#12022 REPORT AND FINANCIAL STATEMENTS Regional#22022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE LETTER FROM THE PRESIDENT Dear Shareholders: 2022 has been a dynamic year with great challenges for all levels of our organization, especially, due to adverse conditions globally and locally related to scenarios of serious drought that radically affected the agriculture and livestock sector and river transport, as well as periods of sustained increase of inflation with impact on the purchasing power of consumers and quick changes to the interest rates of the market, which made the process of economic recovery difficult after the COVID pandemic, impacting on our clients. Those facts, added up to the great challenge that has been the start of the historic process of merger by absorption of our Bank with Sudameris Bank S.A.E.C.A. The start of the referred process of merger has been a highly relevant milestone in the institutional life of Banco Regional and, in that regard, it has had the ample support of regular and preferred shareholders who, in the first special general meeting of shareholders held in the last month of 2022, backed the project of merger by absorption with Sudameris Bank, in the understanding that with that transaction, the largest financial institution of the country would be created with a strong presence in several economic sectors and the scope to increase the volume of businesses while diluting expenses and making large investments with more ease. Likewise, it should be noted that, throughout 2022, and alongside the development of the aforementioned large project, the corporate businesses of the Bank were retained with satisfactory results in the agricultural, livestock, industry and services segments and there were even important increases in the portfolios of SMEs and Individuals concurring with the optimization of technological platforms and service channels, as well as permanent support from each of our branches from around the country, which definitively made it possible to improve the diversification of the portfolio and the financial margins of the institution, according to the institutional strategic plans. However, obtaining a net profit at the end of the year was limited by the express establishment of allowances related to doubtful loans and the start of the process of merger that requires adjustments of the balance sheet that allow the new merged institution to start activities with solid grounds for the benefit of clients, depositors, founders and shareholders, among others. For the next months, we look at the coming challenges with optimism, as we will continue to bravely work for the largest strategic objectives aiming mainly at concluding the merger process in the best way possible, blending the strengths of both institutions for the benefit of all counterparts. Finally, I would like to highlight the great work of the human team of Banco Regional and the support of strategic allies who, throughout 2022, with lots of commitment, a high sense of responsibility and dedication, have allowed us to achieve the biggest objectives underlined for the year. On behalf of the Board, I thank the management team, the shareholders and our collaborators for their active support in the process to be relevant stakeholders for the development of our country. Many thanks, Diego Duarte Presidente Ejecutivo Regional 2#32022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE FIRST CHAPTER ECONOMIC AND FINANCIAL PERFORMANCE + + 3#42022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 1.1. MAIN MANAGEMENT INDICATORS AS OF DECEMBER 31 OF Exchange Rate (PYG per USD) 2018 5.961 2019 6.453 2020 6.900 2021 2022 % 22/21 6.886 7.346 Balance (in millions of guaranies) (A) Total Loans Financial Investments Total Assets Total Deposits 12.854.962 899.417 17.442.398 10.853.035 13.955.271 12.750.796 Paid-in Capital Shareholders' Equity 1.087.788 1.637.058 626.611 17.334.680 11.202.599 1.151.243 561.625 17.556.750 13.172.221 419.920 17.641.888 13.367.114 1,48% 917.841 17.112.756 118,58% -3,00% 11.503.395 12.315.841 11.843.434 -3,84% 1.151.243 1.081.243 1.084.665 0,32% 1.736.966 1.802.998 1.563.541 1.283.946 -17,88% Income Statement (in millions of guaranies) (B) Financial Margin 595.905 644.100 545.466 469.788 553.284 17,77% Net Commissions 119.180 119.209 106.329 103.734 121.522 17,15% Administrative Expenses 409.754 388.667 382.936 399.600 Net Income 138.092 156.900 72.396 4.278 409.470 -1.226 2,47% -128,67% Profitability and Efficiency (in %) (C) Return on Equity (ROE) 10,32% 10,99% 4,56% 0,70% -0,10% Return on Assets (ROA) 0,89% 1,00% 0,45% 0,06% -0,01% Efficiency (costs/income) 55,81% 49,01% 57,23% 64,30% 54,02% I Capital Management (in %) (D) Tier I 13,64% 12,70% 16,26% 12,76% Tier II 15,99% 12,11% 18,92% 13,67% 11,53% 13,67% Quality of Portfolio (E) Allowances (in millions of guaranies) Defaulting 60 days (%) Coverage of Allowances on Past-due Portfolio (%) 173.592 1,47% 146,01% 217.395 1,52% 339,81% 221.483 1,96% 258,57% 184.192 2,74% 160,68% 384.211 4,35% 134,39% 108,59% Liquidity Management (F) Funds of coverage of liquidity (in millions of guaranies) Credits on deposits (%) 2.921.577 118,45% 1.819.762 124,57% 3.800.735 110,84% 2.580.236 106,95% 2.309.395 112,87% -10,50% Structure and alternative channels (G) Number of Branches (1) ATMs Clients (2) 38 83 37 32 33 32 -3,03% 90 84 83 88 6,02% Number of Employees Facebook subscriptions Twitter subscriptions Instagram subscriptions 99.900 653 96.855 9.685 3.810 Regional Web/Regional Mobile subscriptions (3) Number of credit cards (plastics) 36.723 41.151 100.792 654 98.953 9.650 5.157 41.393 44.996 98.441 605 103.499 10.162 8.962 48.065 44.203 101.301 626 107.870 6,48% 108.054 10.161 620 113.829 -0,96% 5,34% 10.302 1,39% 13.664 17.599 28,80% 55.261 65.391 18,33% 44.652 47.790 7,03% (1) The total includes administrative offices. (2) It includes clients with passive accounts. (3) Regional Web: Homebanking; Regional Mobile: App for smartphones and phone banking. (A) The purpose of this group is to present in a summarized manner the evolution of the main items of the consolidated balance sheet, emphasizing the portfolios. (B) In this group, the main accounts that impact the income of the Institution are presented. (C) The purpose of these ratios is to show the profitability and efficiency of recent years. (D) These ratios show the bank's solvency and correct use of capital in recent years. (E) This group shows the leading indicators related to the risk management of the credit portfolio. (F) This group's purpose is to show liquidity's evolution in recent years. (G) This group shows the evolution of the Bank as to its structure and the increase of subscribers to alternative customer service channels. 4#52022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE ASSETS Evolution of total assets In millions of PYG 2022 2021 2020 2019 2018 17.112.756 FINANCIAL INVESTMENTS December 2022 In millions of PYG and thousands of USD INVESTMENTS IN GUARANIES 17.334.680 LOANS Evolution of the loan portfolio In millions of PYG 2022 17.641.888 2021 17.556.750 13.367.114 13.172.221 2020 12.750.796 2019 17.442.398 2018 12.854.962 INVESTMENTS IN DOLLARS 55.541 723.149 Securities 1.049 Títulos Valores Letters of Monetary Regulation Treasury Bonds 139.150 Private Bonds Total 917.841 Total 1.049 Consolidated financial investments in Guaranies 924.609 13.955.271 5#62022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE DEFAULTING > 60 DAYS AND COVERAGE OF ALLOWANCES ON PAST-DUE PORTFOLIO 146,01% DEPÓSITOS Evolution of the deposits portfolio In millions of PYG 339,81% 2022 4,35% 258,57% 2021 2,74% 11.843.434 2020 11.503.395 160,68% 1,96% 134,39% 1,47% 1,52% 2019 11.202.599 2018 2019 2020 2021 2022 2018 10.853.035 Defaulting > 60 Coverage of Allowances 12.315.841 6#72022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE SHAREHOLDERS' EQUITY Evolution of shareholders' equity In millions of PYG 2022 2021 2020 2019 2018 Paid-In Capital Reserves 1.283.946 1.563.541 NET INCOME Evolution of net income In millions of PYG 2022 -1.226 2021 4.278 1.802.998 2020 1.736.966 1.637.058 2019 2018 72.396 156.900 138.092 7#82022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE Loan Portfolio per Currency December - 2022 Local Currency 40,87% Deposits Portfolio per Modality December 2022 Term 47.38% Foreign Currency 59.13% Deposits Portfolio per Currency December 2022 Local Currency 45,01% Foreign Currency 54.99% Loan Portfolio per Economic Activity December 2022 1,81% 7,44% 10,21% 33,55% Demand 52.62% 23,69% 10,97% 12,33% Agribusiness Animal farming Industry Commerce Services ● Consumption Other sectors 8#92022 REPORT AND FINANCIAL STATEMENTS BANCO REGIONAL LETTER FROM THE PRESIDENT - ECONOMIC AND FINANCIAL PERFORMANCE 1.2. FINANCIAL STATEMENTS BALANCE SHEET AS OF DECEMBER 31, 2022 Presented in comparison with the year ended December 31, 2021 (Expressed in Guarani) ASSETS NOTE 31-12-2022 AVAILABLE Cash Central Bank of Paraguay Other financial institutions 2.947.084.001.676 c.3 259.597.421.492 2.478.477.273.640 Checks and other documents to be cleared 168.569.767.719 39.056.141.430 Accounts receivable for accrued financial income c.7 Allowances 1.393.400.790 (10.003.395) PUBLIC AND PRIVATE SECURITIES C.4 898.560.933.155 9 31-12-2021 3.799.196.219.471 406.404.450.111 2.476.039.317.836 863.203.325.644 53.142.676.185 407.943.708 (1.494.013) 320.010.615.787 PERFORMING LOANS FINANCIAL SECTOR C.6.1 Other financial institutions 246.043.547.441 239.297.314.174 359.994.492.099 351.225.165.098 Loans for overdrafts Debtors for financial products accrued 6.746.233.267 c.7 24.035.745 8.745.291.256 Allowances PERFORMING LOANS NON-FINANCIAL SECTOR C.6.2 Loans - Private Sector 11.683.667.770.114 11.403.585.304.065 Loans - Transitory measures issued by B.C.P. Deferred documentary credits receivable Operations to be settled Loans - Public Sector 195.112.829.230 231.739.855.314 25.962.783 138.418.704.599 (13.327.448.759) 164.248.486.024 11.784.271.673.450 11.494.716.966.765 184.297.735.893 199.824.153.129 40.891.271 168.084.264.420 (16.772.691.749) 139.475.803.622 (385.395.449.901) Suspended valuation gains Debtors for financial products accrued Allowances c.7 (436.135.923.142) OTHER RECEIVABLES C.6.4 549.290.934.747 426.617.811.795 NON-PERFORMING LOANS FINANCIAL C.6.3 221.765.022.274 154.380.287.214 Loans - Non-financial Sector 572.191.987.503 351.238.867.985 Loans - financial Sector Suspended valuation gains (14.224.526.697) Debtors for financial products accrued Allowances c.7 9.856.576.900 (346.059.015.432) 1.725.207.732 (11.707.418.762) 8.433.226.461 (195.309.596.202) INVESTMENTS Private Securities Assets acquired in credit recovery C.8 Other investments Fiduciary rights Suspended valuation gains Income on investments in the private sector c.7 Allowances FIXED ASSETS DEFERRED CHARGES TOTAL ASSETS The accompanying notes A to G form an integral part of these financial statements. C.9 C.10 464.911.448.345 232.672.831.477 296.997.019.041 4.774.855 186.185.059.959 (3.912.777.861) 3.220.835.380 (250.256.294.506) 586.577.786.717 231.630.688.124 394.789.001.356 4.475.763 175.751.457.088 (7.835.814.695) 3.757.715.306 (211.519.736.225) 97.074.042.171 102.955.226.376 4.358.116.169 107.884.103.548 17.112.755.816.092 17.641.888.216.457#102022 REPORT AND FINANCIAL STATEMENTS BANCO REGIONAL LETTER FROM THE PRESIDENT - ECONOMIC AND FINANCIAL PERFORMANCE BALANCE SHEET AS OF DECEMBER 31, 2022 Presented in comparison with the year ended December 31, 2021 (Expressed in Guarani) LIABILITIES NOTE 31-12-2022 FINANCIAL LIABILITIES - FINANCIAL SECTOR Deposits C.14, C.15.2B) c.15.1 b) 3.851.134.125.921 557.420.209.253 Deferred letters of credit correspondents Loans from financial institutions Pending operations for ATM compensations Transactions to be settled Creditors for accrued finance charges 10 31-12-2021 3.624.746.457.091 541.267.922.539 231.739.855.314 2.984.449.781.806 40.348.801.711 17.184.910 37.158.292.927 192.849.050.646 2.773.855.509.287 91.374.674.723 25.399.299.896 FINANCIAL LIABILITIES - NON - FINANCIAL SECTOR C.14, C.15.2B) Deposits Private Sector c.15.1 b) c.15.1 b) 11.919.805.446.951 9.540.366.068.677 1.649.553.504.546 Deposits Public Sector Other financial intermediation obligations Debentures and bonds issued in circulation Transactions to be settled Creditors for accrued finance charges OTHER LIABILITIES Tax creditors Social creditors Dividends payable Other liabilities ACCRUALS TOTAL LIABILITIES EQUITY Capital Non-capitalized contributions Equity adjustments c.11 19.879.931.494 651.069.775.900 25.138 58.936.141.196 C.17 36.423.964.660 11.224.700.496 NOTE b.5 773.285.457 24.425.978.707 21.445.892.255 15.828.809.429.787 31-12-2022 12.375.613.926.773 10.221.315.923.471 1.461.841.286.544 15.961.640.213 610.287.567.700 191.222.621 66.016.286.224 54.259.033.463 11.175.820.242 5.737.018.587 809.439.380 36.536.755.254 23.728.007.949 16.078.347.425.276 31-12-2021 1.084.664.800.000 60.000 45.626.908.534 154.881.098.793 1.081.242.800.000 60.000 45.626.908.534 432.392.983.652 Legal reserve Retained earnings c.12 e) Profit for the year - (Losses) / Gain (1.226.481.022) 4.278.038.995 TOTAL EQUITY TOTAL LIABILITIES AND EQUITY CONTINGENCY AND MEMORANDUM ACCOUNTS TOTAL CONTINGENCY ACCOUNTS TOTAL MEMORANDUM ACCOUNTS The accompanying notes A to G form an integral part of these financial statements. NOTE 1.283.946.386.305 17.112.755.816.092 31-12-2022 E E 1.328.183.652.192 18.918.693.109.643 1.563.540.791.181 17.641.888.216.457 31-12-2021 1.516.002.869.874 19.227.752.742.616#112022 REPORT AND FINANCIAL STATEMENTS BANCO REGIONAL - LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2022 Presented in comparison with the year ended December 31, 2021 (Expressed in Guarani) FINANCIAL INCOME From performing loans - Financial sector From performing loans - Non-financial sector From non-performing loans NOTE For income and differences in the price of public securities For valuation of financial assets and liabilities in foreign currency - Net f.2 FINANCIAL EXPENSES 31-12-2022 31-12-2021 1.072.658.540.594 55.408.212.251 916.022.578.670 21.144.195.856 77.716.904.390 2.366.649.427 963.877.694.592 31.375.818.213 868.877.638.792 20.016.124.447 43.608.113.140 (516.978.440.293) From financial liabilities - Financial sector From financial liabilities - Non-financial sector (172.773.418.427) (344.205.021.866) For valuation of financial assets and liabilities in foreign currency - Net f.2 FINANCIAL INCOME BEFORE ALLOWANCES ALLOWANCES Additions Reversals FINANCIAL PROFIT AFTER ALLOWANCES NET INCOME FROM SERVICES Income from services Expenses from services GROSS PROFIT OTHER OPERATING INCOME Foreing exchange and arbitrage operations - net Other income (495.081.939.928) (162.241.141.311) (331.843.119.730) (997.678.887) 555.680.100.301 468.795.754.664 (384.210.560.850) c.7 c.7 (857.342.334.130) 473.131.773.280 (184.192.455.442) (907.359.934.869) 723.167.479.427 171.469.539.451 284.603.299.222 121.521.588.262 181.088.980.748 (59.567.392.486) 103.733.682.228 160.084.482.111 (56.350.799.883) 292.991.127.713 388.336.981.450 87.209.285.005 35.421.159.402 55.387.322.035 35.856.305.181 51.788.125.603 19.531.016.854 OTHER OPERATING EXPENSES Staff remuneration and social contributions Overheads Depreciation of fixed assets (415.887.410.008) (221.969.265.426) (406.067.370.446) (210.267.638.271) (153.293.011.493) (156.283.058.622) c.9 (11.299.216.747) (16.828.566.640) Amortization of deferred charges (1.126.623.036) Others (23.281.293.548) (1.221.172.759) (16.682.693.102) For valuation of other liabilities and assets in foreign currency - Net f.2 (4.917.999.758) (4.784.241.052) NET OPERATING RESULT - (LOSSES) / PROFIT EXTRAORDINARY GAINS AND LOSSES Extraordinary earnings Extraordinary losses PRIOR YEAR ADJUSTMENTS Earnings Loses PROFIT FOR THE YEAR BEFORE INCOME TAX Income tax (LOSSES)/PROFIT FOR THE FINANCIAL YEAR The accompanying notes A to G form an integral part of these financial statements. D.3 (35.686.997.290) 37.656.933.039 35.152.377.246 40.657.569.357 (5.505.192.111) (23.504.895.386) 37.723.899.040 (61.228.794.426) 2.025.835.766 7.644.349.810 (5.618.514.044) (3.307.397.639) 189.444.847 (3.496.842.486) 1.491.215.722 10.844.640.014 f.4 (2.717.696.744) (6.566.601.019) (1.226.481.022) 4.278.038.995 11#122022 REPORT AND FINANCIAL STATEMENTS BANCO REGIONAL LETTER FROM THE PRESIDENT - ECONOMIC AND FINANCIAL PERFORMANCE STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2022 Presented in comparison with the year ended December 31, 2021 (Expressed in Guarani) ITEM Balances as of 31 December 2020 More (less): Transfer of profits for the previous financial year Constitution of legal reserve Redemption of preferred shares (Note d.4) Establishment of specific allowances required by the SIB. (Note C.20) Adjustments required by Resolution SB.SG N° 027/2020 Profit for the year - gain Balances as of 31 December 2021 More (less): Transfer of profits for the previous financial year Capitalization of Dividens from Preferred Shares Use of Legal Reserve Art. No. 28 Law 861/96 Constitution of legal reserve Profit for the year - losses 12 CAPITAL ORDINARY SHARES PREFERRED SHARES NON-CAPITALIZED EQUITY CONTRIBUTIONS ADJUSTMENTS LEGAL RESERVE RETAINED EARNINGS PROFIT / (LOSSES) FOR THE TOTAL YEAR 901.242.800.000 250.000.000.000 (70.000.000.000) 60.000 45.626.908.534 417.913.691.019 115.817.652.614 I 72.396.463.166 1.802.997.575.333 72.396.463.166 (72.396.463.166) 14.479.292.633 (14.479.292.633) 901.242.800.000 180.000.000.000 60.000 45.626.908.534 432.392.983.652 Balances as of 31 901.242.800.000 December 2022 3.422.000.000 183.422.000.000 The accompanying notes A to G form an integral part of these financial statements. (164.761.029.710) (8.973.793.437) (70.000.000.000) (164.761.029.710) (8.973.793.437) 4.278.038.995 4.278.038.995 4.278.038.995 1.563.540.791.181 4.278.038.995 (4.278.038.995) (3.422.000.000) (278.367.923.854) (278.367.923.854) 856.038.995 (856.038.995) (1.226.481.022) (1.226.481.022) 60.000 45.626.908.534 154.881.098.793 (1.226.481.022) 1.283.946.386.305#132022 REPORT AND FINANCIAL STATEMENTS BANCO REGIONAL - LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE STATEMENT OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2022 Presented in comparison with the year ended December 31, 2021 (Expressed in Guarani) CASH FLOW FROM OPERATING ACTIVITIES NOTE 31-12-2022 31-12-2021 (LOSSES)/PROFIT FOR THE YEAR (1.226.481.022) 4.278.038.995 PLUS EXPENSES THAT DO NOT INVOLVE CASH APPLICATIONS Depreciation of fixed assets c.9 Amortization of deferred charges Allowances c.7 11.299.216.747 1.126.623.036 857.342.334.130 16.828.566.640 1.221.172.759 Income tax provision f.4 Accrued interests unpaid Effect of the valuation of foreign currency accounts 2.717.696.744 96.094.434.123 2.551.350.331 907.359.934.869 6.566.601.019 Net value of disposal of fixed assets c.9 68.134.981 971.199.790.092 91.415.586.120 5.781.919.939 118.463.498 1.029.292.244.844 LESS INCOME NOT INVOLVING CASH RECEIPTS Capitalization of dividends from investments Reversal of allowances Uncollected accrued interests Net increase / (Decrease) in Loans Net increase / (Decrease) in Other receivables Net increase / (Decrease) in Financial liabilities Net increase / ( Decrease) in Other liabilities Net increase / ( Decrease) in Accruals Income tax paid NET CASH FLOW (USED)/GENERATED BY OPERATING ACTIVITIES CASH FLOW FROM INVESTMENT ACTIVITIES Net increase / (Decrease) in Public and Private Securities Net increase/ (Decrease) in investments Acquisition of Fixed assets Net increase / (Decrease) in Deferred charges Net cash flow applied to investing activities CASH FLOW FROM FINANCING ACTIVITIES Dividends paid in cash NET CASH FLOWS PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES Net (Decrease)/increase in cash Cash and cash equivalents at beginning of the year CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR The accompanying notes A to G form an integral part of these financial statements. (6.430.051.477) (11.922.100.000) c.7 (473.131.773.280) (723.167.479.427) (180.851.296.191) (157.922.096.238) (660.413.120.948) (893.011.675.665) 553.913.743.508 52.611.717.459 (952.118.968.712) (422.276.034.182) (165.375.494.987) 138.840.199.089 (200.708.763.846) (2.563.719.821) (30.567.398.320) (579.433.389.732) (971.052.256) 4.790.695.728 (444.991.686.608) (269.873.201.610) (304.433.078.434) (578.579.858.858) 159.730.442.125 c.9 2.001.452.124 (5.486.167.523) (174.441.928) (582.239.016.185) (76.905.498.916) (3.981.919.500) (308.953.426) 78.534.070.283 (852.112.217.795) (225.899.008.151) 3.799.196.219.471 4.025.095.227.622 2.947.084.001.676 3.799.196.219.471 13#142022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 14 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON DECEMBER 31, 2022 Presented in comparison with the year ended December 31, 2021 (Figures expressed in Guarani) A. CONSIDERATION BY THE SHAREHOLDERS MEETING The financial statements of Banco Regional S.A.E.C.A. (hereinafter referred to indistinctly as Banco Regional S.A.E.C.A. or "the Entity" or "the Bank") as of December 31, 2022, will be considered for approval by the Ordinary General Shareholders' Meeting on February 21, 2023, within the term established in the Company's Bylaws and Article 1079 of the Civil Code. The Bank's financial statements as of December 31, 2021, were approved by the Ordinary General Shareholders' Meeting held on April 28, 2022. B. BASIC INFORMATION REGARDING THE BANK b.1 Legal status The Banco Regional Sociedad Anónima Emisora de Capital Abierto began its activities under the name of Banco Regional S.A. de Inversión y Fomento, authorized by Executive Decree No. 4321 dated January 8, 1990, and by the Central Bank of Paraguay (hereinafter referred to interchangeably as the Central Bank of Paraguay or BCP) by Resolution No. 5, Minute No. 11 dated February 13, 1991. By Resolution No. 3, Minute No. 214 dated December 1, 1998, the Board of Directors of the Central Bank of Paraguay authorized Banco Regional S.A. de Inversión y Fomento to amend its Bylaws, as resolved by the Extraordinary General Meeting of April 24, 1998, to change its name to Banco Regional S.A. By Resolution No. 1, Minute No. 96 dated November 19, 2008, the Board of Directors of the Central Bank of Paraguay authorized Banco Regional S.A. to modify its Bylaws, as resolved by the Extraordinary General Shareholders' Meeting of September 30, 2008, to change its name to Banco Regional S.A.E.C.A. The modification was registered in the Public Registry on November 21, 2008, and in the National Securities Commission (CNV) on December 4, 2008 by Resolution No. 1156/08. On April 22, 2009, the purchase of all the shares of Banco ABN AMRO Paraguay S.A. was finalized with the purpose of integrating this institution into Banco Regional S.A.E.C.A. On September 3, 2009, the definitive merger agreement for the absorption of Banco ABN AMRO Paraguay S.A. was signed. On September 4, 2009, through the Extraordinary Shareholders' Meeting of Banco Regional S.A.E.C.A., the merger agreement for the absorption of these institutions was approved. By virtue of this process, Banco Regional S.A.E.C.A., as the absorbing company, is universally responsible for all the rights and obligations of the absorbed company. As of December 31, 2022, the Bank had 33 branches (34 branches at December 31,2021) including the head office. b.2 Basis for the preparation of the financial statements The financial statements are a free translation into English of those originally prepared in Spanish, expressed in local currency (Paraguayan Guaranies or Gs.) The financial statements have been prepared in accordance with the accounting standards, regulations and provisions established by the Central Bank of Paraguay, which comprise the legal accounting standards in effect in Paraguay for the presentation of the financial statements of financial entities regulated by the Central Bank of Paraguay. The model is based on a conventional historical cost basis, except for the treatment assigned to assets and liabilities in foreign currency, as explained in note c.1, and the balances of Fixed Assets existing as of December 31, 2019 as explained in note c.9; and does not fully recognize the effects of inflation on the Entity's equity and financial position, nor on the results of its operations and cash flows. Had a comprehensive price-level restatement of the financial statements been applied, differences could have arisen in the presentation of the Entity's equity and financial position, results of operations and cash flows as of December 31, 2022 and 2021 respectively.#152022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 15 According to the Consumer Price Index published by the Central Bank of Paraguay, accumulated inflation on December 31, 2022, and 2021, was 8.1% and 6.8%, respectively. In addition to the requirements of the Central Bank of Paraguay, the following relevant accounting policies have been used: • • To preparing the Statement of Cash Flows, Cash and Cash Equivalents net of the corresponding allowances are considered as cash. ⚫ comparative figures are presented. ⚫ the Statement of Changes in Shareholders' Equity is presented; and • additional disclosures are included in the notes to the financial statements. (i) Estimates: The preparation of these financial statements requires the Board of Directors and Management of the Entity to make certain estimates and assumptions that affect the balances of assets and liabilities, the exposure to contingencies and the recognition of income and expenses. Assets and liabilities are recognized in the financial statements when it is probable that future economic benefits will flow to or from the Entity and that the various items will have a cost or value that can be reliably measured. If, in the future, these estimates and assumptions, which are based on the judgment of the Board of Directors and Management at the date of these financial statements, are changed from the current circumstances, the original estimates and assumptions will be appropriately modified on the date that such changes occur. The main estimates related to the financial statements refer to provisions for doubtful assets and credit risks, depreciation of fixed assets, amortization of deferred charges and allowances to cover other contingencies, and possible legal proceedings initiated against the Entity. (ii) Comparative information: The financial statements as of December 31, 2022, and the supplementary information related are presented in a comparative manner with the corresponding statements and supplementary information for the year ended December 31, 2021. b.3 Foreign branches The Entity does not have any foreign branches. b.4 Participation in other companies The holdings in the capital of other companies as of December 31, 2022 and 2021 respectively, was as follow: COMPANY NAME December 31, 2022 Bancard S.A. - Paraguay Regional Casa de Bolsa S.A. Regional S.A. Seguros VISA INC USA SWIFT Total CONDITION INVESTMENT CURRENCY Affiliate Gs. Affiliate Gs. Affiliate Gs. Not Affiliate US$ Not Affiliate EUR NOMINAL VALUE % PARTICIPATION BOOK VALUE GS. 9.675.000.000 29.931.000.000 39.009.000.000 7,14% 99,99% 99,99% 1 Minority 19.800 Minority 10.482.846.968 29.931.000.000 55.408.940.883 7.801 111.035.560 95.933.831.212#162022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE COMPANY NAME December 31, 2021 Bancard S.A. - Paraguay Regional Casa de Bolsa S.A. Regional S.A. Seguros VISA INC USA SWIFT Total CONDITION Affiliate Affiliate Affiliate Not Affiliate Not Affiliate INVESTMENT CURRENCY NOMINAL VALUE % PARTICIPATION Gs. Gs. Gs. US$ EUR 9.675.000.000 27.559.000.000 39.009.000.000 7,14% 99,99% 99,99% 1 19.800 Minority Minority These investments are recorded in the investments item, under the permanent investments in private companies' account. See note c.8. b.5 Composition of capital and characteristics of shares The composition of the integrated capital as of December 31, 2022 and 2021 respectively, by share types, was structured as follow: As of December 31, 2022 BOOK VALUE GS. 16 10.482.846.968 27.559.000.000 55.408.940.883 7.574 111.035.560 93.561.830.985 SUBSCRIBED AND INTEGRATED COMMON SHARES TYPE AMOUNT NO. OF VOTES FOR EACH TYPE GUARANI Ordinary "Class A❞ Founder Ordinary "Class A" Ordinary Ordinary "Class B" Multiple 135.809 5 13.580.900.000 5.429.941 1 542.994.100.000 90.539 3.356.139 5 1 9.053.900.000 335.613.900.000 Ordinary "Class B" Ordinary Preferred Total 1.834.220 10.846.648 183.422.000.000 1.084.664.800.000#172022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT As of December 31, 2021 ECONOMIC AND FINANCIAL PERFORMANCE SUBSCRIBED AND INTEGRATED COMMON SHARES TYPE Ordinary "Class A" Founder Ordinary "Class A" Ordinary Ordinary "Class B" Multiple Ordinary "Class B" Ordinary Preferred Total NO. OF VOTES GUARANI AMOUNT FOR EACH TYPE 135.809 5 5.429.941 1 90.539 5 3.356.139 1 1.800.000 10.812.428 The Bank's shareholders composition, as of December 31, 2022 and 2021 respectively, was structured as follow: As of December 31, 2022 SHAREHOLDER Local minority shareholders Raatz Group Rabo Partnerships B.V. (*) Total As of December 31, 2021 SHAREHOLDER Local minority shareholders Raatz Group Rabo Partnerships B.V. (*) Total SHARES IN GS. 549.962.900.000 88.134.300.000 446.567.600.000 1.084.664.800.000 % PARTICIPATION 50,70% 8,13% 41,17% 100% 17 13.580.900.000 542.994.100.000 9.053.900.000 335.613.900.000 180.000.000.000 1.081.242.800.000 % OF VOTES 51,65% 9,95% 38,40% 100% COUNTRY Paraguay Paraguay Netherlands SHARES IN GS. 548.477.700.000 88.097.300.000 444.667.800.000 1.081.242.800.000 % PARTICIPATION 50,73% 8,15% % OF VOTES COUNTRY 51,65% 9,95% Paraguay Paraguay 41,13% 38,40% Netherlands 100% 100% (*) Wholly owned by Cooperative Rabobank U.A. of the Netherlands As described in note c.12 d), "Price-level restatement of capital", the current level of the Bank's integrated capital is above the legal minimum required by the Central Bank of Paraguay.#182022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE b.6 Management and Executive Board As of December 31, 2022, the Board of Directors and executive staff is made up as follows: Executive President: Vice-President: BOARD OF DIRECTORS Diego Duarte Schussmuller Cornelis J. Beijer General Manager: Organizational Development Manager: IT Manager: Principal Directors: Alternate Directors: Alfredo Raatz Erik Heyl Roland Wolff Ricardo Carmona Adrián Lorenzutti Erni Schlindwein Diego Castro Feijoo Oscar Godoy Leonardo Petta Titular Trustee: Alternate Trustee: Lourdes Müller Treasury manager: Legal Counsel Manager: Corporate Banking Manager: Financial Manager: Operations manager: Internal Audit Manager: Branch and Business Development Manager Compliance Manager: Risk manager: Risk Manager SME Banking and Personal Banking: Credit Risk Governance Manager: Manager of Regional Exclusive: MIS and Risk Models Manager: Corporate Banking Risk Manager: EXECUTIVE BOARD Laura Silvia Borsato Correspondent and Foreign Trade Transactional Banking Manager: Recovery and Restructuring Manager: Administrative Manager: Operational Risk and Fraud Prevention Manager: General Accountant: Titular Notary: Bettina Agüero Bradshaw Georgina Baumgarten Lavand Daniel Cibils Farres Marcos Dalla Fontana Walter Duarte Kallus Oscar Godoy Silvero Diana Lafeld Rieszotka Juan Carlos Meza Evaristo Enrique Escobar Diego Marcet Oviedo Daniel Van Det Richard Delvalle Medina Antonio Gimenez González Anahí Heisecke Mats Hernegard Per Ricardo Nowosad Gines Rafaela Oleinik Rosa Jorge Sienkawiec Szostak Fabio Sitzmann Hein Erica Werner Schmidt Esteban Rotela Maciel Leticia Pérez Domínguez 18#192022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE b.7 English translation of statutory financial statements These financial statements have been translated into English for the convenience of English-speaking readers. The financial statements are the English translation of those originally prepared by the Entity in Spanish, expressed in local currency (Guarani) and presented in accordance with accounting standards, regulations and instructions established by the Central Bank of Paraguay. The effects of the differences between these standards and the accounting principles generally accepted in the countries in which the financial statements are to be used, have not been quantified. Accordingly, the accompanying financial statements are not intended to present the financial position, results of operations, shareholders' equity or cash flows in accordance with accounting principles generally accepted in the countries of users of the financial statements, other than Paraguay. C. INFORMATION CONCERNING THE MAIN ASSETS AND LIABILITIES c.1 Valuation of foreign currency Assets and liabilities expressed in foreign currency are valued at the exchange rates in effect as of December 31, 2022, and 2021 respectively, provided by the exchange desk of the International Operations Department of the Central Bank of Paraguay on those dates, and do not differ significantly from the exchange rates in effect on the free market: US dollar Euro Yen Real Argentine Peso Pound sterling Swiss franc Swedish Krona Chinese Yuan Australian dollar Canadian dollar Currency December 31, 2022 December 31, 2021 (Guarani for each unit of foreign currency) 7.345,93 7.822,68 6.885,79 7.805,73 55,18 1.405,70 59,83 1.230,53 41,57 8.840,09 7.944,12 702,19 1.054,84 4.957,77 5.421,75 67,01 9.305,46 7.537,81 762,17 1.080,55 5.008,04 5.387,10 19 Exchange differences arising from fluctuations in exchange rates between the dates on which transactions are arranged and their settlement or valuation at the end of each financial year are recognized in profit or loss for each year, except as indicated in note f.1. c.2 Foreign currency position The position of changes as of December 31, 2022 and 2021 respectively, is as follows:#202022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 20 ITEM Total foreign currency assets Total liabilities in foreign currency Position Purchased / (Sold) in foreign currency DECEMBER 31, 2022 DECEMBER 31, 2021 AMOUNT ARBITRATED TO US$ EQUIVALENT AMOUNT IN GS. AMOUNT ARBITRATED TO US$ 1.302.645.006,80 (1.295.536.824,73) 9.569.139.035.006 (9.516.922.826.896) EQUIVALENT AMOUNT IN GS. 9.966.802.441.680 (9.994.631.691.367) 7.108.182,07 52.216.208.110 1.447.445.019,61 (1.451.486.567,47) (4.041.547,86) (27.829.249.687) As of December 31, 2022, and 2021, the foreign currency position did not exceed the position cap set by the Entity according to the note submitted to the Central Bank of Paraguay on January 3, 2013, in compliance with Resolution No. 25 Act No. 77 dated December 28, 2011, which establishes the free choice of the position rank according to the category established in the resolution that financial institutions choose for their net position in each year. This resolution was modified by Resolution N° 2 Act N° 34 dated May 13, 2019, which establishes that the net position adopted in the present day would by the definite position until a new resolution is published. Market risk management: Market risk is the probability that changes in market prices, for example, interest rates, foreign currency exchange rates, etc., will affect the equity and/or profits of the Entity depending on the positions taken in the financial market. The Bank controls market risk by monitoring the limits established in the Market Risk Policies approved by the Assets and Liabilities Committee and the Board of Directors c.3 Deposits in the Central Bank of Paraguay Deposits in the Central Bank of Paraguay as of December 31, 2022, and 2021 respectively, are as follows DESIGNATION December 31, 2022 Gs. Legal reserve - Guarani Legal reserve - Dollars Special reserve - Guarani Legal reserve - Dollars Current accounts - Guarani Current accounts - Dollars Current accounts - Euro Instant Payment System (SPI) Total Additionally see item a) in note c.12. c.4 Public and private securities 478.404.764.355 1.042.144.750.347 1.461.571.604 1.709.661.483 208.938.237.569 734.770.599.905 4.144.279.697 6.903.408.680 2.478.477.273.640 Public and private securities are stated at cost plus accrued interest receivable at the end of each year, which does not exceed their probable realizable value. December 31, 2021 Gs. 508.736.075.020 1.110.241.166.367 40.559.909 260.282.862 439.090.087.851 413.118.751.671 4.552.394.156 2.476.039.317.836#212022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT As of December 31, 2022 ECONOMIC AND FINANCIAL PERFORMANCE 21 AMOUNT IN GUARANI PUBLIC AND PRIVATE SECURITIES CURRENCY OF ISSUE AMOUNT IN CURRENCY OF ISSUE NOMINAL VALUE BOOK VALUE Treasury Bonds of the Republic of Paraguay (a) Monetary Regulation Bills Accrued interest Total As of December 31, 2021 Gs. Gs. Gs. 139.150.000.000 810.000.000.000 139.150.000.000 810.000.000.000 139.150.000.000 723.149.338.579 949.150.000.000 36.261.594.576 898.560.933.155 PUBLIC AND PRIVATE SECURITIES Treasury Bonds of the Republic of Paraguay (a) Monetary Regulation Bills Accrued interest Total AMOUNT IN GUARANI CURRENCY OF ISSUE AMOUNT IN CURRENCY OF ISSUE NOMINAL VALUE BOOK VALUE Gs. Gs. Gs. 139.150.000.000 200.000.000.000 139.150.000.000 200.000.000.000 339.150.000.000 139.150.000.000 179.592.840.888 1.267.774.899 320.010.615.787 (a) As of December 31, 2022, and 2021, the Bank has delivered Treasury Bonds for Gs. 20.000.000.000 in guarantees in favor of the BCP in compliance with the general regulations of the Paraguayan Payment System (SIPAP by its acronym in Spanish). c.5 Assets and liabilities with readjustment clauses Except for the loans obtained (liabilities) from the Financial Agency for Development (in Spanish "Agencia Financiera de Desarrollo" or AFD), the loans granted (assets) with the resources of the AFD, certain loans granted with its own resources and loans from abroad, which have contractual clauses for readjustments of the interest rates, there were no other assets or liabilities with readjustment clauses as of December 31, 2022, and 2021 respectively. These loans granted provide for annual rate adjustments according to the specific conditions included in the loan agreements. c.6 Loan portfolio Credit Risk Management: Credit risk is controlled by the Board of Directors and Management of the Entity, mainly through the evaluation and analysis of individual transactions, for which certain factors clearly defined in the Entity's credit policies are considered, such as: the demonstrated payment capacity and debt level of the debtor, the credit concentration of economic groups, individual credit granting limits, evaluation of economic sectors, preferred guarantees and working capital requirements, in accordance with market risks. Classification and valuation criteria:#222022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 22 The loan portfolio has been valued at its nominal value plus accrued interest at the end of the financial year, net of allowances, which have been calculated in accordance with the allowances of Board Resolution No. 1, Minute No. 60 of the Central Bank of Paraguay dated September 28, 2007, and its subsequent amendments and additions, to which effect: a) The debtors were segmented according to the following types: i) Large Debtors; ii) Medium and Small Debtors; iii) Individual consumer debtors or household loans and iv) microcredits. b) Debtors have been classified into 6 risk categories, based on default and/or the assessment and rating of the payment capacity of a debtor or a group of debtors composed of related persons, in respect of all their obligations. An amending regulation to Resolution No. 1/2007 requires that category 1 be broken down into three sub-categories for the purposes of calculating allowances (categories "1", "1.a" and "1.b"). c) Accrued interest on performing loans classified as category "1" and category "2" on a subjective basis has been recognized as income in full. The interest accrued and not collected at the closing date on non-performing loans and/or Performing loans classified in category "2" and above, which has been recognized as an income until they enter into arrears, has been recognized fully allowances for. See note f.1 d) The accrual of interest and recognition of valuation gains on non-performing loans and Performing loans classified in risk category "2" or higher is suspended as soon as they enter into arrears, and they are recognized as income upon collection, as mentioned in note f.1. e) Loans that are repayable are deemed to be overdue after 61 days of default on any of their instalments, and fixedterm or single-maturity loans are deemed to be overdue on the day following their maturity. f) The specific allowances required to cover possible losses that may arise from the non-recovery of the portfolio have been established in accordance with the criteria and parameters established by Central Bank of Paraguay Board Resolution No. 1, Minute No. 60 dated September 28, 2007, including its amendments. g) Generic allowances on the Loan portfolio have been recognized in accordance with the criteria and parameters established by Central Bank of Paraguay Board Resolution No. 1, Minute No. 60 dated September 28, 2007; and additional generic allowances defined by the Institution's Management and Board of Directors. h) Uncollectible loans that are removed from the assets, under the conditions laid down in the relevant BCP regulations, are recorded and disclosed in memorandum accounts. Transitory and exceptional measures authorized by the BCP In addition to the criteria mentioned above, the Central Bank of Paraguay exceptionally authorized the following measures: a) In the 2019 financial year, the Entity has considered the inclusion of certain customer operations under transitional measures to support the productive sector, according to the conditions established in Resolution No. 21, Minute No. 65 dated September 18, 2019, of the Board of Directors of the Central Bank of Paraguay. The resolution considers in an exceptional manner the impact on the micro, small, and medium agricultural producers who suffered verifiable losses derived from adverse effects of nature, as well as in particular those agricultural producers who suffered losses due to the fall in the prices of their products. In this sense, it allows the deferral of the charges generated by the allowances calculated on the balance of the portfolio that benefited from these transitional measures. These allowances will be gradually recognized in the statement of income within a period not exceeding 36 months. The amounts are disclosed as "Loans - Transitional exceptions issued by BCP" in note c.6.2. b) In 2020 and 2021, the Entity has considered carrying out certain operations and rescheduling of customers under exceptional measures to support sectors economically affected by the spread of the coronavirus (COVID-19), according to the conditions established in the following resolutions issued by the Board of Directors of the Central Bank of Paraguay: - Resolution No. 4, Minute No. 18 dated March 18, 2020. - Resolution N° 4, Minute N° 23 dated April 2, 2020, and its partial modification Resolution N° 1, Minute N° 35 - Resolution N° 12, Minute N° 18 dated October 29, 2020. - Resolution N° 1, Minute N° 17 dated March 25, 2021. The amounts of loans benefiting from the measures are disclosed as "Loans - Exceptional support measures issued by BCP" in note c.6.2.#232022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 23 The resolutions allow the deferral of the charges generated by the allowances calculated on the balance of the portfolio benefited by these exceptional measures, which will be gradually recognized in the statement of income as follows: - For the portfolio benefited under Resolution 4, N° Act 18 dated March 18, 2020 in a term not to exceed 36 months. Allowances will be released gradually and appropriate to the categories immediately below, for each 20% of principal amortization of the portfolio benefiting from the exceptional measure. - - For the portfolio benefited under Resolution No. 4, Minute No. 23 dated April 2, 2020, exonerates from the obligation to recognized allowances for a period of 18 months after the disbursement date for new loans granted from March 16 to June 30, 2020, and that meet the conditions set forth in the aforementioned Resolution. At the end of the exoneration period, the losses arising from the allowance's recognition may be deferred and gradually recognized for up to 60 months. - The portfolio benefited under Resolution No. 1, Minute No. 17 dated March 25, 2021, is exempted from the obligation to make allowances for a term not exceeding 24 months. Provisions will be released gradually and appropriate to the categories immediately below, for each 20% of principal amortization of the portfolio benefiting from the exceptional measure. c) In 2022 fiscal year, the entity has considered the inclusion of certain operations under transitory measures to support productive sectors related to agricultural and livestock activities affected by adverse weather conditions, according to the conditions established in Resolution No. 14, Minute No. 1 dated January 6, 2022, of the Board of Directors of the Central Bank of Paraguay. - – This measure is in force until September 30, 2022. - The losses arising from the allowance's recognition may be deferred and gradually recognized for up to 24 months. - Provisions will be released gradually and appropriate to the categories immediately below, for each 20% of principal amortization of the portfolio benefiting from the exceptional measure. c.6.1 Performing loans - Financial sector In accordance with the rules for the valuation of assets and credit risks, established by the Superintendence of Banks of the Central Bank of Paraguay, the performing loan portfolio from financial sector is classified by risk as follows: As of December 31, 2022 CATEGORY OF RISK BOOK BALANCE BEFORE ALLOWANCES (A) Gs. ELIGIBLE GUARANTEES FOR ALLOWANCES Gs. ALLOWANCES BOOK BALANCE AFTER ALLOWANCES MINIMUM % (b) ESTABLISHED (c) 1 Total 246.043.547.441 246.043.547.441 432.426.994.005 432.426.994.005 0% Gs. 246.043.547.441 246.043.547.441 As of December 31, 2021 CATEGORY OF RISK 1 Total BOOK BALANCE BEFORE ALLOWANCES (A) Gs. 359.994.492.099 359.994.492.099 ELIGIBLE GUARANTEES FOR ALLOWANCES Gs. 258.742.535.283 258.742.535.283 ALLOWANCES MINIMUM % (b) ESTABLISHED (c) 0% BOOK BALANCE AFTER ALLOWANCES Gs. 359.994.492.099 359.994.492.099#242022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE References: (a) Includes capital and accrued interest. (b) the allowance percentages and risk categories defined for the classification and provisioning of the loan portfolio are based on the criteria established for this purpose in Resolution No. 1, Minute No. 60 of the BCP Board of Directors dated September 28, 2007, and its subsequent amendments. (c) The allowances are recognized by also considering the contingent balances. For those debtors that do not have computable guarantees, the allowances are calculated on the total risk (monetary debt plus contingent liabilities). For the rest of the debtors, the allowances are calculated in two tranches, with the guarantees being calculated in the second tranche. c.6.2 Performing loans - non-financial sector The performing loan portfolio from non-financial sector is composed as follows: DECEMBER 31, 2022 ITEM Gs. Non-adjustable fixed-term loans Non-adjustable amortizing loans Loans - Transitional exceptions issued by the BCP Loans - Exceptional support measure issued by the BCP Loans for overdrafts Deferred documentary credits receivable Credit card receivables Loans with resources administered by AFD Discounted documents Discounted deferred checks Purchase of portfolio Operations to be settled Loans Public sector Debtors for financial products accrued (-) Suspended valuation gain (-) Allowances TOTAL 2.372.456.223.615 6.770.169.989.259 195.112.829.230 750.367.321.758 51.336.775.669 231.739.855.314 233.416.261.164 875.682.368.318 71.971.707.105 207.001.825.583 71.182.831.594 25.962.783 138.418.704.599 164.248.486.024 (13.327.448.759) (436.135.923.142) 11.683.667.770.114 24 DECEMBER 31, 2021 Gs. 2.719.218.731.432 6.024.637.214.902 184.297.735.893 1.390.308.151.262 48.213.316.011 199.824.153.129 212.750.165.201 817.825.304.741 43.452.133.198 154.209.653.676 84.102.296.342 40.891.271 168.084.264.420 139.475.803.622 (16.772.691.749) (385.395.449.901) 11.784.271.673.450 As of December 31, 2022, and 2021, the Entity has pledged as collateral for loan agreements, credit card portfolio "Affinity of the Mastercard Classic brand" up to the amount of Gs. 17.579.935.763 in favor of Bancard S.A.; in order to guarantee operations resulting from user transactions at ATM's or POSS of the Infonet Network. See note c.12.g.#252022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE In accordance with the accounting standards, for the valuation of assets and credit risks, established by the Superintendence of Banks of the Central Bank of Paraguay, the performing loan portfolio from non- financial sector is classified by risk as follows: As of December 31, 2022 25 CATEGORY OF RISK BOOK BALANCE BEFORE ALLOWANCES (a) Gs. ELIGIBLE GUARANTEES FOR ALLOWANCES ALLOWANCES Gs. MINIMUM % (b) ESTABLISHED (d)(e) Gs. BOOK BALANCE AFTER ALLOWANCES Gs. 1 1a 1b 10.575.907.558.204 4.956.183.456.121 0% (3.634.110.819) 10.572.273.447.385 272.351.908.800 157.789.824.595 0,5% (1.490.340.369) 270.861.568.431 12 257.068.236.115 187.583.974.172 1,5% (2.442.628.433) 254.625.607.682 299.937.401.147 201.862.103.179 5% (9.780.466.981) 290.156.934.166 3 221.406.955.582 96.937.551.906 25% (41.915.892.046) 179.491.063.536 4 199.238.930.384 45.201.074.956 50% (84.699.877.028) 114.539.053.356 5 140.801.077.598 6 153.091.625.426 52.722.332.436 25.611.567.711 75% 100% (71.981.142.970) (121.227.377.806) 68.819.934.628 Generic Allowances (c) Total As of December 31, 2021 12.119.803.693.256 5.723.891.885.076 (98.964.086.690) (436.135.923.142) 31.864.247.620 (98.964.086.690) 11.683.667.770.114 CATEGORY OF RISK BOOK BALANCE BEFORE ALLOWANCES (a) Gs. ELIGIBLE GUARANTEES FOR ALLOWANCES ALLOWANCES Gs. MINIMUM % (b) ESTABLISHED (d)(e) Gs. 1 10.219.173.353.387 4.684.548.447.059 0% 1a 222.093.472.976 64.497.578.062 0,5% (1.231.725.661) (996.689.029) BOOK BALANCE AFTER ALLOWANCES Gs. 10.217.941.627.726 221.096.783.947 1b 245.987.669.746 176.565.542.583 1,5% (2.347.002.104) 243.640.667.642 2 760.475.819.083 301.842.904.610 5% (27.717.327.594) 732.758.491.489 34 307.330.811.949 120.810.994.081 25% (62.585.532.995) 244.745.278.954 170.151.265.763 52.694.963.094 50% (64.430.200.420) 105.721.065.343 5 29.443.993.898 13.031.427.389 75% (14.321.402.029) 15.122.591.869 6 215.010.736.549 57.226.035.128 100% (134.016.727.107) 80.994.009.442 Generic Allowances (c) (77.748.842.962) (77.748.842.962) Total 12.169.667.123.351 5.471.217.892.006 (385.395.449.901) 11.784.271.673.450#262022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 26 References: (a) Includes capital and interest accrued (net of suspended valuation gains); (b) The allowance percentages and risk categories defined for the classification and the provisioning of the loan portfolio are based on the criteria established for this purpose in Resolution No. 1, Minute No. 60 of the Board of Directors of the BCP dated September 28, 2007, and its subsequent amendments. (c) generic allowances established by the Entity in accordance with the requirements of Resolution 1/2007 of the Central Bank of Paraguay, and additional generic allowances defined by Management and the Board of Directors of the Bank. (d) The allowances are recognized by also considering the contingent balances. For those debtors that do not have computable guarantees, the allowances are calculated on the total risk (monetary debt plus con- tingent liabilities). For the rest of the debtors, the allowances are calculated in two tranches, with the guarantees being calculated in the second tranche. (e) contains portfolio allowances under transitory measures and exceptional measures as of December 31, 2022, and 2021 respectively, in the amount of Gs. 114.846.137.482 and Gs. 150.667.916.006, respectively. c.6.3 Non-performing loans The non-performing loan portfolio was composed as follows: Overdue receivables ITEM Undergoing proceeding Non-performing loans Loans for overdrafts - Financial sector Accrued interest (-) Suspended valuation gain (-) Allowances TOTAL DECEMBER 31, 2022 Gs. 68.670.358.469 122.338.989.153 381.182.639.881 9.856.576.900 (14.224.526.697) (346.059.015.432) 221.765.022.274 DECEMBER 31, 2021 Gs. 23.517.383.314 54.457.711.747 273.263.772.924 1.725.207.732 8.433.226.461 (11.707.418.762) (195.309.596.202) 154.380.287.214#272022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE In accordance with the rules for the valuation of assets and credit risks established by the Superintendence of Banks of the Central Bank of Paraguay, the Entity's portfolio of overdue loans is classified by risk as follows. As of December 31, 2022 27 CATEGORY OF RISK BOOK BALANCE BEFORE ALLOWANCES (a) Gs. ELIGIBLE GUARANTEES FOR ALLOWANCES Gs. ALLOWANCES MINIMUM % (b) ESTABLISHED (c) Gs. BOOK BALANCE AFTER ALLOWANCES Gs. 1b 1.296.192.555 91.389.406 1,5% (42.798.787) 1.253.393.768 2 3 4 5 6 8.192.496.515 8.660.543.423 5% (1.532.823.126) 6.659.673.389 66.091.613.327 7.220.347.700 25% (16.497.479.005) 49.594.134.322 109.913.749.772 47.944.601.479 50% (39.224.983.116) 70.688.766.656 126.371.060.546 10.148.022.861 75% (89.016.858.076) 37.354.202.470 255.958.924.991 48.727.525.808 100% (199.744.073.322) 56.214.851.669 567.824.037.706 122.792.430.677 (346.059.015.432) 221.765.022.274 Total As of December 31, 2021 CATEGORY OF RISK BOOK BALANCE BEFORE ALLOWANCES (a) Gs. 1b 2 34 4 5 6 3.655.267.259 1.285.263.726 32.121.592.143 29.947.914.490 94.908.063.277 187.771.782.521 349.689.883.416 ELIGIBLE GUARANTEES FOR ALLOWANCES Gs. ALLOWANCES BOOK BALANCE MINIMUM % (b) ESTABLISHED (c) Gs. AFTER ALLOWANCES Gs. 2.560.650.000 4.391.882.873 1,5% (260.576.019) 5% (897.286.805) 19.603.307.830 25% (6.073.288.710) 3.394.691.240 387.976.921 26.048.303.433 14.607.687.023 50% (10.182.990.769) 19.764.923.721 6.629.394.114 75% (57.107.485.195) 37.800.578.082 58.096.434.691 100% (120.787.968.704) 66.983.813.817 105.889.356.531 (195.309.596.202) 154.380.287.214 Total References: (a) Includes capital and interest accrued (net of suspended valuation gains), (b) The allowance percentages and risk categories defined for the classification and provisioning of the loan portfolio are based on the criteria established for this purpose in Resolution No. 1, Minute No. 60 of the Board of Directors of the Central Bank of Paraguay dated September 28, 2007, and its subsequent amendments; and (c) The allowances are constituted by also considering the contingent balances. For those debtors that do not have computable guarantees, the allowance is calculated on the total risk (monetary debt plus contingent liabilities). For the rest of the debtors, the allowance is calculated in two tranches, with the guarantees being calculated in the second tranche.#282022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE c.6.4 Other receivables Its composition as of December 31, 2022 and 2021 respectively, is as follows: 28 ITEM Prepaid expenses Charges for loans obtained abroad Advance payment of income taxes (IRE) (*) Advances for the purchase of goods and services Legal expenses to be recovered Tax credit certificates Value Added Tax - Tax credit Compensation for insurance claims Accrued income not received Advances to credit card processing companies Others Receivables from sale of goods in installments Non-accrued earnings Expenses to be recovered (Suspended valuation gains) Allowances (Note c.7) Total DECEMBER 31, 2022 Gs. 2.143.502.900 7.643.650.056 36.233.302.157 13.415.223.638 22.735.018.511 9.845.425.195 5.957.444.728 6.370.520.608 1.398.726.037 2.760.000.000 16.475.340.351 514.363.654.106 (34.394.506.700) 4.924.437.292 (26.292.046.294) (34.288.757.838) 549.290.934.747 (*) Provision for income taxes included in Liabilities under "Accruals" as of December 31, 2022, and 2021, amount to Gs. 2.717.696.744 and Gs. 6.566.601.019, respectively. c.7 Allowances for direct and contingent risks DECEMBER 31, 2021 Gs. 2.024.243.571 10.161.848.256 8.334.720.327 12.822.802.188 18.209.441.297 186.020.321 4.764.304.548 3.904.614.517 3.010.000.000 17.406.114.107 399.845.735.390 (23.291.105.543) 3.290.934.146 (17.753.375.721) (16.298.485.609) 426.617.811.795 The allowances for doubtful loans and other assets are determined at the end of each financial year based on the study of the portfolio carried out to determine the non-recoverable portion thereof and considering the provisions for each type of credit risk in Central Bank of Paraguay Board Resolution No. 1, Minute No. 60 dated September 28, 2007, and its subsequent amendments and/or extensions. Periodically, the institution's Board of Directors and management review and analyze the loan portfolio to adjust the allowances for doubtful accounts, in accordance with the loan valuation standards established by the Superintendence of Banks of the Central Bank of Paraguay and with the Entity's own criteria and policies. Allowances have been made to sufficiently cover possible losses on direct and contingent risks, in accordance with the Board of Directors' and Management's criteria and with the requirements of Resolution No. 1 of the Board of Directors of the Central Bank of Paraguay, Minute No. 60 dated September 28, 2007, and its subsequent amendments and applications.#292022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE The movement recorded during the year ended December 31, 2022, and 2021, in the allowance accounts is summarized as follows: As of December 31, 2022 29 (90.513.482) (586.967.019) BALANCE AT THE BEGINNING OF ITEM THE FINANCIAL YEAR Gs. ADDITIONS (*)(#) Gs. ALLOWANCES Gs. APPLICATION OF WITHDRAWAL OF ALLOWANCES Gs. RECLASSIFICATIONS /ADJUSTMENTS (**) Gs. UTILIZATION OF LEGAL RESERVE VALUATION VARIATION IN (***)(#) Gs. FOREIGN CURRENCIES Gs. Available Performing loans - (1.494.013) 81.891.576 586.748.324 112.524 218.695 BALANCES AT YEAR-END Gs. (10.003.395) Financial sector Performing loans - Non-financial sector Other receivables Non-performing (385.395.449.901) (16.298.485.609) (195.309.596.202) (278.018.993.423) 1.735.408.542 116.718.874.276 397.074.897.279 (278.367.923.854) (9.882.736.061) (436.135.923.142) (24.194.349.574) (556.410.270.830) 298.719.152 174.946.038.793 6.334.320.747 301.277.952.879 (61.209.230.249) (428.962.554) (9.353.909.823) (34.288.757.838) (346.059.015.432) Loans Investments Total (211.519.736.225) (808.524.761.950) (196.893.681.123) (1.056.194.775.451) 148.184.668.095 325.164.834.582 48.131.985.478 473.131.773.280 (31.722.313.700) 304.143.353.330 (278.367.923.854) (250.256.294.506) (1.066.749.994.313) (6.437.217.031) (26.102.494.250) (*) As of December 31, 2022, the Bank has amortized Gs. 198.852.441.321 of allowances corresponding to operations under Transitional exceptions and Exceptional support measure. See note c.10. (**) As of December 31, 2022, the Bank has made reclassifications of specific allowances - recognition of specific allowances to Gs. 147.367.331.458 on operations benefiting from the Exceptional support measure authorized by the Central Bank of Paraguay, to be recognized gradually in results See note c.10. – reclassification of specific allowances for Gs. 31.722.313.700 corresponding to the constitution of a trust portfolio. See note c.8.d. (***) According to Act N° 104, Law 861/96, the Directory of the Bank through directory Act N° 23 dated November 29, 2022, resolve to perfom necesary adjustments to the risk portfolio provitioning aditional losses for bad credits in concordance with current regulations. The additional allowance was covered by the Legal Reserve in concordance with actual banking regulations. The application was as follows: - Allowances for bad credtis under Transitional and Exceptional Measures amounting Gs. 115.943.756.967 - Allowances bad credits for specific clients amounting Gs. 162.424.166.887. See note c.12.c. (#) The process was carried out according to the request of the Superintendency of Banks to review and update the real situation of the credits portfolio in orden to purge it. It was an important request in the framework of fusion processes approved by Extraordinary General Shareholders' Meeting held on December 16, 2022.#302022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE As of December 31, 2021 30 ITEM BALANCE AT THE BEGINNING OF THE FINANCIAL YEAR Gs. ADDITIONS (*) Gs. APPLICATION OF ALLOWANCES Gs. WITHDRAWAL OF VALUATION VARIATION IN ALLOWANCES Gs. RECLASSIFICATIONS (**) FOREIGN CURRENCIES Gs. BALANCES AT YEAR-END Gs. Available (348.411.894) (426.817.003) Performing loans - Financial sector Performing loans - Non-financial sector (1.007.051.425) (587.426.072) 774.962.101 1.596.043.149 (1.227.217) (1.494.013) (1.565.652) Other receivables Non-performing Loans Investments Total (512.268.602.251) (20.336.152.921) (131.293.380.581) (95.425.435.078) (760.679.034.150) (429.660.999.886) 5.560.140.379 572.731.657.958 (22.841.731.911) 1.084.085.810 (385.395.449.901) (19.150.873.170) (474.718.213.082) (82.931.972.356) (1.007.476.301.569) 4.748.478.839 163.829.282.363 8.299.180.774 182.437.082.355 18.662.788.028 55.288.764.450 74.113.263.741 723.167.479.427 194.495.913.172 (115.765.319.736) 55.888.861.525 (222.726.385) (2.911.962.524) 190.546.430 (1.862.849.538) (16.298.485.609) (195.309.596.202) (211.519.736.225) (808.524.761.950) (*) As of December 31, 2021, the Bank has amortized Gs.100.116.366.700 of allowances corresponding to operations under Transitional exceptions and Exceptional support measure. See note c.10 (**) As of December 31, 2021, the Bank had made the following registration in the allowance accounts: - recognition of specific allowances to Gs. 164.761.029.710 charged to retained earnings. See note C.20 - recognition of specific allowances to Gs. 139.550.424.973 on operations benefiting from the Exceptional support measure authorized by the Central Bank of Paraguay, to be recognized gradually in results over a period not exceeding 24 months. See note c.10. - reclassification of specific allowances for Gs. 115.765.319.736 corresponding to the establishment of a trust. See note c. 8.d. c.8 Investments The investments item includes: a. Assets acquired in credit recovery: These assets are valued at the lower of the following three values: appraisal value, adjudication value and balance of the debt immediately prior to adjudication, in accordance with the provisions of the Central Bank of Paraguay. Additionally, for assets that exceed the terms established by the Central Bank of Paraguay for their holding, allowances are made in accordance with the terms of Resolution No. 1, Minute No. 60 dated September 28, 2007 of the Board of Directors of the Central Bank of Paraguay and its subsequent amendments, after three years of holding the assets are covered at 100%, with the exception of assets in the agricultural sector and movable and immovable assets awarded or received in payment within the period between January 1, 2018 and December 31, 2020 included, reach 100% allowance coverage after four years of holding, as established in Resolution No. 7, Minute No. 4 dated January 18, 2018 and Resolution No. 10, Minute No. 17 dated March 16, 2020 of the Board of Directors of the Central Bank of Paraguay, respectively.#312022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 31 b. Permanent investments: Permanent investments in equity investments in private companies (not quoted), which have been valued at cost plus capitalized dividends, which does not exceed their estimated realizable value. c. Private fixed-income securities: These are valued at the lower of either the cost-plus accrued interest receivable or their estimated realizable value, taking into consideration the criteria for the valuation of short, medium and long-term financial investments established in Resolution No. 1, Minute 60 dated September 28, 2007 of the Board of Directors of the Central Bank of Paraguay and its subsequent amendments. d. Fiduciary Rights: The trust is one of the fiduciary business modalities regulated by Law No. 921/96, by virtue of which a person called "Settlor" delivers to another person called "Trustee", one or more specified assets, transferring the ownership of such assets to the latter for the purpose of managing or disposing of them and using them for a specific purpose, either for the benefit of the former or of a third party, called “Beneficiary". Any kind of property or right, the delivery of which is not prohibited by law, may be the subject of a trust. In the trust, the transfer of the ownership of the trust property gives rise to the formation of an "Autonomous Estate", which is assigned to the fulfillment of the purpose indicated by the "Settlor" in the constitutive act. Article 48 sub. b) of Resolution No. 12, Minute No. 9 of the Central Bank of Paraguay of February 15, 2011, regulates the possibility of setting up trusts for the administration of portfolios belonging to financial entities that hold portfolios of categories 4, 5 and 6, provided that the Trustee has the necessary capacity to follow the process of rating the debtors' assets, in accordance with the rules of the Central Bank of Paraguay on the classification of asset risks. The Autonomous Estate of the Portfolio Management Trust was constituted with the transfer of ownership of a Category 6 Loan Portfolio owned by Banco Regional SAECA, which is instrumented through binding documents according to the nature or type of banking operation, to the trustee entity Visión Banco SAECA. e. Other investments: Corresponds to works of art that are valued at acquisition cost, which does not exceed their recoverable value. The composition of investments as of December 31, 2022 and 2021 respectively, is as follows: As of December 31, 2022 ITEM BOOK BALANCE BEFORE ALLOWANCES Gs. ALLOWANCES Gs. (NOTE c.7) BOOK BALANCE NET OF ALLOWANCES Gs. 296.997.019.041 184.715.126.592 (96.333.726.171) (153.922.568.335) 95.933.831.492 66.762.999.985 1.125.000.000 200.663.292.870 30.792.558.257 95.933.831.492 66.762.999.985 1.125.000.000 Assets received in recovery of receivables Fiduciary rights Permanent investments in private companies (note b.4) Permanent investments - Bonds of Tape Pora SA Permanent investments - Subordinated bonds Investments in fixed-income securities issued by the private sector Income on investments in the private sector Other investments Total 68.851.000.000 777.990.886 4.774.855 715.167.742.851 (250.256.294.506) 68.851.000.000 777.990.886 4.774.855 464.911.448.345#322022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE ALLOWANCES Gs. (NOTE c.7) 394.789.001.356 170.889.684.729 (77.581.376.908) (133.938.359.317) 93.561.830.985 As of December 31, 2021 ITEM Assets received in recovery of receivables Fiduciary rights Permanent investments in private companies (note b.4) Permanent investments - Bonds of Tape Pora SA Permanent investments - Subordinated bonds Investments in fixed-income securities issued by the private sector Income on investments in the private sector Other investments Total BOOK BALANCE BEFORE ALLOWANCES Gs. 68.272.857.139 2.250.000.000 67.546.000.000 783.672.970 4.475.763 798.097.522.942 c.9 Fixed Assets II (211.519.736.225) 32 BOOK BALANCE NET OF ALLOWANCES Gs. 317.207.624.448 36.951.325.412 93.561.830.985 68.272.857.139 2.250.000.000 67.546.000.000 783.672.970 4.475.763 586.577.786.717 The initial recognition of these assets corresponds to the acquisition cost. Subsequent valuation of these assets is presented net of accumulated depreciation and, if applicable, net of impairment. Until December 31, 2019, Fixed Assets are valued at revalued cost, in accordance with the Consumer Price Indicator (CPI, known by its Spanish acronym IPC) variation, minus accumulated depreciation. The net amount of the revaluation offsetting entry is shown in the “Adjustments to equity” account in shareholders' equity. As of financial year 2020, the revaluation of Fixed Assets will only be mandatory when the CPI variation exceeds 20% accumulated since the financial year in which the last revaluation was made. The cost of improvements or additions are capitalized, while maintenance and repair expenses that do not increase the value of the assets or their service life are charged to income in the year in which they are incurred. Depreciations are calculated starting from the month following the incorporation into the Institution's Assets, through monthly charges to results based on the linear system, in the estimated years of service life. The residual value of property, plant and equipment is determined based on Decree No. 3182/2019, which does not exceed its recoverable value at year-end. The composition of the fixed assets as of December 31, 2022 and 2021 respectively, is as follows:#332022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE Bank Owned Properties-Land ORIGINAL VALUE BALANCE AT THE BEGINNING OF ITEM THE FINANCIAL YEAR ADDITIONS Gs. WITHDRAWALS Gs. BALANCE AT YEAR-END Gs. Gs. Properties - Buildings Furniture and office supplies Computer equipment Safe deposit boxes and treasury Transport equipment Total as of December 31, 2022 Total as of December 31, 2021 ITEM 14.928.043.110 87.168.301.595 46.102.537.169 108.999.733.708 2.146.766.948 2.469.603.093 261.814.985.623 259.827.439.287 BALANCE AT THE BEGINNING OF THE FINANCIAL YEAR Gs. 366.226.773 5.119.940.750 5.486.167.523 3.981.919.500 33 14.928.043.110 87.168.301.595 (736.038.000) 45.732.725.942 (894.107.030) 113.225.567.428 (60.172.400) 2.086.594.548 2.469.603.093 (1.690.317.430) (1.994.373.165) 265.610.835.716 261.814.985.622 DEPRECIATIONS ADDITIONS Gs. WITHDRAWALS Gs. ACCUMULATED AT YEAR-END Gs. NET INCOME FOR THE YEAR Gs. Bank Owned Properties - Land Properties - Buildings Furniture and office supplies (20.534.506.355) (36.806.882.422) Computer equipment (97.614.948.262) (1.743.666.392) (2.145.818.491) (7.308.354.564) Safe deposit boxes and treasury Transport equipment (1.929.115.770) (1.974.306.438) Total as of December 31, 2022 Total as of December 31, 2021 (158.859.759.247) (143.907.102.273) (36.182.894) (65.194.406) (11.299.216.747) (16.828.566.640) 671.898.570 890.501.770 59.782.109 (22.278.172.747) (38.280.802.343) 14.928.043.110 64.890.128.848 7.451.923.599 (104.032.801.056) (1.905.516.555) 9.192.766.372 1.622.182.449 1.875.909.667 (2.039.500.844) (168.536.793.545) (158.859.759.246) 181.077.993 430.102.249 97.074.042.171 102.955.226.376 According to banking legislation, financial institutions operating in Paraguay are prohibited from pledging fixed assets as security, except for those affected in support of financial leasing operations and to the Central Bank of Paraguay. Banking legislation sets a limit for investment in fixed assets of 50% of effective equity. The accounting balance of the Bank's fixed assets as of December 31, 2022, is within the established limit.#342022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE c.10 Deferred charges The composition of the item as of December 31, 2022 and 2021 respectively, is as follows: ITEM NET BALANCE AT THE BEGINNING OF THE FINANCIAL YEAR Gs. As of December 31, 2022 Leasehold improvements and installations (a) Office supplies and others Intangible assets Transitional measures for the INCREASES/ (DECREASES) Gs. AMORTIZATION FOR THE YEAR Gs. VARIATION IN VALUATION IN FOREIGN CURRENCIES NET BALANCE AT END OF FINANCIAL YEAR Gs. 2.226.700.320 2.985.375.534 (1.126.623.036) 2.876.970.884 98.221.423 (2.604.307.533) (98.221.423) 34 1.100.077.284 3.258.038.885 agricultural sector (2019) and exceptional measures (2020 and 102.573.806.271 93.590.798.837 2.687.836.213 (198.852.441.321) 2021) for Covid’19 issued by the BCP (b) Total 107.884.103.548 96.467.769.721 (202.681.593.313) 2.687.836.213 4.358.116.169 As of December 31, 2021 Leasehold improvements and 3.447.873.059 (1.221.172.739) 2.226.700.320 installations (a) Office supplies and others 2.676.422.128 98.221.423 2.559.683.113 (2.250.729.707) 2.985.375.534 98.221.423 Intangible assets Transitional measures for the agricultural sector (2019) and exceptional measures (2020) for Covid'19 issued by the BCP (b) Total 241.383.990.176 247.606.506.786 (36.012.586.053) (33.452.902.940) (100.116.366.700 (2.681.231.152) 102.573.806.271 (103.588.269.146) (2.681.231.152) 107.884.103.548 (a) The Bank amortizes improvements and installations in leased properties on a linear basis considering a service life of 5 years. (b) See note c.6 (Transitory and exceptional measures authorized by the BCP). c.11 Debentures and bonds issued in circulation Issued in the local market The item "Debentures and bonds issued in circulation" included in the items "Financial Liabilities - Non-financial sector" of the statement of financial position includes subordinated bonds, financial bonds whose balance and detail of issuances as of December 31, 2022 and 2021 respectively, are as follows:#352022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 35 a) Subordinated bonds BCP AUTHORIZATION CURRENCY OF ISSUE AMOUNT OF ISSUE MATURITY DATE CURRENCY OF ORIGIN RESOLUTION NUMBER 00027/2016 US$ 10.000.000,00 2555 days 00027/2016 00112/2019 US$ 8.630.000,00 2555 days US$ 10.000.000,00 1827 days 10.000.000,00 8.630.000,00 10.000.000,00 BALANCE DUE AS OF DECEMBER 31, 2022 73.459.300.000 BALANCE DUE AS OF DECEMBER 31, 2021 68.857.900.000 63.395.375.900 59.424.367.700 73.459.300.000 68.857.900.000 00112/2019 00112/2019 00112/2019 US$ 5.000.000,00 1826 days 5.000.000,00 36.729.650.000 34.428.950.000 US$ 8.000.000,00 2191 days 8.000.000,00 58.767.440.000 55.086.320.000 Total US$ Total equivalent in Gs. US$ (*) 2.000.000,00 43.630.000,00 2191 days 2.000.000,00 43.630.000,00 14.691.860.000 13.771.580.000 320.502.925.900 300.427.017.700 (*) By Resolutions SB. SG. No. 00027/2016 and 00112/2019, the Central Bank of Paraguay authorized, and the Entity has issued, subordinated bonds in foreign currency amounting to US$ 18,630,000.00 and US$ 25,000,000.00 respectively. In Resolution SB. SG. No. 00111/2019 the Central Bank of Paraguay also authorized the issuance of subordinated bonds in local currency up to an amount of Gs. 325.492.000.000. As of December 31, 2022, the Bank had not finalized the issuance of the bonds in Guarani. The subordinated bonds are convertible into shares in case the minimum capital required by law is reached or capital losses are replaced (Law 861/96). Subordinated bonds do not carry the deposit guarantee established in Law 2334/03. b) Financial Bonds BCP AUTHORIZATION CURRENCY OF ISSUE RESOLUTION NUMBER AMOUNT OF ISSUE (*) MATURITY DATE CURRENCY OF ORIGIN BALANCE DUE AS OF DECEMBER 31, 2022 BALANCE DUE AS OF DECEMBER 31, 2021 00176/2018 US$ 00176/2018 US$ 11.000.000,00 15.000.000,00 1827 days 1827 days 11.000.000,00 15.000.000,00 80.805.230.000 110.188.950.000 75.743.690.000 103.286.850.000 00176/2018 US$ 7.000.000,00 1827 days 7.000.000,00 51.421.510.000 00176/2018 US$ 12.000.000,00 1827 days Total US$ (*) 45.000.000,00 12.000.000,00 45.000.000,00 88.151.160.000 48.200.530.000 82.629.480.000 Total equivalent in Gs. 330.566.850.000 309.860.550.000#362022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 36 (*) By means of Resolution SB. SG. No. 00176/2018, the Central Bank of Paraguay authorized the issuance of Financial Bonds in foreign currency up to US$ 75,000,000.00, and the Entity has issued US$ 45,000,000.00 The financial bonds issued are not covered by Law 2334/03, therefore, they are not guaranteed by the Deposit Guarantee Fund. c.12 Limitations on the free availability of assets or equity and any other restrictions on the right of ownership As of December 31, 2022, and 2021, the following limitations exist: a) Legal and special reserves The Central Bank of Paraguay account as of December 31, 2022 and 2021 respectively, includes the sum of Gs. 1.523.720.747.789 and Gs. 1.619.278.084.158 respectively, which correspond to restricted availability accounts, held in the said institution as legal and special reserve requirements (see note c.3). b) Public securities As of December 31, 2022, and 2021, the Entity has delivered Treasury Bonds amounting to Gs. 20.000.000.000 as minimum guarantees required by the BCP under the general regulations of the Paraguayan Payment System. c) Legal reserve In accordance with Article 27 of Law No. 861/96 as amended by Law No. 5.787/2016, financial institutions must have a reserve of no less than the equivalent of one hundred percent (100%) of their capital, which shall be constituted by transferring annually no less than twenty percent (20%) of the net profits of each financial year. Article 28 of the Law establishes that the resources of the legal reserve shall be automatically applied to cover losses recorded in the financial year. In the following years, the total profits must be allocated to the legal reserve until the minimum amount is reached again, or the highest amount obtained in the process of its constitution. At any time, the amount of the reserve may be additionally increased by cash contributions. d) Price-level restatement of capital Under Article 11 of Law No. 861/96, as amended by Law No. 5787/2016, financial institutions must update their capital annually on the basis of the CPI (Consumer Price Index, known by its Spanish acronym IPC) calculated by the Central Bank of Paraguay. The present value of the minimum capital for financial year 2022 and 2021 is Gs. 60.514.000.000 and Gs. 56.647.000.000 respectively, in accordance with Circulars SB. SG. No. 1/2021 and 1/2020 respectively. The Entity's integrated capital (common and preferred shares) as of December 31, 2022 and 2021 respectively, amount to Gs. 1.084.664.800.000 and Gs. 1.081.242.800.000 respectively (see note b.5), which exceeds the minimum capital. e) Profit distribution According to the provisions of Law No. 861/96, modified by Law No. 5.787/2016, financial institutions may distribute their profits after approval by the Superintendence of Banks (SIB) of their respective annual audited financial statements, provided that such approval is issued within one hundred and twenty days of the closing of the financial year. Upon expiration of the aforementioned period and without a pronouncement by the SIB, the earnings may be distributed. The Ordinary Shareholders' meeting held on April 28, 2022, approved the capitalization of profits for the year 2021, which was carried out as follows:#372022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE ITEM Constitution of Legal Reserve Dividend distribution - Preferred shares Total CURRENCY Gs. Gs. AMOUNT 37 856.038.995 3.422.000.000 4.278.038.995 f) Preferred share dividends In accordance with the original terms of the preferred share issuance, the shareholders' meeting granted the holders a preferred dividend of 18% on the preferred capital. On December 18, 2018, exercising its authority, the Ordinary Shareholders' Meeting resolved to modify the original rate, setting the new preferred dividend rate at 12% for the period of 2019 to 2023. g) Guarantees granted in favor of Bancard S.A. As of December 31, 2022, and 2021, the Bank has provided Bancard S.A. with a portfolio of credit cards of the Affinity MasterCard Classic line as collateral up to the amount of Gs. 17.579.935.763 which guarantee transactions resulting from users' transactions at ATMs or points of sale (POS) in the Infonet network, as well as obligations that may arise because of credit card transactions under the MasterCard, VISA and Bancard Check brands. c.13 Guarantees provided regarding liabilities There are no guarantees given with respect to other limitations to the free availability of assets or equity or any other restriction to the right of ownership. c.14 Distribution of loans and liabilities financial intermediation according to their maturity The placements and collections as of December 31, 2022 and 2021 respectively, are shown below, grouped according to their remaining terms. Balances include accrued interest, operations to be settled/reported, and loans before allowances. As of December 31, 2022 ITEM Performing loans - Financial sector REMAINING TERMS TO MATURITY UP TO 30 DAYS FROM 31 TO 180 DAYS FROM 181 TO 1 YEAR MORE THAN 1 YEAR AND UP TO 3 YEARS MORE THAN 3 YEARS TOTAL Gs. 14.746.965.888 130.181.833.370 41.741.859.749 50.205.167.792 9.167.720.642 246.043.547.441 Performing loans - 879.233.708.787 3.410.351.350.178 1.388.109.746.302 2.865.002.719.530 3.577.106.168.459 12.119.803.693.256 Non-financial sector Total - Performing Loans 893.980.674.675 3.540.533.183.548 1.429.851.606.051 2.915.207.887.322 3.586.273.889.101 12.365.847.240.697#382022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 38 Liabilities Financial sector 653.249.579.434 559.637.448.676 583.437.287.474 1.019.634.377.008 1.035.175.433.329 3.851.134.125.921 Liabilities - 6.077.232.669.323 1.099.565.755.891 1.366.991.617.610 2.264.884.066.071 1.111.131.338.056 11.919.805.446.951 Non-financial sector Total - Liabilities 6.730.482.248.757 1.659.203.204.567 1.950.428.905.084 3.284.518.443.079 2.146.306.771.385 15.770.939.572.872 As of December 31, 2021 ITEM Performing loans - Financial sector Performing loans - Non-financial sector Total - Performing Loans REMAINING TERMS TO MATURITY UP TO 30 DAYS FROM 31 TO 180 DAYS FROM 181 TO 1 YEAR MORE THAN 1 YEAR AND UP TO 3 YEARS MORE THAN 3 YEARS TOTAL Gs. 93.874.780.937 132.683.990.100 52.601.852.510 12.286.913.450 359.994.492.099 68.546.955.102 767.981.168.206 3.132.687.224.791 836.528.123.308 3.226.562.005.728 1.685.558.905.034 2.785.368.228.077 3.798.071.597.243 12.169.667.123.351 1.818.242.895.134 2.837.970.080.587 3.810.358.510.693 12.529.661.615.450 Liabilities Financial sector 597.082.548.903 320.629.481.506 348.838.147.650 1.106.904.851.234 1.251.291.427.798 3.624.746.457.091 Liabilities - 6.880.588.034.839 787.548.983.014 1.161.207.623.158 2.816.357.809.135 729.911.476.627 12.375.613.926.773 Non-financial sector Total - Liabilities 7.477.670.583.742 1.108.178.464.520 1.510.045.770.808 3.923.262.660.369 1.981.202.904.425 16.000.360.383.864 Liquidity risk management: Liquidity risk is the risk that an institution will encounter difficulty in meeting obligations associated with financial commitments that are settled by delivering cash or another financial asset. The Board of Directors and Management of the Entity control its liquidity mainly by matching the maturities of its assets and liabilities, in accordance with the short-, medium- and long-term strategies defined and permanently monitored, both for assets and liabilities. Additionally, the Entity has defined contingency plans for cases of transitory liquidity needs. The liquidity position is monitored, and liquidity stress tests are carried out regularly under a variety of scenarios that cover both normal market conditions and more severe ones. All liquidity policies and procedures are subject to review and approval by the Assets and Liabilities Committee. c.15 Concentration of the loan and deposit portfolio c.15.1 Concentration of the portfolio by financial intermediation by number of clients#392022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE Below is the concentration of the portfolio held by the Entity as of December 31, 2022 and 2021 respectively, with the financial (SF) and non-financial (SNF) sectors, both in the portfolio of performing and non- performing loans and in the liabilities through financial intermediation. a) Loans NUMBER OF CUSTOMERS % AMOUNT AND PERCENTAGE OF LOAN PORTFOLIO FINANCIAL SECTOR OUTSTANDING Gs. (*) PAST DUE % % Gs. (*) AMOUNT AND PERCENTAGE OF LOAN PORTFOLIO NON-FINANCIAL SECTOR OUTSTANDING Gs. (*) PAST DUE % Gs. (*) As of December 31, 2022 10 largest debtors 218.691.493.168 89% 50 subsequent largest debtors 27.352.054.273 11% 100 subsequent largest debtors 0% Other subsequent debtors 0% Total loan portfolio 246.043.547.441 100% 0% 1.172.620.296.200 10% 336.371.164.545 59% 0% 2.778.977.888.348 23% 141.855.978.149 25% 0% 2.326.304.648.988 19% 36.109.734.164 6% 0% 0% 5.841.900.859.720 12.119.803.693.256 48% 100% 53.487.160.848 567.824.037.706 9% 100% NUMBER OF CUSTOMERS OUTSTANDING Gs. (*) AMOUNT AND PERCENTAGE OF LOAN PORTFOLIO FINANCIAL SECTOR PAST DUE % % Gs. (*) As of December 31, 2021 10 largest debtors 50 subsequent largest debtors 100 subsequent largest debtors Other subsequent debtors Total loan portfolio 300.865.263.960 84% 59.129.228.139 16% 0% 0% 359.994.492.099 100% AMOUNT AND PERCENTAGE OF LOAN PORTFOLIO NON-FINANCIAL SECTOR OUTSTANDING Gs. (*) % PAST DUE Gs. (*) % 1.725.207.732 100% 1.137.912.374.259 9% 210.192.957.172 60% 0% 2.942.647.147.582 24% 90.792.493.270 26% 0% 2.507.525.922.639 21% 23.772.382.028 7% 0% 1.725.207.732 100% 5.581.581.678.871 12.169.667.123.351 46% 100% 23.206.843.214 347.964.675.684 7% 100% (*) Includes debtors for financial products accrued, suspended valuation gains, and operations to be settled/reported before allowances. 39#402022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE b) Deposits NUMBER OF CUSTOMERS FINANCIAL SECTOR % Gs. (*) AMOUNT AND PERCENTAGE OF DEPOSIT PORTFOLIO NON-FINANCIAL SECTOR PRIVATE SECTOR Gs. (*) % PUBLIC SECTOR Gs. (*) % As of December 31, 2022 10 largest depositors 298.894.137.170 54% 50 subsequent largest depositors 235.241.708.972 42% 554.986.209.831 6% 1.182.663.166.818 12% 1.638.240.321.958 99% 11.313.182.588 1% 100 subsequent largest 23.284.363.111 4% 1.191.866.416.048 13% 0% depositors Other subsequent depositors 0% 6.610.850.275.980 69% 0% TOTAL 557.420.209.253 100% 9.540.366.068.677 100% 1.649.553.504.546 100% As of December 31, 2021 10 largest depositors 305.509.423.628 56% 831.031.448.259 8% 1.452.217.991.873 99% 50 subsequent largest 213.533.259.892 40% 1.342.963.118.552 13% 9.623.294.671 1% depositors 100 subsequent largest 22.225.239.019 4% 1.193.293.083.660 12% 0% depositors Other subsequent depositors TOTAL 541.267.922.539 0% 100% 6.854.028.273.000 10.221.315.923.471 67% 0% 100% 1.461.841.286.544 100% (*) Include amounts for demand and term deposits, excluding accrued finance charges payable at the end of the financial year. c.15.2 Concentration by geographical area and currency a) Loans 40#412022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE As of December 31, 2022 ITEM Local residents Non residents Sub-Total Allowances TOTAL In local currency In foreign currency Sub-Total Allowances TOTAL As of December 31, 2021 Local residents Non-residents Sub-Total Allowances TOTAL ITEM In local currency In foreign currency Sub-Total Allowances CREDIT SECTOR FINANCIAL Gs. (*) % CREDIT SECTOR NON-FINANCIAL Gs. (*) % 243.153.534.212 99% 12.119.803.693.256 100% 2.890.013.229 1% 0% 246.043.547.441 100% 12.119.803.693.256 100% (436.135.923.142) 246.043.547.441 11.683.667.770.114 93.246.059.676 38% 4.860.423.899.013 40% 152.797.487.765 62% 7.259.379.794.243 60% 246.043.547.441 100% 12.119.803.693.256 100% 246.043.547.441 (436.135.923.142) 11.683.667.770.114 CREDIT SECTOR FINANCIAL Gs. (*) % CREDIT SECTOR NON-FINANCIALGS. (*) % 358.559.045.887 1.435.446.212 359.994.492.099 99,60% 12.169.667.123.351 0,40% 100% 0% 100% 12.169.667.123.351 100% (385.395.449.901) 359.994.492.099 234.517.361.387 65% 125.477.130.712 35% 359.994.492.099 100% 11.784.271.673.450 5.136.258.145.292 7.033.408.978.059 12.169.667.123.351 (385.395.449.901) 42% 58% 100% TOTAL 359.994.492.099 (*) Include Time Deposits, debtors for accrued financial products, suspended valuation gains, and transactions to be settled. 11.784.271.673.450 41#422022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE b) Liabilities As of December 31, 2022 ITEM FINANCIAL SECTOR OBLIGATIONS Gs. % NON-FINANCIAL SECTOR OBLIGATIONS Gs. % Local residents 1.743.786.673.195 46% 11.834.315.258.499 99,80% Non-residents 2.029.823.173.178 54% 23.916.157.473 0,20% Sub-Total (*) Other Liabilities (**) TOTAL In local currency In foreign currency 3.773.609.846.373 100% 11.858.231.415.972 100% 77.524.279.548 61.574.030.979 3.851.134.125.921 11.919.805.446.951 1.154.127.195.616 31% 5.049.392.609.394 2.619.482.650.757 69% 6.808.838.806.578 Sub-Total (*) Other Liabilities (**) TOTAL 3.773.609.846.373 77.524.279.548 3.851.134.125.921 100% 11.858.231.415.972 43% 57% 100% 61.574.030.979 11.919.805.446.951 As of December 31, 2021 ITEM Local residents Non residents FINANCIAL SECTOR OBLIGATIONS Gs. % NON-FINANCIAL SECTOR OBLIGATIONS Gs. % 1.592.885.966.798 1.915.086.515.674 45% 12.273.583.275.682 99,73% 55% 33.028.140.650 0,27% Sub-Total (*) Other Liabilities (**) TOTAL In local currency 3.507.972.482.472 116.773.974.619 3.624.746.457.091 100% 12.306.611.416.332 100% 69.002.510.441 12.375.613.926.773 1.079.671.800.657 31% 4.874.458.732.536 40% In foreign currency Sub-Total (*) Other Liabilities (**) TOTAL 2.428.300.681.815 3.507.972.482.472 69% 100% 7.432.152.683.796 12.306.611.416.332 60% 100% 116.773.974.619 3.624.746.457.091 69.002.510.441 12.375.613.926.773 (*) Includes amounts of demand and term deposits, loans from financial institutions, bonds issued in circulation, deferred letters of credit correspondents, without considering accrued finance charges at the cut-off date. (**) Other liabilities includes accrued interest not considered as deposits, transactions pending for ATM compensation and transactions to be settled. 42#432022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE c.15.3 Performing Loans to the non-financial sector distributed by economic sector Its composition as of December 31, 2022 and 2021 respectively, is as follows: Economic Sector Loans to the non-financial sector As of December 31, 2022 (*) Loans to the non-financial sector as of December 31, 2021 (*) Gs. % Gs. % Agribusiness 2.656.772.429.415 22% 2.296.881.739.854 19% Wholesale trade General agricultural crops - agriculture Animal husbandry-livestock Manufacturing industries Retail trade Consumer Other unspecified 2.246.684.827.768 18% 2.021.418.117.049 17% 1.552.124.795.983 13% 1.698.454.223.057 14% 1.345.081.217.275 11% 1.610.791.241.913 13% 1.095.918.153.880 9% 1.101.917.345.932 9% 725.329.857.992 6% 795.556.917.301 6% 608.055.311.639 5% 506.475.388.522 4% 435.620.264.208 4% 462.592.096.112 4% Personal services 357.523.563.732 3% 395.491.812.704 3% Sale, maintenance and repair of vehicles 304.851.156.824 2% 368.515.140.335 3% Construction 277.304.302.318 2% 351.278.059.320 3% Services 215.658.079.546 2% 252.860.016.198 2% Housing 212.945.151.113 2% 244.931.615.082 2% Financial intermediation 85.934.581.563 1% 62.503.409.972 1% Total 12.119.803.693.256 100% 12.169.667.123.351 100% (*) Includes accrued interest, suspended valuation gains, and transactions to be settled/reported before allowances. c.16 Loans and contingencies with related parties Asset and liability balances with related parties as of December 31, 2022 and 2021 respectively, are as follows: 43#442022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT As of December 31, 2022 Assets Performing Loans (*) Contingencies Total Liabilities Deposits Total ECONOMIC AND FINANCIAL PERFORMANCE ITEM BOOK BALANCE BEFORE ALLOWANCES (**) Gs. ALLOWANCES Gs. As of December 31, 2021 Assets Performing Loans (*) Credit contingencies Total 171.139.990.010 60.965.682.158 232.105.672.168 98.699.435.255 98.699.435.255 ITEM BOOK BALANCE BEFORE ALLOWANCES (**) Gs. ALLOWANCES Gs. 250.623.643.407 38.061.417.042 288.685.060.449 Liabilities Deposits Total (*) Performing loans do not include accrued interest. 98.600.055.828 98.600.055.828 (**) Law 861/96 establishes limits for the granting of loans to related parties, which cannot exceed an amount equivalent to 20% of the Bank's effective equity. c.17 Other Liabilities Its composition as of December 31, 2022 and 2021 respectively, as follows I I I I BOOK BALANCE NET OF ALLOWANCES Gs. 44 171.139.990.010 60.965.682.158 232.105.672.168 98.699.435.255 98.699.435.255 BOOK BALANCE NET OF ALLOWANCES Gs. 250.623.643.407 38.061.417.042 288.685.060.449 98.600.055.828 98.600.055.828#452022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT Management checks issued Tax creditors Accounts payable Dividends payable Social creditors Other Total c.18 Operations to be settled ECONOMIC AND FINANCIAL PERFORMANCE ITEM December 31, 2022 Gs. 12.599.423.449 11.224.700.496 720.328.652 773.285.457 11.106.226.606 36.423.964.660 December 31, 2021 Gs. 45 25.981.470.696 11.175.820.242 1.145.246.177 809.439.380 5.737.018.587 9.410.038.381 54.259.033.463 This section records the balances of the following transactions: a) Forward Operations These are contracts for the obligatory exchange of currencies at a rate previously agreed between the parties (Currency “Forward”) which are initially recorded at their agreed value. Subsequently, any change in this amount is charged to income, calculating the present value of the settlement or the theoretical closing, which corresponds to the amount for which it could be delivered or settled, respectively, under market conditions. In terms of Economic Valuation, the Forward Market Quote to be taken into account will be the sum of the Reference Exchange Rate on the date on which each forward contract in effect is being valued plus the forward points according to the residual term. b) Repurchase or repo operations A repo operation occurs when the Bank acquires or transfers securities, in exchange for the delivery of a sum of money, assuming in such act and moment the commitment to transfer or acquire again the property to its "counterparty” securities of the same species and characteristics on the same day or on a later date and at a determined price. In accordance with the provisions of the Central Bank of Paraguay, repurchase/resell agreements are recorded as part of "Transactions to be settled" under the headings Loans outstanding for financial intermediation and Obligations for financial intermediation. The amounts recorded in the Interbank liquidity window operations (VLI Operations) - Offering is composed of the amounts granted to BCP plus the agreed premiums. In turn, the VLI - Demand Transactions refer to the irrevocable commitment to sell securities obtained under the transaction and held in custody by BCP, at the par value of the securities to be transferred. a) Forward Operations FINANCIAL SECTOR FORWARD PURCHASES OF FOREIGN CURRENCY - FINANCIAL SECTOR Debtors from purchases transactions forward foreign currency Creditors from purchases transactions forward foreign currency December 31, 2022 Gs. December 31, 2021 Gs.#462022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE FORWARD SALES OF FOREIGN CURRENCY - FINANCIAL SECTOR December 31, 2022 Gs. Debtors from sales transactions forward foreign currency Creditors from sales transactions forward foreign currency Total Forward Operations (Debtors) - Assets Total Forward Operations (Creditors) - Liabilities NON-FINANCIAL SECTOR At the close of December 31, 2022, there are no forward operations in force. FORWARD PURCHASES OF FOREIGN CURRENCY - NON-FINANCIAL SECTOR December 31, 2022 Gs. Debtors from purchases transactions forward foreign currency Creditors from purchases transactions forward foreign currency (17.184.910) (17.184.910) 24.916.431 (25.138) December 31, 2021 Gs. December 31, 2021 Gs. FORWARD SALES OF FOREIGN CURRENCY - NON - FINANCIAL SECTOR December 31, 2022 Gs. December 31, 2021 Gs. 1.046.352 Debtors from sales transactions forward foreign currency Creditors from sales transactions forward foreign currency Total Forward Operations (Debtors) - Assets Total Forward Operations (Creditors) - Liabilities b) Repurchase transactions through the interbank liquidity window As of December 31, 2021, the institution did not have any outstanding repurchase/resell agreements with the non-financial sector. c.19 Commitments Compliance with financial covenants (Covenants) 25.962.783 (25.138) 46 20.555.871 20.335.400 (191.222.621) 40.891.271 (191.222.621) The Bank is committed to comply with certain financial clauses, positive and negative, in accordance with the contracts and agreements signed with multilateral credit institutions, which are monitored by the Board of Directors and Management of the Bank. As of December 31, 2022, the financial covenants of operations with which the Bank has outstanding debt balances that are out of compliance are in the process of waiver negotiation.#472022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 47 c.20 Important information regarding the financial year c.20.1 Previus Merger Commitment with Sudameris Bank S.A.E.C.A. On November 14, 2022 was subcribed the Previus Marger Commiment by Absortion with Sudameris Bank S.A.E.C.A. as absorbing entity and Banco Regional S.A.E.C.A. as absorbed entity. The agreement was recorded by the respectively directories of both Banks and documented in Directory Act N° 021/2022 dated November 14, 2022 for Banco Regional S.A.E.C.A. and Directory Act N° 1138 dated November 11, 2022 for Sudameris Bank S.A.E.C.A. c.20.2 Adjustments to allowances charged to retained earnings for the years 2019-2020 and incomes for the year 2021. Banco Regional SAECA was inspected by the Superintendency of Banks (SIB) of the Central Bank of Paraguay according to Resolution SB. SG. N° 020/2019 dated March 18, 2019. In the framework of this inspection, in the second quarterly of financial year 2021, the Superintendence of Banks reported the result of the inspection on certain debtors and ordered to the Bank to adjust retained earning. The total adjustment amounted to the sum of Gs. 176.532.211.557 of which Gs. 164.761.029.710 were charged to retained earnings for the years 2019-2020 and Gs. 11.771.181.847 were charged to results for the financial year 2021. These adjustments were formally reported by management to the SIB inspectors by means of notes, attaching the supporting documentation of the calculation and the accounting entries made. Finally, by means of Resolution No. 22, Minute No. 4 of January 20, 2022, the Bank acknowledged the conclusions reached by the Board of Directors of the Central Bank of Paraguay, thus concluding the inspection by the Superintendency of Banks. D. EQUITY d.1. Effective equity The effective equity constitutes the basis for the determination of operational limits and restrictions established by the Superintendence of Banks of the Central Bank of Paraguay for financial entities operating in Paraguay. The effective shareholders' equity of the Bank as of December 31, 2022 and 2021 respectively, amounts to Gs. 1.368.566.622.862 and Gs. 1.532.177.682.472 respectively. Law No. 5787 dated December 19, 2016, establishes the composition of the principal (Level 1) and supplementary (Level 2) capital of financial institutions for the purpose of calculating their solvency. This Law also establishes the minimum proportion that must always exist between the principal capital and the amount of risk-weighted assets and contingencies, in national or foreign currency, including their branches in the country and abroad, which may not be less than 8%. In the case of the minimum ratio between the principal (Tier 1) and supplementary (Tier 2) capital combined and the total amount of risk-weighted assets and contingencies of a financial institution, in domestic or foreign currency, including its branches in the country and abroad, shall not be less than 12% or exceed 14%. As of December 31, 2022, and 2021, the Entity has the following relationship: Tier 1 Principal capital - Tier 2 - Principal capital plus complementary capital December 31, 2022 11,53% 13,67% December 31, 2021 12,76% 13,67%#482022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 48 d.2. Minimum Capital The minimum inflation-indexed capital for 2022 which, by virtue of the provisions of the Central Bank of Paraguay, banks operating in the national financial system must have as integrated capital by December 31, 2022, is Gs. 60.514 million (Gs. 56.647 million for December 31, 2021). Any eventual capital shortfall of an institution with respect to the minimum capital required annually from financial institutions must be covered before the end of the first half of each year. As of December 31, 2022, and 2021, the Bank had an integrated capital for a total of Gs. 1.084.664.800.000 and Gs. 1.081.242.800.000 respectively, higher than the minimum required by the regulations of the Central Bank of Paraguay as at those dates. d.3. Adjustments from previous financial years The BCP's Plan and Accounts Manual establishes that the adjustments of results from previous years are recorded in the income statement without affecting the Bank's equity accounts. As of December 31, 2022, the net adjustment is a gain of Gs. 2.025.835.766 included in "Adjustment of prior years' results" (Loss of Gs.3.307.397.639 as of December 31, 2021). d.4. Redemption of preferred stock The Extraordinary General Shareholders' Meeting held on July 30, 2021, according to Minute No. 56, unanimously approved the redemption of preferred shares for a total amount of Gs. 70.000.000.000. E. INFORMATION REGARDING CONTINGENCY AND MEMORANDUM ACCOUNTS a) Contingency accounts The balance of the contingency accounts as of December 31, 2022 and 2021 respectively, relates to credit lines granted to debtors for credit card operations, loans agreed on current accounts, and other agreed lines pending use. Together, these lines of credit do not exceed 10% of total assets. The composition of the balance is as follows: ITEMS Guarantees issued Credits to be used through the use of cards Documentary credits to be negotiated Credits to be used in current accounts Total b) Memorandum accounts December 31, 2022 Gs. 529.488.728.339 374.917.955.555 287.856.879.079 135.920.089.219 1.328.183.652.192 December 31, 2021 Gs. 575.116.122.763 357.157.053.269 379.693.223.088 204.036.470.754 1.516.002.869.874 The balance of memorandum accounts as of December 31, 2022 and 2021 respectively, corresponds to guarantees received in favor of the Bank for loans or other obligations arising from financial intermediation, securities and documents deposited with the Bank for safekeeping, securities corresponding to bills of exchange and remittances received in the process of acceptance or collection for import operations. The composition of the balance is as follows:#492022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT Guarantees received ECONOMIC AND FINANCIAL PERFORMANCE ITEM Securities and deposit management Sale and transfer of portfolio Other memorandum accounts Foreign business and collections Portfolio Sale Agreement (*) Allowances to be made for exceptional measures Forward Operation - Seller December 31, 2022 Gs. 14.533.766.859.481 2.002.615.940.160 1.158.393.252.053 1.164.963.626.052 23.737.821.597 30.000.000.000 2.056.860.400 49 December 31, 2021 Gs. 14.433.659.274.961 2.458.791.742.315 1.174.759.442.330 1.091.341.663.473 26.494.522.309 16.746.668.928 20.106.506.800 Forward Operation - Buyer Total 3.158.749.900 18.918.693.109.643 5.852.921.500 19.227.752.742.616 (*) The entity has signed an agreement with Compañía Administradora de Riesgos S.A.(CARSA) committing to deliver portfolio with the specific characteristics mentioned in the document for a maximum amount of Gs. 30.000.000.000 at the agreed sale price. F. INFORMATION CONCERNING RESULTS f.1 Profit and loss recognition The Bank applied the accrual principle for the purposes of recognizing income and allocating expenses or costs incurred, with the following exceptions, in which income is recognized as profit upon receipt or collection, as established by Resolution No. 1, Act No. 60 of the Central Bank of Paraguay, dated September 28, 2007, and its subsequent amendments: a) financial products accrued and not received from debtors with overdue receivables and their valuation gains. b) accrued and uncollected financial products relating to non-performing loans classified in categories 2 (other than by subjective criteria), 3, 4, 5 and 6, which are recognized as income upon collection. c) valuation gains of performing loans and non-performing loans classified in categories 2 (other than by subjective criteria), 3, 4, 5 and 6, which are recognized as gains upon collection. d) gains to be realized on the sale of term assets, which are recognized as income as the credits are collected. e) gains from the valuation of term sale transactions; and f) certain fees for banking services.#502022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE f.2 Exchange rate differences in foreign currency The net exchange differences corresponding to the holding of assets and liabilities in foreign currency are shown in the income statement lines "Valuation of Assets and Liabilities in Foreign Currency", and their opening is explained below: ITEM DECEMBER 31, 2022 Gs. DECEMBER 31, 2021 Gs. 50 Income on valuation of financial assets and liabilities in foreign currencies Valuation loss on foreign currency financial assets and liabilities Net foreign exchange difference on foreign currency financial assets and liabilities gain - (loss) Valuation income on other foreign currency assets and liabilities Valuation losses on other foreign currency assets and liabilities Net exchange difference on other foreign currency assets and liabilities gain - (loss) Net exchange difference on total assets and liabilities in foreign currencies gain - (loss) 5.296.895.676.196 (5.294.529.026.769) 2.366.649.427 200.119.569.909 (205.037.569.667) (4.917.999.758) (2.551.350.331) 7.777.103.772.332 (7.778.101.451.219) (997.678.887) 38.428.194.040 (43.212.435.092) (4.784.241.052) (5.781.919.939) As described in point c) of note f.1 above, exchange differences relating to the maintenance of foreign currency performing and/or non-performing loans classified in categories "3", "4", "5" and "6" are recognized as income on a performance basis, since category 3 status is suspended. - Net exchange differences from foreign exchange and arbitrage operations are shown in the statement of income lines "Other operating income – Exchange and arbitrage operations – net”. f.3 Contributions to the Deposit Guarantee Fund (FGD) Under the provisions of Law No. 2334 dated December 12, 2003, financial institutions are required to contribute 0.12% of the average quarterly balances of their deposit portfolios in domestic and foreign currency to the FGD administered by the BCP. The amount contributed by the Bank to the DGF for the years ended December 31, 2022, and 2021, amounts to Gs. 57.940.105.193 y Gs. 56.934.723.689 respectively. Those amounts are registered as non-recoverable expenses under Operating expenses account from the group "Other operating expenses" in the Statement of Income. f.4 Income tax The income tax charged to profit for the year at the rate of 10% is based on the accounting profit before income tax, adjusted by the items included or excluded by Law No. 6.380/19 and its regulations for the determination of the net taxable income. The income tax charge to income for the years ended December 31, 2022, and 2021, amounts Gs. 2.717.696.744 and Gs. 6.566.601.019 respectively.#512022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE f.5 Inflationary effects No inflation adjustment procedures have been applied. See note b.2. G. SUBSEQUENT EVENTS AFTER THE END OF THE FINANCIAL YEAR After December 31, 2022, there have been no other events or transactions that, due to their nature, would warrant disclosure or have an impact on the financial statements for the current year 2022. Amorseto LAURA SILVIA BORSATO DIEGO DUARTE General Manager Executive President ESTEBAN A. ROTELA MACIEL General Accountant LEONARDO PETTA Titular Trustee 51#522022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE 1.3. OPINIONS AND RISK RATINGS BCA BENITEZ CODAS & ASOCIADOS Corresponsal en el Paraguay de KPMG International Cooperative KPMG International Independent Auditor's Report Messrs. President and Members of the Board Banco Regional S.A.E.C.A. Report on the Financial Statements We have audited the accompanying financial statements of Banco Regional S.A.E.C.A., which comprise the balance sheet as of December 31, 2022, the income statement, statements of changes in equity and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements The Entity's management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting standards and valuation criteria, risk classification criteria and presentation regulations established by the Central Bank of Paraguay, and for matters not addressed in these regulations, with standards issued by the National Securities Commission and with the financial reporting standards issued by the Public Accountants Council of Paraguay. This responsibility includes the designing, implementing and maintaining internal control relevant to the preparation and presentation of financial statements free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with standard independent audits established by the Superintendency of Banks of the Central Bank of Paraguay through its Resolution SB.SG. N° 313/2001 and with audit standards in effect in Paraguay issued by the Board of Public Accountants of Paraguay. 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 of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of 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 opinion. [email protected] Firmado digitalmente por JAVIER ANDRES BENITEZ DUARTE www.bca.com.py Av. Brasilia 707 Asunción - Paraguay +595 (21) 212 505 BCA Opinion BENITEZ CODAS & ASOCIADOS Corresponsal en el Paraguay de KPMG International Cooperative KPMG International In our opinion, the financial statements present fairly, in all material respects, the financial position of Banco Regional S.A.E.C.A. as of December 31, 2022 and of its financial performance, statement of changes in equity and its cash flows for the year then ended in accordance with accounting standards and valuation criteria, risk classification criteria and presentation regulations established by the Central Bank of Paraguay, and for matters not addressed in these regulations, with standards issued by the National Securities Commission and with the financial reporting standards issued by the Public Accountants Council of Paraguay Other matters The financial statements of Banco Regional S.A.E.C.A. for the year ended December 31, 2021, were audited by other auditors whose opinion dated February 28, 2022, expresses an unqualified opinion. Asunción, February 15, 2023 BCA Benítez Codas & Asociados External Auditor Registry “SIB” Res. N° 500/98 B Javier Benítez Duarte Partner License Council CPP 528A License School CPy C652 4 3 [email protected] www.bca.com.py Av. Brasilia 707 Asunción Paraguay +595 (21) 212 505 52#532022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT ECONOMIC AND FINANCIAL PERFORMANCE TRUSTEE'S REPORT Encarnación, February 16, 2023 SHAREHOLDERS of BANCO REGIONAL S.A.E.C.A. Dear Sirs: In compliance with the dispositions contained in Article No. 1,124, paragraph e) of the Paraguayan Civil Code, I hereby submit to the General Ordinary Shareholders' Meeting of Banco Regional S.A.E.C.A. convened for February 21 of this year, my written report and opinion on the Annual Report, Inventory, Balance Sheet and Profit and Loss Account for the fiscal year 2022. I have taken cognizance of the Opinion of the independent auditors BENITEZ CODAS & ASOCIADOS on the Financial Statements of Banco Regional S.A.E.C.A. for the year ended December 31, 2022, issued with a favorable opinion without disclaimers on February 15, 2023. I have received all the necessary information regarding the operations of the Society and I have complied in all applicable aspects according to the provisions of Section No. 1,117 and following of the Paraguayan Civil Code. In my opinion, based on the analysis of these documents, I consider that the economic and financial situation set forth therein reasonably reflect, in all material respects, the legal and financial condition of Banco Regional S.A.E.C.A. Therefore, I hereby advise the General Ordinary Shareholders' Meeting to approve the Annual Report of the Board of Directors, the Inventory, the Balance Sheet, and the Statement of Profit and Loss of Banco Regional S.A.E.C.A. as of December 31, 2022, as presented on this occasion. Sincerely, Leonardo Petta Borecki Síndico BANCO REGIONAL S.A.E.C.A. 53#542022 REPORT AND FINANCIAL STATEMENTS - BANCO REGIONAL LETTER FROM THE PRESIDENT RISK RATING ECONOMIC AND FINANCIAL PERFORMANCE International ratings Banco Regional is a financial institution that proves its solvency through evaluations granted by internationally renowned risk rating agencies such as Standard & Poor's (S&P). These evaluations are the result of an efficient and trustworthy management that ensure the capacity of the Bank to comply with the obligations and commitments despite the volatility and complexity of markets. S&P: (December 2022) BB/Stable National ratings (1) The Board of Banco Regional has appointed the company FixScr, affiliated to Fitch Ratings to rate the solvency of the company locally, i.e., the capacity and intention to comply with its obligations. FixScr: (September 2022) AA+pv/Stable Translator's Note: I, the undersigned, JUAN CARLOS DÍAZ, an Official Sworn Translator, registered with the Supreme Court of Justice under No 874, DO HEREBY CERTIFY, that the above is a true and accurate English translation of a document in Spanish, which I had before me.-IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal in the city of Asunción, Paraguay, this 11th day of April A.D. 2023.- 54#55Regional‣