Audited Financial Statements Banco Sofisa S.A. December 31, 2010 and 2009
Banco Sofisa S.A. Financial statements December 31, 2010 and 2009
Table of contents
Independent auditors’ report ............................................................................................. 1 Audited financial statements Balance sheet ................................................................................................................... Statement of income ......................................................................................................... Statements of changes in shareholders’ equity ................................................................. Statements of cash flow .................................................................................................... Value-added statements ................................................................................................... Notes to financial statements ............................................................................................
3 5 6 7 8 9
Management Report ....................................................................................................... 56 Summary of the audit committee’s report ........................................................................ 68
Independent auditors’ report on the financial statements To the Management and Shareholders of Banco Sofisa S.A. We have audited the individual and consolidated financial statements of Banco Sofisa S.A., which are identified as Parent (Bank) and Consolidated (subsidiaries), respectively, and include the balance sheet on December 31, 2010 and the statements of income, statements of changes in shareholders’ equity and statements of cash flow for the six-month period and year then ended, as well as a summary of the main accounting practices and other notes to the financial statements. Management’s responsibility regarding the financial statements The Bank’s Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Brazilian Central Bank – Bacen, and for internal accounting controls deemed as necessary to permit the preparation of these financial statements free from material misstatement, whether due to fraud or error. Independent auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit, which was conducted in conformity with Brazilian and international auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing selected procedures to obtain audit evidence about the amounts and disclosures presented in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of financial statements of the Bank and its subsidiaries in order to design audit procedures that are appropriate in the circumstances, but not to express an opinion on the effectiveness of internal controls of the Bank and its subsidiaries. An audit also includes evaluating the adequacy of the accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
1
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the equity and financial positions, individual and consolidated, of Banco Sofisa S.A. and its subsidiaries as of December 31, 2010, the performance of its operations and its cash flows for the six-month period and year then ended, in conformity with the accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Brazilian Central Bank – Bacen. Other matters Value-added statements We have also audited value-added statements (DVA) for the year ended December 31, 2010, required by the Brazilian Corporation Law for publicly-held companies. These statements were submitted to the same audit procedures previously described and, in our opinion, they are properly presented in all material respects in relation to the overall financial statements. Auditing of amounts corresponding to the previous year The individual and consolidated balance sheet of Banco Sofisa S.A. as of December 31, 2009, its individual and consolidated statements of income, statements of cash flows, statements of changes in shareholders’ equity and value-added statements for the fiscal year then ended were audited by Terco Grant Thornton Auditores Independentes (Terco), a legal entity separated from Ernst & Young Auditores Independentes S.S., that issued an unqualified report on February 12, 2010. On October 1, 2010, Terco was merged into Ernst & Young Auditores Independentes S.S., and, after this merger, Ernst & Young Auditores Independentes S.S. now is named Ernst & Young Terco Auditores Independentes S.S.
São Paulo, February 28, 2011.
ERNST & YOUNG TERCO Auditores Independentes S.S. CRC 2SP-015.199/O-6
Alexandre De Labetta Filho Accountant CRC 1SP-182.396/O-2
2
Fernando Radaich de Medeiros Accountant CRC 1SP-217.532/O-6
Banco Sofisa S.A. BALANCE SHEET Year ended December 31, 2010 and 2009 (In thousands of Reais) Sofisa Consolidated 12/31/2010
Banco Sofisa
12/31/2009
12/31/2010
Sofisa Consolidated
12/31/2009
Assets Current Assets Cash and cash equivalents Short-term interbank investments Investments in open market (Note 6a) Investments in interbank deposits (Note 6b) Foreign currency investments (Note 6c)
12/31/2010
2.104.299
2.728.834
1.949.243
2.749.483
29.517
7.909
18.888
3.770
128.003
588.248
128.003
675.281
20.005 100.815 7.183
550.075 29.219 8.954
20.005 100.815 7.183
550.075 116.252 8.954
128.901
192.107
75.745
239.051
111.470 8.470 8.961
181.105 76 10.926
58.315 8.469 8.961
228.107 18 10.926
Current liabilities
2.202.478
1.895.188
2.167.751
1.209.862
1.267.796
1.292.401
1.274.899
124.674 28.032 1.057.114 42
108.629 93.453 1.064.082 1.632
127.077 32.633 1.132.649 42
111.492 98.952 1.062.823 1.632
45.149
13.722
45.149
13.258
45.149
13.722
45.149
13.258
19.419
44.940
19.419
44.940
19.419
44.940
19.419
44.940
Interbank and interbranch accounts
80
428
80
428
Receipts and payments to be settled Third parties in progress
11 69
428
11 69
428
211.625
49.616
211.625
49.616
211.625
49.616
211.625
49.616
40.152
51.059
40.152
51.059
22.791 17.361
31.055 20.004
22.791 17.361
31.055 20.004
20.523
247.912
20.523
247.912
Foreign onlending obligations (Note 18d)
20.523
247.912
20.523
247.912
Derivative financial instruments (Note 7d)
7.810
10.255
7.249
10.201
7.249 560 1
10.201 54
7.249 -
10.201 -
298.547
516.750
258.590
475.438
621 1.882 96.817 7.906 2.270 189.051
820 15.033 83.645 35.319 934 380.999
621 1.882 83.168 7.906 2.270 162.743
820 15.033 72.140 35.319 45 352.081
Deposits (Note 16) Demand deposits Interbank deposits Time deposits Investments deposits
Funds from acceptance and issuance of securities (Note 16) Real Estate, Mortgage Notes and others
Interbank accounts (Note 8) Linked credits Receivables and payments to be settled Deposits at Brazilian Central Bank Correspondents
38.793
28.725
38.793
28.725
38.663 130
15 28.009 701
38.663 130
15 28.009 701
1.412.880
1.431.578
1.395.020
1.394.858
40.453 1.488.944
44.461 1.498.614
40.453 1.467.176
44.461 1.433.219
Obligations per loans Credit operations
Foreign loans (Note 18a) Credit operations (Note 9) Public sector Private sector Allowance for doubtful accounts (Note 10) Leasing operations Leasing operations receivable (Note 9) Private sector Allowance for doubtful leasing accounts (Note 10) Other credits Exchange portfolio (Note 11) Income receivable Negotiation and intermediation of securities Miscellaneous (Note 13) Allowance for other doubtful accounts (Note 10) Other assets (Note 14) Other assets Prepaid expenses
3
12/31/2009
1.853.167
Own portfolio Own portfolio Derivative Financial Instruments Linked to rendering of guarantees
12/31/2010
Liabilities
Funds obtained in the open market (Note 17) Securities and derivative financial instrument (Note 7)
Banco Sofisa
12/31/2009
(116.517)
(111.497)
(112.609)
(82.822)
99.112
218.529
99.112
218.529
114.811
243.014
114.811
243.014
(15.699)
(24.485)
(15.699)
Domestic onlending obligations - official institutions Onlending Obligations - BNDES (Note 18b) Onlending Obligations - FINAME (Note 18c) Foreign onlending
(24.485)
181.986
197.957
138.862
141.547
25.733 4.493 7.829 144.334 (403)
18.133 1.233 247 180.082 (1.738)
25.733 3.383 4.113 106.036 (403)
18.133 1.048 247 123.857 (1.738)
85.107
63.781
54.820
47.722
73.747 11.360
27.326 36.455
43.526 11.294
20.378 27.344
Swap - differential payable Futures market Options bonuses Other liabilities Tax collection Exchange portfolio (Note 11) Tax and social security (Note 19) Social and statutory Trade and intermediation of amounts (Note 20) Miscellaneous (Note 21)
Long-term assets
2.198.603
1.876.251
2.126.881
1.633.834
Long-term liabilities Deposits (Note 16)
Short-term interbank investments Interbank investments (Note 6b) Securities and derivative financial instruments (Note 7) Own portfolio Subject to repurchase agreement Derivative financial instruments Linked to rendering of guarantee Credit operations Credit operations (Note 9) Public sector Private sector Leasing operations Leasing and subleasing receivable (Note 9) Private sector
2.967
3.341
56.872
Income receivable Miscellaneous (note 13)
2.967
3.341
56.872
3.341
1.163.927
385.193
1.063.614
216.226
1.026.222 45.460 14.254 77.991
263.416 13.350 41.430 66.997
940.046 45.460 117 77.991
113.359 13.350 22.520 66.997
Interbank deposits Time deposits Loan obligations Foreign loans (Note 18a) Domestic onlending obligations - Official Institutions Onlending obligations - BNDES (Note 18b) Onlending obligations - FINAME (Note 18c)
Prepaid expenses Permanent Investments Interest in Subsidiaries In Brazil Overseas Other investments Other investments Allowance for losses Fixed assets for own use (Note 15) Properties for own use Construction in progress Other fixed assets for own use Accumulated depreciation Deferred charges Organization and expansion expenses Accumulated amortization Intangible Intangible Assets
Total assets
1.890.904
1.178.171
945.524
16.197 1.103.819
789 752.060
16.197 1.161.974
790 944.734
-
188.977
-
188.977
-
188.977
-
188.977
29.093
57.495
29.093
57.495
10.005 19.088
28.029 29.466
10.005 19.088
28.029 29.466
361.938
145.750
361.938
145.750
885.862
683.202
844.321
18.337 674.894
25.403 860.459
18.337 664.865
25.403 818.918
Foreign onlending obligations (Note 18d)
361.938
145.750
361.938
145.750
90.823
334.466
90.823
334.466
Derivative financial instruments (Note 7d)
30.511
27.799
30.511
27.799
90.823
334.466
90.823
334.466
Foreign onlending
Swap - differential payable
221.455
193.393
206.229
172.579
3.555 217.900
9.953 183.440
3.555 202.674
8.460 164.119
26.200
73.996
26.141
62.901
26.200
73.996
26.141
62.901
Tax and social security (Note 19) Miscellaneous (Note 21)
70.801 6.825 2.636 2.636 4.189 4.240 (51)
72.042 9.030 4.920 4.920 4.110 4.161 (51)
382.587 366.071
439.035 423.827
365.164 324.047 41.117 907 956 (49)
422.997 387.632 35.365 830 879 (49)
54.163
54.334
6.959
6.820
53.143 520 12.565 (12.065)
50.728 481 12.189 (9.064)
3.286 169 9.294 (5.790)
3.286 168 8.627 (5.261)
4.260
5.446
4.004
5.156
9.535 (5.275)
9.628 (4.182)
9.210 (5.206)
9.266 (4.110)
5.553
3.232
5.553
3.232
5.553
3.232
5.553
3.232
4.373.703
4.677.127
4.458.711
4.822.352
Shareholders' equity (Note 22) Capital: From residents in the country Capital reserve Revaluation reserve Profit reserves Assets valuation adjustments
Total liabilities and shareholders' equity
The explanatory notes are an integral part of these consolidated financial statements.
4
1.792.526
752.849
693.231
Deferred income Other credits (Note 14)
1.709.655
1.120.016
3.341
Other liabilities Other credits
1.749.506
30.511
27.799
30.511
27.799
207.948
536.785
192.813
525.359
118.789 89.159
128.871 407.914
118.789 74.024
128.871 396.488
160
2.227
127
930
770.870
762.767
770.870
762.767
685.700 864 1.022 90.204 (6.920)
685.690 787 1.049 74.797 444
685.700 864 1.022 90.204 (6.920)
685.690 787 1.049 74.797 444
4.373.703
4.677.127
4.458.711
4.822.352
Banco Sofisa S.A. STATEMENT OF INCOME For the half-years and years ended December 31, 2010 and 2009 (In thousands of Reais)
2H Financial intermediation revenues Credit operations (Note 23) Leasing operations (Note 24) Income from operations with securities (Note 25) Income from derivative financial instruments (note 7d) Income from exchange operations Financial assets sales or transfer operations
Consolidated 2010 Year
2009 Year
2H
Banco Sofisa 2010 Year
2009 Year
443.347 241.239 119.091 96.704 (32.484) 16.156 2.641
926.462 478.261 283.864 166.806 (28.866) 20.416 5.981
965.258 419.237 381.512 141.037 (166.077) 180.504 9.045
415.413 225.519 119.091 81.349 (29.300) 16.113 2.641
898.132 456.626 283.864 148.955 (18.028) 20.734 5.981
915.166 398.664 381.512 144.292 (197.075) 178.729 9.044
(294.023)
(677.366)
(771.134)
(299.700)
(685.116)
(744.659)
(141.579) (19.232) (91.862) (13.476) (27.874)
(254.327) (56.950) (215.670) (49.321) (101.098)
(166.852) (44.342) (272.644) (156.264) (131.032)
(148.407) (19.232) (91.862) (13.476) (26.723)
(266.231) (56.950) (215.670) (49.321) (96.944)
(179.043) (44.088) (272.644) (156.261) (92.623)
Gross income from financial intermediation
149.324
249.096
194.124
115.713
213.016
170.507
Operating revenues (expenses)
(84.704)
(130.443)
(206.919)
(60.155)
(120.266)
(187.052)
10.141 (30.570) (33.701) (15.460) (2.201) 5.556 (18.469) -
26.554 (68.305) (67.588) (32.622) (1.016) 11.375 (68.245) 69.404
34.411 (74.850) (66.071) (31.777) (12.208) 27.044 (83.468) -
4.016 (28.255) (32.831) (13.397) 23.887 2.301 (15.876) -
8.820 (54.606) (63.763) (26.454) 43.351 2.900 (59.719) 29.205
6.730 (48.622) (57.858) (25.363) 8.916 21.703 (92.558) -
64.620
118.653
(12.795)
55.558
92.750
(16.545)
(19.427)
(26.362)
(5.959)
(15.631)
(21.438)
(7.699)
Income before taxation on profit and interest
45.193
92.291
(18.754)
39.927
71.312
(24.244)
Income and social contribution taxes (Note 12)
(3.748)
(5.337)
32.701
1.515
15.009
37.740
(2.249) (1.499)
(19.794) 14.457
(66.725) 99.426
2.075 (560)
(7.862) 22.871
(56.379) 94.119
(2.630)
(10.923)
(3.368)
(2.627)
(10.290)
(2.910)
Financial intermediation expenses Funds obtained in the open market (Note 26) Loans, assignment and onlending operations Leasing operations (Note 27) Financial assets sales or transfer operations Allowance for doubtful accounts
Revenue from services rendered Personnel expenses (Note 28) Other administrative expenses (Note 30) Tax expenses (Note 31) Income from interest in subsidiaries Other operating revenues (Note 32) Other operating expenses (Note 33) Other non-recurring income (Note 1) Operating income Non-operating income
Allowance for income and social contribution taxes Deferred tax assets Employees profit sharing Minority interest in subsidiaries Net income for the period
-
-
7
-
-
-
38.815
76.031
10.586
38.815
76.031
10.586
Net income per share - R$
0,28
The explanatory notes are an integral part of these consolidated financial statements.
5
0,55
0,08
Banco Sofisa S.A. STATEMENTS OF CHANGES IN SHAREHOLDERS´EQUITY For the half-years and years ended December 31, 2010 and 2009 (In thousands of Reais) Capital stock Opening balances on July 1, 2010
Capital reserves
685.690
864
10 -
-
Balances as of December 31, 2010
685.700
864
Opening balances on January 1, 2010
685.690
787
10 -
77 -
685.700 685.690
864 548
-
239 -
685.690
787
Assets valuation adjustments - securities available for sale Other events: - Realization of revaluation of real estate for own use Capital increase Net income for the half-year Allocations: Appropriation to legal reserve Expansion reserve Interest on equity
Adjustment of equity instruments Assets valuation adjustment- securities available for sale Acquisition of treasury shares Other events - Realization of revaluation reserve of real estate for own use Capital increase Net income for the year Allocations: Appropriation to legal reserve Expansion reserve Interest on equity Balances on December 31, 2010 Opening balances on January 1, 2009 Adjustment of equity instruments Assets valuation adjustments - securities available for sale Acquisition of treasury shares Other events: Realization of revaluation reserve of real estate for own use Net income for the year Allocations: Appropriation to legal reserve Expansion reserve Interest on equity Balances on December 31, 2009
Revaluation reserves 1.035
Legal
Profit reserves For expansion
Statutory
Treasury shares
Retained earnings
Total
21.189
3.870
44.667
2.464
-
1.941 1.941 -
11.607 11.607 -
6.930 6.930 -
(9.384) -
-
1.022
23.130
15.477
51.597
(6.920)
-
-
770.870
1.049
19.329
3.870
51.597
-
-
762.767
3.801 3.801 -
11.607 11.607 -
-
(7.364) -
23.130 18.846
15.477
51.597 51.597
(6.920) (8.601)
(13.972)
-
9.045 -
(24.212) 38.184 38.184 -
51.597
444
(13) (13) -
(27) (27) 1.022 1.075 (26) (26) 1.049
483 483 19.329
75.859 (71.988) (71.988) 3.870
The explanatory notes are an integral part of these consolidated financial statements. 6
Assets valuation adjustment Securities and Derivatives
444
-
-
13 13 38.815 (38.828) (1.941) (18.537) (18.350)
27 27 76.031 (76.058) (3.801) (11.607) (60.650) 26 26 10.586 (10.612) (483) 33.804 (43.933) -
759.779 (9.384) 10 38.815 (18.350) (18.350)
77 (7.364) 10 76.031 (60.650) (60.650) 770.870 811.042 239 9.045 (24.212) 10.586 (43.933) (43.933) 762.767
Banco Sofisa S.A. Statements of Cash Flow For the half-years and years ended December 31, 2010 and 2009 (In thousands of Reais) Consolidated 2010 2H Adjusted net income Net Income for the period Allowance for doubtful accounts Depreciation and amortization Income from interest in subsidiaries Changes in assets and liabilities (Increase) short term interbank investment (Increase) Decrease in securities and derivative financial instruments (Increase) Decrease in interbank and interbranch transactions (Increase) Decrease in credit operations and leasing (Increase) Decrease in other credits and other securities and assets (Decrease) Increase in other liabilities (Decrease) increase in deferred income Net cash provided by (used in) operating activities Sale of fixed assets for own use Investments Fixed assets for own use Intangible Net cash provided by (used in) investment activities Increase (decrease) in deposits Increase (decrease) in funds obtained in the open market Increase (decrease) in funds from foreign exchange acceptance Increase (decrease) in liabilities due to loans and onlending Increase (decrease) in liabilites derivatives Interest on equity paid and/or accrued Purchase of own shares Capital Increase Net cash provided by (used in) financing activities INCREASE (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period INCREASE (decrease) in cash and cash equivalents
Year
2009 Year
2H
2009 Year
71.345 38.815 27.874 2.455 2.201 (479.488) (21.837) (468.883) (22.199) 212.080 (30.131) (143.783) (4.735) (408.143)
183.111 76.031 101.098 4.966 1.016 (861.099) (73.718) (715.528) (10.416) 473.291 14.379 (547.040) (2.067) (677.988)
159.211 10.586 131.032 5.385 12.208 (376.082) (83.982) 263.426 (4.701) (319.129) 2.038 (235.900) 2.166 (216.871)
42.763 38.815 26.723 1.112 (23.887) (506.768) (102.992) (412.523) (22.199) 194.582 (20.235) (143.473) 72 (464.005)
131.894 76.031 96.944 2.270 (43.351) (859.504) (137.523) (684.082) (10.416) 524.017 (1.303) (549.394) (803) (727.610)
96.692 10.586 92.623 2.399 (8.916) (231.070) (101.332) 251.835 (3.582) (249.887) (53.909) (75.065) 870 (134.378)
1.696 (4.596) (4.582) (957) (8.439)
2.822 (7.090) (5.440) (2.321) (12.029)
13.082 (16.327) (151) (3.232) (6.628)
1.696 (9.182) (2.282) (957) (10.725)
2.387 (3.712) (3.057) (2.321) (6.703)
4.942 (58.423) (11.046) (3.232) (67.759)
9.102 9.174 (8.806) (87.374) 1.846 (18.350) 10 (94.398)
309.233 31.427 (25.521) (77.478) 267 (60.650) 10 177.288
706.907 (3.646) (8.420) (288.203) 21.733 (43.933) (24.212) 360.226
36.161 10.201 (8.806) (87.374) 6.116 (18.350) 10 (62.042)
250.149 31.891 (25.521) (77.478) (240) (60.650) 10 118.161
756.297 646 (8.420) (288.203) 25.181 (43.933) (24.212) 417.356
(510.980)
(512.729)
136.727
(536.772)
(616.152)
215.219
612.074 101.094
613.823 101.094
477.096 613.823
599.987 63.215
679.367 63.215
464.148 679.367
(510.980)
(512.729)
136.727
(536.772)
(616.152)
215.219
The explanatory notes are an integral part of these consolidated financial statements. 7
Banco Sofisa 2010 Year
Banco Sofisa S.A. Value-added Statements For the half-years and years ended December 31, 2010 and 2009 (In thousands of Reais)
CONSOLIDATED 2010
2H
Banco Sofisa 2009
Year
392.706
810.008
829.273
415.413 4.016 (26.723) (272.977) (56.276)
898.132 8.820 (96.944) (588.172) (94.399)
915.166 6.730 (92.623) (652.036) (88.944)
(984) (6.364) (83.175) 138.012 (5.385)
(338) (3.308) (52.630) 63.453 (1.112)
(3.278) (5.865) (85.256) 127.437 (2.270)
(860) (4.435) (83.649) 88.293 (2.399)
(4.966) 181.395 (1.016) (1.016) 180.379 180.379 68.305
(5.385) 132.627 (12.208) (12.208) 120.419 120.419 74.850
(1.112) 62.341 23.887 23.887 86.228 86.228 28.255
(2.270) 125.167 43.351 43.351 168.518 168.518 54.606
(2.399) 85.894 8.916 8.916 94.810 94.810 48.622
19.796 3.695 1.947 5.132 15.460
41.724 7.569 4.014 14.998 32.622
49.217 18.083 4.182 3.368 31.777
18.355 3.253 1.829 4.818 13.397
32.969 5.405 3.384 12.848 26.454
32.598 10.302 2.812 2.910 25.363
13.971 164 1.325 1.816
29.313 331 2.978 3.421
27.786 375 3.616 3.206
12.196 161 1.040 5.761
23.941 323 2.190 11.427
22.760 370 2.233 10.239
Value distributed to shareholders
1.816 38.815
3.421 76.031
3.206 10.586
5.761 38.815
11.427 76.031
10.239 10.586
Interest on equity Retained earnings
18.350 20.465
60.650 15.381
43.933 (33.347)
18.350 20.465
60.650 15.381
43.933 (33.347)
Financial intermediaiton Service rendered Allowance for doubtful accounts
Financial intermediation expenses Inputs acquired from third parties Materials, energy and other Third-party services Other
Value Added Retentions Depreciation and Amortization
Net Value Added Produced Value Added Received in Tranfer Equity in the earnings of subsidiaries
Total Value Added to be Distributed Distribution of Value Added: Personnel Salaries and wages Benefits FGTS (Workers Government Severance Indemnity Fund) Other
Tax expenses (excluding income and social contribution taxes) Federal State Municipal
Valude distributed to providers of capital Rentals
Year
425.614
851.918
868.637
443.347 10.141 (27.874) (266.149) (68.148)
926.462 26.554 (101.098) (576.268) (89.289)
965.258 34.411 (131.032) (640.102) (90.523)
(391) (3.858) (63.899) 91.317 (2.455)
(861) (7.352) (81.076) 186.361 (4.966)
(2.455) 88.862 (2.201) (2.201) 86.661 86.661 30.570
2H
The explanatory notes are an integral part of these consolidated financial statements. 8
2009
Year
Revenues
Year
2010
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 1.
Operations Banco Sofisa S.A. (Sofisa or Bank) is a publicly-held Company of private law that, together with its subsidiary companies, operates as an All Purpose Bank through its commercial, credit, financing and investment, foreign exchange, and commercial leasing portfolios. The Company completed the sale of its subsidiary Sofcred Promotora de Vendas e Serviços Ltda. on May 14, 2010. The effects of this transaction were recorded in the income for the second quarter, highlighted in the statement of income in other non-recurring income, in the net amount of R$69 million.
2.
Preparation of the financial statements The consolidated financial statements of Sofisa fully include the financial information of its overseas branch and subsidiaries (additional information on subsidiaries in Note 36) in Brazil and overseas, comprising the following: Subsidiary Sofisa S/A - Crédito, Financiamento e Investimento Sata Sociedade Assessoria Técnica Administrativa S/A Sofisa Investment Ltd Sofisa Serviços Gerais Administração Ltda. Sofisa Corretora de Seguros Ltda. Rede Matriz Serviços e Franquias Ltda.
% - Interest 100 100 100 99.99 99.99 100
These financial statements were prepared and are being presented in accordance with the accounting practices adopted in Brazil, which took into consideration the provisions contained in the Brazilian Corporation Law, in addition to rules of the Brazilian Monetary Council (CMN), the Brazilian Securities and Exchange Commission (CVM) and the Brazilian Central Bank (BACEN). For disclosure purposes, the Management adopted the decisions, directions and interpretations issued by the Brazilian Accounting Standards Board (CPC) approved by the regulatory bodies related to the process of international accounting convergence that do not conflict with the CMN or the BACEN regulations. Taking into account the fact that Sofisa’s functional currency and also the reporting currency of the Company’s financial statements is the Brazilian Real, and that the operations with our agency and subsidiary abroad are complementary to our operations in Brazil, the assets, liabilities and results are adapted to the accounting practices used in Brazil and translated into reais according to the foreign exchange rates of the local currency. Profits and losses arising from this translation are recorded in the income statement. During the consolidation process, the existing outstanding balances among the consolidated companies were eliminated and the installments of net profit and shareholders’ equity related to the minority interest in subsidiaries highlighted. The accounting practices adopted for accounting entries and assessing balances of equity nature were applied in a consistent manner by the parent company and by the subsidiaries comprised in the consolidation. In foreign investment, the exchange rate variation as from the initial balance, which was not eliminated upon consolidation procedures is recorded in the income statement, as “Result of investment in subsidiaries”. The financial statements include estimates and assumptions, such as the measurement of allowances for loan losses, fair value estimates of some financial instruments and allowance for contingencies. Effective results can differ from those estimates and assumptions.
9
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 3.
Description of accounting practices a.
Cash and cash equivalents For purposes of cash flow statements (pursuant to CMN Resolution 3,604/08), cash and cash equivalents correspond to the balance of cash and banks and short-term interbank investments immediately convertible or with original maturity term equal or shorter than ninety days.
b.
Short-term interbank investments Recorded at their investment or acquisition value, plus yield accrued as of the balance sheet date.
c.
Securities As established by the Brazilian Central Bank (BACEN) Circular Letter 3068/2001, securities will be valued and classified as follows:
d.
Tradable securities: acquired with the purpose of being actively and frequently traded and are mark-to-market adjusted in contra account to the income for the period;
Available-for-sale securities: not classified neither as tradable nor as held to maturity, they are mark-to-market adjusted in contra account to the shareholders’ equity account, net of tax effects;
Held-to-maturity securities: the ones for which there is a financial intent and ability for their maintenance in portfolio up to maturity, they are valued by the acquisition cost, increased by income assessed in contra account to the income for the period. Derivative financial instruments (assets and liabilities) They are classified according to the intent of the Bank’s Management, at the beginning of the operation, taking into consideration whether its purpose is risk (hedge) free or not. Derivative financial instruments are recorded at market value, with appreciation or depreciation directly acknowledged in the income for the period.
e.
Credit and leasing operations, time deposits, interbank procedures and other lending and fund-raising operations The operations involving prefixed yield are recorded at their principal value and respective yield or charges, and adjusted for income or expenses to be appropriated. The indexed operations are recorded at their principal value, plus income earned or charges incurred, prorated on a daily basis. Leasing operations are recorded at their present value, and were classified in the balance sheet as “Commercial leasing operations” corresponding to their anticipated net residual values.
f.
Operations with financial assets – operations with substantial risk and benefit retention Operations of sale and transfer of financial assets with substantial retention of all risks and benefits of financial assets purpose of the transaction are being recorded and shown as follows:
(a) Practice adopted before the enactment of Resolution 3,809/09 (i)
Financial assets for sale or transfer remain in assets;
(ii) Amounts received or receivable are recorded in assets, in contra account to the liability referring to the obligation assumed; 10
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) (iii) Revenues and expenses are monthly recorded in the income of the period by the remaining term of operations, according to the contract rates agreed upon; (b) Practice adopted after the enactment of Resolution 3,809/09 (i) Financial assets to be sold or transferred are fully written-off from assets; (ii) Amounts received or receivable are recorded in assets, in contra-account to income and the amount referring to the risk retention is recorded in the memorandum account, which is not included in the balance sheet; (iii) Revenues and expenses are recorded on the date of transaction. The accounting practice described in item (a) is in line with Resolution 3,533/08, effective as of 2011, and its anticipated adoption was authorized by Resolution 3,673/08, both of the Brazilian Central Bank (BACEN). Subsequently, the Resolution 3,809/09 was issued which prohibited the anticipated adoption of Resolution 3,533/08. g.
Allowance for doubtful accounts Credit, leasing, advances on exchange agreements and other credit operations with underwriting requirements are classified in the corresponding risk levels, taking into consideration: (i) the requirements established by the Brazilian Monetary Council (CMN) Resolution 2,682, which requires its classification in nine levels, between “AA” (minimum risk) and “H” (maximum risk); and (ii) risk levels are assessed by the Management, on a regular basis, taking into consideration the economy scenario, the past experience and specific and global risks regarding operations. In addition, periods of pre-established delay in said Resolution, as well as the double counting for operations with a term to elapse over 36 months, are also taken into account for clients’ risk levels assignments.
h.
i.
Other assets
Assets not used in banking operations: these are represented by assets not used in banking operations received as payment in kind, initially recorded at cost and adjusted by provision for impairment, if applicable;
Prepaid expenses: It corresponds to prepaid expenses whose benefit rights or service agreement will be held in the future, represented by an agent committee in the allocation of insurance financing and expenses. Upon the assignment of rights or benefits, the corresponding commissions are promptly recorded in the income statement.
Investments Investments in subsidiaries are valued at the equity adjustment method, and the other investments at historical cost.
j.
Fixed assets and deferred charges Fixed assets and deferred charges are recorded at acquisition cost. Depreciation and amortization are calculated using the straight-line method with annual rates of the referring asset’s useful life as demonstrated in Note 15. The balances existing in deferred charges recorded before BACEN Resolution 3,617/08 became effective shall be held up to their actual write-off.
k.
Intangible assets Intangible assets correspond to the vested rights as purpose of incorporeal assets with a view to maintaining the Bank’s activities and the goodwill of Rede Matriz, subsidiary of the associated company Sata Sociedade Assessoria Técnicas Administrativa S/A..
11
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) l.
Impairment of non-financial assets The Management annually reviews the net book value of assets with the purpose of evaluating events or changes in economic, operating or technologic circumstances that may indicate the impairment or loss of its recoverable value. When this evidence is indentified, and the net book value exceeds the recoverable value, a provision is recorded for the impairment, adjusting the net book value to the recoverable value.
m. Income and social contribution taxes Provision for income tax comprises the rate of 15% of taxable income, plus 10% over taxable income overage of R$240. Provision for social contribution on net income was calculated at the rate of 15% for financial companies and 9% for non-financial companies, on taxable income. n.
Contingent assets and liabilities and legal liabilities The accounting practices for recording, measurement and disclosing contingent assets and liabilities are based on CVM Resolution 489/05 and BACEN Resolution 3,535/08, namely:
o.
Contingent assets: are only acknowledged when there are real collaterals or favorable court decisions, final and unappealable. Contingent assets with possible chances of success are only disclosed in explanatory notes;
Contingent liabilities: are accrued when losses are valued as possible and the amounts comprised are measurable with sufficient safety. Contingent liabilities deemed as possible losses are disclosed, and those that cannot be measured with enough certainty and that are estimated as remote losses are neither provisioned nor disclosed;
Legal liabilities: are recorded as liabilities, regardless the assessment of chances of success.
Earnings per share Net earnings per share are calculated in Brazilian Reais based on the number of outstanding shares on the balance sheet date.
4.
Cash and cash equivalents
Cash and cash equivalents Short-term interbank investments Balance of cash and cash equivalents
12
Sofisa – consolidated 12/31/2010 12/31/2009 29,517 7,909 71,577 605,914 101,094 613,823
Banco Sofisa 12/31/2010 12/31/2009 18,888 3,770 44,327 675,597 63,215 679,367
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 5.
Consolidated balance sheet by maturity Sofisa Consolidated 12/31/2010 181 to 360 O ver days 360 days
1 to 30 days
31to 180 days
ASSETS Cash and Cash equivalents Short-term interbank investments Money market Interbank deposits Foreign currency investments Securities and derivative financial instruments Interbank and interbranch accounts Credits and leasing operations O ther assets Foreign exchange portfolio Other assets Permanent Investments Fixed assets Deferred assets Intangible assets Total assets
29,517 46,405 20,005 19,217 7,183 56,046 38,793 316,929 131,128 6,471 124,657 618,818
66,430 66,430 27,747 871,272 67,518 14,975 52,543 1,032,967
15,168 15,168 45,108 323,791 68,447 4,287 64,160 452,514
2,967 2,967 1,163,927 784,054 247,655 247,655 2,198,603
70,801 6,825 54,163 4,260 5,553 70,801
29,517 130,970 20,005 103,782 7,183 1,292,828 38,793 2,296,046 514,748 25,733 489,015 70,801 6,825 54,163 4,260 5,553 4,373,703
LIABILITIES Deposits Demand deposits Interbank deposits T ime deposits Investment deposits O pen market funding Exchange acceptance and securities issue Interbank and interbranch accounts O bligations per loans O nlending obligations Derivative financial instruments O ther liabilities Foreign exchange portfolio Other liabilities Deferred income Shareholders' equity Capital stock and reserve Total liabilities
361,411 124,674 9,954 226,741 42 45,149 19,419 80 12,417 261 2,832 158,069 773 157,296 3 599,641
594,352 17,378 576,974 37,910 22,493 2,271 73,093 1,109 71,984 17 730,136
254,099 700 253,399 161,298 37,921 2,707 67,385 67,385 21 523,431
1,120,016 16,197 1,103,819 391,031 30,511 207,948 207,948 119 1,749,625
770,870 770,870 770,870
2,329,878 124,674 44,229 2,160,933 42 45,149 19,419 80 211,625 451,706 38,321 506,495 1,882 504,613 160 770,870 770,870 4,373,703
6.
Short-term interbank investments a.
Market investments – own portfolio position Sofisa Consolidated and Banco Sofisa 12/31/2010
Financial T reasury Notes (LFT ) National T reasury Bill (LT N)
13
12/31/2009
10,003
120,016
-
250,034
Financial T reasury Notes B
10,002
180,025
Total
20,005
550,075
Undetermined due date
Total
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) b.
Short-term interbank deposits Sofisa Consolidated 12/31/2010
Banco Sofisa
12/31/2009
12/31/2010
12/31/2009
Up to 30 days
19,217
23,941
19,217
110,974
From 31 to 90 days
33,045
2,708
33,045
2,708
From 91 to 180 days
33,385
561
33,385
561
From 181 to 360 days
15,168
2,009
15,168
2,009
2,967
3,341
56,872
3,341
103,782
32,560
157,687
119,593
Over 360 days Total
c.
Foreign currency investments Sofisa Consolidated and Banco Sofisa 12/31/2010
7.
12/31/2009
Up to 30 days
7,183
8,954
Total
7,183
8,954
Securities and derivative financial instruments a)
Composition by type Sofisa Consolidated
O wn Portfolio National T reasury Notes B National T reasury Bill (LT N) Total government securities Securities in foreign market CDB Eurobonus Commodities Investment funds Shares Option premium Swaps receivable Total private securities Total
14
Subject to Repurchase
271,894 627,817 899,711 136,532 7,264 55,201 14,338 24,646 237,981
45,460 45,460 -
1,137,692
45,460
12/31/2010 Vinculados Derivative ao Banco Financial Central Instruments -
Banco Sofisa 12/31/2010 Subject to Guarantees
Total
Total
1 22,723 22,724
77,991 77,991 8,647 314 8,961
349,885 673,277 1,023,162 136,532 7,264 55,201 8,647 14,338 24,960 1 22,723 269,666
349,885 589,222 939,107 108,499 7,271 55,201 8,647 3,613 8,435 8,586 200,252
22,724
86,952
1,292,828
1,139,359
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Sofisa Consolidated
O wn Portfolio
Subject to Repurchase
National T reasury Notes B National T reasury Bill (LT N) Total government securities Securities in foreign market CDB Eurobonus Promissory notes Commodities Investment funds Share Option premium Forward sales receivable Swaps receivable Total private securities
49,236 49,270 98,506 48,468 36,633 74,663 19,377 151,384 15,490 346,015
13,350 13,350 -
Total
444,521
13,350
b)
12/31/2009 Derivative Vinculados ao Banco Financial Instruments Central -
Banco Sofisa 12/31/2009 Subject to Guarantees
Total
Total
58 18 41,430 41,506
66,997 66,997 10,926 10,926
129,583 49,270 178,853 48,468 36,633 74,663 19,377 10,926 151,384 15,490 58 18 41,430 398,447
129,583 49,270 178,853 48,468 44,819 10,926 144,723 4,950 18 22,520 276,424
41,506
77,923
577,300
455,277
Composition by maturity
S ofisa Consolidated S hort-term
On December 31, 2010 Financial Treasury Notes B National Treasury Bills (LTN) Public Brazilian securities Securities in foreign markets CDB Eurobonus Commodities Investment funds Shares Option premium Swap receivable Private securities Total
15
Long-term
Up to 30 days
From 31 to 60 days
From 61 to 90 days
From 91 to 180 days
From 181 to 360 days
837 837 7,263 8,647 14,338 24,960 1 55,209 56,046
1,605 1,605 1,605
1,660 2,837 4,497 4,497
19,937 19,937 1,708 1,708 21,645
28,820 7,819 8,469 45,108 45,108
Total 19,937 837 20,774 32,188 7,263 12,261 8,647 14,338 24,960 1 8,469 108,127 128,901
Over 360 days 329,948 672,440 1,002,388 104,344 42,940 14,255 161,539 1,163,927
Grand Total 349,885 673,277 1,023,162 136,532 7,263 55,201 8,647 14,338 24,960 1 22,724 269,666 1,292,828
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) S ofisa Consolidated S hort-term Up to 30 days On December 31, 2009 Financial Treasury Notes B National Treasury Bills (LTN) Public Brazilian securities Securities in foreign markets CDB Eurobonus Promissory notes Commodities Investment funds Shares Option premium Swap receivable Private securities Total
c)
49,270 49,270 15,815 36,633 20,530 19,377 10,926 9,665 15,490 18 128,454 177,724
From 31 to 60 days -
Long-term
From 61 to 90 days
From 91 to 180 days
From 181 to 360 days
445 58 503 503
8,702 3,382 12,084 12,084
1,796 1,796 1,796
Over 360 days
Total 49,270 49,270 24,962 36,633 25,708 19,377 10,926 9,665 15,490 76 142,837 192,107
Grand Total
129,583 129,583 23,506 48,955 141,719 41,430 255,610 385,193
129,583 49,270 178,853 48,468 36,633 74,663 19,377 10,926 151,384 15,490 76 41,430 398,447 577,300
Securities classification Sofisa Consolidated
Trading securities Public government securities Private securities - CDB Promissory notes Investment funds Eurobonus Shares Commodities (CPRF) Derivatives Total
12/31/2010 Value Market at curve value 837 837 14,338 14,335 27,144 26,974 24,960 24,960 8,647 8,647 27,721 22,727 103,647 98,480
Banco Sofisa
12/31/2009 Value Market at curve value 36,633 36,633 19,377 19,377 9,665 9,665 14,208 20,529 15,490 15,490 10,926 10,926 41,505 41,507 147,804 154,127
12/31/2010 Value Market at curve value 837 837 3,613 3,613 27,144 26,974 8,435 8,435 8,647 8,647 13,582 8,586 62,258 57,092
12/31/2009 Value Market at curve value 3,004 3,004 4,950 4,950 10,926 10,926 17,307 22,538 36,187 41,418
Available for sale Public government securities Private securities - CDB Eurobonus Securities in foreign market Total
677,528 7,267 29,441 93,395 807,631
672,440 7,264 28,227 91,197 799,128
160,101 1,859 53,665 215,625
160,062 1,895 54,133 216,090
592,328 7,267 29,441 65,165 694,201
588,385 7,271 28,227 63,164 687,047
160,101 1,859 44,731 206,691
160,062 1,895 44,819 206,776
Held to maturity Public government securities FIDC subordinated quotas Securities in foreign market Total
349,885 45,335 395,220
352,591 45,335 397,926
18,791 141,719 46,573 207,083
18,850 141,719 46,514 207,083
349,885 45,335 395,220
352,591 45,335 397,926
18,791 141,719 46,573 207,083
18,850 141,719 46,514 207,083
1,306,498
1,295,534
570,512
577,300
1,151,679
1,142,065
449,961
455,277
Grand total
Securities classified as “For Trading” and “Available for Sale”, as well as derivative financial instruments, are stated at their estimated fair value (market value). The fair value is usually based on market price quotations through independent sources or market price quotations for assets or liabilities with similar features. If these market prices are not available, fair values are determined through market broker quotations, pricing models, discounted cash flow or similar techniques, for 16
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) which the determination of fair value may require significant judgment or estimate from the Management. On December 31, 2010, an adjustment balance was recorded in shareholders’ equity in the accumulated amount of (R$6,920) and (R$444 on December 31, 2009), net of tax effects related to available-for-sale securities. In compliance with Article 8 of BACEN Circular Letter 3,068/01, the Bank has financial capacity and also intends to hold to maturity the securities classified as “held-to- maturity securities”. d)
Derivatives The Bank carries out derivatives operations aiming at hedging against market price variations and dilution of currency risks and interest rates of its assets and liabilities and cash flows, contracted by compatible terms, fees and amounts. Derivatives are used as a risk management tool aiming at hedging Banking Book and Trading Book positions. Additionally, high-liquid derivatives traded on stock exchange are used, within revised strict and periodic limits in order to manage trading book exposures. In order to manage risks, internal limits for global exposure and portfolios were established. These limits are monitored on a daily basis. Considering the eventual existence of excessive limits due to unforeseen situations, the Management set out in-house policies implying the immediate definition of realignment conditions. These risks are monitored by an area independent from the operational areas and are daily reported to the top Management. Exposure is measured by calculating the value at risk (VaR) within one-year range through historic simulation for 1-day periods and confidence level of 99%, as mentioned in Note 34. The swap contracts are recorded at BM&FBovespa or CETIP (OTC Clearing House) and include fixed rates, DI (Internal Availability), IGPM (General Market Price Index), LIBOR and exchange variation. The futures and option contracts are registered at BM&FBovespa and include exchange variation, DI and the BOVESPA index. The market value of these derivative financial instruments is calculated based on stock exchange quotes and, in certain cases, when there is no liquidity or even quotes, present value estimates are used and other pricing techniques as well. The following bases were adopted when calculating market prices: ·
Futures and options: stock exchange quotes;
·
Swaps: cash flows of each party were discounted at present value, according to the corresponding interest curves, obtained based on BM&FBovespa’s interest rates;
·
Conditions: forward amount of operation discounted at present value, according to the rates obtained at BM&FBovespa or related stock exchanges.
Sofisa did not carry out any exotic derivative-related operations or any other type of leveraged derivative. The swap contracts are recorded in BM&F or CETIP and involve prefixed rates, DI and exchange variation. The futures contracts are recorded in BM&F as instruments and involve exchange variation, fixed rates and the BOVESPA index.
17
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) The face value recorded in the memorandum accounts and their balancing entries of equity accounts are summarized as follows:
Face Value Futures contracts: Purchase commitments DI - Interbank Deposits DDI Index U.S. Dollar Forward U.S. Dollar Futures Index Sales commitment DI - Interbank Deposits DDI Index U.S. Dollar Futures Index Swap contracts: Long position CDI Prefixed U.S. Dollar Euro Short position CDI Prefixed U.S. Dollar IGPM T JLP O ption contracts: Sales commitments Shares Purchase commitments Shares
295,056 62,000 200,444 14,996 17,616 955,773 346,500 187,447 221,760 200,066
(68) (68) (492) (46) (446)
576,026 550,000 8,702 16,412 912 320,146 65,000 127,573 127,573 -
-
805,562 248,111 515,928 41,523 805,562 557,451 152,609 63,646 7,320 24,536
22,724 4,311 14,137 4,276 (37,760) (26,343) (10,041) (1,178) (198)
928,512 382,578 545,934 928,512 545,934 336,890 34,988 10,700 -
41,430 6,436 18,911 16,083 (38,000) (22,321) (15,253) (426) -
42 42 42 42
(1) (1) 1 1
524 524 -
(54) (54) -
Face Value Future s contracts: Purchase commitme nts DI - Interbank Deposits DDI U.S. Dollar Forward U.S. Dollar Futures Index Sale s commitme nt DI - Interbank Deposits DDI U.S. Dollar Swap contracts: Long position CDI U.S. Dollar Euro Short position CDI Prefixed U.S. Dollar IGPM T JLP
18
Sofisa Consolidated Assets (Liabilities) Face Value Assets (Liabilities) 12/31/2010 12/31/2009 76 45 13 18
Banco Sofisa Asse ts (Liabilitie s) Face Value Asse ts (Liabilitie s) 12/31/2010 12/31/2009
278,140 62,000 200,444 14,996 700 748,520 346,500 187,447 214,573
-
564,842 550,000 13,930 912 192,573 65,000 127,573
805,562 248,111 515,928 41,523 805,562 557,451 152,609 63,646 7,320 24,536
8,586 4,310 4,276 (37,760) (26,343) (10,041) (1,178) (198)
928,512 382,578 545,934 928,512 545,934 336,890 34,988 10,700 -
18 18 22,520 6,437 16,083 (38,000) (22,321) (15,253) (426) -
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Below, derivative financial instruments, per maturity, on December 31, 2010 and 2009: Sofisa Consolidated 2010 From 1 to 3 From 3 to 6 From 6 to 12 From 1 to 3 months months months years
Up to 1 month Memorandum account Future contracts Swap contracts Option contracts Total - 2010 Total - 2009
- Short-term position Swap contracts Option contracts Other financial instruments Total - 2010 Total - 2009
Total
561,843 21,287 42 583,172
27,209 27,209
224,169 310,597 534,766
310,500 427,625 738,125
-
1,250,829 805,562 42 2,056,433
896,172 928,512 524 1,825,208
32,420
164,285
50,788
440,678
1,137,037
-
1,825,208
1,825,208
1 1
-
-
8,469 8,469
14,254 14,254
-
22,723 1 22,724
41,430 76 41,506
18
-
58
-
41,430
-
41,506
41,506
2,831 1 2,832
510 560 1,070
1,201 1,201
2,707 2,707
30,511 30,511
-
37,760 1 560 38,321
38,000 54 38,054
54
10,201
-
-
27,799
-
38,054
38,054
Banco Sofisa 2010 From 1 to 3 From 3 to 6 From 6 to 12 From 1 to 3 months months months years
Up to 1 month Memorandum account Future contracts Swap contracts Total - 2010
Total
154,317 18,844 173,161
- Long-term position Swap contracts Option contracts Other financial instruments Total - 2010 Total - 2009
2009 Over 3 years
2009 Over 3 years
Total
Total
154,317 18,844 173,161
561,843 21,287 583,130
27,209 27,209
310,597 310,597
310,500 427,625 738,125
-
1,026,660 805,562 1,832,222
757,415 928,512 1,685,927
32,420
164,385
50,788
301,297
1,137,037
-
1,685,927
1,685,927
- Long-term position Swap contracts Option contracts Total - 2010
-
-
-
8,469 8,469
117 117
-
8,586 8,586
22,520 18 22,538
Total - 2009
-
-
-
18
22,520
-
22,538
22,538
2,831 2,831
510 510
1,201 1,201
2,707 2,707
30,511 30,511
-
37,760 37,760
38,000 38,000
-
10,201
-
-
27,799
-
38,000
38,000
Total - 2009
- Short-term position Swap contracts Total - 2010 Total - 2009
19
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Net income from operations related to derivative financial instrument is composed as follows: Sofisa Consolidated 12/31/2010
12/31/2009
12/31/2010
12/31/2009
(60,005) 2,954 (4,104) 1,558 996 32,219 (4) 102 (4,773) 2,191 (28,866)
(240,226) (950) 294 1,584 53,712 729 18,910 (130) (166,077)
(55,232) 2,954 (4,104) 1,558 996 35,711 (4) 102 (9) (18,028)
(240,226) (13,168) 294 1,584 53,712 729 (197,075)
Swap Future - DI Future -DDI Future - Index Day Trade Profit Future - U.S. Dollar Term Options - Shares Credit Derivatives Options - Financial Assets Total
(i)
Banco Sofisa
Credit Default Swap - CDS Overall, it represents a bilateral contract in which the selling party guarantees the Bank the protection against the credit risk of specific financial assets. In case of default, the Bank (counterpart that acquired the protection) will receive a remuneration based on a protection rate, whose objective is to offset the loss of value of financial assets. The remuneration based on a protection rate pegged to the credit event will be paid within 48 hours from the end of the operation’s effectiveness: Credit risk amount
Calculation effect on income
12/31/2010 12/31/2009 12/31/2010 12/31/2009 Transferred Credit swaps whose underlying assets are: · Loan operations - Consumer finance operations acquired without recourse Total
14,137
18,910
(4,773)
18,910
14,137
18,910
(4,773)
18,910
Sofisa carries out operations with credit derivatives exclusively to minimize its exposure to the credit risk of its assets.
20
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 8.
Interbank accounts
Restricted credits are represented by deposits at the BACEN and refer to reserve requirements in cash, calculated over demand deposits.
9.
Credit operations, leasing operations and other credits (amounts receivable from the sale of assets and exchange) On December 31, 2010, the total number of active clients was distributed as follows (unaudited): Portfolio
Total clients 1,559 103,229
Small-to medium-sized businesses Direct consumer credit/Leasing Total
a.
104,788
Breakdown of the credit operations, leasing operations and other credits by maturity (amounts receivable for the sale of assets and exchange) Sofisa consolidated and Banco Sofisa Small-to-medium-sized business credit operations 12/31/2010
12/31/2009
Risk ratings (Resolution n. 2,682 as of December 21, 1999) AA
B
C
D
E
F
G
Short-term:
86,193
139,454
637,949
360,831
16,897
32,050
1,020
0 to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days
5,379 3,528 8,859 8,200 22,102 38,125
8,232 14,653 34,831 8,828 34,673 38,237
63,637 90,241 171,203 137,353 84,919 90,596
36,878 45,887 98,164 76,923 45,359 57,620
985 219 2,735 384 4,428 8,146
1,040 348 2,992 1,905 5,796 19,969
23 76 96 80 272 473
Long-term:
79,786
70,375
174,765
83,787
12,606
18,556
Over 360 days
79,786
70,375
174,765
83,787
12,606
165,979
209,829
812,714
444,618
5
7,786
T otal Overdue:
-
Up to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days Over 360 days
-
Total
21
A
165,979
5 209,834
H
Total
%
Total
72
1,200,343
%
120
8,314
1,282,828
10 10 10 30 60
547 313 1,189 619 2,814 2,832
116,721 155,275 320,079 234,302 200,393 256,058
1,266
30
3,682
444,853
18,556
1,266
30
3,682
444,853
29,503
50,606
2,286
150
11,996
1,727,681
97
1,705,405
98
12,969
3,496
6,097
205
844
27,060
58,462
3
32,955
2
5,111 2,675 -
10,433 1,801 395 120 220 -
138 1,166 826 214 1,152 -
553 2,283 1,049 752 1,460 -
28 65 19 21 72
14
-
15 12 803 -
606 509 1,583 1,145 9,636 11,927 1,654
16,883 8,504 3,887 2,264 13,343 11,927 1,654
820,500
457,587
32,999
56,703
2,491
994
39,056
1,786,143
-
69
123,860 147,157 323,450 177,204 169,446 259,226 25
505,062
29
505,062
8,768 3,546 10,367 1,221 3,320 5,498 235 100
1,738,360
100
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Sofisa consolidated and Banco Sofisa Leasing O perations 12/31/2010 Risk ratings (Resolution n. 2,682 as of December 21, 1999) AA Short-term: 0 to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days
A
B
C
D
E
F
G
H
12/31/2009
Total
%
Total
%
52
231,761
40
9
78,626
12,877
7,318
1,996
1,025
635
628
3,230
106,344
1
4,319 3,867 7,675 6,961 20,313 35,491
961 138 1,779 601 3,407 5,991
366 330 888 484 1,904 3,346
148 91 283 188 501 785
36 63 99 90 254 483
25 36 63 58 169 284
27 31 59 56 161 294
145 158 312 282 827 1,506
6,028 4,714 11,159 8,721 27,538 48,184
1 1 2 4
Long-term:
-
63,559
10,942
7,614
2,052
1,079
771
744
3,634
90,395
Over 360 days
-
63,559
10,942
7,614
2,052
1,079
771
744
3,634
90,395
11,007 10,608 22,837 19,364 59,667 108,278 44
333,959
58
333,959
T otal
9
142,185
23,819
14,932
4,048
2,104
1,406
1,372
6,864
196,739
96
565,720
98
Overdue:
1
179
884
1,275
1,159
594
514
497
3,792
8,895
4
11,761
2
179 -
87 658 139 -
367 205 619 61 23 -
109 114 228 236 374 98 -
68 46 114 110 194 62 -
34 33 70 73 186 118 -
31 33 62 60 191 120 -
144 158 310 307 950 1,495 428
840 1,427 1,542 847 1,918 1,893 428
142,364
24,703
16,207
5,207
2,698
1,920
1,869
10,656
205,634
Up to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days Over 360 days
1 -
Total
10
1,073 1,935 2,183 1,169 2,414 2,480 507 100
Sofisa consolidated and Banco Sofisa O ther credits (accounts receivable from the sale of assets and exchange) 12/31/2010 Risk ratings (Resolution n. 2,682 as of December 21, 1999) AA
A
B
C
D
E
F
G
H
577,481
100
12/31/2009
Total
%
11,608
%
Short-term:
-
5,785
13,746
3,487
556
-
-
-
-
23,574
0 to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days
-
785 584 1,293 3,123
25 113 2,369 7,686 2,281 1,272
3 253 1,105 634 1,492 -
556 -
-
-
-
-
28 1,151 4,058 8,876 5,066 4,395
Long-term:
-
-
430
-
-
-
-
-
-
430
Over 360 days
-
-
430
-
-
-
-
-
-
430
T otal
-
5,785
14,176
3,487
556
-
-
-
-
24,004
95
12,675
76
Overdue:
-
-
-
894
453
-
-
-
-
1,347
5
3,912
24
Up to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days Over 360 days
-
-
-
894 -
453 -
-
-
-
-
894 453 -
Total
-
5,785
14,176
4,381
1,009
-
-
-
-
25,351
22
93
Total
70
316 378 1,887 2,212 1,817 4,998 2
1,067
6
1,067
44 427 2,246 754 441 100
16,587
100
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Sofisa Consolidated Direct consumer credit operations 12/31/2010
12/31/2009
Risk ratings (Resolution n. 2,682 as of December 21, 1999) AA
A
B
C
D
E
F
G
H
Total
%
Total
%
44
282,928
41
Short-term:
6,667
155,424
7,626
6,270
3,656
1,924
1,558
1,550
5,462
190,137
0 to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days
472 238 717 615 1,649 2,976
10,601 6,407 14,885 14,156 40,770 68,605
558 279 782 707 2,075 3,225
260 406 607 588 1,704 2,705
125 262 371 351 972 1,575
96 99 190 171 510 858
73 84 147 149 420 685
89 66 153 146 411 685
243 312 539 516 1,455 2,397
12,517 8,153 18,391 17,399 49,966 83,711
Long-term:
3,947
193,982
7,624
6,208
3,689
2,562
1,917
2,014
5,728
227,671
Over 360 days
3,947
193,982
7,624
6,208
3,689
2,562
1,917
2,014
5,728
227,671
10,614
349,406
15,250
12,478
7,345
4,486
3,475
3,564
11,190
417,808
96
663,032
96
4
27,545
4
T otal Overdue:
-
363
1,611
2,352
2,024
1,622
1,534
1,582
7,589
18,677
Up to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days Over 360 days
-
363 -
160 1,162 289 -
403 399 1,265 203 82 -
236 198 424 833 333 -
88 152 231 228 730 193 -
66 128 192 190 638 320 -
45 118 164 157 641 457 -
218 377 605 615 1,879 3,179 716
1,216 2,897 3,170 2,226 4,303 4,149 716
349,769
16,861
14,830
9,369
6,108
5,009
5,146
18,779
436,485
Total
10,614
14,652 11,707 26,830 25,573 74,291 129,875 52
380,104
55
380,104
1,431 3,367 3,972 3,214 8,010 7,090 461 100
Banco Sofisa Direct consumer operations 12/31/2010
690,577
100
12/31/2009
Risk ratings (Resolution n. 2,682 as of December 21, 1999) AA
A
B
C
D
E
F
146,900
6,639
G
5,000
3,109
1,685
1,286
1,360
460 247 654 584 1,753 2,941
183 338 464 453 1,319 2,243
104 212 301 284 816 1,392
83 83 159 145 435 780
60 63 116 116 335 596
H
Total
%
Total
%
4,438
170,730
42
232,127
40
78 54 130 123 356 619
188 246 422 401 1,155 2,026
11,248 7,132 16,161 15,280 44,472 76,437
Short-term:
313
0 to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days
-
86 164
10,092 5,857 13,884 13,174 38,217 65,676
Long-term:
349
189,612
7,292
5,664
3,506
2,477
1,764
1,900
5,135
217,699
Over 360 days
349
189,612
7,292
5,664
3,506
2,477
1,764
1,900
5,135
217,699
T otal
662
336,512
13,931
10,664
6,615
4,162
3,050
3,260
9,573
388,429
96
570,902
98
Overdue:
-
361
1,478
2,044
1,796
1,498
1,363
1,435
6,284
16,259
4
12,739
2
Up to 14 days 15 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days Over 360 days
-
361 -
160 1,030 288 -
359 296 1,113 197 79 -
193 166 349 756 332 -
76 134 202 200 696 190 -
56 108 161 158 569 311 -
35 106 143 136 573 442 -
166 310 484 494 1,508 2,663 659
1,045 2,511 2,740 1,941 3,757 3,606 659
Total
662
336,873
15,409
12,708
8,411
5,660
4,413
4,695
15,857
404,688
Grand Total - Consolidated
176,603
707,752
876,240
493,005
48,584
65,509
9,420
8,009
68,491
2,453,613
3,023,005
Grand Total - Banco Sofisa
166,651
694,856
874,788
490,883
47,626
65,061
8,824
7,558
65,569
2,421,816
2,916,069
23
32 31 -
11,769 9,288 21,823 20,919 61,041 107,287 54
338,775
58
338,775
776 1,850 1,946 1,422 3,257 3,239 249 100
583,641
100
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) b. Breakdown of credit operations, leasing operations and other credits by activity sector (amounts receivable from sale of assets and exchange) Sofisa Consolidated 12/31/2010
12/31/2009
12/31/2010
12/31/2009
58,790
69,864
58,790
69,864
1,789,007
1,765,583
1,778,529
1,745,330
84,717 20,952 55,868 180,662 66,770 134,456 17,590 784 48,956 38,705 29,930 32,867 8,372 111,696 79,902 67,370 42,034 245,526 115,331 222,067 12,587 13,883 157,982
109,569 61,224 41,578 133,136 58,662 98,385 12,970 438 33,011 27,179 20,545 32,919 7,384 128,799 79,403 58,662 31,592 218,467 99,562 278,603 8,632 4,987 219,876
84,717 20,952 55,868 180,662 66,770 134,456 17,590 784 48,956 38,705 29,930 32,867 8,372 111,696 79,902 67,370 42,034 245,351 115,331 221,716 12,587 13,883 148,030
109,565 61,224 41,578 133,075 58,626 97,385 12,970 438 33,011 27,179 20,545 32,919 7,159 128,242 78,830 58,214 31,493 235,049 99,091 245,242 8,632 4,987 219,876
605,816
1,187,558
584,497
1,100,875
2,453,613
3,023,005
2,421,816
2,916,069
Public sector Private sector - Corporate Food Auto parts Sugarcane, sugar and alcohol Commerce Communication Construction Leather and footwear Distribution of vehicles and parts Electronics Pharmaceutical Computer and telecommunications Wood and furniture Mechanical Metallurgy and mining Paper and pulp Plastics and rubber Chemical and petrochemical General services T extile and clothing T ransportation and storage Agribusiness Beverage Credit assignments Private sector - Individuals Total credit operations and leasing operations
c.
Banco Sofisa
Diversification by type of product Sofisa Consolidated
AA
Working capital Discounting of trade bills Purchase of credit rights Import credit Collateralized account Advances to depositors Checking account - corporate Overdraft protection BNDES financing Leasing operations Payroll-deductible loans/CDC Other credits and exchange Compror Finame Vehicles Grand Total
24
A
B
C
D
12/31/2010 E
F
G
H
Total
12/31/2009 Total
%
%
2,670 163,310 9 10,614 -
139,226 5 18,629 16,616 24,574 720 99 7,357 142,365 194,266 5,785 2,606 155,504
357,087 40,884 27,714 33,692 307,907 124 9,012 1,344 26,174 24,702 5,899 14,175 16,564 10,962
229,256 43,424 55 5,239 172,038 85 3,711 2,229 16,208 5,266 4,382 1,549 9,563
31,753 1 435 18 5,207 5,229 1,009 790 4,142
56,662 37 5 2,699 2,963 3,143
2,264 2 1,920 2,466 226 2,542
524 116 354 1,868 3,172 1,975
32,465 153 6,323 33 10,656 10,690 81 8,090
851,907 84,583 209,708 55,547 511,668 267 13,443 1,443 35,760 205,634 240,565 25,351 790 21,026 195,921
35 3 9 2 21 0 1 0 1 8 10 1 0 1 8
843,582 107,961 219,876 54,635 402,540 904 15,425 1,146 59,308 577,481 428,381 16,587 32,980 262,199
27 4 7 2 13 1 2 19 14 1 1 9
176,603
707,752
876,240
493,005
48,584
65,509
9,420
8,009
68,491
2,453,613
100
3,023,005
100
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Banco Sofisa
AA
Working capital Discounting of trade bills Purchase of credit rights Import credit Collateralized account Advance to deposit Checking accounts - corporate Overdraft protection BNDES financing Leasing operations Payroll-deductible loans / CDC Other credits and exchange Compror Finame Vehicles Grand Total
d.
A
B
C
12/31/2010 E
D
2,670 163,310 9 662 -
139,226 5 18,629 16,616 24,574 720 99 7,357 142,365 189,783 5,785 2,606 147,091
357,088 40,884 27,714 33,692 307,907 124 9,012 1,344 26,174 24,702 5,684 14,175 16,564 9,724
229,256 43,424 55 5,239 172,038 85 3,711 2,229 16,208 4,879 4,382 1,549 7,828
31,753 1 435 18 5,207 4,734 1,009 790 3,679
56,662 37 5 2,699 2,860 2,798
166,651
694,856
874,788
490,883
47,626
65,061
G
H
Total
2,263 2 1,920 2,258 226 2,155
524 116 354 1,868 2,971 1,725
32,465 153 6,323 33 10,656 10,133 81 5,725
851,907 84,583 209,708 55,547 511,668 267 13,443 1,443 35,760 205,634 223,964 25,351 790 21,026 180,725
35 3 9 2 21 0 1 0 1 8 9 1 0 1 7
843,582 107,961 219,877 54,635 402,540 904 15,425 1,146 59,308 577,481 375,327 16,587 32,980 208,316
8,824
7,558
65,569
2,421,816
100
2,916,069
Sofisa Consolidated
Banco Sofisa
12/31/2010
12/31/2009
12/31/2010
12/31/2009
843,706
668,940
843,706
668,940
66,202
63,332
66,202
63,332
Promissory notes Post-dated checks
8,100
8,728
8,100
8,728
Rent and property - receivables
280,130
293,650
280,130
293,650
Recourse from financial institutions
181,136
245,277
171,184
245,277
Disposal of property
110,219
80,198
110,219
80,198
3,717
9,992
3,717
9,992
Warrant and Lien Overseas companies withdrawals
1,956
3,584
1,956
3,584
Agreements and blocked accounts
56,040
69,886
56,040
69,886
199,109
428,381
193,559
375,327
41,967
54,122
41,967
54,122
Payroll-deductible loans / CDC Financial investments Sale of machinery and equipment Disposal of vehicles Total
e.
%
Diversification by type of guarantee received
T rade notes receivable
11,542
11,899
11,542
11,899
649,789 2,453,613
1,085,016 3,023,005
633,494 2,421,816
1,031,134 2,916,069
Main debtors
Sofisa Consolidated 12/31/2010
Amount Main debtor 10 major debtors 20 major debtors 50 major debtors 100 major debtors
25
29,256 229,710 389,427 693,119 982,128
% of portfolio 1 9 16 28 40
12/31/2009 % of shareholders' equity 4 30 51 90 127
12/31/2009 Total
F
Amount 27,763 223,338 365,215 666,633 956,118
% of portfolio 1 7 12 22 32
% of shareholders' equity 4 29 48 87 125
%
29 4 7 2 14 2 20 13 1 1 7 100
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated)
Banco Sofisa 12/31/2010 % of portfolio
Amount Main debtor 10 major debtors 20 major debtors 50 major debtors 100 major debtors
29,256 229,710 389,427 693,119 982,128
12/31/2009 % of shareholders' equity
1 9 16 29 41
% of portfolio
Amount
4 30 51 90 127
27,763 223,338 365,215 666,633 956,118
% of shareholders' equity
1 8 13 23 33
4 29 48 87 125
10. Allowance for doubtful accounts a.
Classification of the credit, leasing and other operations per risk level (amounts receivable by sale of assets and exchange) S o f is a C o n s o lid a t e d 12 / 3 1/ 2 0 10
Le v e ls
C re d it o p e ra t io n s wit h s m a ll- t o m e d iu m - s iz e d c o m p a n ie s
B a la n c e
E s t a b lis h e d p ro v is io n
AA
165,979
-
A
209,834
1,049
B
820,500
8,205
C
457,587
13,728
D
32,999
5,511
E
56,703
17,011
F
2,491
1,246
D ire c t c o ns um e r c re d it
B a la n c e 10,614
12 / 3 1/ 2 0 0 9 O t h e r c re d it s re c e iv a b le a n d e xc h a n g e
Le a s in g o p e ra t io n s
E s t a b lis h e d p ro v is io n
E s t a b lis h e d p ro v is io n
B a la n c e 10
-
-
E s t a b lis h e d p ro v is io n
E s t a b lis h e d p ro v is io n
B a la n c e
-
T o t a l
B a la n c e
E s t a b lis h e d p ro v is io n
176,603
-
222,436
-
1,749
142,364
712
5,785
29
707,752
3,539
1,448,393
7,241
16,861
169
24,703
247
14,176
142
876,240
8,763
816,131
8,161
14,830
445
16,207
486
4,381
131
493,005
14,790
314,332
9,431
9,369
937
5,207
521
1,009
101
48,584
7,070
74,461
7,446
6,108
1,829
2,698
809
-
-
65,509
19,649
31,798
9,539
5,009
2,505
1,920
960
-
-
9,420
4,711
33,295
16,648
349,769
-
B a la n c e
T o t a l
G
994
696
5,146
3,602
1,869
1,308
-
-
8,009
5,606
9,680
6,775
H
39,056
39,056
18,779
18,779
10,656
10,656
-
-
68,491
68,491
72,479
72,479
1,7 8 6 ,14 3
8 6 ,5 0 2
4 3 6 ,4 8 5
3 0 ,0 15
2 0 5 ,6 3 4
15 ,6 9 9
3 ,0 2 3 ,0 0 5
13 7 ,7 2 0
2 5 ,3 5 1
403
2 ,4 5 3 ,6 13
13 2 ,6 2 0
B a n c o S o f is a
Le v e ls
C re d it o p e ra t io n s wit h s m a llt o m e d iu m - s iz e d c o m p a n ie s
B a la n c e
E s t a b lis h e d p ro v is io n
12 / 3 1/ 2 0 10 Le a s in g o p e ra t io n s
D ire c t c o n s u m e r c re d it
B a la n c e 662
E s t a b lis h e d p ro v is io n -
B a la n c e 10
12 / 3 1/ 2 0 0 9 O t h e r c re d it s re c e iv a b le a n d e xc h a n g e
E s t a b lis h e d p ro v is io n -
B a la n c e -
E s t a b lis h e d p ro v is io n -
T o t a l
B a la n c e
AA
165,979
-
A
209,834
1,049
336,873
1,683
142,364
711
5,785
29
694,856
166,651
B
820,500
8,205
15,409
154
24,703
247
14,176
142
874,788
C
457,587
13,728
12,708
381
16,207
486
4,381
131
490,883
D
32,999
5,511
8,411
841
5,207
521
1,009
101
47,626
E
56,703
17,011
5,660
1,698
2,698
809
-
-
65,061
T o t a l
E s t a b lis h e d p ro v is io n
B a la n c e
E s t a b lis h e d p ro v is io n
-
203,655
-
3,472
1,407,961
7,040
8,748
810,490
8,105
14,726
307,968
9,241
6,974
70,904
7,090
19,518
29,126
8,737 14,964
F
2,491
1,246
4,413
2,206
1,920
960
-
-
8,824
4,412
29,927
G
994
696
4,695
3,287
1,869
1,308
-
-
7,558
5,291
7,229
5,060
H
39,056
39,056
15,857
15,857
10,656
10,656
-
-
65,569
65,569
48,809
48,809
1,7 8 6 ,14 3
8 6 ,5 0 2
4 0 4 ,6 8 8
2 6 ,10 7
2 0 5 ,6 3 4
15 ,6 9 8
2 ,4 2 1,8 16
12 8 ,7 10
2 ,9 16 ,0 6 9
10 9 ,0 4 6
26
2 5 ,3 5 1
403
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) b.
Breakdown of provision by type of transaction Accrued Amount Sofisa Consolidated Banco Sofisa 12/31/2010 12/31/2009 12/31/2010 12/31/2009
Working capital Discounted trade notes Purchase of receivables with recourse Import credit Collateralized account Advance to depositors Checking accounts - Corporate Overdraft protection BNDES Leasing operations Payroll-deductible loans / CDC Finame Other credits (amounts receivable from sale of assets and exchange) Compror Vehicles Grand total
65,282 1,946 372 577 14,988 41 205 14 365 15,699 16,743 419 403 79 13,275
44,806 2,125 199 8,015 86 179 11 530 24,485 37,081 326 1,659 18,218
65,282 1,946 372 577 14,988 41 205 14 365 15,699 15,824 419 403 79 10,284
44,806 2,125 199 8,015 86 179 11 530 24,485 23,074 326 1,659 3,551
130,408
137,720
126,498
109,046
11. Foreign exchange portfolio Sofisa Consolidated and Banco Sofisa
Assets - Other credits Exchange purchase pending settlement Rights on foreign exchange sale (-) Advances received in domestic currency Revenue received over advance granted Liabilities - Other obligations Exchange sales pending settlement Exchange purchase payable (-) Advances over exchange contracts
27
12/31/2010
12/31/2009
25,733 24,210 785 738 1,882 773 25,291 (24,182)
18,133 16,944 11,622 (11,211) 778 15,033 11,554 18,206 (14,727)
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated)
12. Income tax and social contribution Sofisa Consolidated 12/31/2010 12/31/2009
Banco Sofisa 12/31/2010 12/31/2009
Income before income and social contribution taxes Reversal of interest on equity Employees' profit sharing Tax calculation basis Charges (income and social contribution taxes) at 25% and 15% respectively and 9% of social contribution for non-financial companies Increase/decrease in income and social contribution taxes arising from: Permanent additions/(exclusions) Equity in the earnings of subsidiaries T ax loss carryforward from prior years Non-deductible expenses/provisions and others Interest on equity Temporary additions/(exclusions) Allowance for doubtful accounts Adjustment to market value of securities and derivative financial instruments Adjustment to BNDU impairment Adjustments to insufficient depreciation of leased assets
31,641 60,650 (10,923) 81,368
(18,754) (3,368) (22,122)
10,662 60,650 (10,290) 61,022
(24,244) (2,910) (27,154)
32,547
5,531
24,409
10,862
(47,478) 406 (3,739) (14,828) (29,317) 9,493 4,946 8,386 3,497 (7,335)
56,110 5,903 32,634 17,573 29,909 (27,010) 2,787 (2,672) 56,804
(40,537) (17,340) (948) 2,011 (24,260) 15,178 11,641 8,386 2,487 (7,335)
50,779 3,890 29,315 17,573 29,909 14,720 2,787 (2,672) 56,804
Income and social contribution taxes on operations T ax credit over income and social contribution tax losses carryforwards for the year T ax credits pursuant to Law 11,941/2009 - REFIS T ax credit over temporary additions for the year T ax credit over income and social contribution tax losses carryforwards of associated companies Consolidated tax credit of income and social contribution taxes Income and social contribution taxes expenses of associated companies Income tax expenses on excess leasing Total consolidated of income and social contribution taxes expenses
(5,438) 2,072 17,823 14,457 (11,932) (7,862) (19,794)
91,550 91,550 (24,379) 26,948 5,307 99,426 (10,346) (56,379) (66,725)
(949) 2,072 21,748 22,871 (7,862) (7,862)
91,549 91,549 (24,379) 26,948 94,119 (56,379) (56,379)
(5,337)
32,701
15,009
37,740
Total income and social contribution taxes
13. Other credits – Sundry Sofisa Consolidated 12/31/2010 Short term Salary in advance Tax credits (b) Debtors purchase of assets Debtors guaranteed deposits Income tax recoverable Social contribution recoverable PIS/Cofins taxes recoverable INSS - SAT recoverable Options - tax incentive Receivables from sales/transfer of financial assets MTM Sundry debtors - foreign (a) Sundry debtors - domestic Total
28
Long term
12/31/2009
Total
Short term
Long term
Total
3,519 38,391 4,550 7,590 5,623 1,046 8 15,259 15,711 21,841 30,796
187,732 18,294 2,069 9,805 -
3,519 226,123 4,550 18,294 7,590 5,623 1,046 2,069 8 25,064 15,711 21,841 30,796
400 67,177 4,484 8,191 4,829 1,140 8 19,288 22,979 24,016 27,570
142,915 13,793 1,973 24,759 -
400 210,092 4,484 13,793 8,191 4,829 1,140 1,973 8 44,047 22,979 24,016 27,570
144,334
217,900
362,234
180,082
183,440
363,522
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Banco Sofisa 12/31/2010 Short term Salary in advance Tax credits (b) Debtors purchase of assets Debtors guaranteed deposits Income tax recoverable Social contribution recoverable PIS/Cofins taxes recoverable INSS - SAT recoverable Receivables from sales/transfer of financial assets MTM Sundry debtors - foreign (a) Sundry debtors - domestic Total
Long term
12/31/2009
Total
Short term
Long term
Total
10 36,273 430 1,794 3,070 830 15,259 15,711 16,631 16,028
178,364 12,436 2,069 9,805 -
10 214,637 430 12,436 1,794 3,070 830 2,069 25,064 15,711 16,631 16,028
118 63,684 1,085 725 1,756 700 18,203 22,979 14,607
128,082 10,699 1,972 23,366 -
118 191,766 1,085 10,699 725 1,756 700 1,972 41,569 22,979 14,607
106,036
202,674
308,710
123,857
164,119
287,976
(a) Refers to securities repurchase agreements by the counterpart in the amount of R$5,210 with maturity date up to June 6, 2011 and rates of 4.5% p.a., carried out by subsidiary Sofisa Investment Ltd., and reverse repo operations in the amount of R$15,366, due up to June 16, 2011, with rates between 4% and 4.5%, carried out by the Cayman branch.
(b) Tax credit The estimated realization and the present value of the tax credits and social contribution recoverable existing on December 31, 2010, arising from Provisional Measure No. 2158-35 of August 24, 2001, according to the estimate of future taxable income based on the history of profitability and technical feasibility study, broken down by sources and disbursements, are:
29
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated)
12/31/2009
SOFISA Consolidated Tax credits Realization/ Setup writeback
12/31/2010
Tax losses
143,867
(22,115)
22,310
144,062
From exclusion of excess depreciation From operatins
115,895 27,972
(7,370) (14,745)
10,998 11,312
119,522 24,539
28,515 3 860 252 1,542
(11,757) (3) (1,863) (1,262)
15,896 1,124 4,305 4,699
32,654 1,124 860 2,694 4,979
31,172
(14,885)
26,024
42,311
175,039
(37,000)
48,334
186,373
16,351
(8,762)
6,773
14,363
17,108 2 517 151 925
(4,785) (2) (1,145) (758)
7,269 675 2,610 2,821
19,592 675 517 1,616 2,988
Total temporary differences
18,703
(6,690)
13,374
25,387
Social contribution carryforward as a result of option provided in Article 8 of the Provisional Measure 2,158-35 as of August 24, 2001
35,054
(15,452)
20,147
39,749
210,093
(52,451)
68,481
226,123
Temporary differences: Doubtful accounts Tax contingencies Labor claims Mark et value adjustments - Circular Letter 3068/2002 Provision for BNDU impairment/Other Total temporary differences Total income tax credit
Social contribution tax loss carryforwards Temporary differences: Doubtful accounts Tax contingencies Labor claims Mark et value adjustments - Circular Letter 3068/2002 Provision for BNDU impairment/Other
Total income and social contribution tax credits
Tax Credits Corporate Income Tax Year of Realization 2011 2012 2013 2014 2015 2016 to 2020 Total Present value
30
Temporary Differences
Tax Loss
Social Contribution
Tax Loss - excess
Total Income Tax
Temporary Differences
Tax Loss Carryforwards
Total Social Contribution
17,407 17,561 3,850 1,266 920 1,310
35 446 5,950 10,722 5,105 2,280
10,471 46,956 36,892 24,341 825 36
27,913 64,965 46,692 36,329 6,849 3,626
10,442 10,537 2,310 760 551 786
36 267 3,569 6,433 3,063 995
10,478 10,804 5,879 7,193 3,614 1,781
42,315
24,538
119,522
186,374
25,386
14,363
39,749
35,144
13,804
94,428
142,551
21,084
8,058
29,143
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Banco SOFISA Tax credits 12/31/2009
Realization/ writeback
Setup
12/31/2010
Tax losses
137,588
(16,255)
18,328
139,660
From exclusion of excess depreciation From operatins
115,895 21,693
(7,370) (8,885)
10,998 7,330
119,522 20,138
24,059 3 57 252 1,347
(7,975) (3) (1,863) (1,062)
15,896 426 4,305 3,868
31,980 426 57 2,694 4,153
25,718
(10,903)
24,495
39,310
163,306
(27,158)
42,823
178,970
13,030
(5,333)
4,384
12,081
14,435 2 34 151 808
(4,785) (2) (1,145) (638)
9,537 256 2,610 2,322
19,188 256 34 1,616 2,492
Total temporary differences
15,430
(6,570)
14,725
23,586
Social contribution carryforward as a result of option provided in Article 8 of the Provisional Measure 2,158-35 as of August 24, 2001
28,460
(11,903)
19,109
35,667
191,766
(39,061)
61,932
214,637
Temporary differences: Doubtful accounts Tax contingencies Labor claims Mark et value adjustments - Circular Letter 3068/2002 Provision for BNDU impairment/Other Total temporary differences Total income tax credit
Social contribution tax loss carryforwards Temporary differences: Doubtful accounts Tax contingencies Labor claims Mark et value adjustments - Circular Letter 3068/2002 Provision for BNDU impairment/Other
Total income and social contribution tax credits
Tax Credits Corporate Income Tax Year of Realization 2011 2012 2013 2014 2015 2016 to 2020 Total Present value
(*)
Temporary Differences
Tax Loss
Tax Loss excess
Social Contribution Total Income Tax
Temporary Differences
Tax Loss Carryforwards
Total Social Contribution
16,126 15,865 3,843 1,251 918 1,307
446 5,361 10,026 4,305 -
10,471 46,957 36,892 24,341 825 36
26,597 63,268 46,096 35,618 6,048 1,343
9,676 9,519 2,306 751 550 784
267 3,216 6,015 2,583 -
9,676 9,786 5,522 6,766 3,133 784
39,310
20,138
119,522
178,970
23,586
12,081
35,667
33,297
11,663
96,593
140,728
19,979
6,996
26,975
Funding average rate was used for present value adjustment.
The book profit does not have a direct relation with the taxable income for the income tax and social contribution, due to the existing differences between the accounting criteria and the relevant tax legislation. Thus, we point out that the changes in the tax credit realization arising from tax losses carryforward and temporary differences should not be taken as an indicator of future net profit.
31
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 14. Other assets Sofisa Consolidated 12/31/2010 12/31/2009 Foreclosed assets Real estate Vehicles Other (-) Provision for impairment
68,438 16,747 2,128 13,566 73,747
Banco Sofisa 12/31/2010 12/31/2009
14,709 12,904 2,103 2,390 27,326
Sofisa Consolidated 12/31/2010 12/31/2009 Prepaid expenses Insurance expenses Commissions paid to correspondents Funding abroad
108 27,488 9,964 37,560 111,307
35,163 16,532 2,093 10,262 43,526
8,127 12,332 2,093 2,174 20,378
Banco Sofisa 12/31/2010 12/31/2009
21 104,824 5,606 110,451
108 27,363 9,964 37,435
137,777
80,961
21 84,618 5,606 90,245 110,623
15. Fixed assets for own use Depreciation Rate % Land Buildings Facilities Machinery and equipment Data processing system T ransportation system Construction in progress Equipment/right of usage Other
4 10 10 20 20 10
Depreciation Rate % Land Buildings Facilities Machinery and equipment Data processing system T ransportation system Construction in progress Equipment/right of usage Other
32
4 10 10 20 20 10
Sofisa Consolidated Accumulated Depreciation
Cost 12/31/2010
12/31/2009
14,847 38,296 1,037 2,241 4,063 4,871 520 15 338 66,228
12,547 38,181 964 2,128 3,549 5,230 481 15 303 63,398
12/31/2010 (5,609) (551) (1,172) (2,647) (1,834) (252) (12,065)
12/31/2009 (3,383) (474) (1,007) (2,307) (1,655) (238) (9,064)
Banco Sofisa Accumulated Depreciation
Cost 12/31/2010
12/31/2009
203 3,083 1,011 2,125 3,329 2,479 169 15 335 12,749
203 3,083 939 2,012 2,763 2,598 168 15 300 12,081
12/31/2010 (405) (543) (1,145) (2,274) (1,172) (251) (5,790)
12/31/2009 (327) (469) (980) (1,989) (1,259) (237) (5,261)
Net Amount 12/31/2010
12/31/2009
14,847 32,687 486 1,069 1,416 3,037 520 15 86 54,163
12,547 34,798 490 1,121 1,242 3,575 481 15 65 54,334
Net Amount 12/31/2010 203 2,678 468 980 1,055 1,307 169 15 84 6,959
12/31/2009 203 2,756 470 1,032 774 1,339 168 15 63 6,820
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 16. Deposits and exchange acceptances and securities issue On December 31, 2010, the total number of depositors was distributed as follows (unaudited): Type Demand deposits (active accounts) Interbank deposits Time deposits Agribusiness securities (LCA) Total
a.
Total clients 1,682 7 685 69 2,500
Breakdown by maturity Sofisa Consolidated 12/31/2010 Demand deposits 124,674 -
Up to 30 days 31 - 60 days 61 - 90 days 91 - 180 days 181 - 360 days Short-term
124,674
Time deposits 226,741 160,121 61,393 355,460 253,399 1,057,114
12/31/2009
Interbank deposits 9,954 13,575 3,530 273 700
Investment deposits 42 -
28,032
42
Agribusiness letters of credit (LCA) 1,395 3,062 307 12,725 1,930 19,419
Demand deposits 108,629 -
Time deposits 176,244 113,936 190,676 370,518 212,708
Interbank deposits 19,534 30,547 4,151 23,906 15,315
Investment deposits 1,632 -
Agribusiness letters of credit (LCA) 7,292 11,737 9,312 9,389 7,210
108,629
1,064,082
93,453
1,632
44,940
Over 360 days
-
1,103,819
16,197
-
-
-
752,060
789
-
-
Long-term
-
1,103,819
16,197
-
-
-
752,060
789
-
-
124,674
2,160,933
44,229
42
19,419
108,629
1,816,142
94,242
1,632
44,940
12/31/2009 Interbank Investment deposits deposits
Agribusiness letters of credit (LCA)
Grand Total
Banco Sofisa 12/31/2010 Interbank Investment deposits deposits
Demand deposits
Time deposits
Agribusiness letters of credit (LCA)
Demand deposits
Time deposits
Up to 30 days 31 - 60 days 61 - 90 days 91 - 180 days 181 - 360 days
127,077 -
226,741 160,121 61,393 355,460 328,934
14,555 13,575 3,530 273 700
42 -
1,395 3,062 307 12,725 1,930
111,492 -
176,244 113,936 190,676 369,629 212,338
25,034 30,547 4,151 23,905 15,315
1,632 -
7,292 11,737 9,312 9,389 7,210
Short-term
127,077
1,132,649
32,633
42
19,419
111,492
1,062,823
98,952
1,632
44,940
Over 360 days
-
1,161,974
16,197
-
-
-
944,734
790
-
-
Long-term
-
1,161,974
16,197
-
-
-
944,734
790
-
-
127,077
2,294,623
48,830
42
19,419
111,492
2,007,557
99,742
1,632
44,940
Grand Total
b.
Breakdown by market segment Sofisa Consolidated
Public government Rural Manufacturing Commerce Financial institutions Other services Funds Foundations Insurance companies Individuals Housing Grand Total
33
Demand deposits 444 924 64,057 30,860 2,244 25,228 546 371 124,674
Time deposits 1,450 84,447 51,950 57,728 252,901 1,019,684 376,313 49,504 259,573 7,383 2,160,933
12/31/2010 Interbank Investment Agribusiness letters deposits deposits of credit (LCA) 44,229 42 19,419 44,229 42 19,419
Demand deposits 349 2,499 49,471 18,481 1,694 35,293 842 108,629
Time deposits 7,608 99,968 23,441 46,216 212,135 877,642 294,116 32,523 221,027 1,466 1,816,142
12/31/2009 Interbank Investment deposits deposits 94,242 2 1,630 94,242 1,632
Agribusiness letters of credit (LCA) 44,940 44,940
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Banco Sofisa
Public government Rural Manufacturing Commerce Financial institutions
Demand deposits 444 924 64,081 30,860 2,633
Other services Funds Foundations Insurance companies Individuals Housing Grand Total
27,218 546 371 127,077
c.
Time deposits 1,450 84,447 51,950 57,728
12/31/2010 Interbank Investment Agribusiness letters deposits deposits of credit (LCA) 48,830 -
386,591 1,019,684 376,313 49,504 259,573 7,383 2,294,623
48,830
42 42
19,419 19,419
Demand deposits 349 2,499 49,471 18,481 2,787 36,966 841 98 111,492
Time deposits 7,608 99,968 23,441 46,216
12/31/2009 Interbank Investment deposits deposits 99,742 -
403,550 877,642 294,116 32,523 221,027 1,466 2,007,557
99,742
2 1,630 1,632
Agribusiness letters of credit (LCA) 44,940 44,940
Concentration of main depositors
Demand deposits Main depositor 10 major depositors 20 major depositors 50 major depositors 100 major depositors
9,778 33,445 48,580 76,212 97,601
Time deposits
Sofisa Consolidated 12/31/2010 Interbank Investment Agribusiness letters Demand deposits deposits of credit (LCA) deposits
173,503 582,830 759,175 1,177,350 1,604,588
12,647 44,229 -
42 -
1,553 7,774 17,994 19,419 19,419
8,715 37,108 51,046 74,719 93,569
Time deposits
12/31/2009 Interbank Investment deposits deposits
174,223 703,673 904,734 1,283,802 1,620,129
35,840 98,195 99,742 -
Agribusiness letters of credit (LCA)
1,628 1,632 1,632 -
3,536 25,489 34,438 43,508 44,940
Investment
Agribusiness letters
deposits 1,628 1,632 1,632 -
of credit (LCA) 3,536 25,489 34,438 43,508
Banco Sofisa 12/31/2010 Demand
Time
Main depositor 10 major depositors 20 major depositors 50 major depositors
deposits 9,778 33,445 48,976 77,229
deposits 173,503 658,537 856,123 1,283,562
100 major depositors
99,059
1,722,075
Interbank
12/31/2009 Investment
deposits 12,647 48,830 -
deposits 42 -
Agribusiness letters of credit (LCA) 1,553 7,774 17,994 19,419 19,419
Demand
Time
deposits 8,715 37,108 51,046 74,719
deposits 174,223 703,673 904,734 1,283,802
93,569
1,620,129
Interbank deposits 35,840 98,195 99,742 -
-
44,940
17. Funds obtained in the open market These refer to securities repurchase agreements pegged by LTN (National Treasury Bills) to mature on July 1, 2012, in the amount of R$45,149 in Sofisa consolidated and Banco Sofisa (R$13,722 in Sofisa consolidated R$13,258 in Banco Sofisa, on December 31, 2009) of own portfolio.
18. Borrowings and onlending a.
Borrowings abroad Sofisa Consolidated and Banco Sofisa 12/31/2010
34
12/31/2009
Up to 90 days 91 - 180 days 181 - 360 days Over 360 days
37,250 13,077 161,298 -
29,556 18,160 1,900 188,977
Total
211,625
238,593
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) b.
Onlending - BNDES Sofisa Consolidated and Banco Sofisa 12/31/2010
Up to 90 days 91 - 180 days 181 - 360 days Over 360 days Total
c.
6,452 6,116 10,223 10,005 32,796
12/31/2009
9,424 8,040 13,591 28,029 59,084
Onlending - FINAME Sofisa Consolidated and Banco Sofisa 12/31/2010 Up to 90 days 91 - 180 days 181 - 360 days Over 360 days Total
d.
4,577 4,377 8,407 19,088 36,449
12/31/2009 5,325 5,151 9,528 29,466 49,470
Onlending abroad Sofisa Consolidated and Banco Sofisa 12/31/2010 Up to 90 days 91 - 180 days 181 - 360 days Over 360 days Total
964 268 19,291 361,938 382,461
12/31/2009 930 570 246,412 145,750 393,662
Funds raised by the Bank with FMO, IFC and IDB have specific contract covenants, considered appropriate by the Management on December 31, 2010.
35
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 19. Other liabilities - tax and social security Sofisa Consolidated
Provision for income and social contribution taxes T axes and contribution payable (b) Deferred income tax reserve (a) Total
Short-term
12/31/2010 Long-term
15,410 5,395 76,012 96,817
59,031 59,758 118,789
Total
Short-term
12/31/2009 Long-term
10,323 19,282 54,040 83,645
51,190 77,681 128,871
Short-term
12/31/2009 Long-term
1 18,099 54,040 72,140
51,190 77,681 128,871
15,410 64,426 135,770 215,606
Total 10,323 70,472 131,721 212,516
Banco Sofisa
Provision for income and social contribution taxes T axes and contribution payable (b) Deferred income tax reserve (a)
Short-term
12/31/2010 Long-term
2,216 4,940 76,012 83,168
59,031 59,758 118,789
Total 2,216 63,971 135,770 201,957
Total 1 69,289 131,721 201,011
(a) This refers to the income tax and social contribution provision over real estate revaluation reserves in subsidiaries of excess depreciation of leased assets, temporarily excluded from the income tax basis, and of tax effects related to available-for-sale securities marked to market, in the amounts of R$478, R$135,292 and R$13, respectively (related to revaluation reserve, to excess depreciation and to tax effects related to available-for-sale securities marked to market on December 31, 2009 in the amounts of R$492, R$131,207 and R$22, respectively); (b) This refers to the COFINS provision of R$43,911 of previous periods paid in 180 monthly installments (REFIS), R$11,264, paid in 60 months (ordinary payment) and R$9,251 (Sofisa Consolidated) and R$8,796 (Banco Sofisa) amounts corresponding to legal liabilities for the year of 2010.
20. Other liabilities – trade and intermediation amounts Sofisa Consolidated
BM&F financial assets operations Financial intermediation liabilities - other Total
Short-term 2,202 68 2,270
12/31/2010 Long-term -
Total 2,202 68 2,270
Short-term 45 889 934
12/31/2009 Long-term -
Total 45 889 934
Banco Sofisa
BM&F financial assets operations Financial intermediation liabilities - other Total
36
Short-term 2,202 68 2,270
12/31/2010 Long-term -
Total 2,202 68 2,270
Short-term 45 45
12/31/2009 Long-term -
Total 45 45
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 21. Other liabilities - Sundry Sofisa Consolidated 12/31/2010
Accrual for payments Accrual for contingent liabilities (c) Other creditors - abroad (a) Other creditors - domestic Liabilities from sale/transfer of financial assets (b) Total
12/31/2009
Short-term 7,735 73,044 57,216 51,056
Long-term 6,989 16,765 65,405
Total 7,735 6,989 89,809 57,216 116,461
Short-term 7,900 70,781 52,836 249,482
Long-term 3,954 15,381 388,579
Total 7,900 3,954 86,162 52,836 638,061
189,051
89,159
278,210
380,999
407,914
788,913
Banco Sofisa 12/31/2010
Accrual for payments Accrual for contingent liabilities (c) Other creditors - abroad (a) Other creditors - domestic Amounts payable to affiliated companies Liabilities from sale/transfer of financial assets (b) Total
12/31/2009
Short-term 6,316 65,499 39,872 51,056
Long-term 982 7,637 65,405
Total 6,316 982 73,136 39,872 116,461
Short-term 5,345 27,637 38,541 31,076 249,482
Long-term 739 7,170 388,579
Total 5,345 739 34,807 38,541 31,076 638,061
162,743
74,024
236,767
352,081
396,488
748,569
(a) These refer to the issue of linked notes (linked to shares/bond operations) in the amount of R$16,673 with final maturity on December 28, 2012, all of which are carried out by the subsidiary Sofisa Investment Ltd., and repo operations in the amount of R$24,852 with final maturity on June 6, 2011, linked notes in the amount of R$5,936 due on February 1, 2012, and global notes in the amount of R$40,648 due on November 7, 2011 and R$1,700 due on February 1, 2012, which are carried out by Cayman branch. (b) These refer to obligations with other financial institutions arising from credit portfolio assignment with substantial risk and benefit retention. Sofisa Consolidated and Banco Sofisa 12/31/2010 12/31/2009 Book Value of Book Value of the Obligation the Obligation Loan Operations Leasing Operations Total
37
42,038 74,423
230,707 407,354
116,461
638,061
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) (c) Contingencies During the normal course of their businesses, the Bank and its subsidiaries are exposed to certain contingencies and risks. Within this context, the approximate amount of the total ongoing lawsuits, whose loss probabilities are classified between probable and possible, amounts to R$26,160, distributed as follows:
Sofisa Consolidated Description Probable Tax lawsuits 6,761 Labor lawsuits 228 Civil lawsuits -
Possible 11,247 5,422 9,491
Banco Sofisa Probable 754 228 -
Possible 11,247 5,422 9,491
Description Tax lawsuits Labor lawsuits Civil lawsuits
Provisions for contingencies, whose losses are classified as probable, are established at known values, for labor, tax and civil issues being discussed in administrative and legal instances, backed by the opinions of the Company’s legal counsels. On December 31, 2010, we have judicial deposits in the amount of R$18,294 (R$13,793 on December 31, 2009) in Sofisa consolidated and R$12,346 (R$10,699 on December 31, 2009) in Banco Sofisa, recorded in the item “Other receivables”, which are related to these contingencies.
22. Shareholders’ equity - Banco Sofisa S.A. Shares The capital stock subscribed and paid up is represented and divided into 97,140,150 non-par book-entry registered common shares, and 40,607,271 non-par book-entry registered preferred shares. Interest on equity and dividends The Bank’s Bylaws entitles the shareholders to a minimum dividend of 25% of the annual adjusted net income as provided for by laws, which may be alternatively distributed as Interest on Equity (JCP). In the year ended on December 31, 2010, interest on equity was provisioned in the amount of:
Interest on equity paid and/or provisioned Withholding income tax (IRRF)
60,650 (9,098)
Net provisioned for the year
51,552
The Board of Directors’ Meeting held on September 14, 2009 approved the payment of interim Interest on equity (JCP), to be attributed to the 2009 minimum mandatory dividends, in the gross overall amount of R$3,000, or R$0.02177935 per common and/or preferred share. Said payment, scheduled for rd September 28, 2009, was suspended by the Federal Regional Court of the 3 Region, in view of the 38
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) previous discussion at the Federal Judiciary Branch between Banco Sofisa and the Fiscal Authority with the purpose of establishing which revenues of the Bank must and which must not be considered as comprising the PIS/COFINS calculation basis. On December 31, 2009, the Bank adapted its procedures for COFINS recognition in accordance with the rules set forth by the Fiscal Authority and, consequently, the concrete taxable event determining this suspension no longer exists. Accordingly, the Bank is awaiting the legal decision to make the payment. In 2010, according to the following resolutions of the Board of Directors meetings, interest on equity (JCP) was approved and paid, as follows: At the Company’s General Meeting held on April 30, 2010
Payment referring to income for the year(s) 2009
Date of event RCA 3/30/2010
Gross amount (R$) 1,620,532.00
Amount per common and preferred share Gross Net amount amount (R$) (R$) 0.01176471 0.01000000
Subject to the Approval of the Company’s General Meeting to be held in April 2011 Amount per common and preferred share Payment referring to income for the Gross amount Gross Net amount Date of event year(s) (R$) amount (R$) (R$) 2008, 2009 and 2010 RCA 4/12/2010 64,821,265.59 0.47058824 0.40000000 2010 RCA 6/29/2010 16,205,977.53 0.11764706 0.10000000 2009 and 2010 RCA 11/8/2010 10,175,771.00 0.07387268 0.06279178
Payment date 6/22/2010
Payment date 6/11/2010 7/8/2010 11/17/2010
* RCA = Board of Directors Meeting Interest on equity to be imputed as minimum dividends using earnings and reserves from previous years, was provisioned and paid in 2010 and 2009:
Recorded reserves
Year ended on 12/31/2010 44,550
12/31/2009 27,900
12/31/2008 8,900
12/31/2007 23,200
23. Income from credit operations LTM - Last 12 Months Sofisa Consolidated
39
Banco Sofisa
12/31/2010
12/31/2009
12/31/2010
12/31/2009
Working capital MT M of hedge credit operations Discounted trade notes Direct customer credit Collaterized account Advance to depositors Income from payroll deductible loans Checking accounts - Corporate Overdraft protection Income from financing Credit assignment Recovery of receivables written-off as losses
166,348 (7,269) 20,550 38,536 100,532 361 43,030 12,459 298 62,783 20,109 20,524
197,739 4,233 32,803 36,246 52,444 794 31,698 8,705 330 28,455 9,045 16,745
166,348 (7,269) 20,550 38,072 100,532 361 42,272 12,459 298 56,233 20,109 6,661
202,918 4,233 32,803 36,246 52,444 794 26,590 8,705 330 13,734 9,044 10,823
Total
478,261
419,237
456,626
398,664
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 24. Income from leasing operations LTM - Last 12 Months Sofisa Consolidated and Banco Sofisa 12/31/2010
12/31/2009
Income from leased assets sold
181,849
77,289 9,969 227,215 5,622 1,448 59,969
Total
283,864
381,512
Revenue from leasing consideration
53,982
Fines and interest on consideration received
10,879
Revenue from excess depreciation
29,341
Revenue from Finame leasing
8,177
Revenue from hiring fees
(364)
25. Income from operations with securities LTM - Last 12 Months Sofisa Consolidated Banco Sofisa 12/31/2010 Income from investments in purchase and sale commitments Income from investments in interbank deposits
37,491 4,566
Income from investment funds
4
Result of fixed income securities
97,327
Income from securities in foreign markets
23,644
Result of variable income securities
5,211
Result of market value adjustment Total
(1,437) 166,806
12/31/2009
41,877 2,693 85,079 10,202 (1,547) 2,733 141,037
26. Expenses with funds obtained in the open market LTM - Last 12 Months Sofisa Consolidated Banco Sofisa
40
12/31/2010
12/31/2009
12/31/2010
12/31/2009
Foreign securities Interbank deposits T ime deposits Purchase and sale commitments Other
(8,697) (6,201) (226,529) (4,735) (8,165)
(7,493) (23,821) (128,034) (2,565) (4,939)
(5,580) (7,092) (240,180) (4,735) (8,644)
(730) (31,241) (139,454) (2,565) (5,053)
Total
(254,327)
(166,852)
(266,231)
(179,043)
12/31/2010 37,491 8,260 4 80,281 23,644 712 (1,437) 148,955
12/31/2009
41,877 6,162 76,842 12,610 4,068 2,733 144,292
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 27. Expenses from leasing operations LTM - Last 12 Months Sofisa Consolidated and Banco Sofisa 12/31/2010 Depreciation from leased assets
12/31/2009
(569)
(269,911) (2,028) (705)
(215,670)
(272,644)
(209,424)
Discounts granted
(5,677)
Other leasing expenses Total
28. Personnel expenses LTM - Last 12 Months Sofisa Consolidated Banco Sofisa 12/31/2010
12/31/2009
12/31/2010
12/31/2009
Fees
(35,498) (11,786) (14,615) (326) (6,080)
(43,028) (8,654) (16,701) (278) (6,189)
(30,047) (5,277) (12,897) (305) (6,080)
(26,409) (4,533) (11,242) (249) (6,189)
Total
(68,305)
(74,850)
(54,606)
(48,622)
Salaries Benefits Social charges T raining
29.
Headcount per department (unaudited) Sofisa Consolidated
Front office Sales department Financial Investor relations Support & Control
12/31/2010
12/31/2009
12/31/2010
12/31/2009
120
264
120
125
103
241
103
107
15
22
15
17
2
1
2
1
170
238
158
133
Credit support
31
63
31
32
Billing
30
26
30
22
9
9
9
9
15
18
15
16
Budget management and analysis of results
3
5
3
1
Compliance/ Internal Control / Audit
2
5
2
5
Human Resources
4
3
4
3
Legal
4
8
4
5
Ombudsman
1
1
1
1
IT
6
2
6
1
65
97
53
37
-
1
-
1
T reasury back office Controller's department
Administrative T rainees program
41
Banco Sofisa
Grand Total
290
502
278
258
Support/operating staff ratio
1.42
0.90
1.32
1.06
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 30. Other administrative expenses LTM - Last 12 Months Sofisa Consolidated Banco Sofisa 12/31/2010
12/31/2009
12/31/2010
12/31/2009
Marketing and advertising Communications Assets maintenance and conservation Rents Philanthropic contributions Data processing Public relations and promotions Insurance Financial system services T hird party services Specialized services T ransport T ravel and accommodation Depreciation and amortization Other provisions
(587) (4,856) (1,502) (3,411) (1,208) (8,659) (3,696) (2,517) (6,158) (7,352) (12,111) (4,758) (1,210) (4,955) (4,608)
(685) (4,127) (1,330) (3,206) (164) (8,566) (5,920) (3,491) (5,426) (6,364) (9,408) (5,084) (988) (5,385) (5,927)
(509) (3,736) (1,388) (11,427) (1,101) (7,536) (3,324) (2,511) (4,916) (5,865) (11,579) (4,200) (926) (2,270) (2,475)
(610) (3,245) (1,171) (10,239) (119) (7,233) (5,435) (3,408) (3,380) (4,435) (9,014) (2,918) (532) (2,399) (3,720)
Total
(67,588)
(66,071)
(63,763)
(57,858)
31. Tax expenses LTM - Last 12 Months Sofisa Consolidated Banco Sofisa 12/31/2010
Federal Tax expenses Cofins Pis Other State Tax expenses Municipal Tax expenses Total
42
12/31/2009
12/31/2010
12/31/2009
(29,616) (19,830) (3,306) (6,480)
(27,786) (17,065) (2,920) (7,801)
(23,941) (15,892) (2,582) (5,467)
(22,760) (13,031) (2,117) (7,612)
(332)
(375)
(323)
(370)
(2,674)
(3,616)
(2,190)
(2,233)
(32,622)
(31,777)
(26,454)
(25,363)
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated)
32. Other operating Revenues LTM - Last 12 Months Sofisa Consolidated Banco Sofisa 12/31/2010
12/31/2009
12/31/2010
12/31/2009
Reimbursement of expenses
241
Exchange gains
605
Reversal of operational provisions
-
20,167
-
Income from the sale of subsidiaries' assets
3,625
-
-
Sundry
6,904
5,204
2,256
777 404 20,167 355
Total
11,375
27,044
2,900
21,703
796
223
877
421
33. Other operating expenses LTM - Last 12 Months Sofisa Consolidated Banco Sofisa 12/31/2010
12/31/2009
12/31/2010
12/31/2009
Discounts granted
(13,364)
Commission expenses
(19,787)
(19,783) (13,187) (2,635) (1,045) (600)
(11,886) (13,847) -
(11,715) (10,111) (2,089) (1,045) (562)
Loss from the sale of foreclosed assets
-
Expenses with administration fee Expenses with administrative services Expenses with devaluation of CPR's
(2,584)
-
(2,584)
-
Financial agent return Expenses with services rendered
(21,770) -
(42,199)
(24,720)
(32,097)
-
-
(31,076)
Sundry expenses
(10,740)
(4,019)
(6,682)
(3,863)
Total
(68,245)
(83,468)
(59,719)
(92,558)
34. Financial instruments a.
Risk management Banco Sofisa’s risk management, carried out in a structured manner, encompasses the assessment and control of credit, market, liquidity and operating risks incurred by the Bank and its subsidiaries. This is a continuous process, permanently reviewed and serves as the basis to the group’s strategies.
b.
Credit risk Credit risk is associated to losses and uncertainties regarding the capacity of a client or counterpart to comply with their financial obligations with the Institution.
43
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Sofisa’s management aims at maximizing the risk/asset return ratio, maintaining the quality of credit portfolio at levels that are appropriate to the market segment where it operates. Its strategy is focused on the creation of more value for its shareholders than the minimum return adjusted to risk. The credit policy is established based on internal factors, such as client rating criteria and portfolio growth analysis, delinquency levels recorded, return rates, quality of portfolio and economic capital allocated; and external factors, related to the economic environment, both in Brazil and abroad. Additionally, Sofisa continuously evaluates its credit portfolio to identify objective evidence of loss in the fair value of its assets. c.
Market risk It is the risk associated to the probability that the variation in the value of assets and liabilities, caused by uncertainties regarding changes in prices and market rates, will generate losses to the institution. VaR (Value at Risk) is a statistical method used to quantify market risk and was calculated for the Bank’s asset and liability positions based on a 99% confidence interval and a 1-day settlement period. On December 31, 2010, consolidated VaR for operations with interest risk at fixed rates in domestic currency totaled R$1,747 thousand. For more information, please check Banco Sofisa’s IR webpage (www.sofisa.com.br/ri/).
d.
Liquidity risk It is the institution’s risk of not having sufficient net resources to meet its financial commitments the moment they happen, i.e., the possibility of a term or volume mismatch between expected receivables and the payables in its cash flow. To manage cash liquidity in domestic and foreign currencies, future disbursement and receipt premises are established based on statistical and economic-financial models, which are monitored daily by the control and liquidity management areas. As part of the daily controls, minimum cash and liability concentration limits are established, allowing preliminary actions to be taken to ensure that the institution has sufficient resources to meet its financial commitments.
e.
Operating risk Sofisa’s operating risk management structure, whose description is available on its IR webpage, is the responsibility of the internal controls management, subordinated to the CEO. Sofisa’s operating risk structure is going through improvements, mainly focusing on identifying, assessing, monitoring, controlling and mitigating risks whose occurrence might generate operational losses to the Organization, occurring from faults, deficiencies or inadequacy of internal processes, people and systems, or external events, without losing sight of the legal risks associated with the execution of contracts, processes or adverse court decisions. With this purpose, the unit responsible for operating risk management uses the Basic Indicator Approach (BIA) and appropriate mechanisms to support monitoring, which have been equally reviewed, such as: risk matrix and action plans to improve controls, risk indicators, loss basis, capital allocation, compliance agents’ performance, monitoring of operating risks occurrences and clients’ complaints, notices and external frauds, operating risk management policy, management reports and business continuity plan.
44
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) f.
Mark-to-market and exchange exposure for consolidated assets and liabilities On December 31, 2010, the accounting values related to financial instruments, reported or not in the balance sheet, when compared to the amounts which could be obtained from negotiations on an active market or in absence of such, with the net present value of the future cash flows adjusted based on the market interest rate are as follows: Operations with Brazilian currency-denominated fixed interest rates risk
Value at curve (R$ thousand)
Operation Assets Credits purchased Securities and checks discounted Working capital Securities Financial Leasing Collaterized account Future market Total Assets Liabilities Swap CDB/CDI CFI assignments Leasing assignments Futures market Total Liabilities Balance (NET)
Rate (% p.a.)
standard(252)
Amount in Duration Variance 99% stress 1 day (R$ Mark-to-Market Average rate (consecutive ambiance (R$ days) thousand) thousand) (R$ thousand) (% p.m.)
191,680 76,616 107,594 711,502 488,316 194,526 18,013 15,374 1,803,622
201,506 77,369 118,701 707,138 563,816 209,962 17,922 15,374 1,911,788
1.37 1.72 1.35 0.91 1.84 1.50 0.40 0.92
375 36 248 531 513 405 39 652
197,789 77,280 117,340 688,910 549,116 205,761 17,900 14,849 1,868,945
268 8 97 1,315 1,117 304 2 42 3,153
183,028 181,841 65,857 110,128 249,313 790,167
183,673 189,784 70,499 116,441 249,313 809,711
0.98 1.00 1.50 1.49 0.93
331 670 363 307 549
180,736 183,473 69,244 114,745 242,756 790,953
209 508 89 119 480 1,406
1,013,454
1,102,077
1,077,992
1,747
32
60
90
151
180
270
361
720
1082
2160
2286
3602
5580
10.57
10.90
10.95
11.19
11.31
11.69
11.79
12.06
11.97
11.68
11.67
11,67
11,68
Interest rate used to calculate market value based on stress ambiance
Rate (% p.a.)
45
standard(252)
32
60
90
151
180
270
361
720
1082
2160
2286
3602
5580
11.57
11.90
11.95
12.19
12.31
13.44
13.54
13.81
13.97
13.68
13.67
13.67
13.68
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Operations with USD-denominated interest rates risk Amount in stress scenario (R$ thousand)
Mark-to-Market (R$ thousand)
Assets Futures Swap Dollar Cash and cash equivalents Securities Other Finimp/LC BNDES Variable Income Securities - ADR Securities financing ACC/ACE Total Assets
183,734 551,591 29,085 185,070 10,623 55,573 263 16,533 20,586 24,221 1,077,279
183,951 574,302 29,085 196,842 10,623 56,569 292 16,533 20,586 24,599 1,113,382
3.25 5.09 7.36 4.10 9.91 4.26 7.59
851 801 1 2,825 685 593 129 107
176,007 530,390 29,083 168,320 10,623 53,678 255 16,533 20,441 24,081 1,029,412
Liabilities Future BMF Onlending abroad Eurobond Notes issuance - Cayman Linked Notes issuance - ADR Exchange sales pending settlement Other liabilities Swap BNDES Financial securities Other derivatives Total Liabilities
383,885 336,096 144,780 5,939 16,518 773 109,315 58,593 262 24,863 725 1,081,749
383,899 315,285 148,575 5,939 16,518 773 109,286 60,076 271 24,863 725 1,066,210
2.29 0.78 7.34 0.40 7.25 4.91 0.89 -
32 942 181 3 20 188 593 80 -
383,205 319,699 143,389 5,939 16,518 773 109,194 58,009 254 24,754 725 1,062,460
Operation
Total
(4,470)
Average rate (% p.a.)
Duration (consecutive days)
Value at curve (R$ thousand)
47,172
(33,048)
Interest curve used to calculate mark-to-market value Rate (% p.a.)
32 2.94
60 2.44
90 2.28
120 2.21
180 2.08
270 2.06
361 2.09
720 2.39
1082 2.73
60 4.44
90 4.28
120 4.21
180 4.08
270 4.06
361 4.09
720 4.39
1082 4.73
Interest rate used to calculate market value based on stress ambiance Rate (% p.a.)
32 4.94
Amounts do not include overdue operations or contracts. Market values for operations with risk calculated by local pre-fixed interest rates and denominated in US Dollars were calculated by using BM&F swap data as of December 31, 2010. For government bonds, mark-to-market was used on the same date, provided by ANDIMA (National Association of Financial Market Institutions).
46
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) g.
Sensitivity analysis table Demonstrative chart of sensitivity analysis Reference date: 12/31/2010 (amounts in R$ thousand. Exception: percentage on shareholders' equity) Risk Factors Exposure Scenarios Positions subject to variations on: 1 2 Prefixed interest rates prefixed in reais 1,844 (4,576) rates of foreign currency coupons 13,021 (29,925) Exchange Coupon exchange rates (447) (1,676) Foreign Currency share price (852) (1,917) Variable Income 13,566 (38,094) Total (without correlation) 1.76% -4.94% Percentage on Shareholders' Equity
3 (9,104) (56,688) (2,905) (3,248) (71,945) -9.33%
Sofisa’s trading and banking books are the purpose of the sensitivity analysis presented herein, pursuant to CVM Rule 475/2008. The scenarios used as basis for the sensitivity analysis may be described as follows:
Scenario 1: also called probable scenario, it is based on market data on December 31, 2010. It
is worth mentioning that, due to conservativeness, a 10% gap over market prices was embedded in this scenario. Scenario 2: application of 25% shocks over the risk factors observed in scenario 1. Scenario 3: application of 50% shocks over the risk factors observed in scenario 1.
It is important to point out that the result of each scenario reflects a static portfolio position for December 31, 2010.
35. Basel Agreement By means of Communiqué no. 12,746 of December 9, 2004, amended by Communiqué no. 16,137 of September 2007, the Brazilian Central Bank (BACEN) established procedures for implementing the Basel II Agreement, which adopts more appropriate criteria to handle risks and capital allocation associated with the exposure of financial institution operations, improving on the approach established by Resolution 2,099/94. As of July 1, 2007, with wording given by Resolution 3,490/07, the Required Reference Equity (PRE) has been calculated through the sum of the following portions: PRE = Pepr + Pcam + Pjur + Pcom + Pacs + Popr
47
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) On December 31, 2010 the total market, credit and operating risk portions in relation to reference equity, presented a 19.32 index (17.38 on December 31, 2009) according to the method disclosed by BACEN: (R$ thousand)
Basel II - December/10 Economic-Financial Conglomerate R eference B a l a nce
Expos ure
Credit risk - Pepr Credit operations - Companies
387,922 1,754,509
1,672,854
184,014
Credit operations - retail
568,696
420,278
46,231
Tax credit
226,123
543,021
59,732
2,166,816
890,415
97,946
Other
Exchange exposure risk - Pcam
9,449
Interest rate risk (pre) - Pjur1
4,977
Interest rate risk (exchange) - Pjur2
457
Interest rate risk (inflation indexes) - Pjur3
-
Commodities risk - Pcom
650
Share risk - Pacs
965
Operating risk - Popr
32,717
PRE
437,137
PR Level I Level II
767,726 773,624 (5,898)
Basel II *
19.32
Rban installment
36,575
Margin/(Insufficiency) * Basel = PR *100/ [PRE/F] F = 0,11
48
B a s el II
294,014
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 36. Additional information on subsidiaries of Banco Sofisa S.A. For a more comprehensive analysis of the economic and financial situation of the Sofisa Group, we provide below accounting information on subsidiaries owned by Banco Sofisa S.A.: a.
Subsidiary balance sheets as of December 31, 2010 Sofisa Serviços Gerais de Adm. Ltda
Sofisa Corretora Seguros Ltda
Sofisa S/A C.F.I
Sofisa Investment Ltd
Assets Current and long-term assets Cash and cash equivalents Financial investments Other credits Permanent Total assets
55,437 26 55,146 265 75 55,512
1,590 5 1,434 151 1,590
165,572 393 102,794 62,385 6,828 172,400
58,351 4,867 44,559 8,925 58,351
99,077 1,672 85,429 11,976 71,216 170,293
10,984 3,685 7,299 5,538 16,522
Liabilities Current and long-term liabilities Other liabilities Shareholders' equity - Capital stock and reserves Total liabilities
712 712 54,800 55,512
34 34 1,556 1,590
69,023 69,023 103,377 172,400
17,234 17,234 41,117 58,351
6,042 6,042 164,251 170,293
9,805 9,805 6,717 16,522
Last 12 months results Income from financial intermediation Expenses from financial intermediation Other operating income/(expenses) Operating income Non-operating income Income and social contribution taxes
5,158 (1,926) 3,232 (1,901) (591)
133 7 140 (33)
22,183 (7,927) 23,830 38,086 (2,594) (13,115)
8,441 (1,859) 474 7,056 -
11,238 9,430 20,668 (438) (5,963)
1,422 1,422 9 (463)
107
22,377
7,056
14,267
968
740
Net Income for the period
b.
Sata Soc.de Ass. Tec. Adm.S/A
Related parties The operations among the related parties eliminated in consolidation are as follows: 12/31/2010
12/31/2009
2,402 58,506 133,683 2,578 15,406 4,800
2,863 92,533 192,674 31,076 70 4,353 10,653 16,282 4,800
2,402 58,506 133,683 (2,578) (15,406) (4,800)
2,863 92,533 192,674 31,076 (4,353) (10,653) (70) (16,282) (4,800)
Asse ts/re ve nue s Cash and cash equivalent s Int erbank deposit cert ificat es Securit ies Ot her credit s Income from exchange cont ract s Income from invest ment in int erbank deposit cert ificat es Fixed income securit ies Reallocat ion of administ rat ive services Ot her revenues Li abi l i ti e s/e xpe nse s Demand deposit s Int erbank deposit s T ime deposit s Ot her liabilit ies Int erbank deposit expenses T ime deposit expenses Exchange cont ract expenses Administ rat ive services expenses Ot her expenses
49
Rede Matriz Serviços Franq. Ltda
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Operations among related parties are conducted at usual market prices and under usual market conditions: Data of subsidiaries on 12/31/2010
Subsidiaries Sofisa Serviços Gerais de Administração Ltda Sofisa Corretora de Seguros Ltda Sofisa S.A. Crédito, Financiamento e Investimento Sata Sociedade e Assessoria T écnica e Administrativa S/A Rede Matriz Serviços e Franquias Ltda
Corporate Taxpayer's ID 06.990.721/0001-72 03.581.115/0001-05 08.257.293/0001-07 43.347.301/0001-07 89.404.610/0015-6
Number of quotas/shares Type 315,179,965 209,999 7,500,000 Common shares 315,734,177 Common shares 7,010,000 -
Interest in voting and total capital 99.99% 99.99% 100% 100% 100%
CVM Rule 247/96, Article 20 item III
Balance on 12/31/2010 Cash and cash equivalents (Bank account) Securities (CDB)
Value 25 55,146
Sofisa Serviços Gerais de Administração Ltda Guarantees, sureties and Maturity Rate mortgages No maturity 0% n.a. 7/12/2011 104% CDI n.a.
Sofisa Corretora de Seguros Ltda
Balance on 12/31/2010 Cash and cash equivalents (Bank account) Securities (CDB) Securities (CDB)
Value 2 719 715
Maturity No maturity 9/2/2011 10/27/2011
Rate 0% 104% CDI 104% CDI
Guarantees, sureties and mortgages n.a. n.a. n.a.
Balance on 12/31/2010 Cash and cash equivalents (Bank account) Investment in interbank deposits Investment in interbank deposits
Sofisa S/A Crédito, Financiamento e Investimento Guarantees, sureties and Value Maturity Rate mortgages 388 No maturity 0% n.a. 3,801 1/3/2011 10.64% p.a. n.a. 800 1/3/2011 10.64% p.a. n.a.
Balance on 12/31/2010 Disponibilidades (Conta Corrente) Securities (CDB) Securities (CDB) Securities (CDB) Securities (CDB) Securities (CDB) Securities (CDB) Securities (CDB)
Sata Sociedade e Assessoria Técnica e Administrativa S/A Guarantees, sureties and Value Maturity Rate mortgages 1,672 No maturity 0% n.a. 18,774 7/26/2011 104% CDI n.a. 23,459 6/26/2012 104% CDI n.a. 7,936 8/21/2012 104% CDI n.a. 2,848 8/21/2012 104% CDI n.a. 2,872 8/21/2012 104% CDI n.a. 2,844 9/25/2012 104% CDI n.a. 15,972 11/19/2012 104% CDI n.a. Rede Matriz Serviços e Franquias Ltda
Balance on 12/31/2010 Cash and cash equivalents (Bank account)
50
Value 47
Maturity No maturity
Rate 0%
Guarantees, sureties and mortgages n.a.
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 37. Consolidated balance sheet per currency and exchange exposure S o f is a C o n s o lid a t e d
B a la n c e
12 / 3 1/ 2 0 10 C u rre n c y D o m e s t ic
A S S ETS C a s h a n d c a s h e q u iv a le n t s S h o rt - t e rm in t e rb a n k in v e s t m e n t s M o ne y m a rke t Inte rba nk de po s its F o re ign c urre nc y inve s tm e nts S e c u rit ie s a n d d e riv a t iv e f in a n c ia l in s t ru m e n t s In t e rb a n k a n d in t e rb ra n c h a c c o u n t s C re d it a n d le a s in g o p e ra t io n s Othe r a s s e ts F o re ign e xc ha nge po rtfo lio Othe r P e rm a n e n t Inve s tm e nts F ixe d a s s e ts De fe rre d a s s e ts Inta ngible a s s e ts To ta l a s s e ts
2 9 ,5 17 13 0 ,9 7 0 20,005 103,782 7,183 1,2 9 2 ,8 2 8 3 8 ,7 9 3 2 ,2 9 6 ,0 4 6 5 14 ,7 4 8 25,733 489,015 7 0 ,8 0 1 6,825 54,163 4,260 5,553 4 ,3 7 3 ,7 0 3
7 ,6 2 9 12 3 ,7 8 7 20,005 103,782 1,0 8 0 ,7 0 3 3 8 ,7 9 3 2 ,2 4 0 ,2 3 7 4 6 9 ,9 6 2 1,523 468,439 7 0 ,8 0 1 6,825 54,163 4,260 5,553 4 ,0 3 1,9 12
LIA B ILIT IE S D e p o s it s De m a nd de po s its Inte rba nk de po s its Tim e de po s its Inve s tm e nt de po s its F u n d s o b t a in e d in t h e o p e n m a rk e t E xc h a n g e a c c e p t a n c e s In t e rb a n k a n d in t e rb ra n c h a c c o u n t s O b lig a t io n s p e r lo a n s a n d o n le n d in g s D e riv a t iv e f in a n c ia l in s t ru m e n t s O t h e r lia b ilit ie s F o re ign e xc ha nge po rtfo lio Othe r D e f e rre d in c o m e S h a re h o ld e rs ' e q u it y C a pita l s to c k a nd re s e rve s T o t a l lia b ilit ie s
2 ,3 2 9 ,8 7 8 124,674 44,229 2,160,933 42 4 5 ,14 9 19 ,4 19 80 6 6 3 ,3 3 1 3 8 ,3 2 1 5 0 6 ,4 9 5 1,882 504,613 16 0 7 7 0 ,8 7 0 770,870 4 ,3 7 3 ,7 0 3
2 ,3 2 9 ,8 7 8 124,674 44,229 2,160,933 42 4 5 ,14 9 19 ,4 19 80 9 8 ,4 3 9 3 8 ,3 2 0 4 3 2 ,4 2 3 1,109 431,314 16 0 7 7 0 ,8 7 0 770,870 3 ,7 3 4 ,7 3 8
N e t f in a n c ia l p o s it io n o f a s s e t s a n d lia b ilit ie s D e riv a t iv e s - n e t p o s it io n N e t f o re x p o s it io n ( 1) Am o unts e xpre s s e d a nd/o r inde xe d in U.S . Do lla rs ( 2 ) Am o unts ba s e d o n purc ha s e P TAX o f De c e m be r 31, 2010 a nd De c e m be r 31, 2009
51
B a la n c e F o re ig n
(1)(2)
2 1,8 8 8 7 ,18 3 7,183 2 12 ,12 5 5 5 ,8 0 9 4 4 ,7 8 6 24,210 20,576 3 4 1,7 9 1 5 6 4 ,8 9 2 1 7 4 ,0 7 2 773 73,299 6 3 8 ,9 6 5 (297,174) 292,706 ( 4 ,4 6 8 )
12 / 3 1/ 2 0 0 9 C u rre n c y D o m e s t ic
7 ,9 0 9 5 9 1,5 8 9 550,075 32,560 8,954 5 7 7 ,3 0 0 2 8 ,7 2 5 2 ,8 7 0 ,4 3 6 5 2 9 ,12 6 18,133 510,993 7 2 ,0 4 2 9,030 54,334 5,446 3,232 4 ,6 7 7 ,12 7
2 ,5 8 1 5 8 2 ,6 3 5 550,075 32,560 4 3 0 ,3 6 7 2 8 ,7 2 5 2 ,8 14 ,5 3 7 4 8 8 ,16 6 1,189 486,977 7 2 ,0 4 2 9,030 54,334 5,446 3,232 4 ,4 19 ,0 5 3
2 ,0 2 0 ,6 4 5 108,629 94,242 1,816,142 1,632 13 ,7 2 2 4 4 ,9 4 0 428 7 4 0 ,8 0 9 3 8 ,0 5 4 1,0 5 3 ,5 3 5 15,033 1,038,502 2 ,2 2 7 7 6 2 ,7 6 7 762,767 4 ,6 7 7 ,12 7
2 ,0 2 0 ,6 4 5 108,629 94,242 1,816,142 1,632 13 ,2 2 8 4 4 ,9 4 0 428 12 2 ,6 18 3 8 ,0 0 0 1,0 0 6 ,5 6 4 3,775 1,002,789 2 ,2 2 7 7 6 2 ,7 6 7 762,767 4 ,0 11,4 17
F o re ig n
(1)(2)
5 ,3 2 8 8 ,9 5 4 8,954 14 6 ,9 3 3 5 5 ,8 9 9 4 0 ,9 6 0 16,944 24,016 2 5 8 ,0 7 4 494 6 18 ,19 1 54 4 6 ,9 7 1 11,258 35,713 6 6 5 ,7 10 407,636 (393,957) 13 ,6 7 9
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) 38. Other information a.
Liabilities due to “aval” guarantees, sureties and others totaled R$36,555 on December 31, 2010 (R$25,965 on December 31, 2010);
b.
The Bank and its subsidiaries have current insurance contracts in an amount deemed sufficient to cover fixed assets and civil liability claims;
c.
Banco Sofisa S.A. is headquartered at Alameda Santos, 1.496 – City and State of São Paulo, it has branches in Campinas, state of São Paulo, at Av. José Bonifácio Coutinho Nogueira, 150, in Belo Horizonte, state of Minas Gerais, at Rua Paraíba, 1000, in the City and State of Rio de Janeiro, at Avenida Rio Branco, 134-A, in Curitiba, state of Paraná, at Rua Benjamin Lins, 935, in Salvador, state of Bahia, at Rua das Alfazemas, 761, in Goiânia, state of Goiás, at Rua 09 nº 558, in Porto Alegre, state of Rio Grande do Sul, at Avenida Soledade, 550, in Uberaba, state of Minas Gerais, at Praça Rui Barbosa, 300, in Londrina, state of Paraná, at Av. Higienópolis, 32, in Joinville, state of Santa Catarina, at Rua Alexandre Dohler, 129, in Fortaleza, state of Ceará, at Av. Santos Dumont, 2626, in Recife, state of Pernambuco, at Rua Antonio Lumack do Monte, 128, in Riberão Preto, state of São Paulo, at Av. Presidente Getúlio Vargas, 2001, in São José dos Campos, state of São Paulo, at Av. Dr. João Guilhermino, 429, in São José do Rio Preto at Rua Coronel Spínola de Castro, 3.635, in Alphaville/SP at Alameda Rio Negro, 585, in Belém, state of Pará at Av. Governador José Malcher, 168, in Manaus, state of Amazonas, at Av. Djalma Batista , 34, and in Caxias do Sul, state of Rio Grande do Sul at Rua Os Dezoito do Forte, 2000;
d.
Banco Sofisa S.A. has the AA rating from Austin Rating, AA from LF Rating and A(BRA) from Fitch Ratings. In April 2008, Sofisa received the Aa2.Br(Nac) and Ba1(Eurobonds) ratings from Moody’s Investor Service;
e.
Opening of a branch in Grand Cayman, Cayman Islands, duly authorized by the Brazilian Central Bank and by the Cayman Islands Monetary Authority in September 2008;
f.
Management compensation The maximum compensation approved by the Meeting for 2010 is R$12,000 (R$18,000 in 2009), of which R$11,827 (R$8,119 on December 31, 2009) has been distributed among the Management up to December 31, 2010, as follows: 12/31/2010 Board of Directors
Salaries
Total
Fiscal Council
Audit Committee
Total
2,722
2,934
183
240
-
3,953
-
-
3,953
612
1,088
41
54
1,795
3,334
7,975
224
294
11,827
Bonus / Employee Profit Sharing (PLR) Social charges ( INSS + FGTS without salaries)
Statutory Board of Executive Officers
6,079
12/31/2009 Board of Directors Salaries Bonus / Employee Profit Sharing (PLR) Social charges ( INSS + FGTS without salaries) Total
52
2,240 504 2,744
Statutory Board of Executive Officers 3,571 48 1,293 4,912
Fiscal Council 138 31 169
Audit Committee 240 54 294
Total
6,189 48 1,882 8,119
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) Short-term benefits to managers are basically represented by wages, salaries and social security contributions, paid leave and sick leave, profit sharing and bonuses (in case these are payable within twelve months after the end of the year) and non-monetary benefits (such as medical insurance and cars). (i)
Post-retirement benefits Banco Sofisa does not offer post-retirement benefits.
(ii) Share-based compensation In 2007, Banco Sofisa established a long-term share-based incentive program for mangers and eligible employees (beneficiaries), as per resolution of the Extraordinary General Meeting held on July 20, 2007, with the purpose of attracting, keeping and motivating a team of skilled professionals. The program has the following features: a) The option may be exercised by beneficiaries in 5 equal annual tranches, each one is equivalent to 20% out of the total option granted (“annual tranches”) up to June 30, 2008. Each subsequent annual tranche may be fully or partially exercised up to the final and extinguishing 7-year term, as of the execution of the agreement; b) The exercise price to be paid in cash was equivalent to R$12.00 on May 25, 2007, restated by IGPM up to the exercise date of the option; c) The beneficiary may only sell, transfer or, otherwise dispose of subscribed or acquired shares after the minimum unavailability term of 2 years, as of the share subscription or purchase; d) 5,600,000 shares were granted to the Management and eligible employees. Although the conditions of the Plan are still in effect, once the Management did not amend its conditions, no beneficiaries have exercised or there is expectation of exercise of any options up to date due to current market conditions of Sofisa shares that had their price substantially reduced compared to the issue price. (iii) According to current regulations, financial institutions shall not grant loans or advance payments to:
any individuals or corporations that control the institution or any entity with the same the controlling shareholder as the institution, or any executive officers, members of the board, members of the fiscal council or any members of these individuals’ immediate family;
any entities controlled by the institution;
any entities of whose capital stock the institution holds, directly or indirectly, 10% of more, or which holds more than 10% of the institution’s capital stock.
In compliance with these regulations, no loans or advance payments are granted to any subsidiaries, executive officers, members of the board of directors or of the fiscal council or their relatives.
53
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) (iv) Shareholding Members of the Board of Directors, controlling shareholders and the board of executive officers have the following shareholding in Banco Sofisa: 12/31/2010 Management Controlling shareholders
Common
Common
Preferred
Preferred
T otal
T otal
Shares
Shares (%)
Shares
Shares (%)
Shares
Shares (%)
89,019,744
91.641%
12,675,960
31.216%
101,695,704
1,800
0.002%
449,000
1.106%
450,800
0.327%
-
0.000%
364,300
0.897%
364,300
0.264%
89,021,544
91.642%
13,489,260
33.219%
102,510,804
74.419%
Board of Directors Board of Executive Officers Total
73.828%
"Amounts expressed in thousands of shares"
12/31/2009 Management Controlling shareholders Board of Directors
Common
Common
Preferred
Preferred
T otal
T otal
Shares
Shares (%)
Shares
Shares (%)
Shares
Shares (%)
89,019,744
91.641%
12,675,960
31.218%
101,695,704
1,800
0.002%
480,000
1.182%
481,800
0.350%
-
0.000%
47,864
0.118%
47,864
0.035%
89,021,544
91.642%
13,203,824
32.518%
102,225,368
74.213%
Board of Executive Officers Total
73.829%
"Amounts expressed in thousands of shares"
g.
Convergence into the international financial reporting standards The Brazilian Monetary Council (CMN) Resolution 3786 of September 24, 2009, BACEN Circular Letter 3,472 of October 23, 2009, set forth that, as of December 31, 2010, the financial institutions must annually draft and disclose the consolidated financial statements adopting the international financial reporting standards according to the pronouncements issued by the International Accounting Standard Board (IASB), translated into the Portuguese language by a Brazilian entity accredited by the International Accounting Standards Committee Foundation (IASC Foundation). The accounting pronouncements issued by the Brazilian Accounting Standards Board (CPC) and corresponding IASB standards that will be adopted in the consolidated financial statements until the end of 2010 and which may affect the Company’s shareholders’ equity or results: ·
·
54
CPC 2 (IAS 21) – Effects on changes in foreign exchange rates and conversion of the financial statements: effects on results from January 1 to December 31, 2010 (with no effect on shareholders’ equity) due to allocation of foreign exchange variation in the shareholders’ equity related to subsidiaries with other functional currency rather than Brazilian Real, basically represented by Sofisa Cayman and Sofisa Investment Limited; CPC 24 (IAS 10) – Subsequent events: Interest on Equity declared after the accounting period to which the financial statements refer, if it exceeds the minimum mandatory dividend, it shall be reversed with effects on shareholders’ equity;
Banco Sofisa S.A. Notes to Financial Statements December 31, 2010 and 2009 (In thousands Brazilian Reais, except when otherwise indicated) · · ·
CPC 32 (IAS 12) – Taxes on Income: recognition at credit in shareholders' equity of the tax credits opening balance; CPC 38 (IAS 39) – Financial instruments; Recognition and measurement - impairment loss relating to a financial asset: review of the procedures adopted in the Allowance for Doubtful Accounts. The Management does not expect an amount higher than the accrued amount. Using the effective interest method to calculate the cost accounting of loan operations, resulting in the deferral of revenues and expenses related to the opening of loan operations;
·
Risk retention and benefits: financial assets to be sold or transferred fully remain in assets, amounts received or receivable are recorded in assets, in contra account to liabilities referring to the obligation assumed, revenues and expenses are monthly recorded in the income statement for the remaining term of operations according to contracted rates. Other pronouncements should basically impact the way of reporting the financial information. Consolidated financial statements referring to the fiscal year ended December 31, 2010, adopting the international standards according to IASB pronouncements, shall be disclosed until April 30, 2011.
55
2010 MANAGEMENT REPORT MESSAGE FROM THE BOARD OF DIRECTORS th
In 2011, we celebrate the 50 anniversary of Banco Sofisa. It is impossible to see this moment without looking at the past and thinking about the future. When Banco Sofisa started its operations, that time was very different from present days, without a Central Bank, when banks opened on Saturdays and married women only could open a bank account with their husband's auhtorization. Only in 1962, the Brazilian government enacted a law granting this right to women. Interestingly, today, 50 years later, Brazil has its first woman president. The difference in this 50-year company relies on the fact that it already proved its capacity of adapting, surviving and succeeding amid several scenarios. The Management theory calls this capacity as resilience. A resilient company shows reliability, safety and protection to survive and suceed even amid adverse economy changes, aggressive competitors strategies and accelerated changes in the business scenario. During these 50 years, Banco Sofisa from a traditional financial institution was able to become a bank with noteworthy footprint in its market, innovating and raising competitiveness to its segment. Banco Sofisa today’s position is a combination of leadership, culture, people, systems and workplace. The balance of these characteristics that ensures the capacity to adapt, overcome drawbacks and succeed. It is highly realistic to expect that Brazil’s economy will continue showing a solid performance in 2011 and unveiling new business opportunities. Having this scenario in mind, our focus is the corporate segment, where we accumulate a wide range of information and experience. We continue investing in our sales team, hiring new managers and opening new branches and platforms. Certainly the continued development of new products and solutions allows us to deepening and streghtening our relationship with clients, as well as to sustaining a continued improvement of the Bank’s performance and its results, which are already positioned in a satisfactory level, taking into account low leverage levels. Alexandre Burmaian Chairman of the Board of Directors
CREDIT PERFORMANCE IN BRAZIL At the close of 2010, according to the Central Bank, the volume of credit in Brazil's financial system, including operations with both marked and unmarked funds, reached R$1,704 billion, for growth of 20.5% over 2009. The Total Credit/GDP ratio stood at 46.6%, versus 45.9% in 2009. Credit to companies reached nearly R$928 billion in December 2010, 19% more than in December 2009. In all months of 2010, growth in the rolling 12-month periods remained consistently above 13%, which indicates that companies are once again demanding funds from commercial banks.
Since then, Banco Sofisa has played a prominent role in its core business segment: loans to the small and midsized companies, the so-called middle-market. This segment focuses on companies with annual revenue between R$5 million and R$300 million. Sofisa's excellent customer service is assured by special structures that place a special emphasis on these customers' relationship with the Bank. These structures are formed by managers especially trained to offer solutions and comprehensive advice on the products and services that best meet the special characteristics and business demands of each segment.
COMPANY PROFILE Banco Sofisa is one of the most traditional financial institutions in Brazil. Founded in 1961 under the name Sofisa S.A. Crédito, Financiamento e Investimentos, it pioneered the development and continually enhanced the business of lending to individuals. In 1990, it expanded its footprint in Brazil's financial world with a new name: Banco Sofisa S.A.
56
The Management Report is not an integral part of these financial statements.
Sofisa’s operations are underpinned by a policy of granting loans based on strict analysis of fundamentals, and supported by strong collateral and low concentration of risks, with maximum credit exposure per economic group limited to R$ 30 million (3.9% of shareholders’ equity). The Bank currently has R$771 million in shareholders’ equity, R$4.4 billion in assets and a national footprint that includes 11 Brazilian states and a network of 15 branches. Over the 49 years since its founding, Sofisa has become synonymous with solidity and a tradition of service excellence. Today it has a wide range of loyal clients, to which it serves as a trusted financial partner that understands the business of its clients and participates in their day-to-day activities.
MATERIAL EVENTS Sale of the Consumer-Finance Segment – Seeking to strengthen its efforts in the middle-market, its core segment, on May 14, 2010, Sofisa completed the sale of its subsidiary Sofcred Promotora de Vendas e Serviços Ltda., which was responsible for all its origination of consumer-finance operations, to Banco Fibra for R$120.0 million. Interest on Equity for 2009 – On June 22, 2010, the Bank paid complementary IOE for fiscal year 2009 in the gross amount of R$1.6 million, which was approved by the Board of Directors on March 30, 2010, and ratified by the Annual and Extraordinary Shareholders’ Meetings held on April 30, 2010. Interest on Equity for 2010 – During the year, the Bank prepaid the compensation to shareholders related to fiscal year 2010, as follows: a) On June 11, 2010, it paid IOE in the gross amount of R$64.8 million, which was approved by the Board of Directors on April 12, 2010; b) On July 8, 2010, it paid IOE in the gross amount of R$16.2 million, which was approved by the Board of Directors on June 29, 2010; c) On November 17, 2010, it paid IOE in the gross amount of R$10.2 million, which was approved by the Board of Directors on November 8, 2010. Contracting of international loan with the InterAmerican Development Bank (“IDB”) – On November 23, 2010 the Bank signed a Loan Agreement with the IDB, a financial institution and member of the World Bank Group, which made available to Sofisa a US$140.0 million credit line with a term of 5 years, of which US$25.0 million was direct financing from the IDB itself and the remaining US$115.0 million was a syndicated loan from 15 international banks.
57
SUBSEQUENT EVENTS Interest on Equity for 2010 – On February 28, 2011, the Board of Directors approved the payment of IOE for fiscal year 2010 in the gross amount of R$4.4 million, to be paid to Shareholders by April 29, 2011.
OPERATIONAL HIGHLIGHTS Total Loan Portfolio At the close of 2010, the loan portfolio, including credit assignments with recourse, totaled R$2.7 billion, representing contraction of 10.6% from 2009. This contraction was led by the 26.4% (4Q10/4Q09) reduction in the Consumer-Finance segment loan portfolio, including credit assignments with recourse, which ended the year with a balance of R$896.2 million. Meanwhile, the SME portfolio totaled R$1.8 billion in December 2010, remaining virtually stable in relation to the balance at December 2009. With regard to the quality of the Bank’s loan portfolio, its largest debtor represented 1.1% of the total portfolio and 3.8% of shareholders’ equity, while the highest share represented by a single sector was 10.0%. In terms of portfolio breakdown by loan maturity, short-term loans continued to account for the largest share, with 68.9% of the Bank’s total operations (SME and ConsumerFinance segments) maturing within 1 year. In the period, 92.4% of the Bank’s loan portfolio, including credit assignments with recourse, was rated from “AA" to "C". The percentage of operations covered by security interest reached 97.6% of the Bank’s total portfolio, including credit assignments with recourse.
Loan Operations | SME Loans to the SME segment totaled R$1.8 billion in December 2010, corresponding to 67.3% of the total loan portfolio in the 2010 fiscal year, for a reduction of 0.2% (R$3.7 million) from December 2009.
Loan Operations | Consumer Finance Consumer-finance operations, including operations with recourse, totaled R$896.2 million in December 2010, representing 32.7% of the total portfolio, and contracting by 26.4% from 2009. In view of the termination of the loan origination operations as of May 2010, we provide estimates for the remaining balances of the consumer-finance portfolio in the coming years: R$520 million (Dec/2011), R$250 million (Dec/2012) and R$70 million (Dec/2013).
The Management Report is not an integral part of these financial statements.
Delinquency and Provision for Losses Total expenses with provisions for loan losses were R$101.1 million in 2010, a reduction of 22.8%, or R$29.9 million, from the R$131.0 million recorded in the last year.
Funding Funding totaled R$3.2 billion at the end of 2010, decreasing by 3.8% from the R$3.4 billion recorded in December 2009. Term deposits, including Agribusiness Letters of Credit, accounted for 64.2% of total deposits (74.2% in 2009), totaling R$1.5 billion, for a slight decrease of 1.6% in relation to 2009. Funding operations recognized under Resolution 3533 of the Central Bank of Brazil totaled R$91.4 million, down 79.8% on the R$451.8 million recorded at the end of 2009. In 2010, the Bank registered a balance of R$671.7 million in operations involving Certificates of Deposits with Special Guarantees (DPGE), with an average term of 858 days, for growth of 104.7% from 2009. Note that these operations have the objective of matching longterm assets and liabilities and the Bank still has an unused issue limit of R$2.5 billion.
Total Assets Banco Sofisa’s total assets ended 2010 at R$4.37 billion, down 6.5% from R$4.68 billion at the end of 2009, chiefly due to the contraction of the ConsumerFinance loan portfolio.
Shareholders’ Equity The Bank’s shareholders' equity stood at R$770.9 million in 2010, an increase of 1.1% from the R$762.8 million recorded in 2009. The balance of R$762.8 million in 2009 was mainly impacted by the results in the period of R$76.0 million and provisions for interest on equity of R$60.7 milion.
Basel Ratio Banco Sofisa ended 2010 with a capital adequacy ratio (Basel II) of 19.3%, up 2.1 p.p. from the 17.2% recorded in 2009.
CENTRAL BANK CIRCULAR 3,068/01 Banco Sofisa declares that it has the financial capacity and intent to hold until the maturity date the securities classified under “Hold to Maturity” in the amount of R$395,200, which accounts for 30.6% of total securities.
FINANCIAL HIGHLIGHTS Net Income Banco Sofisa recorded net income of R$76.0 million in 2010, 618.2% higher than the R$10.6 million recorded in 2009. Excluding profit sharing, net income amounted to R$87.0 million in 2010, 523.1% higher than the R$14.0 million recorded last year.
Gross Income from Financial Intermediation Gross Income from Financial Intermediation was R$249.1 million in 2010, increasing by 28.3% from the figure recorded in 2009.
Administrative Expenses Administrative expenses amounted to R$135.9 million in 2010, a slight decrease of 3.6% in relation to 2009, primarily due to the 8.7% reduction in personnel expenses, which, in turn, reflected the sale of the consumer-finance origination structure in May 2010.
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BALANCE SHEET HIGHLIGHTS
RATINGS The credit-rating agencies maintained Banco Sofisa’s ratings, reflecting the excellent quality of its assets, the conservative policy adopted by its Management, its vast expertise in the SME segment, as well as its healthy liquidity and capitalization.
Aa2.br/Br-1 (nac.) Ba1(eurobonds)
A(BRA): Longo Prazo F1(BRA): Curto Prazo
Setembro/2010
Julho/2010
AA-: Longo Prazo A1: Curto Prazo
Baixo Risco Médio Prazo Disclosure: Excelente
Outubro/2010
Janeiro/2011
The Management Report is not an integral part of these financial statements.
SHARE PERFORMANCE On December 30, 2010, Banco Sofisa stock closed at R$5.08, for a loss of 4.9% from R$5.34 in 2009, which compares with a gain of 1.0% in the BOVESPA index in the same period.
communities. Important actions in this area include the “Crê-Ser” Program sponsored by Ação Comunitária do Brasil, an organization accredited by the Children and Youths Municipal Council; maintaining one of the Intensive Care Units at Hospital São Paulo; and support for Casas Hope, an organization that provides important assistance to children with cancer. Banco Sofisa also supports the Cancer Hospital of Barretos, which offers treatment to cancer patients from all over Brazil.
INVESTOR RELATIONS Banco Sofisa’s Investor Relations department is the Bank’s link with the capital markets, providing direct interaction with the São Paulo Exchange (BM&FBovespa), the Securities and Exchange Commission of Brazil (CVM), investors, shareholders, analysts and stakeholders in general. The department discloses quality, timely and transparent information, while also capturing market perceptions to optimize results, which helps support stock price appreciation and liquidity. Therefore, the IR team accomplishes its mission by drafting quarterly performance reports, material facts and/or other notices to the market, which are published in both Portuguese and English, and by improving and updating its IR website, which is divided by area of interest. In 2010, the Bank organized and participated in the following events: ü ü
ü ü ü
over 70 individual meetings and/or calls with Brazilian and foreign analysts and investors; 8 earnings conference calls and 1 public meeting with analysts at the Bank’s head offices sponsored by the Capital Market Professionals and Investors Association of São Paulo (APIMEC - SP). th Annual CEO participation in the 11 Conference sponsored by BTG Pactual; nd participation in the 2 Banks and Financial Services Conference sponsored by Fator Corretora; nd participation in the 2 SMid Cap Homebuilders & Financials Conference sponsored by J.P. Morgan.
In 2010, nine Brazilian and international brokerages covered the Bank's stock.
CORPORATE SOCIAL RESPONSIBILITY Banco Sofisa has continually enhanced its social and environmental criteria for lending in the SME segment, based on the guidelines established by the International Finance Corporation (IFC), an arm of the World Bank, by the Dutch development bank Nederlandse Financierings-Maatschappij Vorr Ontwikkelingsladen N.V (FMO), and by the Inter-American Development Bank (IDB), a financial institution and member of the World Bank Group. On the social front, in 2010, Banco Sofisa continued its participation in programs to provide assistance and support to children and adolescents in underprivileged
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HUMAN RESOURCES Achieving customer satisfaction is one of Sofisa’s goals, for which it maintains a motivated team of professionals who are closely aligned with the Bank's targets, and provides them with a healthy corporate environment. In line with this objective, in 2009 and 2010 the Bank developed the project “Golaço”, which enjoys the participation of all members of the management and resulted in a set of targets and actions incorporated by the Bank's entire staff. Given its belief that its employees are its main asset, Sofisa’s policies and actions encourage an attitude of care and concern with the team, which is formed by 290 professionals. As a result, the Bank invests in training and internship programs, as well as in the technical and educational development of its team. Banco Sofisa maintains a healthy organizational environment and offers, through its Medical Insurance, an Employee Assistance Program that provides its employees with professional and personal support. Participation is optional and confidential and helps them cope with any problem that may be compromising the health and wellbeing of an employee or their families. In 2010, the Bank launched a line for direct communication with the HR department, which is called "Sofisa com Você", and initiated a comprehensive organizational climate survey in partnership with the Great Place to Work Institute.
CORPORATE GOVERNANCE Banco Sofisa adopts the best corporate governance practices and, since December 2008, has listed its stock on the Level 2 of BM&FBOVESPA, which assures one of the highest levels of corporate governance. The main highlights of Sofisa's corporate governance are: ü 60% of members of the Board of Directors are independent; ü Audit Committee installed since 1995; ü Fiscal Council with one member and one alternate member elected by the minority shareholders; ü Non-statutory Compensation and Human Resources Committee; ü 100% Tag-along rights;
The Management Report is not an integral part of these financial statements.
ü Securities Trading Policy; ü Banco Sofisa is bound by the Market Arbitration Chamber, pursuant to the Arbitration Clause included in its Bylaws.
RISK MANAGEMENT Banco Sofisa is guided by a set of internal and external standards and procedures that aim to ensure compliance with governing law and regulations, as well as with best market practices and the Bank’s internal policies. Risk management, which is carried out in a structured manner and through a continuously monitored process, encompasses the evaluation and control of any credit, market, liquidity and operational risks that could affect Banco Sofisa and its subsidiaries. Since 1995, Sofisa has an Audit Committee whose aim is to examine the internal and external audit activities and the effectiveness of the internal controls and compliance systems of the Bank. In 2007, the Audit Committee’s structure was adjusted to the current corporate governance standards adopted by the Bank.
PREVENTION AGAINST MONEY LAUNDERING The Bank adopts an adequate system for controlling and monitoring its funding and lending transactions, paying special attention to its registration and back-office activities, with the purpose of preventing transactions that could represent breaches of money laundering regulations, aware of its subsidiary responsibility to combat such transactions.
RELATIONSHIP WITH AUDITORS In compliance with CVM Rule 381 of January 14, 2003, we hereby inform that in 2010 the Bank’s independent auditors, Ernst & Young Terco Auditores Independentes, did not provide any services to Banco Sofisa other than external audit. The Bank’s policy on the hiring of independent audit services ensures that there are no conflicts of interests or loss of independence or objectivity.
More information concerning Banco Sofisa’s risk management practices can be found in Note 34 to the Financial Statements or on the Bank's Investor Relations website (www.sofisa.com.br/ri).
DECLARATION FROM THE MANAGEMENT Pursuant to CVM Instruction 480/09, the Company’s Executive Board declares that it has discussed, reviewed and agrees with the opinions expressed in the report of the independent auditors and the financial statements for the fiscal year ended December 31, 2010.
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The Management Report is not an integral part of these financial statements.
Summary of the Audit Committee’s Report
The Audit Committee of Banco Sofisa is ruled by its charter, available at the Website http://www.sofisa.com.br, and its main purpose is to reviewing, prior to their disclosure, the quality and integrity of the financial statements, monitoring and evaluating the internal and independent audits, as well as the quality and the effectiveness of its internal control systems. 2. The Managements of Banco Sofisa and its subsidiaries are liable for preparing and ensuring the excellence of these financial statements on a regulatory basis, regulating, maintaining and improving an effective and consistent internal control system, managing and monitoring risks and ensuring the compliance with the applicable rules. 3. Ernest Young Terco Auditores Independentes is the company liable for auditing the financial statements and expressing an opinion on the adequacy of these statements to the equity and financial position of Banco Sofisa, in all material respects and as on the related internal controls, in accordance with the accounting practices adopted in Brazil, as well as the Ombudsman services. 4. The Committee held meetings with internal and independent audits in order to take cognizance of their performance, the planning of their works, evaluating their execution and monitoring the implementation of advices on accounting and internal control improvements. By means of presentations, analysis of documents and answers to questions, this Committee assessed that works were fairly executed. 5. Due to works conducted by internal and independent audits and by the internal control area, as well as the Top Management’s attention, which requires continued improvements to the internal controls system, the Committee concluded that presently this system is suitable to the size of the organization, the business complexity and risk profile which shall be monitored and controlled by it.
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The Management Report is not an integral part of these financial statements.
6. Specifically referring to the procedures to draft the financial statements, the Committee held meetings with the areas in charge of works. Based on these meetings and on the independent auditor’s report, this Committee concluded that these statements were prepared with quality and integrity, according to the accounting practices adopted in Brazil and prevailing rules, fairly reflecting Sofisa's financial, equity and economic condition as of December 31, 2010.
São Paulo (SP), February 25, 2010.
Antenor Araken Caldas Farias
Geraldo José Gardenali
José Antonio Guarnieri
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The Management Report is not an integral part of these financial statements.
