ASSETS

Section 1 - Cash and cash equivalents - Item 10

1.1 Cash and cash equivalents: breakdown

  31.12.2015 31.12.2014
a) Cash 34 24
b) On demand deposits at Central banks - -
Total 34 24

Section 2 - Financial assets held for trading - Item 20

2.1 Financial assets held for trading: breakdown by type

Type/Amounts 31.12.2015 31.12.2014
   Level 1  Level 2  Level 3  Level 1  Level 2  Level 3
A. Cash assets            
1. Debt securties - - - - - -
1.1 Structured - - - - - -
1.2 Others - - - - - -
2. Equity instruments - - - - - -
3. O.E.I.C. units - - - - - -
4. Loans - - - - - -
4.1 Repurchase agreements - - - - - -
4.2 Others - - - - - -
Total A - - - - - -
B. Derivative instruments            
1. Financial derivatives - - 259 - - -
1.1 For trading - - 259 - - -
1.2 Connected to the fair value option - - - - - -
1.3 Other - - - - - -
2. Credit derivatives - - - - - -
2.1 For trading - - - - - -
2.2 Connected to the fair value option - - - - - -
2.3 Others - - - - - -
Total B - - 259 - - -
Total (A+B) - - 259 - - -

2.2 Financial assets held for trading: breakdown by debtor/issuer

Type/Amounts 31.12.2015 31.12.2014
A. Cash assets    
1. Debt securities - -
a) Governments and Central banks - -
b) Other public entities - -
c) Banks - -
d) Other issuers - -
2. Equity instruments - -
a) Banks - -
b) Other issuers - -
- insurance companies - -
- financial institutions - -
- non-financial companies - -
- others - -
3. O.E.I.C. units - -
4. Loans - -
a) Governments and Central banks - -
b) Other public entities - -
c) Banks - -
d) Other issuers - -
Total A - -
B. Derivative instruments    
a) Banks    
- fair value 259 -
b) Customers -  
- fair value - -
Total B 259 -
Total (A+B) 259 -

Section 4 - Available for sale financial assets – item 40

4.1 Available for sale financial assets: breakdown by type

Type/Amounts 31.12.2015 31.12.2014
   Level 1  Level 2  Level 3  Level 1  Level 2  Level 3
1. Debt securities 3.216.832 - - 229.355 - 513
1.1 Structured - - - - - 513
1.2 Others 3.216.832 - - 229.355 - -
2. Equity instruments - - 4.701 - - 13.457
2.1 At fair value - - 4.030 - - 10.413
2.2 At cost - - 671 - - 3.044
3. O.E.I.C. units - - - - - -
4. Loans - - - - - -
Total  3.216.832 - 4.701 229.355 - 13.970

Level 1 “other debt securities” refer to Italian government bonds, either fixed-rate and very short-term bonds or floating-rate and medium-term ones.

These securities have been mainly used for short-/very short-term repurchase agreements with banks, on the MTS platform or on the Eurosystem.

The increase in debt securities was mainly attributable to the reclassification of the government bond portfolio from HTM to AFS following the rebalancing completed in April 2015: see the comments under significant events occurred during the year in the Directors' Report.

Level 3 equity instruments refer to non-controlling interests considered strategic for the Bank. During the year, the Bank recognised a total of 9,0 million Euro in impairment losses on these interests after testing them for impairment.

4.2 Available for sale financial assets: breakdown by debtor/issuer

Type/Amounts 31.12.2015 31.12.2014
1. Debt securities 3.216.832 229.868
a) Governments and Central banks 3.216.832 229.355
b) Other public entities - -
c) Banks - 513
d) Other issuers - -
2. Equity instruments 4.701 13.457
a) Banks 4.022 9.798
b) Other issuers 679 3.659
- insurance companies - -
- financial institutions 672 3.087
- non-financial companies 7 572
- others - -
3. O.E.I.C. units - -
4. Loans - -
a) Governments and Central banks - -
b) Other public entities - -
c) Banks - -
d) Other issuers - -
Total 3.221.533 243.325

Section 5 - Held to maturity financial assets – Item 50

5.1 Held to maturity financial assets: breakdown by type

Type/Amounts 31.12.2015 31.12.2014
  Book value Fair value Book value Fair value
    Level 1 Level 2 Level 3   Level 1 Level 2 Level 3
1. Debt securities - - - - 4.827.363 4.961.033 - -
1.1 Structured - - - - - - - -
1.2 Others - - - - 4.827.363 4.961.033 - -
2. Loans - - - - - - - -
Total - - - - 4.827.363 4.961.033 - -

5.2 Held to maturity financial assets: breakdown by debtor/issuer

Type/Amounts 31.12.2015 31.12.2014
     
1. Debt securities - 4.827.363
a) Governments and Central banks - 4.827.363
b) Other public entities - -
c) Banks - -
d) Other issuers - -
2. Loans - -
a) Governments and Central banks - -
b) Other public entities - -
c) Banks - -
d) Other issuers - -
Total - 4.827.363
Total fair value - 4.961.033

The portfolio of held to maturity financial assets, which totalled 4.827,4 million Euro at the end of 2014, amounted to zero due to the mentioned rebalancing of the government bond portfolio, which involved reclassifying all HTM assets to AFS. See the comments under significant events occurred during the year in the Directors' Report.

Section 6 – Due from banks – Item 60

6.1 Due from banks: breakdown by type

Type/Amounts 31.12.2015 31.12.2014
  BV FV Level 1 FVLevel 2 FV Level 3 BV FV Level 1 FVLevel 2 FV Level 3
A. Due from Central banks 14.446     14.446 18.516     18.516
1. Restricted deposits - X X X - X X X
2. Legal reserve 14.446 X X X 18.516 X X X
3. Repurchase agreements - X X X - X X X
4. Others - X X X - X X X
B. Due from banks 80.906 - - 80.906 256.342 - - 256.342
1. Loans 75.896 - - 75.896 245.317 - - 245.317
1.1 Current accounts and on demand deposits 75.896 X X X 106.552 X X X
1.2 Restricted deposits - X X X 138.765 X X X
1.3 Other loans: - X X X - X X X
- Repurchase agreements - X X X - X X X
- Finance leases - X X X - X X X
- Others - X X X - X X X
2. Debt securities 5.010 - - 5.010 11.025 - - 11.025
2.1 Structured - X X X - X X X
2.2 Others 5.010 X X X 11.025 X X X
Total 95.352     95.352 274.858 - - 274.858

Key
FV= fair value
BV= book value

Other debt securities refer to bonds issued by banks which, given their characteristics, are classified under due from banks.

Lending financial resources to other credit institutions is not part of the Group’s core business, and it is largely related to maintaining levels of liquidity exceeding period-end maturities.

The fair value of receivables due from banks is in line with the relevant book value, considering the fact that interbank deposits and debt securities are short- or very short-term indexed-rate instruments.

Section 7 – Due from customers – Item 70

7.1 Loans to customers: breakdown by type

Type/Amounts 31.12.2015 31.12.2014
  Book value Fair value Book value Fair value
  Not impaired Impaired L1 L2 L3 Not impaired Impaired L1 L2 L3
    Purchased Others         Purchased Others      
Loans 2.954.090 354.331 128.715  - - 3.452.700 2.566.242 135.460 112.628  - -  2.920.547
1. Current accounts 94.456 8.298 16.100 X X X 85.079 7.873 19.938 X X X
2. Repurchase agreements - 1 - X X X - - - X X X
3. Loans/mortgages 6.903 2.993 - X X X - 2.896 287 X X X
4. Credit cards, personal loans and salary-backed loans - 162.495 - X X X - 42.374 - X X X
5. Finance leases 5 833 - X X X - 218 - X X X
6. Factoring 2.532.819 - 102.389 X X X 2.181.631 - 79.640 X X X
7. Other loans 319.907 179.711 10.226 X X X 299.532 82.099 12.763 X X X
 Debt securities - - - - - - - - - - - -
8 Structured - - - X X X - - - X X X
9 Others - - - X X X - - - X X X
Total 2.954.090 354.331 128.715 - - 3.452.700 2.566.242 135.460 112.628 - - 2.920.547

Purchased non-performing exposures mainly refer to the distressed retail loans of the DRL sector, whose business is by nature closely associated with recovering impaired assets. Therefore, loans in the DRL sector are recognised under bad loans or unlikely to pay. In particular, those loans maintain the same classification as that assigned by the invoice seller, provided the latter is subject to the same law as Banca IFIS: otherwise, if the Bank has not ascertained the debtor's state of insolvency, those loans are classified as unlikely to pay.

Performing loans classified under “Other transactions” refer to tax receivables (130,7 million Euro) and the margin lending related to repurchase agreements on government bonds on the MTS platform (103,6 million Euro).

7.2 Loans to customers: breakdown by debtor/issuer

Type/Amounts 31.12.2015 31.12.2014
     
  Notimpaired  Impaired Notimpaired  Impaired
    Purchased Others   Purchased Others
1. Debt securities: - - - - - -
a) Governments - - - - - -
b) Other public entities - - - - - -
c) Other issuers - - - - - -
- non-financial companies - - - - - -
- financial institutions - - - - - -
- insurance companies - - - - - -
- others - - - - - -
2. Loans to: 2.954.090 354.331 128.715 2.566.242 135.460 112.628
a) Governments 104.088 - 1.041 82.851 - 684
b) Other public entities 895.162 1 6.580 652.731 - 11.253
c) Other issuers 1.954.840 354.330 121.094 1.830.660 135.460 100.691
- non-financial companies 1.824.749 16.747 108.357 1.715.259 12.052 82.216
- financial institutions 114.927 95 6.666 111.210 19 9.058
- insurance companies - - - 1 - -
- others 15.164 337.488 6.071 4.190 123.389 9.417
Total 2.954.090 354.331 128.715 2.566.242 135.460 112.628

Section 12 - Property, plant and equipment and investment property – Item 120

12.1 Property, plant and equipment for functional use: breakdown of assets measured at cost

Assets/amounts 31.12.2015 31.12.2014
1. Owned 47.523 45.876
a) Land 6.738 6.738
b) Buildings 37.899 36.523
c) Furnishings 641 636
d) Electronic systems 1.480 1.246
e) Others 765 733
2. Acquired under finance leases 3.920 4.086
a) Land - -
b) Buildings 3.862 4.006
c) Furnishings - -
d) Electronic systems - -
e) Others 58 80
Total 51.443 49.962

The buildings and land recognised under property, plant and equipment for functional use at the end of the year mainly include: the important historical building Villa Marocco, located in Mestre (Venice) and housing Banca IFIS’s registered office, and the property in Mestre (Venice), where some of the Bank’s services were relocated.

Since these are luxury properties, they are not amortised, but are tested for impairment at least annually. To this end, they are appraised by experts specialising in luxury properties. The appraisal for the year 2015 did not result in an impairment.

There are also two buildings in Florence: the first, worth 3,9 million Euro, was acquired under a finance lease and is the current head office of the NPL business area; the second, measured at 11,6 million Euro—including the restructuring costs incurred to date—will become the new head office of said area.

12.2 Investment property: breakdown of assets measured at cost

Assets/amounts 31.12.2015 31.12.2014
  Book Value Fair value Book Value Fair value
    L1 L2 L3   L1 L2 L3
1. Owned 720 - - 926 720 - - 926
a) Land -       -      
b) Buildings 720     926 720     926
2. Acquired under finance leases - - - - - - - -
a) Land -       -      
b) Buildings -       -      
Total 720 - - 926 720 - - 926

12.5 Property, plant and equipment for functional use: annual changes

  Land Buildings Furnishings Electronic systems Others Total31.12.2015
A. Gross opening balances 6.738 42.382 4.547 5.353 1.974 60.994
A.1 Total impairment losses - (1.853) (3.911) (4.107) (1.161) (11.032)
A.2 Net opening balance 6.738 40.529 636 1.246 813 49.962
B. Increases - 1.484 260 1.184 333 3.261
B.1 Purchases - 1.484 260 1.184 333 3.261
B.2 Capitalised improvement expenses - - - - - -
B.3 Reversals of impairment losses - - - - - -
B.4 Fair value gains taken to: - - - - - -
a) Equity - - - - - -
b) Income statement - - - - - -
B.5 Exchange gains - - - - - -
B.6 Transfers from investment property - - - - - -
B.7 Other increases - - - - - -
C. Reductions - (252) (254) (950) (324) (1.780)
C.1 Sales - - - (1) (108) (109)
C.2 Depreciation - (252) (254) (949) (196) (1.651)
C.3 Impairment losses taken to: - - - - - -
a) Equity - - - - - -
b) Income statement - - - - - -
C.4 Fair value losses taken to: - - - - - -
a) Equity - - - - - -
b) Income statement - - - - - -
C.5 Exchange losses - - - - - -
C.6 Transfers to - - - - - -
a) Investment property - - - - - -
b) Assets under disposal - - - - - -
C.7 Other reductions - - - - (20) (20)
D. Net closing balance 6.738 41.761 642 1.480 822 51.443
D.1 Total net impairment losses - 2.105 4.160 5.013 1.139 12.417
D.2 Gross closing balances 6.738 43.866 4.802 6.493 1.961 63.860
E. Measurement at cost - - - - - -

Property, plant and equipment for functional use are measured at cost and are depreciated on a straight-line basis over their useful life, with the exclusion of land with an indefinite useful life and the “Villa Marocco” property, whose residual value at the end of its useful life is expected to be higher than its book value.

As for buildings, purchases refer mainly to the costs for restructuring the property in Florence that will house the new headquarters of the NPL business area.

Property, plant and equipment not yet brought into use at the reporting date are not depreciated.

12.6 Investment property: annual changes

  31.12.2015
  Land Buildings
A. Gross opening balance - 720
B.   Increases - -
B.1 Purchases - -
B.2 Capitalised improvement expenses - -
B.3 Fair value gains: - -
B.4 Reversals of impairment losses - -
B.5 Exchange gains - -
B.6 Transfers from property for functional use - -
B.7 Other increases - -
C. Reductions - -
C.1 Sales - -
C.2 Depreciation - -
C.3 Fair value losses - -
C.4 Impairment losses - -
C.5 Exchange losses - -
C.6 Transfers to other asset portfolios: - -
a) Assets for functional use - -
b) Non-current assets under disposal - -
C.7 Other reductions - -
D.  Closing balance - 720
E. Measurement at fair value - -

Buildings held for investment purposes are measured at cost and refer to leased property. This property is not amortised as it is destined for sale.

Section 13 – Intangible assets – Item 130

13.1 Intangible assets: breakdown by asset type

Assets/amounts 31.12.2015 31.12.2014
  Finite life Indefinite life Finite life Indefinite life
A.1 Goodwill: X 820 X 819
A.1.1 Attributable to owners of the parent company X 820 X 819
A.1.2 Non-controlling interests X - X -
A.2 Other intangible assets 6.350 - 5.737 -
A.2.1 Assets measured at cost: 6.350 - 5.737 -
a) Internally generated intangible assets - - - -
b) Other assets 6.350 - 5.737 -
A.2.2 Assets measured at fair value: - - - -
a) Internally generated intangible assets - - - -
b) Other assets - - - -
Total 6.350 820 5.737 819

Goodwill, amounting to 820 thousand Euro, arises from the line-by-line consolidation of the Polish subsidiary IFIS Finance Sp. Z o. o..

The above-mentioned goodwill was tested for impairment in accordance with IAS 36 (Impairment Test). To do so, goodwill was allocated to the cash-generating unit corresponding to the whole company IFIS Finance, as it represents an autonomous business segment which cannot be further broken down. The test was carried out by applying the value in use method based on the projection of expected cash flows for an explicit period of 5 years. Expected cash flows were discounted based on the company’s estimated cost of capital calculated using the Capital Asset Pricing Model. Expected cash flows were estimated based on the most recently approved business plan and financial projections based on the subsidiary’s average growth trends. The terminal value was calculated assuming that the last net cash flow in the explicit planning period is replicable. The impairment test did not reveal any impairment losses to be recognised in profit or loss.

Finally, goodwill underwent a sensitivity analysis based on the cost of capital, using a fluctuation range equal to 5%; the test carried out with the control method confirmed the reliability of the reported amount.

The change in the value of goodwill compared to the previous year is attributable to the impact of changes in year-end exchange rates.

Other intangible assets at 31 December 2015 refer exclusively to software purchase and development, amortised on a straight-line basis over the estimated useful life, which is 5 years from deployment.

13.2 Intangible assets: annual changes

    Goodwill Other internally generated intangible assets Other intangible assets Total 31.12.2015
    Finite Indef. Finite Indef.  
A. Opening balance 819 - - 5.737 - 6.556
A.1 Total impairment losses - - - - - -
A.2  Net opening balance 819 - - 5.737 - 6.556
B.  Increases 1 - - 2.709 - 2.710
B.1 Purchases - - - 2.709 - 2.709
B.2 Increases in internally generated intangible assets X - - - - -
B.3 Reversals of impairment losses X - - - - -
B.4 Fair value gains:   - - - - -
- Equity X - - - - -
- Income statement X - - - - -
B.5 Exchange gains 1 - - - - 1
B.6 Other increases - - - - - -
C.  Reductions - - - (2.096) - (2.096)
C.1 Sales - - - - - -
C.2 Impairment losses and amortisation: - - - (2.096) - (2.096)
- Amortisation X - - (2.096) - (2.096)
- Impairment losses - - - - - -
+ Equity X - - - - -
+ Income statement - - - - - -
C.3 Fair value losses   - - - - -
- Equity X - - - - -
- Income statement X - - - - -
C.4 Transfer to non-current assets under disposal - - - - - -
C.5 Exchange losses - - - - - -
C.6 Other reductions - - - - - -
D.  Net closing balance 820 - - 6.350 - 7.170
D.1 Total net amortisation, impairment losses and reversals of impairment losses - - - - - -
E. Gross closing balance 820 - - 6.350 - 7.170
F. Measurement at cost - - - - - -

Key
Def: definite useful life
Indef: indefinite useful life

Purchases refer exclusively to investments for the enhancement of IT systems.

Section 14 – Tax assets and liabilities – Item 140 of assets and 80 of liabilities

14.1 Deferred tax assets: breakdown

The main types of deferred tax assets are set out below.

Deferred tax assets 31.12.2015 31.12.2014
Loans to customers 38.058 36.482
Others 1.364 1.860
Total 39.422 38.342

Deferred tax assets, amounting to 39,4 million Euro at 31 December 2015, refer for 38,0 million Euro to impairment losses on receivables that can be deducted in the following years.

14.2 Deferred tax liabilities: breakdown

The main types of deferred tax liabilities are shown below.

Deferred tax liabilities 31.12.2015 31.12.2014
Loans to customers 15.257 11.106
Available for sale securities 5.770 2.837
Property, plant and equipment and investment property 309 325
Others 60 -
Total 21.396 14.268

Deferred tax liabilities, amounting to 21,4 million Euro at 31 December 2015, refer for 5,7 million Euro to the measurement of the tax receivables of the former subsidiary Fast Finance S.p.A., which was carried out at the time of the business combination, and for 5,8 million Euro to taxes on the valuation reserve for AFS securities held in the portfolio.

14.3 Changes in deferred tax assets (recognised through profit or loss)

  31.12.2015 31.12.2014
1. Opening balance 38.342 33.955
2. Increases 2.256 8.780
2.1 Deferred tax assets recognised in the current year 2.256 8.713
a) relative to previous years - -
b) due to the change in accounting standards - -
c) reversals of impairment losses - -
d) others 2.256 8.713
2.2 New taxes or increases in tax rates - -
2.3 Other increases - 67
3. Decreases 1.239 4.393
3.1 Deferred tax assets reversed during the year 782 4.393
a) reversals 782 4.393
b) impairment losses due to unrecoverability - -
c) due to change in accounting standard - -
d) others - -
3.2 Reductions in tax rates - -
3.3 Other reductions 457 -
a) transformation into tax credits as per L. 214/2011 - -
b) others 457 -
 4.  Closing balance 39.359 38.342

The increase in deferred tax assets recognised through profit or loss compared to 31 December 2014 mainly refers to impairment losses on receivables which can be deducted in the next years.

14.4 Changes in deferred tax liabilities (recognised through profit or loss)

  31.12.2015 31.12.2014
1. Opening balance 11.432 8.633
2. Increases 4.574 3.454
2.1 Deferred tax liabilities recognised in the year 4.574 16
a) relative to previous years - -
b) due to the change in accounting standards - -
c) others 4.574 16
2.2 New taxes or increases in tax rates - -
2.3 Other increases - 3.438
3. Decreases 363 655
3.1 Deferred tax liabilities reversed during the year 16 52
a) reversals 16 52
b) due to the change in accounting standards - -
c) others - -
3.2 Reductions in tax rates - -
3.3 Other reductions 347 603
 4. Closing balance 15.643 11.432

14.5 Changes in deferred tax assets (recognised through equity)

  31.12.2015 31.12.2014
1. Opening balance - 27
2. Increases 63 -
2.1 Deferred tax assets recognised in the year 63 -
a) relative to previous years - -
b) due to the change in accounting standards - -
c) others 63 -
2.2 New taxes or increases in tax rates - -
2.3 Other increases - -
3. Decreases - 27
3.1 Deferred tax assets reversed during the year - 27
a) reversals - 27
b) impairment losses due to unrecoverability - -
c) due to change in accounting standards - -
d) others - -
3.2 Reductions in tax rates - -
3.3 Other reductions - -
4. Closing balance 63 -

14.6 Changes in deferred tax liabilities (recognised through equity)

  31.12.2015 31.12.2014
1. Opening balance 2.836 7.707
2. Increases 2.948 -
2.1 Deferred tax liabilities recognised in the year 2.948 -
a) relative to previous years - -
b) due to the change in accounting standards - -
c) others 2.948 -
2.2 New taxes or increases in tax rates - -
2.3 Other increases - -
3. Decreases 31 4.871
3.1 Deferred tax liabilities reversed during the year 15 4.871
a) reversals 15 4.871
b) due to the change in accounting standards - -
c) others - -
3.2 Reductions in tax rates - -
3.3 Other reductions 16 -
4. Closing balance 5.753 2.836

The increase in deferred tax liabilities recognised through equity compared to 31 December 2014 mainly refers to the latent gain related to the fair value measurement of the portfolio of available for sale financial assets.

Section 16 - Other assets - Item 160

16.1 Other assets: breakdown

  31.12.2015 31.12.2014
Prepayments and accrued income 19.875 8.982
Tax receivables 18.055 13.952
Guarantee deposits 7.886 7.624
Receivables from securitisation transactions 301 553
Other items 36.219 20.731
Total 82.336 51.842

Tax receivables refer for 9,3 million Euro to payments on account for the virtual stamp duty and for 8,8 million Euro to payments on account for withholding taxes on interest paid to customers, specifically on the rendimax savings account.

Prepayments and accrued income included 14,5 million Euro in prepayments related to the DRL segment's debt collection costs, 3,1 million Euro in interest on arrears due from the Public Administration, and 1,3 million Euro in prepaid interests in favour of customers with a fixed-term rendimax account.

Security deposits at 31 December 2014 refer for 7,3 million Euro to an escrow account held with the Italian Revenue Agency concerning a pending appeal in an outstanding tax dispute (as described in section 12 under liabilities, Provisions for risks and charges). The Bank voluntarily set up said account to allow the Fast Finance Business Area to collect tax receivables as usual; the Bank can simply request for it to be returned.

Other items included the 25,5 million Euro receivable due from one of the two buyers of the sales completed at the end of 2014. The amount corresponds to the consideration for the sale.