Hrvatska Poštanska Banka d.d.

Quarterly Report • Feb 28, 2018

Financial Statements for the Period from Jan 01 to Dec 31 2017

Unaudited

Zagreb, February 28 2018

In accordance with the Capital Markets Act, HPB p.l.c. publishes unaudited financial statements for the period from Jan 01 2017 to Dec 31 2017.

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 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.

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

• net profit amounting to HRK 7,1M in spite of significant impairment losses on exposures towards Agrokor and related parties (HRK 281M of impiarments towards this borrower group). Very good results achieved in 2H 2017 have recouped losses recorded in 1H (HRK 64,5M) and Bank has thereby managed to finish the year in positive territory,
• operating profit amounts to HRK 373,2M, representing a 1,6 percent y-o-y decrease consequent to significant one-offs in 2016 (e.g. VISA Europe Ltd. Transaction was closed in Jun 2016, resulting in HRK 33,5M gain for the Bank),
• net interest income amounts to HRK 531,3M, increasing by +3,3% y-o-y
• net fee income amounts to HRK 191,2M, representing an increase of 4,0% or HRK 7,4M y-o-y
• almost 32 thousand new current accounts have been opened during 2017,
• book value per share increased by 0,9% during 2017,
• other trends in HPB operations new digital banking products, e-cash, new web pages; HPB carried out the due diligence in Jadranska banka; preparations for recapitalization of HPB which is postponed for 2018; 10 branches and outlets have been wholly refurbished; reorganization and personnel changes,
• own funds strengthened by retaining 2016 earnings, and decreased RWA have resulted in strenghtened capital adequacy ratio, which according to temporary calculations equals around 18,0 percent.

Management report of HPB p.l.c.

2017 was marked with deterioration in creditworthiness of Agrokor and related parties, which was felt by HPB as well (HRK 281M of impairments on exposures towards this borrower group as per Dec 31 2017). We have managed to finish the year in positive territory in spite of these demanding circumstances. Net profit for the year amounts to HRK 7,1M. Losses incurred in 1H (HRK 64,5M) have thereby been recouped.

Operating profit amounts to HRK 373,2M, which represents a HRK 6,0M or 1,6% decrease y-o-y, due to lower one-off effects arising from sale of securities.

Net interest income amounts to HRK 531,3M and has increased by 3,3% y-o-y in spite of declining interest income (decline by 8,0% or HRK 57,5M) due to even lower interest expenses which have been cut by 36,2% or HRK 74,4M through optimized funding structure and lower interest rates.

Net fee and commission income amounts to HRK 192,1M representing an increase of 4% or HRK 7,4M when compared to 2016.

HPB has managed to increase fee income, primarily in corporate segment (+4,4%) due to booming guarantees and domestic payment operations. Card fees have simultaneously increased by a substantial margin as well which is in line with higher number of users and ATM transactions.

In conditions where external factors have adverse effects on profitability, Bank endeavours to achieve internal improvements which are aimed to at least partially mitigate these effects. This is reflected by almost equal level of operating expenses (+0,6%), in spite of many initiated activities and projects in 2017, and commencement of recapitalization process.

Impairments and provisions have spiked by 61,1% which is exclusively related to recognized losses on Agrokor exposures and related parties.

Limited capital base due to market share lingering around 5,00% has significantly restrained the possibility of further balance sheet expansion over the course of a larger part of 2017 (until enactment of new Resolution on structural and systemic risk capital buffer – in August 2017), so Bank's asset grew by 2,6 percent and amount to HRK 19,8B.

Due to enormous repayments before maturity which were recorded at the end of 2017, loans to customers have decreased by 3,7 percent, in spite of the Bank recording positive growth rates almost the entire year. Within the loan structure, retail loans have continued to grow (+6,3%), as well as loans to corporations (+5,9%). Loans to other corporate clients have decreased by 20,9 percent due to extremely good fiscal year and budget realization above expectations, which contributed to diminished need for funding by government units.

HPB continues to be one of the banks with highest client confidence. Accordingly, deposit base has increase by 4,2 percent or by HRK 676M. Increase was recorded in funding received by almost all non-financial corporate clients and retail, whilst deposits received by financial institutions remained virtually unchanged.

Considering that there was no need for additional sources of funding, borrowings have been partially repaid (-5,2%), while new deals have not been brokered in material amounts.

Equity and reserves amount to HRK 1.905M as per Dec 31 2017, representing an increase of 0,9 percent.

Capital adequacy ratio according to preliminary calculations equals around 18 percent. We managed to increase capital adequacy in spite of postponement of recapitalization planned for 2017ye, by measures aimed at decreasing risk exposures.

Bank has initiated several strategic projects in 2017, recapitalization has been prolongued for 2018, and we carried out due diligence in Jadranska banka.

In order to meet the needs of our clients, we have reorganized our operations in 2017. New division specialized for SME clients has been created, as well digital marketing section and e-branch.

We continue to actively participate in digital transformation of the banking industry, so we were the first in the Croation market to implement e-cash service (ATM cash withdrawals without the need for a card). Not any less important are our web pages, as the initial point of contact with prospective clients, which were redesigned in 2017 in order to make them more accessible to our clients which are more prone to using this channel for usage and informing about banking services.

Apart from digital channels, we have refurbished 10 branches, which are outfitted based on domestic design with domestic products, thereby making the branches modern and functional.

Bank enters 2018 reorganized and with reinforced personnel, and prepared to meet all the challenges of the digital age, as well as specific features of the domestic banking market.

Tomislav Vuić President of the Management Board

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 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.

Tomislav Katić Executive Director Finance Division

Tomislav Vuić President of the Management Board

HPB p.l.c.
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): Company:	87939104217 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:	1.122
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:	Tomašek David
	Phone: 014804900			Fax:	014804594
	E-mail address: david.tomasek@hpb.hr
Surname and name: Vuić Tomislav

(person authorized for representation)

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	4.391.466.489
1.1.Cash	002	421.479.852	460.023.632
1.2.Deposits with the CNB	003	1.841.823.262	3.931.442.857
2. DEPOSITS WITH FINANCIAL INSTITUTIONS	004	774.135.009	473.348.324
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	551.322.886	513.989.813
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	11.250.340.147	10.852.481.760
11. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES	013	53.420.000	65.490.000
12. REPOSSESSED ASSETS	014	0
13. TANGIBLE ASSETS (LESS DEPRECIATION)	015	146.091.281	143.560.642
14. OTHER ASSETS	016	692.909.263	442.889.947
A) TOTAL ASSETS (001+004 to 016)	017	19.305.827.779	19.802.722.222
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	14.529.990.572	15.134.400.504
2.1. Transactional and current accounts	022	4.009.237.425	5.172.463.233
2.2. Savings deposits (demand)	023	1.486.719.761	1.538.006.561
2.3. Term deposits	024	9.034.033.386	8.423.930.710
3. OTHER BORROWINGS (026+027)	025	88.426.108	20.286.850
3.1. Short-term	026	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
5. ISSUED SECURITIES (030+031)	029	0	0
5.1. Short-term	030	0
5.2. Long-term	031	0
6. SUBORDINATED DEBT ISSUED	032	0
7. HYBRID INSTRUMENTS	033	0
8. OTHER LIABILITIES	034	2.175.324.123	2.091.483.323
B) TOTAL LIABILITIES (018+021+025+028+029+032+033+034)	035	17.418.376.918	17.898.141.658
EQUITY
1. SHARE CAPITAL	036	1.214.298.000	1.214.298.000
2. PROFIT/(LOSS) FOR THE PERIOD	037	181.261.017	7.133.696
3. RETAINED EARNINGS	038	37.417.870	124.540.223
4. REGULATORY RESERVES	039	6.160.835	15.574.701
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	1.887.450.861	1.904.580.564
D) TOTAL LIABILITIES AND EQUITY (035+043)	044	19.305.827.779	19.802.722.222

toAOPlabelCumulative Quarterly Cumulative Quarterly2 3 4 5 6048 720.254.986 181.089.705 662.752.921 161.725.979 049 205.858.447 43.589.715 131.417.909 29.718.303 050 514.396.539 137.499.990 531.335.012 132.007.676051 493.880.472 120.728.951 520.964.661 120.780.574 052 309.110.374 77.948.852 328.837.117 75.683.719 053 184.770.098 42.780.099 192.127.544 45.096.855054 ^{0 0 0 0} 055 66.994.720 13.803.208 50.825.822 11.675.308 056 ^{0 0 0 0} 057 ^{0 0 0 0} 058 48.595.443 6.897.025 29.783.708 24.326.216 059 ^{0 0 0 0} 060 ^{0 0 0 0} 061 3.500.000 3.500.000 3.200.000 1.000.000 062 826.626 32.441 974.919 139.907 063 (4.098.561) (2.973.099) 1.747.151 (347.279) 064 4.277.870 611.864 5.726.521 1.218.359 065 59.443.791 15.018.878 60.814.647 19.843.487 066 380.657.744 99.376.004 381.716.644 98.370.687 067 379.161.200 87.756.646 373.189.386 96.902.868068 225.991.387 74.631.837 364.171.361 87.775.365 Item Jan 01 - Dec 31 2016 Jan - Dec 31 2017 PROFIT OR LOSS STATEMENTfor the period from Jan 01 2017 Dec 31 2017 in HRK 10. Gains less losses arising from financial assets valued at fair value through P&L, not actively traded 3. Net interest income (048-049) 4. Fee and commission income14. Income from investments in subsidiaries, associated companies and joint ventures 5. Fee and commission expense 6. Net fee and commission income (051-052)11. Gains less losses arising from securities available for sale12. Gains less losses arising from securities held to maturity13. Gains less losses arising from hedging activities 8. Gains less losses from trading activities1 1. Interest income 2. Interest expense 7. Gains less losses arising from investments in subsidiaries, associated companies and joint ventures 9. Gains less losses from built-in derivatives15. Income from other equity instruments16. Gains less losses from exchange rate differences20. Operating profit (050+053 to 064-065-066)21. Impairment losses and provisions19. General and administrative expenses, amortization and depreciation18. Other operating costs17. Other income

070

072

23. INCOME TAX EXPENSE / DEFERRED TAX24. NET PROFIT/(LOSS) FOR THE PERIOD (069-070)

22. PROFIT/(LOSS) BEFORE TAX (067-068)

1. Earnings per share

069 153.169.813 13.124.809 9.018.025 9.127.503

(28.091.204) (26.999.122) 1.884.329 659.343 071 181.261.017 40.123.931 7.133.696 8.468.160

^{90 20 4 4}

CASH FLOW STATEMENT - INDIRECT METHOD

Jan 01 2017 Dec 31 2017 for the period from to			in HRK
Item	AOP label	Jan - Dec 2016	Jan - Dec 2017
1	2	3	4
OPERATING ACTIVITIES
1. Cash flow from operating activities before changes in assets (002 to 007)	001	396.785.339	407.891.101
1.1. Profit/(loss) before tax	002	153.169.813	9.018.025
1.2. Impairment losses and provisions	003	225.991.387	364.171.361
1.3. Amortization and depreciation	004	45.052.891	43.848.609
1.4. Net unrealised gains less losses from financial assets valued at fair value through profit or loss	005	(23.227.067)	(9.282.072)
1.5. Gains / losses from sale of tangible assets	006	253.900	1.882.329
1.6. Other gains / losses	007	(4.455.585)	(1.747.151)
2. Net increase / decrease of operating assets (009 to 016)	008	(1.901.651.029)	(1.179.148.942)
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	300.786.685
2.4. Loans to other customers	012	(1.199.224.497)	397.858.387
2.5. Financial assets held for trading	013	45.203.043	46.615.145
2.6. Financial assets available for sale	014	(591.241.616)	150.624.542
2.7. Financial assets valued at fair value through profit or loss, not actively traded	015		-
2.8. Other operating assets	016	(374.687.385)	(76.019.316)
3. Net increase / decrease of operating liabilities (018 to 021)	017	1.754.457.573	516.928.465
3.1. Transactional accounts	018	1.055.284.154	1.163.225.808
3.2. Savings and term deposits	019	1.082.600.372	(558.815.876)
3.3. Derivative financial liabilities and other liabilities actively traded	020	3.640.667	(3.640.667)
3.4. Ostale liabilities	021	(387.067.620)	(83.840.800)
4. Net cash flow from operating activities before taxation (001+008+017)	022	249.591.883	(254.329.376)
5. Income tax paid	023	(171.183)	(421.217)
6. Net cash inflow / outflow from operating activities (022+023)	024	249.420.700	(254.750.593)
INVESTING ACTIVITIES
7. Net cash flow from investing activities (026 to 030)	025	85.557.602	329.641.906
7.1. Purchase of tangible and intangible assets	026	(42.125.587)	(45.022.615)
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	4.455.585	4.174.919
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	038	8.469.377	37.727.588
(024+025+031)
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	38.543.780
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	460.023.632

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	Tot al e qui ty
1	2	3	4	5	6	7	8	9	10
Bal Jan 01 201 7 anc e a s p er	001	1.2 14. 775 .00 0	(47 7.0 00)	369 .78 3.8 58	82. 293 .64 7	188 .27 7.3 28	84. 690 .11 6	-	1.9 39. 342 .94 9
Effe cts of c han in a unt ing poli cies ges cco and tion s of co rrec err ors	002	-	-	-	77) (44 .87 5.7	) (7.0 16. 311	-	-	(51 .89 2.0 88)
Res tate d b ala r Ja n 0 1 20 17 ( 001 +00 2) nce as pe	003	1.2 14. 775 .00 0	(47 00) 7.0	369 .78 3.8 58	37. 417 .87 0	181 .26 1.0 17	84. 690 .11 6	-	1.8 87. 450 .86 1
Disp l of fina ncia l as aila ble for sale set osa s av	004	-	-	-	-	-	) (6.7 44. 613	-	(6.7 ) 44. 613
Cha in t he f air v alue of fina ncia l as aila ble for sale sets nge av	005	-	-	-	-	-	18. 934 .86 5	-	18. 934 .86 5
Tax item nise d d irec tly on s re cog in/tr ferr ed f uity ans rom eq	006	-	-	-	-	-	) (2.1 94. 245	-	(2.1 94. 245 )
Oth ains d (l es) ised dir ect ly in uity er g an oss rec ogn eq	007	-	-	-	-	-	-	-	-
Net ins /(lo s) r gni sed dir ect ly in uity ga sse eco eq (00 4+0 05+ 006 +00 7)	008	-	-	-	-	-	9.9 96. 007	-	9.9 96. 007
Los s fo r th riod e pe	009	-	-	-	-	696 7.1 33.	-	-	7.1 33. 696
Tot al r gni zed inc nd e fo r th eri od eco om e a exp ens e p (00 8+0 09)	010	-	-	-	-	7.1 33. 696	9.9 96. 007	-	17. 129 .70 3
Incr e/de in s har apit al eas cre ase e c	011	-	-	-	-	-	-	-	-
Pur cha se/s ale of o sh w n are s	012	-	-	-	-	-	-	-	-
Oth han er c ges	013	-	-		) (7.0 16. 311	311 7.0 16.	-	-	-
Tra nsf er t o re ser ves	014	-	-	4 94. 138 .66	4 94. 138 .66	) (18 8.2 77. 328	-	-	-
Divi den ds paid	015	-	-	-	-	-	-	-	-
Pro fit a lloc atio n (0 14+ 015 )	016	-	-	94. 138 .66 4	94. 138 .66 4	(18 8.2 77. 328 )	-	-	-
Bal ing da te ( 003 +01 0+0 11+ 012 +01 3+0 16) ort anc e a s p er rep	017	1.2 .00 0 14. 775	(47 7.0 00)	463 .92 2.5 22	124 0.2 23 .54	33. 696 7.1	94. 686 .12 3	-	1.9 04. 580 .56 4

STATEMENT OF CHANGES IN EQUITY

NOTES TO FINANCIAL STATEMENTS

A) PROFIT OR LOSS STATEMENT

Notes to financial statements

1) INTEREST INCOME in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
Loans	595.182.686	152.008.362	573.042.923	140.714.488
Deposits	2.001.471	832.715	(1.125.453)	471.815
Securities	123.070.829	28.248.628	90.835.451	20.539.676
TOTAL	720.254.986	181.089.705	662.752.921	161.725.979

2) INTEREST EXPENSE in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
Borrowings	18.962.631	4.257.844	14.083.983	3.676.154
Deposits	186.895.816	39.331.871	117.333.926	26.042.149
TOTAL	205.858.447	43.589.715	131.417.909	29.718.303

3) FEE AND COMMISSION INCOME in HRK

		Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
Cash payment operations - channels	285.883.396	70.269.462	277.133.722	67.452.911
Retail and card operations	143.639.056	33.051.053	176.067.813	34.522.995
Corporate operations	57.004.833	15.463.557	59.486.631	16.697.514
Other fee and commission income	7.353.187	1.944.879	8.276.495	2.107.154
TOTAL	493.880.472	120.728.951	520.964.661	120.780.574

4) FEE AND COMMISSION EXPENSE in HRK

		Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
Payment operations	284.852.560	70.035.927	278.084.072	66.133.786
Other fee and commission expense	24.257.814	7.912.925	50.753.045	9.549.933
TOTAL	309.110.374	77.948.852	328.837.117	75.683.719

5) GAINS LESS LOSSES FROM TRADING ACTIVITIES in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
Securities and equity instruments	25.153.961	4.165.695	12.093.968	1.849.492
FX transactions	43.408.098	9.847.033	38.157.579	9.693.413
HRK cash transactions	367.955	(0)	490.545	3.850
Derivatives	(1.935.294)	(209.519)	83.730	128.553
TOTAL	66.994.720	13.803.208	50.825.822	11.675.308

6) OPERATING EXPENSES in HRK

	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
General and administrative expenses	335.532.113	87.639.946	337.868.035	87.524.819
Amortization and depreciation	45.125.631	11.736.058	43.848.609	10.845.868
Savings deposit insurance costs	33.913.498	7.643.706	35.559.103	9.155.918
Other costs	25.530.293	7.375.172	25.255.544	10.687.569
TOTAL	440.101.535	114.394.882	442.531.291	118.214.174

7) IMPAIRMENT LOSSES AND PROVISION EXPENSES in HRK
	Jan 01 - Dec 31 2016		Jan 01 - Dec 31 2016
	Cumulative	Quarterly	Cumulative	Quarterly
Individually identified impairment losses
(risk group B i C)	171.720.380	59.412.152	352.916.750	73.235.321
Portfolio based provisions for identified losses (risk group A)	13.522.210	531.014	5.404.384	5.612.933
Other provisions	40.748.797	14.688.671	5.850.227	8.927.111
TOTAL	225.991.387	74.631.837	364.171.361	87.775.365

B) BALANCE SHEET

8) CASH AND DEPOSITS WITH THE CNB	in HRK

	Dec 31 2016	Dec 31 2017
CASH	421.479.852	460.023.632
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	4.391.466.489

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	23.341.073
Portfolio based impairment allowance for identified losses	-
TOTAL	774.135.009	473.348.324

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	551.322.886	513.989.813
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	4.040.269.088	3.372.281.796

11) LOANS TO CUSTOMERS		in HRK
	Dec 31 2016	Dec 31 2017
Loans to financial instutitions	81.579.680	62.450.001
Gross loans	81.583.376	62.454.545
Impairment allowance	(3.696)	(4.544)
Loans to companies	2.783.381.353	2.947.830.178
Gross loans	3.880.932.056	3.908.831.549
Impairment allowance	(1.097.550.703)	(961.001.371)
Retail loans	4.577.784.714	4.867.038.063
Gross loans	4.799.866.200	5.163.867.192
Impairment allowance	(222.081.486)	(296.829.129)
therein: housing loans	1.423.592.367	1.718.662.910
Gross loans	1.441.669.433	1.735.933.740
Impairment allowance	(18.077.066)	(17.270.830)
Other loans	4.037.506.783	3.192.137.704
Gross loans	4.040.077.723	3.197.806.535
Impairment allowance	(2.570.940)	(5.668.831)
Portfolio based impairment allowance for identified losses	(103.076.997)	(116.708.983)
Deferred front-end fee	(45.255.706)	(39.061.939)
TOTAL	11.331.919.827	10.913.685.024

B) BALANCE SHEET (continued)

12) DEPOSITS		in HRK
	Dec 31 2016	Dec 31 2017
Financial institutions	1.180.254.901	1.162.643.489
Corporations	3.010.655.654	3.574.680.750
Retail	8.886.016.253	8.980.391.877
Other	1.453.063.764	1.416.684.388
TOTAL	14.529.990.572	15.134.400.504

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	22.269.210	34.027.728
Other	379.030.399	228.388.306
TOTAL	2.175.324.123	2.091.483.323

C) CHANGES IN ACCOUNTING POLICIES

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

D) CHANGES IN PRESENTATION OF FINANCIAL REPORTS

Bank 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	31 .12 .20 16 as pe r 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	74 4.8 01 .35 1	( ) 51 .89 2.0 88	69 2.9 09 .26 3
EQ UIT Y Pro fit/ ( los s) for th eri od ( AO P 0 37 ) e p Re tai d e ing s ( AO P 0 38 ) ne arn	188 .27 7.3 28 82 .29 3.6 47	( 7.0 16 .31 1) ( 44 .87 5.7 77 )	18 1.2 61 .01 7 37 .41 7.8 70

Effects on P&L statement for the period from Jan 01. –Dec ³¹ 2016:

(in HRK)

Ite m	01 .01 31 .12 .20 16 . - be for tat t e r es em en -	Uč inc i p lja nja rep rav	01 .01 31 .12 .20 16 . - aft tat t er res em en -
Ga ins le lo fro ha ate ss ss es m ex ng e r dif fer en ce s ( AO P 0 63 )	4.4 57 .91 6	( 8.5 56 .47 7)	( 4.0 98 .56 1)
INC OM NS E T AX EX PE E / D EF ER RE D T AX ( AO P 0 ) 70	( 26 1.0 38 ) .55	1.5 40 .16 6	( ) 28 .09 1.2 04
Pro fit/ los s f the rio d or pe ( AO P 0 71 )	18 8.2 77 .32 8	( 7.0 16 .31 1)	18 1.2 61 .01 7

E) BANK'S OWNERSHIP STRUCTURE

Bank's ownership structure 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%

F) 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:

Financial Statements for the Period from Jan 01 – Dec 31 2017 (unaudited)