2020 financial report

BIB – BANK IM BISTUM ESSEN eG

Economically. Socially. Ecologically.

2020 FINANCIAL REPORT STATUS: IN A RELATIONSHIP

01

CONTENTS Preamble 02

Sustainability 04

Management Board and Supervisory Board 10

Facts and figures

Management report by the Management Board 14

Report of the Supervisory Board 29

Financial statements 2020 30

WHAT MOTIVATES US: FAIR BANKING

TAKING RESPONSIBILITY – ACTING SUSTAINABLY

Economically. Socially. Ecologically.

GROWTH

in EUR million

ANNUAL NET PROFIT AT A GLANCE

in EUR (thousands)

5500

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2020

Deposits 3473.25

Total assets 5326.24

Change Change 2019 2020 in EUR in % (thousands)

Net interest income 65,079 65,685 606 0.93

Commission surplus 7,161 7,115 –46 –0.64

Other operating income 1,276 643 –633 –49.61

Operating result 73,516 73,443 –73 –0.10

Personnel expenses 11,459 12,001 542 4.73

Other administrative expenses 11,236 12,063 827 7.36

Depreciation on tangible fixed assets 1,465 1,564 99 6.76

Other operating expenses 1,639 1,573 –66 –4.03

Operating result before measurement gains or losses 47,717 46,242 –1,475 –3.09

Provisions for customer loan risk –4,961 4,149 9,110 >100.00

Securities results 6,468 – 6,645 –13,113 >–100.00

Operating result before tax 49,224 43,746 –5,478 –11.13

Tax 18,940 15,051 –3,889 –20.53

Operating result after tax 30,284 28,695 –1,589 –5.25

Loans 3706.88

02 03 BIB ANNUAL REPORT 2020 // PREAMBLE

Dear members and clients, Have you made a list of everything you want to do when the pandemic is over? Hug grandparents, meet up with

friends, go to the gym, go to the theatre, the cinema, a spa, go on holiday, play pool – for some of us, the list might be 30 items long. However, lots of people have been isolated for so long now and got so fed up that they feel like there’s no point in making plans for the future. While that’s understandable, it’s simply not true. Never give up thinking about the good times and looking on the bright side – because staying hopeful is the only way to stay well. Or, as Kofi Annan once said:

“The world is made up of optimists and pessimists. In the end they are both wrong, but the optimist is happier.” Even we as a bank, despite all the restrictions and uncertainties, are thinking ahead and making plans. After

all, the time after the pandemic is going to be tough. Not only will we have lots of catching up to do, but we will also have to come up with all those long overdue ideas for addressing the major issues affecting society and the environment. We want to be a part of this cultural change and, together with our partners both old and new, to promote ideas that put everyone’s well-being back at the heart of things. Our success in this project will rely on our relationships with others, hence the motto of this year’s annual report. Because we are all keeping our distance from one another at the moment, we have decided against photo shoots for everyone’s safety. Instead, the annual report is illustrated with drawings – very attractively, we think.

Looking back to the future We succeeded in expanding the foundations for our social and ecological commitment again last year with a

great operating result of EUR 43.7 million. And we learned a lot, too, showing there’s truth in the saying “In every crisis, there is opportunity”. Our digitisation has been a historic development that has made us a very agile company in one fell swoop. Above all, however, the pandemic has shone a new light on the issues that have been neglected for far too long: the inadequacy of infrastructures in health and social services, the lack of participation and deficits in training and education. Here we will continue to strengthen our role as a fair bank in political and social discourse and to expand and build networks. After all, without sustainable financing, the major shift towards overall sustainability in relation to the UN’s Sustainable Development Goals (SDGs) and the Paris Climate Agreement will never get off the ground.

Dr Peter Güllmann Johannes Mintrop Manfred Sonnenschein

In the years to come, it will be more important than ever to strengthen our sense of solidarity and democratic structure. That’s why we want to do our part by offering a sustainable financial policy and helping develop ideas for an improved healthcare system, promoting training and education, and demonstrating global responsibility through microfinance.

The mission to save the planet isn’t straightforward and it won’t happen overnight. But, as Barack Obama so

aptly put it: “Change will not come if we wait for some other person, or if we wait for some other time. We are the ones we’ve been waiting for. We are the change that we seek.”

With this in mind, we wish you the strength to process the experiences of the pandemic, the confidence to know

that many things are changing for the better, and the courage to be a part of those changes. Essen, May 2021

The members of the Management Board – Manfred Sonnenschein, Dr Peter Güllmann and Johannes Mintrop – want to take

capital flow in a different and socially responsible direction.

BIB ANNUAL REPORT 2020 // SUSTAINABILITY 04

We all know to be cautious about focusing too much on one thing.

But the concept of sustainability is so crucial to our future that we

have to put it above everything else. Of course, what we don’t mean

is ‘greenwashing'. What’s the point of offering the exact same

products or services but suddenly calling them something different?

That would be a complete sham. Genuine sustainability is actually

about constantly adapting to a set of ever-changing criteria, every

individual taking responsibility for their own actions, and profound

cultural change – on a global scale. We at BIB face this responsibility

head on and renew our commitment afresh ever year. Considering

the full scope of sustainability is an ongoing process and we can

always go one step further.

SUSTAINABILITY IS

EVERYTHING!

05

06 07

ECOPROFIT

BIB ANNUAL REPORT 2020 // SUSTAINABILITY

SWITCHING PROVIDERS IN THE FIELD OF SUSTAINABILITY RESEARCH Since the start of last year, BIB has been working with a new provider in the field of sustainability research. Our collaboration with MSCI ESG Research allows us to establish a broader scope of investment, with positive effects in the areas of asset management and our own investments. It also enables us to take a more diversified approach to the United Nations Sustainable Development Goals. In addition, we now have the opportunity to compare different fund products with one another using a standardised sustainability fact sheet, which means we are able to offer our customers even more added value.

STRICTER INVESTMENT PRINCIPLES Within the scope of the sustainability team, last year adjustments were made to our sustainable investment principles, which underpin the sustainability perspective that informs our own investments and equity funds. Among the measures introduced was the exclusion criterion relating to uranium extraction. Because uranium is mainly used for nuclear power plants and nuclear weapons, and we have already excluded these two areas, excluding the extraction of uranium constitutes a logical addition to the existing criteria. Other measures introduced include the reduction of the turnover limit from 5% to 0% for the criterion on the production of coal for power generation, and a new exclusion criterion for coal-fired power generation, with a turnover limit of 10%.

ECOPROFIT – RECERTIFICATION ACHIEVED On 11 November, we passed the ‘Ecoprofit’ recertification by the City of Essen. They examined the measures we have taken since the last recertification in 2017 and checked that BIB is still pursuing a sustainable path. The feedback was over- whelmingly positive. They were particularly impressed by our redesign of the green spaces in front of the bank building as these are insect-friendly and the gardening team at the Franz Sales House deliberately used a mix of plants that provide flowering throughout the year. Another decisive factor in securing our recertification was the switch from ten under-sink water heaters in the women’s toilets to energy-efficient instantaneous water heaters, the switch to waterless urinals, the changeover to foam handwash and 100% recycled paper, and our JobRad service with bicycle parking.

CLIMATE-NEUTRAL BUSINESS OPERATIONS Like any other year, we have of course measured the emissions generated through our banking operations (heating, business trips, water, paper and electricity consumption, and waste disposal), and offset the residual emissions through our partner KlimaKollekte. The key focus is on avoiding, reducing and offsetting.

In 2020, EUR 403,742 worth of donations were paid out by the BIB FairBanking

foundation. This provided sponsorship to people and organisations in fields such as

social welfare (both Catholic and Protestant), education and the Church. A focus of

our sponsorship over the past year has been to alleviate the impacts of the pandemic. 403,742

BIB ANNUAL REPORT 2020 // SUSTAINABILITY 08 09

SENDING SECURITIES CERTIFICATES ELECTRONICALLY SAVES RESOURCES In the past few months, we have changed the way we send securities certificates for more than a thousand securities deposit accounts. This correspondence is no longer sent by post, but via our customers’ electronic mailboxes. That saves around 10,000 sheets of paper per year, which in turn reduces the use of trees and water for paper production, CO2 emissions, microplastics and pollution from transporting letters. With this measure, together we are taking responsibility for our environment and making a contribution to the ‘Preservation of Creation’.

CLIENTS ATTRACT CLIENTS In collaboration with Plant-for-the-Planet, for every new client that comes to us through a client referral, BIB will plant one tree for every year the referring company has been in business. Since the start of the campaign in 2013, we have saved a total of 167.3 tonnes of CO2. The number of trees planted has risen for the fourth year in a row and by 2020 the majority of clients acquired since then were referred to BIB through the campaign.

NEW REAL ESTATE FUND – KCD CATELLA, REAL ESTATE WITH A CONSCIENCE A SPECIAL APPROACH Over the past year, BIB has initiated a new real estate fund with a focus on social responsibility. The aim of this fund is to make more affordable homes available for tenants, while also offering suitable spaces for social enterprises such as children’s daycare facilities. In addition, the residential properties should enable people in difficult financial situations to live in a way that takes account of their age or disabilities. Upon purchase and at regular intervals thereafter, the properties are checked by Asset Management to ensure they satisfy an extensive catalogue of economic, ecological and social criteria. The aim is to ensure responsible management of real estate, which is both profitable and sustainable and pays special attention to the social needs of existing tenants.

TRANSPARENT LENDING Lending to our members and customers is one of the core business areas of BIB. Even compared to other banks, lending represents a huge proportion of BIB’s total assets. The key aspect is the areas of society in which BIB invests its lending. To make this more transparent, we have grouped our complete credit portfolio (as of 31/12/2020) into the following categories:

26ELDERLY LIVING ❙ Elderly care homes ❙ Assisted living ❙ Daycare, etc.

2316

HEALTH ❙ Hospitals ❙ Rehab clinics ❙ Emergency services, etc.

7CHURCH, CATHOLIC AND EVANGELICAL SOCIAL WELFARE ❙ Dioceses ❙ Parishes ❙ Religious orders ❙ Support for children and young people ❙ Disability support ❙ Advisory services, etc.

2 EDUCATION ❙ Childcare

facilities ❙ Schools, etc.

%

26HOUSING ❙ Private clients ❙ Housing associations ❙ Student accommodation

%

%

%

% %

COMMERCE, INFRASTRUCTURE AND RENEWABLE ENERGY ❙ Office ❙ (Food) retail ❙ Electricity and energy networks ❙ Wind power ❙ Photovoltaics, etc.

Dr Doris König DEPUTY CHAIR

Managing Director Duisburg

10 11 BIB ANNUAL REPORT 2020 // MANAGEMENT BOARD AND SUPERVISORY BOARD

SUPERVISORY BOARD

Dr Heinz Joachim Koch Auditor

Bornheim

MAN AGEMENT BOARD AND SUPERVISORY

BOARD

MANAGEMENT BOARD

Henrike Berger Coach (DGfC) Königswinter

Father Michael Baumbach MSF Treasurer General of the

Congregation of the Missionaries of the Holy Family

Münster

Michael Neuhaus Auditor Münster

Ute Berghaus Lawyer Essen

Ludger Krösmann (Ass. jur.) CHAIR

formerly Episcopalian Financial Director

Essen

Dr Peter Güllmann (qualified Economist)

SPOKESPERSON Essen

Manfred Sonnenschein Hattingen

Johannes Mintrop Essen

13 12 BIB ANNUAL REPORT 2020

FACTS AND FIGURES An overview of the BIB financial year

14 15 BIB ANNUAL REPORT 2020 // MANAGEMENT REPORT BY THE MANAGEMENT BOARD

A. BUSINESS PRINCIPLES Bank im Bistum Essen eG is a cooperative bank whose duty, in accordance with the articles of association, is to support and promote the commercial interests of its members. Its members include corporate clients such as hospitals, foundations, religious housing companies, institutions for elderly and disabled people, pension schemes, registered associations and other charitable NGOs, as well as private clients, including in particular the em-ployees of the aforementioned companies and associations. The bank is also open to all organisations and individuals who share its approach to business, which is based on Christian social teachings and long-term sustainability. In this context, the bank issues credit to its members and clients and provides them with financial advice. From its headquarters in Essen, Bank im Bistum Essen caters for customers throughout the region. Its clients also include microfinance institutions and Church institutions abroad, particularly in developing and emerging countries. B. BUSINESS DIRECTION AND SITUATION

(FINANCIAL REPORT) 1. General conditions The social and economic situation in Germany in 2020 was heavily impacted by a crisis triggered by the coronavirus. The global spread of the virus and the measures taken to contain it meant that the economic slowdown that had already begun resulted in a major recession. Gross domestic product in real terms collapsed by 5.0% on the previous year, having still been growing by 0.6% in 2019. In order to soften the economic blow of the crisis, various government assistance schemes were launched around the world. For example, the German federal government launched a series of aid packages that included, among other things, an extension of the short-time work allowance and a temporary reduction in VAT rates in the second half of the year. While private consumer spending fell by 6%, government consumer spending rose by 3.4% and thus had a stabilising effect on the economy.

MANAGEMENT REPORT BY THE MANAGEMENT BOARD

The coronavirus pandemic also had a noticeable impact on the labour market. Despite the fact that companies are increasing their use of short-time working, the unemployment rate rose to 5.9% from 5.0% in the previous year. Developments on the financial markets were also heavily impact-ed by the course of the coronavirus pandemic last year. There was a dramatic collapse in share prices. The price of bonds increased at the prospect of further stimulus from monetary policy. Eco-nomic policy supported the economy around the world with widespread expansionary measures. The financial markets recov-ered relatively quickly from the shock of the pandemic. The DAX rose by 3.5% over the course of the year and closed the year at around 13,719 points. In the USA, even by mid-August the S&P 500 had already closed above the pre-crisis level. By year-end, the index was 16.3% higher than the previous year. The external value of the euro rose significantly over the past year. Against the US dollar, the euro appreciated by 9.2% over the course of the year and, according to the ECB, stood at USD 1.23 by year-end. 2. Financial performance indicators We use our strategic benchmark and capital planning strategy to plan and manage the development of our institute based on key figures and limits. We use the following key financial performance indicators, which are likewise derived from our business and risk strategy and which we regularly monitor with the help of our internal reporting system. As the most important performance indicator for the profitability of the bank, we calculate the ratio between the operating result before measurement gains or losses and the average total assets (hereinafter referred to as 'OR before measurement/ATA'). The key 'OR before measurement/ATA' indicator measures the earning power of the bank in relation to business growth, measured as the average total assets.

LENDING ACTIVITY

Reporting year 2019 Change EUR (thousands) EUR (thousands) EUR (thousands) %

Customer receivables 3,706,881 3,395,457 311,424 9.2

Portfolio investments 1,116,234 1,309,264 –193,030 –14.7

Accounts receivable from banks 199,707 435,155 –235,448 –54.1

The customer receivables increased by EUR 311,424,000 (9.2%) in comparison to the previous year, exceeding our planned growth of EUR 200,000,000. The expansion of this item was largely down to high demand for fund refinancing, which saw an increase of EUR 129,255,000. Customer receivables also include promissory note loans to the value of EUR 61,500,000. As the bank’s own investments, these are an alternative to portfolio investments. A negative trend in portfolio investments was observed as a residual product of the retail lending business. The reduction in accounts receivable from banks is mainly due to the sale of promissory note loans that were acquired in previous years as an alternative to portfolio investments.

BORROWING ACTIVITY


Liabilities towards banks 902,904 846,186 56,718 6.7

Savings deposits 315,580 309,904 5,675 1.8

Other deposits 3,157,668 3,183,561 –25,892 –0.8

Debts evidenced by certificates 427,682 427,676 5 0.0

Subordinated liabilities 57,294 45,289 12,005 26.5

Profit-sharing rights capital 400 2,400 –2,000 –83.3

We define the growth in client deposits and loans on the balance sheet as another key performance indicator for generating income and thus ensuring the future viability of our institute. The following sections cover the presentation, analysis and assessment of the individual financial performance indicators. 3. Presentation, analysis and assessment of business progression

TOTAL ASSETS AND OFF-BALANCE-SHEET BUSINESS


Total assets 5,326,240 5,266,397 59,842 1.1

Off-balance-sheet business*) 576,620 492,711 83,908 17.0 *) This includes the items under lines 1 (Contingent liabilities) and 2 (Other liabilities) of the balance sheet,

as well as derivative transactions.

Total assets were up by EUR 59,842,000 (1.1%). In our planning in the previous period, we estimated that there would be little to no change in our total assets. The reasons for the increase in total assets were the expansion of our lending business and the growth in liabilities towards banks. In off-balance-sheet business, we recorded growth of EUR 67,962,000 (17.9%) in irrevocable loan commitments. We assume that the overwhelming majority of these will be called in as loans. The growth of EUR 15,946,000 (14.2%) relates to contingent liabilities in the form of guarantee and warranty agreements. The amounts stated do not correspond to the actual payment flows to be expected from these agreements in future, as we believe the contingent liabilities will expire without claims being enforced.


4. Presentation, analysis and assessment of the financial situation

a) Profit situation The key performance components of the cooperative have devel-oped as follows compared to the previous year:

Performance Reporting year 2019 Changecomponents in EUR thousand in EUR thousand in EUR thousand %

Net interest income1) 65,685 65,079 606 0.9

Commission surplus2) 7,115 7,161 –46 –0.6

Administrative expenses 24,065 22,695 1,369 6.0

a) HR expenses 12,001 11,459 542 4.7

b) Other administrative expenses 12,063 11,236 827 7.4

Operating result before measurement gains or losses3) 46,242 47,717 –1475 –3.1

Measurement result4) –2,496 1,507 –4,003 –265.6

Result of ordinary activities 43,746 49,224 –5,478 –11.1

Tax expenditure 15,051 18,940 –3,889 –20.5

Transfers to the funds for general banking risks 24,100 26,000 –1,900 –7.3

Annual surplus 4,594 4,284 311 7.31) Income statement item 1 minus income statement item 2 plus income statement item 3 2) Income statement item 5 minus income statement item 6 3) Balance of income statement items 1 to 12 4) Balance of income statement items 13 to 16

The operating result before measurement gains or losses, calcu-lated as the annual surplus before transfers to the fund for general banking risks and tax, plus extraordinary income and measure-ment gains or losses, fell to EUR 46,242,000 in 2020 (previous year: EUR 47,717,000), i.e. 0.81% of the average balance sheet total (previous year: 0.90%). This exceeded the predictions made in the planning calculations of the previous period (EUR 36,849,000 or 0.67% of the average balance sheet total). This positive deviation from the plan is largely down to unexpected dividends from limited partnership shares.

In our planning for the 2020 financial year, we estimated that the volume of client deposits would remain the same as in the previous period. On the balance sheet date, we recorded a slight decrease in client deposits by EUR 20,217,000. We also attribute this to persistently low interest rates. To refinance our growth in the retail lending business, liabilities primarily towards banks were increased by EUR 56,718,000. Services and commission business Commission income recorded a decrease of EUR 46,000 (0.6%). This is largely down to commission expenses for credit brokering increasing by EUR 98,000. Investments In the 2020 financial year, the installation of a new lift system in our premises at Gildehofstrasse in Essen was completed. Of the total investment of EUR 781,000, the year 2020 accounted for EUR 405,000. To ensure that all departments of the bank could remain opera-tional despite the crisis, the majority of our employees were equipped with mobile workstations. To achieve this, investments of EUR 112,000 were made. Personnel and social aspects At the end of the year, the bank had 144 employees, of whom 39 were part-time employees and 5 were trainees. The average number of employees stood at 138.9. Our employees made use of professional development opportunities by participating in a total of 351 days of training. Alongside internal training courses and use of the services provided by internal educational facilities, we also provide the opportunity to attend seminars from other providers.

The increase in administrative expenses was a significant factor behind the decrease in the operating result before measurement gains or losses compared to the previous year. This is partly due to an increase in staffing costs, resulting from the expansion of employee capacities in line with the growth of the bank. The increase in other administrative expenses is mainly due to an increase of EUR 349,000 in contributions to the restructuring fund (known as the 'bank levy'), as well as an increase of EUR 250,000 in data processing costs. Compared to the original plans, administrative expenses were EUR 935,000 lower in 2020. Excess expenses of EUR 2,496,000 arose from measurement gains or losses (previous year: revenue surplus of EUR 1,507,000). After deduction of taxes, we allocated EUR 24,100,000 to the fund for general banking risks. The net profit amounted to EUR 4,594,000 (previous year: EUR 4,284,000). b) Financial and liquidity situation The business and refinancing structure of the bank is largely determined by the client business as a basis for liquidity level. Our refinancing structure means that we are largely independent of developments on the money and capital market. During the past financial year, the solvency of our institute was verified in terms of type, volume and maturity. The monthly Liquidity Coverage Ratio (LCR) reports always showed a value of over 100%. As at 31/12/2020, the ratio was 142% (previous year: 170%). In the event of fluctuations in liquidity, the bank is able to fall back on highly liquid assets and ample liquidity reserves in the form of bank deposits. Further refinancing opportunities are pro-vided by our involvement in the cooperative finance group and the cooperative liquidity network, as well as the refinancing facil-ities of the ECB. This ensures that the bank is able to meet its payment obligations at all times.

The coronavirus crisis has had no lasting impact on our financial and liquidity situation. In spring 2020, there was an increase in withdrawals of customer deposits. The aforementioned measures to compensate for fluctuations in liquidity have proven to be ef-fective during this period. c) Financial situation Equity capital/capital resources The equity capital structure of the bank is shaped by the paid-up capital shares of our members and generated reserves, as well as the fund for general banking risks. The growth in balance-sheet equity capital largely results from allocations to the fund for general banking risks of EUR 24,100,000. The share of the balance-sheet equity capital in the balance sheet total increased from 8.7% to 9.3%. Within the scope of the banking supervisory reports, the precau-tions taken by our bank for the proper determination of tier 1 capital and supplementary capital are deemed appropriate. According to the contractual and statutory provisions, the capital instruments used meet the requirements of the CRR for regulatory recognition as tier 1 and supplementary capital. The bank’s equity capital complies with statutory provisions. The return on investment as defined by Section 26a (1) sentence 4 of the German Banking Act [KWG] stands at 0.09%. Balance-sheet equity capital, capital resources and capital ratios developed as follows compared to the previous year:


Equity capital according to balance sheet1) 497,446 460,111 37,335 8.1

Capital resources (Article 72 CRR) 510,520 474,056 36,464 7.7

Core tier 1 capital ratio 13.0% 11.8%

Tier 1 capital ratio 13.0% 11.8%

Total capital ratio 16.2% 14.7%1) This includes the liabilities items 9 (subordinate liabilities),

10 (profit-sharing rights outstanding), 11 (fund for general banking risks) and 12 (equity capital).


Key asset and liability structures On the assets side, customer receivables account for 70% and securities for 21%. As regards liabilities, 65% are accounted for by liabilities towards clients, and 25% by liabilities towards banks (including debts evidenced by certificates). Security categories Of the portfolio investments, 83% (EUR 927,107,000) is ac-counted for by bonds and other fixed-interest securities (assets item 5). Of this, EUR 399,153,000 is bonds and debentures issued by public authorities. EUR 527,954,000 was invested in bonds and debentures issued by credit institutions and companies. Shares and other floating rate securities account for 17% (EUR 189,128,000) of our portfolio investments. These are investment funds that are invested in securities and real estate. Risk exposure and risk coverage Acute lending-related risks are shielded by individual value adjustments. General value adjustments, precautionary reserves and the current year’s profits are available for latent risks. Bonds and other fixed-interest securities amounting to a total of EUR 97,022,000 (after the deduction of precautionary reserves) were allocated to current assets and were valued strictly at the lower of cost or market value. We allocated the remainder of this item to fixed assets, and valued it in accordance with the rules applicable to the component parts of the fixed assets. No amorti-sations were made on the lower price value, as a non-permanent reduction in value is to be expected. In order to determine wheth-er reductions in value are likely to be permanent in the case of bonds and other fixed-interest securities, we base our considera-tions on the interest paid to date in line with the agreement and repayment at nominal value upon maturity.

As regards shares and other floating rate securities, which comprise solely shares in investment funds, the sum of EUR 182,473,000 was allocated to fixed assets. Where there were indications of potential permanent impairments in value, the corresponding depreciation adjustments were made. Derivatives As a hedge against interest fluctuation risks for individual securities and receivables, interest rate swaps amounting to EUR 399,794,000 were concluded. Valuation units are in place as micro-hedges. These derivative financial instruments are val-ued in line with the provisions under Section 254 of the German Commercial Code [HGB]. In addition, interest rate swaps of EUR 1,255,700,000 were used in order to reduce the general interest fluctuation risk in the inter-est ledger. The latter are exempt from imparity-based individual valuations. These derivative financial instruments are valued as part of an overall evaluation of all interest-bearing items in the banking book in line with the principle of loss-free valuation. Protection scheme Our cooperative is affiliated with the protection scheme of the National Association of German Cooperative Banks [Bundes- verband der Deutschen Volksbanken und Raiffeisenbanken e.V.], which consists of a guarantee fund and a guarantee network. With the entry into force of the German Deposit Protection Act [Einlagensicherungsgesetz, EinSiG] on 3 July 2015, the BVR Insti-tutssicherung GmbH (BVR-ISG protection scheme) joined the existing protection scheme of the BVR (BVR-SE) as an officially recognised deposit protection scheme. The BVR-SE is an additional cooperative protection scheme that runs in parallel to the BVR-ISG protection scheme as part of a dual system. In accordance with Section 1 EinSiG in conjunction with Section 1(3d), first sentence of the German Banking Act [Kreditwesengesetz, KWG], the bank joined the BVR-ISG protection scheme, effective as of 3 July 2015.

5. Summary statement on financial situation Overall, we find the course of business and the financial situation of our company to be favourable compared to the original plans. For the most part, we were able to achieve, and in some cases exceed, our original target figures in our key financial perfor-mance indicators. Although the growth of client deposits in the 2020 financial year fell short of our expectations, accounts receiv-able from customers developed better than anticipated. The increase in OR before measurement/ATA also exceeded our forecast. The bank’s financial position continues to be characterised by adequate equity capital, as the supervisory requirements were met both in the previous year and in the current financial year. The financial position and liquidity level correspond to both supervisory and operational requirements. C. RISK AND OPPORTUNITY REPORT

RISK MANAGEMENT SYSTEM AND PROCESS Our business and risk strategy is based around the demand situ-ation from our members, as well as our private and institutional clients. A corporate planning strategy was developed in line with our business and risk strategy, which we expect will allow us to ensure long-term support for our members and clients with regard to financing requests, asset investments and services. As with all business undertakings, banking is not free of risk. Alongside general risk factors (e.g. economic fluctuations, new technologies, changes in competition, other changing circum-stances), there are also specific banking risks, which include in particular credit and market risks as well as liquidity and opera-tional risks.

We manage the development of our institute with the help of our five-year benchmark and capital planning strategy. As part of our strategy revision process, we use expert estimates and market forecasts to build our assumptions regarding future market and volume developments. The potential effects on income and assets are determined using simulated calculations with the support of the VR Control management software. The business and risk strategy, as well as the sub-strategies, are updated regularly as part of the strategy review process defined by us. The strategy model used by the bank indicates the organi-sational framework for the strategy review and for the interlink-ing of strategic and operational overall bank management. The aim of the risk strategy and risk management of our bank is to achieve the planned interest income with the lowest possible risk. It is crucial for the management of risks that they are identi-fied and measured. The bank must be able to bear the risks taken. This means that the bank must hold an appropriate level of equity capital to account for the assessed risk. These considerations are therefore dependent on the determina-tion of risk-bearing capacity. When calculating the risk-bearing capacity, in addition to the income components, only those com-ponents of equity that are not required in order to comply with the supervisory equity capital requirements can be considered as aspects of status as a going concern. Otherwise, if the risks were to materialise at the level that has been budgeted for, it would no longer be possible to satisfy the supervisory equity capital requirements. After determining the risk-bearing capacity, budgets are to be drawn up for each individual risk component, which limit both the individual risks and, in aggregate, the overall risk to the bank. The budgeted amount is based on the degree of risk utilisation, the planned changes in volume and any foreseeable strategic management measures.


Risk is measured using appropriate value-at-risk (VaR) models. The quantified risks are calculated in addition to the utilisation of the limit system. We determine the risk-bearing capacity for the current financial year in line with the start-of-year income statement. In the risk scenario, we measure the risks with a confidence level of 99%. With the exception of the interest fluctuation risk, where the effects of residual maturity reduce the degree of risk as of the reporting date, all risks are calculated on a holding period of 250 days. From the mid-year point, we establish an updated risk-bearing capacity for the following year in order to take into account an appropriate period beyond the current financial year. We consider the holding period to be appropriate due to the assessment and risk measurement intervals, as well as the fact that the organisational structure of our company means that the communication and decision-making channels are relatively short. Calculations relating to risk-bearing capacity are updated on a monthly basis. Within the scope of these calculations, the main quantifiable default, market and investment risks are compared against the risk coverage potential. In accordance with the requirements of Article 435 CRR, the busi-ness and risk strategies are communicated to and discussed with the Supervisory Board. The risk management systems and proce-dures in place meet the requirements of MaRisk [the minimum requirements for risk management] and are appropriate to the profile and size of the bank, as well as its business and risk strategy. The primary aim of our early risk detection and monitoring system is to avoid negative deviations from our profit, equity and liquidity planning, as well as to identify risks in good time so that countermeasures can be initiated where necessary. However, the integration of risk management into the overall bank manage-ment system also allows us to identify and act upon opportuni-ties. In light of the growing complexity of the markets in the banking business, we regard this as an essential task.

Risk controlling entails identifying, quantifying and monitoring risks. The compliance officers aim to ensure that employees act in accordance with the rules. The responsible organisational units report directly to the Management Board. In light of this, we have established a risk control and management system with appropri-ate tools to allow us to initiate countermeasures if it should be-come necessary. The internal reporting system informs the decision-makers about changes in the business and risk situation at an early stage so that they can intervene to mitigate them. Types of risk The risk assessment carried out on the reporting date has a con-sistently defined forecast period of two years, in line with the forecast period, and identifies and evaluates any risks that may jeopardise the bank’s existence. There were no risks to the bank’s existence (material risks with major effects) for the assessment period on which this report is based. The degree of risk utilisation measured internally within the framework of the risk-bearing capacity is assured. Potential concentrations of risk are taken into account as part of the risk assessment. Concentrations of risk must also be considered in terms of the income situation of our bank (concentrations of income). In our overall banking strategy, we have integrated aspects of sustainability into all of the primary and secondary strategic ob-jectives. Dealing with sustainability risks is part of our business model. Sustainability risks cannot be quantified as a key figure. Due to the impact that sustainability risks have on other types of risk, we have decided that sustainability risk should not be assessed as a separate risk type. Sustainability risks are therefore included within the other types of risk.

Credit risk Credit risk includes the following types of sub-risk: The default risk is the risk that a contractual partner cannot meet their obligations, either in part or in full. The counterparty, replacement and fulfilment risk is the risk that, due to the default of a contractual partner, non-realised gains from pending transactions can no longer be collected. This can lead to additional default risks, which in turn impact the credit risk. The country risk is a risk that is derived not from the contractual partner itself, but from the country in which it is registered. Political or economic crises in this country can lead to transfer problems, resulting in additional default risks. We assess shadow banking risk as a sub-type of country risk. A finance company is considered a shadow bank if it is not subject to any regulation that is comparable with European standards. When granting SEPA direct debit framework contingents, we assess the risk of a reimbursement obligation if, in the event of a charge back, the payee does not have sufficient credit or an available current account facility. In addition, there are certain migration and spread risks associated with securities. Migration risk means the risk of potential loss in value due to rating changes, and counterparty-related spread risk refers to the risk of risk premium changes on the money and capital market. From a regulatory perspective, we classify the credit risk as a material risk. We describe a risk as material if it amounts to more than 5% of the total risk cover available for internal risk meas-urement. In line with our quantitative benchmarks, of all the sub-types, we define default and migration risks as material risks.

In the client business, we control credit risk by using VR rating systems to assess the creditworthiness of individual commit-ments. In order to quantify the risk arising from loans upwards of EUR 250,000 granted to not-for-profit organisations from the hospitals, retirement homes, care homes, charities and sponsoring organisation sectors, we use the Not-for-Profit Rating (NPO Rat-ing) developed together with other Church banks. For other client groups, we use the VR Rating for private clients, professionals/traders, small and medium-sized enterprises, and the VR Rapid Rating for corporate customers, the VR Renewable Energy Rating and the VR Real Estate Rating. With the help of VR Control software, we are able to quickly iden-tify adverse developments in the credit portfolio and initiate mit-igating action at an early stage. The bank uses the credit portfolio model for client transactions (KPM-KG) module to calculate expected and unexpected losses (credit value-at-risk) from the retail lending business on a monthly basis. The risk is calculated in a multi-stage process, which is based on the aggregate unsecured shares in the risk classes and/or groups of the receivables portfolio, as well as the probability of default and certain industry parameters. When calculating the risk-bearing capacity, the retail lending business is allocated a credit risk budget of EUR 78 million. As of 31/12/2020, the credit risk in the client business amounted to EUR 59 million and the budget was therefore utilised to a level of 76%. As of the report-ing date, the risk volume of our customer receivables was EUR 4411 million. A 95.8% share of the volume falls under normal support (previous year: 95.0%). The volume of intensive support accounts for 3.9% of the risk volume. 0.3% of the risk volume is classified as problem loans. The amount of individual value adjustments fell from EUR 13.6 million in the previous year to EUR 5.8 million.


As part of the risk-bearing capacity concept, we calculate the credit risk for the bank’s own investments on a monthly basis, with the aid of the credit portfolio model for proprietary trading (KPM-EG). The calculations are based on various market partner sectors that have differentiated spread and rating migrations, spread distributions and migration matrices. When calculating risk-bearing capacity, the bank’s own investments are assigned a credit risk budget of EUR 28 million, of which 68% is utilised. As of 31/12/2020, the full credit risk of the bank’s own investments, including the spread and migration risks, stood at EUR 19 million. The calculated expected loss is taken into account when deter-mining the risk coverage potential and is regularly compared with the accumulated measurement result. If the occurrence of higher debits is than expected, the excess amount is identified as an additional risk in the utilisation of the limit for counterparty default risks. For the bank’s own investments, we use DZ Bank’s rating infor-mation for securities, which is derived from external rating agen-cies. We control the credit risks of floating rate securities as a sub-type under market risks. The bank counteracts turbulence on the financial markets by setting structure and issuer limits and not including any securities in its portfolio with a rating below 'investment grade'. Market risks The market risk comprises the risk of adverse changes in market prices or market parameters (yield curve, share prices, exchange rates, etc.) that result in deviations from the planned result. The focus here is solely on the effect on profit. The impact on liquidity is considered under the liquidity risk.

Within the scope of risk management, the market risk is divided into interest fluctuation risk, fund risk and currency risk. Interest fluctuation risk in turn is made up of the interest margin risk and the market value risk (depreciation risk). Interest margin risk is the danger of the bank's gross interest margin shrinking due to a reduction in the average interest charged and/or due to an increase in the average interest on deposits. We define market value risk as the risk of losses that result from falling market prices for our assets and may require depreciation adjustments. By fund risks we mean the risk that the asset value of securities or real estate funds will decline more than expected. Currency risks arise when the value of foreign currency assets or liabilities falls due to fluctuating exchange rates, as these are not financed in the same currency. Based on the risk inventory, the bank classifies the interest fluc-tuation risk as ‘material’ from a regulatory perspective and as ‘high’ from an economic perspective, with a high probability of occurrence and a high degree of potential damage that may sig-nificantly impact our net assets, financial position and operating result. The risk is managed in line with the income statement. As part of the income statement-based management of the interest mar-gin risk, the change in net interest income is simulated every month for the year-end and for the following year, taking various interest scenarios into account. The calculation is based on our own statistically determined interest rate elasticities and moving averages, as well as the expected business structure. These are determined with the help of the VR Control INTEREST MANAGE-MENT module. The bank measures risk and stress using the VR interest scenarios provided. These describe different interest rate development scenarios, which map interest rate fluctuations with a probability of 99%. In each case, a shift scenario simulates an increase or decrease in the entire yield curve. Other scenarios are used to calculate a flattening or steepening of the yield curve. We also simulate how the interest margin changes if the interest rate structure remains constant throughout the assessment period.

Our interest rate forecasts are used to calculate how interest rate trends that differ from this would affect annual net profit. The scenario with the highest negative deviation is used as the basis for the risk. According to the interest fluctuation risks measured on 31/12/2020, our profits for 2021 and 2022 will only be significantly squeezed should market interest rates change to an unusually dramatic extent. The bank uses the aforementioned fluctuations in the yield curve to simulate market value risks for interest-bearing securities. According to our definition of materiality, the currency risk is immaterial. We counteract currency risks by means of matching hedges for our currency exposure. Unsecured currency positions are only present in insignificant amounts. A portion of the bank’s own investments is held in securities and real estate funds. The risk from the investment funds is controlled via the fund risk. We classify the risk as material because it amounts to more than 5% of the total risk cover available for internal risk measurement. The holding period for the risk indica-tors is 250 days as standard and deviations are calculated to a confidence level of 99%. We use an ex-ante value-at-risk indicator to measure the security fund risk. The ratio accounts for all risks contained in the fund. As yet, diversification effects are not included. The risk models of real estate funds are still in development. We do not yet have a standardised risk model. In addition to the ex-post value-at-risk indicators provided by the capital management companies, we have established a minimum risk – a risk threshold based on our experience in fund financing. As part of the annual risk inventory, we look at the individual holdings of all securities and real estate funds and check the relevance of the risk indicators provided by the capital manage-ment companies.

As part of the risk-bearing capacity calculation, we allocated a risk budget of EUR 6.3 million to interest fluctuation risks and a budget of EUR 29 million to fund risks. As of the reporting date, our interest fluctuation risks – including market value risks – amounted to EUR 1.4 million. This corresponds to a budget utili-sation of 23%. The fund risk amounts to EUR 22.1 million and the budget is utilised to a level of 76%. Liquidity risks Fundamentally, liquidity risks can appear in the form of insolvency risk, refinancing risk or market liquidity risk. Insolvency risks arise when payment obligations cannot be met on time or to an adequate degree. Refinancing risks arise when liquidity cannot be obtained under the expected conditions or sufficient refinancing funds are not available. Market liquidity risks arise when investments cannot be liquidated at the required time or to the planned extent. The bank considers the overall liquidity risk to be material, within the context of supervisory law. We assess the refinancing risk and the market liquidity risk as immaterial. Our experience in the recent crises has demonstrated that clients view us as a safe haven due to our membership of the liquidity network, and that they invest their deposits with us without any crisis-specific interest rate surcharges. However, we do assess the withdrawal risk (as a sub-type of insolvency risk) as material, as we have noted a pattern of clustering within client deposits and there is a potential risk of deposit outflows. The liquidity risks are controlled qualitatively – firstly by limiting the market liquidity risk by means of selected types of investment, and secondly by monitoring the general financing risk in the form of regulatory liquidity ratios and specially defined precautionary values.


The short-term liquidity coverage requirements are monitored using the regulatory Liquidity Coverage Ratio (or LCR). We have defined our risk tolerance by setting a warning limit of 125%. As an additional early warning indicator for liquidity risk during the year, we use a liquidity overview in which we assess forward liquidity exposure and liquidity coverage potential. Given our quarterly reporting, we consider the survival horizon of at least four months to be appropriate. In addition, Treasury uses maturity schedules and client-specific behavioural forecasts to monitor and manage the liquidity level. An emergency plan has been drawn up for liquidity shortages. For the time horizon of more than one year, we are already ob-serving the Net Stable Funding Ratio (NSFR) which is due to come into force from mid-2021. This measures the relationship between the stable refinancing available on the liabilities side, and the less liquid assets. The relevant parameters of the NSFR are already taken into account when making risk management decisions. We plan to set a minimum value above the statutory minimum requirement of 100% in the first half of the year. Our five-year benchmark planning represents our medium to long-term refinancing plan. Here we have introduced internal accounting for liquidity costs and utilisation at the business-wide level in order to regularly analyse our refinancing expenses. Additional stress tests are conducted quarterly, in which the institute’s own volume developments are combined with market- wide scenarios.

Operational risks Operational risks relate to the risk of losses that arise as a result of the inadequacy or failure of internal processes, people or sys-tems, or as a result of external events. The bank has established standardised measures for differentiating and delimiting opera-tional risks from the other categories of risk, which are outlined in the organisational guidelines. We specify a fixed amount for operational risks, based on a qual-ified ex-ante risk assessment. Equity is then set aside as a risk buffer for the specified amount, and is not available for other risks. We assess the plausibility of the risk assessments by using the risk/loss database to analysing the history. As part of the self-assessment, those responsible for risk make estimates of risk values in seven risk categories by analysing the probability of occurrence and the amount of potential damage. The categories assessed include internal and external fraud, job security, property damage, effects of business interruptions or disruptions, legal risks and process management risks. In the case of operational risks, we agree with the regulatory assessment that they are material, despite the fact that, accord-ing to our estimates, neither the sub-risks nor the sum of all risk categories are of major economic significance. We try to minimise operational risks by using a comprehensive competency system, digitisation and the four-eyes principle. We counteract legal risks by using the forms developed within the cooperative and by obtaining legal advice in the event of legal disputes.

IT risk is a special type of operational risk. Our outsourcing man-agement team and IT department receive regular reports from our IT service provider about the IT risks affecting the data centre, including a description of the measures taken when problems arise. The Management Board and the Supervisory Board were promptly notified of the rectification by the IT service provider of issues identified in the course of special audits by the financial supervisory authority. The agreed milestone planning was adhered to. There is comprehensive insurance cover in place for all significant damage events in relation to internal IT risks. Operational emer-gency plans have been specially tailored to the requirements of the IT department. Investment portfolio risk The investment portfolio risk is the danger of acquired holdings leading to losses due to the provision of equity capital, profit/loss transfer agreements or liability risks. There are two main motivations for entering into participation investments. The first is to build up investments within the coop-erative financial association – a strategic approach to strengthen the financial power of the group. The second is to invest in other service companies that provide extensive services to the Church and its environment – in order to improve the bank’s revenue and sales structures. We still have real estate investments in our port-folio that are being completely dismantled. We measure the risk of affiliated investments and other Church- related investments using a flat-rate approach, based on the default risk associated with subordinate bonds. When measuring the risk of our real estate investments, we adopt the minimum risk of real estate funds due to the nature of the fund, as the investment companies do not provide any risk indicators.

According to our benchmark, qualitative assessment of our DZ Bank investment deems it to be material, as the cooperative central bank is an important link in the liquidity network and, without a central bank, the credibility of the cooperative business model would come under question from an economic perspec-tive. Our other investments in financial cooperative companies and Church-related service providers are of little significance due to the investment volume, but are included at a flat rate in the risk calculation. Due to the low volume of these investments in relation to other asset types, as well as our focus on the financial cooperative and Church-related service providers, we do not impose any further industry limitation. There are no plans for active expansion. The Supervisory Board must be involved in any investment decisions for new investments. Other risks Under this category, we analyse all non-bank-specific risks. We pay particular attention to potential business, sales and pro-ductivity risks, risks to our reputation and other potential risks. We regularly review the materiality of these risks. We currently classify all other risks as immaterial. Risk reporting in relation to the use of financial instruments For asset and liability management, the bank uses balance-sheet deposit products as well as interest rate hedging instruments to control fixed interest surpluses on the asset side. The fixed-rate payer swaps used for this purpose serve exclusively to minimise the interest rate risk. Because the swaps are exclusively agreed with the cooperative central bank, we are able to minimise the counterparty and fulfilment risk. No derivatives are used for speculative purposes.


Risk overview In line with the risk management procedures used to determine the risks and the risk coverage potential, the risk-bearing capacity was assured at all times in the 2020 reporting year. According to our current assessment, the risk scenarios we have defined will not have an adverse material effect on the bank’s future develop-ment either. There are no discernible risks that threaten the bank's existence. Overall, in our estimation, there have been no significant changes to the risk situation compared to the previous year. So far, our assessment that the majority of our clients are less affected by the economic impact of the COVID-19 pandemic and less de-pendent on the weakening global economy has been confirmed. Some of our clients operate in sectors that can be described as ‘systemically relevant’ and are therefore supported by assistance schemes. On the reporting date, the total risk utilisation stood at 72%. All sub-limits are adhered to. In line with our business strategy, the greatest risks by far are taken in our retail lending business. Hospitals account for a significant share of our customer loan portfolio. The passing of the COVID-19 Hospital Relief Act in Germany has put into perspective the concerns about possible profitability and liquidity losses in acute hospitals. The measures (quick invoicing, health insurance payments, etc.) have generated sufficient liquidity to meet ongoing payment obligations. The crucial factor will be how the hospitals manage to find their way back to normality. Bed occupancy must be increased again in order to resume profitable working without supportive measures in place.

Our investments in sectors that risk permanent damage to eco-nomic performance, e.g. in bricks-and-mortar retail or the catering and hospitality sectors, primarily fall within fund financing and are under intensive observation. We have analysed all our financing in detail and are in contact with the capital manage-ment companies. It is only our fund financing investments in the retail sector that are more severely affected, and only in some cases. It is to be expected that anchor tenants will reduce their number of locations, which will increase vacancy rates. If the properties are re-let, lower rental prices can be expected. We can therefore assume that there will be negative effects on the market values. The longer the pandemic lasts, the greater the existential threat to certain industries. With the early risk detection procedures we have in place, along with the communication between the market departments and our customers, we should be able to detect risks in good time. Interest and repayment deferral requests in the private client segment do not represent a significant earnings risk. In the insti-tutional segment, it was primarily inventory credit lines that came under question, but most of these are now complete again. The liquidity situation tightened for a short time in mid-March 2020 due to the massive drop in prices on the financial and capital markets, resulting from institutional clients making use of their right of termination with respect to cancellation fees. This put a huge strain on the LCR indicator. We took measures to mitigate the risk and stayed within the internal warning limit of 125%. We manage interest rate risks at least quarterly or as required. According to the interest rate risks measured on 31/12/2020, our profits for 2021 and 2022 will only be significantly squeezed should market interest rates change to an unusually dramatic extent.

We have equipped most of our employees with new mobile workstations. The COVID-19 crisis team issued instructions so that operations could continue in all areas, while also protecting our employees and our customers. The bank has demonstrated that it is equipped to handle crisis situations (with emergency remote operation), provided that the mobile workstations are operational. We have not identified any increased operational risks or losses that can be attributed specifically to the pandemic. The new Basel III and SREP provisions have given rise to increased capital requirements. Capital resources correspond to the regula-tory requirements. The internal warning limit of 14.5% defined for risk control was also complied with. It should be noted that in mid-2020, due to the COVID-19 pandemic, the European legis- lators brought the date forward for the planned easing of risk calculations, which has had a positive effect on the capital ratios. The stricter requirements that are due to come into place from 2024 onwards are expected to put a strain on capital ratios. We have analysed the potential effects and taken them into account in our capital planning. D. PROGNOSIS REPORT The prognoses for the development of our institute over the next two years represent estimates we have calculated on the basis of the information available to us at the time of writing this management report. It should be noted that the prognoses may prove incorrect due to changes in the underlying assumptions. We base our expectations of interest rate developments for 2021 and 2022 on the central banking forecast. We therefore expect interest rates to remain low.

Our anticipation that there would still be solid demand in 2020 – in both lending to Church organisations and in private retail lending – has been confirmed. Studies from 2020 by various associations and consultancies support our assumption that loan demand will remain high over the next two years in view of the investment backlog in the hospital sector as well as the increased demand for places in elderly care homes. The further decline in long-term interest rates also means that the return premiums on residential real estate compared to govern-ment bonds have increased yet again, and that residential real estate remains an attractive form of investment. We therefore expect to see a continuation of the high demand from residential construction companies and real estate fund clients. In terms of financing, we will have to pay particular attention to location, careful market analysis and cost security, and use a risk-differen-tiated business model. In real estate financing, the high demand is for the most part still attributable to the period of low interest rates. However, we are also observing that, in some cases, the strength of demand is also due to people valuing their home environment more highly as a response to COVID-19. For some people, their own homes have become – be it voluntarily or involuntarily – both a workplace and a place of retreat. In our opinion, this will have intensified the demand for larger living spaces. As a result of persistent negative interest rates, in 2020 we began to introduce deposits with negative interest rates above a basic allowance for all institutional clients. The fact that there have been no liquidity shortages as a result of substantial cash out-flows shows that our planning was successful. For the years 2021 and 2022, we are planning for further growth in client deposits in line with the growth in receivables. For our private clients, we plan to refrain from increasing negative interest rates for the next two years in order to transfer private client deposits to our sus-tainable product range.

28 29 BIB ANNUAL REPORT 2020 // MANAGEMENT REPORT BY THE MANAGEMENT BOARD BIB ANNUAL REPORT 2020 // REPORT OF THE SUPERVISORY BOARD

We missed our overall target in the commission business for 2020 by EUR 585,000 because our KCD microfinance funds were closed for new money until June 2021 due to COVID-19. How- ever, we did place the new sustainable investment products as planned. We are very confident that, with the re-opening of microfinance funds, the expansion of our qualified investment consultancy and the expansion of innovative, sustainable invest-ment products, we will increase our commission income in 2021. Our benchmark planning is based on the following key assump-tions: For the year 2021, absolute growth of EUR 200 million is assumed in the retail lending business and the same amount in client deposits. By way of precaution, we predict growth of EUR 150 mil-lion in each case for the year after. The net interest income is calculated on the assumption that the interest rate level will remain low and that the volume of business will increase. Special factors (including a major loan repayment and dividends from limited partnership shares in real estate funds) had a markedly positive effect on the 2020 interest income (EUR 65.7 million). Without special factors, we expect a net interest income of EUR 53.2 million in 2021. We also predict our commission surplus to increase by around EUR 0.6 million to EUR 7.7 million. In terms of personnel expenses, we have accounted for the regu-lar wage increases, known individual adjustments and expansion of employee capacities. Due to the significant expansion of our employee capacities in the course of 2020, the new salaries will

not fully show in personnel expenses until 2021. We anticipate a significant increase in material costs due to further investments in the bank’s infrastructure. A further significant increase in contri-butions to the European bank restructuring fund is particularly worthy of note. Administrative expenditure increased significantly by EUR 2.9 million as a result of the aforementioned effects. For 2021, we anticipate an operating result before measurement gains or losses of EUR 31.4 million (OR before measurement/ATA: 0.56%). For the year 2022, we anticipate a result of approx. EUR 29.9 million (OR before measurement/ATA: 0.51%). In terms of our capital planning for the years 2021 and 2022, we are not currently aware of any additional capital requirements that may affect our planned growth in the retail lending business, which is based on allocation to reserves and the acquisition of paid-up capital shares. It has been assumed that the current reg-ulatory requirements will remain in effect in subsequent periods. The total capital ratio as of 31 December 2020 was 16.2%. In accordance with our capital planning, we anticipate a ratio of 16.0% for 2021. For the following year, we anticipate a ratio of 15.8%. We deem the distance to our internal warning limit of 14.5% to be appropriate. No major events, as defined by Section 285 (33) HGB, have oc-curred after the close of the reporting period. Essen, 07 May 2021 BIB – BANK IM BISTUM ESSEN eG

The Management Board

REPORT OF THE SUPERVISORY BOARD

In the 2020 financial year, the Supervisory Board complied with the full scope of its duties and obligations, as specified by the law, the articles of association and the rules of procedure. It was informed at regular intervals about business developments, the liquidity, income and the risk situation of the bank. The Super- visory Board advised the Management Board on major corporate policy matters, procedures and strategic issues. These were discussed and, where necessary, adopted in four joint meetings with the Management Board. In addition to economic develop-ment and strategic orientation in line with its supervisory require-ments, the focus of the Board was on interest rates, liquidity management and the effects of the ongoing pandemic. The Risk Committee established by the Supervisory Board to monitor the risk situation met four times in the reporting year to discuss the bank’s risk situation with the Management Board. The Risk Committee is chaired by Ludger Krösmann; its other members are Dr Doris König and Dr Heinz Joachim Koch. The Supervisory Board’s Executive Committee consists of Ludger Krösmann, Dr Doris König and Father Michael Baumbach MSF. It convened twice to discuss matters relating to the Management Board and to prepare strategic Supervisory Board decisions, as well as to conduct the evaluation of the Management Board and Supervisory Board required under Section 25d (11) clauses 3 and 4 KWG. The results of the committees are reported to the Super- visory Board in the subsequent Supervisory Board meetings.

The members of the Supervisory Board – Ludger Krösmann, Father Michael Baumbach MSF, Henrike Berger, Ute Berghaus, Dr Doris König, Dr Heinz Joachim Koch and Michael Neuhaus – were responsible for arranging any training they deemed necessary for their role on the Supervisory Board. The bank provided appropriate support here. The Supervisory Board reviewed and endorsed the 2020 financial statements, along with the management report and the proposal for the appropriation of net profit. It approved the Management Board’s proposal for the appropriation of net profit. The proposal complies with the requirements of the articles of association. At the time this report went to press, the statutory audit of the financial statements by the Genossenschaftsverband – Verband der Regionen e.V. had not yet been completed. The Supervisory Board expects the 2020 financial statements to be issued with an unqualified opinion. At the end of this successful year, the Supervisory Board would like to thank the Management Board for its trustworthy cooper- ation, and to express its appreciation to the Board and to all employees for their hard work and success in 2020. Essen, May 2021

Ludger Krösmann (Ass. jur.) Chairman of the Supervisory Board

DR PETER GÜLLMANN JOHANNES MINTROP MANFRED SONNENSCHEIN

MANAGEMENT BOARD OF BIB–BANK IM BISTUM ESSEN eG

30 31 BIB ANNUAL REPORT 2020 // 2020 FINANCIAL STATEMENTS

Reporting year Previous year EUR EUR EUR EUR EUR thousand 1. Payables to banks a) Due on demand 8,985,573.38 10,025) b) With agreed term or period of notice 893,918,911.17 902,904,484.55 836,162)

2. Payables to customers a) Savings deposits aa) With a period of notice of three months 290,894,917.33 283,726) ab) With a period of notice of more than three months 24,684,589.03 315,579,506.36 26,178) b) Other payables ba) Due on demand 1,139,130,724.27 1,022,159) bb) With agreed term or period of notice 2,018,537,599.66 3,157,668,323.93 3,473,247,830.29 2,161,401)

3. Debts evidenced by certificates a) Bonds issued 427,681,899.99 427,676) b) Other debts evidenced by certificates 0.00 427,681,899.99 0) of which: money market papers 0.00 (0) acceptances outstanding and promissory notes in circulation 0.00 (0)

3a. Held for trading 0.00 0)

4. Trust liabilities 0.00 0) of which: Trust loans 0.00 (0)

5. Other liabilities 1,990,531.89 15,181)

6. Prepayments and accrued income 2,505,059.79 1,501)

6a. Deferred tax liabilities 0.00 0)

7. Accruals a) Accruals for pensions and similar commitments 16,250,527.00 15,066) b) Tax accruals 2,689,556.00 5,905) c) Other accruals 1,524,021.15 20,464,104.15 1,306)

9. Subordinated liabilities 57,294,151.49 45,289)

10. Profit-sharing rights outstanding 400,000.00 2,400) of which: due within two years 400,000.00 (2,400)

11. Fund for general banking risks 225,100,000.00 201,000) of which: special items in accordance with Section 340e (4)

of the German Commercial Code (HGB) 0.00 (0)

12. Equity capital a) Subscribed capital 92,673,300.00 91,378) b) Capital reserve 0.00 0) c) Earnings reserves ca) Statutory reserve 60,458,240.50 59,539) cb) Other earnings reserves 56,925,591.22 117,383,831.72 56,221) d) Net profit 4,594,418.57 214,651,550.29 4284)

Total liabilities 5,326,239,612.44 5,266,397)

Reporting year Previous year EUR EUR EUR EUR EUR thousand 1. Contingent liabilities a) Contingent liabilities on rediscounted bills 0.00 0) b) Contingent liabilities in respect of guarantees and indemnity agreements 128,399,002.39 112,453) c) Contingent liabilities in respect of collateral given for third-party liabilities 0.00 128,399,002.39 0)

2. Other obligations a) Repurchase obligations from reverse repo agreements 0.00 0) b) Placement and underwriting commitments 0.00 0) c) Irrevocable loan commitments 448,220,546.45 448,220,546.45 380,258) of which: delivery obligations arising from interest futures 0.00 (0)

BALANCE SHEET FOR THE YEAR TO 31/12/2020 EQUITY AND LIABILITIES

Reporting year Previous year EUR EUR EUR EUR EUR thousand 1. Cash reserve a) Cash in hand 533,400.39 643) b) Deposits with central banks 208,827,282.46 29,645) of which: with the Deutsche Bundesbank 208,827,282.46 (29,645) c) Deposits in postal giro accounts 0.00 209,360,682.85 0)

2. Public debt instruments and bills approved for refinancing purposes at central banks

a) Treasury bills and non-interest-bearing treasury bonds and similar public debt instruments 0.00 0) of which: can be refinanced at the Deutsche Bundesbank 0.00 (0) b) Bills of exchange 0.00 0.00 0)

3. Receivables from banks a) Due on demand 17,880,806.97 81,784) b) Other receivables 181,826,234.37 199,707,041.34 353,372)

4. Receivables from customers 3,706,881,034.86 3,395,457) of which: secured by charges on property 1,438,925,273.97 (1,301,261) Loans to public authorities 151,492,165.64 (156,476)

5. Bonds and other fixed-income securities a) Money market papers aa) Issued by public authorities 0.00 0) of which: eligible as collateral at the Deutsche Bundesbank 0.00 (0) ab) Issued by others 0.00 0.00 0) of which: eligible as collateral at the Deutsche Bundesbank 0.00 (0) b) Bonds and debentures ba) Issued by public authorities 399,152,512.37 406,560) of which: eligible as collateral at the Deutsche Bundesbank 371,092,648.65 (378,377) bb) Issued by others 527,954,175.46 927,106,687.83 704,558) of which: eligible as collateral at the Deutsche Bundesbank 440,471,861.82 (600,494) c) Own bonds 0.00 927,106,687.83 0) Nominal value 0.00 (0)

6. Shares and other non-fixed-income securities 189,127,547.01 198,147)

6a. Held for trading 0.00 0)

7. Participating interests and paid-up capital share in cooperatives a) Participating interests 49,662,442.08 53,420) of which: in banks 818,454.19 (818) in financial service providers 0.00 (0) b) Paid-up capital share in cooperatives 18,225.00 49,680,667.08 13) of which: in credit cooperatives 0.00 (0) in financial service providers 0.00 (0)

8. Shares in affiliated companies 0.00 0) of which: in banks 0.00 (0) in financial service providers 0.00 (0)

9. Trust assets 0.00 0) of which: Trust loans 0.00 (0)

10. Equalisation and covering claims against public authorities including bonds from their exchange 0.00 0)

11. Intangible fixed assets a) Self-generated industrial property rights and similar rights and assets 0.00 0) b) Purchased concessions, industrial property rights and similar rights and assets, as well as licences for such rights and assets 39,501.00 38) c) Goodwill 0.00 0) d) Payments on account 0.00 39,501.00 0)

12. Tangible fixed assets 14,799,298.05 15,348)

13. Other assets 29,536,404.86 27,411)

14. Prepayments and accrued income 747.56 1)

15. Deferred tax assets 0.00 0)

16. Surplus arising from offsetting 0.00 0)

Total assets 5,326,239,612.44 5,266,397)

BALANCE SHEET FOR THE YEAR TO 31/12/2020 ASSETS

32 33 BIB ANNUAL REPORT 2020 // 2020 FINANCIAL STATEMENTS

PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 1 JANUARY 2020 TO 31 DECEMBER 2020

Reporting year Previous year EUR EUR EUR EUR EUR thousand Interest income from a) Credit and money market transactions 80,313,824.70 87,799) b) Fixed-income securities and book-entry securities 9,008,255.30 89,322,080.00 11,521)

Interest expenses 37,594,114.57 51,727,965.43 39,564)

Current income from a) Shares and other non-fixed-income securities 3,920,559.66 4,096) b) Participating interests and paid-up capital share in cooperatives 10,036,524.14 1,227) c) Shares in affiliated companies 0.00 13,957,083.80 0)

Income from profit pooling, profit and loss transfer agreementsor partial profit and loss transfer agreements 0.00 0)

Commission income 8,677,849.43 8,568)

Commission expenses 1,562,850.84 7,114,998.59 1,408)

Net income/expenses from trading transactions 0.00 0)

Other operating income 643,130.88 1,276)

General administrative expenses a) Personnel expenses aa) Wages and salaries 9,817,727.69 9,600) ab) Social security contributions and expenses for pensions and for support 2,183,530.35 12,001,258.04 1,858)

of which: for pensions 685,363.16 (441) b) Other administrative expenses 12,063,438.51 24,064,696.55 11,236)

Depreciation, amortisation and impairment losses on intangible and tangible fixed assets 1,563,689.03 1,465)

Other operating expenses 1,573,218.73 1,639)

Depreciation, amortisation and impairment losses on receivables and specific securities, as well as allocations to provisions for loan losses 0.00 4,392)

Income from write-ups on receivables and specific securities, as well as the reversal of provisions for loan losses 3,225,028.61 3,225,028.61 0)

Depreciation, amortisation and value adjustments on investments, shares in affiliated companies and securities treated as fixed assets 5,720,935.25 0)

Income from write-ups on investments, shares in affiliated companies and securities treated as fixed assets 0.00 –5,720,935.25 5,899)

Expenses from loss transfer agreements 0.00 0)

Result of ordinary activities 43,745,667.75 49,224)

Extraordinary income 0.00 0)

Extraordinary expenses 0.00 0)

Extraordinary profit or loss 0.00 (0)

Income taxes 14,981,514.96 18,870) of which: deferred taxes 0.00 (0)

Other taxes not included in item 12 69,734.22 15,051,249.18 70)

Expenditure from allocations to the fund for general banking risks 24,100,000.00 26,000)

Annual net profit 4,594,418.57 4,284)

Profit brought forward from the previous year 0.00 0)

4,594,418.57 4,284

Transfers from earnings reserves a) From the statutory reserve 0.00 0) b) From other earnings reserves 0.00 0.00 0)

4,594,418.57 4,284)

Transfers to earnings reserves a) To the statutory reserve 0.00 0) b) To other earnings reserves 0.00 0.00 0)

Net profit for the year 4,594,418.57 4,284)

34 BIB ANNUAL REPORT 2020 // MEMBERSHIPS AND LEGAL INFORMATION

Publisher: BIB – BANK IM BISTUM ESSEN eG Design And illustration: Werbeagentur Schröter GmbH, Mülheim an der Ruhr Editor: Sabine Kelp, BIB Printing: www.lensing-druck.de Printed on: wood-free, white matt- coated FSC printer paper

LEGAL INFORMATION MEMBERSHIPS

❙ Genossenschaftsverband – Verband der Regionen e.V. [Cooperative Association – Association of Regions] (GV) 40468 Düsseldorf

❙ Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. [National Association of German Cooperative Banks] (BVR) 10785 Berlin

❙ Industrie- und Handelskammer für Essen, Mülheim an der Ruhr, Oberhausen [Essen, Mülheim an der Ruhr, Oberhausen Chamber of Industry and Commerce] (IHK) 45127 Essen

❙ Bundesverband Deutscher Stiftungen e.V. [Association of German Foundations] 14197 Berlin

❙ pro Ruhrgebiet e.V. [organisation dedicated to the development of the Ruhr] 45029 Essen

❙ Initiativkreis Ruhr GmbH [local business association] 45128 Essen

❙ Bundesverband Deutscher Kapitalbeteiligungsgesellschaften e.V. [German Private Equity and Venture Capital Association] (BVK) 10117 Berlin

❙ FNG – Forum Nachhaltige Geldanlagen e.V. [Sustainable Investment Forum]

14193 Berlin, Germany ❙ Bku–Bund katholischer Unternehmer e.V.

[Catholic Business Association] 50676 Cologne

❙ Verein für Umweltmanagement und Nachhaltigkeit in Finanzinstituten e.V. [Association for Environmental Management and Sustainability in Finance Institutes] (VfU) 86150 Augsburg

❙ Corporate Responsibility Interface Center e.V. (CRIC) 60314 Frankfurt/Main

❙ Familiengenossenschaft der Regionen eG [family support services organisation] 48161 Münster

❙ Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. [National Association of German Cooperative Banks] (AVR) 53113 Bonn

❙ VenGa e.V. – Verein zur Förderung ethisch-nachhaltiger Geldanlagen [Association for the Promotion of Ethically Sustainable Financial Investment) 20095 Hamburg

Where persons, job titles etc. are denoted in the masculine form, this should be understood to be gender-neutral and is done merely for reasons of readability.

BIB – BANK IM BISTUM ESSEN eG Gildehofstrasse 2 | 45127 Essen Tel. +49 (0)201 / 2209-0 | Fax +49 (0)201 / 2209-200 [email protected] | www.bibessen.de

2020 financial report

Documents