NATIXIS - 2018 Registration document and annual financial report

5 FINANCIAL DATA

Parent company financial statements and notes

ACCOUNTING PRINCIPLES AND VALUATION METHODS

NOTE 1

Natixis’ separate financial statements have been prepared and are presented in accordance with regulation No. 2014-07 of the Autorité des Normes Comptables (ANC—French accounting standards authority) dated November 26, 2014 relating to the financial statements of companies in the banking sector and regulation No. 2014-03 (modified) relating to the French General Accounting Plan (PCG—Plan comptable général). Financial statements for foreign subsidiaries, prepared in accordance with local rules, are restated in accordance with generally accepted accounting principles in France for the preparation of individual financial statements. The financial statements for the fiscal year are presented in identical format to those for the previous fiscal year. Generally accepted accounting principles have been applied in compliance with the principle of prudence based on the following principles: going concern; a consistency of accounting methods; a principle of periodicity. a 1. Advances to banks cover all receivables other than those represented by a security, held in connection with banking transactions with credit institutions, including subordinated loans and reverse repo stock and securities. They are broken down between demand loans and deposits and term loans and time deposits. Customer loans comprise loans to economic operators other than banks, with the exceptions of those represented by a security, and reverse repo stock and securities. They are broken down by type of loan (current accounts overdrawn, commercial loans, cash loans, equipment loans, export credit, subordinated loans, etc.). Accrued interest is credited to the corresponding receivables item on the income statement. Fees earned on the granting or acquisition of loans, as well as marginal transaction costs, are recognized using the effective interest rate actuarial method over the effective life of the loan. Recognition is shown as net interest income in net revenues. Fees and transaction costs to be recognized are included in the relevant loan book. Loans that have been granted on an irrevocable basis but have not yet given rise to any transfer of funds are included in off-balance sheet items under “Financing commitments given”. Performing and non-performing loans are identified separately. Loans for which there is an identified credit risk, regardless of any guarantees, that makes it probable that Natixis will be unable to recover all or part of the amount owed by the counterparty under the terms and conditions of the loan agreement, are considered to be non-performing. This corresponds to loans for which an event of default as defined in Article 178 of the European regulation dated June 26, 2013 relating to prudential requirements applicable to credit institutions has been identified. In particular, loans that include payments over three months overdue are classified as non-performing loans. Advances to banks and customer loans

When the initial payments of a loan turned non-performing become regular again, the loan in question can be reclassified as a performing loan. Loans accelerated by the lender and loans classified among non-performing loans for more than one year for which a write-off is planned are deemed to be irrecoverable. The reversal of the effect of discounting on impairments of non-performing loans associated with the passage of time is recognized under “Interest and similar expenses” on the income statement. Specific case of receivables restructured due to the debtor’s financial situation Restructured loans correspond to loans with modified terms under which Natixis grants a concession to borrowers facing or likely to face financial difficulties. They are a combination of a concession granted by Natixis and financial difficulties experienced by the borrower. The modified terms of restructured loans must put the borrower in a more favorable situation (e.g. suspension of interest or principal payment, extension of term, etc.) and are confirmed by the use of amendments that modify the terms of an existing contract or by the full or partial refinancing of an existing loan. Financial difficulties are determined by observing a number of criteria such as amounts past due for over 30 days or an at risk rating. The restructuring of a loan does not necessarily result in the counterparty being classified in the Basel default category, as the financial difficulty is addressed before the counterparty is downgraded into the Basel default category. Specific impairments and provisions Where there is a risk of partial or total non-recovery of loans or of borrowers breaching their covenants, impairment charges (for non-performing loans) or provisions (for off-balance sheet commitments) corresponding to the amount of the probable loss are recognized on the income statement under “Provision for credit losses”. These impairments and provisions are assessed quarterly on a case-by-case basis taking into account an analysis of the risk and available collateral. Interest corresponding to the remuneration of impaired loans and receivables or to the reversal of the effect of discounting is recognized as interest income. Impairment losses are calculated as the difference between the gross carrying amount of the receivable and the amounts thought to be recoverable (including flows from the realization of guarantees), discounted at the original effective interest rate for fixed-rate receivables or at the last effective interest rate determined according to the contractual terms for variable-rate receivables. Impairments on non-performing loans covering risks carried on the asset side of the balance sheet are deduced from the assets in question. Probable losses stemming from off-balance sheet commitments are recognized as provisions on the liability side of the balance sheet.

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Natixis Registration Document 2018