCE	005	324.931.405	272.507.001
4. FINANCIAL ASSETS HELD FOR TRADING	006	513.989.813	547.955.953
5. FINANCIAL ASSETS AVAILABLE FOR SALE	007	2.459.982.241	2.739.906.667
6. FINANCIAL ASSETS HELD TO MATURITY	008	72.345.457	71.124.811
7. FINANCIAL ASSETS VALUED AT FAIR VALUE THROUGH PROFIT OR LOSS,
NOT ACTIVELY TRADED	009	-	-
8. DERIVATIVE FINANCIAL ASSETS	010	-	-
9. LOANS TO FINANCIAL INSTITUTIONS	011	62.450.000	41.415.186
10. LOANS TO OTHER CUSTOMERS	012	10.851.664.988	11.924.060.066
11. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES	013	65.490.000	65.490.000
12. REPOSSESSED ASSETS	014	-	-
13. TANGIBLE ASSETS (LESS DEPRECIATION)	015	141.461.846	136.945.733
14. OTHER ASSETS	016	441.748.035	470.803.251
A) TOTAL ASSETS (001+004 to 016)	017	19.798.832.598	20.730.620.260
LIABILITIES
1. BORROWINGS FROM FINANCIAL INSTITUTIONS (019+020)	018	651.970.981	624.533.197
1.1. Short-term	019	-	-
1.2. Long-term	020	651.970.981	624.533.197
2. DEPOSITS (022 to 024)	021	15.134.400.504	16.008.511.168
2.1. Transactional and current accounts	022	5.172.463.233	5.922.570.745
2.2. Savings deposits (demand)	023	1.538.006.561	1.754.368.145
2.3. Term deposits	024	8.423.930.710	8.331.572.278
3. OTHER BORROWINGS (026+027)	025	20.286.850	36.897.885
3.1. Short-term	026	-	-
3.2. Long-term	027	20.286.850	36.897.885
4. DERIVATIVE AND OTHER FINANCIAL LIABILITIES HELD FOR TRADING	028	-	29.846
5. ISSUED SECURITIES (030+031)	029	-	-
5.1. Short-term	030	-	-
5.2. Long-term	031	-	-
6. SUBORDINATED DEBT ISSUED	032	-	-
7. HYBRID INSTRUMENTS	033	-	-
8. OTHER LIABILITIES	034	2.086.882.490	2.113.564.825
B) TOTAL LIABILITIES (018+021+025+028+029+032+033+034)	035	17.893.540.825	18.783.536.921
EQUITY
1. SHARE CAPITAL	036	1.214.298.000	1.214.298.000
2. PROFIT/(LOSS) FOR THE PERIOD	037	8.333.460	94.360.007
3. RETAINED EARNINGS	038	124.540.223	132.457.010
4. REGULATORY RESERVES	039	15.574.701	15.991.374
5. STATUTARY AND OTHER CAPITAL RESERVES	040	448.288.175	391.054.732
6. FAIR VALUE RESERVE	041	94.257.214	98.922.216
7. RESERVES ARISING FROM HEDGING TRANSACTIONS	042	-	-
C) TOTAL EQUITY (036 to 042)	043	1.905.291.773	1.947.083.339
D) TOTAL LIABILITIES AND EQUITY (035+043)	044	19.798.832.598	20.730.620.260

PROFIT OR LOSS STATEMENT

Ja n 0 1 2 01 8 for th eri od fro to e p m	Ju n 3 0 2 01 8				in H R K
Ite m	AO P lab el	Ja n 0 1 - Ju	n 3 0 2 017	Ja n 0 1 - Ju	n 3 0 2 018
		Cu lat ive mu	Qu erl art y	Cu lat ive mu	Qu erl art y
1	2	3	4	5	6
1 . In t in ter es co me	04 8	33 4.8 83 .06 9	165 .79 5.1 94	30 5.1 69 .62 8	154 .97 4.7 28
2 . In ter t e es xp en se	04 9	70 .06 7.4 96	33 .31 3.2 70	53 .76 3.1 33	27 .50 5.8 63
( ) 3 . N et int st inc 04 8-0 49 ere om e	0 50	26 4.8 15 .57 3	132 .48 1.9 24	25 1.4 06 .49 5	127 .46 8.8 6 5
4 . F d c mi ion in ee an om ss co me	0 51	24 1.5 76 .36 5	126 .99 1.9 99	24 0.3 68 .18 6	127 .81 3.1 56
. F d c mi ion 5 ee an om ss ex p en se	0 52	148 .27 2.7 70	76 .31 0.8 01	149 .72 6.5 21	79 .78 5.7 27
6 . N fee d c mis ion in ( 0 51 -0 52 ) et an om s co me	0 53	93 .30 3. 59 5	50 .68 1.1 98	90 .64 1.6 6 5	48 .02 7.4 29
Ga ins le los ris ing fro inv in s bs id iar ies iate d c ies d 7 tm ts ss se s a m es en u , as so c om p an an j int ntu o ve res	0 54	-	-	-	-
Ga fro 8 ins le los d ing tivi ties tra ss se s m ac	0 5 5	19 .98 3.2 90	10 .28 7.8 19	19 .52 9.7 82	9.0 19 .22 9
Ga ins le los fro bu ilt-i n d iva tive 9 ss se s m er s	0 56	-	-	-	-
Ga fro fina fa 10 ins le los ris ing ia l as ts lue d a t ir v lue th h P & L, ss se s a m nc se va a rou g not tive ly tra de d ac	0 57	-	-	-	-
11 Ga ins le los ris ing fro ritie ila b le for le ss se s a m se cu s a va sa	58 0	5.4 57 .49 2	5.1 22 .57 6	-	-
Ga ins le los ris ing fro ritie he ld t rity 12 atu ss se s a m se cu s o m	0 59	-	-	-	-
13 Ga ins le los ris ing fro he dg ing tivi ties ss se s a m ac	06 0	-	-	-	-
. In fro inv in s bs id iar ies iate d c ies d j int 14 tm ts ntu co me m es en u , as so c om p an an o ve res	06 1	2.2 00 .00 0	-	-	-
15 . In fro he ity ins ot tru nts co me m r e qu me	06 2	81 5.6 53	79 3.9 85	80 3.1 41	78 8.6 58
Ga ins le los fro ha d iffe 16 ate ss se s m exc ng e r ren ce s	06 3	189 .30 7	( ) 91 0.8 06	( ) 1.2 16 .56 3	( ) 2.4 00 .68 2
17 Ot he r in co me	06 4	4.1 69 .15 4	3.3 94 .37 6	3.9 28 .44 2	1.3 74 .87 1
Ot he ting 18 sts r o p era co	06 5	28 .86 7.3 56	14 .37 6.4 84	33 .68 0.8 16	17 .76 9.8 88
19 Ge l an d a dm inis tive iza tio nd de iat ion tra ort ne ra ex p en se s, am n a p rec	06 6	189 .63 3.3 69	94 .07 7.2 08	193 .47 3.5 26	97 .90 5.3 61
20 . O ing fit ( 0 50 +0 53 06 4-0 6 5-0 66 ) t to p era p ro	06 7	172 .43 3.3 39	93 .39 7.3 80	137 .93 8.6 20	68 .60 3.1 21
21 . Im irm t lo d p is ion p a en ss es an rov s	06 8	23 7.2 75 .83 9	166 .31 3.9 08	22 .54 6.3 94	33 .90 1.5 34
/ ( S S ) ( ) 22 . P RO FIT LO BE FO RE TA X 06 7-0 68	06 9	( 64 .84 2.5 00 )	( 72 .91 6. 52 8 )	115 .39 2.2 26	34 .70 1.5 87
. IN C O ME TA X E XP EN S E / DE FE RR ED TA X 23	07 0	( 50 ) 33 8. 1	( 56 ) 3. 0.2 04	21 .03 2.2 19	50 6. 7.9 04
/ ( S S ) ( ) 24 . N ET PR O FIT LO FO R T HE PE RIO D 06 9-0 70	07 1	( 64 .50 3.9 99 )	( 69 .3 56 .32 4 )	94 .36 0.0 07	28 .19 3.6 83
25 . E ing ha arn s p er s re	07 2	( 32 )	( 34 )	47	14

CASH FLOW STATEMENT - INDIRECT METHOD

Jan 01 2018 Jun 30 2018 for the period from to			in HRK
Item	AOP	Jan 01 - Jun 30	Jan 01 - Jun 30
1	label 2	2017 3	2018 4
OPERATING ACTIVITIES
1. Cash flow from operating activities before changes in assets (002 to 007)	001	194.628.533	166.335.962
1.1. Profit/(loss) before tax		(64.842.500)	115.392.226
	002
1.2. Impairment losses and provisions	003	237.275.839	22.546.394
1.3. Amortization and depreciation 1.4. Net unrealised gains less losses from financial assets valued at fair value through profit or	004	22.221.186	22.769.143
loss	005	(1.313.285)	4.217.970
1.5. Gains / losses from sale of tangible assets	006	1.476.600	193.666
1.6. Other gains / losses	007	(189.307)	1.216.563
2. Net increase / decrease of operating assets (009 to 016)	008	(276.018.865)	(847.539.178)
2.1. Deposits with the CNB	009	(621.518.645)	614.872.456
2.2. Tresury bills of the Croatian Ministry of Finance	010	5.459.309	52.424.404
2.3. Deposits with and loans to financial institutions	011	297.932.023	(13.808.270)
2.4. Loans to other customers	012	(334.729.651)	(1.103.269.140)
2.5. Financial assets held for trading	013	18.531.506	(38.184.110)
2.6. Financial assets available for sale	014	310.730.975	(285.519.302)
2.7. Financial assets valued at fair value through profit or loss, not actively traded	015	-	-
2.8. Other operating assets	016	47.575.618	(74.055.216)
3. Net increase / decrease of operating liabilities (018 to 021)	017	144.565.801	900.822.845
3.1. Transactional accounts	018	262.837.846	750.107.512
3.2. Savings and term deposits	019	(387.718.912)	124.003.152
3.3. Derivative financial liabilities and other liabilities actively traded	020	(3.640.667)	29.846
3.4. Ostale liabilities	021	273.087.534	26.682.335
4. Net cash flow from operating activities before taxation
(001+008+017)	022	63.175.469	219.619.629
5. Income tax paid	023	(363.028)	-
6. Net cash inflow / outflow from operating activities (022+023)	024	62.812.441	219.619.629
INVESTING ACTIVITIES
7. Net cash flow from investing activities (026 to 030)	025	151.230.037	(12.258.605)
7.1. Purchase of tangible and intangible assets	026	(16.138.698)	(14.282.392)
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	164.353.082	1.220.646
7.4. Dividends received	029	3.015.653	803.141
7.5. Other inflows / outflows from investing activities	030	-	-
FINANCIAL ACTIVITIES
8. Net cash flow from financial activities (032 to 037)	031	(83.785.363)	(10.826.749)
8.1. Net increase / decrease of borrowings	032	(83.785.363)	(10.826.749)
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	-	-
8.6. Other inflows / outflows from financial activities	037	-	-
9. Net increase / decrease of cash and cash equivalents
(024+025+031)	038	130.257.115	196.534.275
10. Effect of foreign exchange differences on cash and cash equivalents	039	902.877	172.690
11. Net increase/(decrease) in cash and cash equivalents (038+039)	040	131.159.992	196.706.965
12. Cash and cash equivalents at the beginning of the year	041	421.479.852	460.023.632
13. Cash and cash equivalents as per reporting date (040+041)	042	552.639.844	656.730.597

for th e p	eri od fro m	Jan 01	20 18	to	Jun 30	20 18			in H RK
	AO		Attr ibu tab le t o th e sh hol der s of the t co are pa ren mp any
Item	P lab el	Sha api tal re c	Ow n sh are s	Reg ula tory , sta tuto ry and oth er r ese rve s	Ret ain ed nin ear gs	Pro fit/( loss ) fo r th e per iod	Fai lue r va rese rve	Min orit y in tere st	Tot al e qui ty
1	2	3	4	5	6	7	8	9	10
Bal r Ja n 01 201 8 anc e a s pe	001	1.2 14. 775 .00 0	( 477 .00 0)	463 .86 2.8 76	124 .54 0.2 23	8.3 33. 460	94. 257 .21 4	-	1.9 05. 291 .77 3
Effe of c han in a unti olic ies cts ges cco ng p and rect ions of e cor rrors	002	-	-	(57 .233 .443 )	-	-	-		(57 ) .233 .443
8 (0 ) Res tate d b ala Ja n 01 201 01+ 002 nce as per	003	1.2 14. 775 .00 0	( 477 .00 0)	406 .62 9.4 33	124 .54 0.2 23	8.3 33. 460	94. 257 .21 4	-	1.8 48. 058 .33 0
l of fina le fo Disp ncia l as sets ilab le osa ava r sa	004	-	-	-	-	-	-		-
Cha in t he f air v alue of f inan cial ets ilab le fo le nge ass ava r sa	005	-	-	-	-	-	5.5 94. 876		5.5 94. 876
Tax item nise d di rect ly on s re cog in/tr ferre d fro quit ans m e y	006	-	-	-	-	-	( 929 .874 )		( ) 929 .874
Oth ains and (los ) rec ised dire ctly in e quit er g ses ogn y	007	-	-	-	-	-	-		-
Net ins/ (los ) re nise d d irec tly in e qui ty ga ses cog (004 +00 5+0 06+ 007 )	008	-	-	-	-	-	4.6 65. 002	-	4.6 65. 002
Los s fo r the iod per	009	-	-	-	-	7 94. 360 .00	-		94. 360 .00 7
Tot al r gni zed inc nd e fo r th erio d (0 08+ 009 ) eco om e a exp ens e p	010	-	-	-	-	94. 360 .00 7	4.6 65. 002	-	99. 025 .00 9
Incr e/de se i n sh ital eas crea are cap	011	-	-	-	-	-	-		-
Pur cha se/s ale of o sha wn res	012	-	-	-	-	-	-		-
Oth han er c ges	013	-	-	.673 416	87 7.9 16.7	) ( 8.3 33. 460	-		-
Tran sfer to rese rves	014	-	-	-	-	-	-		-
Divi den ds p aid	015	-	-	-	-	-	-		-
Pro fit a lloc atio n (0 14+ 015 )	016	-	-	-	-	-	-	-	-
Bal r th ting da te ( 003 +01 0+0 11+ 012 +01 3+0 16) anc e a s pe e re por	017	1.2 14. 775 .00 0	( 477 .00 0)	407 .04 6.1 06	132 .45 7.0 10	94. 360 .00 7	98. 922 .21 6	-	1.9 47. 083 .33 9

STATEMENT OF CHANGES IN EQUITY

HPB p.l.c.

NOTES TO FINANCIAL STATEMENTS

A) Income statement

1) INTEREST INCOME in HRK

		Jan 01 - Jun 30 2017	Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Loans	287.494.307	143.805.324	267.332.665	135.716.582
Deposits	(1.269.866)	(655.007)	636.300	297.051
Securities	48.658.628	22.644.877	37.200.663	18.961.095
TOTAL	334.883.069	165.795.194	305.169.628	154.974.728

2) INTEREST EXPENSE in HRK

		Jan 01 - Jun 30 2017	Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Borrowings	6.904.796	2.966.830	6.385.169	3.480.368
Deposits	63.162.700	30.346.440	47.377.964	24.025.495
TOTAL	70.067.496	33.313.270	53.763.133	27.505.863

3) FEE AND COMMISSION INCOME in HRK

	Jan 01 - Jun 30 2017		Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Cash payment operations - channels	138.969.149	70.754.937	132.109.659	67.076.601
Retail and card operations	70.767.176	39.893.459	75.062.519	43.159.693
Corporate operations	27.722.194	14.434.468	29.439.960	15.644.423
Other fee and commission income	4.117.846	1.909.135	3.756.048	1.932.439
TOTAL	241.576.365	126.991.999	240.368.186	127.813.156

4) FEE AND COMMISSION EXPENSE in HRK

		Jan 01 - Jun 30 2017	Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Payment operations	139.228.922	70.870.813	131.845.757	68.815.218
Other fee and commission expense	9.043.848	5.439.988	17.880.764	10.970.509
TOTAL	148.272.770	76.310.801	149.726.521	79.785.727

5) GAINS LESS LOSSES FROM TRADING ACTIVITIES in HRK
		Jan 01 - Jun 30 2017	Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Securities and equity instruments	2.148.509	420.779	(3.895.428)	(3.558.986)
FX transactions	17.652.385	9.644.730	22.514.068	11.306.995
HRK cash transactions	209.545	201.495	151.080	143.880
Derivatives	(27.149)	20.815	760.062	1.127.340
TOTAL	19.983.290	10.287.819	19.529.782	9.019.229

6) OPERATING EXPENSES in HRK

		Jan 01 - Jun 30 2017	Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
General and administrative expenses	167.412.183	83.083.177	170.704.383	86.470.506
Amortization and depreciation	22.221.186	10.994.031	22.769.143	11.434.855
Savings deposit insurance costs	17.803.541	8.805.541	17.601.264	9.059.264
Other costs	11.063.815	5.570.943	16.079.552	8.710.624
TOTAL	218.500.725	108.453.692	227.154.342	115.675.249

7) IMPAIRMENT LOSSES AND PROVISION EXPENSES in HRK

		Jan 01 - Jun 30 2017	Jan 01 - Jun 30 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Impairments and provisions for losses	249.354.127	178.737.916	15.089.070	30.993.355
Other impairments and adjstuments	(12.078.288)	(12.424.008)	7.457.324	2.908.179
TOTAL	237.275.839	166.313.908	22.546.394	33.901.534

B) Balance sheet

8) CASH AND DEPOSITS WITH THE CNB in HRK

	Dec 31 2017	Jun 30 2018
CASH	460.023.632	656.730.597
DEPOSITS WITH THE CNB	3.931.442.857	3.316.570.401
Mandatory reserve	1.300.268.691	1.328.294.502
Account for transaction settlement	2.631.174.166	1.988.275.899
MANDATORY TREASURY BILLS	-	-
Portfolio based impairment allowance for identified losses	-	-
TOTAL	4.391.466.489	3.973.300.998

9) DEPOSITS WITH FINANCIAL INSTITUTIONS in HRK

	Dec 31 2017	Jun 30 2018
Deposits with foreign banking institutions	449.961.229	485.308.870
Deposits with domestic banking institutions	23.341.095	1.801.724
Portfolio based impairment allowance for identified losses	-
TOTAL	473.302.324	487.110.594

10) EQUITY INSTRUMENTS AND SECURITIES		in HRK
	Dec 31 2017	Jun 30 2018
Short term Treasury bills of the Croatian Ministry of Finance	324.931.405	272.507.001
Financial assets held for trading	513.989.813	547.955.953
Financial assets available for sale	2.459.982.241	2.739.906.667
Financial assets held to maturity	73.139.356	71.136.103
Portfolio based impairment allowance for identified losses	(775.376)	-
Deferred front-end fee	(18.523)	(11.292)
TOTAL	3.371.248.916	3.631.494.432

11) LOANS TO CUSTOMERS in HRK

	Dec 31 2017	Jun 30 2018
Loans to financial institutions	62.450.000	41.415.186
Bruto krediti	62.454.545	41.420.157
Ispravci vrijednosti	(4.545)	(4.971)
Corporate & SME loans	2.948.467.733	3.573.604.125
Bruto krediti	3.908.831.549	4.506.206.728
Ispravci vrijednosti	(960.363.816)	(932.602.603)
Retail loans	4.866.944.528	5.075.883.844
Bruto krediti	5.163.867.192	5.396.077.815
Ispravci vrijednosti	(296.922.664)	(320.193.971)
Other loans	3.192.134.584	3.461.328.016
Bruto krediti	3.198.303.415	3.468.621.555
Ispravci vrijednosti	(6.168.831)	(7.293.539)
Portfolio based impairment allowance for identified losses	(116.708.983)	-
Expected credit losses (A1 and A2 risk groups)	-	(145.938.366)
Other adjustments	-	(7.493.627)
Deferred front-end fee	(39.172.874)	(33.323.926)
LOANS TO CUSTOMERS	10.914.114.988	11.965.475.252

B) Balance sheet (continued)

12) DEPOSITS		in HRK
	Dec 31 2017	Jun 30 2018
Financial institutions	1.198.016.694	1.330.604.293
Corporations	3.891.544.698	4.158.146.250
Retail	9.150.703.429	9.225.610.482
Other	894.135.683	1.294.150.143
TOTAL	15.134.400.504	16.008.511.168

in HRK 13) BORROWINGS
	Dec 31 2017	Jun 30 2018
Borrowings from HBOR	656.196.151	624.110.359
Borrowings from domestic banking institutions	-	-
Borrowings from domestic non-banking institutions	-	4.300.000
Borrowings from foreign banking institutions	20.286.850	36.897.885
Deferred front-end fee	(4.225.170)	(3.877.162)
TOTAL	672.257.831	661.431.082

14) OTHER LIABILITIES in HRK
	Dec 31 2017	Jun 30 2018
Restricted deposits	1.786.812.843	1.809.857.319
Interest and fees payable	48.664.624	51.910.770
Provisions for off-balance sheet exposure	25.171.072	33.239.377
Other	226.233.951	218.557.359
TOTAL	2.086.882.490	2.113.564.825

C) Changes in accounting policies

During the reporting period, Bank has transitioned to new reporting standard IFRS 9 "Financial instruments". Standard supplants the old IAS 39: "Financial instruments: classification and measurement" and consists of conditions relating to classification and measurement, impairment, derecognition and hedge accounting in general.

Classification and measurement – IFRS 9 introduces a new approach to classification of financial assets, based on cash flow features and business model in which certain financial assets is maintained. New model introduces the unique model of impairment.

Impairment – IFRS 9 introduces the new model of impairment based on expected losses. This model instructs that expected credit losses should be recorded in a more timely manner.

Hedge accounting - IFRS 9 brings significant changes to hedge accounting. Based on this changes, more information must be disclosed about risk management activities.

Bank and its subsidiaries have initiated the project of IFRS 9 implementation in 2016, and have succeeded in implementing it with first adoption as of Jan 01 2018.

From the impairment aspect, adoption of this standard has significant effects on the Bank's capital. Migration from IAS 39 to IFRS 9 resulted in an initial effect on the Bank's capital reserves amounting to HRK 57.233 thousand (reduction).

D) Bank's ownership structure

Bank's ownership structure as per Jun 30 2018 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%