Bulgarian American Credit Bank : BACB_Interim Management Report_Q1 2024_Consolidated_ENG

INTERIM ACTIVITY REPORT

OF "BULGARIAN-AMERICAN CREDIT BANK" AD ON A CONSOLIDATED BASIS FOR THE FIRST THREE

MONTHS OF 2024.

SOFIA, 29 APRIL 2024.

General information

The Bulgarian-American Credit Bank AD (BACB, the Bank) continued to operate in the first three months of 2024 as a universal bank offering a full range of banking services, aimed at the green economy, incl. financing small and medium-sized enterprises and expanding the services in retail banking by offering a variety of products in the field of housing and consumer lending and transaction banking. The bank strives to meet its clients' needs by offering a comprehensive range of banking services and providing modern banking technologies and thereby to expand its customer base.

Economic overview

External environment

Over the past year, the prospects for the global economy were characterized by increased geopolitical uncertainty, high inflation, and tightened financing conditions. According to the World Bank, the growth of the real GDP on a global scale in 2023 is expected to reach 2.6% and in 2024 it is expected to slow down to 2.4%. The forecast is for growth to be rising slightly to 2.7% in 2025 as inflation is expected to continue to decrease, and central banks' monetary policies are becoming more accommodative. Global inflation levels continue to decline from the peaks reached in 2022 due to normalization of energy and food prices, demand slow down and recovery of the global supply chains.

The European Central Bank (ECB) expects the annual growth of the real GDP to significantly slow down to 0.6% in 2023 (from 3.4% in 2022), then to slightly increase to 0.8% in 2024, and stabilize at a level of 1.5% in 2025 and 2026.

Despite the economic slowdown, the conditions in the Eurozone labor market remain relatively unchanged, with the unemployment rate dropping to 6.4% at the end of November 2023, and overall employment increasing by 0.2% in the third quarter of 2023. The unemployment rate is expected to remain around the levels reached at the end of the year, with the possibility of minor deviations.

According to the latest forecasts of the World Bank, inflation is expected to reach 3.7% in 2024, with a subsequent decrease to 3.4% in 2025.

The decline in inflation rates over the forecast period reflects effects related to the gradual impact of ECB's monetary policy of raising interest rates starting in December 2022, the outlook for weaker growth and the assumed reduction in energy and food prices in accordance with futures prices, along with the assumption that long-term inflation expectations will remain stabilized.

Bulgaria

Prior to drafting the current document, four of the leading institutions included in the sample published their updated economic forecasts. The Bulgarian National Bank, the European Commission, and the World Bank have improved their estimates for Bulgaria's economic growth, while the Ministry of Finance, in its updated autumn forecast, maintained its assessment of prospects unchanged compared to the spring forecast.

In its January forecast for the global economy, the World Bank raised its expectations for the growth of Bulgaria's real GDP for 2023 by 0.2% compared to its June 2023 forecast, to 1.7%. At the same time, the World Bank revised downwards its expectations for the country's economic growth for the following year to 2.4%, compared to 2.8% in its previous forecast. In its updated forecast for the European economy from November 2023, the European Commission expects inflation in Bulgaria to continue its downward trend, decreasing from 8% in 2023 to 4% in 2024, and to 2.9% in 2025.

2023 Economic Growth Forecasts

*November 2023; **October 2023; ***November 2023; ****January 2024

In its autumn macroeconomic forecast of the Ministry of Finance (MF) provides for a slowdown in GDP growth in the country in 2023 to 1.8% (given a growth in real terms of 3.9% in 2022). According to the forecast, the slowdown will be mainly due to a decrease in household consumption, rise in interest rates and limited external demand. Total investments in the economy for the entire year of 2023 are expected to decrease due to the negative contribution of changes in inventories, while investments in fixed capital will increase, supported by public capital expenditures.

In 2024 the weakening of inflationary pressure will result in a higher growth in household consumption, which in turn will have a positive effect on private investment activity, on the background of relatively high growth of public investment. The improving external environment will represent an incentive for accelerating the growth in goods and services export, and the MF expects the country's GDP to grow by 3.2% for the entire year.

For the period 2025 - 2026, a slight slowdown in GDP growth is expected, with the Ministry of Finance (MF) anticipating an increase of about 3% annually. During this period, the MF forecasts a weaker increase in public spending, as well as in private consumption, due to a slowdown in income growth. In line with the dynamics of the external environment, a gradual slowdown in the growth rates of exports and imports is forecasted.

In the first half of 2023 the growth in the number of employed people remains high. After we observed recovery of employment rates in 2022 after the revocation of all restrictive measures against COVID19, in 2023 the annual growth of employment is expected to increase by 1.24% (a positive revision compared to the spring forecast) with the main contribution originating from the service sector, the agricultural sector and construction.

Despite expectations that the Bulgarian economy will return to annual GDP growth rates of around 3% during the period 2024-2026, the forecast for employment is for its growth to slow down to 0.6% in 2023 and to 0.3% in 2026.

Since the beginning of the year we have been observing a downward trend in the annual inflation rates based on the HICP. Since September 2022, when the highest inflation rate of 15.6% on an annual basis was reported, inflation has been slowing down to 6.4% in September 2023 and additionally to 5 % in December 2023. The slowdown in inflationary processes in the country is largely due to the decreased international prices of energy goods and raw materials, which are expected to drop further throughout the entire forecast period.

The Ministry of Finance forecasts a decrease in inflation rates at the end of 2023 to 6.9%, and the annual average rate to be 9.1% (an increase compared to the spring forecast). The highest contribution for inflation rates is expected from the . The slowdown will be mainly due to a significant reduction in the contribution of food and energy goods, and the prices of the latter are expected to demonstrate a slight decrease in the end of the year. Inflation rates in 2024 are expected to continue gradually slowing down, reaching 3.3% at the end of the year and an average annual rate of 4.8%. In 2025 and 2026 the average annual inflation will continue to decrease, reaching 2.8% and 2.2%, respectively.

Basic macroeconomic indicators

Gross Domestic Product

Source: MF, NSI, BNB, IMF, Eurostat

The geopolitical situation on a global scale remains unstable, with potential significant negative effects on the economies of the European Union and Bulgaria, creating substantial risks for the realization of the macroeconomic forecast. There is a risk of limited supply of certain raw materials, which could be a catalyst for a rise in their prices or a new disruption of global supply chains. The realization of these risks could lead to higher inflation in the country in the medium term, weaker growth in real disposable income of households, which, combined with the rising cost of credit, could limit the increase in consumption.

BACB - business performance

At the end of the first quarter of 2024, the bank's credit portfolio grew by a net 2.53% compared to the end of 2023, reaching a total size of BGN 1,604.3 million. The overall net growth in newly issued loans during the period was 2.62%.

For SME and Corporate credits to legal entities, the bank reports a net increase of 2.42%, resulting in a total portfolio size in the segment of BGN 994.7 million. This portfolio's share of the bank's total credit portfolio is 64.41%, compared to 64.44% at the end of 2023. The market share for legal entities was 2.27% at the end of 2023, with a strategic target of 2-2.5%.

At the end of the period, the total borrowed resources from SME and Corporate clients amounted to BGN 609,558 million, representing an increase of 46.7% compared to the end of 2023. There was an increase of 22.39% in term deposits and a significant increase of 52.84% in demand deposits as of 31.12.2023. The borrowed resources from legal entities reached a market share of 3.05% as of 31.12.2023, with a strategic target of 2-2.5%.

In line with the bank's strategy, the old "legacy" credit portfolio for legal entities was reduced by 1.91% for the quarter, with its share in the total bank portfolio decreasing from 0.95% at the end of 2023 to 0.91% as of 31.03.2024.

Challenging economic conditions of inflation and slowing economic growth have led to a slight increase in problematic exposures for legal entities in the BACB portfolio by 0.34% at the end of the quarter compared to the end of 2023. As a share of the total credit portfolio, problematic exposures decreased by 0.16% to 7.31% compared to 31.12.2023, due to proactive actions by responsible units in their collection and the preceding growth of regular new exposures.

To expand credit operations for Corporate clients, BACB has implemented the following initiatives:

• Since 2018, the bank has been applying the agreement with "Bulgarian Development Bank" EAD for financing small and medium-sized enterprises with guarantee facilities and counter-guarantees under the "COSME" program of the European Investment Fund, supported by the European Fund for Strategic Investments - "COSME+" program, amounting to EUR 10 million. A total of 12 loans have been agreed upon for over BGN 19 million. Thanks to this program, 126 SME companies with a total of over 1,500 employees and total assets of over BGN 192 million have been supported;
• BACB AD works on a guarantee scheme to facilitate SMEs' access to financing from commercial banks through a risk-sharing scheme from the National Guarantee Fund EAD and the Ministry of

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Agriculture and Foods. Since the beginning of the program, 79 SME clients have been supported with a total loan amount of BGN 49.6 million.

• BACB applies a Guarantee Scheme for the support of SMEs from NGF/SME 2019 - revolving and investment credits as well as counter-guarantees for bank guarantees. Thanks to this program, 80 SME companies with a total of over 1,000 employees and total assets of BGN 216 million have been supported.
• BACB applies a Guarantee Scheme Program COSME NGF and the European Fund for Strategic Investments (EFSI). In total, 32 SME companies have been supported under the scheme, with staff of over 740 employees and loans issued amounting to approximately BGN 12.8 million.
• BACB also implements guarantee schemes of the Municipal Guarantee Fund for SMEs to the Sofia Municipality. A total of 139 SMEs have been supported under the MGFSME program.
• BACB implements a Guarantee Scheme for SMEs affected by the Covid-19 crisis, in cooperation with BDB EAD. Since the beginning of the scheme, 195 loans have been granted totaling BGN 42.6 million to companies with over 4,100 employees and total assets of approximately BGN 943 million.
• BACB implements a guarantee scheme under the "Recovery" Program to support business through guarantees from BDB EAD covering 80%. Loans are granted up to a maximum amount of BGN 3 million, provided without collateral and with shortened approval times. Since the beginning of the program, 61 loans have been granted totaling over BGN 26 million to clients with over 560 employees and a total asset value of BGN 277 million.
• BACB implements a guarantee scheme with the Manager of Financial Instruments Fund in Bulgaria - Portfolio Guarantee with a loss cap for overcoming the consequences of the COVID-19 pandemic amounting to BGN 20 million. Since the beginning of the program, 18 loans have been granted for BGN 15.8 million.
• BACB AD also implements a Guarantee Scheme with the Manager of Financial Instruments Fund in Bulgaria - Portfolio Guarantee with a loss cap for overcoming the consequences of the pandemic - "Recovery" Program. Since the beginning of the program, 15 loans have been granted for BGN 5.8 million.
• The bank also applies a Guarantee Program for unsecured loans jointly with the Manager of Financial Instruments Fund in Bulgaria - Portfolio Guarantee with a loss cap "Recovery 2" with a total guarantee size of BGN 12.9 million covering 80% of the loans. Since the beginning of the program, 20 loans have been granted for BGN 16.6 million.
• BACB implements a Guarantee Scheme for supporting SMEs from NGF /SME 2022/ with a total guaranteed portfolio of BGN 55 million, allowing BACB to provide loans amounting to over BGN 110 million. Thanks to this program, 87 SME companies with over 1,050 employees and total assets of BGN 152 million have been supported;

During the first quarter of 2024, the Retail Banking business line, managing the segment of individual clients at BACB, recorded very good results in its credit activities, with the largest growth in low-risk mortgage credits - an increase of 4.49% compared to the end of 2023. The growth in mortgage lending is driven by excellent pricing conditions and the bank's individual customer-oriented approach. Consumer loans, on the other hand, grew by 2.70% compared to the end of the previous quarter. The market presence in the banking system of the two product segments at the end of December 2023 was respectively - 1.31% for mortgage loans and 0.83% for consumer loans, with the bank's expectations for them to continue their upward trend throughout 2024. According to BACB's laid-out strategy, the goal in the Retail Banking business segment is for additional significant growth and reaching a 2% market share in the coming years. With the high results achieved, the bank fulfills another of its main objectives set out in its strategy for the development of Retail lending - regarding the share of loans to individuals in the total credit portfolio, which at the end of the first quarter of 2024 is 29.24% compared to 29.05% at the end of the previous quarter.

To develop its business with individual clients, BACB conducted the following activities:

• Continues offering the payment product for individuals "Clean Account" with a VISA card. The product continues to be a leading factor in attracting new clients to the bank. There is also a functionality for online opening of a "Clean Account", without visiting a bank office.
• The bank is working on new retail payment and credit products to meet its clients' expectations.
• Continues the development of the product "Just Now" loan - an entirely online consumer loan, combining speed, convenience, and security, thanks to automatic approval and disbursement of funds without visiting a bank office.
• The bank continues to offer pension products from Pension Insurance Company Doverie AD in its office network and at BACB Express sales points.
• BACB offers new insurance packages to clients when using consumer credits, in cooperation with UNIQA.
• The digital assistant "Bianca" providing information to clients 24/7 continues to achieve very good results as in the last six months about 5,000 clients have received the information they were looking for.
• Offering the fast consumer loan "BACB Express" at specialized sales points in large shopping centers of the Mall type. Clients can open a "Clean Account" at these locations, taking advantage of their extended working hours, seven days a week.
• BACB is actively working on a loan for students under the Law on Student and PhD Student Loans with a total state guarantee limit of BGN 5 million. The credit scheme of the Ministry of Education allows BACB AD to expand and deepen its cooperation with state institutions in the country, as well as to attract new

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individual clients - students and PhD students in accordance with the bank's development strategy. A total of 110 loans for BGN 3.5 million have been granted with a 100% guarantee.

In its effort to be closer to its individual clients and to offer them top-notch service, BACB offers the possibility for entirely online banking service - online application and opening a "Clean Account" with a debit card and online opening of "It's All Good" and "Online Deposit", online loan "Just Now". Work is being done on the digitalization of the application process for mortgage loans and other customer processes in order to offer an exceptionally modern and convenient way for payments with the digital wallet BACB Pay.

During the first quarter of 2024, there was an 11% increase in the number of processed transfers compared to the same period in 2023. The number of BGN transfers increased by 11%, and foreign currency transfers by 8%. During the reporting period, 13 new documentary operations for BGN 5 million were processed, and 31 changes to bank guarantees and letters of credit were made. In total, fees and commissions collected during the period (excluding those from credits and cards) amounted to BGN 2.5 million, representing a decrease of 4% compared to 31.03.2023. Revenues from accounts increased by 23%, and revenues from documentary operations by 49% for the quarter. Revenues from payments saw a decrease of 24%, and revenues from cash operations - a decrease of 2%. The bank also serves the client payments of 5 electronic money companies (EMC). During the first three months of 2024, there was a 25% increase in the number of transfers compared to the first quarter of 2023, with the collected fees increasing by 12%. At the beginning of 2024, the bank introduced changes in the registration and opening of bank accounts, which significantly facilitate the process and improve the client experience. In line with the bank's strategy, active work is being done on the implementation of optimizations, automations, and digitalizations of other processes.

During the reporting period, the net positive result of the card business was approximately BGN 238 thousand. For the period, the bank reports a total of 2,625 issued and renewed debit cards and 490 credit cards. During the first quarter of 2024, BACB was certified by BORICA, Visa, and MasterCard for ATMs with a deposit function, and accordingly started offering the new service to clients - cash deposits at ATMs. During the period, a pilot project for outgoing instant transfers blink through the BACB Online electronic banking platform was started, and new functionalities for clients using the PSD 2 channel for accessing payment accounts and performing operations were added.

Overview of the activity in the first quarter of 2024.

Selected metrics and ratios

Active operations

As of 31.03.2024, the Group's assets amount to BGN 2 881 758 thousand, where the comparison with the audited data for 2023 reveals an increase of BGN 90.4 million or an increase 3.24%.

At the end of the first quarter of 2024, the Group reports an increase in the loan portfolio based on its reported value by BGN 138.5 million, up to BGN 1 598.5 million, or it has achieved a growth of 2.5% compared to the volume at the end of 2023. Accumulated credit losses and loan impairments according to IFRS 9 amount to BGN 60.3 million and provide a coverage of 3.8% of the loan portfolio, given a volume at the end of 2023 of BGN 59.6 million, coverage of 3.8% and values reported as of 31.12.2023 of 3.21% for the banking system. As at 31.03.2024, loan impairments increased by BGN 0.7 million compared to the end of 2023 and an increase of 1.2%.

As of 31.03.2024, the net loan portfolio amounts to BGN 1 538.2 million and forms a 53.4% share of the total assets.

Since the beginning of 2024 the Group granted new loans in the amount of BGN 212.5 million, and the amount of repaid loans for the same period was BGN 177.7 million, including debt reduction by BGN 0.9 million against acquired collateral. In the first quarter of 2024 on account of set aside impairments loans amounting to BGN 16 thousand have been written off.

As of 31.03.2024, loans overdue by more than 90 days represent 8.21% of the total loans by book value, compared to reported values as of 31.12.2023 of 8.16%. The share of non-performing loans is above the average level for the banking system. The main reason for the higher share is the Bank's sectoral orientation - financing projects in the

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construction and real estate sectors before the global financial crisis. The credit policy applied in recent years and at present places an emphasis on promising and weakly cyclical economic sectors, and aims to achieve effective diversification, both in terms of industry positioning, as well as in terms of size and term, so as to ensure a sustainable basis for development and to limit the influence of individual exposures in a specific industry. As a result, and due to the recovery of the construction and real estate sectors, the negative effects were gradually minimized and the share of non-performing loans decreased by more than 20 percentage points throughout the period December 2017 - March 2024. To improve the quality of its loan portfolio, the Bank developed and implemented a strategy for non- performing exposures management, including a detailed three-year operational program, the implementation of which is monitored and controlled by the management bodies and adequate control procedures are applied. The developed regular internal analyzes and complex stress tests contribute to the timely assessment of the effects of a possible deterioration in the business environment on the bank's portfolio.

As of 31.03.2024, the debt and capital financial assets owned, reported at fair value in the other comprehensive income, amount to BGN 139.5 million or represent 4.8% of the total assets, given their values of BGN 137.6 million and a share of 4.9% at the end of 2023. The portfolio of securities reported through the other comprehensive income is formed by 36% first-quality government securities of the Republic of Bulgaria, 50% first-grade state securities of foreign governments, 12% corporate bonds and 3% capital instruments. During the reporting period, two issues were purchased with a nominal value of EUR 5 million each from the Republic of France, and two issues with a nominal value of USD 5 million each from the USA. In the same quarter, an issue of EUR 5 million from the Republic of France matured, one issue from the Republic of Germany with a nominal value of EUR 5 million, and two issues from the USA with a total nominal value of USD 10 million. The capital instruments are valued at BGN 4.5 million and include a stake in BSE for BGN 306 thousand (BGN 240 thousand as of 31.12.2023), shares in a payment services company Paynetics AD for BGN 3,254 thousand, and shares in a company managing electronic systems in urban transport and parking, Tixi AD, for BGN 978 thousand.

As of 31 March 2024, the portfolio of debt instruments, recorded at amortised cost, includes bonds of the Bulgarian and foreign governments with fixed payments and maturity. In the first three months of 2024, seven issues matured

• four with a nominal value of EUR 80 million from the Republic of France, and three with a nominal value of USD 20 million from the USA, and the portfolio was supplemented with four issues of US government securities with a total nominal value of USD 20 million, eight issues of securities from France with a total nominal value of EUR 70 million and corporate bonds from Finance Plus Management Holding AD for EUR 1 million. As a result, the portfolio of debt instruments, recorded at amortised cost, reached BGN 184.4 million compared to BGN 200.9 million at the end of 2023, a decrease of 8.2%. At the end of the first quarter of 2024, the share of total assets reached 6.4% compared to 7.2% at the end of 2023.

Since the beginning of 2020, based on the management's decision, the Bank has been reporting in "Financial assets at fair value in profit or loss" its investment in shares of Visa Inc., acquired as a result of BACB's membership in VISA Europe, which became the property of VISA Inc. This investment is measured at fair value, upon reflecting any changes in the profit or loss for the period. The initially acquired 560 preferred shares of class C are subject to mandatory conversion into ordinary class A shares /or preferred shares series A, where applicable/ within a 12-year period, at a certain ratio, which is subject to revision and adjustment over time under certain conditions. Newly issued Class A shares are not subject to restrictions and may be freely transferred. The fair value of the investment in VISA Inc. as of 31 March 2024 is BGN 1 576 thousand, compared to BGN 1 438 thousand as of 31.12.2023.

As of 31.03.2024, the Bank has two subsidiaries - BACB Finance EAD and BACB Trade EAD, which it fully owns.

As of 31.03.2024, the receivables from banks amount to BGN 129 million and occupy a share of 4.5% of the total assets, compared to BGN 18.2 million and a share of 0.7% at the end of 2023. The reported increase by BGN 110.8 million compared to the end of 2023, is formed mainly by an increase in demand deposits by BGN 86.2 million and term deposits by BGN 24.6 million.

Cash at hand and accounts held in the central bank decreased by 4.6% to BGN 766.9 million at the end of the first quarter of 2024, compared to BGN 804.3 million at the end of 2023, and their share in total assets amounted to 26.8% compared to 28.8% at the end of 2023. The main reason for the decrease is the decrease in funds on current accounts at the BNB.

The tangible and intangible fixed assets owned by the Bank decreased compared to the end of 2023 by BGN 0.5 Million, to reach BGN 12.7 million in book value, and their share of the total assets amounts to 0.4%. This value includes assets with the right to use in the amount of BGN 8 million (2023: BGN 8.4 million).

As of 31.03.2024, the assets acquired, classified as "assets held for sale" and "investment properties", totaled BGN 96 million or 3.3% of the total assets compared to BGN 101.3 million or 3.6% of the total assets as of 31.12.2023. Since the beginning of the year, "investment properties" in the amount of BGN 2010 thousand and "assets held for sale" valued at BGN 4 134 thousand have been sold. The "assets held for sale" acquired amounted at BGN 882 thousand. The acquisition of properties worth BGN 853 thousand was carried out at the expense of a direct reduction of the loan portfolio. Assets worth BGN 4 880 thousand were reclassified from investment property to assets for sale. The activity for realization of the acquired assets, as well as the management and administration of the accompanying activities, is served and managed by a specialized department at the Bank. In order to achieve the goals set for the realization of the acquired assets, the Bank developed and implemented an asset management

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strategy - acquired collateral from non-performing exposures, including a detailed three-year operational program, the implementation of which is monitored and controlled by the management bodies.

Liabilities

As of 31.03.2024 the funds borrowed from banks were BGN 217 thousand, which represents a decrease compared to the end of 2023, amounting to BGN 129 thousand (31.12.2023 - BGN 346 thousand).

Funds borrowed from companies and citizens increased by BGN 66.6 million to BGN 2467.6 million as of 31.03.2024 or 97.2% of the total liabilities, compared to BGN 2400.9 million and 97.4% at the end of 2023. The reported increase of 2.8% was formed by growth in all sources, with the exception of borrowed funds from current accounts of corporate clients.

On 23 December 2022, BACB issued unsecured bonds in the amount of EUR 15 million. The bonds are issued in fulfillment of the requirements for equity capital and acceptable liabilities, in accordance with the requirements of the Law on the Recovery and Restructuring of Credit Institutions and Investment Brokers. The bonds are ordinary, interest-bearing,non-materialized, registered, freely transferable, unsecured, non-convertible. The issue has a term of seven years, with a fixed interest payable in 6-month periods and a principal which will be paid in one lump sum upon maturity.

As of 31.03.2024, BACB's obligations under issued debt securities, including accrued interest, amount to BGN 29.737 thousand (2023: 29.370 thousand).

The "other borrowed funds" position includes obligations under a credit line from the Bulgarian Development Bank (BDB) under the "NAPRED" and "COSME+" programs for targeted financing of micro, small and medium-sized businesses with an agreed amount of BGN 35 million and EUR 10 million. As of 31.03.2024, the long-term financing from BDB amounts to BGN 9.1 million or 0.4% of the total liabilities, compared to the same volume and share at the end of 2023.

As of 31.03.2024, an increase of BGN 5 million was reported in "other liabilities", and their share of the total liabilities is 1.1 % (2023 - 1%).

Equity

As of 31.03.2024, there are no changes in the fixed capital.

The "reserves and retained earnings" position reported an increase with the profit as of 31.03.2024 in the amount of BGN 16 215 thousand.

The "revaluation reserves" position includes negative changes in the fair value of debt instruments in the amount of BGN 171 thousand and positive changes in equity instruments in the amount of BGN 1 230 thousand, assessed at fair value in the other comprehensive income, as we all as the revaluation reserve formed on the bank's own buildings used in its operational activity in the amount of BGN 165 thousand. As of 31.03.2024, an increase of BGN 497 thousand was reported, formed by a change in the fair value of debt instruments by BGN 438 thousand and an increase in the fair value of equity instruments by BGN 59 thousand.

Overview of the financial position as of 31 March 2024.

As of 31.03.2024, the Group achieved a positive financial result in the amount of BGN 16 215 thousand after taxation, compared to the profit reported for the same period of 2023 in the amount of BGN 10 722 thousand, which represents a growth of 51.2%. The reported value is mainly due to an increase in the net operating revenue before impairment by BGN 6.3 million and weaker costs growth.

The comparison of the revenue from main activities (interest income) for the two periods shows an increase of BGN 9756 thousand, up to BGN 30 970 thousand. The main share in the interest income generated is occupied by loan activity - 75.2%. The income reported from interbank deposits amounts to BGN 4 731 thousand compared to BGN 2253 thousand at the end of March of the previous year. The interest income from the security portfolios held increased by BGN 1 657 thousand and amounted to BGN 2948 thousand at the end of Mach 2024, compared to BGN 1291 thousand at the end of March 2023.

As of 31.03.2024, interest expenses increased by BGN 2754 thousand compared to the report for the same period of the previous year and amounted to BGN 3780 thousand, with BGN 1026 thousand a year ago. A significant increase was reported in interest expenses to clients by BGN 2828 thousand and the costs on lease agreements, reported according to IFRS 16, amount to BGN 56 thousand, or BGN 6 thousand more than a year ago.

As of 31.03.2024, the net interest income was BGN 27 190 thousand, or by BGN 7002 thousand more than the values reported at the end of the first quarter of the previous year 2023.

As of 31.03.2024 the reported net revenue from fees and commissions is BGN 84 thousand less than the reported volume for the same period of the previous year and amounted to BGN 13259 thousand or 10.6% of the total

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operating income before impairment, with a share of 13.7% as at 31.03.2024. The reported decrease was formed by a larger increase in the volume of fee expenses and minor decrease in revenue.

The shares of Visa Inc. owned by the Bank, reported at fair value with a reflection of the changes in the profit or loss, form a positive result at the end of the first quarter of 2024 in the amount of BGN 105 thousand, compared to a profit of BGN 80 thousand at the end of the first quarter of 2023.

As of 31.03.2024 the Bank reported revenue from currency revaluations of BGN 42 thousand, compared to a negative result reported for the same period of the previous year of BGN 114 thousand.

In the end of the first quarter of 2024, the administrative costs increased as compared to the same period of the previous year by BGN 954 thousand to reach BGN 5.8 million. Personnel costs also increased by BGN 823 thousand compared to the end of March year. The administrative costs include expenses for the Bank Deposit Guarantee Fund (BDGF) and the Bank Restructuring Fund (BRF) in the amount of BGN 882 thousand, compared to BGN 1387 thousand as of 31.03.2023.

Depreciation costs as at 31.03.2024 amount to BGN 1138 thousand, and compared to the same period of the previous year, they are increased by BGN 7 thousand, including a decrease in depreciation costs for fixed tangible assets by BGN 6 thousand, an increase in the depreciation costs for fixed intangible assets by BGN 2 thousand and an increase in the depreciation costs of "right of use assets" by BGN 11 thousand.

The costs for impairment of financial assets and modification decreased by BGN 1632 thousand, compared to those reported at the end of March 2023 and reached BGN 1097 thousand.

Liquidity and activity financing

The bank follows the principles of diversification of funding sources and optimization of interest costs in fulfillment of the strategy for securing its liquidity needs.

As at the end of the first quarter of 2024 the Bank maintains a stable deposit base, reporting an increase in client deposits by 2.8% compared to 31.12.2023. The Bank's active deposit activity contributes to reducing its dependence on external financing. The bank continues to attract deposits from individuals from Germany and Spain.

The ratio of gross client loans to client deposits is 64.8% as of 31.03.2024.

The Bank's liquidity position remains strong, where liquid assets (cash at hand and in BNB accounts, short-term loans and advance payments of banks and liquid government securities) amount to BGN 1 144 million. The ratio of these liquid assets to the total deposits (of clients and banks) as of 31.03.2024 is 46.19%.

During the period from the end of 2023 to 31.03.2024, the value of the portfolio of debt instruments at fair value in the Bank's other comprehensive income reported an increase of 1.3%, to BGN 134.9 million (2023: BGN 133.1 million). During the reporting period, two issues with a nominal value of 5 million euro each were purchased from the Republic of France, and two issues with a nominal value of 5 million US dollars each were acquired from the United States. Additionally, an issue in euro from the Republic of France with a nominal value of 5 million euro, one issue from the Republic of Germany with a nominal value of 5 million euro, and two issues from the USA with a total nominal value of 10 million US dollars matured during the same quarter.

From the beginning of 2024 until 31 March 2024, new investments in government securities were made amounting to approximately BGN 213 million in both the "held for contractual cash flows" portfolio and the "held for contractual cash flows and sales" portfolio.

As of 31 March 2024, the Bank's portfolio of government securities amounted to a balance value of BGN 300.7 million (compared to BGN 317.6 million in 2023), distributed between the "held for contractual cash flows and sales" portfolio with a balance value of BGN 120.2 million and the "held for contractual cash flows" portfolio with a balance value of BGN 180.5 million.

Unrealized gains and losses from the revaluation of debt instruments at fair value in the other comprehensive income are deferred in a revaluation reserve, net of tax. In the period in which the asset is written-off, the result of the revaluation is included in the profit or loss for the period. Since the beginning of 2024 until 31 March 2024, there are no gains or losses reported in connection with completed investments. Interest income from debt instruments at fair value in the other comprehensive income is currently recognized in the profit or loss, and for the period from 01.01.2024 - 31.03.2024 it amounts to BGN 1218 thousand. Interest revenue on debt instruments at amortized cost are recognized on a current basis in the profit or loss and for the period from 01.01.2024 to 31.03.2024 they amount to BGN 1731 thousand.

Capital resources

At the end of March 2024, the Group reports equity capital adequate to the risk profile and asset quality and sufficient to implement the strategic goals and plan for the current year. As of 31.03.2024, the Group reported a total capital

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adequacy ratio of 19.26% and a Tier 1 capital adequacy ratio of 19.26%, which is higher than the legally determined level.

Information about the main risks facing the Group is contained in the Management's Annual Report for the activities of 2023, which has been submitted to the Financial Supervision Commission (FSC) and made available to the public. The report can also be accessed on the Bank's website.

Corporate events and internal information under Art. 7 of Regulation (EU) No. 596/2014 of the European Parliament and the Council on market abuse

The below information on corporate events/internal information under Art. 7 of Regulation (EU) No. 596/2014 is available on the corporate website of BACB AD at the following web address: https://www.bacb.bg/bg/za-investitori/novini-za-investitorite

1. On 30 January 2024, BACB published its preliminary unaudited individual and consolidated financial statements as of 31 December 2023, together with the relevant interim management reports and a letter to its shareholders;
2. On 29 March 2024, BACB published its audited annual financial statements for 2023 on a standalone and a consolidated basis, together with information on the Bank's financial result for 2023 on a standalone and on a consolidated basis. Detailed information and the full text of the statements are published on the BACB AD website.

Additional information for the first three months of 2024 under Art. 12 of Ordinance No. 2 of the FSC on the initial and subsequent disclosure of information during public offering of securities and admission of securities to trading on a regulated market

1. Information on facts and circumstances subject to disclosure according to Appendix 4 to Ordinance No. 2 of the Financial Supervision Commission, which occurred during the reporting period

There are no changes in the persons exercising control over the Bank:

No bankruptcy proceedings have been opened against BACB AD and/or against the Bank's subsidiaries.

Conclusion and execution of material transactions, including material transactions with related parties:

The Bank enters into transactions with related parties only as part of its ordinary banking activity under conditions that would be customary for transactions between unrelated parties and include granting of loans, acceptance of deposits and securities transactions.

More detailed information about the transactions concluded and the changes in the concluded transactions with related parties disclosed in the annual financial statements and having a material impact on the Bank's financial condition or operating results for the first three months of 2024 (if any,) is contained in section "Related-Party Transactions" of the Accounting Policy and the selected explanatory notes as of 31.03.2024.

No decisions have been taken on the conclusion, termination and cancellation of a joint venture agreement.

The auditors of BACB AD and its subsidiaries have not been changed.

There are no lawsuits or arbitration proceedings initiated or terminated against the Bank and/or the Bank's subsidiaries, relating to liabilities or receivables of the Bank or its subsidiaries, with a claim price equal to or exceeding 10 percent of the Bank's equity.

In view of its ordinary activity of active management and collection of non-performing loan exposures, the Bank initiates and conducts enforcement proceedings and/or bankruptcy proceedings against borrowers/debtors for compulsory collection of overdue receivables.

Purchase, sale or pledge of shares in trade companies

For the reporting period BACB and/or its subsidiaries have not carried out any other share purchase or sale transactions and have not established any pledges on the shares of trade companies owned by them throughout the period.

1. Information on changes in BACB AD's accounting policy

In the first three months of 2024 BACB consistently applied the accounting policy disclosed in the audited annual financial statements for 2023, having taken into account the IFRS amendments adopted by the EU and coming into force for the annual periods beginning on or after 01 January 2023, as indicated in the explanatory notes to the annual financial statements for 2023.

1. Information on changes in the group of enterprises of BACB AD

There were no changes in BACB group of enterprises throughout the period.

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IV. Information on organizational changes

No organizational changes have been made throughout the period the meaning of Art. 12, paragraph (1), item 4, lit.

1. of Ordinance No. 2 of the FSC.
   V. Forecasts for results from the current financial year

BACB AD does not publish forecasts for its results.

VI. Data on the persons directly or indirectly holding at least 5% of the votes in the general meeting of shareholders and changes in the votes held by the persons compared to the previous reporting period

The above-mentioned information is derived from (1) the book of shareholders, which is kept by "Central Depository" AD, (2) the data from the notifications received for the disclosure of shareholding under Art. 145 and 146 of the Public Offering of Securities Act and (3) the powers of attorney and accompanying founding documents of shareholders of BACB AD provided in connection with the General Shareholders' Meetings held.

VII. Data on the shares held by the members of the management and control bodies of BACB AD and changes in the votes held by the persons compared to the previous reporting period

VIII. Information on pending judicial, administrative or arbitration proceedings concerning liabilities or receivables in the amount of at least 10 percent of the Bank's equity

The Bank and/or the Bank's subsidiaries are not parties to pending judicial, administrative or arbitration proceedings concerning liabilities or receivables in the amount of 10 or more than 10 percent of the Bank's equity. In connection with its ordinary activity of active management and collection of non-performing loan

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