OFFERING MEMORANDUM

BANCO DO NORDESTE DO BRASIL S.A.

(a sociedade de economia mista incorporated in the Federative Republic of Brazil)

U.S.$300,000,000 4.375% Senior Notes due 2019

This Offering Memorandum relates to the issuance of U.S.$300,000,000 aggregate principal amount of 4.375% senior notes due May 3, 2019 (the "Notes") of Banco do Nordeste do Brasil S.A. (the "Bank"), a sociedade de economia mista incorporated in, and controlled by, the Federative Republic of Brazil ("Brazil"). Interest on the Notes will accrue from May 3, 2012 and is payable semi-annually in arrears on May 3 and November 3 in each year, commencing on November 3, 2012. The notes will mature on May 3, 2019. The Notes will be our unsecured senior obligations and will rank equally with all of our other unsecured senior indebtedness from time to time outstanding. For a more detailed description of the Notes see "Description of the Notes" beginning on page 146. We may be required to repurchase all outstanding Notes at a purchase price equal to 101.0% of their principal amount plus accrued interest and additional amounts, if any, if the federal government of Brazil (the "Brazilian Government"), our controlling shareholder, ceases to own more than 50.0% of our voting stock. See "Description of the NotesCovenantsRepurchase of Notes upon Change of Control." The Notes may also be redeemed in whole (but not in part) at 100.0% of their principal amount plus accrued interest and certain additional amounts, if any, as discussed herein, in the event of certain changes in tax laws. See "Description of the NotesRedemptionRedemption of Notes Prior to Maturity Solely for Taxation Reasons." Application has been made to admit the Notes on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF.

Investing in the Notes involves risks. See "Risk Factors" beginning on page 18.
Issue Price: 99.257% plus accrued interest, if any, from May 3, 2012
The Notes have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or any state securities laws. Accordingly, the notes may not be offered or sold within the United States or to U.S. persons as defined in Regulation S under the Securities Act ("Regulation S"), except to certain qualified institutional buyers ("QIBs") as defined under Rule 144A of the Securities Act ("Rule 144A"), in accordance with Rule 144A and to certain non-U.S. persons in offshore transactions in reliance on Regulation S. Prospective investors that are QIBs are hereby notified that the seller of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of eligible offerees and of certain restrictions on transfers of the Notes, see "Transfer Restrictions." Neither the U.S. Securities Exchange Commission (the "SEC") nor any U.S. state securities commission has approved or disapproved of these securities or determined if this Offering Memorandum is accurate or complete. Any representation to the contrary is a criminal offense. The Notes may not be publicly offered or sold, directly or indirectly in Brazil, or to any resident of Brazil, except as permitted by applicable Brazilian law. We expect that the Notes will be ready for delivery in book-entry form through The Depository Trust Company (the "DTC"), and its direct and indirect participants (which include Euroclear Bank S.A./N.V. ("Euroclear") and Clearstream Banking S.A. ("Clearstream")), on May 3, 2012.

Joint Lead Bookrunners

BofA Merrill Lynch

HSBC
Co-Managers

Ita BBA

BTG Pactual

Espirito Santo Investment Bank

The date of this Offering Memorandum is May 3, 2012

In making your investment decision, you should rely only on the information contained in this Offering Memorandum. We and the Initial Purchasers have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this Offering Memorandum is accurate as of the date on the front cover of this Offering Memorandum only. Our business, financial condition, results of operations and prospects may have changed since that date. Neither the delivery of this Offering Memorandum nor any sale made hereunder shall under any circumstances imply that the information herein is correct as of any date subsequent to the date on the cover of this Offering Memorandum. This Offering Memorandum constitutes a prospectus for the purposes of the Luxembourg Act dated July 10, 2005 on prospectuses for securities. This Offering Memorandum may only be used for the purpose for which it has been published. This Offering Memorandum is intended solely for the purpose of soliciting indications of interest in the Notes from qualified investors and does not purport to summarize all of the terms, conditions, covenants and other provisions relating to the terms of the Notes contained in the indenture being entered into in connection with the issuance of the Notes as described herein (the "Indenture") and other transaction documents described herein. The market information in this Offering Memorandum has been obtained by us from publicly available sources deemed by us to be reliable. We accept responsibility for correctly extracting and reproducing such information. Notwithstanding any investigation that the Initial Purchasers may have conducted with respect to the information contained in this Offering Memorandum, the Initial Purchasers accept no liability in relation to the information contained in this Offering Memorandum or its distribution or with regard to any other information supplied by us or on our behalf. We confirm that, after having made all reasonable inquiries, this Offering Memorandum contains all information with regard to us and the Notes which is material to the offering and sale of the Notes, that the information contained in this Offering Memorandum is true and accurate in all material respects and is not misleading in any material respect and that there are no omissions of any other facts from this Offering Memorandum which, by their absence herefrom, make this Offering Memorandum misleading in any material respect. We accept responsibility accordingly. This Offering Memorandum contains summaries intended to be accurate with respect to certain terms of certain documents, but reference is made to the actual documents, all of which will be made available to prospective investors upon request to us or the Trustee. All such summaries are qualified in their entirety by such reference. Prospective investors hereby acknowledge that: (i) they have been afforded an opportunity to request from us and to review, and have received, all additional information considered by them to be necessary to verify the accuracy of, or to supplement, the information contained herein, (ii) they have had the opportunity to review all of the documents described herein, (iii) they have not relied on any Initial Purchaser or any of its affiliates or subsidiaries in connection with any investigation of the accuracy of such information or their investment decision, and (iv) no person has been authorized to give any information or to make any representation concerning us or the Notes (other than as contained herein and information given by our duly authorized officers and employees, as applicable, in connection with prospective investors' examination of us and the terms of this offering) and, if given or made, any such other information or representation should not be relied upon as having been authorized by us or the Initial Purchasers. You must comply with all applicable laws and regulations in force in any jurisdiction in which you purchase, offer or sell the Notes or possess or distribute this Offering Memorandum and must obtain any consent, approval or permission required for your purchase, offer or sale of the Notes under the laws and regulations in force in any jurisdiction to which you are subject or in which you make such purchases, offers or sales, and neither us nor any of the Initial Purchasers will have any responsibility therefor. The Notes offered through this Offering Memorandum are subject to restrictions on transferability and resale, and may not be transferred or resold in the United States except as permitted under the Securities Act and

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applicable U.S. state securities laws pursuant to registration under, or exemption from, such laws. By purchasing the Notes, you will be deemed to have made certain acknowledgments, representations, restrictions and agreements as set forth under "Transfer Restrictions." This Offering Memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, any Notes offered hereby by any person in any jurisdiction in which it is unlawful for such person to make an offer or solicitation. You should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. In making an investment decision, prospective investors must rely on their examination of us and the terms of this offering, including the merits and risks involved. These Notes have not been approved or recommended by any United States federal or state securities commission or any other United States, Brazilian or other regulatory authority. Furthermore, the foregoing authorities have not passed upon or endorsed the merits of the offering or confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense in the United States. Notwithstanding anything in this document to the contrary, except as reasonably necessary to comply with applicable securities laws, prospective investors (and each of their employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and tax structure of the offering and all materials of any kind (including opinions or other tax analyses) that are provided to them relating to such tax treatment and tax structure. For this purpose, "tax structure" is limited to facts relevant to the U.S. federal income tax treatment of the offering. Neither we, the Initial Purchasers nor any of our or their respective affiliates or representatives are making any representation to any offeree or purchaser of the Notes offered hereby regarding the legality of any investment by such offeree or purchaser under any applicable law. Each prospective investor should consult with its own advisors as to legal, tax, business, financial and related aspects of a purchase of the Notes. NOTICE TO PROSPECTIVE INVESTORS IN THE EUROPEAN ECONOMIC AREA This Offering Memorandum has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of the offering contemplated in this Offering Memorandum as completed by final terms in relation to the offer of those Notes may only do so in circumstances in which no obligation arises for the Bank or any of the Initial Purchasers to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Bank nor the Initial Purchasers have authorized, nor do they authorize, the making of any offer of Notes in circumstances in which an obligation arises for the Bank or the Initial Purchasers to publish or supplement a prospectus for such offer. The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU. NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED KINGDOM This Offering Memorandum is for distribution only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc") of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as "relevant persons"). This Offering Memorandum is directed only at

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relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. In connection with the offering of the Notes, the Initial Purchasers are not acting for anyone other than the Bank and will not be responsible to anyone other than the Bank for providing the protections afforded to their clients nor for providing advice in relation to the issue. NOTICE TO RESIDENTS OF NEW HAMPSHIRE NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ("RSA") WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSONS, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. The Notes will be available initially only in book-entry form, in the form of one or more registered global notes deposited with, or on behalf of, DTC and registered in the name of Cede & Co., its nominee. Beneficial interest in respect of the global notes will be shown on, and transfers of beneficial interest in respect of the global notes will be effected through, records maintained by DTC and its participants. We expect the Regulation S global notes, if any, to be deposited with the trustee as custodian for DTC, and beneficial interest in respect of them may be held through Euroclear, Clearstream or other participants. See "Description of the NotesBook-Entry System; Delivery and Form" for further discussion of these matters. We reserve the right to withdraw this offering of the Notes at any time, and we and the Initial Purchasers reserve the right to reject any commitment to subscribe for the Notes in whole or in part and to allot to any prospective investor less than the full amount of Notes sought by that investor. The Initial Purchasers and certain related entities may acquire for their own account a portion of the Notes. Our website is www.bnb.gov.br. The information included on our website or which may be accessed through our website is not part of this Offering Memorandum and is not included herein by reference or otherwise.

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TABLE OF CONTENTS Page Definitions ..................................................................................................................................................................... v Forward-Looking Statements ....................................................................................................................................... ix Presentation of Financial and Certain Other Information ............................................................................................. xi Summary........................................................................................................................................................................ 1 The Offering ................................................................................................................................................................ 11 Summary Financial Information .................................................................................................................................. 16 Risk Factors ................................................................................................................................................................. 18 Use of Proceeds ........................................................................................................................................................... 29 Exchange Rate Information ......................................................................................................................................... 30 Capitalization ............................................................................................................................................................... 32 Selected Financial Information .................................................................................................................................... 33 Other Statistical and Financial Information ................................................................................................................. 36 Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................... 48 Banking Industry Overview......................................................................................................................................... 79 Regulation of the Brazilian Banking Industry ............................................................................................................. 84 Business ..................................................................................................................................................................... 106 Management .............................................................................................................................................................. 137 Principal Shareholders ............................................................................................................................................... 143 Related-Party Transactions ........................................................................................................................................ 145 Description of the Notes ............................................................................................................................................ 146 Taxation ..................................................................................................................................................................... 164 Certain ERISA and Other Considerations ................................................................................................................. 170 Plan of Distribution ................................................................................................................................................... 171 Transfer Restrictions.................................................................................................................................................. 177 Service of Process and Enforcement of Judgments ................................................................................................... 181 Legal Matters ............................................................................................................................................................. 182 Independent Auditors ................................................................................................................................................ 183 General Information .................................................................................................................................................. 184 Description of Certain Differences Between Brazilian Accounting Practices Applicable to Entities Authorized to Operate by the Central Bank and International Financial Reporting Standards .......................... 185 Index to Financial Statements .................................................................................................................................... F-1

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DEFINITIONS In this Offering Memorandum, references to: "Agroamigo" refers to the rural and agribusiness microcredit lending program that we operate using funding from, and as part of, FNE's portfolio. "ANBIMA" refers to the Brazilian Association of Financial and Capital Markets Entities (Associao Brasileira das Entidades dos Mercados Financeiro e de Capitais). "BNB," "Bank," "Issuer," "we," "our," "ours," "us" or similar terms refer to Banco do Nordeste do Brasil S.A., a sociedade de economia mista incorporated under the laws of Brazil, unless the context otherwise requires. "Banking Reform Law" refers to Law No. 4,595, as of December 31, 1964, as amended. "Basel Accord" refers to the banking supervision accord issued by the Basel Committee on Banking Supervision. "BM&FBOVESPA" refers to the So Paulo Stock Exchange (BM&FBovespa S.A.Bolsa de Valores, Mercadorias e Futuros). "BNDES" refers to the Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econmico e Social), a development bank controlled by the Brazilian Government. "Brazil" refers to the Federative Republic of Brazil. "Brazilian Corporations Law" refers to Law No. 6,404, as of December 15, 1976, as amended. "Brazilian Federal Constitution" refers to the Constitution of Brazil, enacted in 1988, as amended. "Brazilian GAAP" refers to the generally accepted accounting principles adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank. "Brazilian Government" refers to the federal government of Brazil. "CAGR" refers to compound annual growth rate. "CDBs" refer to interest-bearing Certificates of Bank Deposit (Certificados de Depsito Bancrio). "CDCs" and "Group CDCs" refer to Direct Consumer Credits (Crdito Direto ao Consumidor), which offer groups of loan applicants the opportunity to provide collateral for each other and thus pool their guarantees together. "CDI rate" refers to the interbank deposit interest rate (depsito interfinanceiro). "Central Bank" refers to the Central Bank of Brazil (Banco Central do Brasil). "Clearstream" refers to Clearstream Banking S.A., located in Luxembourg. "CMN" refers to the Brazilian National Monetary Council (Conselho Monetrio Nacional). "CNSP" refers to the Brazilian Council of Private Insurance (Conselho Nacional de Seguros Privados). "COAF" refers to the Financial Activities Control Council (Conselho de Controle de Atividades Financeiras). "COFINS" refers to the Social Security Financing Tax (Contribuio para Financiamento da Seguridade Social). "CPC" refers to the Brazilian Accounting Pronouncement Committee (Comit de Pronunciamentos Contbeis). "Crediamigo" refers to our urban microcredit lending program offered to our clients in the industrial, commercial and services sectors.

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"CVM" refers to the Brazilian Securities Exchange Commission (Comisso de Valores Mobilirios). "Del credere" refers to fees we earn in exchange for assuming part or all the credit risk in certain loans made under Brazilian Government's funds and programs. "DTC" refers to The Depository Trust Company. "EC" refers to a Constitutional Amendment (Emenda Constitucional). "Euro MTF" refers to the Euro MTF market of the Luxembourg Stock Exchange. "Euroclear" refers to Euroclear Bank S.A./N.V., as operator of the Euroclear System. "Exchange Act" refers to the U.S. Securities Exchange Act of 1934, as amended. "FAT" refers to the Workers Support Fund (Fundo de Amparo ao Trabalhador). "FDNE" refers to the Northeast Development Fund (Fundo de Desenvolvimento do Nordeste), a Brazilian Government fund designed to provide financing for infrastructure, public service and other projects with the purpose of developing businesses in the Northeast region. "FEBRABAN" refers to the Brazilian Federation of Banks (Federao Brasileira dos Bancos). "FGC" refers to the Credit Guarantee Fund (Fundo Garantidor de Crdito). "FGTS" refers to the Unemployment Fund (Fundo de Garantia do Tempo de Servio). "FGV" refers to Fundao Getlio Vargas. "FINOR" refers to the Northeast Investment Fund (Fundo de Investimentos do Nordeste), an investment fund paid for using tax proceeds from companies headquartered in the Northeast region of Brazil that as part of a government tax incentive program are permitted to buy shares of FINOR instead of making standard tax payments. "FNE" refers to the Constitutional Fund for the Financing of the Northeast (Fundo Constitucional de Financiamento do Nordeste), a fund established by the Brazilian Federal Constitution for low-cost loans for the productive sector in the Northeast region of Brazil to stimulate economic and social development, exclusively managed by the Bank. "GDP" refers to gross domestic product. "Group of Governors and Heads of Supervision" refers to the oversight body of the Basel Committee on Banking Supervision. "IBGE" refers to the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatstica). "IBRACON" refers to the Brazilian Institute of Independent Accountants (Instituto dos Auditores Independentes do Brasil). "IDB" refers to the Inter-American Development Bank. "IFRS" refers to the International Financial Reporting Standards set by the International Accounting Standards Board. "IGP-M" refers to the Brazilian General Market Price Index (ndice Geral de Preos de Mercado). "Initial Purchasers" refers individually and collectively to Merrill Lynch, Pierce, Fenner & Smith Incorporated, HSBC Securities (USA) Inc., Itau BBA USA Securities, Inc., Banco BTG Pactual S.A. Cayman Branch and Banco Espirito Santo de Investimento S.A. "IPCA" refers to the Brazilian Extended Consumer Price Index (ndice Nacional de Preos ao Consumidor Amplo).

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"IPI" refers to the Brazilian federal tax on industrial products (Imposto sobre Produtos Industrializados). "ISSQN" refers to the Services Tax (Imposto Sobre Servios de Qualquer Natureza). "LCA" refers to Agribusiness Credit Letter, a negotiable credit bond linked to our agribusiness loans (Letra de Crdito do Agronegcio). "National Treasury" refers to the Secretary of the National Treasury of Brazil (Secretaria do Tesouro Nacional). "NIM" refers to our net interest margin. "Northeast" or "Northeast region" refers to the Brazilian geographic region formed by the following states: Bahia, Sergipe, Alagoas, Pernambuco, Paraba, Rio Grande do Norte, Cear, Piau, Maranho and, for purposes of this Offering Memorandum only, the northern portion of the states of Minas Gerais and Esprito Santo. "PAC" refers to the Growth Acceleration Program (Programa de Acelerao do Crescimento), a Brazilian Government program designed to finance large infrastructure projects throughout the Brazil. "PASEP" refers to the Public Employee Formation Program Tax (Programa de Formao do Patrimnio do Servidor Pblico). "PIS-PASEP" refers to the Social Integration Program Tax (Programa de Integrao Social). "PPP" refers to a Public-Private Partnerships contract entered into between the Brazilian Government and one or more private sector companies. "PREVIC" refers to the National Superintendant of Complementary Pension (Superintendncia Nacional de Previdncia Complementar). "Proagro" refers to the Brazilian Government insurance program that covers certain of our losses for rural loans in the principal amount of up to R$35,000. "PRODETUR" refers to the Northeast Tourism Development Program (Programa de Desenvolvimento do Turismo no Nordeste). "PRONAF" refers to the National Program to Strengthen Family Agriculture (Programa Nacional de Fortalecimento da Agricultura Familiar). "RAET" refers to the Special Temporary Management Regime (Regime de Administrao Especial Temporria). "RBDs" refer to bank deposit receipts. "real," "reais" or "R$" refers to the Brazilian real, the official currency of Brazil. "RECOOP" refers to the Brazilian Government's Program for Revitalization of Agricultural Cooperatives (Revitalizao de Cooperativas de Produo Agropecuria). "Securities Act" refers to the U.S. Securities Act of 1933, as amended. "SELIC rate" refers to the interest rate set forth by the Custody and Settlement Special System (Sistema Especial de Liquidao e Custdia), established by the Central Bank. "SUSEP" refers to the Superintendant of Private Insurance (Superintendncia de Seguros Privados). "TJLP" means the long-term interest rate (Taxa de Juros de Longo Prazo), published by the Central Bank. "TMS" refers to the average SELIC rate (taxa mdia SELIC).

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"U.S. dollar," "U.S. dollars" or "U.S.$" refers to U.S. dollars, the official currency of the United States. "U.S. GAAP" refers to the generally accepted accounting principles adopted in the United States.

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FORWARD-LOOKING STATEMENTS This Offering Memorandum contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements appear throughout this Offering Memorandum, principally in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Such estimates and forward-looking statements are primarily based on current expectations and projections about future events and financial trends that affect, or may affect, our business, financial condition, results of operations and prospects. There are many significant risks, uncertainties and assumptions that might cause our business, financial condition, results of operations, liquidity and prospects to differ materially from those set out in our estimates and forward-looking statements, including matters such as, and include statements regarding our or our officers' intent, belief or current expectations with respect to, among other things, the use of proceeds of the offering, our financing plans, trends affecting our financial condition or results of operations, the impact of competition and future plans and strategies. These statements reflect our views with respect to such matters and are subject to risks, uncertainties and assumptions, including, among other factors: general economic, political and business conditions in the Northeast region, in Brazil and abroad; our level of capitalization; competition in Brazilian banking, financial services and related activities; the market value of Brazilian Government securities; fluctuations in inflation rates, interest rates and exchange rates, among other macroeconomic indicators, which may have an adverse effect on our margins; increases in defaults by borrowers and other loan delinquencies and increases in the provision for loan losses; credit and other risks of lending, investing and conducting our activities; decrease in deposits or other sources of funds, reduction in number of clients and decrease in revenues; cost and availability of funds; implementation of our business and our expansion strategies and investment plans; changes in the applicable laws and governmental regulations, particularly the Central Bank's rules, related to us and our lending and other activities, and tax matters; unfavorable legal or regulatory developments; income from new products and services; changes in our businesses; and other risk factors as set forth under "Risk Factors."

The words "believe," "could," "may," "estimate," "continue," "potential," "anticipate," "intend," "expect," "will," "should" and "plan," among others, are intended to identify forward-looking statements. Forward-looking statements speak only as of the date they were made and neither we nor the Initial Purchasers undertake to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this Offering Memorandum might not occur. Any such forward-looking statements are not guarantees of future performance. As a result, prospective investors should not make an investment decision based on the forward-looking statements contained in this Offering Memorandum.

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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION Our financial statements included elsewhere in this Offering Memorandum were audited by Deloitte Touche Tohmatsu Auditores Independentes. The auditors' reports regarding these financial statements are also included elsewhere in this Offering Memorandum. The Bank's operations are based in Brazil, and each of the Bank's financial statements (i) as of and for the years ended December 31, 2011 and 2010 (the "2011 Financial Statements"); and (ii) as of and for the years ended December 31, 2010 and 2009 (the "2010 Financial Statements" and, together with the 2011 Financial Statements, the "Financial Statements"), in each case together with the notes thereto and included elsewhere in this Offering Memorandum, are expressed in reais and have been prepared in accordance with generally accepted accounting principles adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank ("Brazilian GAAP"), which are based upon: the Brazilian Corporations Law, which sets forth the accounting method required to be followed by Brazilian corporations, and the changes introduced by Law No. 11,638/07 and Law No. 11,941/09, as amended; and the rules and regulations of the CMN, the CVM and the Central Bank, which provide additional industry specific guidelines that are also considered part of accounting practices adopted in Brazil applicable to us.

On December 28, 2007, the Brazilian government enacted Law No. 11,638, which became effective on January 1, 2008 and which, together with Law No. 11,941, amended the Brazilian Corporations Law and introduced the process of convergence of Brazilian GAAP into International Financial Reporting Standards set by the International Accounting Standards Board ("IFRS"). Additionally, during 2008 and 2009 the CPC issued standards relating to the convergence of Brazilian GAAP with IFRS. Although these standards have been approved by the CVM, not all have been ratified by the Central Bank. Accordingly, in the preparation of our financial statements, we have adopted only those pronouncements which have already been ratified by the Central Bank, namely: CPC 01 Impairment of assets (Central Bank Resolution No. 3,566/08); CPC 03 Statements of cash flows (Central Bank Resolution No. 3,604/08); CPC 05 Related party transactions (Central Bank Resolution No. 3,750/09); CPC 10 Share based payments (Central Bank Resolution No. 3,989/11, effective from January 2012); CPC 23 Accounting policies, changes in accounting estimates and errors (Central Bank Resolution No. 4,007/11, effective from January 2012); CPC 24 Subsequent events (Central Bank Resolution No. 3,973/11); and CPC 25 Provisions, contingent liabilities and contingent assets (Central Bank Resolution No. 3,823/09).

Our financial statements and other financial information included in this Offering Memorandum have been prepared in accordance with Brazilian GAAP applicable to entities authorized to operate by the Central Bank. As of and for the years ended December 31, 2010 and 2009, in addition to our 2010 Financial Statements prepared in accordance with Brazilian GAAP, we also prepared financial statements in accordance with IFRS. We are currently preparing financial statements in accordance with IFRS as of and for the year ended December 31, 2011, in addition to our 2011 Financial Statements. These IFRS financial statements are not comparable with those prepared in accordance with Brazilian GAAP and are not included in this Offering Memorandum. Brazilian GAAP differs in certain material respects from IFRS. For a description of some of these differences, see "Description of Certain Differences between Accounting Practices Adopted in Brazil and International Financial Reporting Standards."

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In this Offering Memorandum, references to our total revenues for a period are related to our total income for the relevant periods from (i) financial intermediation, (ii) services provided, (iii) bank fees and (iv) certain other operating income (including del credere fees). Total revenues as so presented is a non-Brazilian GAAP accounting measure prepared by us that we believe to be a useful measure, insofar as it combines our interest and other income from financial intermediation and our income from fund and program management, including from our management of the FNE, which would not otherwise be reported as income from financial intermediation under Brazilian GAAP, although it may not be comparable to any similarly defined measure used by other financial institutions. As a result, our presentation of the components of total revenues set forth in this Offering Memorandum differs from the discussion of the components of our income in "Management's Discussion and Analysis of Financial Condition and Results of Operations." See "Selected Financial Information" or "BusinessOur Activities" for the presentation of total revenues for the years ended December 31, 2011, 2010 and 2009. We calculated our average volume and balance data based upon the average of the month-end balances during the relevant period. We made certain rounding adjustments in calculating some of the figures included in this Offering Memorandum. Accordingly, numerical figures shown as totals or percentages in some tables may not agree precisely with the figures that precede them. We maintain our books and records in reais. We obtained statistical information and data related to our business areas from government entities or extracted them from publications and other public sources that we believe to be reliable. Neither we nor the Initial Purchasers have independently verified this information and data, and, therefore, cannot assure their accuracy and completeness. Solely for the convenience of the reader, we have converted certain amounts contained in this Offering Memorandum from reais into U.S. dollars. Except as otherwise expressly indicated, the rate we used to convert these amounts was R$1.8758 to U.S.$1.00 (subject to rounding adjustments), which was the selling exchange rate in effect as of December 31, 2011 as reported by the Central Bank. The U.S. dollar equivalent information presented in this Offering Memorandum is provided solely for the convenience of investors and should not be construed as implying that the amounts presented in reais represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. The criteria used to convert certain amounts from reais into U.S. dollars differ from the criteria established by International Accounting Standards (IAS) 21The Effects of Changes in Foreign Exchange Rates. The real/U.S. dollar exchange rate may fluctuate, and the exchange rate as of December 31, 2011 may not be indicative of future exchange rates. See "Exchange Rate Information" for information regarding real/U.S. dollar exchange rates. On November 16, 2011, our Board of Directors approved the engagement of Ernst Young & Terco as our independent registered accounting firm for the year ended December 31, 2012. Our Board of Directors participated in and approved the decision to replace Deloitte Touche Tohmatsu Auditores Independentes as our independent auditors as they had already served a term of five years. The report of Deloitte Touche Tohmatsu Auditores Independentes on our financial statements for the years ended December 31, 2011 and 2010 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.

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SUMMARY This summary highlights information contained elsewhere in this Offering Memorandum. It does not contain all of the information that an investor should consider before making a decision to invest in the Notes. For further information on our activities and this offering, this summary must be read together with the detailed information included in the other sections of this Offering Memorandum, in particular the information included in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and the Financial Statements included elsewhere in this Offering Memorandum. General Banco do Nordeste do Brasil S.A. is a multi-service special purpose development bank with operations primarily focused on the Northeast region of Brazil. We provide a comprehensive portfolio of products and services to individuals, companies and the federal, state and municipal governments in Brazil. We are controlled by the Brazilian Government and we act as an agent for implementation of the Brazilian Government's development policies and programs for the Northeast region. As part of the Brazilian Government's plans to facilitate development in this region, we provide competitive financing to small and micro agricultural businesses and infrastructure projects at lower costs than those available from private sector banks and lenders due to our significant funding from the Brazilian Government. Our operations are focused on financing the productive sectors in the Northeast region (including the rural, industrial and commercial sectors), mainly through long- and short-term loans and capital markets transactions. As of December 31, 2011 and 2010, we had total assets of R$26.4 billion and R$23.8 billion and shareholders' equity of R$2.3 billion and R$2.2 billion, respectively. For the years ended December 31, 2011 and 2010, our net income was R$314.8 million and R$313.6 million, respectively. In addition to our own lending operations, we manage certain of the Brazilian Government's funds and programs, including the FNE (Constitutional Fund for the Financing of the Northeast) and the FINOR (Northeast Investment Fund) and we also act as lending agent for PRONAF (National Program to Strengthen Family Agent Cultures) and as loan analyst and administrator for the FDNE (Northeast Development Fund). All of these funds and programs are designed to foster economic and social development in Brazil and particularly the Northeast region for various sectors, activities and clients, ranging from small family farms to large infrastructure projects. We are the exclusive manager of the FNE, the most significant Brazilian Government fund involved in our operations, whose net worth (which is equivalent to its assets) totaled R$37.7 billion as of December 31, 2011. In exchange for being a disbursing agent responsible for approving and allocating the FNE's funds to low-cost loans for economic and social development in the Northeast region, we earn (i) annual management fees of 3.0% of FNE's total net worth (which were R$993.5 million for the year ended December 31, 2011 and R$816.8 million for the year ended December 31, 2010), limited to a maximum of 20% of proceeds annually transferred to FNE by the Brazilian Government based on collection of income and IPI taxes; and (ii) a "del credere" fee for bearing the credit risk associated with certain of these transactions. Although the assets of the FNE (including loans we make using its funds) are not part of the credit underlying the Notes and the FNE is not a guarantor of the Notes, these fees payable to us constitute stable and significant sources of income for us, as our exclusive management relationship with the FNE cannot be changed except by legislative action by the Brazilian Congress. The fees we earned for our roles as manager for FINOR, lending agent for PRONAF and loan analyst and administrator for FDNE totaled R$112.6 million for the year ended December 31, 2011 and R$106.3 million for the year ended December 31, 2010 and, consequently, are much less significant to our operations than that derived from our relationship with FNE. We believe that our management of FNE and other Brazilian Government funds and programs provides us with unique opportunities to gain know-how and cross-sell our products to a large base of potential corporate and individual clients in the Northeast region. We are one of the largest and most active banks in the Northeast region of Brazil in terms of market share, according to Central Bank information as of December 31, 2011, with a R$11.8 billion loan portfolio as of that date. According to the Central Bank, we are the primary domestic source of long-term financing in the Northeast region, with a loan portfolio representing a market share of approximately 19.2% of the total long-term financing portfolio in the entire Northeast region as of December 31, 2011 or 67.4% when considering our and the loan portfolio of the FNE together. Moreover, the entire Northeast region's GDP CAGR between December 31, 2005 and December 31, 2010 was 4.0%, 9.6% higher than the CAGR of Brazil (including the Northeast). We also expect that the increasing number of large corporate projects in the region will continue to require even more long-term financing, which we believe will provide us with the opportunity to further expand our leading position in the Northeast region.

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Products and Services Our principal products and services consist of the following: Loan operations, consisting of loans to micro, small, medium and large customers principally in the Northeast region of Brazil (we also have certain loans outstanding with customers in states outside of the Northeast region which do not, individually or in the aggregate, significantly contribute to our business), including: Industrial loans for purchases of machinery, equipment and raw materials and for plant modernizations, among others; Rural and agribusiness loans; Infrastructure loans to the federal, state and municipal governments; Commercial loans to businesses in the retail, wholesale and service sectors; Individual and consumer loans; Loan portfolios acquired from other financial institutions (particularly during the recent global financial crisis when certain institutions were facing liquidity constraints); and Other loan operations, including working capital products, foreign trade loans, urban microcredit loans for the services segment, guarantee accounts, bank credit notes (CCB Cdulas de Crdito Bancrio), home mortgage loans and loans to non-Bank employees under Group CDCs, among others.

Management, lending agency and administration of, and loan analysis for, government funds and programs, most significantly the FNE, designed to provide low-cost loans to stimulate the economic and social development of the Northeast region. Depending on the fund or program, we are responsible for processing, disbursing, monitoring and collecting on loans made using Brazilian Government funds or through government programs, in exchange for management fees and, depending on the fund or program, additional del credere fees, which are based on the amount of our credit risk associated with certain loans. Banking services and capital markets activities, consisting of checking and savings accounts, time deposits, foreign exchange, wire transfers, collection services, online banking and, through third parties, the sale of private pension plans and savings bonds, in addition to structuring and distributing local debenture issuances and other short- and long-term bonds in the Brazilian capital markets. Asset management, consisting of management of third-party assets for small, medium and large investors (including governmental entities). We invest these assets in our private investment funds, usually consisting of debt or equity securities issued by publicly held Brazilian companies or Brazilian Government debt securities.

As part of our loan operations, we extend microcredit loans to small unincorporated businesses in the industrial, commercial and services sectors through our Crediamigo program and, using FNE funds, to the rural and agribusiness sectors through the Agroamigo program. The combined microcredit portfolios owned or managed by us as of December 31, 2011 totaled R$2,268.8 million, which included R$1,177.9 million from Crediamigo (our portfolio) and R$1,090.9 million from Agroamigo (FNE's portfolio), reflecting an increase of 26.7% from December 31, 2010.

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The table below sets out our loan portfolio divided by type of client as of the dates indicated:
As of December 31, 2011 R$ million Total loan operations .................................................... Loans............................................................................... Industrial(1) ....................................................................... Rural and agribusiness(2) ................................................. Commercial(1) .................................................................. Governments ................................................................... Individual and consumer ................................................. Housing system ............................................................... Acquired loan portfolios(3) ............................................ Other loan operations(4) ................................................ (1) (2) (3) (4) 11,799.1 8,416.8 3,189.2 1,474.6 2,368.4 1,331.0 53.4 0.2 266.0 3,116.3 Relative Participation (%) 100.0% 71.3% 27.0% 12.4% 20.1% 11.3% 0.5% 2.3% 26.4% R$ million 11,287.8 7,792.8 2,605.7 1,974.5 1,898.2 1,257.7 56.5 0.2 695.4 2,799.6 2010 Relative Participation (%) 100.0% 69.0% 23.1% 17.5% 16.8% 11.1% 0.5% 6.2% 24.8%

Includes microcredit operations conducted through the Crediamigo program. Does not include microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio. Recorded as financial intermediaries on our financial statements. Includes working capital loans, foreign trade transactions, urban microcredit loans (services) and other loan operations and products (such as guarantee accounts, bank credit notes, home mortgage loans and loans to non-Bank employees under CDCs).

With respect to our loan operations, our portfolio increased by 4.5%, to R$11.8 billion as of December 31, 2011, from R$11.3 billion as of December 31, 2010. Our income from loan operations accounted for 30.1% (or R$1.8 billion) and 32.6% (or R$1.5 billion) of our total revenues of R$5.9 billion and R$4.6 billion for the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, 92.9% of our loan portfolio was rated between "AA" and "C" as to asset quality, according to our application of Central Bank criteria. See "Other Statistical and Financial InformationLending OperationsPast Due Loans" and "Management's Discussion and Analysis of Financial Condition and Results of OperationsLendingLoan Loss History" for a discussion of Central Bank criteria. For the years ended December 31, 2011 and 2010, we earned from the FNE R$993.5 million and R$816.8 million in management fees, respectively, which accounted for the majority of our income from management fees. We are responsible for the allocation of FNE funds to low-cost loans for economic and social development in the Northeast region. While we have no internal policies regarding asset concentration with respect to FNE loans, in order to uniformly develop the Northeast region, the sole limitations imposed on us by FNE regulations are the requirement that we invest no more than 30% of its funds in any single state, that we invest no less than 4.5% of its funds in each state and that we invest at least 50% of its funds in the semi-arid areas of the region. We may assume part or all of the credit risk associated with loans made with FNE funds, for which we are compensated with an additional del credere fee. This monthly del credere fee is equivalent to 0.25% or 0.5% of the principal amounts of the relevant loans when we assume 50% (for most loans made after December 1, 1998) or 100% (for renegotiated loans that were originally granted with funds other than by FNE) of the credit risk associated with each loan, respectively. These del credere fees for FNE are earned in addition to the management fees and totaled R$822.8 million for the year ended December 31, 2011 and as of that date, we were exposed to 50% and 100% of the credit risk for 83.1% and 0.7%, respectively, of the FNE's total portfolio. For each of our roles as lending agent for PRONAF, manager for FINOR and loan analyst and administrator for FDNE we also receive a management fee from each such fund or program. For PRONAF and FDNE loans for which we assume risk above specified levels, we also receive del credere fees in differing amounts. We do not assume risk on FINOR loans and therefore do not receive del credere fees from FINOR. See "BusinessDescription of Products and Services Government Fund and Program ManagementFNE" for more information regarding the fees we receive from these operations and "Management's Discussion and Analysis of Financial Condition and Results of Operations Principal Factors Generally Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs" for more information regarding how they affect our business and results of operations. Revenues from our banking services and capital markets activities totaled 3.9% (or R$231.3 million) and 6.8% (or R$311.1 million) of our total revenues for the years ended December 31, 2011 and 2010, respectively.

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Revenues from our asset management activities totaled 0.2% (R$14.3 million) and 0.3% (or R$12.6 million) of our total revenues for the years ended December 31, 2011 and 2010, respectively. Our loan operations, government fund and program management and banking services together contributed over 94.2% and 94.6% of our total revenues for the years ended December 31, 2011 and 2010, respectively. Operations As of December 31, 2011, we offered services to our customers through our network, which consisted of 187 full service branches, and more than 20,000 automated teller machines ("ATMs") located in our branches or operated by our ATM service partners, Banco do Brasil, Caixa Econmica Federal and Banco 24 Horas. As of that date, our network served 1,990 cities in the Northeast region and we had 6,077 employees and 1,672,149 active lending, deposit and other customers (an increase from 1,174,415 as of December 31, 2010). We believe that our large number of branches has enabled us to build a substantial client base to which we can offer our portfolio of products and services. In addition, we use our geographically broad branch network to conduct studies on the specific characteristics of the different cities and customers in the Northeast region. These studies allow us to target, plan and implement operations tailored to the specific needs of different areas, supporting what we believe can be sustainable economic growth and social development of local communities. We are also focused on strengthening our brand recognition by sponsoring local cultural events across the Northeast region, both directly and through programs like the BNB Culture Program (Programa BNB de Cultura), which has provided financing to 162 cultural projects in 7 cities between January 1, 2006 and December 31, 2011. Set forth below is a map showing our area of operations and branches: State AL BA CE DF ES MA MG PB PE PI RJ RN SE SP Total Branches 9 37 28 1 2 16 13 14 19 17 1 14 15 1 187

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The table below shows some of our financial and operational highlights as of and for the years ended December 31, 2011, 2010 and 2009:
As of and For the Year Ended December 31, 2011 2010 (In millions of R$, except percentages) Total assets .......................................................................................................... Loans(1) ................................................................................................................. Deposits ................................................................................................................ Past due loans (loans in arrears)/total loans (%)(2) ............................................... Shareholders' equity ............................................................................................. Net income ........................................................................................................... Capital ratio (%)(3) ................................................................................................ Return on average equity (ROAE)(%)(4) .............................................................. Return on average assets (ROAA)(%)(5) .............................................................. (1) (2) 26,436 11,799 8,964 4.0 2,329 315 16.6 13.6 1.3 23,784 11,288 8,510 3.6 2,177 314 13.6 14.9 1.5 19,154 9,938 6,333 4.5 2,073 459 13.0 23.8 2.7 2009

(3) (4) (5)

Includes short- and long-term, individual, consumer, rural and agribusiness, industrial, commercial and government loans. A loan is considered past due when it is overdue from 15 days to the date the loan is written off in full. In accordance with Central Bank Resolution 2,682, loans that will mature within 36 months and loans that mature after 36 months are written off in full when they become overdue by 360 days and 540 days, respectively. See "Other Statistical and Financial InformationLending OperationsPast Due Loans." Capital ratio required by Central Bank corresponding to a minimum capital adequacy ratio of 11% of total risk-adjusted assets. See "Other Statistical and Financial InformationReturn on Equity and AssetsCapital Adequacy and Minimum Capital Requirements." Return on average equity is calculated as net income earned during the accounting period divided by our average equity. Return on average assets is calculated as net income earned during the accounting period divided by our average assets.

Funding As of December 31, 2011, our sources of funding were largely (i) time deposits (particularly in the form of CDBs), representing 33.6% of total funding; (ii) savings deposits, representing 6.5% of total funding; and (iii) interbank deposits and funds from BNDES and other government-owned institutions, and funds from international development banks, such as the Inter-American Development Bank, which together represented 59.9% of our total funding. As a government-owned bank with a mandate to facilitate development in the Northeast region, we have access to Brazilian Government resources and international development banks that provide us with low-cost funding that allows us to perform our development banking activities at more favorable margins compared to those available in the private sector (our average rate on average interest-bearing liabilities was 10.6% for the year ended December 31, 2011, and 7.0% and 4.2% for the years ended December 31, 2010 and 2009, respectively, which we believe in principal part results from the low costs of these sources). For more information on our average interest-bearing liabilities, see "Other Statistical and Financial InformationAverage Balance Sheets and Interest Rate Data." This includes BNDES funding, even though we must follow the same procedures and are subject to the same requirements and commercial terms applicable to non-government owned recipients of its funding. We have also been working to diversify our sources of funding by increasing time deposits, particularly in the form of CDBs. For more information, see "BusinessFunding." In addition, in order to strengthen our capital base, we issued subordinated debt in the local Brazilian markets of R$600.0 million in July 2009 and R$400.0 million in June 2010, to the FNE, which increased our capital ratio by 3.35% and 1.65%, respectively. In the second half of 2010, in order to further strengthen our capital base, we raised an additional R$1.0 billion through a loan agreement granted by the Brazilian government, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444, which increased our capital ratio by 4.21%. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources Sources and Uses of FundsSources of Funds."

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Our Strengths We believe our principal strengths are: Leadership position. Among other market positions, we are: the largest and most active development bank in the Northeast in terms of loans provided (long term and short term), according to the Central Bank, as of December 31, 2011; the second largest bank in Brazil in terms of rural loans, according to the Central Bank, as of December 31, 2011; the 13th largest bank in terms of total assets; the seventh largest bank in terms of total deposits growth; the 12th largest bank in terms of total credit operations; the 13th largest bank in terms of total deposits, in each case according to the Valor 1000 magazine, 2011 edition on the Brazilian banking industry; and the ninth largest bank in terms of number of branches; the tenth largest bank in terms of loans for large companies; and the 13th largest bank in terms of loans for medium-sized companies, in each case according to the Exame Melhores e Maiores magazine, 2011 edition; and with respect to our Crediamigo program: the best and second largest (in terms of the number of outstanding loans) microcredit program in Latin America and Caribbean, according to Microfinanzas magazine, in 2010; and the largest microcredit program in South America, in terms of productive microcredit accounts (which excludes microcredit operations for consumers and home mortgage loans); third among the top microfinance institutions in the Forbes list of the Top 50 Microfinance Institutions in the world in 2007.

We believe that the market leadership and the resulting know-how from our broad network and focus on the Northeast region provides us with a strong brand recognition, significant market presence and the ability to sell a range of financing solutions to a broad client base. Strong presence and growth in a growing geographic area. Through our presence in the Northeast region, we have experienced strong growth, with our loan portfolio almost tripling between December 31, 2006 and December 31, 2011. We believe we are well positioned to continue increasing our loan portfolio, given our experience in long-term lending, deep knowledge of the regional characteristics and needs of borrowers located in the Northeast region and widely recognized brand where we operate. The BrandFinance Banking 500 included us among the 500 most valuable brands in the worldwide banking industry, a global ranking prepared by Brand Finance based on the branding value of publicly traded banks worldwide. Our position increased by 25 positions from 2010 to 2011 (from 349th to 324th) and we were ranked ninth among Brazilian banks. Moreover, the CAGR of the Northeast region's GDP has outpaced that of Brazil and has attracted large amounts of private investments through significant infrastructure and logistics projects, which have also benefited us by increasing demand for the financings we offer. We believe the increasing number of large corporate projects in the Northeast resulting from Brazilian Government programs such as PAC and the infrastructure needed for the pending 2014 World Cup in Brazil will continue to require additional long-term financing, providing us an opportunity to reinforce our leadership in the region and sustain our growth for coming years. Stable source of significant income and broad exposure to a wide customer pool. As the exclusive manager of the FNE, we have access to a stable and significant source of income from management fees calculated based on the FNE's total net worth. Our management of FNE has represented a steady source of income, accounting for more than 25% of our aggregate combined income from financial intermediation, income from services provided and income from bank fees since 2009. We also act as a manager of FINOR, lending agent for PRONAF and loan analyst and administrator for FDNE for the Brazilian Government, which generated aggregate fees of

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R$112.6 million and R$106.3 million for the years December 31, 2011 and 2010, respectively. We believe that the large volume of FNE loans we manage exclusively, at attractive costs, and our various roles for FINOR, PRONAF and FDNE gives us exposure to a broad customer pool, which creates an opportunity for us to increase our market share by further improving our know-how in the Northeast region and cross-selling our products. Strategic relationship with federal, state and municipal governments. We are controlled by the Brazilian Government, with which we have a strategic relationship and through which we developed similar relationships with state and municipal governments. Our operations include Brazilian Government projects under PAC and state and municipal government projects under PPPs. Our constant dialogue with federal, state and municipal governments provides us with important know-how in the economic and social development sector, which enables us to tailor products and services for the region and our clients' needs. We are also an active governmental agent in the Northeast region for the implementation of public policies carried out through governmental programs and/or funds, which are directed, according to geographical or demographical criteria, at specific regions or groups generally not well served by the private sector, such as microcredit, tourism infrastructure and small cities and villages, which we believe gives us an advantage over our competitors. Moreover, the Brazilian Government has also supported our funding needs by directly lending us funds to increase our capital base. See "Funding" above. Experienced approach to risk assessment and management. Since our establishment over a half century ago, we have relied on detailed financial analysis and a deep regional market knowledge to discern sustainable investment opportunities and the feasibility of long-term investments. Our risk management system for monitoring credit, market, liquidity and operational risks has therefore become centralized, integrated and unified across the institution. We have strived to maintain the quality of our loan portfolio through different measures. These measures include engaging in a specific financial evaluation for each client prior to setting credit limits, analyzing projects to ensure sufficient cash flows for repayment and analyzing industry concentration risk. Moreover, we have a centralized registry which contains project and client documents and can be accessed by our different areas (assuring the separation between the commercial and analysis areas) and a risk assessment unit, in addition to a loan recovery unit. We believe the benefit of this experienced approach has been demonstrated by the high proportion of our loans rated at low risk levels, with 92.9% and 92.6% of our loan portfolio rated between "AA" and "C", according to the Central Bank criteria, as of December 31, 2011 and 2010, respectively. See "Other Statistical and Financial InformationLending OperationsPast Due Loans" and "Management's Discussion and Analysis of Financial Condition and Results of OperationsLendingLoan Loss History" for a discussion of Central Bank criteria. Highly dedicated employees and experienced management committed to best practices. We believe the high quality of our professionals and their commitment to our positive performance are key factors in ensuring success in implementing our strategies. We seek to retain professionals who are both highly experienced and qualified and who are committed to our goals and values, and offer constant training opportunities focused on professional development. We select our managers according to established criteria specific to their area of focus. Our directors and executive officers are professionals with significant public and private sector experience, with a comprehensive knowledge of finance and the banking industry. In addition, our employees and management seek to comply with best corporate governance practices and transparency. Our Strategies We intend to pursue the following targeted strategies to generate growth and enhance our profitability: Expand through organic growth in core business areas. Given the growth we expect for Brazil and the Northeast region in particular, we intend to maintain our focus on growing our loan portfolio, while maintaining credit quality. We intend to continue focusing on our financing activities through loan operations and government fund and program management in order to benefit from the strong social and economic development of the Northeast region. We expect this growth to continue, presenting strategic opportunities that we intend to take advantage of by: capitalizing on opportunities to cross-sell and capture new customers mainly through FNE transactions we manage, which exposes us to the borrowers of FNE funds;

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improving our capital markets operations to increase the wide array of financing products we offer our clients with the aim of becoming a comprehensive provider of the financial services they demand; continuing to position the Crediamigo and Agroamigo programs as the leading micro and small enterprise programs in the Northeast region. We intend to grow our branch network in connection with the Crediamigo program, and expand to new markets in other Brazilian states, such as Rio de Janeiro, where the program started operating in 2009; improving products such as receivables discounting, foreign trade transactions and checking accounts to our clients' employees (conta-salrio) by making our information technology systems more user friendly and more efficient in assessing the approval of credit limits and by implementing credit scoring, among other enhancements, which we believe will result in increased returns; and continuing to look for opportunities with government entities by, among other options, implementing a project development company to design projects that will be undertaken by public-private partnerships.

We also intend to continue to improve the quality of our products and services, to increase our market share in the Northeast region, and to expand our distributions channels. We intend to expand our branch network by opening new branches in areas where we identify a steady demand for our services. Particularly, we have a policy for microcredit operations that we must offer a new point of sale for every new 4,000 clients added to our portfolio. This policy, according to our estimates, could require us to open more than 194 new points of sale by the end of 2013. In addition, we are improving our credit approval and monitoring operations by reducing time and improving approval rates while still focusing on credit quality levels. These improvements consist of a network based on credit scoring systems for operations offered to retail customers, like Crediamigo and Agroamigo. Maintain credit quality. We seek to maintain the quality of our loan portfolio by identifying and evaluating levels of risk associated with operations through adequate controls and monitoring tools for the procedures and efficiency of our lending operations. Additionally, in connection with our microcredit operations, we believe we have developed a credit scoring system that will improve our lending efficiency with no adverse effect on our credit analysis process. With respect to the FNE's loan portfolio, we have also decentralized the operational management of the Agroamigo program and we are currently studying the benefits of using the same branch network used for the Crediamigo program to service the Agroamigo program. Continue to diversify funding sources. We seek to continue attracting new depositors in Brazil by increasing our marketing efforts and investments. As a result, our time deposits made in the form of CDBs increased from R$3.4 billion as of December 31, 2009 to R$5.0 billion as of December 31, 2011. In the second half of 2011, we started a new funding program of up to R$500 million in Agribusiness Credit Bonds (Letra de Crdito do Agronegcio LCA), which will allow us to increase financing for agribusiness working capital. We also intend to continue increasing our funding in reais both from government related funding, such as FAT, taking advantage of our strategic relationship with the Brazilian Government in accessing these funds whenever needed. Although these sources of funds have not been historically material to us, we believe they may provide us with important funding for our long-term operations. Regarding foreign currency funding, we intend to strengthen our relationships with foreign banking correspondents, international multilateral entities and foreign investors, and access the international capital markets through the issuance of notes such as the Notes offered hereby and other debt capital market instruments. Expand asset management activities. We intend to expand our asset management activities, with a focus on existing clients. In 2009, we launched two new private investment funds: the Banco do Nordeste "Nordeste 100" Fixed Income Private Credit Investment Fund and the Banco do Nordeste Long-Term Private Credit Fixed Income Investment Fund. We currently manage 20 of our proprietary investment funds, 12 of which are focused on retail customers, two are focused on the public sector and six are tailored to selected investors. As of December 31, 2011, the net asset value of those funds totaled R$3.4 billion, an increase of 14.3% as compared to December 31, 2010.

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Encourage rural, urban and social development in the Northeast. With our development-oriented loans and investments, we expect to continue supporting the growth in the rural and agribusiness sectors in the Northeast region. We also intend to generate employment and income for the Northeast region by providing financial support and customized programs to micro-, small- and medium-sized enterprises in the region, allowing these entities to expand their businesses and, consequently, increase their demand for our banking products and services. We also aim to increase the supply of loans to low-income entrepreneurs through our microcredit programs. Moreover, we seek to strengthen municipal governments in the Northeast by financing infrastructure projects to improve urban planning and access to basic services whilst fostering economic feasibility for the local businesses. Maintain operational efficiency. We strive to constantly monitor the efficiency level of our operations by ensuring we maintain adequate control over our operating costs (personnel expenses and other administrative expenses), with CAGR of 13.5% from 2009 to 2011 (10.5% from 2010 to 2011 and 16.4% from 2009 to 2010) compared to the CAGR of 17.0% in total revenue for the same period (27.3% from 2010 to 2011 and 7.5% from 2009 to 2010). In addition, we intend to invest approximately R$238.6 million in technological improvements during 2012, and expand training opportunities for our employees. Our employees participated in 80,000 hours of training over the past three years as a result of our policy requiring at least 90% of our employees to complete at least one training program per year. History and Relationship with the Brazilian Government The Brazilian Government established us on July 19, 1952 pursuant to Law No. 1,649 to encourage development in the Northeast region, which often experiences droughts and a lack of stable resources. As a result, we focus our activities in the Northeast region of Brazil, although we also conduct some of our activities (such as our capital markets services) in other Brazilian regions. While we are a mixed-capital company (sociedade de economia mista), we are also subject to the regulations applicable to private companies concerning civil and commercial obligations, taxation and labor matters as set forth in the Brazilian Federal Constitution. As a publiclytraded financial institution, we are also required to follow regulations issued by the CMN, the CVM, BM&FBOVESPA and the Central Bank applicable to private sector banks. Moreover, the Brazilian Government, through the National Treasury, is our controlling shareholder and, as a result, appoints the majority of the members of our Board of Directors. The President of Brazil directly appoints our CEO (who is also appointed as a member of our Board of Directors). The Brazilian Government also appoints three of the members of our Board of Directors through its Ministries of Planning, Budget and Management and of Finance, including its chairman. See "ManagementBoard of Directors." The Brazilian Government, as our controlling shareholder, without the consent of the remaining shareholders, is entitled to: modify a large portion of our by-laws; control management through appointments of the majority of our directors and executive officers; determine dividend distribution policies (within the confines of the minimum required distribution established by Brazilian law); and approve certain matters at shareholders' meetings.

In connection with our relationship with the Brazilian Government, we may adopt certain measures or enter into certain transactions intended to promote political, economic or social purposes as a priority over developing our business and increasing our profitability. See "Risk FactorsRisks Relating to us and the Brazilian Banking IndustryOur implementation of government objectives and legislative requirements could divert resources away from other more profitable areas of our lending and investing businesses." Although we are controlled by the Brazilian Government, the assets of the Brazilian Government that are not our assets cannot be considered security for the Notes and the Brazilian Government is not a guarantor of the Notes or liable for our obligations unless explicitly agreed to as a business term of a specific transaction. See "Regulation of the Brazilian Banking IndustryIntervention, Administrative Liquidation and Bankruptcy Bankruptcy Law."

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Bankruptcy, Liquidation and Dissolution Law No. 6,024 of March 13, 1974, as amended, and Decree-Law No. 2,321 of February 25, 1987, as amended, empower the Central Bank to extra-judicially intervene in the operations or to liquidate financial institutions owned by the private sector or Brazilian state governments (but not of the Brazilian Government). We, as a financial institution majority owned by the Brazilian Government, are not subject to intervention or to liquidation by the Central Bank. Furthermore, according to Law No. 11,101 of February 9, 2005, mixed-capital companies (sociedades de economia mista) and financial institutions such as us are not subject to judicial and extrajudicial reorganization and bankruptcy proceedings. As a result, our creditors, including holders of Notes, cannot take advantage of the remedies contemplated by Law No. 11,101 against us, including petitioning for our winding-up, liquidation or dissolution. If a creditor obtains a final judgment against us, it may procure the attachment of our assets since they are subject to seizure and attachment. Further, if our debt remains unpaid, a creditor may attempt to procure payment from the Brazilian Government, as our controlling shareholder, for any unpaid amount. However, because there is no legal provision setting forth such liability on the Brazilian Government (the subsidiary liability of controlling shareholders of financial institutions is not applicable to those controlled by the Brazilian Government pursuant to Decree-Law No. 2,321 and Law No. 9,447 of March 14, 1997), there can be no assurance that, first, the proceedings for obtaining a final judgment against us or the Brazilian Government will be conducted in a timely manner, and, second, whether a Brazilian judicial authority would hold the Brazilian Government liable for our indebtedness. Under Brazilian Law, mixed-capital companies (sociedades de economia mista) such as us, which suffer losses, become dormant, develop activities that are either already fulfilled satisfactorily by the private sector or are not contemplated by their corporate purposes, may be dissolved or merged with another entity by the Brazilian Government (Article 178 of Decree-Law No. 200 of February 25, 1967). Recent Developments CELPA Centrais Eltricas do Par S.A. ("CELPA") filed for judicial recovery (i.e., judicially-mandated reorganization) on February 28, 2012, after it defaulted on its U.S. dollar denominated bonds. As of March 31, 2012, our credit operations with CELPA comprised of one secured working capital loan with a balance due of R$30.6 million, which represented 0.3% of our total loan portfolio and 1.6% of our commercial loan portfolio as of that date. Due to the CELPA judicial recovery proceedings, we have reclassified such loan from level "B" to level "G" and have provisioned an amount of R$21.5 million in connection with such loan. As of the date of this Offering Memorandum, judicial recovery proceedings have commenced, but proceedings are in the early stages and we do not currently know whether we will be able to recover a portion or all of such loan or whether we will need to take additional provisions against this exposure. Our Information Our head office is located in the city of Fortaleza, Cear, Brazil, at Av. Pedro Ramalho 5700, CEP 60743902 and our telephone number there is +55 (85) 3299-3300. We are enrolled with the Taxpayer's Registry (CNPJ/MF) under No. 07.237.373/0001-20.

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THE OFFERING This summary of certain terms and conditions of the Notes is subject to, and qualified in its entirety by, reference to the "Description of the Notes" section of this Offering Memorandum and the Indenture relating thereto. Issuer ............................................................. The Offering ................................................. Amount ......................................................... Issue Price ..................................................... Maturity Date ................................................ Issue Date...................................................... Indenture ....................................................... Banco do Nordeste do Brasil S.A. We are offering U.S.$300,000,000 aggregate principal amount of 4.375% senior notes due May 3, 2019. U.S.$300,000,000 aggregate principal amount of 4.375% senior notes due May 3, 2019. 99.257%, plus accrued interest from May 3, 2012. The Notes will mature on May 3, 2019. May 3, 2012. The Notes will be issued pursuant to an indenture to be dated as of May 3, 2012 among us; The Bank of New York Mellon, as trustee; The Bank of New York Mellon (Luxembourg) S.A., as Luxembourg paying agent and Luxembourg transfer agent; and The Bank of New York Mellon Trust (Japan), Ltd., as principal paying agent. The Indenture does not limit the aggregate principal amount of debt securities that may be issued under the Indenture, and provides that debt securities may be issued under the Indenture from time to time in one or more series. Interest .......................................................... Ranking ......................................................... 4.375% per year, payable semi-annually in arrears on May 3 and November 3 of each year, commencing on November 3, 2012. The Notes will be our direct, unconditional and unsecured general obligations and will, other than as set forth below, at all times rank pari passu in right of payment with all of our other unsecured obligations other than obligations that are, by their terms, expressly subordinated in right of payment to the Notes. The Notes will be effectively subordinated to (i) all of our secured indebtedness with respect to the value of our assets securing that indebtedness, (ii) certain direct, unconditional and unsecured general obligations that in case of our insolvency are granted preferential treatment pursuant to Brazilian law and (iii) all of the existing and future liabilities of our subsidiaries, including trade payables. See "Description of the NotesRanking." As of December 31, 2011, we had indebtedness outstanding as disclosed in notes No. 15 through 18 to the 2011 Financial Statements included in this Offering Memorandum. As of that date, we had no secured debt other than with respect to our derivative obligations. Such derivative obligations were recorded on our financial statements in the total amount of R$21.1 million (the equivalent of U.S.$11.3 million). See "Risk FactorsRisks Relating to the NotesThe Notes will be effectively subordinated to our secured debt and to certain claims preferred by statute." The Indenture contains no restrictions on the amount of additional

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indebtedness that may be incurred by us. Form of Offering ........................................... Notes offered and sold to qualified institutional buyers pursuant to Rule 144A will initially be issued in the form of one or more registered notes in global form, without interest coupons. The Rule 144A global note will be deposited on the date of the closing of the sale of the Notes with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC, and will remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC and the trustee. Interests in the Rule 144A global note will be available for purchase only by qualified institutional buyers in accordance with Rule 144A under the Securities Act. See "Description of the NotesBook-Entry System; Delivery and FormThe Global NotesRule 144A Global Note." Notes offered and sold in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act will initially be issued in the form of one or more registered notes in global form, without interest coupons. The Regulation S global note will be deposited upon issuance with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC, and will remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC and the trustee. See "Description of the NotesBook-Entry System; Delivery and FormThe Global NotesRegulation S Global Note." Book-Entry System and Form and Denomination of the Notes ........................... The Notes will be issued in denominations of U.S.$150,000 and any integral multiple of U.S.$1,000 and only in the form of beneficial interest in respect of one or more global notes registered in the name of Cede & Co., as nominee of DTC. Beneficial interest in respect of the global notes will be shown on, and transfers thereof will be effected only through, the book-entry records maintained by DTC and its participants, including Euroclear and Clearstream. The Notes will not be issued in definitive form except under certain limited circumstances described herein. See "Description of the NotesBook-Entry System; Delivery and Form." None. At maturity, on May 3, 2019. The Notes are redeemable at our option in whole (but not in part), at any time, at the principal amount thereof plus accrued and unpaid interest and any additional amounts due thereon if we have or will become obligated to pay additional amounts as provided or referred to in "Description of the NotesCovenantsPayment of Additional Amounts" in excess of the additional amount we would be obligated to pay if payments were subject to withholding or deduction at a rate of 15% (or at a rate of 25% in case a holder of Notes is resident in a tax haven jurisdiction, a country that does not impose any income tax or that imposes it at a maximum rate lower than 20% or where the laws impose restrictions on the disclosure of ownership composition or securities ownership) as a result of any change in, or amendment to, the laws or regulations

Optional Redemption .................................... Mandatory Redemption ................................ Optional Tax Redemption .............................

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of Brazil (or any political subdivision or governmental authority thereof or therein having power to tax), or any other jurisdiction from or through which we or the paying agent make any payment under the Notes (or any political subdivision or governmental authority thereon or therein having power to tax), or any change in the application or official interpretation of such laws or regulations, which change or amendment occurs after the date of issuance of such Notes. See "Description of the Notes RedemptionRedemption of Notes Prior to Maturity Solely for Taxation Reasons." Covenants ..................................................... The Indenture contains covenants that, among other things: require us to maintain our books and records; require us to maintain an office or agency in New York where Notes may be presented or surrendered for payment or for exchange, transfer or redemption and where notices and demands may be served; require us to pay additional amounts in respect of certain withholding taxes imposed on payments of interest or principal so that the amount you receive under the Notes, after such withholding taxes, if any, will equal the amount that you would have received if no such withholding taxes had been applicable, subject to some exceptions as described under "Description of the NotesCovenants Payment of Additional Amounts;" require us to maintain all necessary governmental and third-party approvals and consents; require us to use the net proceeds from the offer and sale of the Notes for the purposes described under "Use of Proceeds;" require us to take certain actions, at our own cost and expense, as required under the Indenture or requested by the trustee; require us to appoint a successor trustee in the event of a vacancy in the office of the trustee; require us to preserve our corporate existence; limit our ability to create or suffer to exist certain liens with respect to our or our subsidiaries' current or future assets, revenues, rights to receive income and other property to secure any Public External Indebtedness (as defined under "Description of the NotesCovenants Limitation on Liens"); limit our ability to consolidate with or merge into any other corporation or convey or transfer our properties and assets substantially as an entirety to any person; require us to repurchase all outstanding Notes at a

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purchase price equal to 101.0% of the principal amount plus accrued interest and additional amounts, if any, in the event the Brazilian Government ceases to be the beneficial owner of more than 50.0% of our voting stock; require us to furnish our financial statements and certain other financial information to the trustee; and under certain circumstances, may require us to furnish to any holder of Notes or beneficial interest in a global note, or to any prospective purchaser designated by such holder of Notes, certain financial and other information required to be delivered under Rule 144A(d)(4) under the Securities Act.

These covenants are subject to important exceptions and qualifications. See "Description of the NotesCovenants." Events of Default .......................................... The principal amount of the Notes, plus accrued and unpaid interest, may be declared immediately due and payable, if any of the following events of default under the Notes occurs: our failure to pay any principal of any of the Notes, when due and payable; our failure to pay any interest or any additional amounts when due and payable on any of the Notes and the continuance of such default for a period of 30 days; our failure to perform or observe (and the continuance of such default for a period of 60 days) any other term or obligation of the Notes or the Indenture; certain cross-defaults by us amounting to a minimum of U.S.$ 50,000,000; certain final judgments or orders for the payment of money are rendered against us or any of our subsidiaries and our failure to pay or discharge these final judgments or orders causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against us and/or our subsidiaries to exceed U.S.$ 50,000,000; or certain events of, dissolution, winding up or insolvency with respect to us.

The principal amount of the Notes, plus accrued and unpaid interest, will automatically become due and payable if certain events of bankruptcy, dissolution, winding up or insolvency occur. See "Description of the NotesEvents of Default." Use of Proceeds ............................................ The net proceeds arising from the issuance and sale of the Notes are estimated to be approximately U.S.$296.2 million after deductions of fees, commissions and certain other expenses. We expect to apply all of the net proceeds of this offering for general

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corporate purposes. Transfer Restrictions ..................................... The Notes have not been registered under the Securities Act and are subject to restrictions on transfer and resale. See "Transfer Restrictions." There are restrictions on persons to whom the Notes may be sold and on the distribution of this Offering Memorandum, as described in "Plan of DistributionSelling Restrictions." Notes may be acquired by an "employee benefit plan" (as defined in Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to Title I of ERISA, a "plan" as defined in and that is subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), any entity whose assets include, or are deemed to include, "plan assets" by reason of such employee benefit plan's or plan's investment in the entity or any employee benefit plan subject to any U.S. federal, state or local law, or foreign law, that is substantially similar to Section 406 of ERISA or Section 4975 of the Code ("Similar Law"), provided that such purchase and holding of Notes will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of another employee benefit plan, a violation of any Similar Law). Each purchaser and/or holder of Notes and each transferee thereof will be deemed to have made certain representations as to its status under ERISA, the Code and Similar Law. Potential purchasers should read the sections entitled "Certain ERISA and Other Considerations" and "Transfer Restrictions." Application has been made for the Notes to be listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF. The Indenture and the Notes will be governed by, and will be construed in accordance with, the laws of the State of New York, without giving effect to applicable conflict of law principles. The Bank of New York Mellon The Bank of New York Mellon Trust (Japan), Ltd.

Selling Restrictions .......................................

ERISA Considerations ..................................

Listing ...........................................................

Governing Law .............................................

Trustee, Registrar, Paying Agent and Transfer Agent .............................................. Principal Paying Agent ................................. Luxembourg Listing Agent, Luxembourg Paying Agent and Luxembourg Transfer Agent............................................................. Risk Factors ..................................................

The Bank of New York Mellon (Luxembourg) S.A. We urge you to carefully review the risk factors beginning on page 18 for a discussion of factors you should consider before purchasing the Notes.

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SUMMARY FINANCIAL INFORMATION The following tables set forth certain of our financial information as of and for the years ended December 31, 2011, 2010 and 2009, and should be read in conjunction with our audited Financial Statements, including the notes thereto, prepared in accordance with Brazilian GAAP, which are included elsewhere in the Offering Memorandum, as well as the information included in "Presentation of Financial and Certain Other Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Income Statement Data
For the Year Ended December 31, 2011 (U.S.$ thousands)(1) Income from financial intermediation .......................................... Expenses from financial intermediation ....................................... Gross profit from financial intermediation ................................... Other operating income (expenses)............................................... Income from operations ................................................................ Non-operating income ................................................................... Income before taxes on income and profit sharing ....................... Income and social contribution taxes ............................................ Profit sharing ................................................................................. Net income .................................................................................... (1) 1,784,766 (1,135,836) 648,930 (292,584) 356,346 3,756 360,102 (172,515) (19,766) 167,821 3,347,864 (2,130,601) 1,217,263 (548,829) 668,434 7,045 675,479 (323,603) (37,077) 314,799 2011 2010 (R$ thousands) 2,431,267 (1,464,879) 966,388 (436,119) 530,269 1,645 531,914 (174,086) (44,238) 313,590 2,005,203 (1,219,439) 785,764 (126,657) 659,107 2,078 661,185 (160,487) (41,686) 459,012 2009

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011.

Balance Sheet Data

As of December 31, 2011 (U.S.$ thousands)(1) ASSETS Current assets .............................................................................. Cash and cash equivalents ........................................................ Interbank investments ............................................................... Securities and derivatives ......................................................... Interbank accounts .................................................................... Interbranch accounts ................................................................. Lending operations ................................................................... Other receivables ...................................................................... Other assets ............................................................................... Long-term assets .......................................................................... Securities and derivatives ......................................................... Interbank accounts .................................................................... Lending operations ................................................................... Other receivables ...................................................................... Permanent assets ......................................................................... Investments ............................................................................... Property and equipment in use ................................................. Deferred charges ....................................................................... TOTAL ASSETS ......................................................................... (1) 5,642,744 51,757 1,727,414 124,316 142,485 0 2,639,255 948,389 9,127 8,349,552 5,264,205 19,652 3,006,512 59,183 100,672 836 98,928 908 14,092,967 10,584,659 97,086 3,240,283 233,192 267,274 0 4,950,715 1,778,988 17,121 15,662,089 9,874,595 36,863 5,639,615 111,016 188,840 1,568 185,569 1,703 26,435,588 2011 2010 (R$ thousands) 10,838,392 82,391 3,872,110 1,026,946 238,268 285 4,224,164 1,380,525 13,703 12,753,269 6,739,820 32,474 5,910,740 70,235 192,055 1,429 188,219 2,407 23,783,716 11,095,395 72,983 3,248,634 2,227,338 178,392 1 4,177,810 1,182,343 7,894 7,862,666 3,011,201 38,603 4,710,825 102,037 196,405 1,379 191,962 3,064 19,154,466 2009

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011.

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As of December 31, 2011 (U.S.$ thousands)(1) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities ........................................................................ Deposits .................................................................................... Open market funding ................................................................ Payables for securities issued abroad(2) .................................... Interbank accounts .................................................................... Interbranch accounts ................................................................. Borrowings................................................................................ Domestic onlendings - Official institutions ............................. Derivatives ................................................................................ Foreign onlendings ................................................................... Other payables .......................................................................... Long-term liabilities .................................................................... Deposits .................................................................................... Open market funding ................................................................ Payables for securities issued abroad(3) .................................... Borrowings................................................................................ Domestic onlendings - Official institutions ............................. Derivatives ................................................................................ Foreign onlendings ................................................................... Other payables .......................................................................... Deferred income .......................................................................... Shareholders' equity ................................................................... TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. (1) (2) (3) 5,196,798 2,727,359 340,021 106,478 2 3,807 453,016 92,455 4,060 43,337 1,426,263 7,654,291 2,051,669 35,484 300,606 17,604 593,484 7,204 404,681 4,243,559 9 1,241,869 14,092,967 9,748,154 5,115,979 637,812 199,732 4 7,142 849,768 173,427 7,615 81,291 2,675,384 14,357,919 3,848,520 66,561 563,876 33,021 1,113,258 13,513 759,101 7,960,069 16 2,329,499 26,435,588 2011 2010 (R$ thousands) 8,474,793 3,772,031 460,893 2,991 22 30,330 461,822 289,427 12,118 66,808 3,378,351 13,131,569 4,737,550 63,396 482,496 45,656 1,397,349 46,020 662,357 5,696,745 16 2,177,338 23,783,716 8,110,117 3,197,499 445,678 13,128 644,553 313,523 15,979 63,653 3,416,104 8,971,610 3,135,228 56,126 1,120,001 20,592 658,740 3,980,923 14 2,072,725 19,154,466 2009

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011. Interest payments on the U.S.$300 million five-year notes issued in November 2010. Principal payment on the U.S.$300 million five-year notes issued in November 2010.

Selected Financial Ratios

As of and for the Year Ended December 31, 2011 Profitability Return on average assets(1)........................................................................................ Return on average equity(2) ....................................................................................... Asset Quality Past due loans (loans in arrears)/total loans(3) .......................................................... Allowance for loan losses/Past due loans(4).............................................................. Allowance for loan losses/total loans ....................................................................... Liquidity Loans, net of allowance for loan losses/total assets ................................................. Loans, net of allowance for loan losses/liabilities (current and non current) .......... Capital Adequacy Shareholder's equity/total assets ............................................................................... Total liabilities/shareholder's equity ......................................................................... Regulatory Capital Adjusted equity as a percentage of total risk-weighted assets(5) (Capital Ratio) ..... Return Net Interest Margin (NIM)(6) .................................................................................... (1) (2) (3) 1.26% 13.57% 4.02% 132.80% 5.34% 42.25% 46.33% 8.81% 10.30 16.58% 4.30% 2010 1.54% 14.87% 3.58% 161.70% 5.80% 44.71% 49.22% 9.15% 9.90 13.60% 4.60% 2009 2.73% 23.78% 4.50% 136.70% 6.20% 48.70% 54.60% 10.82% 8.20 12.99% 4.80%

(4) (5) (6)

Return on average equity is calculated as net income earned during the accounting period divided by our average equity. Return on average assets is calculated as net income earned during the accounting period divided by our average assets. A loan is considered past due when it is overdue from 15 days to the date the loan is written off in full. In accordance with Central Bank Resolution 2,682, loans that will mature within 36 months and loans that mature after 36 months are written off in full when they become overdue by 360 days and 540 days, respectively. See "Other Statistical and Financial InformationLending OperationsPast Due Loans." Allowance for loan losses is calculated in accordance with the risk level of the credit following Resolution No. 2,682/99 of the CMN, as amended. See "Other Statistical and Financial DataLending OperationsPast Due Loans." Capital ratio required by Central Bank corresponding to a minimum capital adequacy ratio of 11% of total risk-adjusted assets. See "Other Statistical and Financial InformationReturn on Equity and AssetsCapital Adequacy and Minimum Capital Requirements." Net interest income divided by our average interest-earning assets. See "Other Statistical and Financial DataNet Interest Spread and Net Interest Margin (NIM) Analysis."

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RISK FACTORS Investing in the Notes involves a high degree of risk. Before making any decision to invest, you should carefully evaluate the risks described below, together with all of the other information included in this Offering Memorandum. If any of the following risks should occur, our business, financial condition and results of operations could be adversely affected. As a result, the trading price of the Notes could fall and investors could lose all or part of their investment in the Notes. Other risks that we are currently unaware of or that we currently consider immaterial could possibly have a negative effect on us and the trading price of the Notes. Risks Relating to us and the Brazilian Banking Industry Changes in the regulatory structure governing Brazilian banks could adversely affect us. Brazilian banks, including us, are subject to extensive and continuous regulatory review by the Central Bank. Banking regulation is regularly enacted by the Central Bank as a means of controlling credit availability and reducing or increasing consumption. Some of these controls are temporary in nature and may vary from time to time in accordance with the Brazilian Government's credit policies. We have no control over these banking regulations, which govern our operations, including regulations that impose: minimum capital requirements; provisions for loan losses; compulsory deposit and/or reserve requirements; loan classifications; investment requirements in fixed assets; and lending limits and other credit restrictions.

The regulatory structure governing Brazilian banks is continuously evolving. Recent examples of legal changes include (i) the imposition of the IOF/Exchange (Tax on Foreign Currency Exchange Operations) on amounts transferred to Brazil by investors not residing in Brazil, for investments in the financial and capital markets, which was initially set at a rate of 2% on October 19, 2009 and later increased to 4% and 6% on October 4, 2010 and October 18, 2010, respectively, and (ii) changes in the rules regarding compulsory deposits imposed by the Central Bank. See "Regulation of the Brazilian Banking IndustryTaxation of Financial Transactions" for a discussion of exceptions to the current rate of 6% of the IOF/Exchange and "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market Liquidity" for details on compulsory deposits. Existing laws and regulations as well as the manner of enforcement of such laws and regulations could continue to undergo changes in the future, potentially adversely affecting us. Our implementation of government objectives and legislative requirements could divert resources away from other more profitable areas of our lending and investing businesses. As part of our objective to promote economic and social development in the Northeast region of Brazil, we may at any time perform special functions on behalf of, or in cooperation with, the Brazilian Government. As an instrument of governmental policies, we generally take into consideration the economic and social development objectives of the Brazilian Government when making our business decisions. We may make loans at lower rates or involving increased risk and thus reduce the expected profitability of certain operations to achieve the Brazilian Government's objectives when determining whether to extend credit. Such decisions could have the effect of diverting resources away from other more profitable areas of our lending and investing businesses. Any such changes could adversely affect us, including the profitability of our loan portfolio. The Brazilian Government, through the National Treasury, is our controlling shareholder and, as a result, appoints the majority of the members of our Board of Directors. The President of Brazil directly appoints our CEO

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(who is also appointed as a member of our Board of Directors). The Brazilian Government also appoints three of the members of our Board of Directors through its Ministries of Planning, of Budget and Management and of Finance, including its chairman. The Brazilian Government therefore has the power and could cause us to adopt certain measures or enter into certain transactions intended to promote political, economic or social purposes rather than to develop our business and increase our profitability. If any such actions are taken, they may be contrary to our economic interests, and may have adverse effects on us, including our capital reserves. See "Risks Relating to BrazilBrazilian economic and political conditions may adversely affect us and the market price of the Notes" for further discussion of other potential risks related to the Brazilian Government's control over us. Minimum capital adequacy requirements could have an adverse effect on us. In June 2004, the Basel Committee on Banking Regulations and Supervisory Practices approved a new framework for risk-based capital adequacy, commonly referred to as the "Basel II Accord." The Basel II Accord sets out the details for adopting more risk-sensitive minimum capital requirements for financial institutions. As part of its implementation, the Central Bank has proposed new capital adequacy regulations, which among other provisions contain changes to the risk weighting for different categories of loans. According to Central Bank Communication No. 19,028 issued in October 2009, the requirements for use of certain capital calculation models included in the Basel II Accord are to be implemented by the first half of 2013, with emphasis on changes in the allocation of capital for credit risk and the allocation of capital for operating risk. Furthermore, Central Bank Circular No. 3,478 issued in December 2009 established that financial institutions planning to implement internal models for market risks require to request prior authorization from the Central Bank since June 30, 2010. In addition, pursuant to CMN Resolution No. 3,490 issued in August 2007 (which became effective as of July 1, 2008) and Central Bank Circular No. 3,383 issued in April, 2008, the Central Bank requires banks to set aside a portion of their equity to cover operational risks (i.e., losses arising from failures, deficiencies or inadequacies of internal proceeding, personnel or computer systems, including due to events or occurrences beyond our control). As required by the Central Bank, the risk-weighted capital ratio required of us and all other banks in Brazil is currently 11.0% of risk-based exposure. Our capital ratio was 16.58% as of December 31, 2011, 13.60% as of December 31, 2010, and 12.99% as of December 31, 2009. On September 12, 2010, the Group of Governors and Heads of Supervision announced a substantial strengthening of existing capital requirements and fully endorsed previous agreements on the overall design of the capital and liquidity reform package, the Basel III Accord, which was presented during the Seoul G20 Leaders summit in November 2010. The reforms increased minimum common equity requirement from 2% to 4.5%. In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand periods of stress, bringing the total common equity requirements to 7%. Central Bank Communication No. 20,615 issued in February 2011 established the preliminary guidelines for implementation of these reforms in Brazil. For such purpose, the Central Bank will need to issue further regulations, according to a non-binding schedule set forth by Central Bank Communication No. 20,615. The new rules are expected to be implemented gradually by the central banks of various countries between 2013 and 2019. On February 17, 2012, the Central Bank published for public comments proposed rules changing the definition of regulatory capital currently set forth by CMN Resolution No. 3,444 issued on February 28, 2007. Among other topics, the Central Bank indicated it intends to consider, in the composition of the reference shareholders' equity of financial institutions, their controlled entities similar to financial institutions (e.g., credit card administrators) and investment funds from which financial institutions take substantial risks and benefits. We cannot ascertain if, when and to what extent such new rules may become effective. We are still evaluating the potential effects of the Basel III Accord in our activities. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityRegulatory Capital and Shareholders' Equity Standards." Due to changes in the regulation of capital adequacy or due to changes in the performance of the Brazilian economy as a whole, we may be unable to meet the minimum capital adequacy requirements established by the Central Bank. We could be compelled to limit our loan operations, dispose of some of our assets and/or take other

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measures that may adversely affect us in order to comply with those capital adequacy requirements. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesCapital Adequacy" and "Regulation of The Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityRegulatory Capital and Shareholders' Equity Standards." Monetary regulations imposed by the Brazilian Government could adversely affect us. To support its monetary policy and manage the Brazilian economy, the Brazilian Government, acting through the CMN and the Central Bank, periodically introduces regulations aimed at controlling the rate of inflation by means of, among other means, the adjustment of reserve requirements applicable to loans and deposits, the regulation of the maximum term of outstanding credits, and the imposition of limitations on amounts that may be financed. Controls such as these are used by the Brazilian Government on a regular basis to regulate the availability of credit and to reduce or increase consumption. At times, these regulations have affected the ability of our clients to obtain credit and restricted the growth of our loan portfolio. With respect to reserve requirements in particular, financial institutions such as ourselves must deposit cash or, in some cases, Brazilian Government securities with the Central Bank, some of which does not earn interest, and even in those cases where the Central Bank pays interest, the rate is typically significantly less than that which we would be able to earn through other investments. There can be no assurance that the Brazilian Government will not implement regulations, including increasing reserve requirements or imposing new reserve or compulsory deposit requirements, that will negatively affect us, including the creditworthiness of our clients, our funding strategy, our lending growth or our overall profitability. See "Regulation of the Brazilian Banking Industry" for more information on our regulation by the Brazilian Government. Ceasing to be the manager of the FNE could adversely affect us, as this role generates a substantial portion of our revenues. We earned R$993.5 million and R$816.8 million in management fees from the FNE for the years ended December 31, 2011 and 2010, respectively. Although our exclusive management of the FNE, which is mandated by law, has been a stable source of revenues for us, if new legislation were passed by the Brazilian Congress, there can be no assurance that our right to manage the fund, exclusively or otherwise, would not be changed. Any such change would have an adverse effect on us. Similarly, were the Brazilian Government to lower the annual 3.0% management fee that it pays to us for managing FNE's funds through a provisional measure (Medida Provisria), which does not require any approval of the Brazilian Congress, we could be adversely affected. Moreover, for the year ended December 31, 2011, we earned an additional R$112.6 million in fees from the government funds and programs (other than the FNE) we managed or to which we acted as lending agent or loan analyst and administrator, which is subject to change that could adversely affect us in a similar way as changes to the FNE management fees we receive. For more information on our activities in connection with these funds, see "BusinessDescription of Products and ServicesGovernment Fund and Program Management." We could be subject to a greater degree of risk on certain FNE loans than on loans from our own portfolio. Returns on loans from our own portfolio are based on the average return of our entire portfolio. In the event some loans default, those losses are offset by interest earned from the remainder of the portfolio. For FNE management, we earn an annual 3.0% management fee based on FNE's total net worth, limited to a maximum of 20% of proceeds annually transferred to FNE by the Brazilian Government based on collection of income taxes and IPI (which totaled R$5.0 billion for the year ended December 31, 2011) but for the majority of the these loans we assume the credit risk on a loan-by-loan basis. For most FNE loans, our exposure to credit risk is equivalent to 50% of the loan amount, although for certain loans we may assume risk as little as none or as much as 100% of the loan amount. As of December 31, 2011, we were exposed to 0%, 50% and 100% of the credit risk on 16.2%, 83.1% and 0.7% of the total FNE portfolio. As a result of this arrangement, we could be required to pay for losses on specific loans, despite the overall FNE portfolio realizing a profit. In addition, our losses could exceed the management and del credere fees paid by FNE. Furthermore, while we provision against these losses in accordance with Central Bank guidelines, in the same

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manner as we provision for losses on our own loan portfolio, and these provisions are included in our overall allowances for loan losses, we understand those guidelines are generally meant for banks assuming the credit risk of average losses over an entire portfolio, whereas the FNE portfolio provides that we are to bear losses on individual loans offset by management and del credere fees. As a result, the default of certain of the loans in the FNE portfolio could adversely affect us. Moreover, if the Brazilian Government were to require through new legislation that we change our credit risk allocation, as it did in 2001, when new congressional legislation required us to begin assuming 50% of the credit risk in connection with FNE loans, we could be required to bear a greater percentage of the credit risk on these loans going forward, which could have an adverse effect on us. A significant portion of our income is generated from loans that tend to be less profitable than other of our loans, that depend on factors outside the control of borrowers or that are focused in only one region of Brazil. We make a wide range of loans in the rural sector, which includes agribusiness loans (mainly to incorporated entities) and rural loans (mainly to individuals and small farmers), and that accounted for approximately 12.4% of our total loan portfolio as of December 31, 2011 (which excludes microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio). The total amount applied to these loans can directly influence the profitability of our business because rural loans have historically been less profitable than consumer loans, due to lower spreads. The performance of our rural loan portfolio is also subject to factors that are beyond our and our borrowers' control, such as the price of agricultural commodities, the costs of agricultural production, weather conditions, crop failures, the Brazilian Government's policy relative to agricultural credit and agribusiness. Although the Proagro insurance program covers our losses for rural loans in the principal amount of up to R$35,000, which includes most of our loans of PRONAF funds (for which we normally assume 50% of the credit risk), if Proagro becomes subject to restrictions or limitations, and in any case with respect to loans not covered by Proagro, such factors could adversely affect us. See "BusinessDescription of Products and Services Loan OperationsRural and Agribusiness Loans" for a discussion of our rural lending businesses. Pursuant to Article 159 of the Brazilian Federal Constitution and current Brazilian law No. 7,827 issued in September 1989, as amended, we are also required to allocate 50.0% of the FNE's total loans to cities situated in the semi-arid region of the Northeast of Brazil. Because of their semi-arid characteristic, these cities are more subject to adverse weather conditions. If the Brazilian Government were to require us to increase the volume of our loans to these cities, and they were to become unable to repay them, we could be adversely affected. For further information, see "Regulation of the Brazilian Banking Industry" and "BusinessDescription of Products and Services Government Fund and Program ManagementFNE." Although we are permitted to operate outside of the Northeast, almost all of our income is generated by transactions conducted in the Northeast region. Were economic conditions in this region to weaken, the region's growth could slow and the ability of some of our clients to repay debt that they owe us could be limited. As the Northeast is also still the region of Brazil with one of the lowest GDPs per capita, a weakened economy in the region could have greater negative effects on our lending business. If any of these events were to occur, our ability to execute our strategy in the same way that we would in a period of economic growth and stability would be hindered and, therefore, we could be adversely affected and, moreover, to a greater degree than other banks that are not so regionally focused. A significant portion of our loan portfolio involve microfinance loans, which tend to require greater administrative costs than other types of loans. We also make microfinance loans, which accounted for approximately 10.0% of our total loan portfolio as of December 31, 2011. The total amount applied to these loans can directly influence the profitability of our business because the relative operational costs of administrating microfinance loans tends to be higher than the relative operational cost of administrating our other types of loans due to their small sizes (approximately R$1,000) relative to fixed costs. As a result, variations in interest rates can disproportionately negatively affect our return on microfinance loans. See "BusinessDescription of Products and ServicesLoan OperationsMicrocredit Loans" for a discussion of our microfinance lending business. If the relative operational costs related to our microfinance loan portfolio rise, if the portfolio of microfinance loans increases as a percentage of our total loan portfolio or if interest rates decrease, our return on such portfolio could be lower than initially predicted, which could adversely affect us.

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Increased loan default rates and overall adverse economic conditions could have an adverse effect on us. An increase in a financial institution's level of overdue loans may lag behind the rate of loan growth, as loans typically do not become past due within a short period of time after their origination. Rapid loan growth may also reduce the ratio of past due loans to total loans until growth slows or the portfolio becomes more seasoned. Our loan portfolio has grown substantially since 2007, primarily as a result of the economic expansion of the Brazilian Northeast region. Our loan portfolio grew from R$11.3 billion as of December 31, 2010 to R$11.8 billion as of December 31, 2011. As approximately 53.2% of our loans have a long-term maturity, increases in past due loans may occur as our loan portfolio becomes seasoned. This may result in significant increases in allowances for loan losses, charge-offs and the ratio of past due loans to total loans. As the quality of our loan portfolio is largely dependent on domestic economic conditions, adverse economic conditions could have an adverse effect on us by increasing our loan default rate and requiring us to make larger allowances for loan losses and to renegotiate or refinance certain existing loans to distressed borrowers. Exposure to Brazilian Government debt could have an adverse effect on us. We invest in debt securities issued by the Brazilian Government that are instruments of high liquidity. As of December 31, 2011, 33.8% of our total assets consisted of securities issued by the Brazilian Government. As of December 31, 2011, the consolidated net indebtedness of the Brazilian public sector, in accordance with the economic indexes published by the Central Bank, totaled R$1,542.2 billion, or 38.6% of Brazil's GDP. If the Brazilian Government defaults on the timely payment of such securities, losses we could incur as a result of such securities being marked-to-market may adversely affect us. We may face increased international and/or domestic competition in the future. As a supplier of long-term debt financing to companies located in the Northeast region of Brazil, our direct competitors have been Banco do Brasil and, particularly with respect to development loans, BNDES. However, local banks' ability to access the international capital markets and the development of the Brazilian capital markets have improved in the recent past and may continue to do so in the future, providing increased funding opportunities for our competitors. As a result, we may face more intense competition from international and domestic banks that seek to expand into our markets, which could adversely affect us. See "BusinessCompetition" for more information regarding our competitive landscape. It may be difficult for us to repossess and realize value from collateral with respect to defaulted loans. Upon a default by any of our borrowers, it may be difficult for us to repossess and to realize value from collateral that they have been provided with respect to their underlying loans. Some of our loans may be secured by assets that are expensive to repossess and difficult and cumbersome to store and manage or in respect of which security has not been properly taken or registered, which would increase the difficulty in realizing value from such assets, which could adversely affect us upon defaults of corresponding underlying loans. Any restrictions on bank loan interest rates could adversely affect us by decreasing our revenues and limiting our ability to make loans. Decree No. 22,626 issued in April 1933, also known as the Usury Law (Lei de Usura), prevents any person or entity from charging interest rates higher than twice the legal interest rate. However, the Banking Restructuring Law No. 4,595/64, together with various Brazilian court decisions and Constitutional Amendment No. 40 issued in May 2003, have exempted banks from this prohibition. Any changes to the Brazilian courts' interpretations about this exemption, or an amendment in the applicable laws and regulations imposing restrictions on the interest rates banks can charge, could reduce the amount of interest we are allowed to charge on certain of our loans, which could adversely affect us. The Brazilian Government could require us to make dividend payments to it without restrictions that would reduce the funds available for us to pay interest and principal on the Notes, our capital. The Brazilian Government is our controlling shareholder. We are not subject to any restriction under any of our agreements or subject to any policies under our by-laws in respect of paying dividends on our outstanding share capital. The Brazilian Government, as our controlling shareholder, could require us to make, at any time,

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discretionary payments of dividends to it, which would reduce the funds available for us to pay interest and principal, if any, on the Notes. We declared 50% of our adjusted net income for the fiscal years of 2008, 2009, and 2010, as dividends or interest on shareholders' equity to our shareholders, including the Brazilian Government. During the year ended December 31, 2011, we declared R$169.2 million in dividends and interest on shareholders' equity to our shareholders. Furthermore, there is no guarantee that we will not be required to pay the maximum amount of dividends or interest on capital to shareholders permitted under Brazilian law in the future, which is 95% of net income earned in a fiscal year (pursuant to Brazilian Corporations Law, 5% of net income must be retained as a legal reserve). We may be subject to disruptions in some of our information technology operations and other activities provided by third-party service providers, which may adversely affect us. Our information technology systems are essential for us to interact with our clients and conduct our internal operations. We also have a wide network of third-party service providers for supplementary services, such as information technology services, administrative operations for Crediamigo and, with respect to the FNE, Agroamigo (such as marketing, client selection and client information retrieval). Any disruptions in our information technology systems or in these outsourced services may have an adverse effect on us by hindering our interaction with our clients and our normal internal operations. We might not be able to record all of our deferred tax credits Deferred tax credits are derived from either income and social contribution tax loss carry forwards or temporary differences, primarily related to long-term provisions for loan losses. The accounting treatment for deferred tax credits is governed by CMN Resolution No. 3,059 issued in December 2002, as amended by CMN Resolution No. 3,355 issued in March 2006 and CMN Resolution No. 3,655 issued in December 2008. As of December 31, 2011, we recorded deferred tax credits mainly from temporary differences of allowances for loan losses and other doubtful accounts of R$251 million, compared to R$277 million and R$212 million as of December 31, 2010 and 2009, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting PoliciesDeferred Tax Assets." In accordance with these resolutions, financial institutions may only account for deferred tax credits if they: (i) have a history of taxable profits or revenues for income and social contribution tax purposes, evidenced by the occurrence of such profits and revenues in at least three of the five last years, including the then current year; and (ii) expect, based on a technical probability study, to generate future taxable profits or revenues for income and social contribution tax purposes in subsequent periods, that will allow the realization of the deferred tax credits within ten years. Under CMN Resolution No. 3,655 issued in December 2008, the total amount of deferred tax credits as a portion of the Tier 1 regulatory capital cannot exceed (i) 20.0% as of January 1, 2010 and (ii) 10.0% after January 1, 2011. Any amounts in excess of those limits must be deducted from our Tier 1 regulatory capital. If we are unable to maintain our taxable income in the future, we may be required to write-off our deferred tax credits, which could have an adverse effect on us. Risks Relating to Brazil Brazil's economy remains vulnerable to external factors, which could have an adverse effect on Brazil's economic growth and on us. The disruptions recently experienced in the international capital markets have led to reduced liquidity and increased credit risk premiums for certain market participants and have resulted in a reduction of available financing. Financial institutions, such as ourselves, that are located in emerging market countries may be particularly susceptible to these events, which could affect the price or availability of their funding. Because international investors' reactions to the events occurring in one market sometimes affect other regions or disfavor certain investments, Brazil could be adversely affected by negative economic or financial developments in other countries.

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In addition, the recent market volatility and disruption have been accompanied by worsening economic indicators in the world's major economies. Weakening economic conditions in Brazil may, in particular, impair the ability of some of our clients to repay debt that they owe us and/or limit our ability to execute our strategy in the same way that we would in a period of economic growth and stability. Accordingly, we may continue to be adversely affected by conditions in the global financial markets as long as they remain volatile and subject to disruption and uncertainty. Since 2008, the continuation of the economic crisis in Europe, particularly in Greece, Spain, Italy and Portugal, has continued to reduce investor confidence globally, as has the earthquake in Japan last year and the downgrade of the U.S. long-term sovereign credit rating by Standard & Poor's on August 6, 2011. These ongoing events could negatively affect the ability of the Bank and other Brazilian financial institutions to obtain financing in the global capital markets, as well as weaken the recovery and growth of the Brazilian and/or foreign economies and cause volatility in the Brazilian capital markets. See also "The market for Brazilian securities is subject to a high degree of volatility due to developments and perceptions of risks in other countries" for more information regarding risks related to our exposure to events abroad. Brazilian economic and political conditions may adversely affect us and the market price of the Notes. Our business, financial condition and results of operations are substantially dependent on Brazil's economy, which in the past has been characterized by frequent drastic intervention by the Brazilian Government and volatile economic cycles. In the past, the Brazilian Government's actions to control inflation and implement macroeconomic policies have often involved price controls, currency devaluations, capital controls, and limits on imports, among other things. We and the market for the Notes may be adversely affected by changes in policies or rules involving factors such as: banking regulations; the regulatory environment; interest rates; exchange rate variations; exchange control policies; inflation; liquidity of domestic capital and lending markets; tax policies; and other political, diplomatic, social and economic developments affecting Brazil.

For more information regarding risks associated with the Brazilian Government's ownership of us, see "Risk FactorsRisks Related to us and the Brazilian Banking IndustryOur implementation of government objectives and legislative requirements could divert resources away from other more profitable areas of our lending and investing businesses." The market for Brazilian securities is subject to a high degree of volatility due to developments and perceptions of risks in other countries. The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil, as well as, to varying degrees, market conditions in other Latin American and emerging market countries, and the United States and Europe. Although economic conditions differ in each country, the reaction of investors to developments in one country may affect the capital markets in other countries.

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Developments or economic conditions in other emerging market countries have at times significantly affected the availability of credit to the Brazilian economy and resulted in considerable outflows of funds from Brazil and decreases in the amount of foreign investments in Brazil. Crises in other emerging market countries may diminish investor interest in securities of Brazilian issuers, including ours, which could adversely affect us and the market price of the Notes. See also "Brazil's economy remains vulnerable to external factors, which could have an adverse effect on Brazil's economic growth and on us" for more information regarding risks related to our exposure to events abroad. Interest rate changes by the Central Bank could adversely affect us. The Central Bank periodically establishes the SELIC rate, which is the base interest rate for the Brazilian banking system and an important policy instrument for achieving Brazilian Government inflation targets. The Central Bank has frequently adjusted the base interest rate, increasing or decreasing the rate numerous times in response to economic uncertainties and to achieve the goals of the Brazilian Government's economic policies. As of December 31, 2008 and 2007, the target SELIC rate was 13.75% and 11.25%, respectively. As of December 31, 2009, the Central Bank had significantly reduced the target SELIC rate to 8.75%. On April 28, 2010, the Central Bank increased the SELIC rate to 9.50%, on June 9, 2010, to 10.25% and on July 21, 2010, to 10.75%, and maintained that base interest rate for the remaining of 2010. The Central Bank increased the SELIC rate again on January 19, 2011, to 11.25%, on March 2, 2011, to 11.75%, on April 20, 2011, to 12.00%, on June 8, 2011, to 12.25% and on July 20, 2011, to 12.50%. However, the Brazilian Government reversed its trend of periodic increases of interest rates on August 31, 2011, when the Central Bank decreased the target SELIC rate to 12.00%. The Central Bank continued to decrease the target SELIC rate on October 19, 2011 to 11.50%, on November 30, 2011 to 11.00%, on January 18, 2012 to 10.50% and on March 7, 2012 to 9.75%. As of December 31, 2011, 82.9% of our total assets consisted of loan portfolio and securities transactions (including Brazilian Government securities), the return on which is subject to fluctuations in interest rates and other macroeconomic factors. Our securities portfolio consisted of (i) 99.3% of securities linked to inter-bank certificates of deposit (Certificados de Depsito Interbancrio, or "CDIs") or to the average SELIC rate (Taxa Mdia SELIC, or "TMS") and 10.7% of shares of publicly traded companies, making a significant portion of our securities portfolio linked to floating interest rates. Increases in the base interest rate could adversely affect us by reducing demand for our credit, increasing our cost of funds and increasing the risk of client default. Decreases in the base interest rate could also adversely affect us by decreasing the interest income we earn on our assets linked to the SELIC rate and by lowering our margins. In the event of changes in interest rates, the value of any publicly traded security having a fixed rate of interest may be adversely affected, whether on results from securities classified as "trading securities" or on shareholders' equity for securities classified as "available for sale." We are also subject to the risks commonly associated with long-term loan operations, including those related to economic activity, interest rate levels, mismatch of funding periods or changes in the Central Bank's requirements. None of these factors is under our control, and may adversely affect us. If Brazil experiences substantial inflation in the future, there may be an adverse effect on us. In the past, Brazil has experienced high rates of inflation. Certain actions taken by the Brazilian Government to combat inflation have had negative effects on the Brazilian economy. Annual inflation rates were 4.5% in 2007, 5.9% in 2008, 4.3% in 2009 and 5.9% in 2010, respectively, as measured by the IPCA. The inflation rate for the year ended December 31, 2011 was 6.5%, as measured by the IPCA. The Brazilian Government's measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and reducing economic growth. Inflation, along with government measures to combat inflation and public speculation about possible future government measures, has had significant negative effects on the Brazilian economy, and contributed to increase economic uncertainty in Brazil and volatility in the Brazilian securities market, which may have an adverse effect on us. If Brazil experiences substantial inflation in the future, we may be adversely affected. Inflationary pressures could also reduce our ability to access foreign financial markets and lead to further government

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intervention in the economy, including the introduction of policies that adversely affect the performance of the Brazilian economy as a whole, and consequently, us. The Brazilian Government has announced that it plans to propose broad tax reforms that, if implemented, could adversely affect us. The Brazilian Government regularly enacts reforms to tax and other assessment regimes affecting us. These reforms include changes to the frequency of assessments and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental projects. The Brazilian Government has announced that it plans to propose broad tax reforms in Brazil to improve the efficiency of allocating economic resources. It is anticipated that the reform, if adopted, would involve a major restructuring of the Brazilian tax system, including the possible creation of a value-added tax on goods and services that would replace several existing taxes (including a social contribution tax, a IPI tax and a state tax on the circulation of goods and services). The effects of these changes, if enacted, and any other changes that could result from the enactment of additional tax reforms cannot be quantified in advance, and we cannot guarantee that these reforms would not have an adverse effect on us. Changes to the tax system in the past have also produced uncertainty in the financial system and increased the cost of borrowing in Brazil. These changes, if enacted, may contribute to a deterioration in the economic and financial condition of our borrowers, and so may result in increases in our past due loan portfolio in the future. Moreover, the FNE provided 93.4% of the funds that we allocated to long-term financings for the year ended December 31, 2011, for which we recorded approximately R$993.5 million in management fees. As new contribution of funds into the FNE (and therefore available funds for us to manage) are based on the revenue obtained by the Brazilian Government from IPI and income taxes, changes to the tax system in Brazil, would have a direct impact on the amounts of new contributions to the FNE. Accordingly, any of these changes, if enacted, may adversely affect us. It may not be possible for investors to effect service of process within the United States or other jurisdictions outside Brazil upon our directors, executive officers and certain advisors residing in Brazil or outside the United States. We are a mixed-capital company (sociedade de economia mista) organized under the laws of Brazil. Substantially all of our directors and executive officers reside in Brazil or elsewhere outside the United States, and all or a significant portion of the assets of such persons may be, and substantially all of our assets are, located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States or other jurisdictions outside Brazil upon such persons or to enforce against them or against us any judgments obtained in such courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws or predicated upon the laws of such other jurisdictions outside Brazil. See "Service of Process and Enforcement of Judgments." There are significant differences among Brazilian GAAP, IFRS and U.S. GAAP. Law No. 11,638/07 and Law No. 11,941/09 amended the Brazilian Corporations Law and introduced the process of conversion of financial statements into IFRS. However, the Central Bank did not fully adopt, as part of the accounting practices applicable to financial institutions, the provisions of Law No. 11,638. In 2008, we adopted certain new accounting practices related to those required by Law No. 11,638/07 and Law No. 11,941/09. Our financial statements included in this Offering Memorandum have been prepared in accordance with Brazilian GAAP applicable to entities authorized to operate by the Central Bank. As a result, the financial information presented in this Offering Memorandum may differ significantly from financial statements prepared in accordance with IFRS, U.S. GAAP or the accounting standards of other countries. We have made no attempt to identify or quantify the impact of those differences other than as included in "Description of Certain Differences between Brazilian Accounting Practices Applicable to Entities Authorized to Operate by the Central Bank and International Financial Reporting Standards." No reconciliation to IFRS or U.S. GAAP has been prepared for the purposes of this Offering Memorandum or for any other purposes. There can be no assurance that a reconciliation would not identify material quantitative differences between our Brazilian GAAP financial statements, applicable to entities authorized to operate by the

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Central Bank, and such financial statements as prepared on the basis of IFRS or U.S. GAAP. Potential investors should consult their own professional advisors for an understanding of the potential differences among Brazilian GAAP applicable to entities authorized to operate by the Central Bank, IFRS and U.S. GAAP, and how those differences might affect the financial information included herein. Risks Relating to the Notes We may be unable to make a change of control offer required by the Indenture governing the Notes, which would cause defaults under the Indenture governing the Notes. The terms of the Notes will require us to make an offer to repurchase the Notes upon the occurrence of a specified change of control event at a purchase price equal to 101% of the principal amount of the Notes, plus accrued but unpaid interest to the date of the purchase. Any financing arrangements we may enter may also require repayment of amounts outstanding in the event of a specified change of control event and limit our ability to fund the repurchase of your Notes in certain circumstances. It is possible that we will not have sufficient funds at the time of the specified change of control event to make the required repurchase of Notes or that restrictions in our credit facilities and other financing arrangements will not allow the repurchases. See "Description of the Notes Repurchase of Notes upon Change of Control." The Notes are subject to transfer restrictions. The Notes have not been registered under the Securities Act or any state securities laws. As a result, holders of Notes may reoffer or resell Notes only if there is an applicable exemption from the registration requirements of the Securities Act and applicable state laws that apply to the circumstances of the offer and sale. The Notes will be effectively subordinated to our secured debt and to certain claims preferred by statute. Our obligations under the Notes are unsecured. As a result, the Notes will be effectively subordinated to all of our secured debt to the extent of the value of the collateral securing such debt. As of December 31, 2011, we had no secured debt other than with respect to our derivative obligations. Such derivative obligations were recorded on our financial statements in the total amount of R$21.1 million (the equivalent of U.S.$11.3 million). Further, the terms of the Indenture permit us to incur additional secured debt in the future. In the event that we are not able to repay amounts due under any existing or future secured debt obligations, creditors could proceed against the collateral guaranteeing such indebtedness. In that event, any proceeds upon a realization of the collateral would be applied first to amounts due under the secured debt obligations before any proceeds would be available to make payments on the Notes. If there is a default under our debt obligations, the value of this collateral may not be sufficient to repay both our secured creditors and the holders of the Notes. Additionally, the claims of holders of the Notes will rank effectively junior to certain obligations that are preferred by statute, including certain claims relating to taxes, social security and labor. The lack of assurance regarding the future existence of a market for the Notes may restrict the price and the liquidity of the Notes. Although application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and for them to be admitted for to trading on the Euro MTF, there can be no assurance regarding any future market for the Notes, which may limit the ability of holders of Notes to sell their Notes or reduce the price for which such holders may be able to sell their Notes. If such market were to develop, the Notes could trade at prices that may be lower than the face value of the Notes, depending on many factors including some beyond our control. Furthermore, the liquidity of, and trading market, if any, for the Notes may be adversely affected by changes in interest rates and by volatility in the market for similar securities as well as by any changes in our business, financial condition or results of operations. We will not have guaranteed access to U.S. dollars for repayment of the Notes. An amount payable on the Notes is expected to be settled in U.S. dollars outside Brazil and therefore is subject to the risk of a currency constraint event. Any currency constraint event, which includes expropriation,

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confiscation, nationalization, discriminatory legislative actions or other governmental measures taken by the Brazilian Government that would have the effect of depriving us of the use or control of Brazilian or U.S. currencies, would have the effect of prohibiting or preventing, legally or de facto, us from making due and timely payments in U.S. dollars of amounts due under the Notes. The holders of Notes may not have the remedy of instituting bankruptcy proceedings if there has been a payment default on the Notes. The remedies of holders of Notes if we breach other provisions of the Notes may be even more limited. Under the Brazilian Bankruptcy Law, we are not subject to bankruptcy or similar proceedings. To the fullest extent permitted by applicable law, if we become insolvent the sole remedy of holders of Notes against us to recover any amounts owing to them under the Notes may be to institute bankruptcy proceedings against us in any state or federal court in New York in the event of a payment default. Furthermore, if it is determined that our bankruptcy is against Brazilian public policy, national sovereignty or public morality, a court in Brazil will not enforce a bankruptcy ruling from a New York court. There is also significant uncertainty whether a court in the United States would be able to exercise jurisdiction or be willing to accept this type of proceeding since almost all of our assets and operations are located in Brazil and we are organized under the laws of Brazil. In addition, the ability of holders of Notes to institute bankruptcy proceedings against us in Brazil, where almost all of our assets and operations are located, is currently not guaranteed by Brazilian law, which does not expressly contemplate bankruptcy or similar proceedings applicable to mixed-capital companies (sociedades de economia mista), such as us. Therefore, there can be no assurance that the holders of Notes will have the right directly (or indirectly through the Trustee) to institute bankruptcy proceedings against us in Brazil if we default on the Notes. We can issue further debt or other instruments which may rank pari passu with or senior to the Notes. Subject only to the conditions described in "Description of the Notes" there is no restriction on the amount of debt or instruments that we may issue which would rank senior to, or pari passu with, the Notes. The issuance of any such instruments may reduce the amount recoverable by the holders of Notes upon our liquidation, dissolution or winding-up and would increase the likelihood that we may suspend the payment of interest on the Notes or not pay principal amounts on the Notes.

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USE OF PROCEEDS The net proceeds arising from the issuance and sale of the Notes are estimated to be approximately U.S.$296.2 million after deductions of fees, commissions and certain other expenses. We expect to apply all of the net proceeds of this offering for general corporate purposes.

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EXCHANGE RATE INFORMATION Prior to March 14, 2005, there were two legal foreign exchange markets in Brazil in which rates were freely negotiated but could be strongly influenced by Central Bank intervention: the commercial rate exchange market, which was primarily dedicated to foreign trade loans and transactions that generally required prior approval from Brazilian monetary authorities, such as the buying and selling of registered investments by foreign entities, the purchase or sale of shares and the payment of dividends or interest on shareholders' equity with respect to such shares; the payment of principal of and interest on loans, notes, bonds and other debt instruments denominated in foreign currency and duly registered with the Central Bank; and the floating rate exchange market, which was generally applied to specific transactions that required prior Central Bank approval and were not conducted through the commercial rate exchange market.

On March 4, 2005, the CMN enacted Resolution No. 3,265 (superseded by CMN Resolution No. 3,568, dated as of May 29, 2008), pursuant to which the commercial rate exchange market and the floating rate exchange market were unified in a sole exchange market, effective as of March 14, 2005. The new regulation allows, subject to certain procedures and specific regulatory provisions, the purchase and sale of foreign currency and the international transfer of reais by a foreign person or company, without limitation as to amount. Foreign currencies may only be purchased through financial institutions domiciled in Brazil and authorized to operate in the exchange market. The real depreciated against the U.S. dollar by 53.2% in 2002 and 31.9% in 2008. The real appreciated 18.0%, 8.0%, 12.3%, 8.5%, 17.0%, 25.3% and 3.4% against the U.S. dollar in 2003, 2004, 2005, 2006, 2007, 2009 and 2010. In 2011, the real depreciated 13.6% against the U.S. dollar. On December 31, 2011, the real/U.S. dollar exchange rate was R$1.8758 per U.S.$1.00. In the past, the Brazilian Government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluation, periodic mini-devaluation during which the frequency of adjustments ranged from a daily to a monthly basis, floating exchange rate systems, exchange controls and dual exchange rate markets. We cannot predict whether the Central Bank or the Brazilian Government will continue to let the real float freely or intervene in the exchange rate market by returning to a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar. Exchange rate fluctuations may adversely affect us and the market price of our Notes. We are subject to foreign exchange rate instability, including devaluation of the real, which may adversely affect us. The following tables provide information on the selling exchange rate, expressed in reais per U.S. dollar (R$/U.S.$) for the periods indicated, as reported by the Central Bank.
Average for For the year Ended December 31, Period-end Period(1) Low High

(reais per U.S. dollar) 2007 ............................................................................................... 2008 ............................................................................................... 2009 ............................................................................................... 2010 ............................................................................................... 2011 ............................................................................................... 2012 (through May 2, 2012) ........................................................ 1.7713 2.3370 1.7412 1.6662 1.8758 1.9149 1.9483 1.8375 1.9935 1.7593 1.6746 1.7920 1.7325 1.5593 1.7024 1.6554 1.5345 1.7024 2.1556 2.5004 2.4218 1.8811 1.9016 1.9149

(1) Daily rate calculated as the accumulated monthly average up to the date of calculation. Source: Central Bank

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Average for Month Period-end Period

(1)

Low

High

(reais per U.S. dollar) October 2011 ................................................................................. November 2011 ............................................................................. December 2011 ............................................................................. January 2012 ................................................................................. February 2012 ............................................................................... March 2012.................................................................................... April 2012...................................................................................... May 2012 (through May 2, 2012) ................................................. 1.6885 1.8109 1.8758 1.7391 1.7092 1.8221 1.8918 1.9149 1.7726 1.7905 1.8369 1.7897 1.7209 1.7953 1.8577 1.9149 1.6885 1.7270 1.7830 1.7389 1.7024 1.7152 1.8256 1.9149 1.8856 1.8937 1.8758 1.8683 1.7509 1.8334 1.9149 1.9149

(1)

Daily rate calculated as the accumulated monthly average up to the date of calculation.

Source: Central Bank

Brazilian law provides that, whenever there is a serious imbalance in Brazil's balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that such measures will not be taken by the Brazilian Government in the future, which could prevent us from making payments under the Notes. See "Risk FactorsRisks Relating to the NotesWe will not have guaranteed access to U.S. dollars for repayment of the Notes."

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CAPITALIZATION The following table sets forth our capitalization under Brazilian GAAP as of December 31, 2011 and is derived from the 2011 Financial Statements and as adjusted to give effect to the offering of the Notes and intended uses of proceeds thereof. There has been no material change to our capitalization since December 31, 2011.
As of December 31, 2011 (R$ thousands) Current liabilities (including current portion of non-current liabilities): Real-denominated: Deposits .................................................................................................................................. Open market funding, interbank account and interbranch account and derivatives Domestic borrowing and onlendings ..................................................................................... Financial and development funds .......................................................................................... Hybrid instrument of equity and debt .................................................................................... Total real-denominated interest-bearing liabilities .......................................................... Tax and social security ........................................................................................................... Others ..................................................................................................................................... Total real-denominated non-interest bearing-liabilities .................................................. Total current real-denominated liabilities .................................................................................. Foreign currency-denominated: Foreign borrowings and onlendings ...................................................................................... Foreign exchange portfolio .................................................................................................... Payables for securities issued abroad(2) .................................................................................. Total current foreign currency-denominated liabilities............................................................ Total current liabilities ................................................................................................................. Non-current liabilities (excluding current portion): Real-denominated: Deposits .................................................................................................................................. Open market funding and derivatives .................................................................................... Domestic borrowing and onlendings ..................................................................................... Financial and development funds .......................................................................................... Subordinated debt eligible for capital .................................................................................... Hybrid instrument of equity and debt .................................................................................... Total real-denominated interest-bearing liabilities .......................................................... Other ....................................................................................................................................... Total real-denominated non-interest bearing-liabilities .................................................. Total non-current real-denominated ........................................................................................... Foreign currency-denominated: Foreign onlendings ................................................................................................................. Foreign borrowings ................................................................................................................ Payable for securities issued abroad(3) ................................................................................... Total non-current foreign currency-denominated liabilities .................................................... Total non-current liabilities ......................................................................................................... Deferred income ............................................................................................................................ Total liabilities ............................................................................................................................... Shareholder's equity ..................................................................................................................... Total capitalization(4) ..................................................................................................................... (1) (2) (3) (4) 5,115,979 652,573 189,938 1,102,922 70,164 7,131,576 525,820 975,290 1,501,110 8,632,686 914,548 1,188 199,732 1,115,468 9,748,154 Adjusted(1) (R$ thousands) 5,115,979 652,573 189,938 1,102,922 70,164 7,131,576 525,820 975,290 1,501,110 8,632,686 914,548 1,188 199,732 1,115,468 9,748,154

3,848,520 80,074 1,146,279 3,617,155 1,216,319 1,067,708 10,976,055 2,058,887 2,058,887 13,034,943 759,101 0 563,876 1,322,977 14,357,919 16 24,106,089 2,329,499 26,435,588

3,848,520 80,074 1,146,279 3,617,155 1,216,319 1,067,708 10,976,055 2,058,887 2,058,887 13,034,943 759,101 555,619 563,876 1,878,596 14,913,538 16 24,661,708 2,329,499 26,991,207

As adjusted by the issuance of the Notes and assuming proceeds of U.S.$296,203,750 after deductions of fees, commissions and certain other expenses, converted from U.S. dollars to reais using the selling exchange rate of R$1.8758 to U.S.$1.00, as published by the Central Bank on December 31, 2011. Interest payments on the U.S.$300 million five-year notes issued in November 2010. Principal payment on the U.S.$300 million five-year notes issued in November 2010. Total capitalization equals total liabilities plus shareholder's equity.

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SELECTED FINANCIAL INFORMATION The following selected financial information has been derived from the audited Financial Statements included elsewhere in this Offering Memorandum. This selected financial information should be read in conjunction with, and is qualified in its entirety by reference to, the audited Financial Statements. The following selected financial information and the Financial Statements have been prepared in accordance with Brazilian GAAP and should be read in conjunction with the sections "Presentation of Financial and Certain Other Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Offering Memorandum. Income Statement Data
For the Year Ended December 31, 2011 (U.S.$ thousands)(1) Income from financial intermediation .......................................... Expenses from financial intermediation ....................................... Gross profit from financial intermediation ................................... Other operating income (expenses)............................................... Income from operations ................................................................ Non-operating income ................................................................... Income before taxes on income and profit sharing ....................... Income and social contribution taxes ............................................ Profit sharing ................................................................................. Net income .................................................................................... (1) 1,784,766 (1,135,836) 648,930 (292,584) 356,346 3,756 360,102 (172,515) (19,766) 167,821 3,347,864 (2,130,601) 1,217,263 (548,829) 668,434 7,045 675,479 (323,603) (37,077) 314,799 2011 2010 (R$ thousands) 2,431,267 (1,464,879) 966,388 (436,119) 530,269 1,645 531,914 (174,086) (44,238) 313,590 2,005,203 (1,219,439) 785,764 (126,657) 659,107 2,078 661,185 (160,487) (41,686) 459,012 2009

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011.

Balance Sheet Data

As of December 31, 2011 (U.S.$ thousands)(1) ASSETS Current assets .............................................................................. Cash and cash equivalents ........................................................ Interbank investments ............................................................... Securities and derivatives ......................................................... Interbank accounts .................................................................... Interbranch accounts ................................................................. Lending operations ................................................................... Other receivables ...................................................................... Other assets ............................................................................... Long-term assets .......................................................................... Securities and derivatives ......................................................... Interbank accounts .................................................................... Lending operations ................................................................... Other receivables ...................................................................... Permanent assets ......................................................................... Investments ............................................................................... Property and equipment in use ................................................. Deferred charges ....................................................................... TOTAL ASSETS ......................................................................... (1) 5,642,744 51,757 1,727,414 124,316 142,485 0 2,639,255 948,389 9,127 8,349,552 5,264,205 19,652 3,006,512 59,183 100,672 836 98,928 908 14,092,967 10,584,659 97,086 3,240,283 233,192 267,274 0 4,950,715 1,778,988 17,121 15,662,089 9,874,595 36,863 5,639,615 111,016 188,840 1,568 185,569 1,703 26,435,588 2011 2010 (R$ thousands) 10,838,392 82,391 3,872,110 1,026,946 238,268 285 4,224,164 1,380,525 13,703 12,753,269 6,739,820 32,474 5,910,740 70,235 192,055 1,429 188,219 2,407 23,783,716 11,095,395 72,983 3,248,634 2,227,338 178,392 1 4,177,810 1,182,343 7,894 7,862,666 3,011,201 38,603 4,710,825 102,037 196,405 1,379 191,962 3,064 19,154,466 2009

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011.

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As of December 31, 2011 (U.S.$ thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities ........................................................................ Deposits .................................................................................... Open market funding ................................................................ Payables for securities issued abroad(2) .................................... Interbank accounts .................................................................... Interbranch accounts ................................................................. Borrowings................................................................................ Domestic onlendings - Official institutions ............................. Derivatives ................................................................................ Foreign onlendings ................................................................... Other payables .......................................................................... Long-term liabilities .................................................................... Deposits .................................................................................... Open market funding ................................................................ Payables for securities issued abroad(3) .................................... Borrowings................................................................................ Domestic onlendings - Official institutions ............................. Derivatives ................................................................................ Foreign onlendings ................................................................... Other payables .......................................................................... Deferred income .......................................................................... Shareholders' equity ................................................................... TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. (1) (2) (3) 5,196,798 2,727,359 340,021 106,478 2 3,807 453,016 92,455 4,060 43,337 1,426,263 7,654,291 2,051,669 35,484 300,606 17,604 593,484 7,204 404,681 4,243,559 9 1,241,869 14,092,967
(1)

2011

2010 (R$ thousands)

2009

9,748,154 5,115,979 637,812 199,732 4 7,142 849,768 173,427 7,615 81,291 2,675,384 14,357,919 3,848,520 66,561 563,876 33,021 1,113,258 13,513 759,101 7,960,069 16 2,329,499 26,435,588

8,474,793 3,772,031 460,893 2,991 22 30,330 461,822 289,427 12,118 66,808 3,378,351 13,131,569 4,737,550 63,396 482,496 45,656 1,397,349 46,020 662,357 5,696,745 16 2,177,338 23,783,716

8,110,117 3,197,499 445,678 0 0 13,128 644,553 313,523 15,979 63,653 3,416,104 8,971,610 3,135,228 0 0 56,126 1,120,001 20,592 658,740 3,980,923 14 2,072,725 19,154,466

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011. Interest payments on the U.S.$300 million five-year notes issued in November 2010. Principal payment on the U.S.$300 million five-year notes issued in November 2010.

Selected Financial Ratios

As of and for the Year Ended December 31, 2011 Profitability Return on average assets(1)............................................................................... Return on average equity(2) .............................................................................. Asset Quality Past due loans (loans in arrears)/total loans(3) ................................................. Allowance for loan losses/ Past due loans(4).................................................... Allowance for loan losses/total loans .............................................................. Liquidity Loans, net of allowance for loan losses/total assets ........................................ Loans, net of allowance for loan losses/ liabilities (current and non-current) Capital Adequacy Shareholder's equity/total assets ...................................................................... Total liabilities/shareholder's equity ................................................................ Regulatory Capital Adjusted equity as a percentage of total risk-weighted assets(5) (Capital Ratio) ............................................................................................. Return Net Interest Margin (NIM)(6) ........................................................................... (1) (2) (3) 1.26% 13.57% 4.02% 132.80% 5.34% 42.25% 46.33% 8.81% 10.30 16.58% 4.30% 2010 1.54% 14.87% 3.58% 161.70% 5.80% 44.71% 49.22% 9.15% 9.90 13.60% 4.60% 2009 2.73% 23.78% 4.50% 136.70% 6.20% 48.70% 54.60% 10.82% 8.20 12.99% 4.80%

(4) (5) (6)

Return on average equity is calculated as net income earned during the accounting period divided by our average equity. Return on average assets is calculated as net income earned during the accounting period divided by our average assets. A loan is considered past due when it is overdue from 15 days to the date the loan is written off in full. In accordance with Central Bank Resolution 2,682, loans that will mature within 36 months and loans that mature after 36 months are written off in full when they become overdue by 360 days and 540 days, respectively. See "Other Statistical and Financial InformationLending OperationsPast Due Loans." Allowance for loan losses is calculated in accordance with the risk level of the credit following Resolution No. 2,682/99 of the CMN, as amended. See "Other Statistical and Financial DataLending OperationsPast Due Loans." Capital ratio required by Central Bank corresponding to a minimum capital adequacy ratio of 11% of total risk-adjusted assets. See "Other Statistical and Financial InformationReturn on Equity and AssetsCapital Adequacy and Minimum Capital Requirements." Net interest income divided by our average interest-earning assets. See "Other Statistical and Financial DataNet Interest Spread and Net Interest Margin (NIM) Analysis."

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Total Revenues
Year Ended December 31, 2011 R$ millions Total revenues(1) ....................................................... Income from financial intermediation ...................... Government fund and program management ........... Banking services and capital markets activities ....... Asset management..................................................... Other revenues(2) ........................................................ (1) 5,864.4 3,347.9 931.7 231.3 14.3 339.3 Relative Participation % 100.0% 57.1% 32.9% 3.9% 0.2% 5.8% R$ millions 4,605.6 2,431.3 1,615.0 311.1 12.6 235.7 2010 Relative Participation % 100.0% 52.8% 35.1% 6.8% 0.3% 5.1% R$ millions 4,283.4 2,005.2 1,379.6 284.5 9.7 604.4 2009 Relative Participation % 100.0% 46.8% 32.2% 6.7% 0.2% 14.1%

(2)

Total revenues for each period reflected in this table consists of the total of our income for the relevant period from (i) financial intermediation, (ii) administration services provided to government funds and programs, (iii) bank fees and (iv) certain other operating income (including del credere fees). Total revenues as so presented is a non-Brazilian GAAP accounting measure prepared by us that we believe to be a useful measure, insofar as it combines our interest and other income from financial intermediation and our income from fund and program management, including from our management of the FNE, which would not otherwise be reported as income from financial intermediation under Brazilian GAAP, although it may not be comparable to any similarly defined measure used by other financial institutions. As a result, our presentation of the components of total revenues set forth in this table differs from the discussion of the components of our income in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Includes other operating income mainly from the effects of negative exchange rate variation in foreign-currency denominated funding, reversal of operational provisions and recovery of FNE loans. The amounts presented do not include related expenses, such as negative exchange variation on granted loans, accrual of operational provisions, and provisions for FNE transactions, among others, which are recorded as other operating expenses. For a more detailed description of other operating income and expenses, please refer to notes 20, 19 and 19, respectively, to the 2011 Financial Statements, the 2010 Financial Statements and the 2009 Financial Statements.

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OTHER STATISTICAL AND FINANCIAL INFORMATION The following information relating to us is included for analytical purposes and should be read in conjunction with our Financial Statements appearing elsewhere in this Offering Memorandum as well as with the sections "Presentation of Financial Information," "Selected Financial Information," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Average Balance Sheets and Interest Rate Data The tables below present the average balances for interest-earning assets and interest-bearing liabilities, together with the related interest income and expense amounts for the years ended December 31, 2011, 2010 and 2009, resulting in the presentation of the average rates for each period. The average balances have been calculated from the month-end balances of the principal together with the related accrued interest balances.
For the Year Ended December 31, 2011 Average Balance Interest-earning assets(1) Securities, interbank investments and derivatives ......................... Loan operations - Real denominated ............................. Loan operations Foreign currency (2) .................. Interest-earning compulsory deposits..................................... Total interest-earning assets............ Non-interest-earning assets Tax credits ..................................... Debtors for guarantee deposits ...... Permanent assets ........................... Other assets ................................... Total non-interest-earning assets .... Total average assets .......................... (1) (2) Interest Average Rate Average Balance 2010 Interest Average Rate Average Balance 2009 Interest Average Rate

(R$ thousands, except percentages) 12,431,274 9,450,716 1,460,037 271,578 23,613,605 283,697 550,868 192,674 428,567 1,455,806 25,069,411 1,391,188 1,385,323 233,855 20,162 3,030,528 11.2% 14.7% 16.0% 7.4% 12.8% 9,267,359 8,406,863 1,254,282 239,694 19,168,198 247,839 365,291 192,165 374,130 1,179,425 20,347,623 852,630 1,037,632 17,631 15,668 1,923,561 9.2% 12.3% 1.4% 6.5% 10.0% 7,816,113 6,565,732 1,171,794 204,584 15,758,223 193,476 263,005 194,835 375,129 1,026,445 16,784,668 701,097 795,203 (249,657) 2,796 1,249,439 9.0% 12.1% (21.3%) 1.4% 7.9%

Calculated based on average of the month-end balances during the relevant period. Reflects expenses from exchange rate variation of R$82.4 million and R$107.7 million and R$379.2 million for the years ended December 31, 2011, 2010 and 2009, respectively, as recorded on our income statement under other operating expenses.

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For the Year Ended December 31, 2011 Average Balance Interest-bearing liabilities(1) Savings deposits ............................. Interbank deposits .......................... Time deposits ................................. Special deposits .............................. Open market funding...................... Domestic borrowings ..................... Domestic onlendings ...................... Foreign borrowings and onlendings and securities(2) .......................... Financial and development funds and subordinated debt ............... Hybrid instrument of equity and debt(3) ......................................... Total interest-bearing liabilities ....... Other liabilities Demand deposits ............................ Allowance for contingencies .......... Employment benefits ..................... Other ............................................... Shareholders' equity ....................... Total other liabilities ......................... Total average liabilities ..................... (1) (2) (3) Interest Average Rate Average Balance 2010 Interest Average Rate Average Balance 2009 Interest Average Rate

(R$ thousands, except percentages) 1,315,140 630,983 5,368,053 1,299,336 673,299 57,175 1,463,058 1,894,131 5,427,864 1,072,470 19,201,509 125,650 1,546,595 933,423 941,930 2,320,304 5,867,902 25,069,411 (66,127) (19,658) (585,825) (111,194) (75,652) (4,604) (93,618) (364,981) (568,691) (135,550) (2,025,900) 5.0% 3.1% 10.9% 8.6% 11.2% 8.1% 6.4% 19.3% 10.5% 12.6% 10.6% 1,156,987 537,300 4,252,037 937,342 505,323 67,326 1,518,379 1,298,947 4,515,834 77,244 14,866,719 132,999 1,351,590 1,041,124 846,543 2,108,648 5,480,904 20,347,623 (52,176) (15,707) (399,343) (68,306) (48,095) (5,421) (74,973) 29,753 (403,291) (4,167) (1,041,726) 4.5% 2.9% 9.4% 7.3% 9.5% 8.1% 4.9% (2.3)% 8.9% 5.4% 7.0% 902,614 258,460 2,324,223 945,984 456,952 75,546 1,317,242 1,190,430 4,388,086 11,859,537 101,770 1,159,410 960,090 773,578 1,930,283 4,925,131 16,784,668 (41,105) (10,476) (212,886) (68,019) (44,216) (6,109) (43,165) 325,089 (396,171) (497,058) 4.6% 4.1% 9.2% 7.2% 9.7% 8.1% 3.3% (27.3)% 9.0% 4.2%

Calculated based on average of the month-end balances during the relevant period. Reflects income from exchange rate variation of R$105.6 million, R$99.6 million and R$363.4 million for the years ended December 31, 2011, 2010 and 2009, respectively, as recorded on our income statement under other operating income. Loan agreement granted by the Brazilian government, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesSources and Uses of FundsSources of Funds."

Changes in Interest Income and Expenses - Volume and Rate Analysis The following tables show the allocation of the changes in our interest income and interest expense due to changes in the average volume and in the average rates for the year ended December 31, 2011 compared to the year ended December 31, 2010 and for the year ended December 31, 2010 compared to the year ended December 31, 2009. Volume and rate variations have been calculated based on the variation of average balances over the period and changes in average interest rates on average interest-earning assets and average interest-bearing liabilities. The net change attributable to changes in both volume and rate has been allocated to the change due to volume and the change due to rate on a proportional basis. Increase (Decrease) in Interest Rate Income (Expenses) Due to Changes in Volume and Rate
For the Year Ended December 31, 2011/2010 Average Volume Interest-earning assets Securities, interbank investments and derivatives ...................................................... Loan operations - Real denominated .................. Loan operations Foreign currency ............................................ Interest-earning compulsory deposits ................. Total interest-earning assets ................................ Average Rate Net Change Average Volume 2010/2009 Average Rate Net Change

(R$ thousands) 329,643 138,466 3,359 2,224 502,590 208,915 209,225 212,865 2,270 604,377 538,558 347,691 216,224 4,494 1,106,967 133,113 226,973 (16,414) 559 302,613 18,420 15,456 283,702 12,313 371,509 151,533 242,429 267,288 12,872 674,122

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For the Year Ended December 31, 2011/2010 Average Volume Interest-bearing liabilities Savings deposits.................................................. Interbank deposits ............................................... Time deposits ...................................................... Special deposits .................................................. Open market funding .......................................... Domestic borrowings .......................................... Domestic onlendings .......................................... Foreign borrowings and onlendings and securities ......................................................... Financial and development funds and subordinated debt ........................................... Total interest-bearing liabilities........................... Average Rate Net Change Average Volume 2010/2009 Average Rate Net Change

(R$ thousands) (7,578) (2,869) (115,313) (29,548) (17,858) 817 2,820 7,676 (89,044) (359,919) (6,373) (1,082) (71,169) (13,340) (9,699) 0 (21,465) (402,410) (76,356) (624,255) (13,951) (3,951) (186,482) (42,888) (27,557) 817 (18,645) (394,734) (165,400) (984,174) (11,475) (8,798) (180,924) 625 (4,614) 662 (7,365) 27,178 (11,443) (149,239) 404 3,567 (5,533) (912) 735 26 (24,443) (322,513) 4,323 (395,429) (11,071) (5,230) (186,457) (286) (3,879) 688 (31,808) (295,336) (7,120) (544,667)

Net Interest Spread and Net Interest Margin (NIM) Analysis The following table shows the net interest spreads between real-denominated and foreign currency-indexed interest-earning assets and interest-bearing liabilities and the comparative net interest margin (the "NIM") for the years ended December 31, 2011, 2010 and 2009. The net interest spread with respect to a category of assets and a category of liabilities is defined as the difference between the average rate on the assets and the average rate paid on the liabilities. NIM is defined as: NIM = Interest Revenues Interest Expenses Average Interest-Earning Assets

Spread is defined as: Net interest spread = Interest Revenues Interest Expenses Average Interest-Earning Assets Average Interest-Bearing Liabilities
For the Year Ended December 31, 2011 2010 (R$ thousands) Total average interest-earning assets(1) ......................................... Total average interest-bearing liabilities(1) .................................... Interest income .............................................................................. Interest expense ............................................................................. Net financial operations income(2) ................................................ Interest-bearing liabilities/interest-earning assets......................... Average rate on average interest-earning assets(3) ........................ Average rate on average interest-bearing liabilities(4) .................. Net interest spread(5) ...................................................................... Net interest margin(6) ..................................................................... (1) (2) (3) (4) (5) (6) 23,613,606 19,201,509 3,030,528 (2,025,900) 1,004,628 81.3% 12.8% 10.6% 2.2% 4.3% 19,168,198 14,866,719 1,923,561 (1,041,726) 881,835 77.6% 10.0% 7.0% 3.0% 4.6% 15,758,223 11,859,537 1,249,439 (497,058) 752,381 75.3% 7.9% 4.2% 3.7% 4.8% 2009

Calculated using the final position at the end of each month. Interest income less interest expense. Interest income divided by average interest-earning assets. Interest expense divided by average interest-bearing liabilities. Difference between average rate on interest-earning assets and average rate of interest-bearing liabilities. Net interest income divided by average interest-earning assets.

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Securities and Investments Portfolio General The following table shows our portfolio of securities and investments as of December 31, 2011, 2010 and 2009:
As of December 31, 2011 (R$ thousands) Securities Brazilian Government securities: Financial Treasury Bills .. Total Brazilian Government Securities ................................ Private securities: Debentures ......................................................................... Equity Securities ............................................................... Other .................................................................................. Total private securities ........................................................ Total securities .......................................................................... 8,885,516 8,885,516 880,018 226,718 70,641 1,177,377 10,062,893 (%) 88% 88% 9% 2% 1% 12% 100% 2010 (R$ thousands) 6,718,106 6,718,106 523,885 258,167 266,303 1,048,355 7,766,461 (%) 87 87 7 3 3 13 100 2009 (R$ thousands) 3,597,850 3,597,850 405,555 364,920 869,946 1,640,421 5,238,271 (%) 69 69 8 7 16 31 100

Maturity Distribution The following table presents the maturity distribution as of December 31, 2011 for our securities and investments:
As of December 31, 2011 No stated maturity(1) Securities Brazilian Government securities: Financial Treasury Bills ........ Total Brazilian Government Securities ...................................... Private securities: Debentures ............................................................................... Equity Securities ..................................................................... Other ........................................................................................ Total private securities ............................................................. Total securities ............................................................................... (1) Due in 1 year or less Due after 1 year to 5 years Due after 5 year to 15 years Due after 15 years

Total

(R$ thousands) 226,718 428 227,146 227,146 6,012 6,012 6,012 4,823,699 4,823,699 834,451 58,442 892,894 5,716,593 2,908,309 2,908,309 45,567 11,415 56,982 2,965,292 1,147,496 1,147,496 356 356 1,147,852 8,885,516 8,885,516 880,018 226,718 70,641 1,177,377 10,062,893

For securities, "no stated maturity" relates to securities that are highly liquid. As a result, in our financial statements, they are presented as part of current assets.

Lending Operations Loan Portfolio As of December 31, 2011, our total outstanding gross loans (including accrued interest) were R$11,799 million, which accounted for 44.6% of our total assets. From December 31, 2009 to December 31, 2011, our total loan portfolio, net of allowances, grew 19.1%, from R$8,889 million to R$10,590 million. Pursuant to CMN regulations, no Brazilian financial institution is authorized to lend more than 25% of its regulatory capital (subject to certain adjustments) to one client or group of clients under the same control. In our case, this limit excludes loans made by us at the risk of the Brazilian Government, as its agent. Our internal policy complies with the regulatory requirements of the CMN.

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The following table reflects the balances for our loan operations by sector, as of December 31, 2011, 2010 and 2009:
As of December 31, 2011 2010 (R$ thousands, except percentages) Industrial ........................................................ Rural and agribusiness(1) ............................... Commercial ................................................... Governments ................................................. Acquired loan portfolios(2) ............................ Individual and consumer ............................... Housing system(3) .......................................... Other loans .................................................... Total ............................................................. (1) (2) (3) 3,189,114 1,474,609 2,368,416 1,331,046 265,963 53,334 243 3,116,335 11,799,060 27.0% 12.5% 20.0% 11.3% 2.3% 0.5% 0.0% 26.4% 100% 2,605,734 1,974,504 1,898,228 1,257,660 695,360 56,461 243 2,799,578 11,287,768 23.1% 17.5% 16.8% 11.1% 6.2% 0.5% 0.0% 24.8% 100% 1,892,524 2,335,451 1,280,825 1,156,521 600,014 54,329 241 2,617,747 9,937,652 19.0% 23.5% 12.9% 11.6% 6.0% 0.6% 0.0% 26.4% 100% 2009

Does not include microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio. Recorded as financial Intermediaries on our income statement. Includes home mortgage loans.

The table below sets out our loan portfolio divided by type of client, as of the dates indicated:
As of December 31, 2011 2010 (R$ thousands) Companies ......................................................................................................... Individual and consumer ..................................................................................... Governments ........................................................................................................ Total .................................................................................................................... (1)
(1)

2009

10,414,680 53,334 1,331,046 11,799,060

9,973,647 56,461 1,257,660 11,287,768

8,726,802 54,329 1,156,521 9,937,652

Companies includes all clients aside from Individual and consumer and Governments as shown in the table above.

The following table reflects the balances for our loan operations for our 50 largest customers, by industry, as of December 31, 2011:
As of December 31, 2011 (R$ thousands, except percentages) Services .................................................................................................................................................... Industrial ................................................................................................................................................... Governments ............................................................................................................................................ Financial Institutions ................................................................................................................................ Commercial .............................................................................................................................................. Rural ......................................................................................................................................................... Total ......................................................................................................................................................... 1,990,158 1,708,580 1,193,984 197,242 516,027 87,806 5,693,797 35.0% 30.0% 21.0% 3.5% 9.1% 1.5% 100%

Average maturities of loans depend upon the sector to which the loan has been made. We believe we currently lend on terms comparable to private sector banks (with respect to our loan portfolio only) depending on the type of loan. Loans are generally made at pre-fixed rates or index-based rates such as the ANBIMA-rate or the TJLP, plus a spread. Spreads fluctuate depending principally upon the source of funding, the sector, the type of borrower and the program under which the loan is made. The following table reflects the maturity distribution of installments due of our loan portfolio as of December 31, 2011:

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As of December 31, 2011 (R$ thousands) Past due loans ........................................................................................................................................... Due in 360 days or less ............................................................................................................................ Due between 2012 and 2017 .................................................................................................................... Due between 2017 and 2027 .................................................................................................................... Due after 2027 .......................................................................................................................................... Total gross loan....................................................................................................................................... 203,147 5,634,709 2,593,067 3,042,421 325,716 11,799,060 212,151 4,805,951 2,892,513 3,091,803 285,350 11,287,768 2010

Indexation Most of our loan portfolio is denominated in reais, however, loans indexed to foreign currencies represented 14%, 11% and 14% of our total loan portfolio as of December 31, 2011, 2010 and 2009, respectively. The following table presents a breakdown of total loans by currency as of December 31, 2011 and 2010:
As of December 31, 2011 % 2011 % 2010 % 2009 %

(U.S.$ thousands, except percentages)(1) Reais denominated ................ Foreign currency-indexed ..... Total ...................................... (1) 5,383,909 906,239 6,290,148 86% 14% 100% 10,099,136 1,699,924 11,799,060

(R$ thousands, except percentages) 86% 14% 100% 10,080,036 1,207,732 11,287,768 89% 11% 100% 8,539,319 1,398,333 9,937,652 86% 14% 100%

December 31, 2011 figures were converted into U.S. dollars using the selling exchange rate of R$1.8758 per U.S.$1.00, as published by the Central Bank on December 31, 2011.

Allowances for Loan Losses The following table shows the quality and corresponding allowances for loan losses of our loan portfolio as of December 31, 2011, 2010 and 2009 in accordance with our rating system:
As of December 31, 2011
(1)

2010(1) (%) 28.1% 43.2% 18.8% 2.2% 1.6% 2.1% 4.0% 100.0% (R$ thousands, except percentages) (%) 3,640,505 32.3% 3,847,921 34.1% 2,635,606 23.3% 262,461 2.3% 202,477 1.8% 294,945 2.6% 403,853 3.6% 100.0% 11,287,768 652,918

2009(1) (%) 33.7% 32.4% 22.5% 3.3% 1.4% 2.2% 4.5% 100.0%

AA .................................................... A ....................................................... B ....................................................... C ....................................................... D, E and F ......................................... G and H ............................................ Past Due ............................................ Total loan portfolio ....................... Total allowance for loan losses ........ (1)

3,315,259 5,094,425 2,218,403 261,866 188,012 246,529 474,566 11,799,060 630,060

3,346,521 3,224,154 2,232,913 329,704 136,207 217,632 450,521 9,937,652 615,845

Ratings levels have been restated in order to comply with Resolution No. 2,682/99 of the CMN issued on December 21, 1999, as amended. As of December 31, 2011 (%) 5.3% 132.8% 75.6% 4.0% 2010 (%) 5.8% 161.7% 77.8% 3.6% 2009 (%) 6.2% 136.7% 80.3% 4.5%

Allowance for loan losses/total loan portfolio ..................................................... Allowance for loan losses/past due loans(1) ......................................................... Allowance for loan losses/loans classified between D and H(1) .......................... Past due loans (loans in arrears)/total loans(1) ...................................................... (1)

Allowance for loan losses is calculated according to the risk level of the credit following Resolution No. 2,682/99 of the CMN, as amended.

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We also assume the credit risk associated with certain FNE (and other government funds and programs) loans we manage (50% for all loans contracted after December 1, 1998, excluding certain financings under PRONAF, and 100% for debts that were originally granted by another source and later renegotiated with FNE's funds). As of December 31, 2011, we were exposed to 50% and 100% of the credit risk for 83.1% and 0.7%, respectively, of the total FNE portfolio. Accordingly, we make provisions for losses on FNE loans in accordance with Central Bank guidelines, in the same manner as we provision for losses on our own loan portfolio, and these provisions are included in our overall allowances for loan losses and recorded on our balance sheet under the item other payables provision for contingent liabilities. For a more complete discussion of our relationship with the FNE and other government funds and programs, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsPrincipal Factors Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs" and "BusinessDescription of Products and ServicesGovernment Fund and Program Management" and of the corresponding risk we assume see also "Risk FactorsRisks Relating to us and the Brazilian Banking IndustryWe could be subject to a greater degree of risk on certain FNE loans than on loans from our own portfolio." Past Due Loans Brazilian financial institutions are required to classify their lending transactions at different levels and record allowances according to the risk level attributed to each such transaction. The classification is based on the financial condition of the client, the terms and conditions of the relevant transaction and also the period of time for which the transaction has been in arrears according to the criteria set out in Resolution No. 2,682. Transactions are classified as follows: loans are classified according to the level of creditworthiness of the borrower, from "AA" (highest credit quality) to "H" (lowest credit quality). Each classification has a specified reserve requirement that is applicable to every financial institution in Brazil; if a loan is over 60 days past due with respect to principal or interest, it is classified as nonperforming; if a loan is over 15 days past due with respect to principal or interest, it is classified as past due, and is reclassified (from level "B" to level "H") based upon the number of days past; if a loan is 15 days past due or less with respect to principal or interest, it is held in the same level of creditworthiness; if a loan is over 360 days past due it is written-off and the amount of the write-off is transferred to a compensation account; and in respect of their long-term loans, financial institutions are allowed to enlarge the applicable past due time periods by 100%, thereby permitting us to classify a loan as past due after 30 days as opposed to 15 days.

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The following table shows the risk classifications introduced by the Central Bank with the corresponding provision percentages that are required for each risk classification:
Level of provision required by the Central Bank (% of outstanding balance) AA ........................................................................................................................................................ A ........................................................................................................................................................... B ........................................................................................................................................................... C ........................................................................................................................................................... D ........................................................................................................................................................... E ............................................................................................................................................................ F ............................................................................................................................................................ G ........................................................................................................................................................... H ........................................................................................................................................................... 0.5 1.0 3.0 10.0 30.0 50.0 70.0 100.0

Risk Classification

Past due period (Number of days) 30 31 to 60 61 to 90 91 to 120 121 to 150 151 to 180 181 to 360

On February 24, 2000, the CMN Resolution No. 2,697 amended Resolution No. 2,682/99 to provide that Brazilian financial institutions may classify credit transactions involving customers whose debts do not exceed R$50,000 in accordance with either the institution's own evaluation standards or according to the payment delay standards applicable to larger credits described above. In certain situations, we renegotiate to reschedule the payment of principal and interest on overdue loans in order to increase the likelihood of payment. The criteria for approval of rescheduled loans vary from case to case. Rescheduled loans are classified at the same risk level attributed to them before they are rescheduled, pursuant to Resolution No. 2,682. Default History Past due loans increased by 17.5% from R$403.9 million for the year ended December 31, 2010 to R$474.6 million for the year ended December 31, 2011 (compared to R$450.5 million for the year ended December 31, 2009). For a more complete discussion of past due loans, see "Management's Discussion and Analysis of Financial Conditions and Results of OperationsLoan Loss History." We believe our allowance for loan losses is adequate to cover the risk of losses on our loan portfolio. The following table provides information with respect to our total past due loans as of December 31, 2011, 2010 and 2009:
As of December 31, 2011 2010 (R$ thousands) Rural and agribusiness(1) ...................................................................................... Industrial ............................................................................................................... Commercial .......................................................................................................... Purchases of consumer loan portfolios(2) ............................................................. Individual and consumer ...................................................................................... Other loans(3) ........................................................................................................ Total .................................................................................................................... (1) (2) (3) 57,076 103,029 166,668 4,784 7,793 135,216 474,566 92,454 100,061 119,489 18 7,678 84,153 403,853 148,296 145,205 86,365 0 7,993 62,662 450,521 2009

Does not include microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio. Recorded as financial Intermediaries on our income statement. Includes other loan operations.

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The following table reflects the balances of past due loans for our 50 largest customers by industry, as of December 31, 2011:
As of December 31, 2011 (R$ thousands, except percentages) Industrial .................................................................................................................................................... Services ..................................................................................................................................................... Financial institutions ................................................................................................................................. Commercial ............................................................................................................................................... Rural .......................................................................................................................................................... Total ......................................................................................................................................................... 96,198 73,706 59,093 4,632 18,473 252,102 38.2% 29.2% 23.4% 1.8% 7.3% 100%

The table below shows our net losses on loans as a percentage of total loans as of and for the years ended December 31, 2011, 2010 and 2009:
As of and for the Year Ended December 31, 2011 2010 (R$ thousands, except percentages) Balance at the beginning of the period ................................................................ New Provisions ................................................................................................... Write-offs ............................................................................................................. Balance at the end of the period ........................................................................... Net change for the period(a) ............................................................................ Total loan portfolio(b) ......................................................................................... Net loss on loans(a)/(b) ...................................................................................... 652,918 215,557 (238,415) 630,060 (22,858) 11,799,060 (0.19)% 615,845 392,528 (355,455) 652,918 37,073 11,287,768 0.33% 345,790 372,182 (102,127) 615,845 270,055 9,937,652 2.72% 2009

The following table shows the breakdown of our past due loans as of and for the years ended December 31, 2011, 2010 and 2009:
As of and for the Year Ended December 31, 2011 2010 (R$ thousands) Balance at the beginning of the period ................................................................ Net changes in provisions .................................................................................... Write-offs ............................................................................................................. Balance at the end of the period ....................................................................... 403,853 309,128 (238,415) 474,566 450,521 308,787 (355,455) 403,853 261,471 291,177 (102,127) 450,521 2009

The following table shows a breakdown of the past due loan portfolio according to each rating category for the years ended December 31, 2011, 2010 and 2009:
As of December 31, Ratings Categories 2011 2010 (R$ thousands, except percentages) AA ............................................................................... A .................................................................................. B .................................................................................. C .................................................................................. D-H .............................................................................. Total ............................................................................ 34,180 41,691 398,695 474,566 0.0% 0.0% 7.2% 8.8% 84.0% 100% 38,743 23,563 341,547 403,853 0.0% 0.0% 9.6% 5.8% 84.6% 100% 20,996 16,746 412,779 450,521 0.0% 0.0% 4.7% 3.7% 91.6% 100% 2009

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Return on Equity and Assets

As of December 31, 2011 2010 (R$ thousands) Net Income ........................................................................................................... Total average assets.............................................................................................. Average shareholder's equity ............................................................................... Dividend and interest on shareholder's equity ..................................................... Return on assets(1) ................................................................................................. Return on equity(2) ................................................................................................ Dividend payout ratio(3) ........................................................................................ Equity to assets ratio(4) ......................................................................................... Capital Ratio(5) ...................................................................................................... (1) (2) (3) (4) (5) 314,799 25,069,411 2,320,304 169,226 1.23% 13.57% 54.00% 9.26% 16.58% 313,590 20,347,623 2,108,648 206,511 1.54% 14.87% 66.00% 10.36% 13.60% 459,012 16,784,668 1,930,283 240,446 2.73% 23.78% 52.00% 11.50% 12.99% 2009

Return on average assets is calculated as net income earned during the accounting period divided by our average assets. Return on average equity is calculated as net income earned during the accounting period divided by our average equity. Dividends declared per share divided by net income per share. Average equity divided by average total assets. Capital ratio required by Central Bank corresponding to a minimum capital adequacy ratio of 11% of total risk-adjusted assets. See " Return on Equity and AssetsCapital Adequacy and Minimum Capital Requirements."

Capital Adequacy and Minimum Capital Requirements Since June 2004, the Central Bank has required banks in Brazil to comply with its regulations with respect to capital adequacy, which currently are similar to the Basel Accord. The Central Bank requires a minimum capital adequacy ratio of 11% of total risk-adjusted assets. Capital adequacy requirements are now established by Resolution No. 3,444 issued by CMN on February 28, 2007, as amended, which replaced Resolution No. 2,837 of May 30, 2001, establishing the criteria for determining the items to be included in Regulatory Capital (Tier 1 and Tier 2). According to CMN and Central Bank regulations, long-term, subordinated debt without a pre-defined amortization schedule may be classified as Tier 2 capital, up to a maximum of 50% of Tier 1 capital upon Central Bank approval. The Central Bank approved our issuance of subordinated debt in the amounts of R$600.0 million in July 2009 and R$400.0 million in June 2010, respectively, to the FNE. We were able to classify that entire amount of subordinated debt as Tier 2 capital, resulting in an increase to our regulatory capital. On December 9, 2004, the Central Bank published Communication No. 12,746, establishing the schedule for the adoption of the Basel II Accord in Brazil. Following the communication, CMN and the Central Bank issued several resolutions and circulars that became effective as of July 1, 2008, including CMN Resolution No. 3,490/07 which fully replaced Resolution No. 2,099/94 (which establishes the methodology for calculating regulatory capital) and set forth new criteria to the calculation of the minimum capital requirement for financial institutions. This method of calculation includes a capital requirement for operational risks and a more detailed calculation of credit risk and market risk, such as the more ranges of risk weighted assets, changes on the weight for specific credit risks and new rules for complex financial instruments, including securitization and derivatives. According to Resolution 3,490/07, the Total Regulatory Capital Required is the sum of the following amounts: (i) credit exposure risk averaged by its weighting risk factor (11% as a rule); (ii) exposure risk in gold, foreign currency and exchange rate; (iii) risk of transactions subject to interest rate fluctuation; (iv) risk of transactions subject to commodities price fluctuation; (v) risk of transactions subject to variation of share price; and (vi) operational risk. On October 29, 2009, the Central Bank set forth a new schedule for the adoption of the Basel II Accord, by means of Communication No. 19,028, which adjusted the previous schedule. Under this new schedule the requirements relating to the use of certain capital calculation models included in the Basel II Accord will be fully implemented by the first half of 2013. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityRegulatory Capital and Shareholders' Equity Standards."

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On September 12, 2010, the Group of Governors and Heads of Supervision announced a substantial strengthening of existing capital requirements and fully endorsed previous agreements on the overall design of the capital and liquidity reform package, the Basel III Accord, which was presented during the Seoul G20 Leaders summit in November 2010. The reforms increased minimum common equity requirement from 2% to 4.5%. In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand periods of stress, bringing the total common equity requirements to 7%. Central Bank Communication No. 20,615 issued in February 2011 established the preliminary guidelines for implementation of these reforms in Brazil. The new rules are expected to be implemented gradually by the central banks of various countries between 2013 and 2019. On February 17, 2012, the Central Bank published for public comments proposed rules changing the definition of regulatory capital currently set forth by CMN Resolution No. 3,444 issued on February 28, 2007. Among other topics, the Central Bank indicated it intends to consider, in the composition of the reference shareholders' equity of financial institutions, their controlled entities similar to financial institutions (e.g., credit card administrators) and investment funds from which financial institutions take substantial risks and benefits. We cannot ascertain if, when and to what extent such new rules may become effective. We are still evaluating the potential effects of the Basel III Accord in our activities. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityRegulatory Capital and Shareholders' Equity Standards." The following table sets forth information regarding our capital adequacy as of December 31, 2011:
Regulatory Capital Required As of December 31, 2011 (R$ thousands) Tier 1 Capital .......................................................................................................................... Tier 2 Capital .......................................................................................................................... Deductions (shares of financial institutions) ......................................................................... Excess of Fixed Assets Limits ............................................................................................... A. Total Regulatory Capital ................................................................................................ Capital Requirements for Credit Risk ............................................................................... Capital Requirements for Market Risk a. Commodity Risk Variation in commodity prices .................................................. b. Interest Rate Risk Trading Book ........................................................................... Capital Requirements for Operational Risk ...................................................................... B. Total Regulatory Capital required ................................................................................ C. Risk Weighted Assets (B) / 0.11 .................................................................................. D. Capital Requirements for Market Risk: Interest Rate Risk Banking Book...................................... E. (A) (B) (D) = Margin / (Insufficiency) ..................................................................... F. BNB's Regulatory Capital Tier 1 Capital: Shareholder's equity .......................................................................................................... Revaluation reserve ........................................................................................................... Tax credits excluded from Tier 1 ...................................................................................... Deferred Assets = Total Tier 1 capital ..................................................................................................... Tier 2 Capital: Hybrid instrument .............................................................................................................. Subordinated debt (50% of Tier 1 Capital) ....................................................................... Revaluation reserve ........................................................................................................... Excess amount of Tier 2 above Tier 1 Capital .................................................................. = Total Tier 2 capital ..................................................................................................... Total Regulatory Capital (F)...................................................................................... Adjustments: Shares of financial institutions .......................................................................................... Excess of Fixed Assets ...................................................................................................... = Total Regulatory Capital as adjusted ............................................................................ 2,302,307 2,302,307 4,604,614 2,619,648 345 642 433,450 3,054,085 27,764,409 48,603 1,501,926 (%) 8.3 8.3

16.6 9.4 0.0 0.0 1.6 11.0 100.0 0.2 5.4

2,329,499 (25,198) (291) (1,703) 2,302,307 1,137,872 1,151,154 25,198 (11,917) 2,302,307 4,604,614 4,604,614

50%

50% 100% 100%

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As of December 31, 2011 Central Bank: BNB's regulatory capital as adjusted (A) ........................................................ Minimum Regulatory Capital Required (B).................................................... Excess over minimum Regulatory Capital Required............................ BNB's Risk-Weighted Capital Ratio (A / C) ................................................... 2010 (R$ thousands, except percentages) 4,604,614 3,054,085 1,550,529 16.58% 3,248,273 2,627,409 620,864 13.60% 2,692,406 2,280,220 412,186 12.99% 2009

In order to strengthen our capital base, we raised an additional R$1.0 billion through a loan agreement granted by the Brazilian government, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444, which increased our capital ratio by 4.21%. This agreement was approved pursuant to Law No. 12,249 of June 11, 2010, as amended by Provisional Measure No. 513, of November 26, 2011. The Central Bank of Brazil approved the qualification of this agreement as Tier II Capital on February 21, 2011 (Official Letter DEORF/Cofil - 2011/00979). See also "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesSources and Uses of FundsSources of Funds" for more information regarding the sources of funding that contribute to our regulatory capital.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains an analysis of our financial condition and results of operations as of and for the years ended December 31, 2011, 2010 and 2009. The following discussion should be read in conjunction with our audited Financial Statements and the reports and the notes thereto included elsewhere herein as well as the information included in "Presentation of Financial and Certain Other Information." Our audited Financial Statements have been prepared in accordance with Brazilian GAAP. Overview Banco do Nordeste do Brasil S.A. is a multi-service special purpose development bank with operations primarily focused on the Northeast region of Brazil. We provide a comprehensive portfolio of products and services to individuals, companies and the federal, state and municipal governments in Brazil. We are controlled by the Brazilian Government and we act as an agent for implementation of the Brazilian Government's development policies and programs for the Northeast region. As part of the Brazilian Government's plans to facilitate development in this region, we provide competitive financing to small and micro agricultural businesses and infrastructure projects at lower costs than those available from private sector banks and lenders due to our significant funding from the Brazilian Government. Our operations are focused on financing the productive sectors in the Northeast region (including the rural, industrial and commercial sectors), mainly through long- and short-term loans and capital markets transactions. As of December 31, 2011 and 2010, we had total assets of R$26.4 billion and R$23.8 billion and shareholders' equity of R$2.3 billion and R$2.2 billion, respectively. For the years ended December 31, 2011 and 2010, our net income was R$314.8 million and R$313.6 million, respectively. In addition to our own lending operations, we manage certain of the Brazilian Government's funds and programs, including the FNE (Constitutional Fund for the Financing of the Northeast) and the FINOR (Northeast Investment Fund) and we also act as lending agent for PRONAF (National Program to Strengthen Family Agent Cultures) and as loan analyst and administrator for the FDNE (Northeast Development Fund). All of these funds and programs are designed to foster economic and social development in Brazil and particularly the Northeast region for various sectors, activities and clients, ranging from small family farms to large infrastructure projects. We are the exclusive manager of the FNE, the most significant Brazilian Government fund involved in our operations, whose net worth (which is equivalent to its assets) totaled R$37.7 billion as of December 31, 2011. In exchange for being a disbursing agent responsible for approving and allocating the FNE's funds to low-cost loans for economic and social development in the Northeast region, we earn (i) annual management fees of 3.0% of FNE's total net worth (which were R$993.5 million for the year ended December 31, 2011 and R$816.8 million for the year ended December 31, 2010), limited to a maximum of 20% of proceeds annually transferred to FNE by the Brazilian Government based on collection of income and IPI taxes; and (ii) a "del credere" fee for bearing the credit risk associated with certain of these transactions. Although the assets of the FNE (including loans we make using its funds) are not part of the credit underlying the Notes and the FNE is not a guarantor of the Notes, these fees payable to us constitute stable and significant sources of income for us, as our exclusive management relationship with the FNE cannot be changed except by legislative action by the Brazilian Congress. The fees we earned for our roles as manager for FINOR, lending agent for PRONAF and loan analyst and administrator for FDNE totaled R$112.6 million for the year ended December 31, 2011 and R$106.3 million for the year ended December 31, 2010 and, consequently, are much less significant to our operations than that derived from our relationship with FNE. We believe that our management of FNE and other Brazilian Government funds and programs provides us with unique opportunities to gain know-how and cross-sell our products to a large base of potential corporate and individual clients in the Northeast region. We are one of the largest and most active banks in the Northeast region of Brazil in terms of market share, according to Central Bank information as of December 31, 2011, with a R$11.8 billion loan portfolio as of that date. According to the Central Bank, we are the primary domestic source of long-term financing in the Northeast region, with a loan portfolio representing a market share of approximately 19.2% of the total long-term financing portfolio in the entire Northeast region as of December 31, 2011 or 67.4% when considering our and the loan portfolio of the FNE together. Moreover, the entire Northeast region's GDP CAGR between December 31, 2005 and December 31, 2010 was 4.0%, 9.6% higher than the CAGR of Brazil (including the Northeast). We also expect that the increasing number of large corporate projects in the region will continue to require even more long-term financing, which we believe will provide us with the opportunity to further expand our leading position in the Northeast region.

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Products and Services Our principal products and services consist of the following: Loan operations, consisting of loans to micro, small, medium and large customers principally in the Northeast region of Brazil (we also have certain loans outstanding with customers in states outside of the Northeast region which do not, individually or in the aggregate, significantly contribute to our business), including: Industrial loans for purchases of machinery, equipment and raw materials and for plant modernizations, among others; Rural and agribusiness loans; Infrastructure loans to the federal, state and municipal governments; Commercial loans to businesses in the retail, wholesale and service sectors; Individual and consumer loans; Loan portfolios acquired from other financial institutions (particularly during the recent global financial crisis when certain institutions were facing liquidity constraints); and Other loan operations, including working capital products, foreign trade loans, urban microcredit loans for the services segment, guarantee accounts, bank credit notes (CCB Cdulas de Crdito Bancrio), home mortgage loans and loans to non-Bank employees under Group CDCs, among others.

Management, lending agency and administration of, and loan analysis for, government funds and programs, most significantly the FNE, designed to provide low-cost loans to stimulate the economic and social development of the Northeast region. Depending on the fund or program, we are responsible for processing, disbursing, monitoring and collecting on loans made using Brazilian Government funds or through government programs, in exchange for management fees and, depending on the fund or program, additional del credere fees, which are based on the amount of our credit risk associated with certain loans. Banking services and capital markets activities, consisting of checking and savings accounts, time deposits, foreign exchange, wire transfers, collection services, online banking and, through third parties, the sale of private pension plans and savings bonds, in addition to structuring and distributing local debenture issuances and other short- and long-term bonds in the Brazilian capital markets. Asset management, consisting of management of third-party assets for small, medium and large investors (including governmental entities). We invest these assets in our private investment funds, usually consisting of debt or equity securities issued by publicly held Brazilian companies or Brazilian Government debt securities.

Brazilian Economic Conditions Our financial condition and results of operations are directly affected by general economic conditions prevailing in the Northeast region of Brazil and are especially affected by GDP growth rates in the Northeast region, overall inflation, interest rates, exchange rate variations and Brazilian Government tax policies. Economic conditions directly impact our customers' ability to pay their financial obligations on a timely basis, which affects our allowances for loan losses, our balance of outstanding loans and financial performance. Additionally, the demand for banking products and services is generally affected by the overall development of the Brazilian economy.

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2009 During 2009 the real appreciated against the U.S. dollar and as of December 31, 2009 the real/U.S. dollar exchange rate was R$1.74 per U.S.$1.00. Inflation, as measured by the IPCA and the IGP-M, was 4.3% and (1.7)%, respectively, in 2009. In 2009 the Central Bank began reducing the SELIC rate again and, as of December 31, 2009, the SELIC rate was 8.65%. As a result of the global financial crisis, the Brazilian GDP decreased 0.6% in 2009 (decreased 0.7% in the Northeast). 2010 During 2010, due to inflationary pressure, the Central Bank began gradually increasing the target SELIC rate, which reached 10.75% in July 2010, where it stood as of December 31, 2010. Inflation, as measured by the IPCA and the IGP-M, was 5.9% and 11.3%, respectively, in 2010. The real continued to appreciate against the U.S. dollar and, as of December 31, 2010, the real/U.S. dollar exchange rate was R$1.67 per U.S.$1.00. 2011 The Central Bank further increased the target SELIC rate to 11.25% in January 2011; 11.75% on March 2, 2011; 12% on April 20, 2011; 12.25% on June 8, 2011; and 12.50% in July 2011. However, the Brazilian Government reversed its trend of periodic increases of interest rates on August 31, 2011, when the Central Bank decreased the target SELIC rate to 12.00%. The Central Bank continued to decrease the target SELIC rate on October 19, 2011 to 11.50% and on November 30, 2011 to 11.00%, due to uncertainty with respect to the overall global economic outlook. The real continued to appreciate against the U.S. dollar in the first half of 2011 and, as of June 30, 2011, the real/U.S. dollar exchange rate was R$1.56 per U.S.$1.00. This trend changed in the second half of 2011, when the real started to depreciate against the U.S. dollar and, as of December 31, 2011, the real/U.S. dollar exchange rate was R$1.87 per U.S.$1.00. 2012 The Central Bank further decreased the target SELIC rate to 10.50% on January 18, 2012 and to 9.75% on March 7, 2012. The real appreciated in the first quarter of 2012 as compared to the fourth quarter of 2011, with the real/U.S. dollar exchange rate reaching R$1.83 per U.S.$1.00 as of March 31, 2012. The following table sets out certain macroeconomic data for the periods indicated.
Year Ended December 31, 2011 Real GDP growth in % .................................................................................................. GDP growth in Northeast region(1) ............................................................................... Inflation (IGP-M) in %.................................................................................................. Inflation (IPCA) in % .................................................................................................... CDI(2) in % ..................................................................................................................... Real (appreciation)/depreciation vs. U.S. dollar over the period in %(3) ...................... Exchange rate at end of period U.S.$1.00 ................................................................. Average exchange rate U.S.$1.00(4) ........................................................................... 2.7 5.5 5.1 6.5 11.6 (12.6) R$1.87 R$1.87 2010 7.5 5.5 11.3 5.9 10.6 (2.9) R$1.66 R$1.66 2009 (0.2) (0.1) (1.7) 4.3 8.6 (25.5) R$1.74 R$1.74

Sources: FGV, IBGE and the Central Bank. (1) Considering regional figures are available after two years of the end of the terms, these are forecasts for the years ended December 31, 2009, 2010 and 2011. (2) The CDI rate is the average of the prevailing interbank deposit rates in Brazil (as of the last month on day of the period, as applicable, and restated for IPCA inflation). (3) Calculated using the exchange rate at the beginning and end of the applicable period. (4) Average rate is the average of closing PTAX rates over the period.

The Northeast Region The term "Northeast region" for purposes of this item only refers to the Brazilian geographic region comprised of the following nine states: Bahia, Sergipe, Alagoas, Pernambuco, Paraba, Rio Grande do Norte, Cear, Piau and Maranho.

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The Northeast region of Brazil occupies a total area of approximately 1.6 million square kilometers and has a population of over 53 million, or 28% of Brazil's total population, according to the 2010 census conducted by IBGE and Central Bank data. Approximately 56% of the region's total area (and 43% of its population) is subject to harsh climate conditions (semi-arid) which has historically hindered the economic development of the region because of the frequent droughts that have lasted for long periods. Because of the high temperatures and irregular rain periods registered in the region, the soil is poor in quality and water is scarce. As a result, GDP per capita of the Northeast region was R$9,270 (for the year ended December 31, 2010), considerably lower than the national GPD per capita of R$19,265 for the same period. The Northeast region's GDP CAGR between December 31, 2005 and December 31, 2010 was 4.0%, 9.6% higher than the CAGR of Brazil for the same period (including the Northeast region). Banking activities in the semi-arid region are mainly focused in microcredit to local farmers and entrepreneurs, in addition to large agricultural and industrial projects. For the period between January 1, 2006 and December 31, 2010, the average growth of credit transactions in the Northeast region was of 30.6%, in comparison to a national average growth of 23.1% (including the Northeast region). Environmental conditions directly affect agricultural and farming activities in the region. The techniques used in agricultural and farming activities are generally less advanced and a significant percentage of land is concentrated in few owners, despite the existence of a large amount of small properties and family farmers. Within this context, we believe the development of regional economy is an efficient strategy to deal with these challenges. In addition, the Brazilian Government established several programs and funds focused on fostering the development of the region and improving the quality-of-life of the population in a sustainable fashion, such as the FNE, FINOR and FDNE. Additionally, the Brazilian Government has historically offered tax and other benefits (such as investments in infra-structure) to attract large industrial plants to the region. Industrial activity in the Northeast region is mainly concentrated around the largest metropolitan areas. Large industrial facilities in the petrochemical, auto manufacturing, and construction sectors, among others, are located within the region and include Ford (automobiles), Braskem (petrochemicals), Odebrecht group (construction and petrochemicals) and M. Dias Branco (food industry). Other sectors represented in the Northeast region industrial activity are steel making, electronics, shipyards, mining, software, shoe-making and textiles. Tourist activity is another key driver of the Northeast region economy. The increase of ecotourism, together with the flow of tourists to the beaches of the region, contribute to the development of the needed infrastructure to meet this demand and helps develop local businesses, such as restaurants, local tourism agencies and craftsmanship. Principal Factors Generally Affecting Financial Condition and Results of Operations Our financial performance and results of operations are generally principally affected by the factors described below. Our Relationship with FNE and Other Government Funds and Programs Although the assets of the FNE are not part of the credit underlying the Notes and the FNE is not a guarantor of the Notes, our relationship with the FNE affects our results of operations in various ways. All of the assets of FNE are available to be loaned to borrowers in the Northeast region, since FNE is not subject to capital requirements. As the exclusive manager of FNE's funds, subject to the FNE's rules and policies, we decide how and to whom to allocate these funds, in the same manner as we make credit decisions on our own loan portfolio. For FNE management, we earn an annual 3.0% management fee based on FNE's total net worth, limited to a maximum of 20% of proceeds annually transferred to FNE by the Brazilian Government based on collection of income and IPI taxes. While we earn fees from our relationship with FNE, we also incur a contingent liability with respect to the FNE funds portfolio. For most of the loans made with FNE, we are obligated to pay FNE 50% of any loss in principal amounts of any individual loan, regardless of the performance of the overall portfolio. There are some FNE loans (made under PRONAF), mainly loans to family farmers, where we do not assume any risk of loss, and for some others, we take on 100% of the risk of loss. See "BusinessDescription of Products and Services

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Government Fund and Program ManagementFNE and Other Government Fund and Program Management." For each loan on which we assume 50% (for most loans made during December 1, 1998) and 100% (for renegotiated loans that were originally granted with funds mainly by FAT and BNDES) of the credit risk associated with each loan, we earn an additional fee of 0.25% and 0.5% per month of the principal amount of the loan, as del credere, respectively. Del credere fees are recorded as other operating income. We make provisions for these loans in accordance with Central Bank guidelines, in the same manner as we provision for losses on our own loan portfolio, which are recorded as other payables provision for contingent liabilities, following the same criteria as for our loans, and contingent losses once incurred are recorded as other operating expenses on our income statement. As we do not record FNE assets on our balance sheet, we do not include allowances for losses on FNE loans for which we do not assume the credit risk. For further discussion of how we provision for these loans, see "Critical Accounting PoliciesAllowances for Contingencies." For a discussion of the risks relating to our contingent liability with respect to the FNE portfolio, see "Risk FactorsRisks Relating us and the Brazilian Banking SystemWe could be subject to a greater degree of risk on certain FNE loans than on loans from our own portfolio." In addition, while FNE's balance sheet is separate from ours, when we receive proceeds from the FNE to loan to borrowers, pending our disbursement of such funds to borrowers, we typically invest those amounts in money market instruments or Brazilian Government securities and record them as interbank deposits or as securities and derivatives. These investments usually earn interest at the SELIC rate, which income we record as securities transactions on our income statement. We pay interest on these funds to the FNE at the rate of 95.5% of SELIC, which we record as borrowings and onlendings. For the year ended December 31, 2011, the average length of time we held cash from the FNE before we lent it to borrowers was 407 days, consisting of an average 142 days required to contract the loans and 265 days for us to disburse the corresponding proceeds. Our roles as a lending agent for PRONAF, manager for FINOR and loan analyst and administrator for FDNE affect our results of operations in several ways that are similar to our role as FNE's manager. As with loans made on behalf of FNE, we do not record loans under FINOR or FDNE on our balance sheet, although we do for loans made under PRONAF. Also similar to the FNE, we receive a management fee from each of PRONAF, FINOR and FDNE that we record as income from services rendered on our income statement. We receive a del credere fee that we record as other operating income for PRONAF and FDNE loans for which we assume credit risk above specified levels (we do not assume credit risk on FINOR loans and therefore do not receive del credere fees from it). We make provisions for these loans, which we record as other payables provision for contingent liabilities, in the same manner as for the FNE and our loans from our own portfolio and contingent losses once incurred are recorded as other operating expenses on our income statement. For further discussion of how we provision for these loans, see "Critical Accounting PoliciesAllowances for Contingencies." For a further discussion of our relationship with the FNE and other government funds and programs and the corresponding fees we are paid, see "BusinessDescription of Products and ServicesGovernment Fund and Program Management." The Global Financial Crisis Over the past three years, and in particular since mid-2008, the global banking industry has been severely impacted by the global financial crisis, which has contributed to significant write-offs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. The crisis has led to recessions and increasing unemployment in the world's leading economies, a reduction in investments on a global scale, a decrease in commodity prices and a sharp decline in credit availability and liquidity, as well as a general reduction in the levels of transactions observed in the capital markets. A number of major financial institutions, including some of the largest global commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies, experienced significant financial difficulties. Many financial institutions incurred losses and numerous institutions sought additional capital. Central banks around the world coordinated efforts to increase liquidity in the financial markets by taking measures such as increasing the amounts they lend directly to financial institutions, lowering interest rates and significantly increasing temporary reciprocal currency arrangements. In an attempt to prevent the failure of the financial system, many governments intervened in financial systems on an unprecedented scale. Such governments took equity stakes

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in several financial institutions, announced programs to guarantee financial institutions debt, increased consumer deposit guarantees and brokered acquisitions of struggling financial institutions, among other measures. The effects of the global financial crisis in Brazil have been relatively mild compared to the effects in the United States and Europe. While liquidity in the Brazilian banking industry was affected by the global financial crisis, the Central Bank ensured the availability of sufficient liquidity in the Brazilian market during this period through various measures that it implemented, primarily in the fourth quarter of 2008, when the general quality of banking assets deteriorated. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityCompulsory Deposits and Other Requirements." A number of smaller and mid-sized banks suffered from a shortage in available credit and increased loan rates, and the Brazilian market experienced a movement of funds towards larger financial institutions recognized as having greater stability, such as ourselves, and also towards safer forms of investments. The relatively strong domestic demand for financial products and services has helped to reduce the impact of the international crisis on the Brazilian economy, and has also helped to reduce the impact of the crisis on the industrial sector (11.0%, 9.0% and 11.3% of Brazilian GDP was exported for the years ended December 31, 2011, 2010 and 2009, respectively). The effects of the global financial crisis in Brazil had a number of effects on our financial condition and results of operations. The main effects were a migration of deposits from smaller, private sector banks to government-owned banks, which increased our funding base and allowed us to increase our loan portfolio in 2009, 2010 and 2011. Additionally, during this period our consumer loan portfolio increased due to the purchases of consumer loan portfolios by us from smaller banks with recourse remaining with those banks for, and no risk sharing with respect to, any loans in those portfolios. Consequently, our loan portfolio experienced significant growth from R$9.9 billion as of December 31, 2009 to R$11.3 billion as of December 31, 2010 and R$11.8 billion as of December 31, 2011. As a result of the financial crisis, however, our loans migrated from performing to past due and in default, resulting in increased provisions on our loan portfolio and the FNE loan portfolios. This trend continued until the end of 2010, and started to change in the first half of 2011. For more information regarding our classifications of loans by year or period, see "Other Financial and Statistical InformationLending Operations." In light of the global financial crisis, many smaller, privately-owned banks adopted a more conservative strategy, with the implementation of stricter credit approval rules. As a result, their loan portfolios and client bases declined. By comparison, we, like other government-owned banks, experienced increased volumes of deposits and, as a result, were able to increase our commercial operations. The present continuation of the economic crisis in Europe, particularly in Greece, Spain, Italy and Portugal, has continued to reduce investor confidence globally, as has the earthquake in Japan last year and the downgrade of the U.S., long-term sovereign credit rating by Standard & Poor's on August 6, 2011. These ongoing events could negatively affect the ability of the Bank and other Brazilian financial institutions to obtain financing in the global capital markets, as well as weaken the recovery and growth of the Brazilian and/or foreign economies and cause volatility in the Brazilian capital markets. Depreciation and Appreciation of the Real on Lending Activities In the event that the real depreciates, we will have a greater financial expense on our liabilities denominated in or indexed to foreign currencies, such as our U.S. dollar-denominated debt and foreign currency loans, as a result of the exchange loss of such liabilities when measured in reais. In contrast, if the real appreciates, our interest expense will decrease on our liabilities denominated in or indexed to foreign currencies, such as our U.S. dollar-denominated debt and foreign currency loans, as a result of the exchange gain of such liabilities when measured in reais. As of December 31, 2011, our average foreign-currency liabilities totaled R$1,894.1 million (R$1,298.4 million and R$1,190.4 million as of December 31, 2010 and 2009, respectively). Our average foreign currency assets amounted to R$1,460.0 million as of December 31, 2011 (R$1,254.3 million and R$1,171.8 million as of December 31, 2010 and 2009, respectively). The bulk of our monetary assets denominated in or indexed to foreign currencies, such as U.S. dollar-denominated loans, are hedged by us through the use of derivative financial instruments, principally swaps. As a result, we experience marginal gains or losses caused by an appreciation or depreciation of the real, as interest income from such assets increases or decreases (as measured in reais), as the case may be. According to our internal policies, our total exposure in foreign currencies cannot exceed 5% of our regulatory capital.

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Income Tax Our tax expense is made up of a federal income tax and a social contribution, each levied on tax adjusted net income, and together should reach the maximum nominal rate of 40.0%. The federal income tax and social contribution are computed as follows: (i) federal income tax is levied at a rate of 25.0% on our adjusted net income for the period and (ii) social contribution is currently levied on our adjusted net income at a rate of 15.0% (9.0% through May 2009). Brazilian corporations are permitted to make payments to shareholders, which may be characterized as interest on shareholders' equity. This is an alternative form of making dividend payments and allows us to make a deduction against taxable income for such payments. We aim to maximize the amount of dividends paid in the form of interest on shareholders' equity in order to take advantage of this tax benefit. Interest Rates on our Net Interest Income In general, increases in prevailing interest rates result in more revenue from loans. An increase of prevailing interest rates may, however, adversely affect us as a result of reduced overall demand for loans and greater risk of default by our clients. In addition, relatively high interest rates affect our funding costs, particularly time deposits and interbank deposits, and can adversely affect spreads on our loan portfolio if we are unable to pass on the increased funding costs to our clients. On the other hand, a decrease in interest rates can reduce our revenue from our loan portfolio. This revenue decrease could be offset by an increase in the volume of loans resulting from higher demand and/or a decrease in our funding costs. In addition, changes in prevailing interest rates can affect the value of our securities portfolio and therefore our results of operations, as interest income from money market funds and Brazilian Government securities provide a significant contribution to our income from financial intermediation. The following table sets out the period-end TJLP and SELIC rates for the years ended December 31, 2011, 2010 and 2009, as reported by the Central Bank. The rates reflect the average of the month end rates during the relevant period.
Period ended December 31, 2011 .................................................................................................................................. December 31, 2010 .................................................................................................................................. December 31, 2009 .................................................................................................................................. TJLP (per month) 6.00% 6.00% 6.00% SELIC (per year) 10.91% 10.66% 8.65%

Foreign Exchange Variation Our foreign borrowings and onlendings obligations are interest-bearing liabilities denominated in foreigncurrency, and our loan operations in foreign currency are interest-earning assets also denominated in foreigncurrency. Accordingly, these assets and liabilities are subject to the effects of exchange rate variations. For the year ended December 31, 2011, we recorded expenses from foreign exchange variation in the amount of R$82.4 million in our loan operations denominated in foreign currency. This amount was classified on our income statement under other operating expenses, and resulted in decreases in loan operations-foreign currency on our balance sheet. For the years ended December 31, 2009 and 2010, we recorded expenses from foreign exchange variation in the amounts of R$379 million and R$107.7 million, respectively, in our loan operations denominated in foreign currency. For the year ended December 31, 2011, we recorded income from foreign exchange variation in the amount of R$105.6 million in our foreign borrowings and onlendings, denominated in foreign currency. This amount was classified on our income statement under other operating income. For the years ended December 31, 2009 and 2010, we recorded income from foreign exchange variation in the amounts of R$363.4 million and R$99.6 million, respectively, in our foreign borrowings and onlendings, denominated in foreign currency.

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Critical Accounting Policies General The accounting policies adopted by us are critical to understanding our results of operations and Financial Statements included elsewhere in this Offering Memorandum. These accounting policies are described in detail in the notes to our audited Financial Statements. Certain of our accounting policies require significant estimates and judgment by management on matters that are inherently uncertain, including the valuation of certain assets and liabilities and the adoption of estimates and assumptions based on past experience and other factors considered reasonable and significant by our management. We have established policies and control procedures intended to ensure that stringent valuation methods are applied in accordance with applicable accounting practices during the preparation of our Financial Statements for the relevant period. These policies and procedures help to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of our current accounting policies which require significant estimates and judgment by management. See note No. 2 to the Financial Statements attached hereto for a description of the main changes to our accounting policy since December 31, 2007. Revenue and Expenses Recognition Revenues and expenses are recorded on an accrual basis. Income, expenses and monetary or exchange rate on assets and liabilities are appropriated on a pro rata, daily basis. Provisions, including related to employee benefit payments, such as accrued vacations and 13th salary, are recorded monthly, according to the period incurred. Any effects of adjustments of assets to fair market or available for sale values are considered, as applicable. Allowances for Contingencies We are a party to certain judicial and administrative proceedings that arise during the normal course of our business, including civil class actions and collective claims. In proceedings in which we are a defendant, the plaintiffs are mainly clients or current or former employees. In the administrative proceedings, the main plaintiffs include, among others, the INSS, the Federal Revenue Service and state and municipal Treasuries. Most of the lawsuits in which we are the plaintiff are suits to recover matured loans. Controls have been established to identify the effects of these lawsuits which arise out of the normal course of business of a development bank. Provisions are recognized for legal proceedings with probable risk of loss, based on an analysis by our internal legal department, of the likelihood of a favorable outcome and the possibility of estimating the amount under dispute. Our provisioning method, with respect to both our own portfolio and the portfolios of the FNE and other government funds and programs whose loans we assume risk for, follows the standards issued by CMN Resolution No. 3,823, dated as of December 16, 2009, and Central Bank Circular Letter No. 3,429, dated as of February 11, 2010, which accepted and approved CPC Pronouncement No. 25 regarding provisions, liabilities, contingent liabilities and contingent assets. According to this rule, contingencies with chance of loss by us higher than our chance of success should be provisioned. The probability analysis takes into account the alleged facts, legal precedents relevant to the claim and the experience of experts on the legal matters under dispute. Based on the opinion of our internal legal counsel, we recognize provisions only for contingencies with probable chance of loss under CPC Pronouncement No. 25. As of December 31, 2011, we had provisioned R$82.3 million for probable losses associated with taxes, R$30.3 million for probable losses associated with tax lawsuits, R$182.8 million for probable losses associated with labor lawsuits, R$106.7 million for probable losses associated with civil lawsuits and R$140,000 for probable losses associated with other lawsuits. For a further discussion of our litigation matters, see "BusinessLegal Proceedings" and note 22.(d) to our 2011 Financial Statements included elsewhere in this Offering Memorandum.

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Classification of Securities The securities in our portfolio are recorded at acquisition value, including brokerage fees and charges, being classified and evaluated as follows: Trading securities: those acquired for the purpose of being actively and frequently traded, adjusted for securities market value; Held to maturity: those that we intend to maintain in the portfolio until maturity, recorded at acquisition cost plus earned income; Available-for-sale: those that do not fall as trading nor held to maturity, are valued at market value and are adjusted to market value as a counter-entry to a specific account as part of shareholders' equity, net of tax effects;

Securities classified in the trading securities and available-for-sale categories, as well as derivative financial instruments, are recorded at their estimated fair value on our balance sheet. Fair value generally is based on market prices quotations for assets or liabilities with similar characteristics. In the event that market prices are not available, fair values are based on market operators' quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant estimates by our management. Classification of held to maturity is defined according to maturity of each security, not being an estimate of its liquidity in the secondary market. The rates used for market value calculation of swap transactions are published by ANBIMA. In determining the credit risk, correlation coefficients and the risk factors disclosed by the Central Bank are used. Deferred Tax Assets Our deferred tax assets account for income taxes paid when we make provisions on our loans that we cannot at the time deduct from our taxable income. This account records a deferred tax asset whenever we pay income tax and social contribution on amounts we have provisioned as allowances for loan losses, which we are required to expense at the time the provision is made but may not deduct from our taxable income until the provision is actually written-off. Once the provision is written-off, we then deduct this amount from our taxable income and reduce our deferred tax asset account accordingly. Temporary differences, therefore, address the timing mismatch between the moment we expense a provision made and the moment we may deduct such expense from our taxable income. Income tax and social contributions on temporary differences of allowances for loan losses are recorded in accordance with CMN Resolution No.3,059, of December 20, 2002 (as amended), and Central Bank Circular No. 3,171, of December 30, 2002 (as amended), and are based on technical studies performed semi-annually. In accordance with Central Bank Circular Letter No. 3,023, of June 11, 2002, we recognized tax credits on adjustments to fair value of securities classified into the category "available-for-sale." We need to evaluate, at each balance sheet date, our ability to apply our deferred tax assets to future profits. In the event that we determine we would not be able to apply any of our tax credits prior to their expiration, we would have to write them off. See also "Management's Discussion and Analysis of Financial Condition and Results of OperationsDeferred Tax Credits." Principal Components of our Statement of Income Our income from financial intermediation, which consists of our operating revenues less our operating expenses, is comprised of: lending operations which consists of income from our loan portfolio; securities transactions which consists of income from investments in Brazilian Government securities. This line item principally consists of interest income earned on FNE funds we invested in liquid securities prior to lending those funds to borrowers;

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derivatives, which consist of income or losses from our hedging operations, which mostly consist of foreign exchange hedges (reais and U.S. dollars) (we do not engage in speculative derivatives trading on a proprietary basis); foreign trade transactions which consists of income from import and export credits (mostly consisting of export credits); and compulsory investments which consists of income from amounts we are required to deposit with the Central Bank and depends on the ratio of our savings deposits to our total assets.

Our expenses from financial intermediation are comprised of expenses from: funding operations which consists of interest paid to depositors; borrowings and onlendings which consists of interest paid to BNDES, FAT and other government institutions that fund us through onlendings; and allowances for loan losses which consists of expenses related to our provisions.

Our other operating income (expenses) is comprised of: income from services provided which consists primarily of the annual 3.0% management fee we receive for managing the FNE portfolio; income from banking fees; personnel expenses which consists of expenses relating to employee salaries and benefits; other administrative expenses which consists of expenses related to our day to day operations, including our expenses related to information technology, equipment and real estate; tax expenses which include municipal real estate tax (Imposto Predial e Territorial Urbano or "IPTU"), rural land tax (Imposto Territorial Rural or "ITR"), ISSQN, COFINS and PASEP; other operating income, which consists primarily of del credere fees corresponding the 0.25% and 0.50% monthly (del credere) fees we receive for assuming 50% and 100% of the credit risk of FNE loans, respectively; and other operating expenses which consists primarily of allowances for loan losses in connection with the FNE loans for which we are exposed to credit risk.

Our income and social contribution taxes consist of income and social contribution taxes partially offset by deferred taxes.

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Results of Operations Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010 Income from Financial Intermediation The following table sets out the principal components of our income from financial intermediation for the years ended December 31, 2011 and 2010:
Year Ended December 31, 2011 % of total 2010 % of total Variation (%)

(R$ thousands, except for percentages) Lending operations ...................................................... Securities transactions ................................................. Derivatives................................................................... Foreign exchange transactions .................................... Compulsory investments ............................................. Total income from financial intermediation .......... 1,772,643 1,365,528 25,660 163,871 20,162 3,347,864 52.9% 40.8% 0.8% 4.9% 0.6% 100.0% 1,489,809 888,770 (36,140) 73,161 15,667 2,431,267 61.3% 36.6% (1.5%) 3.0% 0.6% 100.0% 19.0% 53.6% (171.0%) 124.0% 28.7% 37.7%

Our total income from financial intermediation increased by 37.7% from R$2,431.3 million for the year ended December 31, 2010 to R$3,347.9 million for the year ended December 31, 2011, primarily due to the factors described below. Income from lending operations increased by 19.0% from R$1,489.8 million for the year ended December 31, 2010 to R$1,772.6 million for the year ended December 31, 2011. This increase mainly reflects an increase in our overall lending activity. The average balance of our loan portfolio increased from an average of R$9,661.1 million for the year ended December 31, 2010 to an average of R$10,910.8 million for the year ended December 31, 2011. The increase in our average loan portfolio was mainly due to an increase in industrial and commercial loans. The average interest rate on our loan portfolio also increased from 10.9% for the year ended December 31, 2010 to 14.8% for the year ended December 31, 2011, due primarily to an increase in the average interest rate of our loan transactions in reais. Notwithstanding the setbacks in economic recovery in the developed countries, the Northeast region of Brazil continued to grow, contributing to the growth of credit demand and resulting in a 4.5% increase in our loan portfolio from December 31, 2010 to December 31, 2011, from R$2.6 billion as of December 31, 2010 to R$3.2 billion as of December 31, 2011, due principally from increases in loans to the industrial sector. Income from securities transactions increased by 53.6% from R$888.8 million for the year ended December 31, 2010 to R$1,365.5 million for the year ended December 31, 2011, primarily due to the increase of our securities portfolio from R$7.8 billion as of December 31, 2010 to R$10.1 billion as of December 31, 2011. Income from derivative financial instruments increased from a loss of R$36.1 million for the year ended December 31, 2010 to a profit of R$25.7 million for the year ended December 31, 2011. This increase was mainly the result of the depreciation of the real against the U.S. dollar, as our derivative instruments hedge our foreign currency exposure. Income from foreign exchange transactions increased by 124.0% from R$73.2 million for the year ended December 31, 2010 to R$163.9 million for the year ended December 31, 2011, primarily due to an increase in revenues from commissions and fees from foreign exchange transactions. Income from compulsory investments with the Central Bank increased from R$15.7 million for the year ended December 31, 2010 to R$20.2 million for the year ended December 31, 2011. This increase was mainly due to: (a) an increase in the balance of compulsory deposits required by the Central Bank, from R$230.0 million as of December 31, 2010 to R$260.6 million as of December 31, 2011 and (b) income from restricted deposits of R$1.4 million for the year ended December 31, 2011 compared to a loss of R$6.9 million during the same period in 2010.

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Expenses from Financial Intermediation The following table sets out the principal components of our expenses from financial intermediation for the years ended December 31, 2011 and 2010:
Year Ended December 31, 2011 % of total 2010 % of total Variation (%)

(R$ thousands, except for percentages) Funding operations ...................................................... Borrowings and onlendings ........................................ Allowance for loan losses ........................................... Total expenses from financial intermediation ........ (1,048,740) (846,952) (234,909) (2,130,601) 49.2% 39.8% 11.0% 100.0% (591,142) (473,727) (400,010) (1,464,879) 40.4% 32.3% 27.3% 100.0% 77.4% 78.8% 41.3% 45.4%

Our expenses from financial intermediation increased by 45.4% from R$1,464.9 million for the year ended December 31, 2010 to R$2,130.6 million for the year ended December 31, 2011. This increase was primarily due to the factors described below. Expenses from funding operations increased by 77.4% from R$591.1 million for the year ended December 31, 2010 to R$1,048.7 million for the year ended December 31, 2011. This increase was mainly due to (i) the increase in the balance of time deposits from R$393.9 million as of December 31, 2010 to R$550.1 million as of December 31, 2011, (ii) R$4.7 million of interest rate expenses recorded from LCAs, and (iii) R$43.7 million of interest rate expenses recorded from U.S.$300 million five year notes issued in November 2010, as well as R$95.8 million of expenses from exchange rate variation in foreign currency denominated funding. Expenses from borrowings and onlendings increased by 78.8%, from R$473.7 million for the year ended December 31, 2010 to R$847.0 million for the year ended December 31, 2011. This increase was mainly due to an increase in the volume and interest rates of transactions with FNE funds carried out by us, as well as an increase in the volume of foreign borrowings and foreign onlendings. Our allowances for loan losses decreased by 41.3% from R$400.0 million for the year ended December 31, 2010 to R$234.9 million for the year ended December 31, 2011. This decrease was mainly the result of the improved credit quality of our loan transactions exceeding R$35,000. We believe all of our provisions for our credit and loan portfolio and the other loans for which we bear risk are in accordance with requirements of the Central Bank and are adequate to cover all our risk of loss on those loans. Gross Profit from Financial Intermediation As a result of the foregoing factors, our gross profit from financial intermediation increased by 26.0% from R$966.4 million for the year ended December 31, 2010 to R$1,127.3 million for the year ended December 31, 2011.

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Other Operating Income (Expenses) The following table sets out the principal components of our other operating income (expenses) for the years ended December 31, 2011 and 2010 (for a more detailed description of the principal components of our other operating income (expenses), see note No. 20 to the 2011 Financial Statements included in this Offering Memorandum):
For the year ended December 31, 2011 2011 % of total 2010 % of total Variation (%)

(R$ thousands, except for percentages) Income from services provided(1) ....................... Income from bank fees(2) .................................... Personnel expenses............................................. Other administrative expenses ........................... Tax expenses ...................................................... Other operating income ...................................... Other operating expenses ................................... Total other operating income (expenses) ....... (1) (2) 1,327,021 24,735 (1,081,293) (775,242) (188,995) 1,164,760 (1,019,815) (548,829) (241.8)% (4.5)% 197.0% 141.3% 34.4% (212.2)% 185.8% 100.0% 1,233,992 12,768 (1,019,740) (659,632) (173,182) 927,571 (757,896) 436,119 (283.0)% (2.9)% 233.8% 151.3% 39.7% (212.7)% 173.8% 100.0% 7.5% 93.7% 6.0% 17.5% 9.1% 25.6% 34.6% 25.8%

Income from services provided include, among others, fees deriving from collection services (utilities and taxes), consulting and advising services and from opening new accounts. Income from bank fees include, among others, fees charged for application processing, replacement of credit or debit cards, bank statement issuances, wire transfers and cash withdrawals.

Our net other operating expenses increased by 25.8% from R$436.1 million for the year ended December 31, 2010 to R$548.8 million for the year ended December 31, 2011, primarily due to the factors described below. Income from services provided increased by 7.5% from R$1,234.0 million for the year ended December 31, 2010 to R$1,327.0 million for the year ended December 31, 2011. This increase was mainly due to an increase in FNE management fees from R$816.8 million for the year ended December 31, 2010 to R$993.5 million for 2011, as a result of: (i) the increase in FNE's net worth from R$33.3 billion as of December 31, 2010 to R$37.7 billion as of December 31, 2011; and (ii) the increase in proceeds transferred to FNE by the Brazilian Government from R$4.1 billion for the year ended December 31, 2010 to R$5.0 billion for the year ended December 31, 2011, which was due to an increase in the aggregate tax receipts collected by the Brazilian Government from IPI and income tax. See "BusinessDescription of Products and ServicesGovernment Fund and Program ManagementFNEFNE Management Fees" for more information regarding our FNE management fees. This increase was partially offset by a decrease in revenues from banking services, due to the elimination of certain fees charged on loan transactions. Income from bank fees increased by 93.7% from R$12.8 million for the year ended December 31, 2010 to R$24.7 million for the year ended December 31, 2011. This increase was mainly due to a higher volume of transactions for which we charge fees, such as checking accounts, factoring and working capital transactions. Personnel expenses increased by 6.0% from R$1,019.7 million for the year ended December 31, 2010 to R$1,081.3 million for the year ended December 31, 2011. This increase was mainly due to (i) an increase of 10% in wages in December 2011, as a result of a collective agreement entered into by us and unions representing our employees. This increase was partially offset by a decrease of R$57.0 million in provisions for retirement benefits. Other administrative expenses increased by 17.5% from R$659.6 million for the year ended December 31, 2010 to R$775.2 million for the year ended December 31, 2011. This increase was mainly due to (i) an increase of R$80 million in expenses with third-party service providers hired for the assistance in credit administration of our loans and business generally due to an overall increase in our loan portfolio; and (ii) an increase of R$13 million in legal fees related to credit recoveries. Tax expenses increased by 9.1% from R$173.2 million for the year ended December 31, 2010 to R$189.0 million for the year ended December 31, 2011. This increase was mainly due to the increase of the taxable amounts subject to COFINS and PIS-PASEP.

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Other operating income increased by 25.6% from R$927.6 million for the year ended December 31, 2010 to R$1,164.8 million for the year ended December 31, 2011. This increase was mainly due to (i) FNE del credere fees, which increased from R$690.2 million for the year ended December 31, 2010 to R$822.8 million for the year ended December 31, 2011, reflecting an increase in the overall FNE and other funds portfolio; and (ii) an increase in income recovery of FNE loans in which we bear part of the risk from R$56.6 million for the year ended December 31, 2010 to R$87.6 million for the year ended December 31, 2011. For a more complete discussion of our relationship with the FNE, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsPrincipal Factors Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs" and "BusinessDescription of Products and Services Government Fund and Program Management" and of the corresponding risk we assume see also "Risk Factors Risks Relating to us and the Brazilian Banking IndustryWe could be subject to a greater degree of risk on certain FNE loans than on loans from our own portfolio." Other operating expenses increased by 34.6% from R$757.9 million for the year ended December 31, 2010 to R$1,019.8 million for the year ended December 31, 2011. This increase was primarily due to (i) R$135.6 million in interest expenses under the loan agreement from the Federal Government signed in the second half of 2010; (ii) an increase in expenses incurred to FNE under a subordinated debt agreement due to increases in the SELIC rate from R$406.4 million for the year ended December 31, 2010 to R$429.8 million for the year ended December 31, 2011 and (iii) the provision of R$86.6 million relating to the risk reclassification of 153 credit transactions, as recommended by the Central Bank. Operating Income Our operating income increased by 26.1%, from R$530.3 million for the year ended December 31, 2010 to R$668.4 million for the year ended December 31, 2011. This increase is explained by the factors discussed above. Income Tax and Social Contribution Expenses from income tax and social contribution increased by 85.9% from R$174.1 million for the year ended December 31, 2010 to R$323.6 million for the year ended December 31, 2011. This increase was mainly due to (i) the recognition of deferred tax credits in the year ended December 31, 2010, with a corresponding credit to our income taxes in the amount of R$64.9 million, and (ii) the realization of deferred tax credits in the year ended December 31, 2011, with a corresponding charge to our income taxes in the amount of R$26.7 million, in accordance with CMN Resolution No. 3,059 of December 20, 2002 (as amended by CMN Resolution No. 3,355 of March 31, 2006) and Central Bank Circular No. 3,171 of December 30, 2002 regarding income tax and social contributions on temporary differences of allowances for doubtful accounts, as well as Central Bank Circular No. 3,023 of June 11, 2002 regarding adjustments to fair value of securities classified in the "available-for-sale" category. For a more detailed description of tax credits on temporary differences, please refer to note 21(b) to the 2011 Financial Statements. Profit Sharing Profits distribution is limited to 9.0% of our net income or 25% of the distributions made to shareholders in the form of dividends and interest on shareholders' equity, whichever is lower, subject to an increase of 2.0% upon achievement of our disbursement and profitability goals. Participation in profits distributed among our employees and members of our Board of Directors decreased by 16.2% from R$44.2 million for the year ended December 31, 2010 to R$37.1 million for the year ended December 31, 2011, as determined by an agreement reached with the employees unions. Net Income As a result of the foregoing factors, our net income increased by 0.4% from R$313.6 million for the year ended December 31, 2010 to R$314.8 million for the year ended December 31, 2011.

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Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009 Income from Financial Intermediation The following table sets out the principal components of our income from financial intermediation for the years ended December 31, 2010 and 2009:
Year Ended December 31, 2010 % of total 2009 % of total Variation (%)

(R$ thousands, except for percentages) Lending operations .................................................. Securities transactions ............................................. Derivatives............................................................... Foreign exchange transactions ................................ Compulsory investments ......................................... Total income from financial intermediation ...... 1,489,809 888,770 (36,140) 73,161 15,667 2,431,267 61.3% 36.3% (1.5)% 3.0% 0.6% 100.0% 1,214,532 739,243 (38,146) 86,778 2,796 2,005,203 60.6% 36.9% (1.9%) 4.3% 0.1% 100.0% 22.7% 20.2% (5.3)% (15.7)% 460.3% 21.2%

Our total income from financial intermediation increased by 21.2% from R$2,005.2 million for the year ended December 31, 2009 to R$2,431.3 million in year ended December 31, 2010, primarily due to the factors described below. Income from lending operations increased by 22.7% from R$1,214.5 million for the year ended December 31, 2009 to R$1,489.8 million for the year ended December 31, 2010. This increase was principally due to growth of our loan portfolio, including (i) an increase of 27% in loans for working capital purposes (from R$572.8 million for the year ended December 31, 2009 to R$727.4 million for the year ended December 31, 2010); (ii) an increase of 95.5% in income from the IGPM-indexed Federal Government Refinanced Credits as a result of an increase in the IGPM index (from R$56.4 million for the year ended December 31, 2009 to R$110.3 million for the year ended December 31, 2010); (iii) an increase in revenues from financings of infrastructure projects within the PRODETUR, a program of the Brazilian Government sponsored by the IDB created to finance investments in tourist infrastructure in the Northeast region (from R$44.7 million for the year ended December 31, 2009 to R$94.1 million for the year ended December 31, 2010), due to an increase in the UC-IDB index to which these transactions were linked from (24.9)% to (2.9)%, caused by exchange rate fluctuation; and (iv) an increase of 53.5% in rural and agribusiness loans using savings deposits funding from R$66.0 million for the year ended December 31, 2009 to R$101.2 million for the year ended in December 31, 2010 (which excludes microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio). The overall average interest rate of our real-denominated loans increased from 12.1% in 2009 to 12.3% in 2010, and the overall average interest rate of our foreign currency-denominated loans increased from (21.3)% in 2009 to 1.4% in 2010. Income from securities transactions increased by 20.2% from R$739.2 million for the year ended December 31, 2009 to R$888.8 million for the year ended December 31, 2010, primarily due to (i) an increase in our average balance of securities and (ii) an increase in the SELIC rate. Our loss from derivative financial instruments decreased from a loss of R$38.1 million for the year ended December 31, 2009 to a loss of R$36.1 million for the year ended December 31, 2010. This decrease was mainly the result of the appreciation of the real against the U.S. dollar in 2010, which decreased our losses from derivative instruments that hedge our foreign currency exposure. Income from foreign exchange transactions decreased by 15.7% from R$86.8 million for the year ended December 31, 2009 to R$73.2 million for the year ended December 31, 2010, primarily due to the effects of the appreciation of the real against the U.S. dollar. Income from compulsory investments increased by 460.3%, from R$2.8 million for the year ended December 31, 2009 to R$15.7 million for the year ended December 31, 2010. This increase was mainly due to (i) an increase in the average volume of savings deposits, and consequently of compulsory deposits, and (ii) advisory fees in the total amount of R$8 million in connection with certain loan transactions between the Brazilian government and FGTS.

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Expenses from Financial Intermediation The following table sets out the principal components of our expenses from financial intermediation for the years ended December 31, 2010 and 2009:
Year Ended December 31, 2010 % of total 2009 % of total Variation (%)

(R$ thousands, except for percentages) Funding operations ...................................................... Borrowings and onlendings ........................................ Allowance for loan losses ........................................... Total expenses from financial intermediation ........ (591,142) (473,727) (400,010) (1,464,879) 40.4% 32.3% 27.3% 100.0% (381,160) (461,687) (376,592) (1,219,439) 31.2% 37.9% 30.9% 100.0% 55.1% 2.6% 6.2% 20.1%

Our expenses from financial intermediation increased by 20.1% from R$1,219.4 million for the year ended December 31, 2009 to R$1,464.9 million for the year ended December 31, 2010. This increase was primarily due to the factors described below. Expenses from funding operations increased by 55.1% from R$381.2 million for the year ended December 31, 2009 to R$591.1 million for the year ended December 31, 2010. This increase was mainly the result of an increase in the average volume of deposits, especially time deposits (from R$2.3 billion as of December 31, 2009 to R$4.3 billion as of December 31, 2010) and savings deposits (from R$0.9 billion as of December 31, 2009 to R$1.1 billion as of December 31, 2010). The overall interest rate paid to investors in funding products remained substantially the same. See "Other Statistical and Financial InformationAverage Balance Sheets and Interest Rate Data." Expenses from borrowings and onlendings increased by 2.6%, from R$461.7 million for the year ended December 31, 2009 to R$473.7 million for the year ended December 31, 2010. This increase was mainly due to an increase in the volume of BNDES and foreign direct borrowings. Our allowance for loan losses increased by 6.2% from R$376.6 million for the year ended December 31, 2009 to R$400.0 million for the year ended December 31, 2010. This increase was mainly the result of an increase in the volume of our loan portfolio. We believe all of our provisions for loan losses are in accordance with requirements of the Central Bank and are adequate to cover all our risk of loss on these loans. Gross Profit from Financial Intermediation As a result of the foregoing factors, our gross profit from financial intermediation increased by 23.0% from R$785.8 million for the year ended December 31, 2009 to R$966.4 million for the year ended December 31, 2010.

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Other Operating Income (Expenses) The following table sets out the principal components of our other operating income (expenses) for the years ended December 31, 2010 and 2009 (for a more detailed description of the principal components of our other operating income (expenses), see note No. 19 to our 2010 Financial Statements included in this Offering Memorandum):
Year Ended December 31, 2010 2009 Variation (%)

(R$ thousands, except for percentages) Income from services provided(1) .................................................. Income from bank fees(2) ............................................................... Personnel expenses........................................................................ Other administrative expenses ...................................................... Tax expenses ................................................................................. Other operating income ................................................................. Other operating expenses .............................................................. Total other operating income (expenses) .................................. (1) (2) 1,233,992 12,768 (1,019,740) (659,632) (173,182) 927,571 (757,896) (436,119) 1,106,886 12,205 (890,476) (551,813) (144,214) 1,159,159 (818,404) (126,657) 11.5% 4.6% 14.5% 19.5% 20.1% (20.0%) (7.4%) 244.3%

Income from services provided include, among others, fees deriving from collection services (utilities and taxes), consulting and advising services and from opening new accounts. Income from bank fees include, among others, fees charged for application processing, replacement of credit or debit cards, bank statement issuances, wire transfers and cash withdrawals.

Our net other operating expenses increased by 244.3% from R$126.7 million for the year ended December 31, 2009 to R$436.1 million for the year ended December 31, 2010, primarily due to the factors described below. Income from services provided increased by 11.5% from R$1,106.9 million for the year ended December 31, 2009 to R$1,234.0 million for the year ended December 31, 2010. This increase was mainly due to (i) an increase of 7.8% in FNE management fees (from R$757.6 million for the year ended December 31, 2009 to R$816.8 million for the year ended December 31, 2010); and (ii) an increase of 23.2% in PRONAF management fees (from R$57.7 million for the year ended in December 31, 2009 to R$71.1 million for the year ended December 31, 2010). Income from bank fees increased by 4.6% from R$12.2 million for the year ended December 31, 2009 to R$12.8 million for the year ended December 31, 2010. This increase was mainly due to an increase in the volume of our transactions where we charge banking fees. Personnel expenses increased by 14.5% from R$890.5 million for the year ended December 31, 2009 to R$1,019.7 million for the year ended December 31, 2010. This increase was mainly due to an increase of 11.8% in wages in September 2009, as a result of a collective agreement entered by us and employees unions and an increase of 38% in expenses for middle-management positions due to the need for more specialized personnel. Other administrative expenses increased by 19.5% from R$551.8 million for the year ended December 31, 2009 to R$659.6 million for the year ended December 31, 2010. This increase was mainly due to expenses related to third-party service providers (R$50.0 million increase); data processing (R$17.5 million increase); and legal fees related to credit recoveries (R$25 million increase). Our tax expenses increased by 20.1% from R$144.2 million for the year ended December 31, 2009 to R$173.2 million for the year ended December 31, 2010. This increase was primarily due to an increase in expenses incurred related to COFINS (increase of R$21.4 million), PIS-PASEP (increase of R$3.5 million) and ISSQN (increase of R$2.1 million), caused by the increase in our revenues. Other operating income decreased by 20.0% from R$1,159.2 million for the year ended December 31, 2009 to R$927.6 million for the year ended December 31, 2010. This decrease was mainly due to (i) a decrease in income from foreign-denominated loans from R$363.4 million for the year ended December 31, 2009 to R$99.6 million for the year ended December 31, 2010 as a result of a lower appreciation of the real against the U.S. dollar in 2010 than

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in 2009; and (ii) a decrease in reversal of operational provisions from R$123.0 million for the year ended December 31, 2009 to R$8.2 million for the year ended December 31, 2010. This decrease was partially offset by an increase in FNE del credere fees, which increased from R$554.5 million for the year ended December 31, 2009 to R$690.2 million for the year ended December 31, 2010, reflecting an overall increase in our FNE portfolio that we bear risk. Other operating expenses decreased by 7.4% from R$818.4 million for the year ended December 31, 2009 to R$757.9 million for the year ended December 31, 2010. This decrease was primarily due to the corresponding effect of the appreciation of the real against the U.S. dollar in the loans we made in foreign currency, which decreased to R$107.7 million for the year ended December 31, 2010 compared to R$379.2 million for the year ended December 31, 2009. This decrease was partially offset by an increase in provisions for FNE portfolio that we bear risk, from R$282.2 million for the year ended December 31, 2009 to R$406.4 million for the year ended December 31, 2010. Income Tax and Social Contribution Expenses from income tax and social contribution increased by 8.5% from R$160.5 million for the year ended December 31, 2009 to R$174.1 million for the year ended December 31, 2010. This increase was due to an increase in our taxable income. Profit Sharing Participation in profits distributed among our employees and members of our Board of Directors increased by 6.1% from R$41.7 million for the year ended December 31, 2009 to R$44.2 million for the year ended December 31, 2010, due to a collective bargaining agreement entered by us and employees unions. Net Income As a result of the foregoing factors, our net income decreased by 31.7% from R$459.0 million for the year ended December 31, 2009 to R$313.6 million for the year ended December 31, 2010. Liquidity and Capital Resources Overview We maintain capital levels within the acceptable levels of our market risk and liquidity policies. We monitor market and liquidity risks based on the volatility of interest rates, currencies and securities indices, as well as the prices for our loan and investment portfolios. We believe the Brazilian Government's ownership of us, as well as our partnerships and alliances with domestic and foreign institutions, including multilateral institutions such as the IDB, allows us to raise funds in the financial markets at relatively low costs. Therefore, we believe it is unlikely that our liquidity levels will drop to a level where a Central Bank intervention would be required. In the event we fail to comply with the minimum capital requirements established by the Basel II Accord, we could be compelled to curtail our lending activities and change our capital strategy. For more information, see "Capital Adequacy Information."

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Sources and Uses of Funds General The table below shows indicators that demonstrate the correlation between our sources and uses of funds, and demonstrates that our loan portfolio is backed by deposits, government resources (such as BNDES, the FAT and the National Treasury) and funds from international development banks (such as the IDB), among others.
As of December 31, Var. % 2011 2010 2009 (2011/2010) (2010/ 2009)

(R$ millions, except percentages) Total funding .............................................................. Total deposits ................................................................ Open market and interdepartmental accounts and interbranch accounts and derivatives ....................... Payables for securities issued abroad(1) ......................... Borrowings and onlendings .......................................... Hybrid instrument of equity and debt(2) ........................ FNE (deposits and subordinated debt) .......................... Net loan portfolio ......................................................... Loan portfolio ................................................................ Allowance for loan losses ............................................. Availability ................................................................... Ratios Net loan portfolio/total deposits .................................... Net loan portfolio/total funding .................................... Availability/total funding .............................................. (1) (2) 20,404 8,964 733 764 3,010 1,138 5,795 11,169 11,799 (630) 9,235 125% 55% 45% 18,293 8,510 613 485 2,923 1,004 4,758 10,635 11,288 (653) 7,658 125% 58% 42% 13,860 6,333 495 2,857 4,175 9,322 9,938 (616) 4,538 147% 67% 33% 11.5% 5.3% 19.6% 57.5% 3.0% 13.3% 21.8% 5.0% 4.5% 3.5% 32.0% 34.4% 23.7% 2.3% 14.0% 14.1% 13.6% 6.0%

U.S.$300 million five-year notes issued in November 2010. Loan agreement granted by the Brazilian government, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444. See "Sources of Funds."

The net loan portfolio/total funding index was 55% as of December 31, 2011, as compared to 58% as of December 31, 2010 and 67% as of December 31, 2009. Availability, as measured by the difference between total funding and net loan portfolio, reached R$9,235 million as of December 31, 2011, as compared to R$7,658 million as of December 31, 2010 and R$4,538 million as of December 31, 2009. As of December 31, 2011, availability accounted for 45% of our total funding. Our net loan portfolio increased by 5.0% and 14.1% for the years ended December 31, 2011 and 2010, respectively, as compared to the same periods in the prior years. This overall increase was supported by a 5.3% increase in total deposits, mainly due to our branches having expanded their customer bases and having enhanced their loan operations mainly through short-term loans. The net loan portfolio/total funding index decreased by 5.1% in December 31, 2011 as compared to 2010, while the net availability/total funding index increased by 7.1% in December 31, 2011 as compared to 2010. Sources of Funds As of December 31, 2011, our sources of funding were largely (i) time deposits (particularly in the form of CDBs), representing 33.6% of total funding; (ii) savings deposits, representing 6.5% of total funding; and (iii) interbank deposits and funds from BNDES and other government-owned institutions, and funds from international development banks, such as the Inter-American Development Bank, which together represented 59.9% of our total funding. As a government-owned bank with a mandate to facilitate development in the Northeast region, we have access to Brazilian Government resources and international development banks that provide us with low-cost funding that allows us to perform our development banking activities at more favorable margins compared to those available in the private sector (our average rate on average interest-bearing liabilities was 10.6% for the year ended December 31, 2011, and 7.0% and 4.2% for the years ended December 31, 2010 and 2009, respectively, which we believe mainly results from the low costs of these sources). For more information on our average interest-bearing liabilities, see "Other Statistical and Financial InformationAverage Balance Sheets and Interest

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Rate Data." This includes BNDES funding, even though we must follow the same procedures and are subject to the same requirements and commercial terms applicable to non-government owned recipients of its funding. We have also been working to diversify our sources of funding by increasing time deposits, particularly in the form of CDBs. For more information, see "BusinessFunding." In addition, in order to strengthen our capital base, we issued subordinated debt in the local Brazilian markets of R$600.0 million in July 2009 and R$400.0 million in June 2010, to the FNE. The Brazilian Government has also disbursed to us an additional R$1.0 billion through a loan agreement, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444. We consider the charts entitled "Assets" and "Liabilities and Shareholders' Equity" in the "Summary Financial Information" section to be an accurate description of our sources of funds for working capital and investments in non-current assets. We maintain adequate liquidity levels to finance our working capital requirements. We seek time deposits with average maturities greater than the average maturities of our short-term loans. In addition, some of these deposits are invested in securities available-for-sale, including money market funds and Brazilian Government securities. Some other liabilities, such as FNE funds and provisions for employee benefits, are not committed to lending operations but are invested in securities available-for-sale. The increase in term deposits and long-term liabilities, such as FNE funding, allows us to finance part of our working capital requirements with funds due in more than 1 year. In addition, in 2009 and 2010, more than 40% of our highly liquid funds invested in available-for-sale securities and interbank investments were allocated to working capital requirements. This ratio decreased to 26% in 2011, due to the allocation of new funds to long-term investments given our working capital requirements had already been met. We also maintain adequate liquidity levels to finance our non-current assets. Sources of long-term debt such as FAT and BNDES have terms consistent with those institutions' standard loan operations. Sources of funds also include funds from the FNE (prior to being loaned to borrowers), provisions for losses on FNE loans, retirement benefits, taxes and provisions for dividends and interest on shareholders equity, all of which we invest in highly liquid securities until they are committed to lending operations or contingencies, and from subordinated debt we issued to the FNE. In addition, highly-liquid available-for-sale securities represent a significant portion of our noncurrent assets (R$9.9 billion for the year ended December 31, 2011, R$6.7 billion in 2010 and R$2.9 billion in 2009). Deposit Accounts As of December 31, 2011, the balance of total deposits from individuals and companies, including time deposits, savings deposits, demand deposits and interbank deposits and others totaled R$8,964 million, which represents an increase of 5.3% compared to R$8,510 million as of December 31, 2010 (R$6,333 million as of December 31, 2009), accounting for 44% of our total funding (compared to 47% and 46% as of December 31, 2010 and 2009, respectively). The table below sets out our deposit accounts on a consolidated basis as of the dates indicated:
As of December 31, 2011 2010 (R$ millions) Time deposits ....................................................................................................... FAT .................................................................................................................. FINOR and reinvestments (Law No. 8,167) ................................................... Others (CDBs) ................................................................................................. Savings deposits ................................................................................................... Demand deposits .................................................................................................. Interbank deposits and others ............................................................................... Total Deposits ..................................................................................................... 6,862 622 670 5,570 1,330 183 589 8,964 6,387 686 448 5,253 1,289 134 700 8,510 4,384 395 521 3,468 1,382 175 392 6,333 2009

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Time deposits. Time deposits are comprised of a variety of funding instruments, primarily in the form of CDBs. Pursuant to Central Bank regulations, 20.0% of the financial institution's time deposits must be deposited with the Central Bank. The Central Bank also requires that an additional 12.0% of such deposits are made in cash. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market Liquidity Compulsory Deposits and Other Requirements." As of December 31, 2011, time deposits totaled R$6,862 million (compared to R$6,387 million and R$4,384 million as of December 31, 2010 and 2009, respectively), accounting for 77% of the total deposits maintained with us (compared to 75% and 69% as of December 31, 2010 and 2009, respectively). We have also been working to diversify our sources of funding, particularly in the form of CDBs, which increased from R$3,468 million as of December 31, 2009 to R$5,570 million as of December 31, 2011. Fund for Workers' Assistance (FAT), is included in account of time deposits. As of December 31, 2011, FAT funding totaled R$622 million (compared to R$686 million and R$395 million as of December 31, 2010 and 2009, respectively), accounting for 6.9% of our total deposits (compared to 8.1% and 6.2% as of December 31, 2010 and 2009, respectively). The decrease of FAT funds is due to the reduced demand for these resources. FINOR and reinvestments is included in our time deposits. As of December 31, 2011, FINOR and reinvestments funding totaled R$670 million (compared to R$448 million, R$521 million as of December 31, 2010 and 2009, respectively), accounting for 7.5% of our total deposits (compared to 5.3% and 8.2% as of December 31, 2010 and 2009, respectively). The increase of FINOR funding from December 31, 2010 to December 31, 2011 is due to the increased demand for these resources. Savings deposits. As of December 31, 2011, savings deposits totaled R$1,330 million (compared to R$1,289 million and R$1,382 million as of December 31, 2010 and 2009, respectively), accounting for 15% of the total deposits we maintain (compared to 15% and 22% as of December 31, 2010 and 2009, respectively). The decrease that occurred from December 31, 2009 to December 31, 2010 is due to the reduced demand for these resources. The increase that occurred from December 31, 2010 to December 31, 2011 is due to the growth of our client base. According to Central Bank regulations, banks in Brazil can offer two types of savings accounts (housing or agribusiness). We are authorized to receive agribusiness savings accounts. For these accounts, the Central Bank regulations establish that (i) 68.0% of these amounts have to be used in rural loan transactions (to be decreased to 67.0% in July 2012, 66.0% in July 2013 and 65% in July 2014); (ii) 17.0% must be deposited with the Central Bank (to be increased to 18.0% in July 2012, 19.0% in July 2013 and 20.0% in July 2014), earning monthly interest equal to the TR variation plus a 0.5% spread; (iii) 10.0% must be used as compulsory deposits, earning interest based on the SELIC rate; and (iv) 5.0% are freely disposable. The Central Bank currently requires Brazilian financial institutions to deposit, on a weekly basis, in an interest-bearing account with the Central Bank, an amount equivalent to 20% of the average balance of savings accounts during the prior week. The Central Bank established an additional reserve requirement of 10% on the savings account funds captured by the entities of SBPE. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityCompulsory Deposits and Other Requirements." Demand deposits. Demand deposits, which are largely cash we hold in current accounts on which we pay no interest to the depositor, totaled R$183 million as of December 31, 2011 (compared to R$134 million and R$175 million as of December 31, 2010 and 2009, respectively), accounting for 2.0% of our total deposits (compared to 1.6% and 2.8% as of December 31, 2010 and 2009, respectively). The decrease with respect to the percentage of our total funding during the period from December 31, 2008 to December 31, 2011 reflects our strategy of focusing on longer-term investments. The Central Bank prescribes certain uses for funds obtained from demand deposit accounts and other sources to all Brazilian banks (such as float on taxes and other collections) and requires us to deposit 43.0% of our daily average balance of demand deposits in cash and on a non-interest bearing basis (to be increased to 44.0% in July, 2012 and 45.0% in July, 2014). The Central Bank also requires that an additional 12.0% of such deposits be made with the Central Bank in cash. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityCompulsory Deposits and Other Requirements." Interbank and other deposits. Interbank deposits consist of borrowings from financial institutions. As of December 31, 2011, interbank and other deposits totaled R$589 million (compared to R$700 million and R$392 million as of December 31, 2010 and 2009, respectively), accounting for 6.6% of the total deposits maintained with us (compared to 8.2% and 6.2% as of December 31, 2010 and 2009, respectively). The decrease reflects our strategy of focusing on longer-term investments.

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Borrowing and Onlendings As of December 31, 2011, the balance of total borrowing and onlendings totaled R$3,010 million, which represents an increase of 3.0% compared to R$2,923 million as of December 31, 2010 (R$2,857 million as of December 31, 2009) and accounts for 15% of our total funding (compared to 16% and 21% as of December 31, 2010 and 2009, respectively). The table below sets out our domestic and foreign borrowings as of the dates indicated:
As of December 31, Specification 2011 2010 (R$ millions) Domestic borrowings official institutions/Refinancing .................................... Foreign borrowings/Borrowings in foreign currency .......................................... Total ..................................................................................................................... Current ........................................................................................................... Long-term ....................................................................................................... 50 833 883 850 33 61 447 508 462 46 70 631 701 645 56 2009

The increase in the balance of total borrowing and onlendings for the year ended December 31, 2011 compared to 2010 was mainly due to our needs to fund our growing portfolio of industrial and commercial loan operations. The increase in the balance of total borrowing and onlendings was partially offset by the removal of certain rural loans from our loan portfolio, totaling R$685 million, as we bear no credit risk with respect to these loans and operate solely as a service provider, receiving service fees for their administration. The table below sets out our domestic and foreign onlendings on a consolidated basis as of the dates indicated:
As of December 31, 2011 Domestic onlendings National Treasury ................................................................................................. BNDES ................................................................................................................. POC(1) ............................................................................................................... Credit facility for investment in agriculture .................................................... Caixa Econmica Federal .................................................................................... FINAME ............................................................................................................... "Programa automtico"(2)................................................................................ Farm program .................................................................................................. Import .............................................................................................................. Other institutions .................................................................................................. Pilot support project of agrarian reform(3) ....................................................... "MEPF-Banco da Terra" Land fund and agrarian reform land bank(3) .... "Banco da Terra" and bank fight against rural poverty(3) ......................... Other programs ................................................................................................ Total ..................................................................................................................... Current ............................................................................................................. Long-term ........................................................................................................ Foreign onlendings IDB PRODETUR .............................................................................................. IDB other programs ........................................................................................... Total ..................................................................................................................... Current ............................................................................................................. Long-term ........................................................................................................ (1) (2) (3) 2010 (R$ millions) 1 1,153 919 233 133 117 16 1,287 173 1,114 833 7 840 81 759 1 933 712 221 53 38 15 700 82 126 492 1,687 289 1,397 722 7 729 67 662 1 744 428 316 29 16 13 659 82 138 439 1,434 314 1,120 714 8 722 64 659 2009

Credit facility granted by BNDES to shareholders of medium-sized and small companies to buy shares in capital increases. Program for the purchase of new machinery and equipment by companies based in Brazil. Federal funds for financing agrarian reform and infrastructure for settlements on new land for which we do not assume risk.

The main variations in domestic onlendings are related to an increase in BNDES onlendings to support the demand for long-term credit. This in particular reflects our strategy to, even though we must still follow the same

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procedures and are subject to the same requirements and commercial terms applicable to non-government owned recipients of BNDES funding, increase our funding from BNDES for long-term loans for customers and loan types that are not covered by FNE or other government funds to which we have access. As of December 31, 2011, BNDES funding totaled R$1,153 million (compared to R$933 million and R$744 million as of December 31, 2010 and 2009, respectively), accounting for 5.6% of our total funding (compared to 5.1% and 5.4% as of December 31, 2010 and 2009, respectively). Variations in foreign onlendings are explained by changes in the dollar/real exchange rate, which registered an increase of 12.6% from December 31, 2010 to December 31, 2011 and a decrease of 4.5% from December 31, 2009 to December 31, 2010. The table below sets out our domestic and foreign borrowings and onlendings by maturity:
Specification Up to 3 years 3 to 5 years 5 to 15 years Over 15 years (R$ millions) Domestic borrowings ....................... Foreign borrowings .......................... Domestic onlendings ........................ Foreign onlendings ........................... Total ................................................. 33 833 369 240 1,475 17 316 168 501 418 268 686 184 164 348 50 833 1,287 840 3,010 61 446 1,687 729 2,923 70 631 1,434 722 2,857 2011 As of December 31, 2010 2009

We believe that the liquidity of our borrowings and onlendings are sufficient to avoid mismatches with the liquidity needs of our loan portfolio. Open Market, Interdepartmental and Interbranch Accounts Open market, interdepartmental and interbranch accounts consist mainly of securities sold under repurchase commitments. As of December 31, 2011, open market and interdepartmental accounts totaled R$733 million (compared to R$613 million and R$495 million as of December 31, 2010 and 2009, respectively), or 3.6% of our total funding (compared to 3.4% and 3.6% as of December 31, 2010 and 2009, respectively). This increase reflected a higher volume of transactions in the market for borrowing and lending reserve balances. Other Sources Other funding mainly consists of funds from the FNE (prior to being loaned to borrowers). As of December 31, 2011, these funding sources totaled R$5,795 million (compared to R$4,758 million and R$4,175 million as of December 31, 2010 and 2009, respectively), which accounts for 28% of our total funding (compared to 26% and 30% as of December 31, 2010 and 2009, respectively). Use of Funds The following table sets out the breakdown of our lending operations by type of financial product offered as of the dates indicated:
As of December 31, 2011 2010 (R$ millions) Advances to depositors(1)...................................................................................... Loans .................................................................................................................... Discounted notes .................................................................................................. Loans and financings............................................................................................ Export financing ................................................................................................... Financing in foreign currencies............................................................................ Refinancing with Brazilian Government ............................................................. Rural and agribusiness financing(2) ...................................................................... Real estate financing(3) ......................................................................................... Infrastructure and development financing ........................................................... Subtotal of lending operations .......................................................................... 0 5,003 175 1,969 276 474 1,466 0 1,849 11,212 1.4 4,883 170 1,717 24 533 1,961 0.2 1,426 10,716 0.7 4,324 158 1,152 274 517 2,321 0.2 696 9,444 2009

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As of December 31, 2011 2010 (R$ millions) Guarantees honored .............................................................................................. Income receivable from advances ........................................................................ Debtors for purchase of assets ............................................................................. Receivables ........................................................................................................... Advances on foreign exchange contracts ............................................................. Subtotal of other lines with loan features ........................................................ Total loan portfolio ............................................................................................ (1) (2) (3) 13 2 3 569 587 11,799 0.02 10 2 41 519 572 11,288 0.07 16 6 3 469 494 9,938 2009

Consists of overdraft accounts. Does not include microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio. Consists of home mortgage loans.

Short-term loans are among our main uses of funds and totaled R$5,003 million as of December 31, 2011, an increase of 2.5% compared to R$4,883 million as of December 31, 2010. From December 31, 2009, short-term loans grew by 15.7% through December 31, 2011. The growth over this period primarily resulted from our strategy to focus on assets offering higher spreads, also supported by an increase in the sources of funds for the period. Rural and agribusiness financings and loans totaled R$1,466 million as of December 31, 2011 (which excludes microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio), a decrease of 25.2% compared to R$1,961 million as of December 31, 2010 due to the removal of certain rural loans from our loan portfolio, totaling R$685 million, as we bear no credit risk with respect to these loans and operate solely as a service provider, receiving service fees for their administration. This portfolio decreased by 15.5% from December 31, 2009 to December 31, 2010 due to our focus on using FNE funds to make rural loans. Infrastructure loans totaled R$1,849 million as of December 31, 2011, an increase of 29.7% compared to R$1,426 million as of December 31, 2010. This increase was primarily a result of an expansion of loans to the transportation, energy generation and distribution, water systems and gas distribution sectors. As of December 31, 2010, these loans increased by 104.9% as compared to December 31, 2009. Capital Expenditures We seek to avoid investments in permanent assets, including with respect to information technology, equipment and real estate, in favor of renting or leasing assets whenever possible. As a result, we do not generally account for improvements to our permanent assets as capital expenditures on our balance sheet and instead expense these items as incurred. Our principal expenses typically involve information technology and, for the year of 2011, these expenses amounted to R$23.0 million. We expect our expenses for permanent assets for 2012 to amount to R$14.6 million and 2013 to be in line with that incurred in prior periods. Lending Overview We are a multi-service bank offering different products to meet specific client needs. Accordingly, our lending activities are divided into several categories. We primarily lend to the private sector, principally at our own risk. We lend to companies, businesses and individuals of five different sectors: agriculture, industry, infrastructure, commerce and services. We offer special products of short, medium or long terms to clients and/or businesses of different sizes (mini, micro, small, medium or large), in addition to products tailored for infrastructure financing and capital market access. See "BusinessDescription of Products and ServicesBanking Services and Capital Markets Activities." Part of our lending includes the onlending of loans made through us by Brazilian Government entities (including the FNE) to borrowers in Brazil both at our risk and at the Brazilian Government's risk. Loan Portfolio As of December 31, 2011, our total amounts of gross loans (including accrued interest) outstanding was R$11,799 million (including past due loans), which accounted for approximately 45% of our total assets. From

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December 31, 2009 to December 31, 2011, our total loan portfolio, net of allowance, grew at an annual rate of 9%, from R$8,889 million to R$10,590 million.
Var. R$ As of December 31, 2011 2010 2009 2011/2010 Var. % December 31, 2011/2010 2010/2009

(R$ thousands, except percentages) Industrial ............................................. Rural and agribusiness(1) .................... Commercial ........................................ Government ........................................ Acquired loan portfolios .................... Individual and consumer .................... Housing system .................................. Other loans ......................................... Total portfolio ................................... (1) 3,189,114 1,474,609 2,368,416 1,331,046 265,963 53,334 243 3,116,335 11,799,060 2,605,734 1,974,504 1,898,228 1,257,660 695,360 56,461 243 2,799,578 11,287,768 1,892,524 2,335,451 1,280,825 1,156,521 600,014 54,329 241 2,617,747 9,937,652 583,380 (499,895) 470,188 73,386 (429,397) 3,127 0 316,757 511,292 22% (25)% 25% 6% (62)% (6)% 0% 11% 5% 38% (15)% 48% 9% 16% 4% 1% 7% 14%

Does not include microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio.

Lending Limits Pursuant to CMN regulations, no Brazilian financial institution is authorized to lend more than 25% of its regulatory capital value to one client or group of clients representing a common economic interest. In our case, this limit excludes loans made by us at the risk of the Brazilian Government or as the Brazilian Government's agent. Our internal policy is more conservative than the regulatory requirements of the CMN. We are also prohibited under the FNE's rules from loaning more than 30% of the FNE's total funds to any single state of the Northeast region and are required to invest no less than 4.5% of its fund in each state and at least 50% of its funds in the semi-arid areas of the region. Loan Loss History Pursuant to Central Bank rules, financial institutions are required to classify corporate loan transactions in nine categories, ranging from "AA" to "H", based on credit risk. Loan ratings are the responsibility of the financial institution extending the loan and must be assigned in accordance with the following factors set forth in the CMN Resolution 2,682, of December 21, 1999: (i) characteristics of the borrower and the guarantor, such as their respective economic and financial conditions, debt level, ability to generate profit, cash flows, management and internal control level, delinquency in payments, contingencies, economic industry and credit limits; and (ii) characteristics of the transaction, such as the nature and purpose, sufficiency of collateral, liquidity level and overall loan and collateral amount. For individual loans, the loan is classified based the individual's income, net worth and credit history (as well as other personal information). Regulations set out, for each loan category, a minimum allowance as follows:
Credit Rating AA ....................................................................................................................................................................................... A .......................................................................................................................................................................................... B .......................................................................................................................................................................................... C .......................................................................................................................................................................................... D .......................................................................................................................................................................................... E ........................................................................................................................................................................................... F ........................................................................................................................................................................................... G .......................................................................................................................................................................................... H .......................................................................................................................................................................................... Minimum Allowance 0.0% 0.5% 1.0% 3.0% 10.0% 30.0% 50.0% 70.0% 100.0%

Our allowance for loan losses totaled R$630 million as of December 31, 2011 and R$652 million as of December 31, 2010, as compared to R$615 million as of December 31, 2009. As of December 31, 2011, transactions in default and allowances for loan losses represented 4.0% and 5.3% of our total loan portfolio, respectively. If only transactions with one or more installments outstanding for over 90 days were considered,

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allowances for loan losses would have covered 180% of the principal and accrued interest amount of those transactions as of that date. As of December 31, 2010, transactions in default and allowances for loan losses represented 3.6% and 5.8% of our total loan portfolio, respectively. If only transactions with one or more installments outstanding for over 90 days were considered, allowances for loan losses would have covered 220% of the principal amount of those transactions as of that date. As of December 31, 2009, transactions in default and allowances for loan losses represented 4.5% and 6.2% of our total loan portfolio, respectively. If only transactions with one or more installments outstanding for over 90 days were considered, allowances for loan losses would have covered 176% of the principal amount of those transactions as of that date. The portion of our loan portfolio that was overdue by more than 90 days totaled R$350 million as of December 31, 2011, which accounted for 3.0% of our total loan portfolio as of December 31, 2011, lower than the 3.6% recorded by the overall National Financial System over the same period, according to Central Bank data. Our loan portfolio that was overdue by more than 15 days accounted for 4.0% of our total loan portfolio, 0.4 basis points above the rate in December 2010. The table below sets out the evolution of the default indices of our loan portfolio as of the dates indicated.
As of December 31, 2011 2010 (R$ thousands, except percentages) Loans portfolio.................................................................................................... Installments overdue + 15 days ......................................................................... Installments overdue + 15 days/Loan Portfolio% ........................................... Installments overdue + 90 days ......................................................................... Installments overdue + 90 days/Loan Portfolio% ........................................... Write-off for loss .................................................................................................. Recovery ............................................................................................................... Loss balance ........................................................................................................ Loss balance/Loan portfolio% annualized(1) .................................................. Provision .............................................................................................................. Provision/Loan Portfolio% .............................................................................. Provision/Overdue + 15 days% ....................................................................... Provision/Overdue + 90 days% ....................................................................... 11,799,060 474,566 4.0% 350,425 3.0% 238,415 (120,472) 117,943 2.0% 630,060 5.3% 133% 180% 11,287,768 403,853 3.6% 296,856 2.6% 355,455 (156,964) 198,491 1.8% 652,918 5.8% 162% 220% 9,937,652 450,521 4.5% 350,002 3.5% 102,127 (181,602) (79,475) (0.8)% 615,845 6.2% 137% 176% 2009

Allowances and Risk Classification The table below sets out our total loans denominated in reais, the percentage of allowances and the percentage of charge-offs, as of the dates indicated. Loans include all Brazilian currency denominated agricultural, industrial, and commercial and service sector loans.
As of December 31, 2011 2010 (R$ thousands) Total lending operations ....................................................................................... Public sector ......................................................................................................... Private sector ........................................................................................................ Allowances .......................................................................................................... As a percentage of total lending operations ......................................................... 11,799,060 1,331,046 10,468,014 630,060 5.3% 11,287,768 1,257,660 10,030,108 652,918 5.8% 9,937,652 1,156,521 8,781,131 615,845 6.2% 2009

"AA"-"C" risk level accounted for 92.9% of our total portfolio as of December 31, 2011, an increase of 0.3 basis point as compared to December 31, 2010.

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The table below set out overdue loans by rating category as of December 31, 2011, 2010 and 2009:
As of December, 31, 2011 2010 (R$ thousands, except percentages) AA ............................................................ A ................................................................ B ................................................................ C ................................................................ D-H ............................................................ Total .......................................................... 34,180 41,691 398,695 474,566 0.0% 0.0% 7.2% 8.8% 84.0% 100.0% 38,743 23,563 341,547 403,853 9.6% 5.8% 84.6% 100.0% 20,996 16,746 412,779 450,521 0.0% 0.0% 4.7% 3.7% 91.6% 100.0% 2009

The classifications set out above are based upon a determination made by us according to CMN Resolution No. 2,682 and may not necessarily be comparable with classifications made by other Brazilian banks. The tables below set out our total loan portfolio and other outstanding credits and integral and partial recovery previously provisioned or written-off as loss and other adjustments as of December 31, 2011, 2010 and 2009, respectively:
As of December 31, 2011 Value of Operations Allowance for loan losses Value of Operations 2010 Allowance for loan losses Value of Operations 2009 Allowance for loan losses

(R$ thousands, except percentages) AA .................................... A ....................................... B ....................................... C ....................................... D ....................................... E ........................................ F ........................................ G ....................................... H ....................................... Total ................................. 0.5 1.0 3.0 10.0 30.0 50.0 70.0 100.0 3,315,259 5,094,425 2,252,583 303,557 189,718 76,280 41,003 52,124 474,111 11,799,060 25,472 25,526 9,106 18,972 22,884 20,502 36,487 474,111 630,060 3,640,505 3,847,921 2,674,349 286,024 129,910 92,776 81,036 60,778 474,469 11,287,768 19,239 26,743 8,581 12,991 27,833 40,518 42,544 474,469 652,918 3,346,521 3,224,154 2,253,909 346,450 161,232 43,946 33,237 24,455 503,748 9,937,652 16,121 22,539 10,394 16,123 13,184 16,618 17,118 503,748 615,845

The classifications set forth above are based upon a determination made by us according to Resolution No. 2,682 and may not necessarily be comparable with classifications made by other Brazilian banks. Capital Adequacy Information CMN Resolution No. 2,099 created a capital measurement for Brazilian financial institutions based on a risk-weighted asset ratio. The framework of this methodology is similar to the Basel II Accord. Under this regulation, as a general rule, Brazilian financial institutions are required to maintain minimum regulatory capital of at least 11.0% of total risk-weighted assets, valued in accordance with the risk weighting criteria set out in Annex IV to the Resolution. As part of the process of implementation of the Basel II Accord, the CMN, pursuant to Resolution No. 3,490, set forth the required referential equity amount (PRE) to substitute the required shareholders' equity (PEE) (revoking Annex IV to Resolution No. 2,099), among other new requirements. Regulatory Capital Value is comprised mainly of Tier 1 Capital (shareholders' equity and other similar instruments) and Tier 2 Capital (subordinated debt). See "Other Statistical and Financial InformationLending OperationsPast Due Loans," "Regulation of the Brazilian Banking IndustryRegulatory Capital and Shareholders' Equity Standards" for more information. On September 12, 2010, the Group of Governors and Heads of Supervision announced the Basel III Accord, presented during the Seoul G20 Leaders summit in November 2010, to substantially strengthen existing

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capital requirements and fully endorse previous agreements on the overall design of the capital and liquidity reform package. The reforms increased minimum common equity requirement from 2% to 4.5%. In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand periods of stress, bringing the total common equity requirements to 7%. Central Bank Communication No. 20,615 issued in February 2011 established the preliminary guidelines for implementation of these reforms in Brazil. For such purpose, the Central Bank will need to issue further regulations, according to a non-binding schedule set forth by Central Bank Communication No. 20,615. The new rules are expected to be implemented gradually by the central banks of various countries between 2013 and 2019. On February 17, 2012, the Central Bank published for public comments proposed rules changing the definition of regulatory capital currently set forth by CMN Resolution No. 3,444 issued on February 28, 2007. Among other topics, the Central Bank indicated it intends to consider, in the composition of the reference shareholders' equity of financial institutions, their controlled entities similar to financial institutions (e.g., credit card administrators) and investment funds from which financial institutions take substantial risks and benefits. We cannot ascertain if, when and to what extent such new rules may become effective. See "Regulation of the Brazilian Banking IndustryRegulatory Capital and Shareholders' Equity Standards" for more information. We are still evaluating the potential effects of the Basel III Accord in our activities. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityRegulatory Capital and Shareholders' Equity Standards." The Central Bank prescribes two forms of financial statement consolidation: the financial conglomerate method, for the consolidation of financial companies, and the economic financial method, for the consolidation of financial and non-financial companies. All capital adequacy information provided below and elsewhere in this Offering Memorandum as of December 31, 2011, 2010 and 2009 was prepared on the basis of the financial conglomerate method of consolidation. The table below sets out our compliance with capital adequacy regulations as of the dates indicated:
As of December 31, 2011 2010 (R$ thousands) Regulatory Capital................................................................................................ Tier 1 Capital ........................................................................................................ Tier 2 Capital(1) ..................................................................................................... PRE Deductions ................................................................................................... Credit risk(2) .......................................................................................................... APR requirement .................................................................................................. Swap requirement ................................................................................................. Market risk(3) ........................................................................................................ Foreign exchange exposure requirement ............................................................. Interest rate exposure requirement ....................................................................... Operating risk(4) .................................................................................................... Capital ratio .......................................................................................................... (1) (2) (3) 4,604,614 2,302,307 2,302,307 2,619,648 987 433,450 16.58% 3,248,273 2,146,806 1,101,467 2,248,812 17,033 361,564 13.60% 2,692,406 1,973,582 718,824 2,025,320 18,858 - 236,042 12.99% 2009

(4)

Corresponds to (a) subordinated debt we issued to FNE in the amounts of R$600.0 million in July 2009 and R$400.0 million in June 2010, and (b) a loan agreement granted by the Brazilian government, in the amount of R$1.0 billion in the second half of 2010, classified as a hybrid instrument of equity and debt. Relates to exposure to the weighted risk of our loans, pursuant to Circular No. 3,360 of September 12, 2007, as amended. Until June 2008 (Basel I Accord), this item consisted of the portions corresponding to the APR requirement and swap requirement. Corresponds to exposures to gold and foreign currencies (PCAM), interest rates (PJUR), commodity prices (PCOM) and stock prices (PACS), pursuant to Circulars No. 3,361 to 3,364, 3,366 and 3,368, all dated September 12, 2007; and Circular No. 3,389. Until June 2008 (Basel I Accord), this item consisted of portions corresponding to the foreign exchange exposure requirement and interest rate exposure requirement. Corresponds to the operational risk (POPR) set forth in the Basel II Accord, pursuant to Circular No. 3,383.

As of December 31, 2011, our capital ratio calculated according to the Basel II Accord criteria was 16.58%, compared to 13.60% as of December 31, 2010 and 12.99% as of December 31, 2009.

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Interest Rate and Exchange Rate Sensitivity Profile of Renegotiation of Interest Rates We recorded R$22.9 billion in interest-earning assets and R$20.4 billion in interest-bearing liabilities as of December 31, 2011, a difference of R$2.5 billion. Our assets most affected by interest rates are those with fixed rates, representing more than 33% of the total assets subject to interest. The CDI/TMS operations account for 45.5% of the total assets. With respect to liabilities, the more significant are those subject to fixed rates, which account for 13.2% of the total liabilities subject to interest. The CDI/TMS operations account for 52.1% of the total liabilities. The table below sets forth the inventory of our assets and liabilities subject to interest rates and allocated by index and term as of December 31, 2011:
Assets Total (R$ thousands) Previously fixed............................................................................................................................................................................. CDI/TMS ....................................................................................................................................................................................... Inflation ......................................................................................................................................................................................... TR/IRP........................................................................................................................................................................................... TJLP .............................................................................................................................................................................................. US$/ME ......................................................................................................................................................................................... Total assets subject to interest ................................................................................................................................................... Liabilities 7,687,088 10,443,668 2,170,394 182,944 139,495 2,334,265 22,957,854 Total (R$ thousands) Previously fixed............................................................................................................................................................................ CDI/TMS ...................................................................................................................................................................................... Inflation ........................................................................................................................................................................................ TR/IRP.......................................................................................................................................................................................... TJLP ............................................................................................................................................................................................. US$/ME ........................................................................................................................................................................................ Total liabilities subject to interest ............................................................................................................................................ Difference ..................................................................................................................................................................................... Accumulated difference ............................................................................................................................................................... Accumulated difference as % of profitable assets ....................................................................................................................... 2,743,626 10,651,471 1,389,618 1,827,910 1,491,008 2,335,882 20,439,515 2,518,339 2,518,334 11.0%

The table below shows details of our market risk exposures, which are monitored by our senior management since the Basel II rules were implemented, starting in the second half of 2008:
Index and Interest Rates Coupons Assets As of December 31, Liabilities As of December 31, 2009 7,105,356 10,033,876 1,489,956 644,170 182,089 1,428,857 2011 2,743,626 10,651,471 1,389,618 1,827,910 1,491,008 2,335,882 2010 2,681,435 10,064,073 239,682 1,467,446 1,064,362 1,759,344 2009 2,475,029 11,073,878 216,122 1,527,880 851,573 1,427,799 2011 4,943,462 (207,803) 780,776 (1,644,966) (1,351,513) 2,518,339 Net Mismatch As of December 31, 2010 5,319,478 (1,347,034) 2,295,760 (1,222,384) (911,935) (884) 2009 4,630,327 (1,040,002) 1,273,834 (883,710) (669,484) 1,058

Risk Factor
Fixed ........................ CDI .......................... Price index ............... TBF/TR.................... TJLP ........................ Dollar and other foreign exchange currencies ...........

2011 7,687,088 10,443,668 2,170,394 182,944 139,495 2,334,265

2010 8,000,913 8,717,039 2,535,442 245,062 152,062 1,758,460

The decrease in mismatches of fixed rates, from 2010 to 2011, resulted mainly from increases in the portfolios "Cliente-Lastro Ttulos Pblicos" and "Giro Simples". In the same period, the decrease in mismatches of CDI resulted mainly from decreases in the portfolios "Clientes-Lastro CDI, CDB" and "Ttulos Pblicos". The decrease in mismatches of Price Index resulted mainly from an increase in operations based on Resolution 2,471/04, issued by the Central Bank.

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Foreign Exchange Exposure The table below illustrates our foreign exchange exposure as of December 31, 2011. As of that date, our foreign exchange rate exposure related to derivatives consisted of one currency swap transaction we entered to hedge the currency risk exposure relating to the dollar-denominated bonds we issued in 2010.
As of December 31, 2011 Balance Sheet Accounts Assets Currency US Dollar ......................................................................................................................................................... Euro ................................................................................................................................................................. Yen .................................................................................................................................................................. Switzerland franc............................................................................................................................................. Total................................................................................................................................................................. Net position ..................................................................................................................................................... Total net position ............................................................................................................................................. Liabilities

(R$ thousands) 2,326,340 7,237 645 38 2,334,260 34,103 34,103 2,293,116 6,401 640 0 2,300,157 -

Guarantee Agreements We provide guarantees to consumers and companies. These guarantees include mainly guarantee letters. In the event of a default of these consumers or companies, we may be required to honor these guarantees. If that happens, the operations are recorded as assets under receivables for the honored guarantees, in accordance with the rules of the CMN, and become a past due loan operation. As of December 31, 2011, we acted as a guarantor of third party obligations in two transactions, as identified below:
Amount (R$thousands) 50,000.0 42,219.40 Term 18 months 38 months Initial date May 3, 2010 December 3, 2009 Maturity date November 3, 2014 February 15, 2013

Derivative Financial Instruments Financial swap transactions consist of contracts entered into between us and a counterparty whereby we agree to pay the counterparty an amount linked to one particular interest rate, inflation index rate or currency exchange rate (as applied to a notional principal amount) and, in return, receive from the counterparty an amount linked to a different interest rate, inflation index rate or currency exchange rate (as applied to such notional principal amount). Our contingent liability in respect of such a transaction is not the notional amount of the transaction, but rather the resulting difference between the interest rate, inflation index rate or currency exchange rate that we agree to pay and the interest rate, inflation index rate or currency exchange rate that the counterparty agrees to pay. In some cases we mitigate the market risk in relation to a swap agreement by matching our position in such swap contract with a matching position in a separate swap contract. In such cases, our actual exposure is only the credit risk of the swap counterparties. We conduct operations with derivatives exclusively for hedging purposes, in order to protect our asset and liability positions, and which mostly consist of foreign exchange hedges (reais and U.S. dollars). We do not conduct speculative derivatives trading. As of December 31, 2011, our derivative obligations amounted to R$21.1 million, while the notional value of our corresponding hedging arrangements totaled R$869.8 million, compared to R$58.1 million and R$1,053.4 million, R$36.6 million and R$813.6 million as of December 31, 2010 and 2009, respectively. Off-Balance Sheet Transactions The following assets, not recorded in our balance sheet, are described in the explanatory notes to the 2011 Financial Statements: (i) tax credits; (ii) derivative financial instruments agreements; (iii) security agreements; (iv) credit lines not used; and (v) import and export credit letters.

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We do not otherwise have any material off-balance sheet transactions. We record funding transactions conducted by special purpose entities on our balance sheet. Compulsory Deposits with the Central Bank Our reserves deposited with the Central Bank totaled R$260.6 million as of December 31, 2011, compared to R$230.0 million and R$172.8 million as of December 31, 2010 and 2009, respectively, which consists of mandatory deposits and other account sources. We recorded interest income of R$15.2 million for the year ended December 31, 2011, compared to R$11.8 million and R$8.7 million in the years ended December 31, 2010 and 2009, respectively, as a result of these deposits. Deferred Tax Credits As of December 31, 2011, we recorded deferred tax credits mainly from temporary differences of allowances of loan losses and other doubtful accounts of R$250.6 million, compared to R$277.4 million and R$212.5 million as of December 31, 2010 and 2009, respectively. In addition, as of December 31, 2011, we recorded receivables in respect of income tax and social contribution on net income to be offset of R$7.7 million, compared to R$6.8 million and R$8.2 million as of December 31, 2010 and 2009, respectively. These amounts were recorded in our balance sheet under "other receivables-others" in current and long-term assets, in accordance with CMN Resolution No. 3,059, as amended, and Central Bank Circular No. 3,171, as amended.

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BANKING INDUSTRY OVERVIEW Evolution of the Brazilian Banking Industry The Brazilian banking industry has experienced a major structural change, evolving from operating in a high-inflation environment in the 1980s and early 1990s, to operating in a low-inflation environment combined with more macroeconomic and monetary stability from 1994 onwards, when the real was introduced as Brazil's currency. The monetary stability achieved in 1994 led to sustained growth in credit demand in Brazil. This growth, combined with the loss of inflationary profits, caused the banking industry to improve its efficiency ratios and increase revenues from services. As a result, the banking industry entered a period of rationalization and consolidation. The Brazilian Government has been monitoring this process closely, creating programs aimed at protecting the average Brazilian citizens, including measures to ensure the solvency of institutions and increase competition among private banks. The Brazilian Government also reduced entry restrictions to foreign banks in the Brazilian market. In the last three years, in particular since the second half of 2008, the global banking industry was seriously affected by the financial crisis, which contributed significantly to the reduction of the assets of this industry. The effects of the crisis in Brazil were relatively moderate in comparison with the effects in the United States and Europe. While liquidity in the Brazilian banking sector was, in a certain manner, affected by the financial global crisis, the Central Bank assured availability of enough liquidity in the Brazilian market during this period of instability through several measures, mainly in the fourth quarter of 2008. Despite that Brazil still has a low penetration ratio in terms of persons utilizing banking products when compared to more developed countries, such penetration has been increasing over the last few years. According to FEBRABAN, approximately 40 million Brazilians have no access to banking services. The table below shows the evolution of the volume of loans within the Brazilian financial system which are granted by financial institutions with funds not required to be used for any particular purpose under applicable regulation.
Consumer loans(1)(2) As of December 31, 2001 ....................................... 2002 ....................................... 2003 ....................................... 2004 ....................................... 2005 ....................................... 2006 ....................................... 2007 ....................................... 2008 ....................................... 2009 ....................................... 2010 ....................................... 2011 ....................................... 2001 to 2011 CAGR ............. (1) (2) (3) (R$ billions) 69.9 76.2 88.1 113.3 155.2 191.8 240.2 277.6 323.8 417.3 505.7 21.8 (%) of total loans 36.0 35.9 39.3 41.7 45.6 46.8 45.9 41.5 49.2 47.4 47.7 Corporate Loans(3) (R$ billions) 124.2 136.2 136.1 158.1 185.4 217.6 283.5 391.5 397.8 462.7 554.8 16.1 (%) of total loans 64.0 64.1 60.7 58.3 54.4 53.2 54.1 58.5 50.8 52.6 52.3 Total (R$ billions) 194.1 212.4 224.2 271.4 340.6 409.5 523.7 669.1 721.6 880.1 1,060.4 18.5

Overdraft loans, consumer credit, real estate loans, loans for acquiring goods, credit cards and others. This category is comparable to our individual and consumer loans, purchased consumer loans portfolios and other loans operations. This category is comparable to our operations other than individual and consumer loans, purchased consumer loans portfolios and other loans. Source: Central Bank

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Source: World Bank data, 2008.

Main Financial Institutions Brazilian Regulatory Authorities The Brazilian financial system is subject to several regulatory and supervisory authorities, including the CMN, the Central Bank, the CVM, the SUSEP and PREVIC, which are subordinated to several entities and institutions. Private Sector Financial Institutions The private financial sector of the Brazilian financial system includes, among others, multi-service banks, commercial banks, investment banks, credit, finance and investment companies, securities dealers, stock brokerage firms, real estate financing companies, leasing companies and factoring companies. As of February 29, 2012, according to the Central Bank's website, there were 2,191 financial institutions regulated and supervised by the Central Bank, including: 21 Commercial Banksfinancial institutions that receive current account deposits, grant short- and medium-term loans and are engaged in wholesale and retail banking; 14 Investment Banksfinancial institutions specialized in medium- and long-term loans and asset management services. These banks do not hold demand deposits and their main sources of funding are time deposits or foreign loans for local onlending. Their main lending transactions are working capital and loans for fixed capital, securities underwriting and trading, interbank deposits and onlending of foreign loans; and 139 Multi-Service Banksfinancial institutions authorized to engage in multiple financial activities pursuant to applicable laws and regulations governing each type of activity, such as commercial, investment and loan transactions. Such banks are authorized to provide a full range of commercial and investment banking services (including securities underwriting and trading), leasing and other services, such as real estate loans and fund management.

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Public Sector Financial Institutions Despite the privatization process both at federal and state levels, the Brazilian Government and several state governments still control many major commercial banks and financial institutions, with the purpose of encouraging the development of the Brazilian economy, primarily with respect to the agricultural, industrial and housing sectors. Such institutions hold a substantial portion of deposits and assets in the financial system and play a major role in relation to savings accounts, mortgage notes and agricultural loans. In addition, development banks act as regional development agencies. In addition to ourselves, the most important Brazilian Government-controlled banks are: Banco Nacional de Desenvolvimento Econmico e SocialBNDES: the main agent of the Brazilian Government's investment policy, providing long-term financing for companies of all sizes to support their respective cash expenditure programs. Caixa Econmica Federal: the main agent of the Brazilian Government's housing policy. Caixa Econmica Federal accepts demand and savings deposits and provides housing finance, participating in urban infrastructure projects and consumer lending. Banco do Brasil: the largest bank in Latin America in terms of assets. Banco do Brasil provides a full range of commercial and retail banking services to all levels of government, businesses in general and consumers.

In addition to the institutions above, the following are also considered part of the public sector within the Brazilian financial system: (i) state and regional development banks; (ii) state savings banks; and (iii) federal and state-controlled commercial and multi-service banks. Our Principal Markets The Brazilian Consumer Lending Market According to the Central Bank, total loan transactions with consumers (which, for our purposes, includes our individual and consumer and other credit operations portfolios), increased by an average of 21.4% between 2007 and 2010 (CAGR), reaching R$417.1 billion as of December 31, 2010. At that date, credit to consumers and financing of vehicles represented 85.2% of the total consumer credit transactions. Credit to individuals continued its expansion in 2011, reaching R$244.2 billion as of December 31, 2011. The table below shows the growth of consumer lending outstanding in Brazil by product:
As of December 31, 2011 (R$ billion) Overdraft facilities............. Consumer credit ................ Financing for vehicles and other goods ................... Credit card financing ......... Credit plans........................ Other .................................. Total .................................. 18.9 244.2 182.7 35.6 13.9 10.3 505.7 (%) of total loans 3.7 48.3 36.1 7.0 2.7 2.0 100.0 As of December 31, 2010 (R$ billion) 16.2 204.9 150.7 29.1 7.4 8.9 417.3 (%) of total loans 3.9 49.1 36.1 7.0 1.8 2.1 100.0 As of December 31, 2009 (R$ billion) 15.8 164.3 103.6 25.7 4.5 9.9 323.8 (%) of total loans 4.9 50.7 32.0 7.9 1.4 3.1 100.0 As of December 31, 2008 (R$ billion) 16.0 133.0 94.0 22.0 3.6 8.8 277.6 (%) of total loans 5.8 47.9 33.9 7.9 1.3 3.2 100.0 As of December 31, 2007 (R$ billion) 13.0 100.9 93.9 17.2 2.3 12.9 240.2 (%) of total loans 5.4 42.0 39.1 7.2 1.0 5.4 100.0 2007 to 2010 CAGR

CAGR(1) 9.8% 24.7% 18.1% 19.9% 56.8% (5.5%) 20.5%

(1) CAGRCompound Annual Growth Rate. Source: Central Bank.

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Overdraft Facilities Overdraft facilities have higher interest rates than other financing alternatives. The overdraft contract is renewed on a monthly basis and the overdue interest is incorporated into the principal amount of the loan, if not paid by the due date. Consumer Credit Consumer credit is frequently used by consumers who have limited access to credit facilities and is characterized by high interest rates due to the high default rates. Credit is made available in a lump sum to the consumer who repays the loan in monthly installments. Financing for Vehicles The vehicle financing market is dominated by the large retail banks, which have gradually taken over the position that was held in the past by the financial companies of vehicles manufacturers. Interest rates in this market are highly competitive. Smaller institutions in this market primarily focus on the used car market. Default rates are relatively low and loans are secured by the financed asset, which can be repossessed and publicly auctioned in the event of default. Credit Card Financings The large retail banks are the major players in the credit card financing market. Credit card financings have high rates of default and, consequently, interest rates for consumers are high. Credit Plans In-store financing still is the most fragmented of all consumer financing segments in Brazil. Historically, large retailers financed their consumers' purchases, but retailers and banks have recently entered into joint ventures in connection with those financings. In-store financing can be used for durable goods, such as construction materials and home appliances, as well as non-durable goods, such as clothing and food items. Rural and Agricultural Credit Market Agribusiness plays a strategic role in the Brazilian economy, primarily by generating funds for the country's trade balance from exports. The agricultural credit market is subject to current regulations and legislation and to the rules set forth by the Rural Credit Manual (the "MCR"). Rural credit operations are considered to be those in which National Rural Credit System ("SNCR") institutions supply funds for the purposes specified in the MCR and in accordance with its provisions. The main objectives of agricultural credit are to: (i) foster agricultural investments in the production, storage, processing and industrialization of agricultural and livestock farming products; (ii) favor the timely and appropriate funding of agricultural and livestock farming production and commercialization; (iii) strengthen the agricultural sector; and (iv) encourage the introduction of rational methods in the production system, aiming at increasing productivity, improving the standard of living of agricultural communities and adequately protecting the soil. Rural credit can be used for the following purposes: (i) funding; (ii) investment; and (iii) commercialization. Funding credit is used for covering normal production cycle expenses. Investment loans are used for investing in goods or services, the benefits of which are reflected over various production cycles. Commercialization loans are to cover expenses during the post-production phase or to convert into cash the receivables coming from the sale or delivery of products by the producers or their cooperatives. The funds earmarked for the agricultural sector are divided into regulated and non-regulated funds. Operations secured by regulated funds are subject to the CMN's normal financial charges, in accordance with the underlying goods to which the loans refer.

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The regulated agricultural credit funds include: (i) compulsory funds, calculated on demand deposits and subject to the compulsory payments made by financial institutions; (ii) official credit operations, monitored by the Ministry of Finance; (iii) the rural savings account, the worker protection fund and the "extra-market" investment fund, when in connection with operations subsidized by the Brazilian Government in the form of financial charges' equalization; and (iv) others that may be specified by the CMN. Financial charges on operations covered by non-regulated agricultural credit funds can be freely negotiated between the borrower and the lender.

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REGULATION OF THE BRAZILIAN BANKING INDUSTRY Overview The basic institutional framework of the Brazilian financial system was established by the Banking Reform Law. The Banking Reform Law created the CMN and granted the Central Bank, among others, the right to issue Brazil's currency and exercise credit control. Main Regulatory Agencies National Monetary Council (CMN) The CMN is the highest authority of the Brazilian financial system, responsible for monetary, credit, budgeting, fiscal and public-debt policies. CMN policies include, among other objectives, the following: adjusting the volume of currency to the needs of the Brazilian economy; regulating the domestic value of the currency; regulating the external value of the currency and the country's balance of payments; regulating the establishment and operation of financial institutions; directing the investment of funds by government-owned or private financial institutions, taking into account different regions of the country and favorable conditions for the harmonious development of the national economy; enabling improvement of the resources of financial institutions and of financial instruments; monitoring the liquidity and solvency of financial institutions; coordinating monetary, credit, budgeting, fiscal and public-debt policies; establishing the policy to be followed in the organization and operation of the Brazilian securities market; and establishing standards and rules for currency exchange policies, including purchase and sale of gold and transactions in foreign currencies.

The Minister of Finance is the chairman of the CMN, which is also composed of the Ministry of Planning, Budgeting and Management and the President of the Central Bank. The Central Bank The Banking Reform Law empowered the Central Bank of Brazil to implement the monetary and credit policies of the CMN, as well as to supervise public and private financial institutions and, when needed, apply the penalties set forth by law to such institutions. Further, it also made the Central Bank responsible for, among others, controlling credit and foreign capital, receiving mandatory payments and voluntary demand deposits made by financial institutions, engaging in rediscount operations and loans to financial banking institutions, and being the depository of official reserves of gold and foreign currency. The Central Bank also controls and approves the operation, control transfer, and corporate reorganization of financial institutions, as well as the transfer of the location of its branches (in Brazil or abroad). The Central Bank is also responsible for requiring periodic disclosure of financial institution's financial statements and for setting minimum capital requirements, compulsory reserve requirements and operational limits to be met by Brazilian financial institutions. The President of the Central Bank is appointed by the President of Brazil, subject to ratification by the Senate, to hold office for an indefinite period of time.

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Brazilian Securities Exchange Commission (CVM) The CVM is the agency responsible for implementing CMN policy for the securities market and regulating, developing, controlling and supervising the securities market, pursuant to the securities laws and to the Brazilian Corporations Law. With headquarters in the City of Rio de Janeiro, State of Rio de Janeiro, and jurisdiction over the entire Brazilian territory, the CVM is an agency of the Ministry of Finance. It is an independent legal entity with its own corporate existence and assets. The CVM is responsible, among other things, for regulating, monitoring and inspecting publicly-held companies, the trading and intermediation in the securities and derivatives markets, the organization, functioning and operation of stock exchanges and commodities and futures exchanges, and the management and custody of securities. Pursuant to Law No. 10,303 of October 31, 2001, the regulation and supervision of mutual and investment funds (originally regulated and supervised by the Central Bank) were transferred to the CVM. The CVM is managed by a president and four officers appointed by the President of Brazil among individuals of high reputation who are known for their expertise in matters of capital markets and whose appointment shall be ratified by the Senate. The term of office of CVM officers is five years, reappointment is not permitted and one fifth of such officers are appointed each year. Brazilian Council of Private Insurance (CNSP) The CNSP establishes the guidelines and rules governing private insurance policies. The CNSP is comprised of the Minister of Finance (Chairman), members appointed by the Ministries of Justice and Social Security, the SUSEP, the Central Bank and CVM. CNSP's duties include: (i) regulating the establishment, organization, operation and oversight of those who conduct activities subject to the Brazilian Private Insurance System (SNSP); (ii) enforcing penalties; (iii) setting the general provisions for insurance contracts, pension plans, capitalization and reinsurance; and (iv) establishing the general guidelines of reinsurance operations. Legal Reform of Brazilian Banking System Article 192 of the Brazilian Federal Constitution, enacted in 1988, set a maximum interest rate per annum of 12% on bank loans. However, the limit has not been enforced since the enactment of the Brazilian Federal Constitution because this provision requires complementary regulation that has not yet been issued. Several attempts to regulate the maximum interest on bank loans have been unsuccessful. In May 2003, EC 40/03 was approved in lieu of Article 192 of the Brazilian Federal Constitution. EC 40/03 replaced the restrictive constitutional provision on the maximum interest rate by granting overall authority to the Brazilian Congress to regulate the Brazilian financial system through specific legislation. After the enactment of the Brazilian Civil Code, the maximum interest rate was indexed to the SELIC rate, unless parties agreed to a different interest rate. As of the date hereof, uncertainty still remains as to which should be the maximum interest rate in Brazil, the SELIC or the former interest rate of 12% per annum, and as to the enforceability of this limit on transactions carried out by financial institutions. Foreign Investments Foreign Banks The Brazilian Federal Constitution prohibits foreign financial institutions from opening branches in Brazil, unless authorized by a presidential decree. A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.

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Foreign Investments in Brazilian Financial Institutions The Brazilian Federal Constitution permits individuals and companies residing, or incorporated abroad, to invest in the voting capital of Brazilian financial institutions, provided that such investors have a specific authorization from the Brazilian Government and investments are within the limits set forth by the Central Bank. Foreign investors who have not obtained such specific authorization may, however, by public negotiation, acquire non-voting shares issued by Brazilian financial institutions or depositary receipts representing non-voting shares, offered abroad through public offerings. The Role of the Government in the Brazilian Banking System In light of the global financial crisis, on October 6, 2008, the then Brazilian President issued a provisional measure on the internal use of reserves denominated in foreign currency by the Central Bank to provide liquidity to financial institutions by means of re-discount and loan transactions. In addition, Law No. 11,908 of March 3, 2009 authorized: (i) Banco do Brasil and Caixa Econmica Federal to acquire, directly or indirectly, with or without control, equity interests in private and government-owned companies in Brazil, including insurance companies, pension plan institutions and capitalization companies; (ii) Caixa Banco de Investimentos S.A. to be established as a wholly-owned subsidiary of Caixa Econmica Federal for investment bank operations; and (iii) the Central Bank to carry out swap transactions in foreign currency with central banks of other countries. CMN Resolution No. 3,656 of December 17, 2008 amended the by-laws of the FGC to allow it to invest up to 50% of its net equity in: (i) acquisition of credit rights from financial institutions and leasing companies; (ii) certificated and non-certificated banking deposits, leasing notes and bills of exchange accepted by associated institutions, provided that they are guaranteed by credit rights created or to be created in the respective transaction, or other credit rights with in rem or in personam guarantee; and (iii) linked transactions, under the terms of CMN Resolution No. 2,921 of January 17, 2002. FGC may sell other assets acquired in the transactions listed in items (i), (ii) and (iii). As per CMN Resolution No. 3,931 of December 3, 2010, the raising of funds through banking deposits without issuance of certificates and with special guarantees to be provided by the FGC will decrease gradually until such deposits cease to be accepted by financial institutions in January 2016. Corporate Structure Except as provided by law, financial institutions must be organized as corporations (sociedades por aes) and be subject to the provisions of Brazilian Corporations Law and the regulations issued by the Central Bank, and also to inspections by the CVM if they are publicly-held corporations. The share capital of financial institutions may be divided into voting or non-voting shares, but non-voting shares may not exceed 50% of the total share capital. Limitations and Restrictions on Financial Institutions Limitations on the Extension of Credit The activities carried out by financial institutions are subject to several limitations and restrictions. These limitations and restrictions are generally related to the granting of credit, risk concentration, investments, sales under repurchase transactions, foreign currencies loans, asset management, micro-credit and payroll-deducted credit. The main restrictions and limitations imposed on financial institutions are the prohibitions to grant loans or make advances to (i) individuals or companies holding, directly or indirectly, more than 10% of the institution's capital stock, except under specific circumstances authorized by the Central Bank; (ii) companies in which they hold more than 10% of the capital stock; and (iii) its directors or officers and their immediate family members or companies in which any of these persons hold, directly or indirectly, more than 10% of the capital stock. Restrictions to transactions with related parties do not apply to transactions between financial institutions in the interbanking market. Restrictions to loan or advances to individuals or companies holding more than 10% of the institution's capital stock are not applicable for public financial institutions.

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Furthermore, financial institutions must also comply with certain limitations regarding concentration of risk. Such restrictions prevent financial institutions to grant loans or make advances to any individual or legal entity or a group of persons representing a common economic interest in an amount that exceeds 25% of the value of its regulatory capital. Limitations on Repurchase Transactions Repurchase transactions (operaes compromissadas) are transactions involving assets that are sold or purchased that may subject the seller or the buyer to repurchase or resell the assets (as the case may be) upon the occurrence of certain conditions contractually agreed. The conditions triggering the repurchase or resale obligation vary from one transaction to the other, and typically must occur within a particular timeframe. Repurchase transactions executed in Brazil are subject to operational capital limits, based on the financial institution's shareholders' equity, as adjusted in accordance with Central Bank regulations. A financial institution may only hold repurchase transactions in an amount up to 30 times its regulatory capital. Within this limit, repurchase transactions involving private securities may not exceed five times the amount of the regulatory capital. Limits on repurchase transactions involving securities backed by Brazilian government authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer, as established by the Central Bank. Limitations on Foreign Currency Loans Financial institutions may borrow foreign currency denominated funds in the international markets (either through bilateral loans or the issuance of debt securities), for onlending or other purposes contemplated in the applicable regulation. Banks conduct these onlending transactions through loans payable in Brazilian currency and denominated in foreign currency. The terms of the onlending must correspond to the terms of the original transaction. The interest rate charged on the underlying foreign loan must also conform to international market practices. In addition to the original cost of the transaction, the financial institution may only charge an onlending commission. The Central Bank may establish limitations on the term, interest rate and general conditions of foreign currency loans. It frequently changes these limitations in accordance with the economic environment and the monetary policy of the Brazilian Government. Regulations Affecting Financial Market Liquidity Compulsory Deposits and Other Requirements The Central Bank currently imposes several compulsory deposits, requirements to financial institutions. Some of the current types of reserves required under Brazilian law include: Demand Deposits Pursuant to Central Bank Circular No. 3,274, dated February 10, 2005, as amended by Circular No. 3,323, dated May 30, 2006, and Circular No. 3,497, dated June 24, 2010, banks and other financial institutions in general are currently required to deposit with the Central Bank, on a non-interest bearing basis, 43% of the sum of the daily average balance of their demand deposits, bank drafts, banking collections, collection receivables and tax receipts, debt assumption transactions and proceeds from the realization of guarantees granted to financial institutions in excess of R$44 million. This requirement has increased to 43% on July 7, 2010 and will increase to 44% on July 18, 2012; and 45% on July 2, 2014. As of the closing of each day, the balance in such account must be equivalent to at least 80% of the reserve requirement for the respective calculation period. Savings Accounts The Central Bank currently requires Brazilian financial institutions to deposit, on a weekly basis, in an interest-bearing account with the Central Bank, an amount equivalent to 20% of the weekly average of the aggregate balance of savings accounts during the prior week. These requirements are set forth in Central Bank Circular No. 3,093, dated March 1, 2002, as amended by Central Bank Circular No. 3,128, dated June 24, 2002 and Central

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Bank Circular No. 3,130, dated June 27, 2002. In addition, pursuant to CMN Resolution No. 3,932, dated December 16, 2011, a minimum of 65% of the total amount of deposits in savings accounts must generally be used to finance residential real estate or the housing construction sector. Amounts that can be used to satisfy this requirement include, in addition to direct residential real estate financings, mortgage notes, written-off residential real estate loans, and certain other financings, all as specified in guidance issued by the Central Bank. Pursuant to Resolution No. 3,023, dated October 11, 2002, as amended, the CMN established an additional reserve requirement of 10% on the rural savings accounts we and other state-owned banks hold and on the savings account funds captured by the entities of SBPE. Time Deposits Pursuant to Central Bank Circular No. 3,569, dated December 22, 2011, as amended, 20% of the financial institutions' time deposits exceeding R$30 million must be deposited with the Central Bank, in the amount exceeding: (i) R$3.0 billion for financial institutions with Tier 1 component of the regulatory capital below R$2.0 billion; (ii) R$2.0 billion for financial institutions with Tier 1 component of the regulatory capital equal to or higher than R$2.0 billion and below R$5.0 billion; (iii) R$1.0 billion for financial institutions with Tier I component of the regulatory capital equal to or higher than R$5.0 billion and below R$15.0 billion; and (iv) zero for financial institutions with Tier 1 component of the regulatory capital equal to or higher than R$15.0 billion. Financial institutions that hold compulsory time deposits up to R$0.5 million are exempted from the reserve requirement of Circular No. 3,569, as amended, although they must provide information to the Central Bank on time deposits held by them. Interest on part of such deposits is paid at a SELIC-based rate. As of the closing of each day, the balance in such account must be equivalent to 100% of such reserve requirement. Additional Deposit Requirements (Demand Deposits, Savings Accounts and Time Deposits) On August 14, 2002, the Central Bank, by means of Circular No. 3,144, as amended by Circular No. 3,486 of February 24, 2010, Circular No. 3,514 of December 3, 2010, Circular No. 3,528 of March 23, 2011 and Circular No. 3,576 of February 10, 2012, established an additional reserve requirement on deposits captured by multipleservice banks, investment banks, commercial banks, development banks, credit, financing and investment companies, real estate companies and savings and loan associations. Pursuant to such regulations, these entities are required to reserve, on a weekly basis, the cash equivalent to the sum of (i) 12% of the arithmetic average of the time deposits funds and certain other amounts subject to the respective reserve requirement; (ii) 10% of the arithmetic average of the savings deposits funds subject to the respective reserve requirement; and (iii) 12% of the arithmetic average of the demand deposits funds subject to the respective reserve requirement. These entities will only be required to reserve these funds to the extent they exceed (i) R$3.0 billion, for financial institutions with adjusted Tier 1 component of the regulatory capital below R$2.0 billion; (ii) R$2.0 billion, for financial institutions with Tier 1 component of the regulatory capital below R$5.0 billion and equal to or higher than R$2.0 billion; (iii) R$1.0 billion, for financial institutions with Tier I component of the regulatory capital below R$15.0 billion and equal to or higher than R$5.0 billion, or (iv) zero, for financial institutions with Tier 1 component of the regulatory capital equal to or higher than R$15.0 billion. If the applicable reserve requirement of a financial institution is equal to or below R$0.5 million, such financial institution will be exempt from the reserve requirements set forth by Circular No. 3,144 and amendments thereto. The reserve requirement must be met in cash in a specific account and, at the end of each day, the balance in such account must be equivalent to 100% of such additional reserve requirement. Rural Credit The MCR, published by the Central Bank, requires certain financial institutions authorized to conduct rural credit operations to maintain a daily average balance of rural credit not lower than (i) 28% (to be gradually reduced to 27%, 26% and 25%, on July 2013, 2014 and 2015) of resources arising from a certain amount calculated over demand deposits; and (ii) 68% (to be gradually reduced to 67%, 66% and 65%, on July 2012, 2013 and 2014) of its agricultural savings deposits. A financial institution that does not meet these requirements will be subject to payment of fines, calculated on the daily difference between the required balance and the portion actually used for agricultural lending, and to a penalty or, if the financial institution wishes, it must deposit the unused amount in a non-interest bearing account maintained with the Central Bank until the last business day of the subsequent month.

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We, as a development bank, are not required to meet the minimum daily average balance of rural credit of 28% of demand deposits. Foreign currency Pursuant to Circular No. 3,548, dated July 8, 2011, the Central Bank established that Brazilian financial institutions authorized to carry out foreign exchange transactions are required to deposit 60% of daily exposure in foreign currencies exceeding the lesser of the following: (i) the amount equivalent to US$1.0 billion; or (ii) the amount equivalent to the Tier 1 component of the regulatory capital of the financial institution. Financial conglomerates may calculate these reserve requirements on a consolidated basis, in which case, a 60% rate will be applied over the financial conglomerate's daily exposure in foreign currencies exceeding the lesser of the following: (i) the amount equivalent to US$1.0 billion; or (ii) the amount equivalent to the Tier 1 component of the regulatory capital of the financial conglomerate. Deposits will be made with the Central Bank on a non-interest bearing basis. If the applicable reserve requirement of a financial institution or financial conglomerate is equal to or below R$0.1 million, such financial institution will be exempt from setting aside reserve requirements set forth by Circular No. 3,548. Deposits and Guarantees Pursuant to the Central Bank Circular No. 3,090, dated as of March 1, 2002, certain financial institutions are required to deposit with the Central Bank, on a non-interest bearing basis, an amount in cash equivalent to 45.0% of the amounts corresponding to the sum of the average balance of (i) deposits made by individuals or legal entities domiciled abroad, compulsory deposits and linked deposits (depsitos vinculados) in excess of R$2.0 million; and (ii) agreements with assumption of obligation related to transactions carried out in Brazil and guarantees granted by them (garantias realizadas) in excess of R$2.0 million. As of the closing of each day, the balance in such account shall be equivalent to at least 100% of the reserve requirement for the respective calculation period, which begins on Monday of one week and ends on Friday of the following week. In addition, in the past the Central Bank has imposed certain compulsory deposit requirements on other types of transactions (e.g. the grant of guarantees) that are no longer in effect, but there is no assurance that the Central Bank will not impose similar restrictions in the future. Foreign Currency and Gold Exposure Pursuant to CMN Resolution No. 3,488, dated August 29, 2007, the total consolidated exposure of a financial institution in foreign currencies and gold cannot exceed 30% of its regulatory capital. Microcredit Regulations According to CMN Resolution No. 4,000, dated August 25, 2011, at least 2% of the balance of the demand deposits of financial institutions must be allocated to low-interest-rate loan transactions designated for lower-income individuals and micro enterprises, following a specific methodology. Regulatory Capital and Shareholders' Equity Standards Brazilian financial institutions are required to comply with guidelines laid down by the Central Bank and CMN consistent with the Basel Accords in view of the capital adequacy risk, including Basel II and Basel III Accords, which is under implementation in Brazil. Banks provide the Central Bank with the information necessary to discharge its oversight duties, which include monitoring capital adequacy and solvency. The main principle of the Basel II Accord, as implemented in Brazil, is that a bank's own capital must cover the major of its risks, including credit risks, market risk and operational risk. CMN and Central Bank requirements differ from the Basel II Accord requirements in the following respects, among others: Required minimum capital of 11% instead of 8%, as provided under Basel II Accord; Required additional capital in relation to off-balance sheet swaps of foreign currency and interest rates;

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Assigned risk weighting and different credit conversion factors for some assets, including a risk weighting of 300% for tax credits; Required assessment and report on the minimum capital and equity on a consolidated basis; Require banks to set aside a portion of their capital to cover operational risks; Preclude the use of external rating for calculating the minimum required capital; and The Central Bank uses a conservative approach to define demand of corporate venture capital.

In June 2004, the bank supervision committee of the Bank of International Settlements ("BIS") endorsed the publication of the International Convergence of Capital Measurement and Capital Standards: A Revised Framework, otherwise known as the "Basel II Accord." On December 9, 2004, the Central Bank expressed its intention to adopt the Basel II Accord in Brazil. The bulletin indicated that the Central Bank intends to adopt the Basel II Accord gradually, seeking to incorporate provisions applicable to the Brazilian banking sector. Furthermore, the CMN issued on June 29, 2006, Resolution No. 3,380, which sets out procedures for the implementation of an operational risk internal structure, aimed at fostering compliance with Basel II Accord principles by Brazilian banks. Brazilian banks were required to present their proposed procedures by the end of 2006 and implement their procedures by the end of 2007. On February 28, 2007, the CMN established the criteria for calculation of regulatory capital. In addition, on August 29, 2007, the CMN established new criteria for calculating the required regulatory capital (PRE) of financial institutions effective from July 1, 2008. On September 27, 2007, the Central Bank set out a revised schedule for the adoption of the Basel II Accord through Communications No. 16,137 and 19,028, indicating that the requirements relating to the use of advanced methods for the valuation of capital will be fully implemented by the first half of 2013. Our regulatory capital is not affected by the FNE portfolio, except to the extent that our servicing of that portfolio affects our balance sheet. For a description of the effects of our relationship with FNE on our balance sheet, see "Principal Factors Generally Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs." On September 12, 2010, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced a substantial strengthening of existing capital requirements and fully endorsed previous agreements on the overall design of the capital and liquidity reform package, the Basel III Accord, presented during the Seoul G20 Leaders summit in November 11, 2010. These reforms would increase the minimum common equity requirement from 2% to 4.5%. In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand periods of stress, bringing the total common equity requirements to 7%. The new rules are expected to be implemented gradually by the central banks of various countries between 2013 and 2019. See "Risk FactorsRisks Relating to us and the Brazilian Banking IndustryMinimum capital adequacy requirements could have an adverse effect on us." On January 13, 2011, the Basel Committee expanded on the Basel III capital rules with additional requirements applicable to non-common Tier 1 or Tier 2 instruments issued by internationally active banks. The January 13 Annex imposes further requirements on additional Tier 1 and Tier 2 capital instruments issued by internationally active banks. The additional requirements would apply to all instruments issued after January 1, 2013; otherwise, qualifying instruments issued prior to that date would be phased out proportionately over a ten-year period, beginning in 2013. On February 17, 2011, the Central Bank issued Communication No. 20,615, whereby the Central Bank indicated its willingness to implement the provisions of the January 13 Annex. For such purpose, the Central Bank will need to issue further regulations, according to a non-binding schedule set forth by Communication No. 20,615. On February 17, 2012, the Central Bank published for public comments proposed rules changing the definition of regulatory capital currently set forth by CMN Resolution No. 3,444 issued on February 28, 2007.

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Among other topics, the Central Bank initially intended to consider, in the composition of the reference shareholders' equity of financial institutions, their controlled entities similar to financial institutions (e.g., credit card administrators) and investment funds from which financial institutions take substantial risks and benefits. We cannot ascertain if, when and to what extent such new rules may become effective. Regulatory capital is currently taken into account for the determination of operating limits of Brazilian financial institutions (with the exception of the limit of real property), and are represented by the total sum of the Tier 1 equity and Tier 2 equity (pursuant to the terms of CMN Resolution No. 3,444, as amended): Tier 1. Corresponds to the net assets, the balance of profits and loss accounts of creditors and deposits in escrow accounts to cover capital shortages (pursuant to the terms of CMN Resolution No. 3,398, of August 29, 2006), after deduction of amounts corresponding to (i) the balance of debtor income accounts; (ii) revaluation reserves, contingency reserves and special income reserves relating to mandatory dividends yet to be distributed; (iii) the amounts related to cumulative preferred shares and to redeemable preferred shares; (iv) tax credits (pursuant to Resolution No. 3,059, issued by CMN on December 20, 2002, as amended); (v) permanent deferred assets, net of goodwill paid in the acquisition of investments; and (vi) the balance of unearned gains and losses resulting from the adjustment in the market value of securities classified as "securities available for sale" and derivative financial instruments used for cash flow hedge. Tier 2. Corresponds to revaluation reserves, contingency reserves, and special reserves of profits relating to mandatory dividends not distributed, added to (i) cumulative preferred shares, redeemable preferred shares, subordinated debts and hybrid instruments and debt papers; and (ii) the balance of unearned gains and losses resulting from the adjustment in the market value of securities classified as "securities available for sale" and derivative financial instruments used for cash flow hedge. The total amount of Tier 2 is limited to the total amount of Tier 1, provided that (i) the total amount of revaluation reserves is limited to 25% of Tier 1 equity; (ii) the total amount of subordinated debt plus the total amount of redeemable preferred shares with an original term to maturity below 10 years is limited to 50% of the total amount of Tier 1; and (iii) a 20% reduction will be applied each year to the amount of subordinated debts authorized as Tier 2 equity and of redeemable preferred shares during the five years immediately preceding their respective maturities. Financial institutions must calculate the reference capital on a consolidated basis. Starting on July 2007, the balances of assets represented by shares, hybrid equity and debt instruments, subordinated debt instruments and other financial instruments authorized by the Central Bank for inclusion in Tier 1 and Tier 2, issued by financial institutions authorized by the Central Bank, must be deducted from the reference capital. In addition, investment fund quotes proportional to these instruments must also be deducted from the reference capital, as well as amounts relating to (i) equity in financial institutions which information the Central Bank does not have access to; (ii) excess funds applied to permanent assets pursuant to the current regulation; and (iii) funds delivered to or available by third parties for related transactions. In addition to the minimum limits of realized capital and shareholders' equity set forth in the current legislation, financial institutions must keep a regulatory capital compatible with the exposure of their assets, liabilities and offsetting accounts. Financial institutions may only distribute income on any account in amounts that exceed the amounts required by law or by applicable regulation when such distribution does not prevent compliance with the capital and shareholders' equity standards. On June 28, 2010, the Central Bank issued Circular No. 3,498, as amended, establishing new rules for calculation of the daily amount of minimum capital maintained by financial institutions to avoid market risks. The new calculation rules will result in an increase in the financial institution's capital requirements. Further, Circular No. 3,498 established a timeline for the implementation of such changes, providing for gradual changes in the criteria for calculating minimum capital requirements and, consequently, leading to an increase in the minimum capital requirements as of January 2012.

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Pursuant to the notice published by the Central Bank jointly with Circular No. 3,498, the new rules are intended to enhance the Brazilian financial system in a manner that reflects international regulatory standards agreed by the G20 and that stimulates improvements in market risk management of financial institutions. See "Other Statistical and Financial InformationLending OperationsPast Due Loans" for more information on Brazilian regulations with respect to classification of loan operations and allowance for loan losses. Regulations Applicable to Micro Credit Transactions The Brazilian Government has taken various measures to encourage low-income individuals and micro enterprises to have greater access to the Brazilian financial system. Such measures include requirements of credit allocation, the simplification of banking procedures and the adjustment of credit union regulations. Since 2003, commercial banks, service banks licensed to render commercial banking services and the Caixa Econmica Federal must allocate 2% of their cash deposits for loans at low interest to lower-income individuals and micro enterprises, according to a specific methodology. The interest rates may not exceed 2% per month (or 4% per month to specific production financingsmicrocrdito produtivo orientado), the repayment term may not be less than 120 days (except in certain cases), and the principal amount may not exceed R$2,000 to individuals and R$5,000 to micro enterprises (or R$15,000 for loans granted under certain specific production financings). Account opening charges in connection with microcredit transactions may not be higher than 2% or 3%, depending on the type of borrower. Regulation Applicable to Issuance of Financial Bills (Letras Financeiras "LFs") Provisional Measure No. 472, enacted by the Brazilian Government on December 15, 2009 (converted into Law 12,249), among other items, created a long term debt security, enabling a new category of fund raising by Brazilian financial institutions. On February 25, 2010 the CMN issued Resolution No. 3,836, regulating the issuance of LFs. Pursuant to Resolution No. 3,836, the LFs must have a minimum nominal amount of R$300,000, and a minimum tenor of 24 months. Pursuant to Instruction No. 488 of December 16, 2010, the CVM has regulated the public offering of LFs in the Brazilian capital markets. LFs with subordination provisions may not be publicly offered, as provided by CMN Resolution No. 3,836. Regulation Applicable to Agribusiness Credit Bonds (Letras de Crdito do Agronegcio LCA) Pursuant to Law No. 11,076, of December 30, 2004, the Brazilian Government developed certain financial products, including LCAs, aimed at funding agribusiness in Brazil. LCAs are issued exclusively by private or public financial institutions acting in the agribusiness financing market. Accordingly, LCAs will be backed by the receivables from agribusiness transactions (e.g., facilities for the production of agricultural goods, the acquisition of agricultural equipments, among others), which must be registered with a settlement system duly recognized by the Central Bank. Upon the issuance of an LCA, the underlying receivables will become pledged in favor of the holder of the LCA, which will not surpass the value of the underlying receivables to which it is linked. Regulation to Guarantee the Security and the Soundness of the Brazilian Financial System Financial institutions must provide information regarding the credit granted to, and guarantees submitted by, their clients at least annually. This information is used to: facilitate the monitoring and regulatory role of the Central Bank; provide information on debtors to other financial institutions (which may only have access to such information after prior authorization of the client); and prepare macro-economic analyses.

If the total amount of client transactions exceeds R$1,000, the financial institution must provide the Central Bank with: client identification documents;

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a break-down of client transactions, including any guarantees granted by the financial institution to the client obligations; and information related to the credit risk classification of the client based on the classification of its credit transactions.

The CMN, through Resolution No. 3,721, dated April 30, 2009, established new standards relating to the credit risk management structure, which were adopted by financial institutions by October 29, 2010. Pursuant to this rule, financial institutions are required to create an internal credit risk management body consistent with the structure of the services and products offered by the financial institution and with its risk exposure. Policies for credit risk management created under this rule are required to be approved and annually reviewed by the board of directors and executive officers of the relevant financial institutions. Brazilian Payment System In December 1999, the Brazilian Government issued new rules on the settlement of payments in Brazil, based on the guidelines adopted by the BIS. After a period of testing and gradual implementation, the Brazilian Payment System, began operating in April 2002. The Central Bank and CVM have the authority to regulate and oversee this system. In accordance with these rules, new clearing houses can be set up and all are required to implement procedures to reduce the possibility of systemic crises and mitigate risks currently under the responsibility of the Central Bank. The most important principles of the Brazilian payment system are: Existence of two main payment and settlement systems: real time gross settlement, using the reserves deposited with the Central Bank, and deferred net settlement by clearing houses); Clearing houses, with a few exceptions, are accountable for the orders they accept; and Bankruptcy laws do not affect the payment orders placed through credit from clearing houses, nor the guarantee given to secure such orders. However, the clearing houses have ordinary credits against any participant under the bankruptcy laws.

The systems created by clearing houses are responsible for establishing security mechanisms and rules to curb risks and contingencies, cover losses among market agents and directly execute the positions of the agents, to perform their agreements and exclude warranty held in custody. The clearing houses and settlement service providers considered important for the system are required to set aside a portion of its assets as additional collateral for settlement of transactions. Under these rules, the responsibility for settling a transaction lies with the clearing house and settlement service providers responsible for it. Once a financial transaction is submitted for clearing and settlement, it usually becomes an obligation of the clearing house and/or settlement service provider, and is no longer exposed to bankruptcy or insolvency by the market agent presenting it to the clearing and settlement. Pursuant to Circular No. 3,057, of August 31, 2001, as amended, the Central Bank, within its authority to regulate the operation of clearing and settlement systems, established that: according to Circular No. 3,057, as amended, systemically important systems are, in principle (without prejudice to the right of the Central Bank to consider other systems as systemically important): (i) all systems that settle financial assets, securities, stock, financial derivatives and foreign currency transactions; and (ii) systems to transfer funds or settle other interbank transactions which average daily trading volume exceeds 4% of the average daily trading volume of the reserve transfer system, or, to the best knowledge of the Central Bank, can jeopardize the flow of payments within the Brazilian payments system; systemically important deferred settlement systems ought to promote the final settlement of the results assessed thereby directly into accounts held with the Central Bank;

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the maximum deferral time to settle a transaction should be: (i) the end of day, in the event of transfer of funds; (ii) one business day, in the case of spot transactions in securities and stock other than shares; or (iii) three business days in the case of spot transactions in shares on stock exchanges (except if the Central Bank sets forth a new deadline for cases in which spot transactions in shares occur simultaneously on different stock exchanges). The deadline for settling other transactions is established by the Central Bank on a case-by-case basis; and the operator must maintain a net worth consistent with the risks inherent in the settlement systems it operates, subject to a minimum of R$30.0 million, for systemically important operator, or R$5.0 million, for systemically non-important operators.

Financial institutions and other institutions contracted by the Central Bank are also necessary to create mechanisms to identify and avert risks of liquidity, according to certain procedures established by the Central Bank. Within the scope of these procedures, institutions are required to: Have criteria in place for measuring liquidity risks and mechanisms for managing them; Analyze economic and financial data to assess the impact of different market scenarios on the institution's liquidity and cash flow; Prepare reports to enable the institution to monitor liquidity risk; Identify and assess mechanisms to undo positions that could threaten the institution economically and/or financially in obtaining the necessary funds to make such reversals; Implement control systems and test them regularly; Provide the institution's management promptly with information and analyses available on any identified liquidity risk, including any findings or corrective measures taken; and Develop contingency plans to address liquidity crises.

Independent Auditor and Audit Committee Resolution No. 3,198, issued by the CMN on May 27, 2004, as amended, established certain requirements in respect of financial institutions' independent auditors and required financial institutions to have an audit committee. Financial institutions may hire an independent auditor only among those accountants that are registered with the CVM, with a certification of specialist in banking audit granted by the CFC and by IBRACON, and provided that the minimum requirements proving the accountant's independence are met. In addition, the partners and managers of the independent audit firm in charge of the audit of financial institutions must be replaced at least once every five consecutive years. An independent auditor who has worked for a financial institution can only be appointed again after three consecutive years from the date of its replacement. The financial institution must appoint an executive manager responsible for ensuring compliance with the regulations on preparation of financial statements and audit. In addition to the auditor's report, the independent auditor must prepare a report on: the evaluation of internal controls and risk management procedures of the financial institution, including issues related to its data processing electronic system, and disclose all deficiencies found; and the description of any non-compliance by the financial institution with any regulation to which it is subject, in respect of its financial statements or its activities.

Under CMN Resolution No. 3,198, as amended, every financial institution that (i) has a regulatory capital, or a consolidated regulatory capital equal to or higher than R$1.0 billion; (ii) manages third party assets in an amount greater than R$1.0 billion; or (iii) manages third party assets and deposits in an amount greater than R$5.0

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billion; must create an internal audit committee within one year from indicating in its financial statements that any such parameter has been reached. For a definition of regulatory capital, see "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market LiquidityRegulatory Capital and Shareholders' Equity Standards." The audit committee must be created by express provision in the bylaws of the financial institution, and is comprised of at least three members, one of whom must specialize in accounting and auditing. Pursuant to Brazilian legislation, the audit committee members can also serve as members of the board of directors of the financial institution and must meet certain requirements in order to guarantee the independence of the audit committee. Members of the audit committee of banks controlled by the Brazilian government or banks with shares traded in stock exchanges may not be, or have been over the last 12 months: (i) an officer of the bank or its associate companies; (ii) an employee of the bank or its associate companies; (iii) a technical manager, officer, manager, supervisor, or any other team manager involving in auditing within the bank; (iv) a member of the fiscal council of the bank; or (v) spouses or cousins up to second degree of individuals mentioned in items (i) through (iv) above. In addition the members of the audit committee of publicly held banks are forbidden to receive any compensation by the bank or its affiliates in addition to their payment as members of the audit committee. If the member of the audit committee of the bank or its affiliates is also a member of the board of directors of the bank or its affiliates, he/she will be paid a compensation relative to one position only, at his/her choice. Some of the main functions of the audit committee are to: appoint independent auditors to be elected by the board of directors; supervise the work of the independent auditors; request the replacement of the independent auditors; review the semi-annual and annual financial statements, and the management and independent auditor's reports; supervise the accounting and auditing of the financial institution, including compliance with internal procedures and applicable legislation; evaluate the implementation of the independent auditors' recommendations by the management of the financial institution; receive and disseminate information regarding any non-compliance with internal procedures or applicable legislation; instruct managers regarding internal controls and procedures to be adopted; meet with managers, independent auditors and internal accountants to check the implementation of recommendations made by the audit committee; prepare a report with the information gathered by it and keep it available to the Central Bank and the financial institution's board of directors; and publish, together with the financial statements, a summary of the audit committee's report.

In addition, Brazilian law permits the creation of a single audit committee for a group of companies. In this case, the audit committee will be in charge of each institution belonging to the same group. Independent auditors and the audit committee must inform the Central Bank, within three business days of the relevant identification, of the existence or evidence of error or fraud represented by: non-compliance with rules and regulations that may affect the continuation of the audited company; any type of fraud by the bank's management; significant fraud by the bank's employees or third parties; or

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errors resulting in significant mistakes in the company's financial statements.

Internal Compliance Procedures All financial institutions must maintain internal policies to control their activities, their financial, transactional and management information systems, as well as ensure compliance with applicable laws and regulations. The executive officers of the financial institution are responsible for the implementation of a system of internal control, by defining procedures and responsibilities, and by setting goals for each internal division of the financial institutions. The executive officers are also responsible for monitoring the compliance with such internal policies. Internal accountants or internal auditors are responsible for monitoring the internal control systems, and must report directly to the board of directors. Transactions with Affiliates Law No. 7,492, dated June 16, 1986, provides, among other things, for criminal offenses against the Brazilian financial system. This law defines as a crime the extension of credit by a financial institution to any entity controlled, directly or indirectly, by such financial institution or which is subject to common control with such financial institution and is punishable by two to six years' imprisonment and a fine. On June 30, 1993, the CMN issued Resolution No. 1,996, which requires any such transaction to be reported to the Attorney General's office. Law No. 6,099, dated September 12, 1974, and CMN Resolution No. 2,309, dated August 28, 1996, as amended, set forth that a bank and its leasing subsidiary may enter into a credit transaction. Anti-Money Laundering Laws On July 24, 2009, the Central Bank issued Circular No. 3,461, which, as amended, consolidates the procedures to be complied with by financial institutions (including their branches and subsidiaries abroad) in order to prevent the crimes set forth in Law No. 9,613, dated March 3, 1999 (the Money Laundering Law), or Money Laundering Crimes. Circular No. 3,461, as amended, sets forth requirements to be complied with by financial institutions related to (i) internal policies and controls systems, (ii) record of customer information, (iii) record of financial services and transactions, (iv) record of checks and transfer of funds, (v) record of prepaid cards, (vi) record of handling of resources in excess of R$100,000, and (vii) report of material information to COAF. Internal Policies and Controls Systems Financial institutions shall develop and implement internal policies and control systems that: (i) indentify the responsibilities of the members of each of the hierarchical levels of the financial institutions; (ii) contemplate collection and registration of information systems that shall enable the identification of transactions that may constitute a money laundering crime in a timely manner; (iii) define criteria and proceedings for the selection and training of the employees of financial institutions, as well for monitoring their economic and financial conditions; and (iv) reflect the necessity of previous analysis of new products aiming at preventing the money laundering crimes. In addition, such internal policies and control systems shall encompass measures that shall enable financial institutions to (i) confirm the costumer identification; (ii) indentify the final beneficiary of the transactions; and (iii) indentify politically exposed persons. According to Article 4 of Circular No. 3,461, a politically exposed person is an individual who performs or has performed, in the last 5 years, relevant public positions, jobs or functions, in Brazil or in other countries, territories and foreign dependencies, as well as their representatives, relatives and other people closely related to him. Circular No. 3,461, provides for further details to be complied with by financial institutions with respect to the identification of a politically exposed person.

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Record of Customer Information The identification of individuals and legal entities must be recorded in a regularly updated customer information file, at least on an annual basis, pursuant to Circular No. 3,461. All files may be stored either physically or electronically. Circular No. 3,461 provides for different levels of record requirements by financial institutions depending on the type of relationship maintained with the costumer, whether on an occasional or on a permanent basis. Record of Financial Services and Transactions Financial institutions must record all the financial services rendered to or financial transactions entered into with their customers. The information about the financial services shall be recorded in order to enable them to identify: (i) if the relevant resources are compatible with the financial and economic conditions of the customer; (ii) the origin of the resources; and (iii) the ultimate beneficiary of the resources. The record system of financial transactions must enable the identification of (i) transactions conducted by a person, group of persons or corporate group, separately or jointly, in excess of R$10,000 per month; and (ii) transactions that may constitute, in view of their frequency, amount or structure, a way to avoid the identification, control and record mechanisms of the financial institutions. Record of Checks and Transfer of Funds The information about checks and transfers of funds must be recorded in order to enable the financial institutions to identify: (i) transactions involving receipt of deposits by virtue of electronic transfer of amounts, wire transfer, check, bank check and other documents with equivalent nature, as well as set off checks deposited in other financial institutions; and (ii) transactions involving the issuance of checks and bank checks, wire transfer, electronic transfer of amounts and document of credit in excess of R$1,000. Record of Prepaid Cards Financial institutions shall record information about cards with a function to receive charge or recharge of amounts, in national or foreign currencies, as a result of a payment in cash, a foreign exchange transaction or any other transfer of deposit accounts. Such registration system shall enable the identification of the following events: (i) the issuance or recharge of values, in one or more prepaid cards, in amounts of or in excess of R$100,000, or any equivalent amounts in other currencies, per month; and (ii) the issuance or recharge of values in prepaid cards that may evidence, conceal or disguise the true nature, origin, location, disposition, movement, or ownership of assets, rights and valuables. Record of Handling of Resources in Excess of R$100,000 Financial institutions must record any information about deposits in cash, withdrawals in cash, withdrawals in cash by means of prepaid cards and request of withdrawal provisioning in order to enable the identification of: (i) deposits in cash, withdrawals in cash, withdrawals in cash by means of prepaid cards and request of withdrawal provisioning in amount of or in excess of R$100,000; (ii) deposits in cash, withdrawals in cash, withdrawals in cash by means of prepaid cards and request of withdrawal provisioning that may evidence conceal or disguise the true nature, origin, location, disposition, movement, or ownership of assets, rights and valuables; and (iii) issuance of bank check, electronic transfer of amounts or any other instrument of transfer of funds that comprises payment in cash in amounts of or in excess of R$100,000. Report of Material Information to COAF Financial institutions must report to COAF, without the knowledge of the relevant client, the occurrence of the following events or proposals leading to such events: the issuance or recharge of values, in one or more prepaid cards, in amounts of or in excess of R$100,000, or any equivalent amounts in other currencies, per month;

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deposits in cash, withdrawals in cash, withdrawal in cash by means of prepaid cards and request of withdrawal provisioning in amount of or in excess of R$100,000; and issuance of bank checks, electronic transfers of amounts or any other instruments of transfer of funds that comprise payment in cash in amounts of or in excess of R$100,000.

Additionally, the financial institutions shall report to COAF the occurrence of the following events or proposals leading to such events: transactions or services (i) in amounts of or in excess of R$10,000; and (ii) that may evidence the existence of the Money Laundering Crimes in view of the parties thereto, their structure and lack of legal and economic support; transactions and services that may constitute, in view of their frequency, amount or structure, a way to avoid the identification, control and record mechanisms of the financial institutions; transactions of and services rendered to any person that has perpetrated or intended to perpetrate terrorist acts, or that has participated on or facilitated the perpetration of such acts, as well as the existence of resources owned by such person or, otherwise, directly or indirectly controlled by him; and acts that may constitute terrorism financing.

The records referred to above must be kept for at least five years or ten years depending on the information. Failure to comply with any of the obligations indicated above shall subject the financial institution and its officers and directors to penalties that vary from the application of fines (between 1% and 100% of the transaction amount or 200% over any profit generated by the same), to the declaration of its officers and directors as ineligible to exercise any position at a financial institution and/or the cancellation of the financial institution's operating license. The Money Laundering Law establishes that employees are subject to criminal penalties if they facilitate or participate in money laundering activities. According to article 1, paragraph 2, I, of the Money Laundering Law, the same penalty (imprisonment for 3 to 10 years, plus fine) applies to a person who uses, in the economic or financial activity, assets, right or valuables, knowing that they originate from any of the Money Laundering Crimes listed therein. Bank Secrecy Brazilian financial institutions are also subject to strict bank confidentiality regulations. The only circumstances in which information about clients, services or operations of Brazilian financial institutions or credit card companies may be disclosed to third parties are the following: (i) the disclosure of information with the express consent of the interested parties; (ii) the exchange of information between financial institutions for record purposes; (iii) the supply of information to credit rating agencies based on records of customers issuing checks against insufficient funds and defaulting debtors; and (iv) as to the occurrence or suspicion that criminal or administrative illegal acts have been performed, financial institutions and the credit card companies may provide the competent authorities with information relating to such criminal acts. Supplementary Law No. 105 enacted on January 10, 2001 also allows the Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty in that respect has previously been executed. Financial institutions must maintain the secrecy of their banking operations and services provided to their customers. Certain exceptions apply to this obligation, however, such as the sharing of information on credit history, criminal activity and violation of bank regulations or disclosure of information authorized by interested parties, as discussed above. Bank secrecy may also be breached when necessary for the investigation of any illegal act. The government and auditors from the Brazilian Internal Revenue Service may also inspect an institution's documents, books and financial registry in certain circumstances.

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Tax Evasion Information protected by banking secrecy may only be disclosed by an order of a competent court or a parliamentary committee of enquiry (Comisso Parlamentar de Inqurito). However, the Central Bank may, without judicial authorization, require financial institutions to provide information that is usually protected by banking confidentiality during the exercise of its regulatory activities, including the investigation of any unlawful act committed by any director, administrator, counselor or manager of a financial institution, as long as the Central Bank has strong circumstantial evidence that any such persons has engaged in tax evasion. In addition, banking confidentiality may not hinder tax authorities in the investigation of tax evasion. Such evidence includes, among other things. a statement by the client detailing transactions below market value; credits acquired from sources outside the Brazilian financial system; transactions involving "tax havens;" expenses or investments that exceed the amount of the declared available income; remittances of currency abroad, using non-resident accounts in amounts that exceed the income declared to the appropriate authority; and companies whose registration with the Brazilian Corporate Taxpayers Register, or "CNPJ," has been made null or cancelled.

Further, pursuant to Normative Ruling No. 811/2008 of the Brazilian Internal Revenue Service, financial institutions must provide certain information related to transactions carried out in Brazil through a Statement of Information on Financial Transactions (Declarao de Informaes sobre Movimentao Financeira). These transactions include time and demand deposits, payments in currency or checks and issuances of credit orders or related documents, among others. Intervention, Administrative Liquidation and Bankruptcy General The Central Bank may intervene in the operations of financial institutions not controlled by the Brazilian Government, in the presence of material risk to creditors or where the institution repeatedly violates the applicable regulations. The Central Bank may also intervene where liquidation can be prevented, to facilitate administrative liquidation or, in some cases, order the bankruptcy of any financial institution, except those controlled by the Brazilian Government. For more information, see "Risk FactorsRisks Relating to usThe holders of Notes may not have the remedy of instituting bankruptcy proceedings if there has been a payment default on the Notes." The Special Temporary Management Regime RAET is directed at enabling the economic and financial recovery and the reorganization of a financial institution without interfering with the regular course of business, rights or obligations of the institution. The RAET may be imposed by the Central Bank when the private financial institutions or the non-federal public financial institutions show: repeated practice of transactions that are contrary to federal economic and financial policy; failure to observe rules relating to the banking reserves account; reckless or fraudulent management; lack of assets; or the occurrence of any situation or transactions requiring intervention.

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The main object of the RAET is to assist with the recovery of the financial conditions of the institution under special administration and thereby avoid intervention, liquidation and/or bankruptcy. Therefore, the RAET does not affect the day to day business operations, liabilities or rights of the financial institution, which continues to operate in its ordinary course. There is no minimum period for RAET, which could cease after any of the following events: (i) acquisition by the Brazilian Government of controlling ownership interest in the financial institution; (ii) corporate restructuring, merger, spin off or transfer of shareholding control of financial institution; (iii) the Central Bank's decision; or (iv) declaration of extrajudicial liquidation of the financial institution. Intervention Private and non-federal public financial institutions are subject to the proceedings established by Law No. 6,024, dated March 13, 1974, which sets out the provisions applicable in the event of intervention or administrative liquidation. Intervention and administrative liquidation will occur if the financial institution frequently violates applicable regulations or when the Central Bank determines that the financial institution is in a dire financial condition so as to potentially affect the position of their creditors. Intervention may also occur by a duly justified request of the financial institution's officers (where its bylaws delegate them such authority). The Central Bank must intervene in the management of any financial institution that: suffers losses as a result of mismanagement which may represent a risk to its creditors; repeatedly violates rules of the financial system; or faces circumstances that could result in its bankruptcy.

Intervention may not exceed 12 months, being a six-month period renewable for another six-month period upon decision of the Central Bank. During the intervention period, the institution's liabilities for overdue obligations, unmatured obligations incurred prior to the intervention, and also for deposits, are suspended. The intervention proceedings will be terminated if any of the following occurs: (i) if the Central Bank determines that the irregularities that triggered intervention have been eliminated; (ii) if the parties concerned resume administration of the financial institution after having provided the necessary guarantees with the approval of the Central Bank; or (iii) upon the declaration of the financial institution's extra-judicial liquidation or bankruptcy. The Central Bank may liquidate the financial institution or authorize the manager appointed by the Central Bank to file for bankruptcy following the report or proposal of such manager if the assets of the financial institution are insufficient to pay at least 50% of the amount of its unsecured outstanding debts, or when an extra-judicial liquidation is deemed inconvenient, or otherwise, when the complexity of the business of the institution or the impact of the facts disclosed justify such action. Extra-judicial Liquidation Extra-judicial liquidation of a financial institution (other than financial institutions controlled by the Brazilian Government, such as ourselves) can be accomplished by the Central Bank (Law No. 6,024), provided that: The debts of the financial institution are not being paid when due; The financial institution has incurred losses that could unusually increase the risk exposure of unsecured creditors; The management of the financial institution has been materially breaching Brazilian banking laws or regulations; The financial institution does not start its ordinary liquidation within 90 days as of the revocation of its authorization to operate, or if started, Central Bank determines that the management's lethargy may result in losses to creditors; or

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The liquidation process can also be commenced by request of the financial institution's officers (where its bylaws delegate them such authority) or as proposed by the interventor, as properly justified.

Extra-judicial proceedings of liquidation may cease: Bankruptcy Law Law No. 6,024, as amended, and Decree-Law No. 2,321 of February 25, 1987, as amended, empower the Central Bank to extra judicially intervene in the operations or to liquidate financial institutions owned by the private sector or Brazilian state governments (but not of the Brazilian Government). We, as a financial institution majority owned by the Brazilian Government, are not subject to intervention or to liquidation by the Central Bank. Furthermore, according to Law No. 11,101 of February 9, 2005, mixed-capital companies (sociedades de economia mista) and financial institutions such as us are not subject to judicial and extrajudicial reorganization and bankruptcy proceedings. As a result, our creditors, including holders of Notes, cannot take advantage of the remedies contemplated by Law No. 11,101 against us, including petitioning for our winding-up, liquidation or dissolution. If a creditor obtains a final judgment against us, it may procure the attachment of our assets since they are subject to seizure and attachment. Further, if our debt remains unpaid, a creditor may attempt to procure payment from the Brazilian Government, as our controlling shareholder, for any unpaid amount. However, because there is no legal provision setting forth such liability on the Brazilian Government (the subsidiary liability of controlling shareholders of financial institutions is not applicable to those controlled by the Brazilian Government pursuant to Decree-Law No. 2,321 and Law No. 9,447 of March 14, 1997), there can be no assurance that, first, the proceedings for obtaining a final judgment against us or the Brazilian Government will be conducted in a timely manner, and, second, whether a Brazilian judicial authority would hold the Brazilian Government liable for our indebtedness. Under Brazilian Law, mixed capital companies (sociedades de economia mista) such as us, which suffer losses, become dormant, develop activities that are either already fulfilled satisfactorily by the private sector or are not contemplated by their corporate purposes, may be dissolved or merged with another entity by the Brazilian Government (Article 178 of Decree-Law No. 200 of February 25, 1967). Repayment of Creditors in Liquidation In case of the bankruptcy or liquidation of a financial institution, certain credits, such as credits for salaries up to 150 minimum wages (salrios mnimos) per employee or former employee, among others, will have preference over any other credits. As a deposit insurance system, FGC guarantees a maximum amount of R$70,000 of deposits and credit instruments held by an individual against a financial institution (or against financial institutions of the same financial group). FGC is funded principally by mandatory contributions from all Brazilian financial institutions that work with customer deposits. The payment of unsecured credit and customer deposits not payable under the FGC is subject to the prior payment of all secured credits and other credits to which specific laws may grant special privileges. At the discretion of the Central Bank, if the parties involved undertake to manage the financial institution, providing the necessary guarantees; When the final accounts of the liquidator are processed and approved, and subsequently, filed with the relevant public registry; When converted into an ordinary liquidation; or When the financial institution is adjudicated bankrupt.

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Taxation of Financial Transactions Financial transactions in Brazil are generally subject to income tax and to tax on financial transactions ("IOF"), in addition to the regular corporate income taxes and other social contributions at the level of the Brazilian legal entity making the investment. The income tax assessed on the income received on financial transactions by Brazilian residents generally depends on: (i) the type of investment (fixed or variable income, as defined by Brazilian law; variable income investments are usually treated more favourably); and (ii) the term of the investment (long-term investments usually have a more favourable treatment). The income tax assessed on income deriving from financial transactions (a) is, as a general rule, considered for Brazilian legal entities as an advance payment of the corporate income tax due by them and (b) is definite for individuals that are Brazilian residents. Investments in Brazilian financial and capital markets by individuals or legal entities resident or domiciled abroad are generally subject to the same taxation rules applicable to Brazilian residents, except for foreign investments made in accordance with the rules set forth by the CMN, which currently benefit from a favourable taxation regime. Tax on Financial Transactions (IOF) IOF is a tax levied on foreign exchange, securities/bonds, credit and insurance transactions. The IOF rate may be changed by an Executive Decree (rather than a law). An Executive Decree increasing the IOF rate would take effect from its publication date, with no retroactive effects. Pursuant to Decree No. 6,306 of December 14, 2007, as amended ("Decree No. 6,306"), foreign exchange transactions are subject to the IOF ("IOF/Cmbio"). Under the IOF regulations currently in force, the Minister of Finance is empowered to establish the applicable IOF/Cmbio rate. Such IOF/Cmbio rate can be increased at any time up to a rate of 25%, with no retroactive effects. Decree No. 6,306, as amended, sets out that the current general IOF is 0.38%, although there are some exceptions, such as: (i) Foreign exchange transactions for the inflow of funds, contracted as of March 1, 2012, in connection with international loans, subject to registration before the Central Bank, contracted either directly or through the issuance of notes in the international market, with a minimum average term not exceeding 1800 days, which are subject to the IOF/Cmbio at a 6.0% rate; foreign exchange transactions for the inflow and outflow of funds, including through simultaneous transactions, related to acquisition, by foreign investors, of Brazilian Depositary Receipts - BDRs, in the form regulated by CVM, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions for the acquisition of goods or services outside Brazil with credit cards, in which case the IOF/Cmbio rate is 6.38% of the amount of the transaction; foreign exchange transactions for the acquisition of goods or services outside Brazil with credit cards by the Brazilian Government, states, municipalities, the federal district, as well as their foundations and agencies, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions for the inflow of funds related to the export of goods and services, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions for the inflow and outflow of funds related to investments made by investment funds that invest in non-Brazilian markets in accordance with the rules set forth by the CVM, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions for the inflow of funds related to investments made by non-residents in the Brazilian financial and capital markets in accordance with the rules set forth by the CMN, in which case the respective IOF/Cmbio rates are: (i) 0% in the case of investments in variable income securities in the Brazilian stock, futures or commodities exchanges, or related to equity investments from public offerings, except investments in derivative instruments that grant a fixed income, foreign exchange transactions contracted as of December 1, 2011 for the acquisition of

(ii)

(iii) (iv)

(v) (vi)

(vii)

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quotas of private equity funds (fundos de investimentos em participaes), investment funds on emerging companies (fundos mtuos de investimento em empresas emergentes), quota investment funds on mentioned funds (fundos de investimento em cotas dos referidos fundos), inflow of funds into Brazil arising from the cancellation of depositary receipts ("DR") and the conversion of investments governed by Law No. 4,131 into investments governed by CMN Resolution 2,689, and investments in long term private debt instruments outlined in Articles 1 and 3 of Law 12,431/11; and (ii) 6.0% in the case of other investments in Brazilian financial and capital markets, such as fixed income investments (Brazilian government bond and others), and transactions related to the constitution of initial or additional guarantee margins in the Brazilian stock, futures or commodities exchanges; (viii) (ix) (x) (xi) foreign exchange transactions for the return of the investments mentioned in item (vi) above, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions for the remittance of interest on net equity and dividends earned by foreign investors, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions performed between financial institutions in interbank currency exchange transactions, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions made by international air transportation companies, domiciled abroad, for purposes of remitting resources derived from their local revenues, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions for the inflow of funds to cover expenses incurred in the country with credit cards issued abroad, in which case the IOF/Cmbio rate is 0%; foreign exchange transactions related to the acquisition of foreign currency by financial institutions simultaneously contracted with a foreign currency sale transaction, in which case the IOF/Cmbio rate is 0%, except for some of the transactions mentioned in item (vi) above; and foreign exchange transactions for the inflow and outflow of funds related to external credits, except for those mentioned in item (i) above, in which case the IOF/Cmbio rate is 0%.

(xii) (xiii)

(xiv)

The IOF tax may also be levied on transactions involving bonds or securities, including transactions carried out on Brazilian stock, futures or commodities exchanges ("IOF/Ttulos"). Currently, IOF/Ttulos is assessed on transactions consisting of the acquisition, assignment, repurchase or renewal of fixed-income investments or the redemption of bonds and securities. The maximum rate of IOF/Ttulos payable in such cases is 1.0% per day and decreases with the length of the transaction, reaching 0% for transactions with maturities of at least 30 days. The Minister of Finance, however, has the legal authority to increase the rate to a maximum of 1.5% per day of the amount of the taxed transaction, during the period in which the investor holds the securities, but only to the extent of the gain realized on the transaction and only from the date of its increase or creation. Decree No. 7,536, dated July 26, 2011, as amended by Decree No. 7,563, dated September 15, 2011, and Normative Ruling No. 1,207, dated November 4, 2011, established the assessment of IOF/Ttulo at the rate of 1% on the adjusted notional value at the purchase, sale or maturity of financial derivative contracts the settlement of which is affected by foreign exchange fluctuation, which individually results in an increase in the long currency position or in a reduction in the short currency position. Additionally, the rate for the following types of transactions is currently 0%: (i) transactions carried out by financial institutions and other institutions chartered by the Central Bank as principals, not including consortium managers provided by Law No. 11,795, dated October 8, 2008; transactions carried out by mutual funds or investment pools themselves; transactions involving variable income, including those performed in stock, futures and commodities exchanges and similar entities;

(ii) (iii)

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(iv) (v)

redemptions of shares in equity funds as defined by income tax legislation. transactions with agribusiness receivables (Certificado de Direitos Creditrios do Agronegcio, or "CDCA," Letra de Crdito do Agronegcio, or "LCA," and Certificado de Recebveis de Agronegcio, or "CRA") provided by Article 23 of Law No. 11,076, dated December 30, 2004; transactions with debentures provided by Article 52 of Law No. 6,404, dated December 15, 1976, with real estate receivables (Certificado de Recebveis Imobilirios) provided by Article 6 of Law No. 9,514, dated November 20, 1997, as well as transactions with those bonds provided by Article 37 of Law No. 12,249, dated June 11, 2010; other transactions with bonds and securities, including the redemption of shares of the Fundo de Aposentadoria Programada Individual, or "FAPI," which was created by Law No. 9,477, dated July 24, 1997; and transactions involving derivatives contracts not related to currency exchange.

(vi)

(vii)

(viii)

IOF also applies to credit transactions ("IOF/Crdito"), except for foreign credit in which the creditor is domiciled outside Brazil, in which case IOF/Cmbio will apply. IOF/Crdito levied on credit transactions is usually assessed at a daily rate of 0.0041% (if the debtor is a legal entity), or 0.0068% (if the debtor is an individual), up to a limit of 365 days. Additionally, an IOF/Crdito surtax of 0.38% is currently applicable to most of the credit transactions, regardless of the term for the transaction maturing. Additionally, IOF tax is levied, among other things, on the payment of premium in connection with insurance transactions ("IOF/Seguro") at a rate of: (i) 0% in reinsurance, insurance on export credits or on international transport of goods and life insurance plans with coverage for survival; (ii) 0.38% of premiums related to life insurance plans without coverage for survival, among others; (iii) 2.38% in the case of private health insurance; and (iv) 7.38% for other types of insurance. Rural insurance, among certain other specific insurance transactions, is exempt from IOF. Taxation of Brazilian Corporations Brazilian corporate income tax is made up of two components, a federal income tax and social contribution on taxable profits, which is known as the "Social Contribution on Net Profits." In turn, the federal income tax includes two components: a federal income tax and an additional income tax. The federal income tax is assessed at a combined rate of up to 25% of adjusted net income (the normal rate for Brazilian legal entities is 15% plus 10% for legal entities with annual profits exceeding R$240,000). The Social Contribution on Net Profits is currently assessed at a rate of 15% for financial institutions pursuant to Law No. 11,727/2008, of June 23, 2008 ("Law No. 11,727/2008"). Companies are taxed based on their worldwide income rather than on income produced solely in Brazil. Therefore, profits, capital gains and other income obtained abroad by Brazilian entities will be computed in the determination of their net profits. In addition, profits, capital gains and other income obtained by foreign branches or income obtained from subsidiaries or foreign corporations controlled by a Brazilian entity will also be computed in the calculation of such entity's profits, in proportion to its participation in such foreign companies' capital. The Brazilian entity is allowed to deduct any income tax paid abroad, up to the amount of Brazilian income taxes imposed on such income. As at January 1, 2002, Provisional Measure No. 2,158-35 determined that such profits, capital gains and other income obtained abroad by a controlled or affiliate company shall be subject to taxation on an accrual basis by the Brazilian entity on December 31 of every taxable year, unless the Brazilian entity is liquidated before the date of its year-end balance sheet, in which case the profits are taxed at the time of its liquidation. Dividends paid by Brazilian legal entities and deriving from profits generated as from January 1, 1996 out of after-tax profits are not subject to withholding income tax when paid, nor to corporate income tax or individual income tax on the person receiving the dividend. However, as the payment of dividends is not tax deductible for the

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company distributing them, there is an alternative regime for shareholder compensation called "interest on equity" which allows companies to deduct any interest paid to shareholders from net profits for tax purposes. Law No. 9,249, of December 26, 1995, as amended, allows a corporation to deduct from its net profits for corporate income taxes purposes any interest paid to shareholders as remuneration of the shareholders' equity called "interest on net equity" or "interest on shareholder's capital." These distributions may be paid in cash. The interest is calculated on the net equity accounts in accordance with the daily pro rata variation of the long-term interest rate ("TJLP"), as determined by the Central Bank from time to time, and cannot exceed the greater of: 50% of the net income (before the federal income tax provision and the deduction of the interest amount attributable to shareholders) related to the period in respect of which the payment is made; or 50% of the sum of retained profits and profits reserves as at the date of the beginning of the period in respect of which the payment is made.

Any payment of interest to shareholders is subject to withholding income tax at the rate of 15%, or 25% in the case of a shareholder who is domiciled in a tax haven jurisdiction, as defined by Brazilian tax law. These payments may be qualified, at their net value, as part of any mandatory dividend. Tax losses carried forward are available for offset up to 30% of the annual taxable income. No time limit is currently imposed on the application of tax losses to offset future taxable income. Two federal contributions are imposed on the gross revenues of corporate entities: the Programa de Integrao Social ("PIS") and the Contribuio para Financiamento de Seguridade Social ("COFINS"). Since September 2003, the PIS and COFINS have been imposed on financial institutions' gross revenues at a combined rate of 4.65%, but some specific costs, such as funding cost, are authorized to be deducted from the PIS and COFINS taxable bases. Nonetheless, certain revenues, such as dividends, equity pick-up, revenues from the sale of fixed assets and export revenues paid in foreign currency with the inflow of funds to Brazil are not included in the taxable basis for PIS and COFINS.

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BUSINESS General Banco do Nordeste do Brasil S.A. is a multi-service special purpose development bank with operations primarily focused on the Northeast region of Brazil. We provide a comprehensive portfolio of products and services to individuals, companies and the federal, state and municipal governments in Brazil. We are controlled by the Brazilian Government and we act as an agent for implementation of the Brazilian Government's development policies and programs for the Northeast region. As part of the Brazilian Government's plans to facilitate development in this region, we provide competitive financing to small and micro agricultural businesses and infrastructure projects at lower costs than those available from private sector banks and lenders due to our significant funding from the Brazilian Government. Our operations are focused on financing the productive sectors in the Northeast region (including the rural, industrial and commercial sectors), mainly through long- and short-term loans and capital markets transactions. As of December 31, 2011 and 2010, we had total assets of R$26.4 billion and R$23.8 billion and shareholders' equity of R$2.3 billion and R$2.2 billion, respectively. For the years ended December 31, 2011 and 2010, our net income was R$314.8 million and R$313.6 million, respectively. In addition to our own lending operations, we manage certain of the Brazilian Government's funds and programs, including the FNE (Constitutional Fund for the Financing of the Northeast) and the FINOR (Northeast Investment Fund) and we also act as lending agent for PRONAF (National Program to Strengthen Family Agent Cultures) and as loan analyst and administrator for the FDNE (Northeast Development Fund). All of these funds and programs are designed to foster economic and social development in Brazil and particularly the Northeast region for various sectors, activities and clients, ranging from small family farms to large infrastructure projects. We are the exclusive manager of the FNE, the most significant Brazilian Government fund involved in our operations, whose net worth (which is equivalent to its assets) totaled R$37.7 billion as of December 31, 2011. In exchange for being a disbursing agent responsible for approving and allocating the FNE's funds to low-cost loans for economic and social development in the Northeast region, we earn (i) annual management fees of 3.0% of FNE's total net worth (which were R$993.5 million for the year ended December 31, 2011 and R$816.8 million for the year ended December 31, 2010), limited to a maximum of 20% of proceeds annually transferred to FNE by the Brazilian Government based on collection of income and IPI taxes; and (ii) a "del credere" fee for bearing the credit risk associated with certain of these transactions. Although the assets of the FNE (including loans we make using its funds) are not part of the credit underlying the Notes and the FNE is not a guarantor of the Notes, these fees payable to us constitute stable and significant sources of income for us, as our exclusive management relationship with the FNE cannot be changed except by legislative action by the Brazilian Congress. The fees we earned for our roles as manager for FINOR, lending agent for PRONAF and loan analyst and administrator for FDNE totaled R$112.6 million for the year ended December 31, 2011 and R$106.3 million for the year ended December 31, 2010 and, consequently, are much less significant to our operations than that derived from our relationship with FNE. We believe that our management of FNE and other Brazilian Government funds and programs provides us with unique opportunities to gain know-how and cross-sell our products to a large base of potential corporate and individual clients in the Northeast region. We are one of the largest and most active banks in the Northeast region of Brazil in terms of market share, according to Central Bank information as of December 31, 2011, with a R$11.8 billion loan portfolio as of that date. According to the Central Bank, we are the primary domestic source of long-term financing in the Northeast region, with a loan portfolio representing a market share of approximately 19.2% of the total long-term financing portfolio in the entire Northeast region as of December 31, 2011 or 67.4% when considering our and the loan portfolio of the FNE together. Moreover, the entire Northeast region's GDP CAGR between December 31, 2005 and December 31, 2010 was 4.0%, 9.6% higher than the CAGR of Brazil (including the Northeast). We also expect that the increasing number of large corporate projects in the region will continue to require even more long-term financing, which we believe will provide us with the opportunity to further expand our leading position in the Northeast region. Products and Services Our principal products and services consist of the following: Loan operations, consisting of loans to micro, small, medium and large customers principally in the Northeast region of Brazil (we also have certain loans outstanding with customers in states

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outside of the Northeast region which do not, individually or in the aggregate, significantly contribute to our business), including: Industrial loans for purchases of machinery, equipment and raw materials and for plant modernizations, among others; Rural and agribusiness loans; Infrastructure loans to the federal, state and municipal governments; Commercial loans to businesses in the retail, wholesale and service sectors; Individual and consumer loans; Loan portfolios acquired from other financial institutions (particularly during the recent global financial crisis when certain institutions were facing liquidity constraints); and Other loan operations, including working capital products, foreign trade loans, urban microcredit loans for the services segment, guarantee accounts, bank credit notes (CCB Cdulas de Crdito Bancrio), home mortgage loans and loans to non-Bank employees under Group CDCs, among others.

Management, lending agency and administration of, and loan analysis for, government funds and programs, most significantly the FNE, designed to provide low-cost loans to stimulate the economic and social development of the Northeast region. Depending on the fund or program, we are responsible for processing, disbursing, monitoring and collecting on loans made using Brazilian Government funds or through government programs, in exchange for management fees and, depending on the fund or program, additional del credere fees, which are based on the amount of our credit risk associated with certain loans. Banking services and capital markets activities, consisting of checking and savings accounts, time deposits, foreign exchange, wire transfers, collection services, online banking and, through third parties, the sale of private pension plans and savings bonds, in addition to structuring and distributing local debenture issuances and other short- and long-term bonds in the Brazilian capital markets. Asset management, consisting of management of third-party assets for small, medium and large investors (including governmental entities). We invest these assets in our private investment funds, usually consisting of debt or equity securities issued by publicly held Brazilian companies or Brazilian Government debt securities.

As of December 31, 2011, we offered services to our customers through our network, which consisted of 187 full service branches, and more than 20,000 automated teller machines ("ATMs") located in our branches or operated by our ATM service partners, Banco do Brasil, Caixa Econmica Federal and Banco 24 Horas. As of that date, our network served 1,990 cities in the Northeast region and we had 6,077 employees and 1,672,149 active lending, deposit and other customers (an increase from 1,174,415 as of December 31, 2010). We believe that our large number of branches has enabled us to build a substantial client base to which we can offer our portfolio of products and services. In addition, we use our geographically broad branch network to conduct studies on the specific characteristics of the different cities and customers in the Northeast region. These studies allow us to target, plan and implement operations tailored to the specific needs of different areas, supporting what we believe can be sustainable economic growth and social development of local communities. We are also focused on strengthening our brand recognition by sponsoring local cultural events across the Northeast region, both directly and through programs like the BNB Culture Program (Programa BNB de Cultura), which has provided financing to 162 cultural projects in 7 cities between January 1, 2006 and December 31, 2011.

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Set forth below is a map showing our area of operations and branches:

State AL BA CE DF ES MA MG PB PE PI RJ RN SE SP Total

Branches 9 37 28 1 2 16 13 14 19 17 1 14 15 1 187

The table below shows some of our financial and operational highlights as of and for the years ended December 31, 2011, 2010 and 2009:
As of and For the Year Ended December 31, 2010 2010 (In millions of R$, except percentages) Total assets ........................................................................................................... Loans(1) ................................................................................................................. Deposits ................................................................................................................ Past due loans (loans in arrears)/total loans (%)(2) ............................................... Shareholders' equity ............................................................................................. Net income ........................................................................................................... Capital ratio (%)(3) ................................................................................................ Return on average equity (ROAE)(4)(%) .............................................................. Return on average assets (ROAA)(5)(%) .............................................................. (1) (2) 26,436 11,799 8,964 4.0 2,329 315 16.6 13.6 1.3 23,784 11,288 8,510 3.6 2,177 314 13.6 14.9 1.5 19,154 9,938 6,333 4.5 2,073 459 13.0 23.8 2.7 2009

(3) (4) (5)

Includes short- and long-term, individual, consumer, rural and agribusiness, industrial, commercial and government loans. A loan is considered past due when it is overdue from 15 days to the date the loan is written off in full. In accordance with Central Bank Resolution 2,682, loans that will mature within 36 months and loans that mature after 36 months are written off in full when they become overdue by 360 days and 540 days, respectively. See "Other Statistical and Financial InformationLending OperationsPast Due Loans." Capital ratio required by Central Bank corresponding to a minimum capital adequacy ratio of 11% of total risk-adjusted assets. See "Other Statistical and Financial InformationReturn on Equity and AssetsCapital Adequacy and Minimum Capital Requirements." Return on average equity is calculated as net income earned during the accounting period divided by our average equity. Return on average assets is calculated as net income earned during the accounting period divided by our average assets.

Bankruptcy, Liquidation or Dissolution Law No. 6,024 of March 13, 1974, as amended, and Decree-Law No. 2,321 of February 25, 1987, as amended, empower the Central Bank to extra judicially intervene in the operations or to liquidate financial institutions owned by the private sector or Brazilian state governments (but not of the Brazilian Government). We, as a financial institution majority owned by the Brazilian Government, are not subject to intervention or to liquidation by the Central Bank. Furthermore, according to Law No. 11,101 of February 9, 2005, mixed-capital companies (sociedades de economia mista) and financial institutions such as ourselves are not subject to judicial and extrajudicial reorganization and bankruptcy proceedings. As a result, our creditors, including holders of Notes, cannot take advantage of the remedies contemplated by Law No. 11,101 against us, including petitioning for our winding-up, liquidation or dissolution.

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If a creditor obtains a final judgment against us, it may procure the attachment of our assets since they are subject to seizure and attachment. Further, if our debt remains unpaid, a creditor may attempt to procure payment from the Brazilian Government, as our controlling shareholder, for any unpaid amount. However, because there is no legal provision setting forth such liability on the Brazilian Government (the subsidiary liability of controlling shareholders of financial institutions is not applicable to those controlled by the Brazilian Government pursuant to Decree-Law No. 2,321 and Law No. 9,447 of March 14, 1997), there can be no assurance that, first, the proceedings for obtaining a final judgment against us or the Brazilian Government will be conducted in a timely manner, and, second, whether a Brazilian judicial authority would hold the Brazilian Government liable for our indebtedness. Under Brazilian Law, mixed capital companies (sociedades de economia mista) such as us, which suffer losses, become dormant, develop activities that are either already fulfilled satisfactorily by the private sector or are not contemplated by their corporate purposes, may be dissolved or merged with another entity by the Brazilian Government (Article 178 of Decree-Law No. 200 of February 25, 1967). Our Strengths We believe our principal strengths are: Leadership position. Among other market positions, we are: the largest and most active development bank in the Northeast in terms of loans provided (long term and short term), according to the Central Bank, as of December 31, 2011; the second largest bank in Brazil in terms of rural loans, according to the Central Bank, as of December 31, 2011; the 13th largest bank in terms of total assets; the seventh largest bank in terms of total deposits growth; the 12th largest bank in terms of total credit operations; the 13th largest bank in terms of total deposits, in each case according to the Valor 1000 magazine, 2011 edition on the Brazilian banking industry; and the ninth largest bank in terms of number of branches; the tenth largest bank in terms of loans for large companies; and the 13th largest bank in terms of loans for medium-sized companies, in each case according to the Exame Melhores e Maiores magazine, 2011 edition; and with respect to our Crediamigo program: the best and second largest (in terms of the number of outstanding loans) microcredit program in Latin America and Caribbean, according to Microfinanzas magazine, in 2010; and the largest microcredit program in South America, in terms of productive microcredit accounts (which excludes microcredit operations for consumers and home mortgage loans); third among the top microfinance institutions in the Forbes list of the Top 50 Microfinance Institutions in the world in 2007.

We believe that the market leadership and the resulting know-how from our broad network and focus on the Northeast region provides us with a strong brand recognition, significant market presence and the ability to sell a range of financing solutions to a broad client base. Strong presence and growth in a growing geographic area. Through our presence in the Northeast region, we have experienced strong growth, with our loan portfolio almost tripling between December 31, 2006 and December 31, 2011. We believe we are well positioned to continue increasing our loan portfolio, given our experience in long-term lending, deep knowledge of the regional characteristics and needs of borrowers located in the Northeast region and widely recognized brand where we operate. The BrandFinance Banking 500 included us among the 500 most valuable brands in the worldwide banking industry, a global ranking prepared by Brand Finance based on the branding value of publicly traded banks worldwide. Our position increased by 25 positions

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from 2010 to 2011 (from 349th to 324th) and we were ranked ninth among Brazilian banks. Moreover, the CAGR of the Northeast region's GDP has outpaced that of Brazil and has attracted large amounts of private investments through significant infrastructure and logistics projects, which have also benefited us by increasing demand for the financings we offer. We believe the increasing number of large corporate projects in the Northeast resulting from Brazilian Government programs such as PAC and the infrastructure needed for the pending 2014 World Cup in Brazil will continue to require additional long-term financing, providing us an opportunity to reinforce our leadership in the region and sustain our growth for coming years. Stable source of significant income and broad exposure to a wide customer pool. As the exclusive manager of the FNE, we have access to a stable and significant source of income from management fees calculated based on the FNE's total net worth. Our management of FNE has represented a steady source of income, accounting for more than 25% of our aggregate combined income from financial intermediation, income from services provided and income from bank fees since 2009. We also act as a manager of FINOR, lending agent for PRONAF and loan analyst and administrator for FDNE for the Brazilian Government, which generated aggregate fees of R$112.6 million and R$106.3 million for the years ended December 31, 2011 and 2010, respectively. We believe that the large volume of FNE loans we manage exclusively, at attractive costs, and our various roles for FINOR, PRONAF and FDNE gives us exposure to a broad customer pool, which creates an opportunity for us to increase our market share by further improving our know-how in the Northeast region and cross-selling our products. Strategic relationship with federal, state and municipal governments. We are controlled by the Brazilian Government, with which we have a strategic relationship and through which we developed similar relationships with state and municipal governments. Our operations include Brazilian Government projects under PAC and state and municipal government projects under PPPs. Our constant dialogue with federal, state and municipal governments provides us with important know-how in the economic and social development sector, which enables us to tailor products and services for the region and our clients' needs. We are also an active governmental agent in the Northeast region for the implementation of public policies carried out through governmental programs and/or funds, which are directed, according to geographical or demographical criteria, at specific regions or groups generally not well served by the private sector, such as microcredit, tourism infrastructure and small cities and villages, which we believe gives us an advantage over our competitors. Moreover, the Brazilian Government has also supported our funding needs by directly lending us funds to increase our capital base. See "Funding" above. Experienced approach to risk assessment and management. Since our establishment over a half century ago, we have relied on detailed financial analysis and a deep regional market knowledge to discern sustainable investment opportunities and the feasibility of long-term investments. Our risk management system for monitoring credit, market, liquidity and operational risks has therefore become centralized, integrated and unified across the institution. We have strived to maintain the quality of our loan portfolio through different measures. These measures include engaging in a specific financial evaluation for each client prior to setting credit limits, analyzing projects to ensure sufficient cash flows for repayment and analyzing industry concentration risk. Moreover, we have a centralized registry which contains project and client documents and can be accessed by our different areas (assuring the separation between the commercial and analysis areas) and a risk assessment unit, in addition to a loan recovery unit. We believe the benefit of this experienced approach has been demonstrated by the high proportion of our loans rated at low risk levels, with 92.9% and 92.6% of our loan portfolio rated between "AA" and "C", according to the Central Bank criteria, as of December 31, 2011 and 2010, respectively. See "Other Statistical and Financial InformationLending OperationsPast Due Loans" and "Management's Discussion and Analysis of Financial Condition and Results of OperationsLendingLoan Loss History" for a discussion of Central Bank criteria. Highly dedicated employees and experienced management committed to best practices. We believe the high quality of our professionals and their commitment to our positive performance are key factors in ensuring success in implementing our strategies. We seek to retain professionals who are both highly experienced and qualified and who are committed to our goals and values, and offer constant training opportunities focused on professional development. We select our managers according to established criteria specific to their area of focus. Our directors and executive officers are professionals with significant public and private sector experience, with a comprehensive knowledge of finance and the banking industry. In addition, our employees and management seek to comply with best corporate governance practices and transparency.

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Our Strategies We intend to pursue the following targeted strategies to generate growth and enhance our profitability: Expand through organic growth in core business areas. Given the growth we expect for Brazil and the Northeast region in particular, we intend to maintain our focus on growing our loan portfolio, while maintaining credit quality. We intend to continue focusing on our financing activities through loan operations and government fund and program management in order to benefit from the strong social and economic development of the Northeast region. We expect this growth to continue, presenting strategic opportunities that we intend to take advantage of by: capitalizing on opportunities to cross-sell and capture new customers mainly through FNE transactions we manage, which exposes us to the borrowers of FNE funds; improving our capital markets operations to increase the wide array of financing products we offer our clients with the aim of becoming a comprehensive provider of the financial services they demand; continuing to position the Crediamigo and Agroamigo programs as the leading micro and small enterprise programs in the Northeast region. We intend to grow our branch network in connection with the Crediamigo program, and expand to new markets in other Brazilian states, such as Rio de Janeiro, where the program started operating in 2009; improving products such as receivables discounting, foreign trade transactions and checking accounts to our clients' employees (conta-salrio) by making our information technology systems more user friendly and more efficient in assessing the approval of credit limits and by implementing credit scoring, among other enhancements, which we believe will result in increased returns; and continuing to look for opportunities with government entities by, among other options, implementing a project development company to design projects that will be undertaken by public-private partnerships.

We also intend to continue to improve the quality of our products and services, to increase our market share in the Northeast region, and to expand our distributions channels. We intend to expand our branch network by opening new branches in areas where we identify a steady demand for our services. Particularly, we have a policy for microcredit operations that we must offer a new point of sale for every new 4,000 clients added to our portfolio. This policy, according to our estimates, could require us to open more than 194 new points of sale by the end of 2013. In addition, we are improving our credit approval and monitoring operations by reducing time and improving approval rates while still focusing on credit quality levels. These improvements consist of a network based on credit scoring systems for operations offered to retail customers, like Crediamigo and Agroamigo. Maintain credit quality. We seek to maintain the quality of our loan portfolio by identifying and evaluating levels of risk associated with operations through adequate controls and monitoring tools for the procedures and efficiency of our lending operations. Additionally, in connection with our microcredit operations, we believe we have developed a credit scoring system that will improve our lending efficiency with no adverse effect on our credit analysis process. With respect to the FNE's loan portfolio, we have also decentralized the operational management of the Agroamigo program and we are currently studying the benefits of using the same branch network used for the Crediamigo program to service the Agroamigo program. Continue to diversify funding sources. We seek to continue attracting new depositors in Brazil by increasing our marketing efforts and investments. As a result, our time deposits made in the form of CDBs increased from R$3.4 billion as of December 31, 2009 to R$5.0 billion as of December 31, 2011. In the second half of 2011, we started a new funding program of up to R$500 million in Agribusiness Credit Bonds (Letra de Crdito do Agronegcio LCA), which will allow us to increase financing for agribusiness working capital. We also intend to continue increasing our funding in reais both from government related funding, such as FAT, taking advantage of our strategic relationship with the Brazilian Government in accessing these funds whenever needed. Although these

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sources of funds have not been historically material to us, we believe they may provide us with important funding for our long-term operations. Regarding foreign currency funding, we intend to strengthen our relationships with foreign banking correspondents, international multilateral entities and foreign investors, and access the international capital markets through the issuance of notes such as the Notes offered hereby and other debt capital market instruments. Expand asset management activities. We intend to expand our asset management activities, with a focus on existing clients. In 2009, we launched two new private investment funds: the Banco do Nordeste "Nordeste 100" Fixed Income Private Credit Investment Fund and the Banco do Nordeste Long-Term Private Credit Fixed Income Investment Fund. We currently manage 20 of our proprietary investment funds, 12 of which are focused on retail customers, two are focused on the public sector and six are tailored to selected investors. As of December 31, 2011, the net asset value of those funds totaled R$3.4 billion, an increase of 14.3% as compared to December 31, 2010. Encourage rural, urban and social development in the Northeast. With our development-oriented loans and investments, we expect to continue supporting the growth in the rural and agribusiness sectors in the Northeast region. We also intend to generate employment and income for the Northeast region by providing financial support and customized programs to micro-, small- and medium-sized enterprises in the region, allowing these entities to expand their businesses and, consequently, increase their demand for our banking products and services. We also aim to increase the supply of loans to low-income entrepreneurs through our microcredit programs. Moreover, we seek to strengthen municipal governments in the Northeast by financing infrastructure projects to improve urban planning and access to basic services whilst fostering economic feasibility for the local businesses. Maintain operational efficiency. We strive to constantly monitor the efficiency level of our operations by ensuring we maintain adequate control over our operating costs (personnel expenses and other administrative expenses), with CAGR of 13.5% from 2009 to 2011 (10.5% from 2010 to 2011 and 16.4% from 2009 to 2010), compared to the CAGR of 17.0% in total revenue for the same period (27.3% from 2010 to 2011 and 7.5% from 2009 to 2010). In addition, we intend to invest approximately R$238.6 million in technological improvements during 2012, and expand training opportunities for our employees. Our employees participated in 80,000 hours of training over the past three years as a result of our policy requiring at least 90% of our employees to complete at least one training program per year. History The Brazilian Government established us on July 19, 1952 pursuant to Law No. 1,649 to encourage development in the Northeast region, which is often beset by constant droughts and a lack of stable resources. As a result, we focus our activities in the Northeast region of Brazil, although we also conduct some of our activities (such as our capital markets services) in other Brazilian regions. While we are a mixed-capital company (sociedade de economia mista), we are also subject to the regulations applicable to private companies concerning civil and commercial obligations, taxation and labor matters as set forth in the Brazilian Federal Constitution. As a publiclytraded financial institution, we are also required to follow regulations issued by the CMN, the CVM, BM&FBOVESPA and the Central Bank applicable to private sector banks. In the early 1960s, we and several government bodies formulated new procedures for planning our development operations, which included an annual investment budget and a targeted investment plan to accomplish all targeted investments. At this time, we also provided human resources training as part of the implementation of administrative and operational components of these new procedures. During the 1970s, due to a lack of stable resources, we pursued the strategy of diversifying our funding sources through onlendings from both domestic and foreign institutions, as well as diversifying our credit activities through financial support to infrastructure improvement in large urban areas, modernization of the industrial sector in the semi-arid areas of the Northeast region, foreign trade operations and special programs to improve the competiveness of agribusiness in the region and the productive chain of ethanol as vehicular fuel. Also during this period, we expanded our branch network and modernized our facilities, among other improvements. The CVM declared our registration statement effective on July 20, 1977. During the 1980s, we continued our efforts to strengthen our funding sources in order to fully implement our development operations. In 1988, the Brazilian Federal Constitution created the FNE, and Law No. 7,827/89

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granted its management to us, providing us with a stable and significant source of income. The purpose of the FNE is to foster the economic and social development of the Northeast region, by providing financing to production sectors, according to regional development plans, and giving priority to activities developed by small farmers, small company businesses (including unincorporated businesses) and food producers, as well as irrigation projects in semi-arid regions. During the 1990s, we implemented significant organizational changes for the purpose of better facilitating sustainable development in the Northeast region and promoting economic growth, in an attempt to diminish the historical development gap between the Northeast and other Brazilian regions, particularly the Southeast and South regions. We introduced a new functional model with respect to our lending process, designed to integrate regional farmers into the global economy by providing them business-related advice, improving their overall competitiveness. Over the past decade, we have focused on improving regional income levels by providing financing and technical qualification support for regional producers, including urban micro entrepreneurs and small agricultural units. We have promoted enterprise and partnerships as a means of achieving regional economic development. Relationship with the Brazilian Government The Brazilian Government, through the National Treasury, is our controlling shareholder and, as a result, appoints the majority of the members of our Board of Directors. The President of Brazil directly appoints our CEO (who is also appointed as a member of our Board of Directors). The Brazilian Government also appoints three of the members of our Board of Directors through its Ministries of Planning, of Budget and Management and of Finance, including its chairman. See "ManagementBoard of Directors." The Brazilian Government, as our controlling shareholder, without the consent of the remaining shareholders is entitled to: modify a large portion of our by-laws; control management through appointments of the majority of our directors and executive officers; determine dividend distribution policies (within the confines of the minimum required distribution established by Brazilian law); and approve certain matters at shareholders' meetings.

In connection with our relationship to the Brazilian Government, we may adopt certain measures or enter into certain transactions intended to promote political, economic or social purposes as a priority over developing our business and increasing our profitability. See "Risk FactorsRisks Relating to us and the Brazilian Banking IndustryOur implementation of government objectives and legislative requirements could divert resources away from other more profitable areas of our lending and investing businesses." Although we are controlled by the Brazilian Government, the assets of the Brazilian Government that are not our assets cannot be considered security for the Notes and the Brazilian Government is not a guarantor of the Notes or liable for our obligations unless explicitly agreed to as a business term of a specific transaction. See "Regulation of the Brazilian Banking IndustryIntervention, Administrative Liquiditation and Bankruptcy Bankruptcy Law."

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Organizational Chart The following chart illustrates our organizational structure as of the date hereof:

We do not have any subsidiaries and do not beneficially own the whole or any part of the capital stock of any other person. Our Activities We operate in all of the primary segments of the Brazilian banking and financial markets, offering financial and non-financial solutions (such as technical advising, structuring of productive chains and development of technical studies) to our clients. In addition, we manage certain government-sponsored programs and funds focused on long-term development actions, offering financing products at favorable terms and conditions for eligible participants. Our businesses can be grouped generally into the following segments: Loan operations, consisting of (i) industrial loans; (ii) rural and agribusiness loans; (iii) loans to the federal, state and municipal governments; (iv) commercial loans; (v) individual and consumer loans; (vi) loan portfolios acquired from other financial institutions; and (vii) other loan operations. Government funds and programs management, consisting of management of, lending agency and loan analysis for, government funds and programs. Banking services and capital markets activities, consisting of checking and savings accounts, time deposits, foreign exchange, wire transfers, collection services, online banking and, through third parties, the sale of private pension plans and savings bonds, in addition to structuring and distributing local debenture issuances and other short- and long-term bonds in the Brazilian capital markets. Asset management, consisting of management of third-party assets for small, medium and large investors (including governmental entities).

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The tables below set out each segment's revenue and its share in our total net revenue for the periods indicated.
Year Ended December 31, 2011 R$ millions Relative Participation % R$ millions 2010 Relative Participation % R$ millions 2009 Relative Participation %

Total revenues(1) ......................................................... Income from financial intermediation ........................ Government fund and program management ............. Banking services and capital markets activities ......... Asset management....................................................... Other revenues(2) .......................................................... (1)

5,864.38 3,347.86 1,931.66 231.31 14.30 339.25

100.00% 57.09% 32.94% 3.94% 0.24% 5.78%

4,605.6 2,431.3 1,615.0 311.1 12.6 235.7

100.0% 52.8% 35.1% 6.8% 0.3% 5.1%

4,283.4 2,005.2 1,379.6 284.5 9.7 604.4

100.0% 46.8% 32.2% 6.7% 0.2% 14.1%

(2)

Total revenues for each period reflected in this table consists of the total of our income for the relevant period from (i) financial intermediation, (ii) management services provided to government funds and programs, (iii) bank fees and (iv) certain other operating income (including del credere fees). Total revenues as so presented is a non-Brazilian GAAP accounting measure prepared by us that we believe to be a useful measure, insofar as it combines our interest and other income from financial intermediation and our income from fund and program management, including from our management of the FNE, which would not otherwise be reported as income from financial intermediation under Brazilian GAAP, although it may not be comparable to any similarly defined measure used by other financial institutions. As a result, our presentation of the components of total revenues set forth in this table differs from the discussion of the components of our income in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Includes other operating income mainly from the effects of negative exchange rate variation in foreign-currency denominated funding, reversal of operational provisions and recovery of FNE loans. The amounts presented do not include related expenses, such as negative exchange variation on granted loans, accrual of operational provisions, and provisions for FNE transactions, among others, which are recorded as other operating expenses. For a more detailed description of other operating income and expenses, please refer to notes 20, 19 and 19, respectively, to the 2011 Financial Statements, the 2010 Financial Statements and the 2009 Financial Statements.

Description of Products and Services Our main products and services are described below. Loan Operations Our income from loan operations accounted for 52.9% (or R$1.8 billion) and 61.3% (or R$1.5 billion) of our income from financial intermediation for the years ended December 31, 2011 and 2010, respectively. The lending segment encompasses a broad range of customized solutions aimed at strengthening our relationships with our customers, mostly in the Northeast region of Brazil, who are shown by type in the table below. Industrial Small industrial businesses Mid-sized industrial businesses Large industrial businesses Industrial corporations and conglomerates Rural and Agribusiness Rural cooperatives Small rural properties Medium rural properties Family rural properties Agribusiness Government - Brazilian Government - State governments - Municipal governments

Commercial - Micro businesses - Small businesses - Mid-sized businesses

Individual and Consumer - Consumer credit

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The table below shows the balances for our loan operations as of December 31, 2011 and 2010:
December 31, 2011 R$million Total loan operations .................................................... Loans............................................................................... Industrial(1) ....................................................................... Rural and agribusiness(2) ................................................. Commercial(1) .................................................................. Governments ................................................................... Individual and consumer ................................................. Housing system ............................................................... Acquired loan(3).............................................................. Other loan operations(4) ................................................ (1) (2) (3) (4) 11,799.1 8,416.8 3,189.1 1,474.6 2,368.4 1,331.0 53.3 0.2 266.0 3,116.3 Relative Participation (%) 100.0% 71.3% 27.0% 12.5% 20.1% 11.3% 0.5% 2.3% 26.4% December 31, 2010 R$ million 11,287.8 7,792.8 2,605.7 1,974.5 1,898.2 1,257.7 56.5 0.2 695.4 2,799.6 Relative Participation (%) 100.0% 69.0% 23.1% 17.5% 16.8% 11.1% 0.5% 6.2% 24.8%

Includes microcredit operations conducted through the Crediamigo program. Does not include microcredit operations under the Agroamigo program, which are part of the FNE's loan portfolio. Recorded as financial Intermediaries on our financial statements. Includes working capital loans, foreign trade transactions, urban microcredit loans (services), and other loan operations and products (such as guarantee accounts, bank credit notes, home mortgage loans and loans to non-Bank employees under CDCs).

Industrial Loans We extend industrial loans to a broad range of small, mid-sized and large industrial businesses as well as industrial corporations and conglomerates. Our portfolio of industrial loans totaled R$3,189.1 million as of December 31, 2011, an increase of 22.4% from December 31, 2010. Our industrial loan portfolio accounted for 27.0% of our total lending activity as of December 31, 2011 (23.1% as of December 31, 2010). We extend industrial loans for acquisition of machinery, equipment and raw materials, and for plant modernizations, among others. According to clients' specific needs, we make industrial loans through several funds and programs, including FAT (which includes PROFAT and Protrabalho) and programs from BNDES (including PMPE - BNDES Automtico, Nordeste Competitivo/FINAME and FINAME Automtico). These programs are targeted to customers of different sizes and needs (ranging in need from working capital to machinery and equipment investments), and totaled R$902.4 million of our portfolio as of December 31, 2011 (R$474.6 million as of December 31, 2010). We also make industrial loans not directly related to any governmental program, such as through our Crediamigo program, which is discussed below in "Microcredit Loans." We are exposed to 100% of the credit risk associated with our industrial loan portfolio and may take collateral, according to the type of loan, that can include mortgages, fiduciary assignment (alienao fiduciria) of machinery, equipment and receivables, and other types of collateral. Rural and Agribusiness Loans We extend rural and agribusiness loans primarily to rural cooperatives, small, medium and family rural properties and agribusinesses. While we classify loans to incorporated entities for corporate farming operations (planting and harvesting for example) as agribusiness loans, we classify loans to individuals and small farmers for other rural activities as rural loans. Our portfolio of rural and agribusiness loans totaled R$1,474.6 million as of December 31, 2011, a decrease of 25.3% from December 31, 2010, due to the removal of certain rural loans from our loan portfolio, totaling R$685 million, as we bear no credit risk with respect to these loans and operate solely as a service provider, receiving service fees for their administration. The rural and agribusiness loans portfolio accounted for 12.5% of our total lending activity as of December 31, 2011 (17.5% as of December 31, 2010). We are in compliance with the minimum requirements established by the Brazilian regulations applicable to rural loans. See "Regulation of the Brazilian Banking IndustryRegulations Affecting Financial Market Liquidity Compulsory Deposits and Other Requirements."

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We believe that family agriculture is an important way to develop food production and promote social and economic inclusion of the agricultural workers. PRONAF is a rural and agribusiness financing program under which different groups of borrowers selected by the government, namely: (i) "A" or "A/C" for farmers eligible to receive land through agrarian reform programs; (ii) "B" for farmers with annual income not exceeding R$6,000.00; and (iii) "Common" for farmers with annual income between R$6,000.00 and R$110,000.00, become eligible for low-cost loans. Additionally, the PRONAF has special credit lines aimed at specific activities or clients, such as PRONAF semi-arid (for clients living within the semi-arid climate region of Brazil, mostly in the Northeast region), PRONAF woman and PRONAF agro-industry, among others. As of December 31, 2010, we had approximately 1.4 million loans under the PRONAF program, including those under our and the FNE's portfolio, totaling R$4.8 billion in aggregate principal amount. See "Government and Program Fund ManagementOther Government Fund and Program ManagementPRONAF and Other Programs" for more information on PRONAF operations. We benefit from Proagro, the Brazilian Government insurance program that covers our losses for rural and agribusiness loans in the principal amount of up to R$35,000, which includes most of our loans under the PRONAF programs (for which we bear 50% of the credit risk, except for a limited number of PRONAF loans, for which we bear no credit risk). We also make rural loans not directly related to governmental programs, including loans that we administrate and disburse using FNE funds through the Agroamigo program, which is discussed below in "Microcredit Loans." Except as described above, we are exposed to 100% of the credit risk associated with our rural and agribusiness loan portfolio, except for loans under PRONAF, for which we assume risk only under limited exceptions. For the rural and agribusiness loans for which we assume credit risk, we may take collateral according to the type of loan, including mortgages, fiduciary assignment (alienao fiduciria) of machinery, equipment and receivables, and other types of collateral. Commercial Loans We extend commercial loans primarily to micro, small and mid-sized businesses (in the retail, wholesale and services sectors) through several funds and programs, including FAT (including PROFAT and Protrabalho), and BNDES (including PMPE - BNDES Automtico and FINEM), to finance investments, acquisitions of assets (long-term and current), working capital and purchases of raw materials. Our portfolio of commercial loans totaled R$2,368.4 million as of December 31, 2011, an increase of 24.8% from December 31, 2010. The commercial loans portfolio accounted for 20.1% of our total lending activity as of December 31, 2011 (16.8% as of December 31, 2010). In making our loans, we aim to equally service various economic sectors resulting in a widely dispersed client and economic sector base for these loans. We also make commercial loans not directly related to any governmental program, such as through our Crediamigo program, which is discussed below in "Microcredit Loans." We are exposed to 100% of the credit risk associated with our commercial loan portfolio, for which we may take collateral, according to the type of loan, that can include mortgages, fiduciary assignment (alienao fiduciria) of machinery, equipment and receivables, and other types of collateral. Loans to the Federal, State and Municipal Governments We extend loans to the federal, state and municipal governments to finance the construction of infrastructure projects such as roads, sanitation systems and administrative offices. These loans are made directly to the federal, state or municipal governments, including their departments and ministries, but not to any government owned companies. Our portfolio of loans to federal, state and municipal government entities totaled R$1,331.0 million as of December 31, 2011, an increase of 5.8% from December 31, 2010. This portfolio accounted for 11.3% of our total lending activity as of December 31, 2011 (11.1% as of December 31, 2010). The table below shows our portfolio of loans to federal, state and municipal government entities according to type, as of the dates indicated.

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Year Ended December 31, 2011 Relative Participation % 100.0% 36.7% 61.8% 1.5%

Year Ended December 31, 2010 Relative Participation % 100.0% 42.4% 56.1% 1.5%

R$ millions Government ................................................................................. Federal ........................................................................................... State ............................................................................................... Municipal....................................................................................... 1,331.0 488.7 822.5 19.8

R$ millions 1,257.7 533.3 705.2 19.2

We have also been, since 1994, responsible for the PRODETUR, a program of the Brazilian Government sponsored by the IDB. The program is designed to state and municipal governments and focuses on expanding and improving the quality of tourism, investments in infrastructure (sanitation, transportation and urbanization, among others), environmental protection and historical and cultural heritage preservation and restoration. The initial phase of the program ended on 2005, with total investments of US$660 million. A second phase of the program was started in 2002 and is ongoing, which is also focused on strategic planning, strengthening of local governments and professional development. Some of the major construction works we financed through PRODETUR include the refurbishment and expansion of the airports at five state capitals in the Northeast region (Salvador, Fortaleza, Natal, Aracaj and So Luis), road construction in the states of Cear, Bahia, Paraba, Pernambuco, Sergipe, Rio Grande do Norte and Minas Gerais, and implementation of sanitation systems in the states of Alagoas, Bahia, Cear, Maranho, Paraba, Pernambuco, Rio Grande do Norte and Sergipe. We are exposed to 100% of the credit risk associated with our federal, state and municipal loan portfolio. Individual and Consumer Loans Individual and consumer loans consist of a special employee-focused direct consumer credit program and overdraft accounts for individuals. Our portfolio of individual and consumer loans totaled R$53.3 million as of December 31, 2011, a decrease of 6.0% from December 31, 2010. The individual and consumer loan portfolio accounted for 0.5% and 0.5% of our total lending activity as of December 31, 2011 and 2010, respectively. These amounts do not include our rural microcredit portfolio (included in our rural and agribusiness loan portfolio) and urban microcredit (which is distributed amongst our industrial, commercial and other loan operations portfolios). We also extend microcredit loans to individuals, discussed below in "Microcredit Loans." We are exposed to 100% of the credit risk associated with our individual and consumer loans, over some of which we take collateral. Purchases of Consumer Loans Portfolios Our acquisition of loan portfolios (loans made by third party financial institutions to finance the purchase of goods and services) from other financial institutions totaled R$266.0 million as of December 31, 2011, a decrease of 61.7% from December 31, 2010. The acquisition of loan portfolios from other financial institutions accounted for 2.3% of our total lending activity as of December 31, 2011 (6.2% as of December 31, 2010). The loan portfolios we acquired consist mostly of CDC's of smaller banks and/or financial institutions. We purchased these CDC's for their profitability and to comply with government mandates, which have required larger banks to make such acquisitions to increase liquidity in the banking system by funding smaller financial institutions during financial crises. We have, however, decreased our acquisition of CDC's in 2010, have not purchased any in 2011 and do not anticipate acquiring any in 2012. We are not a party to any agreement or commitment to purchase any loan portfolio from any particular institution. Other Loan Operations Other loan operations consist of the products and services discussed below. Our portfolio of other loan products totaled R$3,116.3 million as of December 31, 2011, an increase of 11.3% from December 31, 2010. The portfolio of other loan operations accounted for 26.4% of our total lending activity as of December 31, 2011 (24.8% as of December 31, 2010). We are exposed to 100% of the credit risk associated with our other loan operations.

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Other loan operations includes working capital products, foreign trade transactions (including through the Northeast Export Program (NExport)), urban microcredit loans (services), and other loan operations and products (such as guarantee accounts, bank credit notes, home mortgage loans and loans to non-Bank employees under CDCs). Microcredit Loans Our microcredit operations are distributed among our different loan portfolios, specifically industrial loans, commercial loans and other loan operations (urban microcredit loans), through our Crediamigo program. Our microcredit operations also include rural and agribusiness loans, using FNE funds and as part of the FNE's portfolio, through the Agroamigo program. The combined microcredit portfolios we managed as of December 31, 2011 totaled R$2,268.8 million, which included R$1,177.9 million from Crediamigo (our portfolio) and R$1,090.9 million from Agroamigo (the FNE's portfolio), reflecting an increase of 41.6% from December 31, 2010. Under our Crediamigo program, we extend microcredit loans to small unincorporated businesses in the commercial, industrial and services sectors. We initiated the Crediamigo program in 1998, to provide loans with an expedited credit approval process, quick disbursements, personalized service and a methodology uniquely based on pooled borrower groups. We offer groups of loan applicants the opportunity to provide collateral for each other and thus pool their guarantees together, instead of being treated individually (CDCs). For the year ended December 31, 2011, the balance of the Crediamigo program totaled R$1,177.9 million (R$770.4 million as of December 31, 2010), representing 10.0% of our total lending activity (6.8% as of December 31, 2010). As of December 31, 2011, the program was available in 1,878 cities through 173 of our branches and 208 Crediamigo's advanced service points. In 2009, the Crediamigo program was also extended to certain cities in the state of Rio de Janeiro, which we believe is an indication of the program's success. We also conduct microcredit operations for rural and agribusiness loans through the Agroamigo program, which was created in 2005 to assist family agricultural producers eligible under the PRONAF B category to obtain financing. We manage Agroamigo, although the program is part of the FNE's portfolio and is operated with FNE funds. Under the Agroamigo program, we develop special products tailored for the needs of family and small agricultural producers. During the year ended December 31, 2011, disbursements through the Agroamigo program totaled R$775.1 million. The Agroamigo portfolio totaled R$1,090.9 million (FNE's portfolio) as of December 31, 2011 (R$831.4 million as of December 31, 2010). We are not exposed to any credit risk associated with the loans made under our Agroamigo program. The table below shows our microcredit loans portfolio as of the dates indicated.
December 31, 2011 December 31, 2010

(R$ millions, except percentages) Total Microcredit(1) ..................................................................... Crediamigo(2) ................................................................................. Agroamigo (rural and agribusiness)(3) ........................................... (1) (2) (3) Sum of our and the FNE's portfolios combined. Our portfolio only. FNE's portfolio only. 2,268.8 1,177.9 1,090.9 100.0% 51.9% 48.1% 1,601.8 770.4 831.4 100.0% 48.1% 51.9%

Government Fund and Program Management As part of our development bank role, we manage and act as agent for certain government funds and programs that generally focus on sectors and areas that demand large investments in infrastructure and on microcredit operations (rural and urban), with the ultimate objective of reducing social disparity in the region. FNE Overview. The FNE is the largest Brazilian Government fund we manage, with total assets of R$37.7 billion as of December 31, 2011. Considering the total long-term loans we disbursed for the year ended

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December 31, 2011, 93.4% were made using FNE funds. The Brazilian Constitution established the FNE to invest in low-cost loans to entrepreneurs from the productive sectors to promote economic and social development in the Northeast region, by supporting the creation of new urban areas, activities and development centers to reduce the economic and social imbalances among the various regions of Brazil and within the Northeast region itself. The FNE was created particularly to help investments in the semi-arid area of the country and, as a result, at least 50% of its funds must be utilized in this area. The FNE's beneficiaries are, among others, producers, companies, associations and production cooperatives, which may obtain funding for long-term investments and working capital, among other purposes. In addition to farming, mining, industry and agribusiness, the FNE is also permitted to fund tourism, commercial, services, cultural and economic infrastructures of the Northeast region. FNE Operations. We are required to invest all FNE funds in low-cost loans for economic and social development in the Northeast region. Although there is no mandatory allocation of these funds in particular categories or sectors, we are not permitted to invest more than 30.0% of FNE funds in any single state of the Northeast region. All of FNE's assets are available to be loaned to borrowers in the Northeast region, since FNE is not subject to capital requirements. As the exclusive manager of the FNE, subject to its rules and policies, we decide how and to whom to allocate these funds, in the same manner as we make credit decisions on our own loan portfolio. As mandated by Article 159 of the Brazilian Federal Constitution and Law No. 7,827 of September 27, 1989, we are the exclusive manager of FNE, which cannot be changed unless the Brazilian Congress passes a law to that effect. We currently offer FNE loans at interest rates starting at 5.00% per annum for the rural and agribusiness and 6.75% for industrial and commercial sectors, and offer bonuses for timely repayment in the form of rebates of 25% and 15% of the total interest due, for borrowers located in the semi-arid and other regions, respectively. We also act, through FNE, as a financing agent for the PAC. The PAC, launched on January 28, 2007, is a Brazilian Government program that established a set of economic policies that over a period of four years is meant to accelerate Brazil's economic growth by investing in infrastructure, sanitation, housing, transportation, energy and water resources of the Northeast region, among others. We provide financial support to projects under the PAC utilizing FNE funds. During the year ended December 31, 2011, our contracted amounts under the PAC program totaled R$1.4 billion, distributed among 12 projects. As of December 31, 2011, the total amount contracted under the PAC program utilizing FNE funds totaled R$9.4 billion. FNE Management Fees. In return for our role as manager of FNE's funds, we receive an annual 3% management fee based on FNE's total net worth, which is reflected in our income from services provided line item. The amount of assets allocated to the FNE by the Brazilian Government every year is proportionate to the aggregate tax receipts collected from IPI and income taxes and our annual management fee is limited to a maximum of 20% of proceeds annually transferred to FNE by the Brazilian Government to FNE based on collection of income taxes and IPI. Revenues from management fee from the FNE totaled R$993.5 million for the year ended December 31, 2011 (R$816.8 million for the year ended December 31, 2010), which represents 16.9% (and 17.7%) of our total revenues for these periods. FNE Del Credere Fees. In addition to the annual management fees we receive from FNE, we also receive additional payments in exchange for assuming the credit risk of FNE's portfolio (usually, 50%), beyond our role as fund manager. This del credere fee corresponds to 0.25% per month where we assume 50% of the credit risk and 0.50% per month for transactions where we assume 100% of the credit risk, and is calculated monthly based on the outstanding balance of each loan operation. These revenues totaled R$822.8 million for the year ended December 31, 2011 (R$690.2 million for the year ended December 31, 2010).

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In accordance with the applicable FNE regulations, the risk allocation of the transactions contracted by FNE are as follows: Transactions entered into as of or before November 30, 1998 and from other specific programs, such as PRONAF and Programa da Terra: we assume no credit risk. These loans totaled 16.2% of the total FNE portfolio as of December 31, 2011. Transactions entered into as of and after December 1, 1998 (excluding real property financing lines under the PRONAF): we assume 50% of the credit risk. These loans totaled 83.1% of the total FNE portfolio as of December 31, 2011. Renegotiated transactions (past due transactions that were originally funded with resources other than FNE's and are renegotiated with FNE funds): we assume 100% of the credit risk. These loans totaled 0.7% of the total FNE portfolio as of December 31, 2011.

Del credere fees are recorded as other operating income on our income statement, and our contingent liability for losses are recorded as other operating expenses. For a discussion of the risks relating to our contingent liability with respect to the FNE portfolio, see "Risk FactorsRisks Relating to us and the Brazilian Banking IndustryWe could be subject to a greater degree of risk on certain FNE loans than on loans from our own portfolio" and for a discussion of how our del credere fees affect our results of operations, see "Treasury Operations." We make provisions for losses on FNE loans in accordance with Central Bank guidelines, in the same manner as we provision for losses on our own loan portfolio, and these provisions are included in our overall allowances for loan losses and recorded on our balance sheet under the item other payables provision for contingent liabilities. For a more complete discussion of how the FNE affects our results of operations, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsPrincipal Factors Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs." Other Government Fund and Program Management We act as a manager for FINOR, lending agent for PRONAF and other smaller programs and loan analyst and administrator for FDNE for the Brazilian Government, which operations generated aggregate fees totaling R$112.6 million and R$106.3 million for the year ended December 31, 2011 and 2010, respectively. FINOR. FINOR is a fund that is funded through tax benefits for companies headquartered in the Northeast region that opt to buy shares of FINOR instead of paying certain taxes. FINOR financings are made solely through subscription of shares or debentures (convertible or not) issued by the borrower. As manager of FINOR, our role is restricted to disbursing funds and managing cash flow, accounting records, and FINOR's portfolio. Unlike our management role for the FNE, however, we do not select target borrowers for loans, and instead allocate loans to clients selected by FINOR. In exchange for our management role, we are paid an annual management fee of 3.0% calculated on 70% of FINOR's net worth. As of December 31, 2011, FINOR's net worth was R$373.9 million, which corresponds to an increase of 237.3% from December 31, 2010. This increase was mainly caused by tax incentives and recovery of the stock portfolio held by the fund. During 2011, the Federal Government contributed R$252.4 million to FINOR. During 2011, onlendings from FINOR totaled R$215.0 million, and we earned R$6.0 million in management fees from FINOR during this period. We do not assume any risk on FINOR loans and thus do not receive del credere fees them. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsPrincipal Factors Generally Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs" for more information regarding how FINOR affects our results of operations. PRONAF and other Programs. We act as a lending agent for the PRONAF, a rural and agribusiness financing program under which different government-selected groups of borrowers may become eligible for loans with more competitive terms than otherwise available in the market. See "Description of Products and Services Loan OperationsRural and Agribusiness Loans" for a discussion of our PRONAF operations. We receive management fees in connection with PRONAF and are moreover reimbursed monthly by the Brazilian Government

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for loans we extend under the program that exceed our costs. Subject to only few limited exceptions, we do not assume risk on PRONAF loans, however if we do assume risk exceeding specified levels, we receive a del credere fee that we record as other operating income on our income statement (and the corresponding contingent liability as a provision on our balance sheet under other payablesprovisions for contingent liabilities). See "Management's Discussion and Analysis of Financial Condition and Results of OperationsPrincipal Factors Generally Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs" for more information regarding how PRONAF affects our results of operations. We also act as lending agent for other smaller government programs designed for regional rural workers, including the emergency credit lines for Northeast states affected by floods, the Real Estate Credit and Rural Poverty Combat Program (Programa de Crdito Fundirio e Combate Pobreza) and the Family Agriculture Consolidation Program (Programa de Consolidao da Agricultura Familiar), in exchange for a management fee. As of December 31, 2011, our portfolio for these other programs totaled R$677.0 million (R$583.9 million as of December 31, 2010). We take no credit risk for loans under these programs, as we operate solely as a service provider in accordance with agreements we entered into with the Brazilian Government through the Ministry of Agrarian Development (Ministrio de Desenvolvimento Agrrio). FDNE. FDNE is a governmental fund designed to provide financing for investments in infrastructure, public service and other projects with potential to create other businesses in the Northeast region in accordance with the guidelines and priorities approved by the Development Council of the Northeast (Conselho Deliberativo para o Desenvolvimento do Nordeste). FDNE financings are made solely through subscription of debentures convertible into common shares, issued by the borrower. We conduct the economic and financial feasibility analysis required for the projects presented to the fund, in addition to acting as its administrator, disbursing its loans. In exchange for the analysis services provided by us to FDNE, we earn fees corresponding to 0.75% of the amount of the each financing up to R$50.0 million, and 0.45% of the total amount of each financing for any amount of financing exceeding R$50.0 million. In any case, these fees are subject to minimum and maximum limits, corresponding to R$100,000 and R$1.0 million, respectively. For our role as administrator of FDNE, we are entitled to a 2.0% fee on any disbursed amounts, and a fee for receiving payments or successfully collecting FDNE loans corresponding to 1.5% of the received amounts (which is capped at R$50.0 million for the purpose of determining the applicable fee). Until December 31, 2011, we received 14 projects for analysis, six of which were ultimately approved, totaling R$3.3 billion allocations by the FDNE. For the year ended December 31, 2011, we earned R$10.2 million in management fees in connection with our services within these projects (R$27.4 million for the year ended December 31, 2010). We additionally receive a del credere fee ranging from 0.15% to 0.60% of the outstanding amount of the respective loans for assuming from 2.5% to 10% of the credit risk associated with loans made with FDNE funds, which we do occasionally. These revenues totaled R$2.7 million for the year ended December 31, 2011 (R$1.2 million for the year ended December 31, 2010). When we assume risk on FDNE loans, we record the corresponding contingent liability as a provision on our balance sheet under other payablesprovisions for contingent liabilities. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsPrincipal Factors Generally Affecting Financial Condition and Results of OperationsOur Relationship with FNE and Other Government Funds and Programs" for more information regarding how FDNE affects our results of operations, including how we provision for FNDE loans for which we assume risk. Banking Services and Capital Markets Activities Our banking services encompass a broad range of typical banking products and services, including time deposits, checking accounts, electronic fund transfers, internet banking, collection services and sale of third-party private pension plans and savings bonds. Time deposits allow clients to buy certain securities with the right to receive interest income according to pre-established terms. They are fixed-income securities with fixed or variable rates, with yields varying in accordance with the index chosen. Time deposits include CDBs and RDBs (bank deposit receipts). The two differ in that RDBs are non-transferable and uncertificated, whereas CDBs are transferable and may be certificated. Although CDBs are transferable securities, in practice they are traded only electronically. As of December 31, 2011, we had 1,134 clients holding time deposit accounts totaling R$5.0 billion.

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Our capital markets activities encompass a broad range of products and services, including: Financial advisory: preparation of business plans and investment projects necessary for structuring financial and capital markets transactions; Transaction structuring: definition of terms and conditions of securities to be issued, including maturity date, interest rates, covenants, interest and principal payments; and Underwriting: underwriting and distribution of debentures and other short and long-term bonds for institutional investors.

As of December 31, 2011, we were ranked 12th in the origination and distribution ranking of ANBIMA for fixed income debt securities in Brazil (since January 2011). Asset Management Our asset management activities amounted to R$14.3 million and R$12.6 million for the years ended December 31, 2011 and 2010, respectively. This segment encompasses a broad range of products and services, including administration and management of third-party assets for small, medium and large investors (including government entities). Asset management revenues come mainly from commissions and management fees charged to investors for services provided. As of December 31, 2011, we managed 20 of our proprietary investment funds, 12 of which were designed for retail investors, six were tailor made for certain selected investors and two for the public sector (governmental entities acting in the role of investors), with a total net asset value of R$3.4 billion. Treasury Operations According to our treasury management policy, our treasury operations are considered a supplementary activity to our loan operations. Accordingly, our treasury does not assume leveraged positions that may increase our risk. Consequently, our treasury resources are invested primarily in debt instruments issued by the Brazilian Government and interbank deposits based on such instruments, both of which have short-term maturities. The remaining funds are invested in securities issued by publicly-held companies (such as debentures, equity securities and short-term securities). We believe these investments provide us with adequate returns and liquidity to meet our obligations and assure the availability of funds for our loan operations. As of December 31, 2011, treasury investments in such debt instruments and interbank deposits totaled 88% of the total treasury investments. See "Other Statistical and Financial InformationSecurities and Investments Portfolio" for more information on our treasury operations. In addition, while FNE's balance sheet is separate from ours, we usually hold FNE funds on our balance sheet for an average period of 292 days between the time we receive the funds from FNE and the time we disburse these funds to borrowers. During this period, we typically invest those funds in money market instruments or Brazilian Government securities and record them as interbank deposits or as securities and derivatives. These investments usually earn interest at the SELIC rate, which income we record as securities transactions on our income statement. Partially offsetting this interest income, until these proceeds are loaned to borrowers, we are required to pay interest on these amounts to the FNE at the rate of 95.5% of the SELIC rate, which we record as borrowings and onlendings. For the year ended December 31, 2011, the 407 days over which we held funds from the FNE before disbursement to borrowers consisted of an average of 142 days for us to contract the loans and an average of 265 days for us to disburse the corresponding loan amounts. For the year ended December 31, 2011, our income from treasury operations totaled R$1,365.5 million (R$888.8 million for the year ended December 31, 2010). Funding As of December 31, 2011, our sources of funding were largely (i) time deposits (particularly in the form of CDBs), representing 33.6% of total funding; (ii) savings deposits, representing 6.5% of total funding; and

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(iii) interbank deposits and funds from BNDES and other government-owned institutions, and funds from international development banks, such as the Inter-American Development Bank, which together represented 59.9% of our total funding. As a government-owned bank with a mandate to facilitate development in the Northeast region, we have access to Brazilian Government resources and international development banks that provide us with low-cost funding that allows us to perform our development banking activities at more favorable margins compared to those available in the private sector (our average rate on average interest-bearing liabilities was 10.6% for the year ended December 31, 2011, and 7.0% and 4.2% for the years ended December 31, 2010 and 2009, respectively, which we believe in principal part results from the low costs of these sources). For more information on our average interest-bearing liabilities, see "Other Statistical and Financial InformationAverage Balance Sheets and Interest Rate Data." This includes BNDES funding, even though we must follow the same procedures and are subject to the same requirements and commercial terms applicable to non-government owned recipients of its funding. We have also been working to diversify our sources of funding by increasing time deposits, particularly in the form of CDBs. In addition, in order to strengthen our capital base, we issued subordinated debt in the local Brazilian markets of R$600.0 million in July 2009 and R$400.0 million in June 2010, to the FNE, which increased our capital ratio by 3.35% and 1.65%, respectively. In the second half of 2010, in order to further strengthen our capital base, we raised an additional R$1.0 billion through a loan agreement granted by the Brazilian government, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444, which increased our capital ratio by 4.21%. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources Sources and Uses of FundsSources of Funds." The table below contains the distribution of our funding for the indicated periods.
As of December 31, 2011 Funding Deposits ................................................................................................................ Open market funding............................................................................................ Bonds .................................................................................................................... Interbank accounts................................................................................................ Interbranch accounts ............................................................................................ Borrowings ........................................................................................................... Domestic onlendings - official institutions .......................................................... Derivatives............................................................................................................ Foreign onlendings ............................................................................................... Other payables ...................................................................................................... Hybrid instrument of equity and debt(1) ............................................................... Total ..................................................................................................................... (1) 2010 (R$ thousands) 8,964,499 704,373 763,607 4 7,142 882,789 1,286,685 21,128 840,392 5,794,545 1,137,872 20,403,037 8,509,581 524,289 485,487 22 30,330 507,478 1,686,776 58,138 729,165 4,758,110 1,004,166 18,293,542 6,332,727 445,678 13,128 700,679 1,433,524 36,571 722,393 4,175,390 13,860,090 2009

Loan agreement granted by the Brazilian government, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesSources and Uses of FundsSources of Funds."

See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesSources and Uses of FundsSources of Funds" for more details on our sources and uses of funds, including our deposits.

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Lending Procedures General Our lending process is comprised of nine phases. These procedures are standard and are followed for loan approval for all of our products (including FNE loans), as illustrated by the chart below:

LendingProcess

Client

Loan Application

Consultation Letter*

Project Elaboration**

Client Registration/ Managerial Visit

Client Classification/ Product Selection

CreditLimit Approval

Project Elaboration Approval

Project Analyst**

LoanApproval

Compliance verification

Loan Origination and Disbursement Applications are the first step for customers to obtain financing from us. This phase involves an initial interview with the potential client to assess its financial needs and credit worthiness. Once the loan feasibility is confirmed, we open a client account and obtain information about the client's current operations and projected investment, and a site visit is scheduled. Based on the information compiled and depending on the amount of the proposed loan, we assign the client to a specific client portfolio and the most suitable credit product is selected. In addition to the client's internal ratings and financial statements, the credit review process involves external factors such as the economic environment and industry risk. After a credit limit has been approved, the client must submit a consultation letter disclosing details of the proposed project, including the additional funding sources for the project, collateral availability and any other relevant information to be considered by us. Based on the approved credit limit, the client's profile and the initial evaluation of project feasibility, we approve a project development process to evaluate the proposed business plan, including projected income statements and cash flows, an itemized investment expenditures budget, and an analysis of potential clients and market share. We then examine the proposed business plan, verifying the consistency of its figures with industry ratios, the economic environment and market growth projections, as well as compliance with regulatory and environmental matters and local legislation. Based on this technical analysis, we issue a technical opinion evaluating the credit facility and the economic impact of the project, which may include additional credit conditions. For more information on our management of credit risk, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsAllowances and Risk Classification." Although our activities are focused in the Northeast region of Brazil and FNE loans may only be contracted in the Northeast region, we are also qualified to conduct our banking activities in other states (such as the introduction of the Crediamigo program in Rio de Janeiro in 2009 or our capital markets activities).

Bank

AppliestoloansaboveR$5million **AppliestoloansaboveR$200,000

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Credit Monitoring After a loan is disbursed, we continue to periodically monitor the client's financial condition and to assess the progress and regulatory compliance of the funded projects. Credit monitoring includes inspection visits to assess the following: Application of resources in a timely manner, in accordance with the itemized investment expenditures budget; Progress of the funded project in relation to the implementation schedule provided; Verification and monitoring of actual results compared to the borrowers' projected indicators included in their business plans; Compliance with technical specifications, including accessibility standards for people with disabilities (buildings, facilities, equipment, etc); Compliance with recommended techniques in the plantation and harvesting of crops (agribusiness); Location of construction sites and installations; Quality of construction materials and/or raw materials used; Condition of assets financed and/or given as collateral; Current client competitiveness; and Revenue prospects in relation to projections included in the business plan, including possible delay in revenue generation, analysis of the client's ability to make payments and the percentage of use of the business installed capacity.

Risk Management General We manage credit, market and liquidity risks. We conduct stress tests on our loan portfolio (as well as on the FNE portfolio) in order to determine the level of allowances for loan losses for the period, including the minimum required and any additional allowances for loan losses in accordance with Resolution No. 2,682, of December 31, 1999, as amended. We also operate a risk management system in order to react to changing economic and financial conditions in Brazil. Our stress tests evaluate the probability of loss amounting to 5%, 10% and 20% of our total financial assets. This system is consistent with applicable Brazilian legal and regulatory requirements although it sets out segregation levels that are even more stringent than those required by the applicable regulations. The main features of our risk management system include: maximum value at risk (VaR) for interest rates, commodities prices and average price index; maximum exposure limits for foreign currency (5% of reference capital); minimum limits for maturing obligations; and control of transaction limits for each of our products and services.

In order to implement and evaluate our various risk categories and define our strategies, we have a Risk and Control Officer, responsible for the supervision and implementation of risk, internal controls and corporate security policies, which are subject to prior approval by the Board of Directors and our risk committee, which is comprised

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of senior management of our different areas that deal with risk See "Management's Discussion and Analysis of Financial Condition and Results of OperationsAllowances and Risk Classification." Market and Liquidity Risk We adopt market-validated methodologies to manage our market and liquidity risk, including those to demonstrate the impairment of maturity and interest rates between assets and liabilities. First, we use a mark to market method to value our assets and liabilities to determine any impairment related to interest rates and commodities prices. The discount rate used is the rate of return used as benchmarking (the interbank deposit interest rate). As the majority of the assets are represented by long-term loans, the target of our management is to minimize the default rates. We also focus on maturity impairment, which is managed by allocating appropriate funding to each type of loan. If no long-term funding is available, we do not extend development loans for industrial production in the Northeast region. Before being implemented or modified, those systems, models and procedures are subject to an internal validation process, that consists on the submission of the proposed changes for prior approval to the Risk Management Committee and to the Board of Directors. After being approved, the rules become internal norms which are subject to compliance by all operational areas. Additionally, we apply tests to check the efficiency of the adopted methodologies and models in adequately measuring the risks and in verifying whether the estimated risks correspond to the effective risks, to assure their credibility. The risk management department periodically conducts stress tests simulating extreme conditions such as economic cycles and changes in market and liquidity conditions, in order to propose additional mitigating measures. In addition, this department issues monthly, semi-annual and annual reports about the performance of our market and liquidity risk management system to the management. The liquidity risk control is mainly conducted by a daily monitoring of the cash flow by the risk management department, observing the ratios allowed by the liquidity policy approved by the Board of Directors. Each unit responsible for managing transactions which are subject to market and liquidity risks, collectively with our controller, must produce adequate and sufficient information to ensure an appropriate decision-making process and must be standardized as to the concept, content and technical vocabulary. According to our internal regulations, whenever the liquidity level is low, the risk control area issues a warning letter to the financial area, to restore the adequate liquidity level. Credit Risk Our credit risk operations are supported by a risk limit, which imposes a maximum commitment of resources per client or business group, requiring an adequate and sufficient guarantee. An overall limit is assigned to each customer, to support their total (direct or indirect) liabilities. The approval of risk limits and maximum commitment per customer is exclusively made by committees with mandates from our risk department. Systems, routines and procedures are implemented in order to identify, measure, monitor and mitigate exposure to credit risk, at individual and aggregate levels. The credit risk corporate manager prepares monthly, semi-annual and annual management reports for our senior management, including suggestions on measures to minimize risk. As a means of mitigating credit risk, the collateral policy was designed to provide collateral guarantee, ensuring greater safety and liquidity. Operational Risks The operational risk assessment observes both legal and Basel II criteria, taking into account the creation, modification or discontinuance of products, services, and technology solutions. These processes have checkpoints in order to enable managerial intervention before the risk turns into a loss. The impacts of operational risk are systematically assessed and analyses of how to improve mitigation mechanisms, including training of personnel, process redesign and systems improvements, are routinely performed.

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From the standpoint of evaluating operational risks, we assess our own operational risks to identify critical activities as well as weaknesses in our procedures. We also evaluate the risk factors and loss events in order to establish key indicators of risk and mitigating actions, measuring the degree of risk exposure of each process and establishing the internal points of control. In operational risk management, we evaluate whether our operations ensure the efficiency and effectiveness in mitigating the risks. The corporate risk manager prepares monthly, semiannual and annual management reports for our management to take note and decide on appropriate actions. Marketing Our marketing strategy is aimed at the productive sector, consisting of activities that promote production of goods and services and foster economic and social development. We believe that sustainable development includes, and is also made of, an appreciation for talent and labor and of the preservation of our art, culture and history. In this fashion, as part of the marketing of our development activities, we participate in cultural projects and offer financing for cultural activities, both corporate or otherwise. We support and invest, through direct sponsorship, the production and dissemination of cultural events that promote participation in Northeastern communities. Our activities in the cultural area are in sintony with our development bank role and aligned with the culture-related guidelines of the Brazilian Government. These activities are based on three independent concerns: Fair access to artistic and cultural events: evidenced by the investments made in cultural centers in Fortaleza, Souza and Juazeiro do Norte with public access, including theaters (for plays and movies), exhibition areas with a permanent schedule of different regional artists and multimedia library (books, music and movies); and Special credit lines for cultural events: we provide special credit lines for cultural events, such as the BNB Culture Program (Programa BNB de Cultura), which has provided financing to 1,390 projects in 474 municipalities between 2005 and 2011.

Distribution Channels Our principal distribution channel is our branch network, which consisted of 187 branches that serviced 1,990 cities in the Northeast region as of December 31, 2011. We also offer access throughout more than 20,000 ATMs located throughout Brazil, operated by Banco 24 Horas, Banco do Brasil and Caixa Econmica Federal. In addition to the branches' cashiers and ATMs, we offer a variety of other options for accessing banking services, such as Internet and telephone banking. This branch network is complemented by alternative distribution channels, such as: Cliente Consulta (toll-free number): we offer to our current and prospective customers a personalized service through a toll-free number with timely and updated information on any subject related to our performance, products and services. This service is offered 24 hours a day (including on holidays), including for information about any services contracted with us. Information on products, services or institutional information and ombudsman services are available from Monday to Friday during usual business hours; Nordeste Eletrnico (internet banking): our customers have complete access to their checking and saving accounts information and are able to access services such as payments, transfers and investments. For corporate clients, access to corporate services is also available, including collection services, contract management information and foreign exchange contracts information; Nordeste Eletrnico Celular (telephone banking): we also provide our clients with the option to check information on checking accounts, saving accounts and other investments via mobile phone access; and Agncias Itinerantes (on-the-road branches): these mobile branches consist of our staff travelling to communities that are not serviced by our permanent branches. These teams visit different cities

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on a rotating basis, and stay up to two days at each location, providing local customer services, including: information about products and services; client interviews for lending purposes, including obtaining data for risk assessment; lending; and disbursement of PRONAF installments.

Transactions related to the Crediamigo and Agroamigo programs are conducted through separate distribution channels, and were offered in 173 branches and 208 advanced lending offices, respectively, as of December 31, 2011. Information Technology We had a Strategic Plan for Information Technology (Planejamento Estratgico de Tecnologia da Informao or "PETI") for the four-year period from 2008 to 2011. Examples of our improvements since 2008 include: For the year ended December 31, 2011: (i) acquiring 97 high-performance servers to enable the server virtualization project, (ii) acquiring solution to expand and modernize our computer network, to increase the availability and performance of services dependent on physical and logical resources sharing, (iii) acquiring communication services and infrastructure for the integrated telephone system for the headquarters and branch network, (iv) Evolution of Software Development Process (RUP-BNB) in mainframe platforms, Sybase, Microsoft and BI, (v) acquiring software for services and software assets governance (SOA), (vi) restructuring software development in mainframe and BI platforms, (vii) procurement of support services and specialized technical development, maintenance and documentation of business intelligence systems, (viii) concluding the Operational Assets Data Mart project, which automates the process of consolidation and dissemination of reports and (ix) structuring information for deployment of IFRS reports and (x) updating our internet banking service including new services and products and enhancements in security features; For the year ended December 31, 2010: (i) expanding by eight times the capacity of internet access (from 8Mbps to 64Mbps), (ii) acquiring seven servers for high end database to extend the processing power, (iii) acquiring servers for the branch network, (iv) acquiring 450 ATMs, replacing older equipment, (v) switching 24 legacy mainframe platform with Mantis language to new platforms, (vi) implementing the new system to process VISA Electronic debit card transactions, (vii) updating our internet banking service including new services and products and of enhancements in security features, (viii) Evolution of Data Mart systems: Credit Recovery, Internal Controls, CrediAmigo, customer profitability, customer management and operational assets and (ix) implementing a Project Office in the IT area and definition of prioritization model of IT projects; For the year ended December 31, 2009: (i) increasing by more than a factor of five, our data storage capacity used in our banking activities; (ii) acquiring over 200 new servers installed throughout our branch network; (iii) implementing full connectivity of our Crediamigo service points to our corporate network; (iv) licensing new systems that improved our operational risk management; (v) improving security standards for our internet banking services, as well as platforms for the visually impaired to access our ombudsman; (vi) implementing our internet banking platform for corporate clients; (vii) developing systems that allowed the automatic renegotiation of over 24,000 transactions under PRONAF category "B"; (viii) developing our balanced scorecard credit evaluation system; (ix) implementing several new supporting systems to our banking activities, such as receivables management, client and operational risks, and management of the FNE portfolio; and

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For the year ended December 31, 2008: (i) leasing of approximately 7,200 new desktop computers to modernize the hardware used in our branches; (ii) hiring of three software development companies, seven IT support service providers and one specialized consulting firm to increase our ability to meet the increasing demand for development and improvement of our IT systems; (iii) improving our telecommunications infrastructure to allow us to securely access our applications through internet connection and interconnect our branches and units; and (iv) developing procedures to allow us to collect critical information used in our strategic projects based on IT systems.

Our expenses from leasing information technology equipment totaled R$19.0 million for the year ended December 31, 2011. Property, Plant and Equipment As of December 31, 2011, all of our branches are located in leased buildings. We own the property where our head office is located in Fortaleza, Cear. We have not acquired, and do not currently expect to acquire, any other properties that would be material to our business and financial condition. Intellectual Property Most of our brands are registered with the National Institute of Intellectual Property (Instituto Nacional de Propriedade Intelectual, or "INPI") to ensure that we have their use and exclusive benefit in Brazil. The brand "Crediamigo" has not been registered with the INPI. In 2004, we applied for registration of the "Crediamigo" brand but our request was denied by the INPI on the basis that a third party had already applied for the registration of this brand in 2002. We have appealed from this determination made by the INPI and, the decision is pending. In 2008, the third party obtained the registration of "Crediamigo" brand. We initiated an administrative proceeding before the INPI seeking the nullification of the registration and a decision on this proceeding is pending. Employees General As of December 31, 2011, we had 6,077 full-time employees (5,993 as of December 31, 2010). According to Brazilian law, employees applying for a position with us must pass a competitive admission exam open to the general public and widely announced in the national media. As part of our strategy of constantly increasing our long-term competitiveness, we emphasize investment in human resources. Some of our employees are affiliated with the Banking Union (Sindicato dos Bancrios) and an internal association of employees. We believe we have good relations with our employees and the Banking Union. We believe our employees are a key factor in our activities and in successfully achieving our objectives. Therefore, we focus our investments in human resources on providing constant, high-quality training to our employees. We strive for at least 90% of our employees to complete at least one training program per year. As a result, we offered our employees more than 80,000 training opportunities over the last three years. Compensation Our employees' compensation consists of a fixed wage and an annual variable amount (through a profit sharing program). Our profit sharing program is determined in accordance with an internal policy that contains the terms and conditions of the program, and sets out the organizational performance goals that are evaluated and, if successfully achieved, entitle the beneficiaries to a bonus. The goals are proposed annually by our Board of Executive Officers, that sends the proposal to the Governance and Coordination Department for Government-owned Companies (Departamento de Coordenao e Governana das Empresas Estatais, or DEST), which is responsible for approving the plan. We currently follow, in accordance with the DEST's recommendation, the distribution terms established by the FENABAN, and we enter into specific agreements with the labor unions that represent our employees. The amounts distributed as profit sharing are subject to a limit, corresponding to the lesser of (i) 9.0% of our annual net income; or (ii) 25% of the dividends and interest on shareholders' equity paid to the shareholders.

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Employee Benefit Plans We provide medical, hospital and dental health care plans to our current employees and retirees, including their dependents. We contribute 3.0% of the employees' salary to the health for employees and retirees. Additionally, we offer our employees the opportunity to enroll in Caixa de Previdncia dos Funcionrios do Banco do Nordeste do Brasil - Capef, a post-retirement and pension fund for them and their beneficiaries that we established in 1967. We are one of the sponsors of Capef and, accordingly, we make contributions to the plan matching our employees' contributions. Relationship with Labor Unions To comply with current legislation, to provide a positive work environment and to maintain a constant relationship with employee unions, we have historically maintained a collegial relationship with unions by prioritizing communication and working towards negotiated solutions. Our organizational structure includes executive managers responsible for focusing on relationships with employee unions. We exceed statutory requirements by having adopted a permanent collective bargaining model, mutually agreed upon with the unions, with periodic meetings scheduled to discuss employment matters. In addition, we hold monthly topic-specific round-table discussions of matters including occupational health and working conditions, supplementary pension plans, compensation and outsourcing. We recognize one of our employees as the union representative, as provided for in our Collective Bargaining Agreement, and grant to that representative the same rights as are conferred upon the leader of the union, as required by Article 543 of the Consolidated Labor Laws (CLT). Since 2003, we have experienced strikes during the collective bargaining periods between the third and fourth quarter of each year, with no material adverse effect on our operations. See "Legal Proceedings" for more information regarding these strikes and related legal claims. Competition As a supplier of long-term debt financing to companies located in the Northeast region of Brazil, our direct competitors have been Banco do Brasil and, particularly with respect to development-related loans, BNDES (particularly because most development banks are regional, restricting competition between them). However, local banks' ability to access to the international capital markets and the development of the Brazilian capital markets have improved in the recent past and may continue to do so in the future, providing increased funding opportunities for our competitors. In this respect we may face more intense competition from international and domestic banks. The last several years have been characterized by increased competition and consolidation in the financial services industry in Brazil. As of December 31, 2011, there were numerous multiservice banks, commercial banks, and savings and loan, brokerage, leasing and other financial institutions in Brazil. Notwithstanding the increased competition in the banking sector, we believe our expertise in long-term loans and our development bank role makes us the primary source of this type of financing for small and micro enterprises, business and corporate sector in the Northeast region of Brazil. Our retail banking services, such as checking and savings accounts, credit card issuances and others, are mainly offered as accessories to our core credit operations activities. In this segment, there is aggressive competition, as a considerable number of large Brazilian banks focus their activities in retail. Amongst our main competitors in this segment are Banco do Brasil S.A., Ita Unibanco Banco Mltiplo S.A., Banco Bradesco S.A. and Banco Santander (Brasil) S.A. Legal Proceedings Overview We are party to certain judicial and administrative proceedings that arise during the normal course of our business, including civil class actions and collective suits. In proceedings in which we are defendants, the plaintiffs

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are mainly clients or current or former employees. In the administrative proceedings, the main plaintiffs include, among others, the National Institute of Social Security (Instituto Nacional de Seguridade Social, or "INSS"), the Federal Revenue Service or State and Municipal Treasuries. Most of the lawsuits where we are the plaintiff seek to recover matured loans. We recognize provisions for legal proceedings with probable risk of loss, based on analysis of the likelihood of a favorable outcome and the possibility of our calculation. The provisioning method follows the standards issued by CMN Resolution No. 3,823, dated as of December 16, 2009 and Central Bank Circular-Letter No. 3,429, dated as of February 11, 2010, which accepted and approved CPC Pronouncement No. 25 regarding provisions, liabilities, contingent liabilities and contingent assets. According to this rule, contingencies with chance of loss by us greater than our chance of success should be provisioned. The probability analysis takes into account the alleged facts, legal precedents relevant to the claim and the experience of experts on the legal matters under dispute. Based on the opinion of our internal legal counsel, we recognize provisions only for contingencies with a probable risk of loss under CPC Pronouncement No. 25. As of December 31, 2011, our litigation provisions totaled R$402.2 million, 45.5% of which were related to labor matters, 28.0% of which were related to tax matters, and 26.5% of which were related to civil liability matters. We believe that, as of December 31, 2011, our litigation provisions were sufficient to cover our expected losses from litigation matters. The table below describes the nature, amounts involved and provisions in connection with the judicial and administrative proceedings to which we were a party as of December 31, 2011, shown according to their respective risk of loss:
As of December 31, 2011 Base value Provisions

(R$ thousands) Tax matters (administrative) .............................................................................................................................. Probable .................................................................................................................................................................. Tax matters (judicial) .......................................................................................................................................... Probable .................................................................................................................................................................. Possible ................................................................................................................................................................... Remote.................................................................................................................................................................... Labor matters ....................................................................................................................................................... Probable .................................................................................................................................................................. Possible ................................................................................................................................................................... Remote.................................................................................................................................................................... Civil matters .......................................................................................................................................................... Probable .................................................................................................................................................................. Possible ................................................................................................................................................................... Remote.................................................................................................................................................................... Other matters........................................................................................................................................................ Probable .................................................................................................................................................................. Possible ................................................................................................................................................................... Remote.................................................................................................................................................................... Total ....................................................................................................................................................................... 82,269 82,269 850,647 29,246 617,180 203,158 263,035 182,824 31,463 48,748 2,519,657 106,653 467,538 1,945,466 697 140 556 1 3,716,305 82,269 82,269 30,309 30,309 182,824 182,824 106,653 106,653 140 140 402,195

Material Proceedings The following is a detailed description of our material legal proceedings: Tax Matters We have filed writ of mandamus against the Fortaleza Federal Revenue Office and the Office of Attorney-General of the National Treasury in order to obtain set-off of overpayments made by us for income taxes in the year of 1999, after adjusting the income tax due for tax losses related to monetary restatement. The decision of the lower court was not favorable to us and we have appealed to the higher court, and our appeal is pending. We have a balance in the amount of R$87.6 million representing a judicial deposit as of December 31, 2011. We

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classify as probable the risk of loss arising from this lawsuit. As of December 31, 2011, we have provisioned an amount of R$70.8 million in connection with this claim. We have filed three tax assessment annulment lawsuits against the City of Fortaleza, all relating to municipal services taxes (ISSQN) assessed to us due to our role as manager of FNE and FINOR. Preliminary injunctions have been granted in our favor, but the lower court has not issued a final decision on these lawsuits. As of December 31, 2011, we estimated possible losses in the amount of: (i) R$160.5 million in connection with one of the proceedings; (ii) R$108.8 million in connection with another proceeding; and (iii) R$276.2 million in connection with another proceeding. Considering the estimated risk arising from these lawsuits, we have not made any provision in connection with them. The City of So Lus filed a tax enforcement lawsuit (execuo fiscal) against us in connection with municipal services taxes (ISSQN) regarding our role as manager of FNE and FINOR during the period from 1996 through 1999. The decision from the lower court in this case is still pending. We classify the risk of loss arising from this lawsuit as probable. As of December 31, 2011, we have provisioned an amount of R$20.8 million in connection with this claim. The Brazilian Government has filed a tax enforcement lawsuit (execuo fiscal) against us in connection with income taxes that we offset from July 1998 through December 1998. The decision of the lower court was favorable to us and this decision was upheld by the higher court. The Brazilian Government appealed this decision to the Brazilian Superior Court of Justice and the appeal is still pending. We have offered treasury bills as a security for this judgment in the amount of R$100.2 million, as of December 31, 2011. As of December 31, 2011, we estimated potential losses in the amount of R$91.3 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with this claim. The Brazilian Government filed a tax enforcement lawsuit (execuo fiscal) against us in connection with social contribution taxes on net income (CSLL) and withholding income taxes regarding the years of 1997 and 1998. The decision of the lower court was favorable to us, and we are currently waiting for a decision under the appeal of the Brazilian Government. We have made a judicial deposit in the amount of R$70.1 million, as of December 31, 2011. As of December 31, 2011, we estimated potential losses in the amount of R$62.4 million in connection with it. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with this claim. Civil Matters An individual plaintiff has filed a lawsuit against us and Caixa de Previdncia dos Funcionrios do Banco do Nordeste do Brasil Capef, the post-retirement and pension fund we developed for our employees, alleging that we failed to contribute all of the amounts due to Capef in 1997. An unfavorable decision against us was issued by the lower court. We have appealed to a higher court and we are awaiting judgment. As of December 31, 2011, we estimated potential losses in the amount of R$584.1 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Avinorte Ltda. has commenced a declaratory and damages lawsuit against us alleging that we have not disbursed all of the amounts due under a financing agreement for the expansion of its business activities. The lower court rejected the plaintiff's claim. As of December 31, 2011, we estimated potential losses in the amount of R$156.0 million in connection with this lawsuit. We classify the risk of loss arising from this claim as remote and, accordingly, we have not made any provision in connection with it. Two individual plaintiffs have filed an enforcement lawsuit against us claiming damages granted to them under a judgment issued under an indemnification suit they filed against us. The lower court ordered us to pay fines in the amount of R$116.5 million, but the appeals court granted us an injunction suspending the enforcement of these fines. As of December 31, 2011, we estimated potential losses in the amount of R$126.1 million in connection with the fines imposed under this lawsuit. We classify the risk of loss arising with it as remote and, accordingly, we have not made any provision in connection with it.

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Samara Indstria de leos e Sabo Ltda. has filed a damages lawsuit against us alleging that we are not entitled to charge it R$120.7 million, given that we have already commenced an enforcement lawsuit against it in the amount of R$1.3 million. No lower court decision has been issued in connection with this claim. As of December 31, 2011, we estimated potential losses in the amount of R$221.6 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Cogrisa Cooperativa Agroindustrial do Semirido has commenced a damages lawsuit against us alleging that we have not disbursed all of the amounts due under a financing agreement. No lower court decision has been issued in connection with this claim. As of December 31, 2011, we estimated potential losses in the amount of R$16.6 million in damages and R$83.3 million in lost profits. We classify the risk of loss arising from damages as remote and the risk of loss arising from lost profits as possible. Accordingly, we have not made any provision in connection with this lawsuit. Three individual plaintiffs have filed a damages lawsuit against us in connection with bankruptcy proceedings we commenced against their company. An unfavorable decision against us was issued by the lower court, but the appeals court reversed such decision. The plaintiffs appealed to the Brazilian Superior Court of Justice and are awaiting judgment. As of December 31, 2011, we estimated potential losses in the amount of R$83.5 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Porcellanati Revestimentos Cermicos S.A. has filed a damages lawsuit against us, the Northeast Development Superintendant (Superintendncia de Desenvolvimento do Nordeste, or SUDENE) and the Brazilian Government, alleging that we have not disbursed all of the amounts due under a financing agreement. No judicial decision has been issued in connection with this claim. As of December 31, 2011, we estimated potential losses in the amount of R$72.9 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Itaguahy Agropecuria S.A. has filed a damages lawsuit against us and the Brazilian Government alleging that we have delayed the disbursement of certain amounts due under a financing agreement. The lower court rejected the plaintiff's claim. The plaintiff has appealed to the higher court and we are awaiting judgment. As of December 31, 2011, we estimated potential losses in the amount of R$71.5 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Agrodisa Agropecuria Diamante S.A. has filed a damages lawsuit against us and the Brazilian Government alleging that, due to changes in rules regarding FINOR funding, we have delayed the disbursement of certain amounts due under a financing agreement. The lower court rejected the plaintiff's claim. The plaintiff has appealed to the higher court and we are awaiting judgment. As of December 31, 2011, we estimated potential losses in the amount of R$70.8 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Nova Fronteira Agrcola S.A. has filed a damages lawsuit against us seeking the refund of an alleged overpayment under certain foreign exchange agreements. The lower and higher courts rejected the plaintiff's claim for a refund, and ordered us to pay attorneys fees and court costs in connection with this lawsuit. We appealed to the Brazilian Superior Court of Justice and are awaiting judgment. As of December 31, 2011, we estimated potential losses in the amount of R$35.4 million in connection with the claim for refund. We classify the risk of loss arising from this claim as remote and, accordingly, we have not made any provision in connection with it. Quiflores Quinta das Flores Agro Export Ltda. has filed a declaratory and damages lawsuit against us alleging that we have not agreed to grant it new lines of credit. No lower court decision has been issued. As of December 31, 2011, we estimated potential losses of R$37.2 million in connection with this lawsuit. We classify the risk of loss as remote and, accordingly, we have not made any provision in connection with it. Nortech Industrial Ltda. has filed a damages lawsuit against us alleging that we have not agreed to grant it new lines of credit. The lower court rejected the plaintiff's claim and this decision was upheld by the higher court. As of December 31, 2011, we estimated potential losses in the amount of R$34.2 million in connection with this

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lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Dureino S.A. has filed a preliminary injunction proceeding against us in order to prevent us from reporting its name to consumer and commercial credit protection bureaus. The lower court granted relief to the plaintiff and also imposed a R$5,000 daily fine until we cancelled the reporting procedure. We have made a judicial deposit in connection with this lawsuit in the amount R$2.5 million. As of December 31, 2011, we estimated potential losses of R$33.8 million. We classify the risk of loss as remote and, accordingly, we have not made any provision in connection with it. Cristina Indstria de Confeces Finas S.A. has filed a damages lawsuit against us seeking the refund of an alleged overpayment in the amount of R$5.3 million and alleging that we have not disbursed all of the amounts due under a financing agreement. The decision of the lower court required us to pay approximately R$10.6 million. We have appealed to the higher court, whose decision was partially favorable to us. We appealed to the Brazilian Superior Court of Justice and are awaiting judgment. As of December 31, 2011, we estimated potential losses of R$32.5 million. We classify the risk of loss arising from this lawsuit as possible and, accordingly, we have not made any provision in connection with it. Granvale Cia. Agropecuria do Grande Vale has filed a damages lawsuit against us to prevent us from reporting its name to consumer and commercial credit protection bureaus in connection with a financing agreement, seeking the refund of an alleged overpayment under such financing agreement; and claiming the right to use FNE funds to renegotiate outstanding debts under such financing agreement. No lower court decision has been issued in connection with this claim. As of December 31, 2011, we estimated potential losses in the amount of R$32.3 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. Icapel-Icapui Pesca Ltda. has filed a damages lawsuit against us seeking the refund of an alleged overpayment. An unfavorable decision against us was issued and, following that, we have filed a termination action (ao recisria). The decision of the lower court on the termination action was favorable to us, and we are currently awaiting judgment under the appeal of Icapel-Icapui Perca Ltda. As of December 31, 2011, we estimated potential losses in the amount of R$25.1 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as remote and, accordingly, we have not made any provision in connection with it. The association of textile micro entrepreneurs from the State of Maranho (Associao de Defesa dos Micro Empresrios de Confeco do Estado do Maranho, or ADEMECEMA) has filed a damages lawsuit against us alleging errors in the disbursement of certain amounts due under a financing agreement. A partially favorable decision was issued by the lower court and this decision was upheld by the higher court. As of December 31, 2011, we estimated potential losses in the amount of R$21.1 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as possible and, accordingly, we have not made any provision in connection with it. Avestruz Nordeste S.A. Agronegcio e Exportao has filed a damages lawsuit against us alleging non-compliance with certain agreements for technical support and that we have not disbursed all of the amounts due under a financing agreement for the expansion of its ostrich products business. The plaintiff has withdrawn and the lawsuit was dismissed without prejudice. The Parties are still discussing costs and attorney fees in connection with this lawsuit. As of December 31, 2011, we estimated potential losses in the amount of R$22.6 million in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as possible and, accordingly, we have not made any provision in connection with it. Capitania Empreendimentos Tursticos Ltda. has filed a damages lawsuit against us alleging that we have delayed the disbursement of amounts due under certain mortgage agreements, preventing the plaintiff from trading real estate properties with its clients. The Superior Court of Justice ordered us to disburse the amounts due under such mortgage agreements, indemnify the plaintiff for damage and lost profits, and pay attorneys fees in connection with this lawsuit. As of December 31, 2011, we estimated potential losses in the amount of R$15.2 million in damages and R$5.9 million in lost profits and payment of attorney fees. We classify the risk of loss arising from damages as possible and the risk of loss arising from lost profits and payment of attorney fees as probable. Accordingly, we have provisioned an amount of R$5.9 million in connection with lost profits and payment of attorney fees.

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Elstico Indstria Ltda. has filed a damages lawsuit against us seeking the refund of an alleged overpayment of certain debts in connection with a judicial enforcement proceeding (execuo judicial). No lower court decision has been issued in connection with this claim. As of December 31, 2011, we estimated potential losses in the amount of R$20.4 million in connection with this lawsuit. We classify the risk of loss arising from this claim as remote and, accordingly, we have not made any provision in connection with it. Labor Matters The Banking Union of Cear has filed a collective labor claim against us alleging nonconformity of our employee compensation package with that of Banco do Brasil S.A. An unfavorable decision against us was issued and we are currently negotiating a settlement in connection with this lawsuit. We classify the risk of loss arising from this lawsuit as probable and, as of December 31, 2011, we have provisioned R$53.0 million in connection with it. The Banking Union of Bahia has filed a collective labor claim against us alleging nonconformity of our employee compensation package with that of Banco do Brasil S.A. An unfavorable decision against us was issued and we are currently discussing in an enforcement proceeding filed to determine the amount payable by us based on this final decision. We have offered treasury bills as security for this judgment in the amount of R$236.7 million. We classify the risk of loss arising from this lawsuit as probable and, as of December 31, 2011, we have provisioned R$35.4 million in connection with it.

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MANAGEMENT In accordance with our by-laws, we are managed by a Board of Directors (Conselho de Administrao) and a Board of Executive Officers (Diretoria). We also have a permanent Fiscal Council (Conselho Fiscal), an Audit Committee (Comit de Auditoria) and a Remuneration Committee (Comit de Remunerao). The address of the members of the Board of Directors, the Audit Committee, the Board of Executive Officers and the Fiscal Council is the same as the address of the Issuer: Av. Pedro Ramalho 5700, Fortaleza, Cear, Brazil. Board of Directors Our Board of Directors is comprised of six members. Two members of the Board are appointed by the Minister of Finance, one of them being elected by the other members of the Board of Directors as its chairman. One member is appointed by the Minister of Planning, Budget and Management, one is appointed by our common minority shareholders, and one is appointed by our employees (as provided by Law No. 12,353, of December 28, 2010). Our CEO is also part of our Board of Directors. The members of the Board of Directors are elected at our shareholders' meeting for a three-year term of office, with the possibility of reelection. We have not concluded the process of appointment of a member of our Board of Directors by our employees, but our by-laws were amended in order to reflect such legal requirement. The Board of Directors conducts monthly ordinary meetings and extraordinary meetings whenever considered convenient or necessary, as called by the chairman, and requiring a minimum quorum of four members. Resolutions of the Board of Directors are passed upon approval of the majority of its members, and in case of a tied decision, the chairman's vote determines the result. Our bylaws provide for two committees as advisory bodies to the Board of Directors, the Audit Committee and the Remuneration Committee. See "Audit Committee" and "Remuneration Committee." The Board of Directors is responsible for, among other things: establishing guidelines for our activities; examining, by the proposal of the executive officers, the appointment or removal of the chief of the internal audit team; examining and approving, by the proposal of the executive officers, the appointing or removal of the person in charge of the ombudsman; oversee the executive officers conduct, examine books and records, request information about contracts signed or yet to be signed, or about any other acts; approving the creation or termination of our branches, offices and other service units; opining on any contracts to the purchase or sale of fixed assets and on any credit transaction or security amounting to more than 25.0% of our net assets (on March 30, 2012, an amendment to our by-laws was approved by our shareholders in order to set the above mentioned limit of 25.0%; such amendment has not yet been approved by the Central Bank); opining on the management's report and on the executive officers' accounts; and appointing and removing members of the Audit Committee and of the Remuneration Committee.

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Set out below are the names, positions, dates of appointment, terms of office and brief biographical descriptions of the members of the Board of Directors as of the date hereof.
Name Dyogo Henrique de Oliveira ......................................................... Jurandir Vieira Santiago ................................................................ Demetrius Ferreira e Cruz ............................................................. Martin Ramos Cavalcanti(1) ........................................................... Augusto Akira Chiba..................................................................... Zilana Melo Ribeiro ...................................................................... (1) Position Chairman Member Member Member Member Member Date of Appointment April 1, 2011 June 14, 2011 April 1, 2011 March 30, 2012 April 1, 2011 April 1, 2011 Expiration of Appointment April 2014 April 2014 April 2014 April 2014 April 2014 April 2014

The election of Mr. Martin Ramos Cavalcanti is still pending approval of the Central Bank.

Dyogo Henrique de Oliveira. Mr. Henrique de Oliveira holds a masters degree in economics from University of Brasilia. He has been a public policy advisor to the executive secretary of the Ministry of Finance since the beginning of 2011. He was a technical advisor (planning and research) to IPEA (Institute of Applied Economy Research) from 2004 to 2008, and a general coordinator of fiscal policy to the Secretary of Economic Policy from 2008 to 2010. Jurandir Vieira Santiago. Mr. Santiago holds a degree in law and also in geography from University of Fortaleza and State University of Cear, respectively. He worked as a manager at Caixa Econmica Federal from 1993 to 2003 and also as a supervisor of the Cear region from 2003 to 2006. He was Secretary of Cities for the Cear government from 2007 to January 2011. He acted as the CEO of CAGECE Water and Sanitation Company of Cear from January to June of 2011. Mr. Santiago has been acting as our CEO since June 14, 2011. Demetrius Ferreira e Cruz. Mr. Ferreira e Cruz holds a degree in social sciences (anthropology) from University of Braslia. He was a director of Banco da Amaznia from 2002 to 2010 and since 2010 he has been acting as a director of Empresa Baiana de gua e Saneamento S.A. In addition, since early 2010 Mr. Ferreira e Cruz is a special advisor to the Finance Ministry, responsible for the oversight of parliamentary activities and directly advisor to the Minister in matters related to legislation. Martin Ramos Cavalcanti. Mr. Ramos Cavalcanti holds a masters degree in economics from University of Brasilia. He was the coordinator of financial economic affairs in the Department of Foreign Affairs of the Ministry of Finance from August 2004 to November 2005. In addition, Mr. Ramos Cavalcanti was an adviser on economic assistance at the Ministry of Planning, Budget and Management from December 2005 to September 2008. He has been acting as Deputy Economic Adviser to the Ministry of Planning, Budgeting and Management since September 2008. Mr. Ramos Cavalcanti was a member of the board of BNDES Participaes SA BNDESPAR from November 2010 to November 2011. Augusto Akira Chiba. Mr. Chiba holds a degree in mechanical engineering from University of Itajub and a law degree from Centro Universitrio de Braslia. He was an engineer for industrial planning at Ideal Standard WABCO Indstria e Comrcio Ltda., and was also officer of engineering and systems of Controlmax Ltda. from 1986 to 1990. He was also manager of organization, systems and methods at Banco do Brasil from 1991 to 1998. Since 2003, he has been acting as the head of internal management at MOP/ENAP and general coordinator of logistical resources of the Federal Revenue Office, among others. Zilana Melo Ribeiro. Ms. Melo Ribeiro holds a degree in law from University of Cear. She was an Area Executive Officer, as well as Agency Executive Manager, Superintendent of Human Resources and Superintendent of the Ombudsman's Office of BNB from 2007 to 2008. She works in BNB since 1978. Audit Committee In accordance with Resolution No. 3,198 of the CMN, as amended, we have implemented an Audit Committee as an advisory body to the Board of Directors in 2004. The Audit Committee consists of three active members and one alternate, appointed by the Board of Directors and with staggered terms of office of up to five years.

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The Audit Committee's responsibilities include, among others: recommending the hiring and substitution of our independent auditors; reviewing, prior to publishing, our financial statements, including the notes thereto, the management's report and the independent auditors' report; evaluating the efficiency of the internal and external audits, including the compliance with applicable rules and statutes; establishing and disclosing whistle blowing procedures; and recommending, to the Board of Executive Officers, corrections or improvements to policies, processes and procedures, and oversee the fulfillment of these recommendations.

Set out below are the names, positions, dates of appointment of the members of the Audit Committee as of the date hereof. Appointment of members of the Audit Committee by our Board of Directors on July 8, 2011 and August 8, 2009.
Name Joo Alves de Melo ....................................................................... Luciano Silva Reis ........................................................................ Antonio Carlos Correia ................................................................. Jos Renato Corra de Lima ......................................................... Position Chairman Member Member Member (Alternate) Date of Appointment July 8, 2011 July 8, 2011 August 8, 2009 July 8, 2011 Expiration of Appointment August 2012 August 2012 August 2012 July 2012

Remuneration Committee In November 2011 we established our Remuneration Committee, in accordance with the requirements of CMN Resolution No. 3,291, of November 25, 2010. The Remuneration Committee is comprised of three active members (one of whom may not be a member of our management) and two alternates (one of whom may not be a member of our management), each of whom serves a term of two years. Members are appointed by, and may be reappointed (up to a 10-year term) or replaced by, the Board of Directors. The committee's primary responsibility is to provide the Board of Directors with proposed policies and guidelines related to the compensation of our management. We have not concluded the process of appointment of the members of our Remuneration Committee. Board of Executive Officers We are managed by a Board of Executive Officers comprised of five to seven members, one of which being the CEO, one being exclusively responsible for our asset management activities, and one responsible for managing internal controls, risks and compliance. The Executive Officers are elected for three-year terms of office, which are renewable for equal periods. The Board of Executive Officers will ordinarily meet on a weekly basis and extraordinarily, whenever called. The Resolutions of the Board of Executive Officers will be passed upon approval of the majority of its members, and in case of a tied decision, the CEO's vote determines the result. The Board of Executive Officers is responsible for, among other things: approving its internal rules, and submitting proposed changes to our ethical conduct code to the Board of Directors; proposing the creation or termination of our branches, offices and other service units to the Board of Directors; establishing our general operational rules;

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approving our semi-annual, annual and multiannual planning and the budgets for operational and administrative activities; establishing conditions and interest rates for banking transactions; authorizing us to enter into loans in local or foreign currency, in Brazil or abroad; approving transactions within its scope and applicable thresholds (amounts not exceeding 25.0% of our shareholders' equity); approving the purchase and sale of real estate, the negotiation, resignation or waiver of rights, the sale of fixed assets, the establishment of encumbrances over our property, and the granting of guarantees by us, except when those transactions exceed the threshold that require approval by the Board of Directors (amounts exceeding 25.0% of our shareholders' equity) or when those transactions refer to matters within the scope of a shareholders' meeting; submitting to the Board of Directors proposal for the appointment or substitution of chief of the internal audit team and the person in charge of the ombudsman.

Set forth below are the names, positions, dates of appointment, terms of office and brief biographical descriptions of our executive officers as of the date hereof. Except for our CEO, who is directly appointed by the President of Brazil, according to our by-laws, our executive officers are appointed by our Board of Directors. The reappointment of our Board of Executive Officers occurred on August 31, 2011 and further changes occurred on October 17, 2011.
Name Jurandir Vieira Santiago ............................ Fernando Passos ........................................ Luiz Carlos Everton de Farias ................... Jos Sydrio de Alencar Jnior ................. Isidro Moraes de Siqueira ......................... Paulo Srgio Rebouas Ferraro ................. Stlio Gama Lyra Jnior ........................... Position Chief Executive Officer Chief Financial and Capital Markets Officer Asset Management Officer Development Management Officer Internal Control, Risk and Compliance Officer Businesses Officer Administrative and Information Technology Officer Date of Appointment June 14, 2011 October 17, 2011 October 17, 2011 August 31, 2011 August 31, 2011 August 31, 2011 August 31, 2011 Expiration of Appointment August 2014 August 2014 August 2014 August 2014 August 2014 August 2014 August 2014

Jurandir Viera Santiago. See "Board of Directors." Fernando Passos. Mr. Passos holds a degree in law and an MBA from Universidade de Fortaleza UNIFOR and IBMEC, respectively. He holds the following certifications: Social Security Professional Certification from ICSS, ANBID Professional Series 20 Certification from ANBIMA, Investment Professional National Certification - CNPI from APIMEC, Security Analyst Certification from CVM. Since January 2009, he has been acting as a superintendent in the Financial and Capital Markets department. Luiz Carlos Everton de Farias. Mr. Farias holds a degree in information technology management from Universidade do Planalto. He has acted as secretary general at the Evangelical School of Salvador, from 2002 to 2003. Currently, he acts as secretary of the board of directors at the Ministry of Agrarian Development and as adviser to the Minister, and as our agency manager, assistant for the regional superintendence of Bahia, Esprito Santo and Minas Gerais, and as assistant for the regional superintendence of Piau and Maranho. He is also the president of Companhia de Desenvolvimento dos Vales do So Francisco e Parnaba since March 16, 2004. Jos Sydrio de Alencar Jnior. Mr. Alencar Jr. holds a degree in economics and law from the Federal University of Cear and University of Fortaleza, respectively. He serves as our superintendent at the Technical Office for Economic Studies of the Northeast ETENE. Moreover, he acts as an assistant professor at Universidade de Fortaleza UNIFOR at the faculties of Economics, Foreign Trade and Management, and also as councilor of the Regional Council of Economy CORECON/CE, alternate director of the Federal Council of Economy COFECON, member of the board of Fundao Getlio Vargas FGV, and member of the editorial board of Revista Econmica do Nordeste REN. Since September 2009, he has been acting as our Development Management Officer.

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Isidro Moraes de Siqueira. Mr. Moraes de Siqueira holds a degree in business administration from Faculdade de Administrao de Braslia. He has acted as a manager at a number of our branches and as a superintendent for the states of Maranho and Cear. Since October 2011, he has been acting as our Risk, Compliance and Control Officer. Paulo Srgio Rebouas Ferraro. Mr. Rebouas Ferraro holds a degree in business administration from Associao Internacional de Educao. He acted for us as head of sector in 1993, agency advisory in 1994, business manager from 1994 to 1998, agency manager from 1999 to 2002 and superintendent from 2003 to 2008. Mr. Rebouas Ferraro works for us since 1977. Since September 2007, Mr. Rebouas Ferraro has been acting as our Business Officer. Stlio Gama Lyra Jnior. Mr. Gama Lyra holds a degree in economy from Universidade de Fortaleza UNIFOR and a masters degree in public policy assessments from the Federal University of Cear. He also holds an MBA degree from Fundao Getlio Vargas. He has participated in management courses, information systems and project management, and has been a key speaker at seminars, forums and conferences on the topic of microfinance and poverty. He managed PRODETUR and Crediamigo and served as a superintendent of our microfinance and special programs from 2003 to 2009. Since June 2010, he has been acting as Administrative and Information Technology Officer. Fiscal Council The Fiscal Council is comprised of five active members and five alternate members, appointed at our annual shareholders' meeting, and their term office lasts until the following annual shareholders' meeting. Its members may be re-elected. Three of the active members and their corresponding alternate members are appointed by the Ministry of Finance (one of them to represent the National Treasury). The other two members and respective alternate members are appointed, respectively, by our common and preferred minority shareholders. It is the Fiscal Council's responsibility to examine and give opinions on our financial statements, oversee the senior management and to exercise other powers provided by Brazilian Corporations Law. The Fiscal Council conducts monthly ordinary meetings and extraordinary meetings whenever considered convenient or necessary, as called by its chairman, by three of its members or by our CEO and requiring a minimum quorum of three members. The resolutions of the Fiscal Council are passed upon approval of the majority of its members. Set forth below are the members of the Fiscal Council elected by our shareholders on March 30, 2012, and their respective positions as of the date hereof. The election of the current Fiscal Council is still pending approval of the Central Bank.
Name Claudio Xavier Seefelder Filho.................................................................................................. Manuel dos Anjos Marques Teixeira ......................................................................................... Andr Proite ............................................................................................................................... Marco Antnio Fiori .................................................................................................................. Roberta Carvalho de Alencar ..................................................................................................... Joo Batista De Figueiredo ........................................................................................................ Antnio Jos Lvio Teixeira ...................................................................................................... Helano Borges Dias.................................................................................................................... Emlio Salomo Elias ................................................................................................................. Francisco Leo de Freitas........................................................................................................... Position Member Member Member Member Member Deputy Deputy Deputy Deputy Deputy Date of Appointment March 2012 March 2012 March 2012 March 2012 March 2012 March 2012 March 2012 March 2012 March 2012 March 2012

Ombudsman's Office We have an Ombudsman's Office (Ouvidoria), as required by our by-laws. The ombudsman's office was created to assist the communication and mediate conflicts between our organization and our customers. The Ombudsman's Office's responsibilities include: (i) provide an appropriate treatment to the customers' and users' claims involving our products and services, (ii) propose to our senior management corrective measures or improvements for our procedures and routines as a result of the analysis of claims received, and (iii) prepare and submit to the internal audit, Audit Committee, Board of Executive Officers and Board of Directors, by the end of each calendar semester, a quantitative and qualitative report about the Ombudsman's Office performance.

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The Ombudsman is appointed for a renewable two-year term of office and may be dismissed by the Board of Directors, upon proposal by the Board of Executive Officers. The current Ombudsman, Mr. Saldanha Fontenele, was elected in March, 2008 and re-elected in February, 2010 and April 5, 2012. His re-election by the Board of Directors is still pending approval by the Central Bank. Compensation The Brazilian Corporations Law provides that it is the responsibility of our shareholders to set the individual or overall management compensation amount at each annual shareholders' meeting. Whenever this amount is set on an overall basis, the Board of Directors will decide on the manner of allocating it among its members, the Board of Executive Officers, the Fiscal Council and the Audit Committee. The table below sets out the overall management compensation for the years ended December 31, 2011, 2010 and 2009.
As of December 31, 2011 2010 (R$ thousands) Board of Directors ................................................................................................ Board of Executive Officers................................................................................. Fiscal Council ....................................................................................................... Audit Committee .................................................................................................. 178.1 2,061.7 165.3 600.4 187.4 2,056.7 152.7 370.7 172.3 1,761.7 138.4 330.4 2009

The following table sets out the highest, lowest and average individual management compensation for the year ended December 31, 2011 and for the years ended December 31, 2010, 2009 and 2008.
As of December, 31 2011 2010 (R$ thousands) Lowest individual compensation ......................................................................... Highest individual compensation ......................................................................... Average individual compensation........................................................................ 62.0 295.7 193.1 71.6 251.8 167.3 51.1 218.5 152.1 2009

See also "BusinessEmployeesEmployee Benefit Plans" for more information regarding employee benefit plans we offer.

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PRINCIPAL SHAREHOLDERS As of December 31, 2011, we had 87,001,901 shares outstanding (48,484,775 common shares and 38,517,126 preferred shares), totaling R$2,010.0 million in capital stock, all of which was fully paid up as of such date. Our preferred shares trade on the So Paulo Stock Exchange. On March 30, 2012, our shareholders approved an increase of our capital stock to R$2,142.0 million, which remains subject to Central Bank approval and registration with the Board of Commerce of the State of Cear. Our controlling shareholder is the Brazilian Government, which held, as of December 31, 2011, directly or indirectly, 99.10% of our total capital stock 99.17% of our total voting capital stock). There have been no changes to our controlling shareholder stockholding (direct or indirect) since December 31, 2011 given that the capital increase dated March 30, 2012 did not involve the issuance of new shares. The following table sets out the principal shareholders of our common and preferred stock, on a percentage basis, as of December 31, 2011:
Ownership of Common Stock Shareholders Brazilian Government ................................................................... Fundo Nacional de Desenvolvimento - FND(1) ............................ BNDESpar(1) .................................................................................. Others ............................................................................................ Total .............................................................................................. (1) Indirectly owned by the Brazilian Government. Shares 46,595,279 1,473,704 13,800 401,992 48,484,775 % 96.10% 3.04% 0.03% 0.83% 100.00% Ownership of Preferred stock Shares 35,373,190 2,373,264 386,795 383,877 38,517,126 % 91.84% 6.16% 1.00% 1.00% 100.00%

Dividend Policy Our by-laws require the Board of Directors to recommend, at each annual shareholders' meeting, that our net income for the fiscal year be allocated as follows: (i) 5% to a legal reserve, not to exceed 20% of our capital stock during each fiscal year. According to Brazilian law, this requirement does not apply in fiscal years when the legal reserve, added to the other capital reserves, exceeds 30% of our capital stock; an amount (to be determined by our shareholders based on probable potential losses) to a contingency reserve against future losses; at least 25% (after legal and contingency reserves are allocated) for mandatory distribution to our shareholders; and any outstanding balance to a statutory profit used to raise our capital stock, to be proposed by the management to the shareholders, but not to exceed 50% of the capital stock.

(ii) (iii) (iv)

We must pay a minimum mandatory annual dividend of 25% of our net income within 60 days of the annual shareholders' meeting. However, Brazilian law allows for the suspension of the payment of mandatory dividends if the Board of Directors reports at the shareholders' meeting that the distribution would not be appropriate in light of our financial condition, and our shareholders approve the suspension by a simple majority of votes. The income that is not distributed as dividends as a result of the suspension must be allocated to a special reserve. If not absorbed by subsequent losses, the amounts in the reserve have to be paid as dividends as soon as our financial condition permits. Preferred shareholders are entitled to receive dividends per share in an amount at least 10% greater than the dividends per share paid to the common shareholders. The Board of Directors may distribute dividends based on the profits reported in our semi-annual financial statements. The amount of interim dividends distributed cannot exceed 25% of our net income for the period.

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Consistent with Brazilian law, our by-laws allow our Board of Directors to make distributions in the form of interest on shareholders' equity instead of dividends. Payments of interest on shareholders' equity may be included as part of any mandatory dividend. The amounts paid as interest on shareholders' equity net of withholding income tax are deducted from the amount of the dividends declared. According to the Brazilian Corporations Law, a shareholder who does not receive payment of a dividend may initiate a proceeding for the collection of dividends within three years from the date we declare the dividend. After the three year period, the unclaimed dividends revert to us. The table below sets out the amount declared to shareholders in dividends and interest on shareholders' equity for the periods indicated.
As of December 31, 2011 2010 (R$thousands) Common Shares Dividends.............................................................................................................. Interest on shareholders' equity ............................................................................ Preferred Shares Dividends.............................................................................................................. Interest on shareholders' equity ............................................................................ 90,305 51,069 39,236 78,921 44,631 34,290 110,200 45,631 64,569 96,311 39,880 56,431 128,309 69,610 58,699 112,137 60,836 51,301 2009

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RELATED-PARTY TRANSACTIONS Related party transactions may be carried out providing that they are in ours and our shareholders' best interest and conducted pursuant to and to the extent permitted by Brazilian Law. We enter into such transactions during the normal course of our business, with terms and conditions that are standard for the market in which we operate and are in compliance with our by-laws. Our funding from official entities (such as the BNDES/FINAME), public funds (FAT and FMM) and from government bodies (Ministry of Agrarian Development) are used to finance transactions related to the region's development acts and programs, in addition to the financings granted within the PRONAF and within the agrarian reform programs. Although BNDES and we are both government-owned companies, we must still follow the same procedures and are subject to the same requirements and commercial terms applicable to non-government owned recipients of its funding. Our balance of assets and liabilities and results from transactions with government-owned companies, autarchies, programs and funds controlled by the Brazilian Government are as follows for the dates indicated:
As of December 31, 2011 Assets Refinancing transactions with the Brazilian Government .................................. Total ..................................................................................................................... Liabilities Time Deposits (FAT) ........................................................................................... Domestic onlendings (official institutions).......................................................... National Treasury ............................................................................................ BNDES ............................................................................................................ Caixa Econmica Federal ................................................................................ FINAME .......................................................................................................... Others ............................................................................................................... Other obligations .................................................................................................. FNE .................................................................................................................. Hybrid debt ...................................................................................................... Subordinated debt ............................................................................................ Total ..................................................................................................................... 2010 (R$thousands) 473,643 473,643 622,389 1,286,685 992 1,152,894 132,799 6,932,417 4,578,226 1,137,872 1,216,319 8,841,491 533,239 533,239 686,791 1,686,776 1,086 933,260 52,859 699,571 5,762,276 3,656,262 1,004,166 1,101,848 8,135,844 517,064 517,064 395,254 1,433,524 1,164 743,796 29,330 659,234 4,175,390 3,553,326 3,553,326 622,064 6,004,168 2009

The principal transactions with entities affiliated to our employees (related to retirement pension funds and medical insurance) are described in the table below for the dates indicated:
As of December 31, 2011 Liabilities Other obligations .................................................................................................. Caixa de Previdncia (CAPEF) ...................................................................... Caixa de Assistncia Mdica (CAMED)......................................................... Total ..................................................................................................................... 2010 (R$thousands) 985,408 457,916 527,492 985,408 925,375 490,630 434,745 925,375 1,023,192 765,942 257,250 1,023,192 2009

The Brazilian Government also disbursed to us in 2010 an additional R$1.0 billion through a loan agreement, with no maturity date, classified as a hybrid instrument of equity and debt (instrumento hbrido de capital e dvida) in accordance with CMN Resolution No. 3,444.

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DESCRIPTION OF THE NOTES The Notes will be issued pursuant to an Indenture to be dated as of May 3, 2012 (the "Indenture"), among us; The Bank of New York Mellon, as trustee (the "Trustee," which shall include any successor trustee appointed in accordance with the Indenture); The Bank of New York Mellon (Luxembourg) S.A., as Luxembourg paying agent and Luxembourg transfer agent; and The Bank of New York Mellon Trust (Japan), Ltd., as principal paying agent. The Indenture provides for the issuance of the Notes but does not limit the aggregate principal amount of notes that may be issued under the Indenture, and provides that, subject to certain conditions, additional Notes may be issued under the Indenture from time to time. The Indenture does not limit the amount of additional indebtedness or other obligations that we may incur. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the extent applicable to the United States Trust Indenture Act of 1939, as amended, or the "TIA." The Notes are subject to all such terms, and you are referred to the Indenture and the TIA for a statement of those terms. This section describes the general terms and provisions of the Indenture and the Notes. The description of certain provisions of the Indenture and the Notes does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Indenture and the Notes, including the definitions therein of certain terms. A copy of the Indenture is available upon written request from the Trustee. We urge you to read each of the Indenture and the form of the Notes because they, and not this description, define your rights as a Holder of Notes. The Indenture is incorporated by reference and forms part of this Offering Memorandum. In case of any conflict regarding the rights and obligations of the Holders (as defined below) of the Notes under the Indenture, the Note, and this offering memorandum, the terms of the Indenture will prevail. Ranking The Notes will be our direct, unconditional and unsecured general obligations and will, other than as set forth below, at all times rank pari passu in right of payment with all of our other unsecured obligations other than obligations that are, by their terms, expressly subordinated in right of payment to the Notes. The Notes will be effectively subordinated to (i) all of our secured indebtedness with respect to the value of our assets securing that indebtedness, (ii) certain direct, unconditional and unsecured general obligations that in case of our insolvency are granted preferential treatment pursuant to Brazilian law and (iii) all of the existing and future liabilities of our subsidiaries, including trade payables. As of December 31, 2011, we had indebtedness outstanding as disclosed in notes No. 15 through 18 to the 2011 Financial Statements included in this Offering Memorandum. The Indenture contains no restrictions on the amount of additional indebtedness that may be incurred by us. Principal, Maturity and Interest We are issuing U.S.$300 million aggregate principal amount of Notes. The Notes will mature on May 3, 2019. Interest on the Notes will accrue at a fixed rate of 4.375% per annum except that interest on unpaid principal after the maturity date and interest on any overdue interest will accrue (including, for the avoidance of doubt, during the grace period for late payment of interest as defined in "Events of Default" below) at the note rate plus 1% per annum. Interest on the Notes will be payable semi-annually in arrears on May 3 and November 3 of each year, commencing on November 3, 2012 (each an "Interest Payment Date"). Interest on the Notes will accrue from the date of original issuance, or if interest has already been paid, from the date it was most recently paid. Payment and Administration of the Notes The Notes will bear interest at the rate specified in "Principal, Maturity and Interest" above. Interest on each Note will be paid on the Interest Payment Dates specified above to the person in whose name such Note is

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registered at the close of business on the 15th day preceding the respective Interest Payment Date (such date, a "record date" whether or not a Business Day). The notes will mature on May 3, 2019. If any Interest Payment Date, redemption date, or maturity date for the Notes falls on a day that is not a Business Day, the corresponding payment of principal or interest, if any, will be made on the next succeeding Business Day as if it were made on the date such payment was due, and no interest will accrue for the period from and after such Interest Payment Date or maturity date, as the case may be. For the purposes of this section, "Business Day" shall mean any weekday on which banking and trust institutions in Fortaleza, Brazil, or New York City are not authorized generally or obligated by law, regulation or executive order to close. Any interest on a Note that is payable, but is not paid or duly provided for, on any Interest Payment Date shall cease to be payable to the Holder of such Note on the regular Note record date, and such defaulted interest may be paid by us to the persons in whose name such Note is registered at the close of business on a special record date (as such term is explained in the Indenture) fixed by the Trustee for such purpose. Interest on the Notes will be computed on the basis of a 360-day year or twelve 30-day months. Except as described in "Book-Entry System; Delivery and Form," we will pay principal and interest by check and may mail interest checks to a Holder's registered address. The principal of and interest on the Notes will be payable in U.S. dollars or in such other coin or currency of the United States of America as is legal tender for the payment of public and private debts at the time of payment. The Notes will be issued in denominations of U.S.$150,000 and any integral multiple of U.S.$1,000 and only in the form of beneficial interests in respect of one or more global notes registered in the name of Cede & Co., as nominee of The Depository Trust Company, or DTC. Beneficial interests in respect of the global notes will be held through financial institutions acting on behalf of the beneficial holders of such interests as direct or indirect participants in DTC. Except in limited circumstances, owners of beneficial interests in respect of the global notes will not be entitled to receive physical delivery of Notes in certificated form. See "Book-Entry System; Delivery and Form." No service charge will be made for any registration of, transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Initially, the Trustee will act as paying agent, registrar and transfer agent for the Notes. The Notes may be presented for registration of transfer and exchange at the offices of the registrar for the Notes. Paying Agents; Transfer Agents; Registrar; Listing Agent We have initially appointed the Trustee as paying agent, transfer agent and registrar and have appointed The Bank of New York Mellon (Luxembourg) S.A. as the listing agent, Luxembourg paying agent and Luxembourg transfer agent and; The Bank of New York Mellon Trust (Japan), Ltd. as the principal paying agent. We may at any time appoint any other paying agents, transfer agents and registrars, however, we will at all times maintain a paying agent in New York until the Notes are paid. The address of the principal paying agent is Marunouchi Trust Tower, Main 1-8-3 Marunouchi, Chiyoda-Ku, Tokyo, 100-8580, Japan. The address of the listing agent, Luxembourg paying agent and Luxembourg transfer agent is Vertigo Building, Polaris, 2-4 rue Eugene Ruppert, L-2453, Luxembourg. We will provide prompt notice of any changes in the principal paying agent, Luxembourg listing agent, Luxembourg paying agent and Luxembourg transfer agent or any change in the location of their offices. Highly Leveraged Transactions The Indenture does not include any debt covenants or other provisions that afford Holders of the Notes protection in the event of a highly leveraged transaction. Indebtedness, Dividends, Reserves The Indenture does not limit our ability to incur additional indebtedness (including additional Notes), does not limit our ability to make payment of dividends or require us to create or maintain any reserves.

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Additional Notes The Indenture will provide that, from time to time, without notice to or the consent of the Holders of the Notes, additional notes may be issued upon satisfaction of the conditions set forth in the Indenture, provided that no such additional Notes may be issued if such issuance would result in any materially disadvantageous tax consequences to any Holder or beneficial owner of the Notes. Any additional notes may be issued on terms established pursuant to a resolution of our Board of Executive Officers, which will also establish the aggregate principal amount of any additional notes delivered to the Trustee, or pursuant to a supplement to the Indenture. Any additional notes will have the same terms in all respects as the Notes except that the additional notes may have a different issue date, purchase price and initial interest accrual date. The Notes offered hereby and any additional notes will be treated as a single series for all purposes under the Indenture and will vote together as one class on all matters with respect to the Notes. For purposes of this "Description of the Notes," references to the Notes include additional notes, if any. Listing We have made an application for admission of the Notes to the official list of the Luxembourg Stock Exchange and an application for admission to trading on the Euro MTF market of the Luxembourg Stock Exchange. Covenants Maintenance of Books and Records We will maintain books, accounts and records as may be necessary to comply with all applicable laws and to enable our financial statements to be prepared in accordance with Brazilian GAAP or IFRS, as applicable, and we will allow the Trustee access to those books, accounts and records at reasonable times. Maintenance of Office or Agency We will maintain an office or agency in the Borough of Manhattan, The City of New York where Notes may be presented for payment or for exchange, transfer or redemption and where notices to and demands upon us in respect of the Indenture and the Notes may be served. Initially this office will be the corporate trust office of the Trustee, located at 101 Barclay Street, Floor 4 East, New York, New York 10286, and we will agree not to change the designation of such office without prior written notice to the Trustee and designation of a replacement office. So long as the Notes are admitted to the official list of the Luxembourg Stock Exchange, we will maintain a paying agent in a member state of the European Union that will not be obliged to withhold or deduct tax pursuant to any law implementing the European Council Directive 2003/48/EC (the "Directive") or any other directive implementing the conclusions of the European Council of Economic and Finance Ministers ("ECOFIN") meeting of 26 and 27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive. Payment of Additional Amounts We are required to make all payments in respect of the Notes free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, fines, penalties, assessments or other governmental charges (or interest on those taxes, duties, fines, penalties, assessments or other governmental charges) (collectively, "Taxes") imposed, levied, collected, withheld or assessed by, within or on behalf of Brazil (or any political subdivision or governmental authority thereof or therein having power to tax), or any other jurisdiction from or through which we or the paying agent make any payment under the Notes (or any political subdivision or governmental authority thereof or therein having power to tax) (a "Relevant Taxing Jurisdiction"), unless such withholding or deduction is required by law. In that event we will pay to the Holders (as defined below) of the Notes, or the Trustee, as the case may be, such additional amounts as may be necessary to ensure that the net amounts received by the Holders of such Notes or the Trustee after such withholding or deduction shall not be less than the amounts of principal, interest and premium, if any, which would have been received in respect of such Notes in the absence of such withholding or deduction, except that no such additional amounts shall be payable in respect of any Notes:

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(i)

in the case of payments for which presentation of such Notes is required, presented for payment more than 30 days after the later of: (a) (b) the date on which such payment first became due, and if the full amount payable has not been received in the place of payment by the Trustee on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Holders by the Trustee;

except to the extent that the Holder would have been entitled to such additional amounts on presenting such Note for payment on the last day of such period of 30 days; (ii) held by or on behalf of a Holder who is liable for Taxes imposed in respect of such Notes by reason of such Holder having some present or former direct or indirect connection with the taxing jurisdiction imposing such Taxes, other than the mere holding of such Note or the receipt of payments or the enforcement of rights in respect thereto; in respect of any Taxes that would not have been so withheld or deducted but for the failure by the Holder or the beneficial owner of the Note to (i) make a declaration of non-residence, or any other claim or filing for exemption, to which it is entitled or (ii) comply with any reasonable certification, identification, information, documentation or other reporting requirement concerning its nationality, residence, identity or connection with the jurisdiction imposing the Taxes (including, for the avoidance of doubt, U.S. Internal Revenue Service Forms W-8 and W-9) if compliance is required by statute or by regulation of any Relevant Taxing Jurisdiction as a precondition to relief or exemption from the Taxes, provided that (x) we have given Holders written notice of such requirement at least 60 days prior to the first payment date with respect to which such requirement is applicable, and (y) in no event shall such Holder's requirement to make such a declaration, claim or filing require such Holder to provide any materially more onerous information, documents or other evidence than would be required to be provided had such Holder been required to file U.S. Internal Revenue Service Forms W-8BEN, W-8ECI, W-8EXP and/or W-8IMY; in respect of any estate, inheritance, gift, or similar Taxes; in respect of any Taxes payable other than by withholding or deduction from payments of principal or interest on the Note; in respect of any payment to a Holder of a Note that is a fiduciary or partnership or any person other than the sole beneficial owner of such payment or Note, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such partnership or the beneficial owner of such payment or Note would not have been entitled to the additional amounts had such beneficiary, settlor, member or beneficial owner been the actual Holder of such Note; in respect of any withholding or deduction imposed on a payment to an individual that is required to be made pursuant to the Directive implementing the conclusions of the ECOFIN meeting of 26 and 27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; in respect of any Taxes imposed in connection with a Note presented for payment by or on behalf of a Holder who is a resident of the European Union for tax purposes and would have been able to avoid such tax by presenting the relevant Note to another paying agent in a member state of the European Union to whom presentation could have been made; or any combination of any of the above.

(iii)

(iv) (v) (vi)

(vii)

(viii)

(ix)

As used in this Offering Memorandum, a "Holder" is an individual, corporation, partnership, limited liability company, joint venture, association, company, trust, unincorporated organization or government or any

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agency or political subdivision thereof, in whose name a Note is recorded in the register maintained by us or the registrar for registration and transfer of securities, including the Notes. References to principal, interest, premium or other amounts payable in respect of any of the Notes also refer to any additional amounts which may be payable. Refunds, if any, of Taxes with respect to which we pay additional amounts are for our account. Except as described in the Indenture, we will pay when due any present or future stamp, transfer, court or documentary taxes or any other excise or property taxes, charges or similar levies imposed by any jurisdiction (or any governmental authority thereof or therein having power to tax) with respect to the initial execution, delivery or registration of the Notes or any other document or instrument relating thereto. Maintenance of Approvals We will obtain and maintain in full force and effect all governmental approvals, consents or licenses of any governmental authority under the laws of Brazil or any other jurisdiction having jurisdiction over us, our business or the transactions contemplated herein, as well as of any third party under any agreement to which we may be subject, in connection with our execution, delivery and performance of the transaction documents related to this offering or the validity or enforceability thereof. Use of Proceeds We will agree to use the net proceeds from the offer and sale of the Notes for general corporate purposes. Further Actions We will, at our own cost and expense, take any action at any time required, as necessary or as requested by the Trustee, in accordance with applicable laws and regulations, to be taken in order: to enable us to lawfully enter into, exercise our rights and perform our obligations under the Notes and the Indenture; to ensure that our obligations under the Notes and the Indenture are legally binding and enforceable; to make the Notes and the Indenture admissible in evidence in the courts of the State of New York or Brazil; to enable the Trustee to exercise and enforce its rights under and carry out the terms, provisions and purposes of the Indenture and the Notes; to take any and all actions necessary to preserve the enforceability of, and maintain the Holders of the Notes and the Trustee's rights under, the Indenture and the Notes; and to assist the Trustee, to the extent reasonably necessary.

Appointment to Fill a Vacancy in the Office of the Trustee Whenever necessary to avoid or fill a vacancy in the office of the Trustee, we will appoint a successor trustee so that there will at all times be a trustee with respect to the Notes. Maintenance of Existence Subject to the covenant described in "Consolidation, Merger, Sale or Conveyance", we will do all things necessary to preserve and keep in full force and effect our corporate existence and rights (charter and statutory); provided, however, that we will not be required to preserve any such right if our Board of Directors determines in good faith that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Holders of the Notes.

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Limitation on Liens We may not, nor will we permit any of our subsidiaries to, create or suffer to exist any mortgage, hypothecation, lien, security interest, pledge, preferential arrangement or other charge or encumbrance or any similar arrangement, including any equivalent created or arising under the laws of Brazil (a "Lien") (other than a Permitted Lien (as defined below)) upon or with respect to the whole or any part of our or our subsidiaries' assets, revenues, rights to receive income and other property (whether tangible or intangible), present or future (collectively, "Property"), to secure any Public External Indebtedness (as defined below). If we or any of our subsidiaries shall create any Lien on any part of the Property as security for any of our or its Public External Indebtedness or the Public External Indebtedness of any other person, we will ensure that such Lien will, at the same time or prior thereto, equally and ratably secure the payment of the principal of and interest on and any other obligation resulting from the Notes or the Notes will benefit from a guarantee or indemnity or other security arrangement in substantially identical terms. If any statutory Lien shall be created on any part of the Property as security for any of our or our subsidiaries' Public External Indebtedness or the Public External Indebtedness of any other person, we shall ensure that an equivalent lien or another equivalent security interest is granted to secure the payment of principal of and interest on and any other obligation resulting from the Notes. Notwithstanding the foregoing provision of this paragraph, such provisions shall not apply to a Permitted Lien. For the purposes of the previous paragraph, the following terms have the meanings specified herein: "Indebtedness" means (i) all money borrowed, and premiums and accrued interest in respect thereof, (ii) any liability under or in respect of any acceptance or credit, (iii) any principal, premium or accrued interest in respect of any bonds, notes, debentures, debenture stock, loan stock, certificates of deposit or other securities whether issued for cash or in whole or in part for a consideration other than cash, (iv) all obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable in the ordinary course of business), (v) all obligations under leases which should be, in accordance with Brazilian GAAP, recorded as capitalized leases; and (vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above. "Public External Indebtedness" means any Indebtedness which is payable (or may be paid) in a currency or by reference to a currency other than the currency of Brazil, and which is in the form of, or represented by, bonds, debentures, notes or other securities which are for the time being or are capable of being or intended to be quoted, listed or ordinarily dealt in on any stock exchange, automated trading system, over-the-counter or other securities market. "Permitted Lien" means: (i) a Lien arising by operation of any law, decree or governmental regulation of general applicability in connection with any Indebtedness, provided that such Lien does not arise by exercise of rights of the Holder or beneficiary as a result of any default or omission under such Indebtedness by us or any of our subsidiaries; in the case of a wholly owned subsidiary, a Lien in our favor securing Indebtedness owed by such subsidiary to us and, in the our case, a Lien in favor of any wholly owned subsidiary securing Indebtedness owed by us to such wholly owned subsidiary, in both cases in connection with a Lien on receivables or other assets granted by us or any of our subsidiaries securing Public External Indebtedness involving a securitization or similar transaction allowable under paragraph (v) below, it being understood that in determining compliance with paragraph (v) below, only one but not both of the contemporaneous grants of a Lien in connection with securitization shall be considered; a Lien securing Public External Indebtedness incurred or assumed by us in connection with a Project Financing (as defined below), provided that the Property over which such Lien is granted consists solely of assets or revenues of the project for which the Project Financing was incurred;

(ii)

(iii)

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(iv) (v)

a Lien securing Public External Indebtedness incurred or assumed by us to finance or refinance the acquisition of the assets in respect of which such Lien has been created or permitted to subsist; and a Lien that is not otherwise a Permitted Lien as set forth in (i) to (iv) above; provided that the aggregate principal amount of Public External Indebtedness secured by all such Liens that is outstanding at any time does not as of the date any such Lien is created or suffered to exist exceed 20% of our Shareholders' Equity. For the purposes of this paragraph (v), in a securitization or similar transaction, the value of only the second level encumbrance shall be counted.

"Project Financing" means any financing of all or part of the costs of the acquisition, construction or development of any project in respect of which a person or persons providing such financing (i) expressly agree to limit their recourse to the project financed and the revenues derived from such project as the source of payment, and in the event of non-payment, of the moneys advanced, and (ii) have been provided with a feasibility study prepared by competent independent experts on the basis of which it was reasonable to conclude that such project would generate sufficient income to service substantially all indebtedness incurred in connection with such project. "Shareholders' Equity" means the amount which, as of the date any determination is being made, is the amount of our total shareholders' equity appearing in our most recently published audited financial statements, prepared in accordance with Brazilian GAAP or IFRS. Consolidation, Merger, Sale or Conveyance We may not, in a single transaction or a series of related transactions, consolidate with or merge into any other corporation or convey or transfer our properties and assets substantially as an entirety to any person, unless: (i) the successor corporation shall be a corporation organized and existing under the laws of Brazil and shall expressly assume by a supplemental Indenture, delivered to and in a form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of, premium, if any and interest on all the outstanding Notes and the performance of every covenant in the Indenture on our part to be performed or observed, immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both would become an Event of Default, shall have happened and be continuing, and we shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, conveyance or transfer and such supplemental Indenture comply with the foregoing provisions relating to such transaction and all conditions precedent in the Indenture relating to such a transaction have been complied with.

(ii)

(iii)

In case of any such consolidation, merger, conveyance or transfer such successor corporation will succeed to and be substituted for us as obligor on the Notes with the same effect as if it had issued the Notes. Upon the assumption of our obligations by any such successor corporation in such circumstances, subject to certain exceptions, we will be discharged from all obligations under the Notes and the Indenture. Repurchase of Notes upon Change of Control Not later than 30 days following a Change of Control (as defined below), we will make an Offer to Purchase (as defined below) all outstanding Notes at a purchase price equal to 101.0% of the principal amount plus accrued interest to, but excluding, the date of purchase and additional amounts, if any. An "Offer to Purchase" must be made by written offer, which will specify the principal amount of Notes subject to the offer and the purchase price. The offer must specify (i) an expiration date, which we refer to as the "Expiration Date," not less than 30 days or more than 60 days after the date of the Offer to Purchase and (ii) a settlement date for purchase, which we refer to as the "Purchase Date," not more than five Business Days after the Expiration Date.

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The offer must include information concerning our business which we believe will enable the holders of the Notes to make an informed decision with respect to the Offer to Purchase. The Offer to Purchase will also contain instructions and materials necessary to enable Holders to tender Notes pursuant to the offer. We will comply with Rule 14e-1 under the Exchange Act (to the extent applicable) and all other applicable laws in making any Offer to Purchase, and the above procedures will be deemed modified as necessary to permit such compliance. A Holder may tender all or any portion of its Notes pursuant to an Offer to Purchase, subject to the requirement that any portion of a Note tendered must be in a multiple of U.S.$1,000 principal amount and that the minimum tender of any Holder must be no less than U.S.$150,000. Holders shall be entitled to withdraw Notes tendered up to the close of business on the Expiration Date. On the Purchase Date the purchase price will become due and payable on each Note accepted for purchase pursuant to the Offer to Purchase, and interest on Notes purchased will cease to accrue on and after the Purchase Date. We agree to obtain all necessary consents and approvals from all appropriate Brazilian and other governmental authorities or agencies having jurisdiction over us and the Offer to Purchase for the remittance of funds outside of Brazil prior to making any Offer to Purchase. Any failure to obtain such consents and approvals shall constitute an Event of Default hereunder. For the purposes of the previous paragraphs, "Change of Control" means: the proposing of any transaction (including a series of related transactions) or occurrence of any event that would cause the Unio Federal (the Brazilian federal sovereign entity) to cease to be the "beneficial owner" (as such term is used in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50.0% of the total voting power of our outstanding voting stock, including as a result of any merger or consolidation transaction involving us. Periodic Reports Within 60 days after the end of each first and third fiscal quarter and 90 days after the end of each fiscal semester and fiscal year, we shall provide to the Trustee for the benefit of the Holders of the Notes copies of unaudited (with respect to the first and third fiscal quarters) or audited (with respect to a fiscal semester or a fiscal year) financial statements in English, accompanied by an opinion from an independent auditor with respect to the semi-annual and annual audited financial statements, which shall be based upon an examination made in accordance with Brazilian GAAP or IFRS, as applicable, and accompanied by a limited review from an independent auditor with respect to the first fiscal quarter and third fiscal quarter unaudited financial statements prepared in accordance with Brazilian GAAP or IFRS; as applicable, provided that (i) all such financial statements and reports may be provided in the forms included in this offering memorandum or such other form as is then required in Brazil for financial institutions such as us, (ii) in respect of each first and third quarter, we may provide audited statements and an opinion of independent auditors if we are then preparing audited quarterly financial statements, and (iii) any such financial statements will be deemed to have been delivered on the date on which we have posted such financial statements on our website at www.bnb.gov.br (it being understood that we shall promptly provide copies to the Trustee and provide such other information as the Trustee may reasonably request and that we may provide without violating any applicable law). The information contained on our website, or that might be obtained via our website, is not incorporated by reference in, and shall not be considered part of this offering memorandum. Available Information We shall take all action necessary to provide information to permit resales of the Notes pursuant to Rule 144A under the Securities Act, including furnishing to any Holder of Notes or beneficial interest in a global note, or to any prospective purchaser designated by such Holder of Notes, upon request of such Holder of Notes, financial and other information required to be delivered under Rule 144A(d)(4) (as amended from time to time and including any successor provision) unless, at the time of such request, we are subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act or are exempt from such requirements pursuant to Rule 12g3-2(b) under the Exchange Act (as amended from time to time and including any successor provision).

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Redemption Redemption of Notes at Maturity The outstanding principal amount of the Notes will be paid upon maturity unless required to be earlier repaid as a result of the occurrence and continuation of an Event of Default (as defined herein), for tax reasons as described below under "Redemption of Notes Prior to Maturity Solely for Taxation Reasons" or upon a Change of Control as defined under "CovenantsRepurchase of Notes upon Change of Control." Redemption of Notes Prior to Maturity Solely for Taxation Reasons If as a result of any change in or amendment to the laws or treaties (or any rules or regulations thereunder) of any Relevant Taxing Jurisdiction (as defined under "Payment of Additional Amounts"), or any amendment to or change in an official interpretation, administration or application of such laws, treaties, rules, or regulations (including a judgment by a court of competent jurisdiction), which change or amendment or change in official position becomes effective on or after the issue date of the Notes or, with respect to a successor, after the date a successor assumes the obligations under the Notes, we or the successor have or will become obligated to pay additional amounts as described above under "Payment of Additional Amounts" in excess of the additional amounts that we would be obligated to pay if payments were subject to withholding or deduction at a rate of 15% (or at a rate of 25% in case the Holder of the Notes is resident in a tax haven jurisdiction, i.e., countries which do not impose any income tax or which impose it at a maximum rate lower than 20% or where the laws impose restrictions on the disclosure of ownership composition or securities ownership) as a result of the taxes, duties, assessments and other governmental charges described above (the "Minimum Withholding Level"), we may, at our option, redeem all, but not less than all, of the Notes, at a redemption price equal to 100% of their principal amount, together with interest and additional amounts accrued to, but excluding, the date fixed for redemption, upon delivery of irrevocable notice not less than 30 days nor more than 90 days prior to the date fixed for redemption. No notice of such redemption may be given earlier than 90 days prior to the earliest date on which we would, but for such redemption, be obligated to pay the additional amounts above the Minimum Withholding Level, were a payment then due. We shall not have the right to so redeem the Notes in the event we become obliged to pay additional amounts which are less than the additional amounts payable at the Minimum Withholding Level. Notwithstanding the foregoing, we shall not have the right to so redeem the Notes unless: (i) we have taken measures we consider reasonable to avoid the obligation to pay additional amounts; and (ii) we have complied with all applicable regulations to legally effect such redemption; provided, however, that for this purpose reasonable measures shall not include any change in our or any successor's jurisdiction of incorporation or organization or location of its principal executive or registered office. In the event that we elect to so redeem the Notes, we will deliver to the Trustee: (i) an officers' certificate, stating that we are entitled to redeem the Notes pursuant to their terms and setting forth a statement of facts showing that the condition or conditions precedent to our right to so redeem have occurred or been satisfied; and (ii) an opinion of counsel (as provided for in the Indenture) to the effect that we have or will become obligated to pay additional amounts in excess of the additional amounts payable at the Minimum Withholding Level as a result of the change or amendment and that all governmental approvals necessary for us to effect the redemption have been obtained and are in full force and effect. Notes called for redemption will become due on the date fixed for redemption. On and after the redemption date, interest will cease to accrue on the Notes as long as we have deposited with the paying agent funds in satisfaction of the applicable redemption price pursuant to the Indenture. Upon redemption of the Notes by us, the redeemed Notes will be cancelled. No Mandatory Redemption or Sinking Fund There will be no mandatory redemption or sinking fund payments for the Notes.

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Events of Default An "Event of Default," with respect to the Notes is defined in the Indenture as: (i) (ii) (iii) our failure to pay any principal of any of the Notes, when due and payable, whether at maturity or otherwise; or our failure to pay any interest or any additional amounts when due and payable on any of the Notes and the continuance of such default for a period of 30 days; or our failure to perform or observe any other term, covenant, warranty, or obligation in respect of the Notes or the Indenture, not otherwise expressly defined as an Event of Default in (i) or (ii) above, and the continuance of such default for more than 60 days after written notice of such default has been given to us by the Trustee or to us and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default;" or if any of our indebtedness or that of our subsidiaries becomes due and repayable prematurely by reason of an event of default (however described) or we or any of our subsidiaries fails to make any payment in respect of any Indebtedness on the due date for such payment (or within any originally applicable grace or cure period) or any security given by us or any of our subsidiaries for any Indebtedness becomes enforceable and steps are taken to enforce the same or if we or any of our subsidiaries fail to make any payment when due (or within any originally applicable grace period in respect thereof) under any guarantee and/or indemnity given by us or such subsidiary (as the case may be) in relation to any indebtedness of any other person, provided that no such event as aforesaid shall constitute an Event of Default unless such Indebtedness either alone or when aggregated with other Indebtedness in respect of which one or more of the events mentioned in this paragraph (iv) has occurred shall amount to at least US$50,000,000 (or its equivalent in any other currency on the basis of the middle spot rate for any relevant currency against the U.S. dollar as quoted by any leading bank on the day on which this paragraph operates); one or more final non-appealable judgments or orders for the payment of money in the aggregate are rendered against us or any of our subsidiaries and are not paid or discharged, and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against us and/or our subsidiaries to exceed U.S.$50,000,000 or the equivalent thereof at the time of determination (in excess of amounts which our insurance carriers have agreed to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect; or certain events subjecting us to a special management regime under Brazilian law or certain events of bankruptcy, intervention, dissolution, winding-up or insolvency with respect to us.

(iv)

(v)

(vi)

The Indenture provides that (i) if an Event of Default (other than an Event of Default described in paragraph (vi) above) shall have occurred and be continuing with respect to the Notes, either the Trustee or the Holders of not less than 25% of the total principal amount of the Notes then outstanding may declare the principal of all outstanding Notes and the interest accrued thereon, if any, to be due and payable immediately and (ii) if an Event of Default described in paragraph (vi) above shall have occurred, the principal of all outstanding Notes and the interest accrued thereon, if any, shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of Notes. The Indenture provides that the Notes owned by us or any of our affiliates shall be deemed not to be outstanding for, among other purposes, declaring the acceleration of the maturity of the Notes. Upon the satisfaction by us of certain conditions, the declaration described in clause (i) of this paragraph may be annulled by the Holders of a majority of the total principal amount of the Notes then outstanding. Past defaults, other than non-payment of principal and interest, may be waived by the Holders of a majority of the total principal amount of the Notes outstanding.

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Modification of the Indenture We and the Trustee may, without the consent of the Holders of the Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including (i) curing any ambiguity, defect or inconsistency in the Indenture or the Notes, as evidenced by an opinion of counsel delivered to the Trustee, (ii) complying with the consolidation, merger, sale or conveyance covenant (see "CovenantsConsolidation, Merger, Sale or Conveyance"), (iii) evidencing and providing for the acceptance of an appointment by a successor trustee, (iv) providing for uncertificated Notes in addition to or in place of certificated Notes, (v) providing for any guarantee of the Notes, securing the Notes or confirming and evidencing the release, termination or discharge of any guarantee of or lien securing the Notes when such release, termination or discharge is permitted by the Indenture, (vi) providing for or confirming the issuance of additional notes, (vii) making any other change that does not materially adversely affect the rights of any Holder of Notes, or (viii) conforming the terms of the Indenture with the description thereof set forth in this section, as evidenced by an opinion of counsel delivered to the Trustee. In addition, with certain exceptions, the Indenture and the Notes may be modified by us and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding, but no such modification may be made without the consent of the Holder of each outstanding Note affected thereby which would: (i) change the maturity of any payment of principal of or any installment of interest on any Note, or reduce the principal amount thereof or the interest, premium, additional, or amounts payable thereon, or change the method of computing the amount of principal thereof or interest or premium, if any, payable thereon on any date or change any place of payment where, or the coin or currency in which, any Note or interest or premium thereon are payable, or impair the right of Holders to institute suit for the enforcement of any such payment on or after the date when due; reduce the percentage in aggregate principal amount of the outstanding Notes, the consent of whose holders is required for any such modification or the consent of whose Holders is required for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences provided for in the Indenture; or modify any of the provisions of certain sections of the Indenture with respect to the Notes, including the provisions summarized in this paragraph, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby.

(ii)

(iii)

The Indenture provides that the Notes owned by us or any of our affiliates shall be deemed not to be outstanding for, among other purposes, consenting to any such modification. The Trustee The Bank of New York Mellon is the trustee under the Indenture and has been appointed by us as paying agent, registrar and transfer agent. The Indenture provides that during the existence of an Event of Default, the Trustee will exercise the rights and powers vested in it by the Indenture, using the same degree of care and skill as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. In the absence of an Event of Default, the Trustee need only perform the duties specifically set forth in the Indenture. The Trustee shall not be liable for any error in judgment made in good faith by a Responsible Officer (as defined below), unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts, nor shall the Trustee be liable for any action taken by it or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture with respect to the Notes. The Indenture does not require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties under the Indenture if it has reasonable grounds for believing the repayment of such funds or adequate indemnity of such risk or liability is not reasonably assured to it.

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As used in this section, a "Responsible Officer" is, with respect to the Trustee, any officer within the corporate trust office of the Trustee, including any vice-president, assistant vice-president, assistant secretary, assistant treasurer, associate, senior trust officer or trust officer or any other officer of the Trustee customarily performing functions similar to those performed by such persons or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and whom shall have direct responsibility for the administration of the Indenture. The Indenture does not contain limitations on the rights of the Trustee under the Indenture, should it become our creditor, to obtain payment of claims. The Trustee is not precluded from engaging in other transactions and, if it acquires any conflicting interest, it is not required to eliminate such conflict or resign. The address of the Trustee is 101 Barclay Street, Floor 4 East, New York, New York 10286. Unclaimed Money If money for the payment of principal, premium or interest or additional amounts, if any, remains unclaimed for two years, the Trustee or the relevant paying agent shall pay the money back to us at our written request. After any such payment, Holders entitled to the money must look only to us and not to the Trustee or the paying agent for payment. Defeasance We may, at our option at any time, with the prior approval of the Central Bank if then required, defease our obligations with respect to the Notes by "legal defeasance" or "covenant defeasance." In general, upon legal defeasance, we will be deemed to have paid and discharged all of our indebtedness under the Notes and to have satisfied all of our obligations under the Notes and the Indenture except that the following will survive: (i) the rights of the Holders of the Notes to receive payments of principal of and interest on the Notes (including any additional amounts) when the payments are due, (ii) our obligations relating to the transfer and exchange of Notes, the payment of additional amounts, maintenance of a paying agent and a registrar and certain other matters specified in the Indenture and (iii) the rights, powers, trusts, duties, immunities and indemnities of the Trustee. In addition, through covenant defeasance, we may defease certain of our obligations under the covenants described above under the caption "Covenants" and other matters under the Indenture. Following covenant defeasance, we may omit to comply with any defeased covenant and the provisions with respect thereto will cease to be effective. In order to exercise either legal defeasance or covenant defeasance, we must satisfy the following conditions: we must irrevocably deposit with the Trustee cash in: (i) U.S. dollars; or (ii) U.S. government obligations; or (iii) a combination thereof, in an amount sufficient, in the opinion of an internationally recognized firm of independent public accountants set forth in a certificate delivered to the Trustee, to pay and discharge the principal of and each installment of interest on the Notes in accordance with the terms of the Indenture and the Notes; no Event of Default, or event which with notice or lapse of time or other conditions would become an Event of Default, has occurred and is continuing on the date of the deposit and, with respect to the liquidation, bankruptcy, insolvency and other events described in clause (vi) under "Events of Default" have not occurred and are not continuing, at any time during the period ending on the 123rd day after the date of that deposit or, if longer, the period ending on the day after the longest applicable preference period relating to that deposit expires; we must deliver to the Trustee either a ruling received from the Internal Revenue Service and any other relevant taxing authority (covering each taxing jurisdiction), or an opinion of counsel to the effect that the deposit and related defeasance or release will not be deemed to be a taxable event for the Holders of the Notes for United States income tax purposes (in the case of legal defeasance, such an opinion could not be given absent a change of law after the date of the Indenture), unless

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the Trustee has received documentary evidence that each Holder of the Notes is either not subject to or is exempt from United States income taxation; such defeasance will not result in a breach or violation of any other agreement or instrument to which we are a party or by which we are bound; such defeasance will not result in the trust arising from that deposit constituting an investment company as defined under the U.S. Investment Company Act of 1940, as amended; we have delivered an officers' certificate and an opinion of counsel stating that all the conditions to defeasance have been complied with; and no default in the payment of principal, premium, if any, or interest on any of the senior indebtedness ranking pari passu with the Notes has occurred and is continuing, such senior indebtedness has not been accelerated and no other event of default under the senior indebtedness has occurred and is continuing that would permit acceleration of those obligations.

Satisfaction and Discharge The Notes will be deemed to be paid for all purposes under the Indenture, and our indebtedness under the Notes will be deemed to have been satisfied and discharged if the following conditions are met, among others: either we have given a notice of redemption and all other conditions to redemption have been met or the principal and all amounts due and payable on the Notes have become due and payable or, subject to approval of the Central Bank, if then required, will become due and payable within one year; we have irrevocably deposited money in trust with the Trustee that will be sufficient to pay when due all the principal of and interest on the Notes to maturity or redemption; no Event of Default or event that, with the giving of notice, lapse of time or other conditions, would become an Event of Default, has occurred and is continuing on the date of the deposit, and the deposit will not breach any other instrument to which we are a party or by which we are bound; and except in the case the principal and all amounts due and payable on the Notes have become due and payable, the Trustee has received an opinion of counsel to the effect that the satisfaction and discharge of our indebtedness under the Notes will not be deemed to be a taxable event for the holders of the Notes for United States income tax purposes, unless the Trustee has received documentary evidence that each Holder of the Notes is either not subject to or is exempt from United States income taxation.

The Indenture will cease to be of further effect when: either (i) all the Notes have been delivered to the Trustee for cancellation (other than destroyed, lost or stolen Notes that have been replaced or paid in accordance with the Indenture and Notes that are deemed to have been paid, and Notes for whose payment money has been deposited in trust or held in trust by us and have thereafter been returned to us) or (ii) all Notes that have not been delivered to the Trustee for cancellation have been deemed to have been paid as described in the Indenture; all other amounts due and payable under the Indenture have been paid; and we have delivered to the Trustee an officer's certificate and an opinion of counsel stating that the conditions to satisfaction and discharge of the Indenture have been complied with.

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Notwithstanding the satisfaction and discharge of the Notes and/or the Indenture, our obligations under specified provisions of the Indenture relating to the transfer and exchange of Notes, payment of additional amounts, maintenance of a paying agent and a registrar, rights, protections, immunities and indemnifications of the Trustee, and certain other matters specified in the Indenture will survive. Book-Entry System; Delivery and Form The Notes are being offered and sold in connection with the initial offering thereof solely to "qualified institutional buyers," as that term is defined in Rule 144A under the Securities Act of 1933, as amended, pursuant to Rule 144A, and in offshore transactions to persons other than "U.S. persons," as defined in Regulation S under the Securities Act, in reliance on Regulation S. Following the initial offering of the Notes, the Notes may be resold to qualified institutional buyers pursuant to Rule 144A, non-U.S. persons in offshore transactions in reliance on Regulation S, and pursuant to Rule 144 under the Securities Act, as described under "Transfer Restrictions." The Global Notes Rule 144A Global Note Notes offered and sold to qualified institutional buyers pursuant to Rule 144A will initially be issued in the form of one or more registered notes in global form, without interest coupons. The Rule 144A global note will be deposited on the date of the closing of the sale of the Notes with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC, and will remain in the custody of the Trustee pursuant to the FAST Balance Certificate Agreement between DTC and the Trustee. Interests in the Rule 144A global note will be available for purchase only by qualified institutional buyers. Regulation S Global Note Notes offered and sold in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act will initially be issued in the form of one or more registered notes in global form, without interest coupons. The Regulation S global note will be deposited upon issuance with, or on behalf of, a custodian for DTC in the manner described in the preceding paragraph for credit to the respective accounts of the purchasers. Investors may hold their interests in the Regulation S global note directly through Euroclear or Clearstream as participant in DTC, if they are participants in such systems, or indirectly through organizations which are participants in such systems. After the expiration of the restricted period (defined below under "Exchanges Among the Global Notes"), investors may also hold such interests through organizations other than Euroclear or Clearstream that are participants in the DTC system. Euroclear and Clearstream will hold such interests in the Regulation S global note on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositaries. Such depositaries, in turn, will hold such interests in the Regulation S global note in customers' securities accounts in the depositaries' names on the books of DTC. Except as set forth below, the Rule 144A global note and the Regulation S global note, collectively referred to in this section as the "global notes," may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in respect of the global notes may not be exchanged for Notes in physical, certificated form (referred to as "certificated notes") except in the limited circumstances described below. The Notes will be subject to certain restrictions on transfer and will bear a restrictive legend as set forth under "Transfer Restrictions." All interests in the global notes, including those held through Euroclear or Clearstream, shall be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems. Exchanges Among the Global Notes Prior to the 40th day after the later of the commencement of the offering of the Notes and the date of the closing of the sale of the Notes (through and including the 40th day, the "restricted period"), transfers by an owner

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of a beneficial interest in respect of the Regulation S global note to a transferee who takes delivery of this interest through the Rule 144A global note will be made only in accordance with applicable procedures and upon receipt by the Trustee of a written certification from the transferor of the beneficial interest in respect of the form provided in the Indenture to the effect that such transfer is being made to a person whom the transferor reasonably believes is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A. Such written certification will no longer be required after the expiration of the restricted period. Transfers by an owner of a beneficial interest in respect of the Rule 144A global note to a transferee who takes delivery of such interest through the Regulation S global note, whether before or after the expiration of the restricted period, will be made only upon receipt by the Trustee of a certification from the transferor to the effect that such transfer is being made in accordance with Regulation S or (if available) Rule 144 under the Securities Act and that, if such transfer is being made prior to the expiration of the restricted period, the interest transferred will be held immediately thereafter through Euroclear or Clearstream. Any beneficial interest in respect of one of the global notes that is transferred to a person who takes delivery in the form of an interest in another global note will, upon transfer, cease to be an interest in such global note and become an interest in the other global note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other global note for as long as it remains such an interest. Certain Book-Entry Procedures for the Global Notes The descriptions of the operations and procedures of DTC, Euroclear and Clearstream set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. We, the initial purchasers and the Trustee do not take any responsibility for these operations or procedures, and investors are urged to contact the relevant system or its participants directly to discuss these matters. DTC has advised us that it is (i) a limited purpose trust company organized under the laws of the State of New York, (ii) a "banking organization" within the meaning of the New York Banking Law, (iii) a member of the Federal Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and (v) a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include securities brokers and dealers (including the initial purchasers), banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies, or indirect participants that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. We expect that pursuant to procedures established by DTC (i) upon deposit of each global note, DTC will credit the accounts of participants designated by the initial purchasers with an interest in the global note and (ii) ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of participants) and the records of participants and the indirect participants (with respect to the interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the Notes represented by a global note to such persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in Notes represented by a global note to pledge or transfer such interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest. So long as DTC or its nominee is the registered owner of a global note, DTC or such nominee, as the case may be, will be considered the sole owner or Holder of the Notes represented by the global note for all purposes

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under the Indenture. Except as provided below, owners of beneficial interests in respect of a global note will not be entitled to have Notes represented by such global note registered in their names, will not receive or be entitled to receive physical delivery of certificated notes, and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the Trustee thereunder. Accordingly, each beneficial owner of interest in respect of a global note must rely on the procedures of DTC and, if such beneficial owner is not a participant or an indirect participant, on the procedures of the participant through which such beneficial owner owns its interest, to exercise any rights of a Holder of Notes under the Indenture or such global note. We understand that under existing industry practice, in the event that we request any action of Holders of Notes, or a beneficial owner that is an owner of a beneficial interest in respect of a global note desires to take any action that DTC, as the Holder of such global note, is entitled to take, DTC would authorize the participants to take such action and the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instruction of such holders. Neither we, the Trustee nor any agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such Notes. Payments with respect to the principal of, premium, if any, liquidated damages, if any, and interest on any Notes represented by a global note registered in the name of DTC or its nominee will be payable by the Trustee to or at the direction of DTC or its nominee in its capacity as the registered Holder of the global note representing such Notes under the Indenture. Under the terms of the Indenture, we and the Trustee may treat the persons in whose names the Notes, including the global notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the Trustee or any paying agent has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in respect of a global note (including principal, premium, if any, liquidated damages, if any, and interest). Payments by the participants and the indirect participants to the owners of beneficial interests in respect of a global note will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the indirect participants and DTC. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Subject to compliance with the transfer restrictions applicable to the Notes, cross-market transfers between the participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary. However, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a global note from a participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream as a result of sales of interest in a global security by or through a Euroclear or Clearstream participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC's settlement date. Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the Trustee or any agent will have any responsibility for the performance by DTC, Euroclear or Clearstream

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or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes If (i) we notify the Trustee in writing that DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of such notice or cessation, (ii) we, at our option, notify the Trustee in writing that we elect to cause the issuance of Notes in definitive form under the Indenture or (iii) upon the occurrence of certain other events as provided in the Indenture, then, upon surrender by DTC of the global notes, certificated notes will be issued to each person that DTC identifies as the beneficial owner of the Notes represented by the global notes. Upon any such issuance, the Trustee is required to register such certificated notes in the name of such person or persons (or the nominee of any thereof) and cause the same to be delivered thereto. Neither we, the Trustee nor any agent shall be liable for any delay by DTC or any participant or indirect participant in identifying the beneficial owners of the related Notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Notes to be issued). Notices Notice to Holders of the certificated Notes will be given by mail to the addresses of such Holders as they appear in the security register. Replacement of Notes In case of mutilated, destroyed, lost or stolen Notes, application for replacement thereof may be made to the Trustee or us. Any such Note shall be replaced by the Trustee in compliance with such procedures, on such terms as to evidence and indemnification as the Trustee or we may require and subject to any applicable law or regulation. All such costs as may be incurred in connection with the replacement of any Notes shall be borne by the applicant. Mutilated Notes must be surrendered before new ones will be issued. Governing Law The Indenture provides that it and the Notes will be governed by, and be construed in accordance with, the laws of the State of New York, without giving effect to the applicable principles of conflict of laws. Submission to Jurisdiction We have consented to the exclusive jurisdiction of any court of the State of New York or any United States Federal court sitting, in each case, in the Borough of Manhattan, The City of New York, New York, United States, and any appellate court from any of these courts, and have waived any immunity from the jurisdiction of these courts over any suit, action or proceeding that may be brought by the Trustee or a Holder of Notes based upon the Indenture and the Notes. We have appointed Article 9 Agents, LLC, located at 535 8th Avenue, 15th Floor, New York, New York 10018 as our initial authorized agent upon which all writs, process and summonses may be served in any suit, action or proceeding brought by the Trustee or a Holder of Notes based upon the Indenture or the Notes against us in any court of the State of New York or any United States Federal court sitting in the Borough of Manhattan, The City of New York and have agreed that such appointment shall be irrevocable so long as any of the Notes remain outstanding or until the irrevocable appointment by us of a successor in The City of New York as its authorized agent for such purpose and the acceptance of such appointment by such successor. Currency Rate Indemnity The U.S. dollar is the sole currency of account for the Notes and payment for all sums payable by us under the Notes, including damages. Any amount received or recovered in a currency other than U.S. dollars (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the our winding-up or dissolution or otherwise) by a Holder of Notes with respect to any amount due to it under the Notes will constitute a discharge to us only to the extent that such Holder of Notes is able to purchase with the amount it receives or

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recovers the relevant amount in U.S. dollars (or if it is not practicable to make a purchase of U.S. dollars on that date, on the first date on which it is practicable to do so). If the amount in U.S. dollars is less than the amount expressed to be due to the Holder of Notes, we will indemnify the Holder of Notes against any loss sustained as a result. In any event, we will indemnify the Holder of Notes against the cost of any such purchase. For the purposes of the preceding paragraph, it will be sufficient for the Holder of Notes to certify in a satisfactory manner (indicating sources of information used) that it would have suffered a loss had it made an actual purchase of U.S. dollar with the amount it received or recovered in the other currency on the date it received or recovered that amount (or, if a purchase of U.S. dollars on that date had not been practicable, on the first date on which it would have been practicable, so long as the Holder of Notes certifies the need for the change of date). These indemnities are a separate and independent obligation from our other obligations, will give rise to a separate and independent cause of action, will apply regardless of any waiver or extension granted by the Holder of Notes and will continue in full force and effect in spite of any other judgment or order or the filing of any proof of claim in our winding-up for a liquidated sum.

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TAXATION Prospective investors are advised to consult their own tax advisers as to the consequences of purchasing the Notes, including, without limitation, the consequences of the receipt of the interest and the sale, redemption or repayment of the Notes. Brazilian Tax Considerations The following discussion is a summary of the Brazilian tax considerations relating to an investment in the Notes by a non-resident of Brazil, or Non-Resident Holder. The discussion is based on the tax laws of Brazil as in effect on the date hereof and is subject to any change in Brazilian law that may come into effect after such date. The information set forth below is intended to be a general discussion only and does not address all possible tax consequences relating to an investment in the Notes. Prospective purchasers should consult their tax advisors as to the specific tax consequences of acquiring, holding and disposing of the Notes, in particular with regard to Notes having special features such as Notes denominated in a foreign currency as to the holder and Notes subject to currency constraint, sovereign event or credit event provisions. Prospective purchasers should note that, as to the discussion below, other income tax rates or treatment may be provided for in any applicable tax treaty between Brazil and the country where the relevant holder is domiciled. Prospective purchasers should also note that there is no tax treaty between Brazil and the United States. This summary does not address any tax issues that may affect solely the Issuer, such as the deductibility of expenses. As a general rule, non-Brazilian residents are taxed in Brazil only when income is derived from Brazilian sources. The applicability of Brazilian taxes with respect to payments on the Notes will depend on the origin of such payments and the domicile of the recipient of such payments. Interest Payments Under the Notes Interest, fees, commissions (including any original issue discounts and any redemption premiums) and any other income payable by a Brazilian obligor to an individual, entity, trust or organization domiciled outside Brazil with respect to debt obligations derived from the issuance by a Brazilian issuer of international debt securities previously registered with the Central Bank, such as the Notes, is subject to withholding income tax. The rate of withholding income tax is generally 15%, unless: (i) the holder of the Notes is resident or domiciled in a tax haven jurisdiction (that is deemed to be a jurisdiction which does not impose any tax on income or which imposes such tax at a maximum effective rate lower than 20%, or where the laws impose restrictions on the disclosure of ownership composition or securities ownership or do not allow for the identification of the effective beneficiary of the income attributed to non-residents), in which case the applicable rate is 25% (the withholding income tax rate remains 15% in the event of interest income payable by a Brazilian obligor to an individual, company, trust or organization domiciled outside Brazil in respect of debt obligations resulting from the issuance by a Brazilian issuer of international debt securities previously registered with the Central Bank, including commercial paper, as provided for in Article 10 of Normative Instruction No. 252, dated December 3, 2002 issued by the Brazilian Revenue Service); or (ii) a lower rate is provided for in an applicable tax treaty between Brazil and the other country where the beneficiary is domiciled. Brazil and Japan are signatories to a treaty (the "Japan Treaty") for the avoidance of double taxation. Under the Japan Treaty, payments of interest to entities incorporated in Japan (or a branch thereof) or other types of income deemed similar to income from borrowed funds under Brazilian tax law will be subject to a Brazilian withholding tax rate of 12.5%. We believe and intend to take the position for tax purposes that, as long as such payments are made by the Issuer to a Japanese paying agent pursuant to the terms and conditions of the Notes and provided further that such Japanese paying agent is a tax resident of Japan and is qualified for the treaty benefits under the Notes, interest (including any original issue discount) will likely be subject to Brazilian tax at a rate of 12.5% pursuant to the Japan Treaty. For this purpose, the principal paying agent must be granted discharge powers and be authorized to receive payments on behalf of the holders of the Notes, which would release the Brazilian

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debtor from the payment obligations. If the Issuer is not able to rely on the Japan Treaty to make the payments, or the payments are not made by us to the principal paying agent any such payments will be subject to the Brazilian withholding tax at the rates referred to above. On June 23, 2008, Law No. 11,727 changed the scope of new transactions that would be subject to Brazilian transfer pricing rules with the creation of the concept of a privileged tax regime. Pursuant to Law No. 11, 727, a jurisdiction will be considered a privileged tax regime if it (i) does not tax income or taxes income at a maximum rate lower than 20%; (ii) grants tax advantages to a non-resident entity or individual (a) without the need to carry out a substantial economic activity in the country or territory or (b) conditioned upon the non-exercise of a substantial economic activity in the country or territory; (iii) does not tax or taxes proceeds generated abroad at a maximum rate lower than 20% or (iv) restricts the ownership disclosure of assets and ownership rights or restricts disclosure about economic transactions carried out. Because several Brazilian regulations refer to the concepts defined in the Brazilian transfer pricing rules when referring to tax haven jurisdictions and despite the opinion of the Issuer's Brazilian legal counsel that the changes discussed in this paragraph should apply exclusively for transfer pricing purposes and thin capitalization rules, there is a risk that a privileged tax regime will be treated similarly to a tax haven jurisdiction, and therefore the concept could be extended to the burdensome income tax rates described in the preceding paragraph. Capital Gains According to Article 26 of Law No. 10,833, enacted on December 29, 2003, capital gains realized on the disposition of assets located in Brazil by a non-resident to another non-resident made outside Brazil are subject to taxation in Brazil at a rate of 15% or 25%, depending on whether the beneficiary is resident of a tax haven jurisdiction under Brazilian law. Based on the fact that the Notes are issued abroad and, therefore, may not fall within the definition of assets located in Brazil for purposes of Law No. 10,833, gains on the sale or other disposition of such Notes made outside Brazil by a non-resident holder, other than a branch or a subsidiary of a Brazilian resident, to another non-resident would not be subject to Brazilian taxes. However, considering the general scope of Law No. 10,833 and the absence of judicial guidance in respect thereof, it is impossible to predict whether such interpretation will ultimately prevail in the Brazilian courts. If the position mentioned above does not prevail, gains realized by a non-resident holder from the sale or other disposition of the Notes could be subject to Brazilian withholding income tax at a rate of 15% or 25%, if the non-resident holder is domiciled in a tax haven jurisdiction. In any event, the Issuer would be required to pay any such additional amounts as may be necessary to ensure that the net amounts to be received by a non-resident holder after withholding for the applicable taxes will equal the amounts that would have been payable in the absence of such withholding. Other Tax Considerations IOF/Cmbio may apply if payments are made from Brazil. Pursuant to Decree No. 6,306, of December 14, 2007, the conversion of foreign currency into Brazilian reais and the conversion of Brazilian reais into foreign currency are subject to the IOF/Cmbio. Currently, the IOF/Cmbio rate is 0.38% for most transfers of foreign currency into reais. According to Article 15-A of the Decree No. 6,306, the settlement of exchange transactions in connection with foreign financing or loans, for both inflow and outflow of proceeds into and from Brazil, are subject to IOF/Cmbio at a zero percent rate. However, in the case of the settlement of foreign exchange transactions (including simultaneous foreign exchange transactions) agreed from March 1, 2012, in connection with the inflow of proceeds to Brazil deriving from foreign loans, including those obtained through the issuance of notes in the international market, with the minimum average term not exceeding 1800 days, the IOF/Cmbio tax rate is 6% (this rate of 6% will be levied with penalties and interest in the case of financings or international bonds with a minimum average term longer than 1800 days). However, the Brazilian Government may increase the current IOF/Cmbio rate at any time, up to a maximum rate of 25%. Any such new rate would only apply to future foreign exchange transactions. IOF also applies to credit transactions in general, which may include guarantee transactions between a guarantor and a guaranteed party. IOF is not levied on foreign credit transactions in which the creditor is domiciled outside Brazil, in which case IOF/Cmbio will apply. IOF levied on credit transactions is usually assessed at a daily

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rate of 0.0041%, up to a limit of 1.5%. Additionally, an IOF surtax of 0.38% is currently applicable to most of the credit transactions, regardless of the term for the transaction maturing. Generally, there are no stamp, transfer or other similar taxes in Brazil with respect to the transfer, assignment or sale of the Notes outside Brazil. Under Brazilian law, the transfer of a Note by gift made by a holder (whether or not a non-resident holder) and involving a resident of Brazil may be subject to Gift Tax (Imposto Sobre Transmisso Causa Mortis e Doao de Quaisquer Bens ou Direitos) imposed on the donee by the state in which such Brazilian resident resides. Prospective purchasers of the Notes are advised to consult their own tax advisers as to the consequences of a purchase of the notes under the tax laws of the country of which they are residents, including without limitation, the consequences of receipt of interest and sale or redemption of the Notes. U.S. Tax Considerations The discussion set forth in this Offering Memorandum was written in connection with the promotion or marketing by us of the Notes and was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding penalties under U.S. federal, state or local tax law. Each taxpayer should seek advice based on its particular circumstances from an independent tax advisor. ***** The following summary discusses certain U.S. federal income tax consequences of the acquisition, ownership and disposition of the Notes. Except as specifically noted below, this discussion applies only to: Notes purchased on original issuance at their "issue price," which is set out on the cover page of this Offering Memorandum; Notes held as capital assets (generally, property held for investment); and U.S. holders (as defined below).

The Issuer expects, and this discussion assumes, that the terms of the Notes, including the manner in which payments on the Notes in U.S. dollars are calculated and the possible payment of a premium pursuant to the change of control provisions (see "Description of the NotesRepurchase of Notes upon a Change of Control"), will not cause the Notes to be classified as "contingent payment debt instruments" for U.S. federal income tax purposes. However, no rulings have been or will be sought from the U.S. Internal Revenue Service, (the "IRS"), with respect to the Notes. If these conclusions were successfully challenged by the IRS, U.S. holders would be subject to different rules than those described below. Prospective investors should consult their own advisors with respect to these matters and the significance of a possible recharacterization in their particular situations. This discussion does not describe all of the tax consequences that may be relevant in light of a holder's particular circumstances or to holders subject to special rules, such as: financial institutions; insurance companies; dealers in securities or foreign currencies; traders in securities or currencies electing to mark their positions to market; regulated investment companies; U.S. expatriates; tax-exempt organizations;

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persons holding Notes as part of a hedging transaction, "straddle," conversion transaction or other integrated transaction; persons subject to the alternative minimum tax; U.S. holders whose functional currency is not the U.S. dollar; or partnerships or other entities classified as partnerships for U.S. federal income tax purposes.

In addition this summary does not address consequences to U.S. holders of the acquisition, ownership and disposition of a Note under the tax laws of any state, locality or other political subdivision of the United States or other countries or jurisdictions. This summary is based on the Internal Revenue Code of 1986, as amended, (the "Code"), administrative pronouncements, judicial decisions and final, temporary and proposed U.S. Treasury Regulations, each as of the date hereof, changes to any of which subsequent to the date of this Offering Memorandum may affect the tax consequences described below. No ruling will be sought from the IRS with respect to any statement or conclusion in this discussion, and there is no assurance that the IRS will not challenge such statement or conclusion in the following discussion or, if challenged, a court will uphold such statement or conclusion. U.S. holders As used herein, the term "U.S. holder" means a beneficial owner of a Note that is for U.S. federal income tax purposes: an individual that is a citizen or resident of the United States; a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds Notes, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. A partnership considering an investment in Notes should consult its own tax advisors about the consequences to its partners of the acquisition, ownership or other disposition of Notes by the partnership. Prospective purchasers should consult their own tax advisors as to the particular tax considerations for them relating to the acquisition, ownership and disposition of a Note, including the applicability of any U.S. federal, state, local, or non-U.S. tax laws, any changes in applicable tax laws, and any pending or proposed legislation or regulations. Payments of interest Payments of interest on a Note (and additional amounts, if any) generally will be taxable to a U.S. holder as ordinary interest income at the time it accrues or is received in accordance with the holder's regular method of accounting for U.S. federal income tax purposes. Interest income earned by a U.S. holder with respect to a Note will constitute foreign source income for U.S. federal income tax purposes, which may be relevant in determining the U.S. holder's ability to claim foreign tax credits. For U.S. federal income tax purposes, U.S. holders will be treated as having received the amount of any Brazilian taxes withheld by us and as then having paid over the withheld taxes to the Brazilian taxing authorities.

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As a result of this rule, the amount included in gross income for U.S. federal income tax purposes by a U.S. holder with respect to a payment of interest, plus any additional amounts with respect thereto, will be greater than the amount of cash actually received (or receivable) by the U.S. holder from us with respect to the payment. Subject to certain limitations (including minimum holding period requirements), a U.S. holder will generally be entitled to a credit against its U.S. federal income tax liability, or in computing its U.S. federal taxable income, for Brazilian income taxes withheld by us. Alternatively, the U.S. holder may take a deduction for the non-U.S. income tax if the U.S. holder does not elect to claim a foreign tax credit for any non-U.S. income taxes paid or accrued during the taxable year. The limitation on non-U.S. taxes eligible for credit is calculated separately with respect to specific classes of income. For these purposes, interest received or accrued on the Notes generally will constitute "passive category income." The rules governing foreign tax credits are complex and, therefore, U.S. holders should consult their own tax advisors concerning the availability and the utilization of the foreign tax credit or deduction. Sale, exchange or retirement of the Notes Upon the sale, exchange or retirement of a Note, a U.S. holder generally will recognize U.S. source capital gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and the holder's adjusted tax basis in the Note. A U.S. holder's adjusted tax basis in a Note generally should equal the acquisition cost of the Note. For these purposes, the amount realized does not include any amount attributable to accrued but unpaid interest on the Note, which will be treated like a payment of interest, as discussed above. Gain or loss realized on the sale, exchange or retirement of a Note will be long-term capital gain or loss if at the time of sale, exchange or retirement the Note has been held for more than one year. The deductibility of capital losses is subject to limitations. Gain realized by a U.S. holder on the sale, exchange or retirement of a Note generally will be treated as U.S. source income. Consequently, if Brazilian income tax is withheld on such gain, the U.S. holder may not be able to use the corresponding foreign tax credit, unless the holder has other foreign-source income. Alternatively, the U.S. holder may take a deduction for the non-U.S. income tax if the U.S. holder does not elect to claim a foreign tax credit for any non-U.S. income taxes paid or accrued during the taxable year. The U.S. foreign tax credit or deduction rules are very complex. U.S. holders should consult their own advisors with respect to the application of these rules to their particular circumstances. Information reporting and backup withholding U.S. holders may be subject to information reporting on the amounts paid to them (including additional amounts, if any), unless they provide proof of an applicable exemption. A U.S. holder may be subject to U.S. backup withholding on these payments if it fails to provide its tax identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the holder's U.S. federal income tax liability and may entitle them to a refund, provided that the required information is timely furnished to the IRS. U.S. holders should consult their own tax advisors regarding any reporting or filing obligations that may arise as a result of their acquiring, owning or disposing of the Notes including the reportable transaction rules. Failure to comply with reporting and filing requirements can result in substantial penalties. EU Savings Directive Under European Community Council Directive 2003/48/EC on the taxation of savings income, each Member State is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State; however, for a transitional period, Austria, Belgium and Luxembourg may instead apply a withholding system in relation to such payments, deducting tax at rates rising over time to 35%. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments. Belgium has replaced this withholding tax with a regime of exchange of information to the Member State of residence as from January 1st, 2010.

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A number of non-EU countries, and certain dependent or associated territories of certain Member States, have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories. On November 13, 2008 the European Commission published a proposal for amendments to the Directive, which included a number of suggested changes which, if implemented, would broaden the scope of the requirements described above. The European Parliament approved an amended version of this proposal on April 24, 2009. Investors who are in any doubt as to their position should consult their professional advisers. THE ABOVE INFORMATION IS SET FORTH IN SUMMARY FORM ONLY AND IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF THE NOTES.

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CERTAIN ERISA AND OTHER CONSIDERATIONS The U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain requirements on "employee benefit plans" (as defined in Section 3(3) of ERISA) subject to TITLE I of ERISA, including entities such as collective investment funds and separate accounts whose underlying assets include the assets of such plans (collectively, "ERISA Plans") and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA Plan's investments be made in accordance with the documents governing the ERISA Plan. Section 406 of ERISA and Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, "Plans")) and certain persons (referred to as "parties in interest" or "disqualified persons") having certain relationships to such Plans, unless a statutory or administrative exception or exemption is applicable to the transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code and the prohibited transaction itself may have to be rescinded. Governmental plans and certain church and various other plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state or other federal or foreign laws that are substantially similar to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code ("Similar Law"). Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if any Notes (or interests therein) are acquired by a Plan with respect to which we, the Trustee or the Initial Purchasers or any of their respective affiliates are a party in interest or a disqualified person. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be applicable, however, depending in part on the type of Plan fiduciary making the decision to acquire Notes and the circumstances under which such decision is made. There can be no assurance that any exemption will be available with respect to any particular transaction involving the Notes, or that, if an exemption is available, it will cover all aspects of any particular transaction. Accordingly, by its purchase and holding of any Notes (or any interest therein), the purchaser thereof (including any subsequent transferee of any Notes or any interest therein) will be deemed to have represented and agreed either that: (i) it is not and for so long as it holds Notes will not be (and is not acquiring the Notes directly or indirectly with the assets of a person who is or while the Notes are held will be) an ERISA Plan or other Plan, an entity whose underlying assets include, or are deemed to include "plan assets" by reason of such ERISA Plan's or other Plan's investment in the entity, or any employee benefit plan which is subject to any Similar Law, or (ii) its purchase and holding of the Notes (or any interest therein) will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of another employee benefit plan subject to Similar Law, a violation of any such Similar Law). The foregoing discussion is general in nature and is not intended to be all-inclusive. Any Plan fiduciary who proposes to cause a Plan to purchase any Notes should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code (or any applicable Similar Law) to such an investment, and to confirm that such investment will not constitute or result in a non-exempt prohibited transaction or any other violation of an applicable requirement of ERISA (or any applicable Similar Law). The sale of Notes to a Plan is in no respect a representation by us or the Initial Purchasers that such an investment meets all relevant requirements with respect to investments by Plans generally or any particular Plan, or that such an investment is appropriate for Plans generally or any particular Plan.

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PLAN OF DISTRIBUTION Purchase Agreement Subject to the terms and conditions of the purchase agreement, the Initial Purchasers named below have severally and not jointly agreed to purchase, and we have agreed to sell to the Initial Purchasers, the following respective principal amounts of Notes listed opposite their name below at the initial offering price set forth on the cover page of this Offering Memorandum, less discounts and commissions:
Initial Purchasers Principal Amount HSBC Securities (USA) Inc. ...................................................................................................................................................... U.S.$96,000,000 Itau BBA USA Securities, Inc. .................................................................................................................................................. U.S.$96,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated ......................................................................................................................................................... U.S.$96,000,000 Banco BTG Pactual S.A. Cayman Branch ............................................................................................................................. U.S.$6,000,000 Banco Espirito Santo de Investimento S.A. ............................................................................................................................... U.S.$6,000,000 Total ........................................................................................................................................................................................... U.S.$300,000,000

Subject to the terms and conditions set forth in the purchase agreement, the Initial Purchasers have agreed, severally and not jointly, to purchase all of the Notes sold under the purchase agreement if any of these Notes are purchased. If an Initial Purchaser defaults, the purchase agreement provides that the purchase commitments of the non-defaulting Initial Purchasers may be increased or the purchase agreement may be terminated. We have agreed to indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Initial Purchasers may be required to make in respect of those liabilities. The Initial Purchasers are offering the Notes, subject to approval of legal matters by their counsel, including the validity of the Notes, and to other conditions contained in the purchase agreement, such as the receipt by the Initial Purchasers of officers' certificates and legal opinions. The Initial Purchasers reserve the right to withdraw, cancel or modify offers and to reject orders in whole or in part. Banco BTG Pactual S.A. Cayman Branch and Banco Espirito Santo de Investimento S.A. will act as comanagers (the "Co-Managers") for sales of the Notes. The Co-Managers are not broker-dealers registered with the SEC, and therefore may not make offers or sales of any Notes in the United States to U.S. persons except in compliance with applicable U.S. laws and regulations. To the extent that the Co-Managers intend to effect any offers or sales of the Notes in the United States, the Co-Managers will do so only through one or more U.S. registered broker-dealers or otherwise as permitted by applicable U.S. law. To the extent Banco BTG Pactual S.A. Cayman Branch intends to effect any offers or sales of the Notes in the United States, Banco BTG Pactual S.A. Cayman Branch will do so only through BTG Pactual US Capital LLC, its registered U.S. broker dealer, or one or more U.S. registered broker-dealers or otherwise as permitted by applicable U.S. law. To the extent Banco Espirito Santo de Investimento S.A. intends to effect any offers or sales of the Notes in the United States, Banco Espirito Santo de Investimento S.A. will do so only through Espirito Santo Financial Services, Inc., its registered U.S. broker dealer, or one or more U.S. registered broker-dealers or otherwise as permitted by applicable U.S. law. Commissions and Discounts The Initial Purchasers have advised us that the Initial Purchasers propose initially to offer the Notes at the offering price set forth on the cover page of this Offering Memorandum. After the initial offering, the offering price or any other term of the offering may be changed. We will pay the Initial Purchasers' selling and underwriting commissions in connection with the purchase of the Notes. Notes Are Not Being Registered The Notes have not been registered under the Securities Act. Each Initial Purchaser has agreed severally and not jointly that it will offer or sell the Notes only (i) in the United States to persons they reasonably believe to be QIBs in reliance on Rule 144A under the Securities Act or (ii) to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. The Notes being offered and sold pursuant to Regulation S may

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not be offered, sold or delivered in the United States or to, or for the account or benefit of, any U.S. person, unless the Notes are registered under the Securities Act or an exemption from, the registration requirements thereof is available. Resales of the Notes are restricted as described under "Transfer Restrictions." Until the expiration of forty (40) days after the commencement of the offering, any offer or sale of Notes within the United States by a broker-dealer (whether or not participating in this offering) could violate the registration requirements of the Securities Act, unless such offer or sale is made pursuant to Rule 144A under the Securities Act or another available exemption from the registration requirements thereof. Terms used above have the meanings given to them by Regulation S and Rule 144A under the Securities Act. No Sales of Similar Securities We have agreed, that for a period of 30 days from the date of this Offering Memorandum, we will not, without the prior written consent of the Initial Purchasers, offer, sell, contract to sell or otherwise dispose of any debt securities issued or guaranteed by us or any of our subsidiaries and having a tenor of more than one year. New Issue of Notes The Notes are a new issue of securities with no established trading market. We do not intend to apply for listing of the Notes on any national securities exchange other than the Luxembourg Stock Exchange, or for inclusion of the Notes on any automated dealer quotation system. We have been advised by the Initial Purchasers that they may make a market in the Notes after completion of the offering. However, they are under no obligation to do so and may discontinue any market-making activities at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes or that an active market for the Notes will develop or be sustained. If an active public trading market for the Notes does not develop or is not sustained, the market price and liquidity of the Notes may be adversely affected. If the Notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, our operating performance and financial condition, general economic conditions and other factors. Listing of the Notes We have applied to admit the Notes for listing on the Luxembourg Stock Exchange and to be admitted for trading on the Euro MTF Market. Stabilization and Short Positions In connection with the offering, the Initial Purchasers may purchase and sell the Notes in the open market. These transactions may include short sales, purchases to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the Initial Purchasers of a greater principal amount of Notes than they are required to purchase in the offering. The Initial Purchasers may close out any short position by purchasing Notes in the open market. A short position is more likely to be created if Initial Purchasers are concerned that there may be downward pressure on the price of the Notes in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of the Notes made by the Initial Purchasers in the open market prior to the completion of the offering made for the purpose of preventing or hindering a decline in the market price of the Notes while the offering is in process. The Initial Purchasers may also impose a penalty bid, which occurs when one Initial Purchaser repays to the other Initial Purchasers a portion of the placement discount received by it because the other Initial Purchasers have repurchased Notes sold by or for the account of that Initial Purchaser in stabilizing or short covering transactions. Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the market price of the Notes. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the Notes. As a result, the price of the Notes may be higher than the price that might otherwise exist in the open market. These transactions may be effected in the over-the-counter market or otherwise.

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Neither we nor any of the Initial Purchasers make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither we nor any of the Initial Purchasers make any representation that the Initial Purchasers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. Settlement Delivery of the Notes is expected on May 3, 2012 which will be the fifth business day following the date of pricing of the Notes (such settlement being referred to as "T+5"). Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes on the date of pricing or the next succeeding business day business day will be required by virtue of the fact that the Notes initially will settle in T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the Notes who wish to trade Notes on the pricing date or the next succeeding business day should consult their own advisor. Other Relationships with the Company Some of the Initial Purchasers and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. In addition, in the ordinary course of their business activities, the Initial Purchasers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such short positions could adversely affect future trading prices of the notes offered hereby. The Initial Purchasers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. Selling Restrictions Notice to Prospective Investors in Brazil The Notes have not been and will not be issued nor placed, distributed, offered or negotiated in the Brazilian capital markets and, as a result, have not been and will not be registered with the CVM. Any public offering or distribution, as defined under Brazilian laws and regulations, of the Notes in Brazil is not legal without prior registration under Law No. 6,385 of December 7, 1976 ("Law No. 6,385"), as amended, and Instruction No. 400, issued by the CVM on December 29, 2003 ("CVM Instruction No. 400"), as amended. Documents relating to the offering of the Notes, as well as information contained therein, may not be supplied to the public in Brazil (as the offering of the Notes is not a public offering of securities in Brazil), nor be used in connection with any offer for subscription or sale of the Notes to the public in Brazil. Persons wishing to offer or acquire the Notes within Brazil should consult with their own counsel as to the applicability of registration requirements or any exemption therefrom. Notice to Prospective Investors in the European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Memorandum to the public in that Relevant Member State other than:

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a) b)

to any legal entity which is a qualified investor as defined in the Prospectus Directive; to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive; or in any other circumstances falling within Article 3(2) of the Prospectus Directive,

c)

provided that no such offer of Notes shall require the Bank or any Initial Purchaser to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression an "offer of Notes to the public" in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU. Notice to Prospective Investors in the United Kingdom Each Initial Purchaser has represented and warranted that: a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Bank; and it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

b)

Notice to Prospective Investors in Hong Kong The Notes may not be offered or sold in Hong Kong by means of any other document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the Notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder. Notice to Prospective Investors in Japan The Notes offered in this Offering Memorandum have not been registered under the Securities and Exchange Law of Japan, and the Notes have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law, and (ii) in compliance with any other applicable requirements of Japanese law.

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Notice to Prospective Investors in Singapore This Offering Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA. Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: to an institutional investor (for corporations, under Section 274 of SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than U.S.$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; where no consideration is or will be given for the transfer; or where the transfer is by operation of law.

Notice to Prospective Investors in Switzerland The Notes may not and will not be publicly offered, distributed or redistributed on a professional basis in or from Switzerland only on the basis of a non-public offering, and neither this Offering Memorandum nor any other solicitation for investments in our securities may be communicated or distributed in Switzerland in any way that could constitute a public offering within the meaning of articles 652a or 1156 of the Swiss Federal Code of Obligations or of Article 3 of the Federal Act on Collective Investment Schemes of June 23, 2006. This Offering Memorandum may not be copied, reproduced, distributed or passed on to others without the Initial Purchasers' prior written consent. This Offering Memorandum is not a prospectus within the meaning of Articles 1156 and 652a of the Swiss Code of Obligations or a listing prospectus according to article 27 of the Listing Rules of the SIX Swiss Exchange and may not comply with the information standards required thereunder. We will not apply for a listing of the Notes on any Swiss stock exchange or other Swiss regulated market and this Offering Memorandum may not comply with the information required under the relevant listing rules. The Notes have not been and will not be approved by any Swiss regulatory authority. The Notes have not been and will not be registered with or supervised by the Swiss Federal Banking Commission, and have not been and will not be authorized under the Federal Act on Collective Investment Schemes of June 23, 2006. The investor protection afforded to acquirers of investment fund certificates by the Federal Act on Collective Investment Schemes of June 23, 2006 does not extend to acquirers of our securities.

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Notice to Prospective Investors in Chile The Notes may not be offered or sold in Chile, directly or indirectly, by means of a "Public Offer" (as defined under Chilean Securities Law (Law No. 18,045 and regulations from the Superintendencia de Valores y Seguros of the Republic of Chile)). Chilean institutional investors (such as banks, pension funds and insurance companies) are required to comply with specific restrictions relating to the purchase of the Notes. Notice to Prospective Investors in Peru The Notes and the information contained in this Offering Memorandum have not been and will not be registered with or approved by CONASEV or the Lima Stock Exchange. Accordingly, the Notes cannot be offered or sold in Peru, except if such offering is a private offering under the securities laws and regulations of Peru. The Peruvian securities market law establishes that any offering may qualify as private offering if it is directed exclusively to institutional investors.

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TRANSFER RESTRICTIONS The Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority in any jurisdiction and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons except that Notes may be offered or sold to (i) QIBs in reliance upon the exemption from the registration requirement of the Securities Act provided by Rule 144A and (ii) persons other than U.S. persons as such term is defined in Regulation S under the Securities Act ("Foreign Purchasers") in offshore transactions in reliance upon Regulation S. Each purchaser or beneficial owner of the Notes that is not a Foreign Purchaser will be deemed to: (i) represent that it is purchasing the Notes for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is (a) a QIB and is aware that the sale to it is being made in reliance on Rule 144A under the Securities Act or (b) a non-U.S. person that is outside the United States; acknowledge that the Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority in any jurisdiction and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below; agree that if it should resell or otherwise transfer the securities, it will do so only pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, in each case in accordance with all applicable securities laws of the states of the United States or any other applicable jurisdiction; agree that it will deliver to each person to whom it transfers Notes notice of any restrictions on transfer of such Notes; agree that it shall not resell or otherwise transfer any of the Notes except: (vi) (vii) to us or any of our subsidiaries; pursuant to a registration statement which has been declared effective under the Securities Act; within the United States to a QIB in compliance with Rule 144A under the Securities Act; in transactions meeting the requirements of Rule 903 or Rule 904 of Regulation S under the Securities Act; or pursuant to another available exemption from the registration requirements of the Securities Act;

(ii)

(iii)

(iv) (v)

agree that it is not our "affiliate" (within the meaning of Rule 144 under the Securities Act); and acknowledge that we, the Trustee, the Initial Purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements. If it is acquiring any Notes for the account of one or more QIBs, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account. If any of the acknowledgements, representations or agreements it is deemed to have been made by the purchaser of Notes is no longer accurate, it will promptly notify us and the Initial Purchasers to that effect.

Each 144A global Note will bear the following legend: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR

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ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, (2) AGREES THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER SUCH NOTES EXCEPT IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND ONLY (A) TO THE ISSUER OR A SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE). PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (E) ABOVE, THE ISSUER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY RULE 144 EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS NOTE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH HEREOF. BY ITS PURCHASE AND HOLDING OF THIS NOTE (OR ANY INTEREST HEREIN), THE HOLDER WILL BE DEEMED TO HAVE REPRESENTED AND AGREED THAT EITHER (I) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS NOTE WILL NOT BE (AND IS NOT ACQUIRING THIS NOTE DIRECTLY OR INDIRECTLY WITH THE ASSETS OF A PERSON WHO IS OR WHILE THIS NOTE IS HELD WILL BE) (A) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO TITLE I OF ERISA, (B) A "PLAN" AS DEFINED IN AND THAT IS SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (C) ANY ENTITY WHOSE ASSETS INCLUDE, OR ARE DEEMED TO INCLUDE, "PLAN ASSETS" BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE ENTITY OR (D) ANY EMPLOYEE BENEFIT PLAN SUBJECT TO ANY U.S. FEDERAL, STATE OR LOCAL LAW, OR FOREIGN LAW, THAT IS SUBSTANTIALLY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE ("SIMILAR LAW"), OR (II) ITS PURCHASE AND HOLDING OF THIS NOTE (OR ANY INTEREST HEREIN) WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF ANOTHER EMPLOYEE BENEFIT PLAN SUBJECT TO SIMILAR LAW, A VIOLATION OF ANY SUCH SIMILAR LAW). THIS LEGEND MAY ONLY BE REMOVED AT THE OPTION OF THE COMPANY." Each purchaser or beneficial owner of Notes that is a Foreign Purchaser will be deemed to: (i) represent that it is purchasing the Notes for its own account or an account for which it exercises sole investment discretion and that it and any such account is a Foreign Purchaser that is outside the United States and acknowledge that the Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority in any jurisdiction and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below; and agree that if it should resell or otherwise transfer the Notes prior to the expiration of a restricted period, it will do so only (a)(1) outside the United States in compliance with Rule 904 under the Securities Act or (2) to a qualified institutional buyer in compliance with Rule 144A, and (b) in

(ii)

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accordance with all applicable securities laws of the states of the United States or any other applicable jurisdiction. Each Regulation S global Note will bear the following legend: "THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR WITH ANY SECURITIES REGULATORY AGENCY IN ANY JURISDICTION, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS NOTE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE REVERSE HEREOF. PRIOR TO THE EXPIRATION OF A RESTRICTED PERIOD ENDING ON JUNE 13, 2012 OR SUCH LATER DATE AS THE ISSUER MAY NOTIFY TO THE TRUSTEE, THIS NOTE, OR ANY BENEFICIAL INTEREST HEREIN, MAY NOT BE RESOLD OR OTHERWISE TRANSFERRED EXCEPT (A)(1) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (2) TO A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN COMPLIANCE WITH RULE 144A, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION. BY ITS PURCHASE AND HOLDING OF THIS NOTE (OR ANY INTEREST HEREIN), THE HOLDER WILL BE DEEMED TO HAVE REPRESENTED AND AGREED THAT EITHER (I) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS NOTE WILL NOT BE (AND IS NOT ACQUIRING THIS NOTE DIRECTLY OR INDIRECTLY WITH THE ASSETS OF A PERSON WHO IS OR WHILE THIS NOTE IS HELD WILL BE) (A) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO TITLE I OF ERISA, (B) A "PLAN" AS DEFINED IN AND THAT IS SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (C) ANY ENTITY WHOSE ASSETS INCLUDE, OR ARE DEEMED TO INCLUDE, "PLAN ASSETS" BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE ENTITY OR (D) ANY EMPLOYEE BENEFIT PLAN SUBJECT TO ANY U.S. FEDERAL, STATE OR LOCAL LAW, OR FOREIGN LAW, THAT IS SUBSTANTIALLY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE ("SIMILAR LAW"), OR (II) ITS PURCHASE AND HOLDING OF THIS NOTE (OR ANY INTEREST HEREIN) WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF ANOTHER EMPLOYEE BENEFIT PLAN SUBJECT TO SIMILAR LAW, A VIOLATION OF ANY SUCH SIMILAR LAW). The transfer or exchange of a beneficial interest in respect of a Regulation S global Note for a beneficial interest in respect of a 144A global Note during the restricted period may be made only upon receipt by the trustee of a duly completed Rule 144A Certificate, as defined in the Indenture. Such Rule 144A Certificate will no longer be required after the expiration of the restricted period. The transfer or exchange of a beneficial interest in respect of a 144A global Note for a beneficial interest in respect of a Regulation S global Note may be made only upon receipt by the trustee of a duly completed Regulation S Certificate, as defined in the Indenture. The resale restriction periods may be extended, in our discretion, in the event of one or more issuances of additional notes or resales by our affiliates. The above legends (including the restrictions on resale specified thereon) may be removed solely in our discretion and at our discretion. Each purchaser of Notes (or any interest therein) and each subsequent transferee will be deemed to have represented and agreed that either: (i) it is not and for so long as it holds Notes will not be (and is not acquiring the Notes directly or indirectly with the assets of a person who is or while the Notes are held will be) (a) an "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a "plan" as defined in and that is subject to Section 4975 of the Code, (c) any entity whose assets include, or are deemed to include, "plan assets" by reason of such employee benefit plan's or plan's investment in the entity or (d) any employee benefit plan which is subject to Similar Law, or (ii) its purchase and holding of the Notes (or any interest therein) will not

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constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of another employee benefit plan subject to Similar Law, a violation of any such Similar Law). Each purchaser of Notes will be deemed to acknowledge that the foregoing restrictions apply to holders of beneficial interests in the Notes, as well as holders of the Notes. Each person purchasing Notes from the Initial Purchasers or through an affiliate of the Initial Purchasers pursuant to Rule 144A under the Securities Act, by accepting delivery of this Offering Memorandum, acknowledges that (i) it has not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with its investigation of the accuracy of the information contained in this Offering Memorandum or its investment decision; and (ii) no person has been authorized to give any information or to make any representation concerning us or the Notes other than those contained in this Offering Memorandum and, if given or made, such other information or representation should not be relied upon as having been authorized by us or the Initial Purchasers. Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with the above stated restrictions shall not be recognized by us. For further discussion of the requirements (including the presentation of transfer certificates) under the Indenture to effect exchanges or transfers of interests in global Notes, see "Description of the NotesBook-Entry System; Delivery and Form." We have prepared this Offering Memorandum solely for use in connection with the offer and sale of the Notes outside the United States and for the private placement of the Notes in the United States. We and the Initial Purchasers reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than the amount of Notes offered pursuant to Rule 144A under the Securities Act. This Offering Memorandum does not constitute an offer to any person in the United States other than any QIB under the Securities Act to whom an offer has been made directly by the Initial Purchasers or an affiliate of the Initial Purchasers. Each purchaser of Notes must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells Notes or possesses or distributes this Offering Memorandum or any part of it and must obtain any consent, approval or permission required by it for the purchase, offer or sale by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or resales, and neither us nor the Initial Purchasers shall have any responsibility therefor.

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SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS We are a corporation organized under the laws of Brazil. Substantially all of our directors and executive officers reside in Brazil or elsewhere outside the United States, and all or a significant portion of the assets of such persons may be, and substantially all of our assets are, located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States or other jurisdictions outside Brazil upon such persons or to enforce against them or against us any judgments obtained in such courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws or predicated upon the laws of such other jurisdictions outside Brazil. In the Indenture, we will: (i) agree that the courts of the State of New York and the federal courts of the United States, in each case sitting in the Borough of Manhattan, The City of New York shall have exclusive jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with the Notes and, for such purposes, irrevocably submit to the jurisdiction of such courts; and (ii) name an agent for service of process in the Borough of Manhattan, The City of New York. See "Description of the NotesSubmission to Jurisdiction." We have been advised by Machado, Meyer, Sendacz e Opice Advogados, our Brazilian counsel, that judgments of non-Brazilian courts for civil liabilities predicated upon the securities laws of such countries, including the securities laws of the United States, subject to certain requirements described below, may be enforced in Brazil. A judgment against either us or any other person referred to above obtained outside Brazil would be enforceable in Brazil against us or any such person without reconsideration of the merits, upon confirmation of that judgment by the Brazilian Superior Court of Justice (Superior Tribunal de Justia). That confirmation, generally, will occur if the foreign judgment: fulfills all formalities required for its enforceability under the laws of the country where the foreign judgment is issued; is issued by a competent court after proper service of process is made; is not subject to appeal; is authenticated by a Brazilian consular office in the country where the foreign judgment is issued and is accompanied by a translation into Portuguese of a Brazilian-registered sworn translator; and is not contrary to Brazilian national sovereignty, public policy or public morality (as set forth in Brazilian law).

Notwithstanding the foregoing, no assurance can be given that confirmation will be obtained, that the process described above can be conducted in a timely manner or that a Brazilian court would enforce a monetary judgment for violation of the securities laws of countries other than Brazil with respect to the Notes. We understand that original actions predicated on the securities laws of countries other than Brazil may be brought in Brazilian courts and that, subject to Brazilian public policy, public morality and national sovereignty, Brazilian courts may enforce civil liabilities in such actions against us, our directors and certain of our officers. Pursuant to Article 835 of the Brazilian Code of Civil Procedures, a plaintiff (whether Brazilian or non-Brazilian) who resides outside or leaves Brazil during the course of litigation in Brazil must provide a bond to guarantee court costs and legal fees if the plaintiff owns no property in Brazil that may ensure such payment. This bond must be sufficient to satisfy the payment of court fees and defendant's attorneys' fees, as determined by the Brazilian judge usually fixed between 10% to 20% of the amount under dispute. This requirement does not apply to enforcement of foreign judgments which have been duly confirmed by the Brazilian Superior Court of Justice (Superior Tribunal de Justia), nor to the exceptions set forth in certain limited circumstances (enforcement of extrajudicial instruments (which does not include the Notes) that may be enforced in Brazil without the review of their merits (ttulos executivos extrajudiciais) and counterclaims (reconvenes)) under Article 836 of the Brazilian Code of Civil Procedures. See also "Regulation of the Brazilian Banking IndustryIntervention, Administrative Liquidation and BankruptcyBankruptcy Law."

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LEGAL MATTERS The validity of the Notes will be passed upon for us by Clifford Chance US LLP, our U.S. counsel, and for the Initial Purchasers by Shearman & Sterling LLP, their U.S. counsel. Matters of Brazilian law will be passed upon by Machado, Meyer, Sendacz e Opice Advogados, special Brazilian Transaction counsel for us and for the Initial Purchasers.

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INDEPENDENT AUDITORS The financial statements of Banco do Nordeste do Brasil S.A as of and for the years ended December 31, 2011, 2010 and 2009, included elsewhere in this Offering Memorandum, have been audited by Deloitte Touche Tohmatsu Auditores Independentes ("Deloitte"), independent auditors, in accordance with Brazilian and international audit standards, as stated in their independent auditor's reports appearing herein.

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GENERAL INFORMATION The issuance and terms of the Notes have been authorized by us pursuant to resolutions of our Board of Executive Officers adopted on March 26, 2012. All consents, approvals, authorizations and other orders of all regulatory authorities under the laws of Brazil have been obtained for the issuance of the Notes and are in full force and effect, except for (i) the electronic registration of the financial terms and conditions of the Notes in the Registro Declaratrio Eletrnico de Operaes Financeiras (RDE-ROF) Module of the Central Bank of Brazil, or ROF; (ii) the registration in the ROF of the relevant schedule of payments; (iii) the obtaining of further authorizations from the Central Bank to make payments outside Brazil other than scheduled payments of principal, interest, commissions, fees and expenses as contemplated by the ROF; and (iv) any necessary amendments to the ROF in order to enable the payments earlier than the due date thereof. Application has been made to admit the Notes on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF. As set forth in Article 3 of our by-laws, our objective is to contribute to the development and distribution of goods through financial and technical assistance and includes, without limitation, the performance of all direct, indirect and accessory banking transactions, the rendering of banking services and intermediation and financial support services in their multiple forms and the exercise of any activity that can be performed by members of Brazil's National Financial System. Our by-laws are available on our website at www.bnb.gov.br and at the offices of the Luxembourg agents and copies of the Indenture (containing the forms of the Notes) will be available for inspection at the office of the Trustee (currently The Bank of New York Mellon) and The Bank of New York Mellon (Luxembourg) S.A. as the listing agent for the Notes on the Luxembourg Stock Exchange and the Luxembourg paying agent (currently The Bank of New York Mellon (Luxembourg) S.A). In addition, copies of our most recent audited Financial Statements may be obtained at those offices. Our preferred shares trade on So Paulo Stock Exchange and we are subject to the periodic reporting and disclosure requirements established by the CVM and applicable to Brazilian publicly-held companies. We produce audited annual and semi-annual financial statements in Portuguese and English prepared in accordance with Brazilian GAAP. Copies of all such financial statements, including our Financial Statements contained herein and prepared in accordance with Brazilian GAAP, may be obtained from our offices and our website. Since December 31, 2011, there has been no material adverse change in our financial condition. Except as disclosed in this Offering Memorandum, there has been no material adverse change in our financial position, or any material change with respect to the trends affecting our business, since December 31, 2011, the date of the last audited financial statements included in this Offering Memorandum. Except as disclosed in this Offering Memorandum, we are not involved in any litigation or arbitration proceedings relating to claims or amounts that are material in the context of this offering or which has had a significant effect on our financial position since December 31, 2011, nor so far as we are aware is any such ligation or arbitration pending or threatened. The Notes, the Indenture and the Purchase Agreement are governed by and construed in accordance with the laws of the State of New York. The Notes offered and sold outside the United States to purchasers in transactions outside the United States in accordance with the requirements of Regulation S have been assigned a CUSIP Number of P1193TAK0 and an International Securities Identification Number ("ISIN") of USP1193TAK09 and a Common Code of 077922164. Notes offered or sold in the United States to qualified institutional buyers pursuant to Rule 144A have been assigned a CUSIP Number of 05957UAD7 and an ISIN of US05957UAD72 and a Common Code of 077922156. The Notes have been accepted for clearance through DTC's book-entry settlement system and the applicable systems used by Euroclear and Clearstream. So long as the Notes are admitted to listing on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF, copies of all notices to holders of the Notes will be published in a leading daily newspaper of general circulation in Luxembourg, which is expected to be the Luxemburger Wort, and on the website of the Luxembourg Stock Exchange at http://www.bourse.lu.

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DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN BRAZILIAN ACCOUNTING PRACTICES APPLICABLE TO ENTITIES AUTHORIZED TO OPERATE BY THE CENTRAL BANK AND INTERNATIONAL FINANCIAL REPORTING STANDARDS General Information This Offering Memorandum contains financial information relating to us, which has been prepared in accordance with Brazilian GAAP applicable to entities authorized to operate by the Central Bank. There are certain differences between accounting principles under Brazilian GAAP and IFRS, as issued by the International Accounting Standards Board (IASB), which incorporates all existing International Accounting Standards ("IAS"), that are relevant to the financial information presented herein. Future differences between Brazilian GAAP and IFRS resulting from future changes in accounting standards or from transactions or events that may occur in the future have not been taken into account in this summary and no attempt has been made to identify any such future events, ongoing work and decisions of the regulatory bodies that promulgate the Brazilian GAAP and IFRS; which can affect future comparisons between Brazilian GAAP and IFRS, including the current differences disclosed in this summary. This summary does not purport to be complete and is subject to, and qualified in its entirety by, reference to the respective pronouncements of the Brazilian and International accounting professional bodies. Prospective investors should also consult their own professional advisors for an understanding of the differences between Brazilian GAAP and IFRS and how those differences might impact the financial information presented herein. Brazilian Accounting Practices applicable to entities authorized to operate by the Central Bank, and applied by us in the presentation of our financial statements included in this Offering Memorandum, are established in accordance with the Brazilian Corporations Law, and accounting standards issued by the Central Bank, which has the power to establish accounting standards applicable to financial institutions subject to its regulation. Other accounting standards setters include the CVM, SUSEP, the CPC and IBRACON, the Brazilian accounting professional body. On December 28, 2007, Law No. 11,638 was enacted that alters, revokes and adds new provisions to the Brazilian Corporations Law, especially with respect to chapter XV, Fiscal Year and Financial Statements. Law No. 11,638 was designed primarily to update accounting practices as contemplated in the Brazilian Corporations Law, so as to enable the convergence of Brazilian GAAP with IFRS, and contemplates broad changes to accounting practices generally accepted in Brazil as they relate to statutory accounting practices and procedures. The changes and requirements introduced by Law No. 11,638 are effective for fiscal years beginning on or after January 1, 2008; however, they are subject to additional interpretation and regulation by applicable regulatory agencies (which, in our case, is the Central Bank) and accounting standards bodies in Brazil. The CPC has issued accounting standards in order to achieve convergence of Brazilian GAAP and IFRS. As of the date of this Offering Memorandum, the Central Bank has approved only seven accounting standards. The standards not yet approved by the Central Bank are not supposed to be applied by us if the CPC pronouncement differs from the accounting standards established by the Central Bank. The following is a summary of some of these principal measurement and recognition differences; however, this summary does not purport to be complete and should not be construed as exhaustive. Furthermore the summary was not construed to address the level of disclosures in the Notes to the financial statements which also differ significantly. Restatement of Financial Statements for General Price-Level Changes Under Brazilian GAAP, because of the highly inflationary conditions that historically existed in Brazil, a form of inflation accounting, referred to as monetary correction, has been in use for many years to minimize the impact of distortions in financial statements caused by inflation. Inflation accounting adjustments were required from 1977 until December 31, 1995. Therefore, our financial statements prepared in accordance with Brazilian GAAP for periods after December 31, 1995 do not include the effects of inflation accounting, except for effects on depreciation and the amortization of assets that were

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monetarily corrected prior to January 1, 1996, and any gains or losses resulting from the sale or other disposition of such assets. Under IFRS, inflation accounting following the methodology prescribed by IAS 29 (Financial Reporting in Hyperinflationary Economies) is required for companies which report in local currency and which operate in hyperinflationary economies in which cumulative inflation has exceeded 100% over the preceding three years. However, other indicators prescribed by IAS 29 can be taken into consideration along with the 100% three year inflation limit. As a result, considering this quantitative limit for IFRS purposes, financial statements should be adjusted for the effects of inflation to the date on which the Brazilian economy was no longer deemed to be hyper-inflationary, which was as from July 1, 1997. However, in practice considering all other factors January 1, 1997 is also an acceptable date. Leasing Agreements as Capital Leases Under Brazilian GAAP, all leases are treated as operating leases and the expense is recognized at the time each lease installment falls due. The leasing operations are record on the basis of accounting principles prescribed by the Central Bank. Under IAS 17 (Leases), lease capitalization is required if certain conditions are met. Under this accounting method, both an asset and an obligation are recorded in the financial statements and the asset is depreciated in a manner consistent with the normal depreciation policy for owned assets. Intangible Assets CPC 04 (Intangible Assets) sets forth the requirements for measurement, recognition and disclosure for intangible assets. However, CPC 04 will only become mandatory to financial institutions after it is approved by the Central Bank. Under CMN Resolution No. 3,642, of November 26, 2008, entities authorized to operate by the Central Bank can recognize intangible assets if they arise from legal rights. Prior to CPC 04, there were no specific standards relating to intangible assets in Brazil. However, the concept of deferred assets under Central Bank rules allowed entities to capitalize pre-operating expenses and research and development costs. Under IAS 38 (Intangible Assets), an intangible asset, whether purchased or self-created, is recognized if (i) it is probable that the future economic benefits that are attributable to the asset will flow to the entity and (ii) the cost of the asset can be measured reliably. IAS 38 provides additional recognition criteria for self-created intangible assets in which all research costs are charged to expense when incurred, and development costs are capitalized only after technical and commercial feasibility of the resulting product or service have been established. Marketable Securities Under Brazilian GAAP, marketable securities are classified based on the investment strategy of the financial institution as either trading securities, available-for-sale or held-to-maturity and defines the recognition of the fair market value of such securities as the basis for its presentation in the financial statements, except in the case where the investment strategy is to hold the investment until maturity. Recognition of changes in fair market value for trading securities is in income, while for available-for-sale securities is directly in shareholders' equity. The rules to account for securities are stated more generally and are less comprehensive than the standards to account for securities under IFRS. Under IFRS, financial assets including debt and equity securities can be categorized and accounted for as follows: (i) (ii) (iii) financial assets at fair value through profit or loss including both financial assets held for trading and any financial assets designated within this category at their inception; held-to-maturity investments held with a positive intent and ability to be held to maturity and are recorded at amortized cost. Equity securities cannot be classified as held-to-maturity investments; loans and receivables that correspond to financial assets with fixed or determinable payments not quoted in an active market and are measured at amortized costs; and

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(iv)

available-for-sale financial assets including debt and equity securities designated as available-forsale, except those equity securities classified as held for trading and those not covered in the above categories which are measured at fair value. Changes in fair value are recognized in equity and recognized in the statement of income when realized.

Earnings Per Share Under Brazilian GAAP, earnings per share is normally computed on the number of shares outstanding at the end of the year, although it is acceptable to use a weighted-average basis. Under IFRS, in accordance with IAS 33 "Earnings per Share (EPS)", the presentation of earnings per share must be disclosed on the face of the income statement by enterprises with publicly traded ordinary shares (as defined) or potential ordinary shares (as defined), or those in the process of issuing such instruments. The EPS data do be presented is basic EPS and diluted EPS for each class of ordinary share. EPS based on alternative measures of earnings also may be presented if required. Computations of basic and diluted earnings per share data should be based on the weighted average number of common shares outstanding during the period and all potentially dilutive common shares outstanding during each period presented, respectively. Segment Reporting Under accounting practices adopted in Brazil and in accordance with Central Bank rules, there is no requirement for financial reporting of operating segments. However, CPC 22 (Financial Information), which will only become mandatory after it is approved by the Central Bank, sets forth the requirements for financial reporting of operating segments. Under IFRS, publicly held companies should report both financial and descriptive information about their reportable segments. Reportable segments are defined as those about which separate financial information is available and is regularly evaluated by the chief operating decision-maker. Segment information is given about any operating segment that broadly accounts for 10% or more of all segment revenue, results of operating activities, or total assets. Generally, companies will report financial information on the basis used internally for evaluating segment performance. Financial information to be disclosed include segment profit or loss, certain specific revenue and expense items and segment assets as well as reconciliation of total segment revenues, profit or loss and assets to the corresponding amounts in the financial statements. Effective Interest Rate Under Central Bank rules, loans and receivables and other financial assets and liabilities are measured at amortized cost using nominal interest rates, which excludes transaction costs, fees and commissions relating to the origination of a financial asset or financial liability. Under IFRS, loans and receivables and other financial assets and liabilities are measured at amortized cost using the effective interest method, which is used to calculate the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and allocate the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, an entity will estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but will not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate (IAS 18 "Revenue"), transaction costs, and all other premiums or discounts. Transaction costs Under Brazilian GAAP, transaction costs are usually fully recognized in the statement of income when incurred. However, deferral of transaction costs is acceptable in certain cases.

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Under IAS 39, financial instruments are measured at amortized cost and transaction costs are subsequently included in the calculation of amortized cost using the effective interest method and, in effect, amortized through profit or loss over the life of the instrument. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs. Revenue Recognition (Long Term Service Agreements) Under Brazilian GAAP, revenues are fully recognized when all payments are made under a long term service agreement. Accordingly, revenues are accounted for without considering the stage of conclusion of the services under the long term service agreement, and expenses are recognized as they are incurred. Under IFRS, revenues are recognized at fair value whenever it is probable that economic benefits will flow to the company. Accordingly, revenues are accounted for in accordance with long-term contract accounting and are recognized over the term of the contract in relation to the services rendered. The Effects of Variation in Foreign Exchange Rates Under Central Bank rules, transactions in foreign currency are accounted for by using the average PTAX rate. Under IFRS, transactions in foreign currency are accounted for by using the closing spot exchange rate. Impairment of Financial Instruments Under Central Bank rules, allowance for loan losses is based on an expected loss model. In contrast, under IFRS the provisioning for losses in loan operations is based on a loss incurred model, after the occurrence of loss events as a result of recoverability problems.

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INDEX TO FINANCIAL STATEMENTS Page Banco do Nordeste do Brasil S.A. audited financial statements as of and for the years ended December 31, 2011 and 2010 and Independent Auditor's Report on the Financial Statements ............................................ Banco do Nordeste do Brasil S.A. audited financial statements as of and for the years ended December 31, 2010 and 2009 and Independent Auditor's Report on the Financial Statements ............................................ F-2 F-76

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Deloitte Touche Tohmatsu Av. Desembargador Moreira, 2120 Salas 201, 202 e 204 - Aldeota 60170-002 - Fortaleza - CE Brasil

Tel: + 55 (85) 3264-7050 Fax:+ 55 (85) 3264-7055 www.deloitte.com.br

(Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT AUDITORS REPORT ON THE FINANCIAL STATEMENTS

To the Board of Directors, Shareholders and Management of Banco do Nordeste do Brasil S.A. Fortaleza, CE

We have audited the financial statements of Banco do Nordeste do Brasil S.A. (the Bank), which comprise the accompanying balance sheet as at December 31, 2011 and the related statements of income, changes in shareholders equity, and cash flows for the year then ended and six-month period ended December 31, 2011, as well as a summary of significant accounting policies and other explanatory notes. Managements responsibility for the financial statements The Banks management is responsible for the preparation and fair presentation of these financial statements in accordance with Brazilian accounting practices applicable to entities authorized to operate by the Central Bank of Brazil (BACEN) as well as the internal controls deemed necessary for preparing financial statements that are free from material misstatement, whether due to fraud or error. Independent auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit, which was conducted in accordance with Brazilian and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Deloitte refere-se sociedade limitada estabelecida no Reino Unido Deloitte Touche Tohmatsu Limited e sua rede de firmas-membro, cada qual constituindo uma pessoa jurdica independente. Acesse www.deloitte.com/about para uma descrio detalhada da estrutura jurdica da Deloitte Touche Tohmatsu Limited e de suas firmas-membro. Deloitte Touche Tohmatsu. Todos os direitos reservados.

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Banco do Nordeste do Brasil S.A.

An audit involves performing selected procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the Banks financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Banks internal control. An audit also includes evaluating the appropriateness of accounting practices used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements taken as a whole. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the financial position of Banco do Nordeste do Brasil S.A. as at December 31, 2011, its financial performance and its cash flows for the year then ended and six-month period ended December 31, 2011, in conformity with Brazilian accounting practices applicable to entities authorized to operate by the Central Bank of Brazil (BACEN). Other matters Statement of value added We have also audited the statement of value added (DVA) for the year ended December 31, 2011, whose presentation is required for publicly-held companies by the Brazilian corporate law. Such information has been subjected to the auditing procedures above mentioned and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. The accompanying financial statements have been translated into English for the convenience of readers outside Brazil.

Fortaleza, February 7, 2012

DELOITTE TOUCHE TOHMATSU Auditores Independentes

Claudio Lino Lippi Engagement Partner

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(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A, BALANCE SHEETS AS AT DECEMBER 31, 2011 AND 2010 (In thousands of Brazilian reais - R$)

ASSETS
CURRENT ASSETS CASH AND CASH EQUIVALENTS (Note 5) INTERBANK INVESTMENTS (Note 6.a ) Money market investments Interbank deposits SECURITIES AND DERIVATIVES (Note 7 ) Own portfolio Derivative financial instruments Linked to guarantees INTERBANK ACCOUNTS Unsettled payments and receipts Restricted deposits: Deposits with the Central Bank of Brazil (Note 8.a) National Treasury - Rural Credit Funds (Note 8.a) Interbank onlendings Correspondents INTERDEPARTMENTAL ACCOUNTS Internal transfers of funds LENDING OPERATIONS Lending operations (Note 9.a) Public sector Private sector (Allowance for loan losses) (Note 9.a) OTHER RECEIVABLES Receivables for guarantees honored (Note 10.a) Foreign exchange portfolio (Note 10.b) Income receivable (Note 10.c) Other receivables (Note 10.d) (Allowance for losses on other receivables) (Note 10.e) OTHER ASSETS Other assets (Allowance for devaluation) Prepaid expenses LONG-TERM ASSETS SECURITIES AND DERIVATIVES (Note 7 ) Own portfolio Held under repurchase commitments Derivative financial instruments Linked to guarantees INTERBANK ACCOUNTS Restricted deposits: National Treasury - Rural loan (Note 8.a) Financial Housing System (SFH) (Note 8.a) Interbank onlendings LENDING OPERATIONS Lending operations (Note 9.a) Public sector Private sector (Allowance for loan losses) (Note 9.a) OTHER RECEIVABLES Receivables for guarantees honored (Note 10.a) Other receivables (Note 10.d) (Allowance for loan losses on other receivables) (Note 10.e) PERMANENT ASSETS INVESTMENTS (Note 12.a) Other investments (Allowance for losses) PROPERTY, PLANT AND EQUIPMENT IN USE (Note 12.b) Real estate Real estate revaluation Other property, plant and equipment in use (Accumulated depreciation) DEFERRED CHARGES (Note 12.c) Organization and expansion costs (Accumulated amortization) TOTAL ASSETS

12/31/2011
10.584.659 97.086 3.240.283 3.036.454 203.829 233.192 233.158 34 267.274 90 260.563 4.984 905 732 4.950.715 5.251.775 78.446 5.173.329 (301.060) 1.778.988 641.071 22.902 1.118.570 (3.555) 17.121 6.169 (1.248) 12.200 15.662.089 9.874.595 8.878.659 672.509 44.860 278.567 36.863 422 32.369 4.072 5.639.615 5.960.393 1.255.601 4.704.792 (320.778) 111.016 161.747 (50.731) 188.840 1.568 6.871 (5.303) 185.569 137.759 105.410 166.672 (224.272) 1.703 4.624 (2.921) 26.435.588

12/31/2010
10.838.392 82.391 3.872.110 3.451.521 420.589 1.026.946 809.265 210 217.471 238.268 2.320 230.048 3.971 805 1.124 285 285 4.224.164 4.470.238 58.378 4.411.860 (246.074) 1.380.525 8 521.843 25.570 851.425 (18.321) 13.703 6.702 (1.302) 8.303 12.753.269 6.739.820 6.293.647 437.948 95 8.130 32.474 329 27.718 4.427 5.910.740 6.245.600 1.209.193 5.036.407 (334.860) 70.235 12 155.592 (85.369) 192.055 1.429 6.732 (5.303) 188.219 132.615 111.628 151.302 (207.326) 2.407 6.096 (3.689) 23.783.716

The accompanying notes are an integral part of these financial statements.

F-5

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S.A. BALANCE SHEETS AS AT DECEMBER 31, 2011 AND 2010 (In thousands of Brazilian reais - R$)

LIABILITIES
CURRENT LIABILITIES DEPOSITS (Note 13.a) Demand deposits Savings deposits Interbank deposits Time deposits Other deposits OPEN MARKET FUNDING (Note 13.b) Own portfolio Third parties portfolio FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES (Note 15) Funds from real estate bills, mortgage bills, bills of credit and similar notes Payables for securities issued abroad INTERBANK ACCOUNTS Receipts and payments pending settlement INTERDEPARTMENTAL ACCOUNTS Third-parties funds in transit BORROWINGS (Note 14.b) Domestic borrowings - Official institutions Foreign borrowings DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS (Note 14.c) National Treasury BNDES (National Bank for Economic and Social Development) FINAME (National Equipment Financing Authority) Other institutions DERIVATIVE FINANCIAL INSTRUMENTS (Note 7.c) Derivative financial instruments FOREIGN ONLENDINGS (Note 14.d) Foreign onlendings OTHER LIABILITIES Collected taxes and other (Note 16.a) Foreign exchange portfolio (Note 16.b) Social and statutory (Note 16.c) Tax and social security (Note 16.d) Trading account Financial and development funds (Note 16.e) Hybrid debt/ equity instruments(Note 17) Other (Note 16.h) LONG-TERM LIABILITIES DEPOSITS (Note 13.a) Demand deposits Interbank deposits Time deposits OPEN MARKET FUNDING (Note 13.b) Own portfolio FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES (Note 15) Payables for securities issued abroad BORROWINGS (Note 14.b) Domestic borrowings - Official institutions DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS (Note 14.c) National Treasury BNDES (National Bank for Economic and Social Development) FINAME (National Equipment Financing Authority) Other institutions DERIVATIVE FINANCIAL INSTRUMENTS (Note 7.c) Derivative financial instruments FOREIGN ONLENDINGS (Note 14.d) Foreign onlendings OTHER LIABILITIES Financial and development funds (Note 16.e) Hybrid debt/ equity instruments (Note 17) Subordinated debt eligible for capital (Note 18) Other (Note 16.h) DEFERRED INCOME Deferred income SHAREHOLDERS' EQUITY (Note 19) CAPITAL Brazilian residents REVALUATION RESERVE EARNINGS RESERVES VALUATION ADJUSTMENTS TO EQUITY (TREASURY SHARES) TOTAL LIABILITIES
The accompanying notes are an integral part of these financial statements.

12/31/2011 9.748.154 5.115.979 162.445 1.329.994 588.986 3.034.554 637.812 603.883 33.929 199.732 196.364 3.368 4 4 7.142 7.142 849.768 16.511 833.257 173.427 217 162.562 10.648 7.615 7.615 81.291 81.291 2.675.384 4.805 1.188 12.254 525.820 1.102.922 70.164 958.231 14.357.919 3.848.520 21.179 3.827.341 66.561 66.561 563.876 563.876 33.021 33.021 1.113.258 775 990.332 122.151 13.513 13.513 759.101 759.101 7.960.069 3.617.155 1.067.708 1.216.319 2.058.887 16 16 2.329.499 2.010.000 2.010.000 25.198 244.536 50.149 (384) 26.435.588

12/31/2010 8.474.793 3.772.031 109.037 1.288.569 670.627 1.688.256 15.542 460.893 372.897 87.996 2.991 2.991 22 22 30.330 30.330 461.822 15.219 446.603 289.427 192 166.206 3.921 119.108 12.118 12.118 66.808 66.808 3.378.351 5.604 16.601 130.687 493.132 7 1.011.809 1.647 1.718.864 13.131.569 4.737.550 25.082 13.501 4.698.967 63.396 63.396 482.496 482.496 45.656 45.656 1.397.349 894 767.054 48.938 580.463 46.020 46.020 662.357 662.357 5.696.745 2.734.366 1.002.519 1.101.848 858.012 16 16 2.177.338 1.851.000 1.851.000 28.064 248.528 50.130 (384) 23.783.716

F-6

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A, INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2011 (In thousands of Brazilian reais - R$, except earnings per share) 2nd half 2011 INCOME FROM FINANCIAL INTERMEDIATION Lending operations (Note 9.a.2) Securities transactions (Note 7.b) Derivative financial instruments (Note 7.d) Gains (losses) on foreign exchange transactions (Note 11.b) Gains (losses) on compulsory investments (Note 8.b) EXPENSES FROM FINANCIAL INTERMEDIATION Funding operations (Note 13.c) Borrowings and onlendings (Note 14.e) Allowance for loan losses (Note 9.e) GROSS INCOME FROM FINANCIAL INTERMEDIATION OTHER OPERATING INCOME (EXPENSES) (Note 20) Income from services provided Income from bank fees Personnel expenses Other administrative expenses Tax expenses Other operating income Other operating expenses INCOME FROM OPERATIONS NONOPERATING INCOME (EXPENSES) INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING INCOME TAX AND SOCIAL CONTRIBUTION (Note 21) Provision for Income Tax Provision for Social Contribution Deferred income tax PROFIT SHARING NET INCOME INTEREST ON OWN CAPITAL (Note 19.e) Number of shares (in thousands) Earnings per share - R$ 1.913.727 989.381 717.539 65.827 129.215 11.765 (1.326.146) (622.226) (573.996) (129.924) 587.581 (393.949) 690.624 15.300 (596.639) (413.352) (96.622) 574.230 (567.490) 193.632 7.781 201.413 (175.399) (80.021) (52.695) -42.683 (11.908) 14.106 (9.562) 87.002 0,16 2011 3.347.864 1.772.643 1.365.528 25.660 163.871 20.162 (2.130.601) (1.048.740) (846.952) (234.909) 1.217.263 (548.829) 1.327.021 24.735 (1.081.293) (775.242) (188.995) 1.164.760 (1.019.815) 668.434 7.045 675.479 (323.603) (181.082) (115.798) -26.723 (37.077) 314.799 (73.526) 87.002 3,62 2010 2.431.267 1.489.809 888.770 (36.140) 73.161 15.667 (1.464.879) (591.142) (473.727) (400.010) 966.388 (436.119) 1.233.992 12.768 (1.019.740) (659.632) (173.182) 927.571 (757.896) 530.269 1.645 531.914 (174.086) (145.381) (93.598) 64.893 (44.238) 313.590 (121.000) 87.002 3,60

The accompanying notes are an integral part of these financial statements.

F-7

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A,
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2011 (In thousands of Brazilian reais - R$) CAPITAL RESERVE OTHER CAPITAL RESERVES REVALUATION RESERVE

PAID-IN CAPITAL

EARNINGS RESERVES VALUATION ADJUSTMENTS TO EQUITY RETAINED EARNINGS (ACCUMULATED LOSSES)

CAPITAL

CAPITAL INCREASE

OWN ASSETS

LEGAL

STATUTORY

OTHER

TREASURY SHARES

TOTAL

BALANCES AS OF DECEMBER 31, 2009 PRIOR-YEAR ADJUSTMENTS CVM Resolution 600/2009 VALUATION ADJUSTMENTS TO EQUITY CAPITAL INCREASE From Reserve: Transfer for capital increase Capital contribution OTHER EVENTS Revaluation of assets: Reserve realization: Gross value Taxes NET INCOME FOR THE YEAR Allocation: Reserves Dividends Interest on own capital BALANCES AS AT DECEMBER 31, 2010 CHANGES FOR THE YEAR BALANCES AS OF DECEMBER 31, 2010 VALUATION ADJUSTMENTS TO EQUITY CAPITAL INCREASE From Reserve: Capital contribution OTHER EVENTS Revaluation of assets: Reserve realization: Gross value Taxes NET INCOME FOR THE YEAR Allocation: Reserves Dividends Proposed Additional Dividends Interest on own capital BALANCES AS AT DECEMBER 31, 2011 CHANGES FOR THE YEAR BALANCES AS AT JUNE 30, 2011 VALUATION ADJUSTMENTS TO EQUITY OTHER EVENTS Revaluation of assets: Reserve realization: Gross value Taxes NET INCOME FOR THE PERIOD Allocation: Reserves Dividends Proposed Additional Dividends Interest on own capital BALANCES AS AT DECEMBER 31, 2011 CHANGES OF THE PERIOD

1.652.000

502

30.501

73.216

198.760

118.130

(384)

2.072.725

65.534 (68.000) -

65.534 -68.000

198.000

199.000 (198.000)

-502 -

(198.498) -

1.850.000 198.000 1.850.000 -

1.000 1.000 1.000 -

(502) -

(4.061) 1.624 28.064 (2.437) 28.064 -

15.680 88.896 15.680 88.896 -

159.370 159.632 (39.128) 159.632 -

50.130 (68.000) 50.130 19

4.061 (1.624) 313.590 (175.050) (85.511) (121.000) -

(384) (384) -

313.590 (85.511) (121.000) 2.177.338 104.613 2.177.338 19

160.000

(1.000)

(159.000)

2.010.000 160.000 2.010.000 -

(1.000) -

(4.614) 1.748 25.198 (2.866) 26.231 -

15.740 104.636 15.740 103.931 -

132.230 132.862 (26.770) 131.458 -

7.038 7.038 7.038 -

50.149 19 34.457 15.692

3.994 (1.597) 314.799 (147.970) (95.700) (7.038) (66.488) -

(384) (384) -

(620) 151 314.799 (95.700) (66.488) 2.329.499 152.161 2.305.693 15.692

2.010.000 -

(1.972) 939 25.198 (1.033)

705 104.636 705

1.404 132.862 1.404

7.038 7.038 7.038

50.149 15.692

1.972 (788) 14.106 (2.109) (3.619) (7.038) (2.524) -

(384) -

151 14.106 (3.619) (2.524) 2.329.499 23.806

The accompanying notes are an integral part of these financial statements.

F-8

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A,
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2011 (In thousands of Brazilian reais - R$)

2nd half 2011

CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year/period Adjustments to net income: Depreciation and amortization Allowance for losses on other assets Allowance for loan losses Provision for contingent liabilities Deferred charges Deferred income Adjusted net income Interbank investments Interbank and interdepartmental accounts Lending operations Other receivables Other assets Deposits Open market funding (repurchase commitments) Funds from acceptance and issuance of securities Borrowings and onlendings Derivative financial instruments Other liabilities Revaluation reserve Income tax and social contribution NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Available-for-sale securities Additions to investments Addition to property, plant and equipment in use Addition to assets not in use Disposal of investments Disposal of property, plant and equipment in use Disposal of assets not in use NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Dividends and interest on own capital paid Subordinated debt eligible for capital Hybrid debt/equity instruments NET CASH USED IN/PROVIDED BY FINANCING ACTIVITIES Decrease in Cash and Cash equivalents REPRESENTED BY CASH AND CASH EQUIVALENTS At beginning of period At end of period Decrease in Cash and Cash equivalents The accompanying notes are an integral part of these financial statements. 14.106

2011

2010

314.799

313.590

13.952 9 129.924 141.186 (118) 299.059 280.135 (41.220) (818.018) (81.859) 4.704 150.089 (69.007) 306.642 575.519 (50.442) 654.920 151 (113.468) 1.097.205

27.346 27 234.909 146.536 (358) 723.259 17.643 (56.316) (712.580) (387.230) (3.879) 454.919 180.084 278.120 86.448 (37.010) 1.258.716 (469) (29.771) 1.771.934

25.551 65 400.010 83.233 (842) 2 821.609 (48.890) (36.807) (1.588.942) (196.015) (5.215) 2.176.853 78.613 485.487 66.822 21.568 1.291.732 (27.702) 3.039.113

(1.512.616) (81) (9.262) (324) 4 3.427 494 (1.518.358)

(2.425.319) (137) (27.607) (750) (2) 3.974 1.183 (2.448.658)

(4.192.807) (50) (20.580) (1.008) 270 351 (4.213.824)

(155.933) 59.261 64.069 (32.603) (453.756)

(255.260) 114.471 133.707 (7.082) (683.806)

(317.658) 479.783 1.004.166 1.166.291 (8.420)

3.639.449 3.185.693 (453.756)

3.869.499 3.185.693 (683.806)

3.877.919 3.869.499 (8.420)

F-9

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A, STATEMENTS OF VALUE ADDED FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2011 (In thousands of Brazilian reais - R$)

2nd half 2011

REVENUES Financial intermediation Service provided and bank fees Allowance for loan losses Other income/expenses EXPENSES ON FINANCIAL INTERMEDIATION INPUTS PURCHASED FROM THIRD PARTIES Materials, electric power and other Outside services GROSS VALUE ADDED RETENTIONS Depreciation, amortization and depletion WEALTH CREATED BY THE ENTITY WEALTH FOR DISTRIBUTION DISTRIBUTION OF WEALTH PERSONNEL COMPENSATION Employees Profit sharing BENEFITS Pension plan (Capef and PGBL) Provisions (Post-employment benefits - CVM Resolution 600) Benefits - Other Severance Pay Fund (FGTS) TAXES AND CONTRIBUTIONS Federal State Municipal PAYMENTS TO THIRD PARTIES Rents SHAREHOLDERS' PAYMENTS INTEREST ON OWN CAPITAL Federal government Other DIVIDENDS Federal government Other RETAINED EARNINGS 2.461.565 1.913.727 705.924 (129.924) (28.162) (1.196.222) (382.974) (137.963) (245.011) 882.369 (13.952) (13.952) 868.417 868.417 868.417 540.888 326.598 314.690 11.908 190.101 117.167 72.934 24.189 296.997 289.192 16 7.789 16.426 16.426 14.106 9.562 9.000 562 3.619 3.406 213 925

12/31/2011
4.589.979 3.347.864 1.351.756 (234.909) 125.268 (1.895.692) (714.868) (254.162) (460.706) 1.979.419 (27.346) (27.346) 1.952.073 1.952.073 1.952.073 987.241 650.738 613.661 37.077 289.720 153.387 136.333 46.783 617.004 602.035 26 14.943 33.029 33.029 314.799 73.526 69.206 4.320 95.700 90.077 5.623 145.573

12/31/2010
3.514.232 2.431.267 1.246.760 (400.010) 236.215 (1.064.869) (604.897) (252.445) (352.452) 1.844.466 (25.551) (25.551) 1.818.915 1.818.915 1.818.915 950.902 582.963 538.725 44.238 327.459 11 210.263 117.185 40.480 525.239 509.409 49 15.781 29.184 29.184 313.590 121.000 113.891 7.109 85.511 80.487 5.024 107.079

62,3% 37,6%

50,6% 33,3%

52,3% 32,1%

21,9%

14,8%

18,0%

2,8% 34,2%

2,4% 31,6%

2,2% 28,9%

1,9% 1,6% 1,1%

1,7% 16,1% 3,8%

1,6% 17,2% 6,7%

0,4%

4,9%

4,7%

0,1%

7,5%

5,9%

The accompanying notes are an integral part of these financial statements.

F-10

(Convenience Translation

into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S.A. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Contents of the Notes to the Financial Statements
Note 1- The Bank and its Characteristics Note 2- Basis of Preparation and Presentation of Financial Statements Note 17 - Hybrid Debt/Equity Instruments Note 18- Subordinated Debt Eligible for Capital Note 19 - Shareholders Equity Note 20 - Other operating income (expenses) Note 21- Income tax and social contribution Note 22 - Provisions, Contingent Assets and Liabilities and Legal Obligations - Tax and Social Security Note 23 - Employees and Officers Compensation Note 24 - Profit Sharing Note 25 - Employee Benefits Note 26 - Northeast Constitutional Financing Fund (FNE) Note 27- Workers Assistance Fund (FAT) Note 28 - Risk Management and Basel Ratio Note 29 - Related-Parties Transactions Note 30 - Other Information

Note 3- Summary of Significant Accounting Practices Note 4 - Segment Reporting Note 5 - Cash and Cash Equivalents Note 6 -Interbank Investments Note 7 - Securities and Derivatives Note 8 - Interbank Accounts - Restricted Deposits Note 9 - Loan Portfolio and Allowance for Loan Losses Note 10- Other Receivables Note 11 - Foreign exchange portfolio Note 12 - Permanent Assets Note 13 - Deposits and Open Market Funding Note 14 - Borrowings and Domestic Onlendings Note 15 - Funds from Acceptance and Issuance of Securities Note 16 - Other Liabilities

1. THE BANK AND ITS CHARACTERISTICS

Banco do Nordeste do Brasil S.A. (the Bank) is a private legal entity operating regionally as a public financial institution established by Federal Law 1649 of 07/19/1952. The Bank was structured as a mixed economy, publicly-traded corporation and its mission is to operate, in the capacity of a public financial institution, as a catalytic agent in promoting the sustainable development of the Northeast, integrating it to the domestic economic dynamics. Banco do Nordeste is authorized to operate all the portfolios permitted for multiple service banks, except the mortgage loan portfolio. As an institution devoted to regional development, the Bank acts as the executive agent of public policies and is responsible for managing the Northeast Constitutional Financing Fund (FNE), - the main source of funds utilized by the Bank for long-term financing - and the operation of the National Family Farming Strengthening Program (PRONAF) in its jurisdiction. It is also the operator of the Northeast Investment Fund (FINOR) and the Northeast Development Fund (FDNE), the latter created in 2001 and altered in 2007 by Supplementary Law 125, which recreated the Northeast Development Authority (SUDENE). In 1998, the Bank created its Oriented Productive Microcredit Program (Crediamigo), a Production Microcredit Program that facilitates access to credit by thousands of small entrepreneurs who engage in production-related, product sale, and service activities. In addition to federal funds, the Bank has access to other sources of financing in the domestic and foreign markets through funds raised directly, as well as partnerships with domestic and foreign institutions, including multilateral institutions such as the World Bank and the Inter-American Development Bank (IDB).

F-11

BANCO DO NORDESTE DO BRASIL S.A.

2.

BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS The financial statements have been prepared in accordance with Brazilian Corporate Law, as amended by Laws 11638 and 11941, of 12/28/2007 and 05/27/2009, respectively, and regulations of the National Monetary Council (CMN), the Central Bank of Brazil (BACEN), and the Brazilian Securities and Exchange Commission (CVM), and are presented in accordance with the Standard Chart of Accounts for National Financial Institutions (COSIF). The Banks financial statements are in conformity with the pronouncements issued by the Accounting Pronouncements Committee (CPC) in the process of convergence between the Brazilian accounting standards and the International Financial Reporting Standards (IFRS), as approved by the National Monetary Council (CMN), and the Brazilian Securities and Exchange Commission (CVM) standards that are in line with CMN rules, as follows: CPC 01 - Impairment of Assets (National Monetary Council (CMN) Resolution 3566, of 05/29/2008); CPC 03 - Statements of Cash Flows (CMN Resolution 3604, of 08/29/2008); CPC 05 - Related-Party Disclosures (CMN Resolution 3750, of 06/30/2009); CPC 24 - Events After the Reporting Date (CMN Resolution 3973, of 05/26/2011); CPC 25 - Provisions, Contingent Liabilities and Contingent Assets (CMN Resolution 3823, of 12/16/2009); CPC 09 - Statement of Value Added (CVM Resolution 557, of 11/12/2008); CPC 22 - Segment Reporting (CVM Resolution 582, of 07/31/2009); CPC 27 - Property, Plant and Equipment (CMN Resolution 583, of 07/31/2009); CPC 32 - Taxes on Income (CVM Resolution 599, of 09/15/2009); CPC 33 - Employee Benefits (CVM Resolution 600, of 10/07/2009); and CPC 40 - Financial Instruments - Disclosure (CVM 604, of 11/19/2009).

3.

SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES a) Results of operations Revenue and expenses are recorded on the accrual basis, as detailed below: a.1) interest, charges and monetary or exchange variations on assets and liabilities are recorded on a daily pro rata basis; a.2) provisions, including accrued vacation, license award and 13th salary, are recorded monthly on an accrual basis; and a.3) assets are marked to market or adjusted to realizable value, if applicable.

F-12

BANCO DO NORDESTE DO BRASIL S.A.

b) Current and long-term assets and liabilities Assets and receivables are stated at realizable values, plus income earned and currency adjustments and foreign exchange fluctuation, less unearned income or allowance, if applicable. Liabilities are stated at original amounts plus, if applicable, accrued interest and monetary and exchange variations, less deferred expenses. Available funds from FNE (Northeast Constitutional Financing Fund) are classified in current and long-term liabilities according to the expected outflow of funds. Receivables and payables are recorded in Current and Long-term Assets and Liabilities, respectively, according to maturity dates. c) Cash and cash equivalents For purposes of the statement of cash flows, cash and cash equivalents correspond to the balances of cash and interbank investments immediately convertible into cash or with original maturity equal to or less than ninety days. d) Interbank investments Interbank investments are recorded at acquisition cost, plus income earned and adjusted for the provision for losses, when applicable. e) Securities Securities are recorded at cost, plus brokerage and other fees, and are classified and accounted for as described below: Available-for-sale securities - securities not classified as either trading securities or held-to-maturity securities and reported at fair value, net of taxes, with unrealized gains and losses reported in a separate component of shareholders equity; and Held-to-maturity securities - securities that the enterprise has the positive intent and ability to hold to maturity and stated at acquisition cost, plus income earned, included in income for the year; The classification of Available-for-sale securities and Held-to-maturity securities in current and long-term assets was determined according to their maturities, which does not mean the unavailability of the securities, which are of the highest quality and highly liquid.

F-13

BANCO DO NORDESTE DO BRASIL S.A.

f)

Derivative financial instruments Banco do Nordeste limits its operations in the derivative market to swap transactions intended solely to hedge its asset and liability positions, when necessary. Swap transactions are stated at fair value on monthly trial balances and balances and gains and losses are recorded in revenue or expense accounts. The fair value of swap transactions is calculated using the rates disclosed by the Brazilian Financial and Capital Markets Association (ANBIMA).

g) Lending operations, advances on foreign exchange contracts, other receivables with loan characteristics and allowances for loan losses. Lending operations, advances on foreign exchange contracts, and other receivables with loan characteristics are classified in accordance with Managements judgment on risk level, taking into consideration the economic scenario, past experience and specific risks related to the operation, creditors and guarantors, considering the standards established by CMN Resolution 2682 of 12/21/1999, which require the periodic analysis of the portfolio and its rating into nine risk levels, where AA is the minimum risk and H is the maximum risk, as well as the classification of operations in arrears for more than 15 days as past due operations. Income from lending operations over 59 days past due, regardless of the risk level, is only recognized when realized. H-rated operations remain under this rating for six months, when they are then written off against the existing allowance and controlled for five years, no longer being included in the balance sheet. Renegotiated operations remain at least at the same risk level in which they were classified. Renegotiated loans that have been written off against the allowance are rated as H, and possible recoveries are recognized as income when received. h) Prepaid expenses Refer to funds used in advanced payments, whose benefits or service rendering will occur in coming years.

F-14

BANCO DO NORDESTE DO BRASIL S.A.

i)

Permanent assets Investments are stated at cost, net of allowance for losses; Property, plant and equipment includes depreciation calculated under the straight-line method at the following annual rates: buildings - 4%; data processing systems and vehicles - 20%; tractors and motorcycles - 25%; and other items - 10%. Real estate includes the revaluation amount. Deferred charges include costs on third-party properties and software purchase and development incurred through 09/30/2008 and include amortization calculated under the straight-line method at the annual rate of 20%. CMN Resolution 3617, of 09/30/2008, determines that any balances of property, plant and equipment and deferred charges existing before the Resolution came into effect that have been recorded based on prior standards should be maintained until such balances are actually written off.

j)

Income tax, social contribution, PASEP and COFINS (taxes on revenue) IRPJ (corporate income tax) is calculated at the rate of 15% plus a 10% surtax (on income exceeding R$ 240), and Social Contribution (CSLL) is calculated at the rate of 15%, after the adjustments, on the Companys net income, defined in tax law. Tax credits and deferred liabilities are calculated, basically, on temporary differences between accounting and tax income, on allowances for loans and doubtful accounts and on securities and derivatives fair value adjustments. In accordance with current regulation, the expected realization of tax credits is based on the projection of future earnings and on technical studies carried out every six months. PIS/PASEP and COFINS are calculated at the rates of 0.65% and 4.00%, respectively.

k) Employee benefits The Bank grants its employees short-term and post-employment benefits. Short-term benefits are recognized and measured at their original amounts (excluding the effect of the discount to present value or actuarial calculation) based on the monthly accrual basis of accounting. Post-employment benefits refer to defined benefit and variable contribution pension plans, and a defined benefit health care plan.

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BANCO DO NORDESTE DO BRASIL S.A.

The policy adopted for the recognition of actuarial gains and losses beginning December 2010 is consistent with the provisions of item 93 of the Appendix to CVM Resolution 600, that is, actuarial gains and losses are immediately recognized as revenue or expense. The policy adopted for the recognition of actuarial gains and losses was based on items 52 to 55 of the Appendix to CVM Resolution 371, i.e., the Bank recognized a portion of actuarial gains and losses in excess of the higher of: 10% of the defined benefit total actuarial obligation present value, and 10% of plan assets fair value. The effects of the first-time adoption of CVM Resolution 600, beginning 01/01/2009, have been fully recognized in the statements as at 12/31/2010. l) Impairment assessment Impairment losses are recognized when the carrying amount of an asset exceeds its recoverable value. Relevant non-financial assets are reviewed for impairment at least annually, to determine if there is any indication that the asset might be impaired. m) Contingent assets and contingent liabilities and legal obligations Contingent assets, contingent liabilities and legal obligations are recognized, measured and disclosed according to the criteria defined in CMN Resolution 3823, of 12/16/2009. Contingent assets are recognized in the financial statements only when their realization can be reliably measured from evidences, which may be the final and unappealable decision on a lawsuit or the confirmation of its recoverability, either through the receipt or offset against another liability. Contingent liabilities are recognized in the financial statements when, based on the opinion of legal counsel and Management, the risk of loss on a judicial or administrative proceeding is considered probable, with probable outflow of funds to settle the obligations, the amounts involved can be reliably measured upon court reference/notification and reviewed monthly. Legal obligations derive from tax obligations and a provision in their full amount is recognized in the financial statements, regardless of the likelihood of success in ongoing lawsuits. n) Use of estimates The preparation of the financial statements includes estimates and assumptions, such as the measurement of allowances for loan losses, estimates of certain financial instruments fair values, provision for contingencies, impairment losses, other provisions, and the calculation of technical provisions for health care plan and pension plans. Actual results could differ from such estimates and assumptions.

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BANCO DO NORDESTE DO BRASIL S.A.

4.

SEGMENT REPORTING For management purposes, the Bank is organized into two operating segments based on products and services: a) Own Portfolio - comprises own portfolio products and services such as lending and market operations, fund management and provision of other banking services and collaterals; and b) FNE - comprises lending operations within the scope of FNE and the provision of portfolio management services. The Banks management manages operating income (loss) separately in order to make decisions on the fund allocation and performance evaluation. The performance of each segment is determined based on the financial margin plus bank fees. As at 12/31/2011 and 12/31/2010, no revenue from transactions with one single external customer accounted for 10% or more of the Bank's total revenues. The table below, prepared in the format used by the Bank's management, shows information on revenues, costs, expenses and financial margin of operating segments. Administrative expenses, as well as other expenses not directly allocated to each operating segment, are classified as corporate expenses and were included in column Total:

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BANCO DO NORDESTE DO BRASIL S.A.

2nd half 2011 Specification

Own portfolio

12/31/2011 Total 2,495,738 989,381 717,539 65,827 129,215 11,765 582,011 (1,663,739) (622,226) (573,996) (380,831) (86,551) (135) 831,999 690,624 15,300 (88,094) 1,449,829 (1,009,991) (596,639) (13,952) (399,400) (213,079) (25,346) 201,413 (175,399) (11,908) 14,106 Own portfolio FNE Total 4,519,669 1,772,643 1,365,528 25,660 163,871 20,162 1,171,805 (2,647,170) (1,048,740) (846,952) (664,691) (86,551) (236) 1,872,499 1,327,021 24,735 (173,146) 3,051,109 (1,856,535) (1,081,293) (27,346) (747,896) (452,713) (66,382) 675,479 (323,603) (37,077) 314,799 Own portfolio 2,255,281 1,489,809 474,641 (36,140) 73,161 15,667 238,143 (1,069,387) (591,142) (78,235) (400,010) 1,185,894 346,045 12,768 (77,027) 1,467,680

12/31/2010 FNE Total

FNE 691,842 265,209 426,633 (575,533) (253,275) (250,907) (71,216) (135) 116,309 554,686 (45,821) 625,174

Income Income from lending operations Securities transactions Derivative financial instruments Gains (losses) on foreign exchange transactions Gains (losses) on compulsory investments Others incomes Expenses Expenses on money market funding operations Expenses on borrowings and onlending Allowance for loan losses Other contingent liabilities (Note 20.g) Proagro provision receivable Financial margin Income from services provided Income from fees, rates and commissions Pasep and Cofins Income (loss) after fees and commissions Administrative expenses Personnel expenses Depreciation and amortization Other administrative expenses Others expenses Expenses on provision, except allowance for loan losses Income before taxes and profit sharing Income tax and social contribution on income Profit sharing Net income

1,803,896 989,381 452,330 65,827 129,215 11,765 155,378 (1,088,206) (622,226) (320,721) (129,924) (15,335) 715,690 135,938 15,300 (42,273) 824,655

3,154,365 1,365,304 1,772,643 823,007 542,521 25,660 163,871 20,162 349,022 822,783 (1,627,827) (1,019,343) (1,048,740) (328,843) (518,109) (234,909) (429,782) (15,335) (71,216) (236) 1,526,538 345,961 251,507 1,075,514 24,735 (82,635) (90,511) 1,720,145 1,330,964

1,105,202 3,360,483 1,489,809 414,129 888,770 (36,140) 73,161 15,667 691,073 929,216 (805,739) (1,875,126) (591,142) (395,492) (473,727) (406,384) (806,394) (3,863) (3,863) 299,463 1,485,357 887,947 1,233,992 12,768 (77,987) (155,014) 1,109,423 2,577,103 (1,679,372) (1,019,740) (25,551) (634,081) (300,079) (65,738) 531,914 (174,086) (44,238) 313,590

F-18

BANCO DO NORDESTE DO BRASIL S.A.

5.

CASH AND CASH EQUIVALENTS Investments in securities and Interbank investments refers to transactions whose maturity on the investment date is equal to or lower than 90 days and that are subject to an insignificant risk of change in fair value.
Specification Cash in local currency Cash in foreign currency Total cash Investments in securities Interbank investments Total cash and cash equivalents 12/31/2011 94,777 2,309 97,086 4,016 3,084,591 3,185,693 12/31/2010 80,923 1,468 82,391 88,333 3,698,775 3,869,499

6.

INTERBANK INVESTMENTS a) Breakdown

Specification a) Money market investments Resale agreements pending settlement - own portfolio Resale agreements pending settlement - third-party portfolio b) Interbank deposits Investments in foreign currency Interbank deposits TOTAL CURRENT 12/31/2011 3,036,454 3,002,525 33,929 203,829 14,987 188,842 3,240,283 3,240,283 12/31/2010 3,451,521 3,363,525 87,996 420,589 13,475 407,114 3,872,110 3,872,110

b) Income (loss) from interbank investments

Specification a) Income from money market investments (Note 7.b) Own portfolio Third-party portfolio b) Income from interbank deposits (Note 7.b) TOTAL
2nd half 2011

12/31/2011 350,862 340,397 10,465 32,476 383,338

12/31/2010 324,934 316,614 8,320 22,715 347,649

173,604 167,719 5,885 16,236 189,840

7.

SECURITIES AND DERIVATIVES a) Securities The inflation adjusted cost (plus income earned) and the fair value of securities are as follows: a.1) SECURITIES PORTFOLIO
Specification Available-for-sale securities Held-to-maturity securities Swap differential receivable TOTAL CURRENT LONG-TERM 12/31/2011 10,049,334 13,559 44,894 10,107,787 233,192 9,874,595 12/31/2010 7,758,083 8,378 305 7,766,766 1,026,946 6,739,820

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BANCO DO NORDESTE DO BRASIL S.A.

a.2) AVAILABLE-FOR-SALE SECURITIES

12/31/2011 SPECIFICATION COST FIXED-INCOME SECURITIES Treasury bills National Treasury Notes (NTN) Financial bills Debentures Bank credit notes (CCB) Promissory notes Federal government securities - FCVS and other Agricultural debt securities INVESTMENT FUND SHARES Social development fund (FDS) Receivables Investment Fund (FIDC) shares Investment Guarantee Fund (FGI) Operation Guarantee Fund (FGO) VARIABLE-INCOME SECURITIES Other tax incentives (FINOR) Shares of publicly-traded companies LINKED TO GUARANTEES(1) Treasury bills Federal government securities - Other Debentures TOTAL Tax credit Provision for deferred taxes (note 16.d) TOTAL MARK-TO-MARKET 9,527,312 7,461,949 1,091,120 30,302 898,502 13,588 31,598 253 14,750 1,316 13,079 235 120 144,159 4,211 139,948 279,532 275,236 614 3,682 9,965,753 FAIR VALUE 9,530,187 7,462,115 1,141,978 30,302 876,719 13,370 5,518 185 13,434 13,079 235 120 227,146 428 226,718 278,567 275,268 3,299 10,049,334 MARK-TOMARKET 2,875 166 50,858 (21,783) (218) (28,080) (68) (1,316) (1,316) 82,987 (3,783) 86,770 (965) 32 (614) (383) 83,581 23,453 (56,885) 50,149 MATURITY YEAR COST
7,288,386

12/31/2010 FAIR VALUE

7,259,257 5,646,915 844,253 30,313 520,204 30,811 182,165 4,583 13 14,552 14,552

MARK-TOMARKET
(29,129) (1,540) (564) (701) (26.319) (5) (1,247) (1,247) -

MATURITY YEAR

2012 to 2018 2050 2016 2013 to 2018 2013 2027 2012 to 2022 2014 2014 Without maturity Without maturity Without maturity Without maturity 2013 to 2017 1993 2018

5,648,455 844,817 30,313 520,905 30,811 182,165 30,902 18 15,799 1,247 14,552

2011 to 2017 2015 2016 2012 to 2018 2011 to 2013 2011 2027 2011 to 2015

Without maturity 2012 Without maturity Without maturity

2011 a 2015 1993 2018

144,159 4,211 139,948 226,188 221,920 587 3,681 7,674,532 -

258,673 506 258,167 225,601 221,920 3,681 7,758,083 -

114,514 (3,705) 118,219 (587) (587) 83,551 13,873 (47,294) 50,130

Note: (1) In addition to the securities pledged as a collateral shown in the table above, there are LFTs in the amount of R$ 217,193 in 12/31/2010 and CVSs in the amount of R$ 89 (R$ 74 in 12/31/2010) not blocked by Brazilian Clearing and Custody Company - CBLC, which are pending the final decision on whether these financial assets will be accepted or not for pledge purposes.

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BANCO DO NORDESTE DO BRASIL S.A.

The caption Federal Government Securities - Other records cash investments in government securities called by the National Treasury as NUCL910801 with a maturity on 08/31/1993, not yet redeemed. In view of the classification of assets in the category above, the amount of R$ 83,581 (R$ 83,551 as at 12/31/2010) was recorded in the Banks shareholders' equity, under Market-to-market. This adjustment, net of taxes, corresponds to R$ 50,149 (R$ 50,130 as at 12/31/2010).

a.3) HELD-TO-MATURITY SECURITIES

12/31/2011 SPECIFICATION FIXED-INCOME SECURITIES Investment Fund Shares - Northeast Entrepreneur National Treasury Notes (NTN) - P Investment Fund Shares - CRIATEC FGO (Fund for Collateral of Transactions) FIP Brasil Agronegcios (Agribusiness) TOTAL (*) Estimated maturity COST
13,559 1,691 453 8,609 -

12/31/2010 MATURITY YEAR COST

8,378 2013 (*) 2012 to 2014 2017 (*) 2018 (*) 1,608 421 5,200 231

FAIR VALUE
13,559 1,691 453 8,609

FAIR VALUE
8,378 1,608 421 5,200 231

MATURITY YEAR

2011 (*) 2012 to 2014 2017 (*) Without maturity 2018 (*)

2,806 13,559

2,806 13,559

918 8,378

918 8,378

a.4) In December 2011, due to a specific, unusual, nonrecurring and unexpected event occurred after the classification date, the Bank reclassified the Operation Guarantee Fund (FGO) shares (R$120) from Securities held to maturity to Securities available for sale. a.5) The Company uses the criteria below to measure fair value, according to the following order of priority: 1st - Market Prices disclosed by the National Association of Financial Market Institutions - ANBIMA and BM&FBOVESPA; 2nd - Goodwill/Negative Goodwill based on the last three-month transactions at CETIP S.A. - Organized Markets. 3rd - Calculation of probable realizable value obtained based on its own pricing model.

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BANCO DO NORDESTE DO BRASIL S.A.

b) Income (loss) from securities transactions

Specification Interbank Investments (Note 6.b ) Interbank deposits (Note 6.b) Fixed-Income Securities Variable-Income Securities TOTAL 2nd half 2011 173,604 16,236 525,178 2,521 717,539 12/31/2011 350,862 32,476 976,902 5,288 1,365,528 12/31/2010 324,934 22,715 537,428 3,693 888,770

c)

Derivatives Banco do Nordeste operates under a conservative investment policy focused on investing strictly under the maturities and rates conditions established by the sources of the funds in order to avoid any mismatching among assets and liabilities in terms of maturities, interest rates and indices. Banco do Nordeste employs a conservative portfolio management policy and limits its operations in the derivative market to swap transactions intended solely for hedging its asset and liability positions, when necessary. Swap transactions are recorded in balance sheet and memorandum accounts, according to their nature, in accordance with prevailing law and accounting standards. As at December 31, 2011, the Bank has swap transactions registered with CETIP S.A. (Clearinghouse for the Custody and Financial Settlement of Securities) and the notional amount of these transactions is recorded in memorandum accounts and the related book value is recorded under the captions Differential Payable and Differential Receivable, as shown below:
12/31/2011 NOTIONAL AMOUNT FAIR VALUE CURVE MARK-TO-MARKET POSITIVE NEGATIVE

SWAP CONTRACTS ASSET POSITION Foreign currency - dollar LIABILITY POSITION Fixed rate TOTAL

RECEIVABLE PAYABLE RECEIVABLE PAYABLE

509,020 360,759 869,779

44,769 125 44,894

21,128 21,128

44,338 125 44,463

7,147 7,147

431 431

13,981 13,981

12/31/2010 NOTIONAL AMOUNT FAIR VALUE RECEIVABLE CURVE MARK-TO-MARKET POSITIVE NEGATIVE

SWAP CONTRACTS ASSET POSITION Foreign currency - dollar LIABILITY POSITION Fixed rate TOTAL

PAYABLE RECEIVABLE PAYABLE

509,020 544,399 1,053,419

305 305

28,855 29,283 58,138

148 148

11,174 17,459 28,633

157 157

17,681 11,824 29,505

F-22

BANCO DO NORDESTE DO BRASIL S.A.

Swap transactions amounts in risk MARKET RISK HEDGE ASSETS HEDGED ITEMS - LIABILITIES MARKET RISK HEDGE - LIABILITIES HEDGED ITEMS ASSETS

12/31/2011 562,301 566,822 453,266 439,143

12/31/2010 488,587 485,113 667,566 655,709

12/31/2011 Swap contracts mature as follows: Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years TOTAL Difference receivable 9 25 56 44,804 44,894 Difference payable 580 7,035 10,639 2,874 21,128

12/31/2010 Swap contracts mature as follows: Difference receivable 53 157 95 305 Difference payable 2,490 9,628 13,000 33,020 58,138

Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years TOTAL

The fair value of swap transactions is calculated using the rates disclosed by ANBIMA. The credit risk is determined using the correlation ratios and risk factors disclosed by the Central Bank of Brazil. d) Income (loss) from derivative transactions
Specification Swap TOTAL 2nd half 2011 65,827 65,827 12/31/2011 25,660 25,660 12/31/2010 (36,140) (36,140)

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BANCO DO NORDESTE DO BRASIL S.A.

8.

INTERBANK ACCOUNTS - RESTRICTED DEPOSITS a) Restricted Deposits

Specification Mandatory payments - Savings Compulsory reserves - Cash funds National Housing System (SFH) National Treasury - Rural credit TOTAL CURRENT LONG TERM 12/31/2011 223,654 36,909 32,369 5,406 298,338 265,547 32,791 12/31/2010 196,368 33,680 27,718 4,300 262,066 234,019 28,047

b) Income (loss) from compulsory investments

Specification Income from restricted deposits - Central Bank of Brazil Income from restricted deposits SFH Income from restricted deposits - Rural credit Devaluation of restricted deposits TOTAL 2nd half 2011 8,023 1,790 39 1,913 11,765 12/31/2011 15,189 3,467 106 1,400 20,162 12/31/2010 11,779 10,710 113 (6,935) 15,667

9.

LOAN PORTFOLIO AND ALLOWANCE FOR LOAN LOSSES a) Loan portfolio and allowance for loan losses
12/31/2011 Specification Loans Current Long-term Other lines with loan features Current Long-term TOTAL Gross amount 11,212,168 5,251,775 5,960,393 586,892 147,451 439,441 11,799,060 Allowance (621,838) (301,060) (320,778) (8,222) (3,555) (4,667) (630,060) 12/31/2010 Gross amount 10,715,838 4,470,238 6,245,600 571,930 82,839 489,091 11,287,768 Allowance (580,934) (246,074) (334,860) (71,984) (18,321) (53,663) (652,918)

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BANCO DO NORDESTE DO BRASIL S.A.

a.1) Loan portfolio

Specification Advances to depositors Loans Discounted notes Financing Financing in foreign currencies Refinancing with Federal Government (Note 29.a.1) Rural and agro-industrial financing(1) Real estate financing(2) Infrastructure and development financing Subtotal of lending operations Guarantees honored Income receivable from advances Debtors for purchase of assets Notes and credits receivables Advances on foreign exchange contracts (3) Subtotal of other items with loan features TOTAL LOAN PORTFOLIO 12/31/2011 90 5,002,849 175,036 1,968,974 275,591 473,643 1,466,409 243 1,849,333 11,212,168 12,866 1,517 3,348 569,161 586,892 11,799,060 12/31/2010 1,417 4,882,670 170,113 1,716,772 24,311 533,239 1,961,023 243 1,426,050 10,715,838 20 9,896 2,298 40,526 519,190 571,930 11,287,768

Notes: (1) Reduction of R$ 685,000 in rural and agro-industrial financing as a result of the reclassification to memorandum accounts NET ASSETS OF MANAGED PUBLIC FUNDS, since they refer to lending operations managed by the Bank mainly using funds from Fundo de Terras, Banco da Terra, INCRA - Conta Fundiria and Fundo Rotativo de Terras. On the other hand, liabilities recorded under DOMESTIC ONLENDING OFFICIAL INSTITUTIONS (Note 14.c) were reclassified. (2) Refer to transactions contracted before the discontinuance of real estate financing activities. (3) Accounts classified as OTHER PAYABLES/Foreign Exchange Portfolio.

a.2) Income from lending operations

Specification Loans and discounted notes Financing Rural and agro-industrial financing Recovery of receivables written off as loss Guarantees honored Other TOTAL 2nd half 2011 450,093 391,993 73,729 73,265 1 300 989,381 12/31/2011 888,272 614,342 149,610 120,472 2 (55) 1,772,643 12/31/2010 759,469 403,112 171,478 156,964 1 (1,215) 1,489,809

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BANCO DO NORDESTE DO BRASIL S.A.

b) Breakdown by maturity b.1) Normal (1)

Business sector Rural Manufacturing Government Other services Trading Financial institutions Housing Individuals TOTAL From 01 to 30 days 79,285 276,335 4,005 115,950 265,653 13,888 243 4,591 759,950 From 31 to 60 days 50,312 246,925 4,005 127,553 216,678 15,091 4,062 664,626 From 61 to 90 days 27,548 198,431 16,256 296,456 188,123 13,282 4,033 744,129 From 91 to 180 days 99,642 485,489 11,504 311,477 587,659 39,370 11,047 1,546,188 From 181 to 360 days 121,254 455,385 40,676 542,500 540,282 62,874 7,913 1,770,884 Over 360 days 1,039,492 1,423,520 1,254,600 1,587,183 403,353 116,674 13,895 5,838,717 Total as at 12/31/2011 1,417,533 3,086,085 1,331,046 2,981,119 2,201,748 261,179 243 45,541 11,324,494 Total as at 12/31/2010 1,882,050 2,505,673 1,257,660 2,715,425 1,778,739 695,342 243 48,783 10,883,915

Note: (1) Include past-due receivables up to 14 days.

b.2) Past-due
Current Business sector Rural Manufacturing Other services Trading Financial institutions Individuals TOTAL
From 01 to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Over 360 days Total as at 12/31/2011 Total as at 12/31/2010

145 2,668 3,735 5,516 142 361 12,567

109 2,647 3,886 7,087 135 319 14,183

158 7,327 2,682 7,782 138 291 18,378

760 7,423 12,865 15,044 402 736 37,230

4,019 14,233 13,596 25,631 733 1,001 59,213

13,351 29,556 37,825 45,477 2,290 1,349 129,848

18,542 63,854 74,589 106,537 3,840 4,057 271,419

32,184 32,213 45,564 77,687 16 4,038 191,702

Past-due Business sector Rural Manufacturing Other services Trading Financial institutions Individuals TOTAL
From 01 to 14 days From 15 to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Over 360 days Total as at 12/31/2011 Total as at 12/31/2010

56 1,213 1,390 1,959 34 75 4,727

1,062 3,783 7,489 4,555 554 17,443

379 6,567 12,879 11,136 145 527 31,633

2,123 7,320 7,627 7,686 112 342 25,210

6,391 8,901 9,075 19,940 416 721 45,444

12,496 9,466 13,450 14,277 237 1,306 51,232

16,027 1,925 8,717 578 211 27,458

38,534 39,175 60,627 60,131 944 3,736 203,147

60,270 67,848 38,589 41,802 2 3,640 212,151

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BANCO DO NORDESTE DO BRASIL S.A.

c) Specification by risk level

12/31/2011 Risk rating AA A B C D E F G H TOTAL Current (1) Past-due Total portfolio 3,315,259 5,094,425 2,252,583 303,557 189,718 76,280 41,003 52,124 474,111 11,799,060 Allowance 25,472 22,526 9,106 18,972 22,884 20,502 36,487 474,111 630,060 Current (1) 3,640,505 3,847,921 2,635,606 262,461 111,266 56,686 34,525 17,621 277,324 10,883,915 12/31/2010 Past-due 38,743 23,563 18,644 36,090 46,511 43,157 197,145 403,853 Total portfolio 3,640,505 3,847,921 2,674,349 286,024 129,910 92,776 81,036 60,778 474,469 11,287,768 Allowance 19,239 26,743 8,581 12,991 27,833 40,518 42,544 474,469 652,918

3,315,259 5,094,425 2,218,403 34,180 261,866 41,691 139,191 50,527 32,618 43,662 16,203 24,800 28,007 24,117 218,522 255,589 11,324,494 474,566

Note: (1) Include past-due receivables up to 14 days.

d) Change in allowance for the period

Specification Opening balance (+) Net allowance recognized in the period (1) (-) Receivables written off as a loss in the period (=) Allowance for loan losses (+) Allowance for losses on other receivables without loan features (note 10.e) (=) Allowance for loan losses balance 12/31/2011 652,918 215,557 (238,415) 630,060 46,064 676,124 12/31/2010 615,845 392,528 (355,455) 652,918 31,706 684,624

Note: (1) Of the total allowance in the year, R$20,141 refers to amounts recorded under BACEN Official Letter GTRJA/Cosup- 03/2011/77, of 12/22/2011, based on the provisions of article 3 of CMN Resolution 2682, of 12/21/1999.

e) Breakdown of allowance expense balance

Specification (+) Expenses on allowance for loan losses (+) Expenses on allowance for losses on other receivables (-) Reversals of operating allowances (=) Expense balance on allowance with loan features (+) Expenses on allowance for losses on other receivables without loan features (-) Reversals of allowance for losses on other receivables without loan features (=) Expense balance on allowance for loan losses 2nd half 2011 132,707 4,862 (26,431) 111,138 18,786 129,924 12/31/2011 265,187 4,862 (54,492) 215,557 19,352 234,909 12/31/2010 356,324 57,357 (21,153) 392,528 8,630 (1,148) 400,010

f) In the year, receivables that had been written off as loss were recovered in the amount of R$ 120,472 (R$ 156,964 as at 12/31/2010) and renegotiations of operations amounted to R$ 750,172 (R$ 787,810 as at 12/31/2010).

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BANCO DO NORDESTE DO BRASIL S.A.

g) Recovery of receivables with legal base: In conformity with Law 11322, of 07/13/2006, Law 11775, of 09/17/2008, and Law 12249, of 06/11/2010, concerning rescheduling of debts arising from rural credit operations, that provides for rebates in the debit balance, discounts for prompt payment of installments, reduction of interest rate, and extension of payment terms of referred operations, a positive effect on the Banks income, referring to 12/31/2011, was recognized in the amount of R$ 209,488 (R$ 89,582 as at 12/31/2010). Pursuant to the mentioned laws, part of these transactions was acquired by the Northeast Constitutional Financing Fund (FNE):
Specification Income earned Recovery of operations written off from assets Expenses on discounts Net effect of allowances TOTAL 2nd half 2011 39,272 36,479 (12,092) 57,541 121,200 12/31/2011 72,772 53,186 (24,117) 107,647 209,488 12/31/2010 54,611 28,998 (11,767) 17,740 89,582

10.

OTHER RECEIVABLES
Specification a) Receivables for guarantees honored b) Foreign exchange portfolio (Note 11) c) Income receivable d) Other Tax credits - temporary differences (Note 21.b) Tax credits - securities and derivatives (Notes 7.a.2 and 21.b) Debtors from guarantee deposits Recoverable taxes and contributions From prepayments - SRF Regulation 90/92 Other amounts Tax incentive options Receivables Salary advances Payments to be refunded Recalculation, discounts, waivers and bonuses in BNDES transactions Recalculation, discounts, waivers and bonuses in FAT transactions Other amounts e) Allowance for losses on other receivables Receivables with loan features Receivables without loan characteristics (Note 10.e) TOTAL CURRENT LONG-TERM

12/31/2011
641,071 22,902 1,280,317 250,629 23,453 644,977 207,830 200,124 7,706 26,748 3,348 2,095 8,246 4,843 26,648 81,500 (54,286) (8,222) (46,064) 1,890,004 1,778,988 111,016

12/31/2010
20 521,843 25,570 1,007,017 277,353 13,873 367,471 177,148 170,353 6,795 26,748 40,526 2,111 8,110 8,320 27,142 58,215 (103,690) (71,984) (31,706) 1,450,760 1,380,525 70,235

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11.

FOREIGN EXCHANGE PORTFOLIO a) Breakdown

Specification Assets - Other Receivables Foreign exchange purchased pending settlement Receivables for foreign exchange sold Advances received in local currency Income receivable from advances Current Assets (Note 10.b) Liabilities - Other Payables Foreign exchange purchased Foreign exchange sold pending settlement (Advances on foreign exchange contracts) Other Current Liabilities (Note 16.b) 12/31/2011 12/31/2010

627,494 762 (51) 12,866 641,071 627,494 569,584 765 (569,161) 1,188

511,266 2,883 (2,202) 9,896 521,843 511,266 532,891 2,855 (519,190) 45 16,601

b) Income (loss) from foreign portfolio

Specification Exchange gains Exchange losses TOTAL 2nd half 2011 12/31/2011 129,541 (326) 129,215 164,406 (535) 163,871 12/31/2010 74,128 (967) 73,161

12.

PERMANENT ASSETS

a) Investments
12/31/2010 2011 Changes Allowance for impairment Account balance 12/31/2010 Allowance for impairment (5,010) (293) (5,303)

Specification Tax incentive investments Shares Artworks and valuables TOTAL

Account balance 652 777 1,429

Additions 139 139

Write-offs -

Cost 5,010 945 916 6,871

Account balance 652 916 1,568

652 916 1,568

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BANCO DO NORDESTE DO BRASIL S.A.

b) Property and equipment

12/31/2010 Specification 2011 Changes Allowance for impairment Account balance 100,517 23,151 22,087 17,025 7,259 139 4,206 4,867 6,318 185,569 12/31/2011 Allowance for impairment -

Account balance 103,926 17,210 22,648 17,498 7,858 158 5,586 4,266 9,069 188,219

Additions 8,675 13,639 3,605 225 924 15 (1,098) 1,556 66 27,607

Write-offs Depreciation (2,876) (81) (698) (2) (5) (282) (30) (3,974) (9,209) (7,698) (4,084) (1,521) (28) (926) (2,818) (26,284)

Cost 226,144 68,488 50,322 17,025 16,167 424 4,206 10,944 16,121 409,841

Accumulated depreciation (125,627) (45,337) (28,235) (8,908) (285) (6,077) (9,803) (224,272)

Account balance 100,517 23,151 22,087 17,025 7,259 139 4,206 4,867 6,318 185,569

Buildings Data processing system Furniture and equipment Land Facilities Communications system Construction in progress (1) Security system Transportation system TOTAL

Note: (1) Refers to transfer to Buildings, considering the completion of the construction.

c) Deferred Charges
12/31/2010 Specification 2011 Changes Allowance for impairment Account balance 1,695 8 1.703 12/31/2011 Allowance for impairment -

Account balance 2,391 16 2,407

Additions 358 358

Write-offs Amortization (1,054) (8) (1.062)

Cost 4,583 41 4,624

Accumulated amortization (2,888) (33) (2,921)

Account balance 1,695 8 1,703

Beneficiaries Expenses on the development of software TOTAL

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13.

DEPOSITS AND OPEN MARKET FUNDING a) Deposits

Specification a.1) Demand deposits Foreign currency deposits Government deposits Restricted deposits Legal entities Individuals Other amounts a.2) Savings deposits Free savings deposits - individuals Free savings deposits - legal entities From related parties and institutions of the Financial System a.3) Interbank deposits a.4) Time deposits Time deposits Interest-bearing escrow deposits Interest-bearing special deposits /FAT - available funds Proger Urbano Pronaf Protrabalho Infrastructure Drought PNMPO - National Program for Guided Productive Microcredit Interest-bearing special deposits /FAT - invested funds Proger Urbano Pronaf Protrabalho Infrastructure Drought PNMPO - National Program for Guided Productive Microcredit FINOR/cash and cash equivalents and reinvestments Law 8167 Other amounts a.5) Other deposits - Investment deposits TOTAL CURRENT LONG-TERM 12/31/2011 183,624 28,344 32,763 44,610 63,739 11,978 2,190 1,329,994 839,805 489,013 1,176 588,986 6,861,895 5,000,379 567,361 50,795 13,293 262 3,320 20,404 84 13,432 571,594 62,810 561 159,624 249,455 9,838 89,306 670,169 1,597 8,964,499 5,115,979 3,848,520 12/31/2010 134,119 31,487 20,446 39,117 30,369 9,363 3,337 1,288,569 740,681 546,832 1,056 684,128 6,387,223 5,048,516 202,751 370,420 18,200 273 3,535 328,476 155 19,781 316,372 60,448 964 192,453 50,731 11,776 447,569 1,595 15,542 8,509,581 3,772,031 4,737,550

b) Open Market Funding

Specification Own portfolio Treasury bills Third-party portfolio Treasury bills TOTAL CURRENT LONG-TERM 12/31/2011 670,444 670,444 33,929 33,929 704,373 637,812 66,561 12/31/2010 436,293 436,293 87,996 87,996 524,289 460,893 63,396

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c) Expenses of open market funding operations

Specification Expenses on raising deposits Time deposits Savings deposits Escrow deposits Interbank deposits Special deposits - FAT Expenses on Funds from acceptance and issuance of securities Other Expenses on money market funding operations Third-party portfolio Own portfolio TOTAL 2nd half 2011 (579,023) (283,738) (33,967) (24,070) (8,587) (56,991) (166,973) (4,697) (43,203) (5,889) (37,314) (622,226) 12/31/2011 (973,088) (550,126) (66,127) (35,698) (19,658) (111,196) (180,822) (9,461) (75,652) (10,473) (65,179) (1,048,740) 12/31/2010 (543,046) (393,896) (52,176) (5,446) (15,706) (68,306) (7,516) (48,096) (8,297) (39,799) (591,142)

14.

BORROWINGS AND ONLENDINGS a) Borrowings and Onlendings by Maturity

Specification 0 to 3 months 241,007 59,938 13,797 314,742 3 to 12 months 16,511 592,250 113,489 67,494 789,744 1 to 3 years 16,511 195,718 158,676 370,905 3 to 5 years 16,510 315,845 168,489 500,844 5 to 15 years 418,357 267,725 686,082 Over 15 years 183,338 164,211 347,549 Total as at 12/31/2011 49,532 833,257 1,286,685 840,392 3,009,866 Total as at 12/31/2010 60,875 446,603 1,686,776 729,165 2,923,419

Domestic borrowings Foreign borrowings Domestic onlendings Foreign onlendings TOTAL

b) Borrowings
Specification Domestic borrowings - official institutions/Refinancing Foreign borrowings/Borrowings in foreign currency TOTAL CURRENT LONG-TERM Financial charges TJLP+ 3.0 or 7.75 p.a. USD 12/31/2011 49,532 833,257 882,789 849,768 33,021 12/31/2010 60,875 446,603 507,478 461,822 45,656

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c) Domestic Onlendings - Official Institutions

Specification National Treasury BNDES POC (credit facility granted by the BNDES agents to shareholders of medium-sized and small companies to buy shares in capital increases) Credit Facility for investment in agriculture FINAME (National Equipment Financing Authority) Programa Automtico (program that intended purchase of new machinery and equipment by companies based in Brazil) Farm Program Other institutions Pilot Support Project of Agrarian Reform MEPF-Banco da Terra - Land Fund and Agrarian Reform - Land Bank Banco da Terra- Land Bank - Fight against rural poverty TOTAL CURRENT LONG-TERM Financial charges (p.a.) IGP-DI+ 2.0 or 6.75 TJLP/IGPM/IPCA+1.5 TJLP/IGPM/IPCA+1.5 TJLP/IGPM/IPCA+1.5 TJLP/IGPM/IPCA+1.5 SELIC/TJLP / 6.0 SELIC/4.0 to 18.0 Extra Mkt rate./ 2.0 to 10.0 12/31/2011 992 1,152,894 919,432 233,462 132,799 116,710 16,089 1,286,685 173,427 1,113,258 12/31/2010 1,086 933,260 712,269 220,991 52,859 38,276 14,583 699,571 81,699 126,302 491,570 1,686,776 289,427 1,397,349

d) Foreign Onlendings
Specification IDB-Prodetur (Tourism Development Program with funds provided by the IDB) IDB-Other programs Other programs TOTAL CURRENT LONG-TERM Financial charges (% p.a.) USD + 1.24 or UCBID + 2.26 USD + 1.24 USD + 6.0 12/31/2011 12/31/2010

833,307 6,703 382 840,392 81,291 759,101

722,200 6,456 509 729,165 66,808 662,357

e) Expenses on Borrowings and Onlendings

Specification Borrowings Domestic borrowings Onlendings Domestic Onlendings - Official Institutions National Treasury BNDES FINAME Other institutions Foreign onlendings Foreign banks Financial and development funds TOTAL 2nd half 2011 (2,128) (2,128) (195,304) (46,996) (30) (44,686) (2,131) (149) (148,308) (133,995) (242,569) (573,996) 12/31/2011 (4,604) (4,604) (250,727) (93,619) (74) (84,911) (3,618) (5,016) (157,108) (137,402) (454,219) (846,952) 12/31/2010 (5,484) (5,484) (121,605) (74,911) (108) (66,654) (3,268) (4,881) (46,694) (23,131) (323,507) (473,727)

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15.

FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES

Contractual amount as at 12/31/2011 - R$ 566,108 191,015

Specification Eurobond - Senior Unsecured Notes (1) Agribusiness credit notes (2)

Funding date 11/09/2010 -

Maturity 11/09/2015 -

Amount in US$ thousand 300,000 -

Fair value as at 12/31/2011 - R$ 567,244 196,364

Fair value as at 12/31/2010 - R$ 485,487 -

(1) In November 2010, Banco do Nordeste issued Senior Unsecured Notes amounting to US$ 300,000 thousand in the international financial market, maturing in 5 years and a coupon rate of 3.625% p.a., subject to semi-annual interest. The notes are not subject to intermediary payments and principal is settled on the transaction maturity date. (2) Medium-term security effective over 197 days, with average yield of 90.76% of the interbank deposit rate (CDI) per year on a pro rata basis through maturity. Swap transactions contracted to hedge US dollar liabilities from securities raised abroad against market fluctuations have been classified as hedge operations and, therefore, the balances from obligations were adjusted to fair value.

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16. OTHER LIABILITIES

Specification a) Collected taxes and other Funds from Proagro (program established to guarantee supplemental funds for farmers to pay their costs of farming and cattle raising) IOF (tax on financial transactions payable) Other taxes b) Foreign exchange portfolio (Note 11) c) Social and statutory Dividends and bonuses payable Profit sharing d) Tax and social security Provision for tax contingencies (Note 22.d) Taxes payable Tax lawsuits Provision for deferred income and social contribution taxes Securities and derivatives (Note 7.a.2) Revaluation of buildings and land Provision for income and social contribution taxes Income tax Social contribution Taxes payable Trading account e) Financial and development funds Northeast Constitutional Financing Fund (FNE) Other f) Hybrid debt & equity instruments (Note 17) g) Subordinated debt eligible for capital (Note 18) h) Other Provision for contingent liabilities Labor lawsuits (Note 22.e.iv) Civil lawsuits (Note 22.e.v) Other lawsuits (Note 22.e.vi) FNE (Note 22.e. vii) Onlending Full risk Shared risk FDNE (Note 22.e.ix) PROAGRO (Note 22.e.x) Other contingent liabilities ( Notes 22.e.xi and 22.k) Accrued liabilities allowances Employee benefits - CVM Resolution 600 Pension plan - CVM Resolution 600 Health care plan - CVM Resolution 600 Personnel expenses Other Other TOTAL CURRENT LONG-TERM 12/31/2011 4,805 114 4,601 90 1,188 12,254 342 11,912 525,820 112,578 82,269 30,309 66,561 56,885 9,676 298,477 182,080 116,397 48,204 - 4,720,077 4,578,226 141,851 1,137,872 1,216,319 3,017,118 1,767,867 182,824 106,653 140 1,386,807 1,149 91,376 1,294,282 1,593 3,299 86,551 1,131,570 985,408 457,916 527,492 114,564 31,598 117,681

12/31/2010 5,604 148 5,389 67 16,601 130,687 96,519 34,168 493,132 101,525 74,847 26,678 58,716 47,294 11,422 284,294 173,703 110,591 48,597 7 3,746,175 3,656,262 89,913 1,004,166 1,101,848 2,576,876 1,436,231 161,863 92,970 65 1,177,757 372 84,960 1,092,425 277 3,299 1,053,884 925,375 490,630 434,745 94,143 34,366 86,761 9,075,096 3,378,351 5,696,745

10,635,453 2,675,384 7,960,069

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17.

HYBRID DEBT/EQUITY INSTRUMENTS On 12/22/2010, pursuant to Law 12249, of 06/11/2010, as amended by Provisional Act 513, of 11/26/2010, Banco do Nordeste and the Federal Government entered into a Loan Contract, classified as Hybrid Debt/Equity Instruments (IHCD), in the amount of R$ 1,000,000, already paid in. As at 02/21/2011, through Deorf/Cofil Letter 2011/00979, the Central Bank authorized the classification of such hybrid instrument as capital tier II. The table below contains information on the transaction:
Specification Hybrid debt/equity instruments Amount issued 1,000,000 Clearance IPCA+6.5715% p.a. Funding Date 12/22/2010 12/31/2011 1,137,872 12/31/2010 1,004,166

18.

SUBORDINATED DEBT ELIGIBLE FOR CAPITAL The Bank has subordinated debt contracts with the Northeast Constitutional Financing Fund (FNE), classified as Regulatory Capital (PR) Tier II, under the Subordinated Debts Eligible to Capital category, in accordance with CMN Resolution 3444, of 02/28/2007, and the Central Bank of Brazils authorization. The agreements have indeterminate term and establish that the funds not yet invested will yield the extramarket rate disclosed by the Central Bank of Brazil, and, when invested upon release to the borrowers under the financings contracted by Banco do Nordeste, will be updated at the charges agreed on in the corresponding credit instruments, pursuant to Article 9-A of Law 7827, of 09/27/1989. Breakdown is as follows:
Specification Constitutional Fund to Finance the Northeast (FNE) Funds available (1) Funds invested (2) TOTAL 12/31/2011 1,216,319 328,126 888,193 1,216,319 12/31/2010 1,101,848 319,417 782,431 1,101,848

Notes: (1) Yielding extramarket rates disclosed by the Central Bank of Brazil, pursuant to article 9-A of Law 7827, of 09/27/1989. (2) Yielding rates agreed upon with borrowers, less financial comission of the institution, pursuant to article 9-A of Law 7827, of 09/27/1989.

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19.

SHAREHOLDERS' EQUITY a) Capital The Extraordinary Shareholders Meeting held on 04/01/2011 approved a capital increase of R$ 159,000 by using bylaws reserves, without issuance of new shares. Capital increased from R$ 1,851,000 to R$ 2,010,000 represented by 87,001,901 registered, fully paid shares with no par value, distributed as follows:
Composition as of 12/31/2011 Common shares 46,595,279 1,473,704 13,800 401,992 48,484,775 Preferred shares 35,373,190 2,373,264 386,795 383,877 38,517,126 Total shares 81,968,469 3,846,968 400,595 785,869 87,001,901 % voting capital 96.10 3.04 0.03 0.83 100.00 % total capital 94.21 4.42 0.47 0.90 100.00

Shareholders Federal Government FND (National Development Fund) BNDESPAR Other TOTAL

Composition as of 12/31/2010 Common shares 46,595,279 1,473,704 15,000 400,792 48,484,775 Preferred shares 35,373,190 2,373,264 387,995 382,677 38,517,126 Total shares 81,968,469 3,846,968 402,995 783,469 87,001,901 % voting capital 96.10 3.04 0.03 0.83 100,00 % total capital 94.21 4.42 0.47 0.90 100,00

Shareholders Federal Government Fundo Nacional de Desenvolvimento - FND BNDESPAR Other TOTAL

b) Revaluation reserve The amount of R$ 25,198 (R$ 28,064 as at 12/31/2010) refers to the revaluation of property, plant and equipment in use, recognized on 02/26/1993. Said reserve will be maintained through its actual realization date either as a result of depreciation, writeoff or sale, pursuant to CMN Resolution 3565, of 05/29/2008. The realization occurred in the year totaled R$ 2,866 (R$ 2,437 as at 12/31/2010) and was used as the basis for profit distribution. c) Treasury shares - In R$ 1.00 The Bank holds 10,232 own shares, of which 8,088 are registered common shares (ON) and 2,144 are registered preferred shares (PN), bought back on 02/17/2009. These shares, whose fair value on 12/31/2011 represent, respectively, R$ 35.00 and R$ 38.00 per share, are held in treasury to be later disposed of or cancelled.

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d) Net Income - Allocations

Specification 1. Net income 2. Prior-year adjustment 3. Revaluation reserves transferred to retained earnings (accumulated losses) 4. Adjusted net income Legal reserve (item 1 x 5%) Dividends (Note 19.e) Interest on own capital (Note 19.e) 12/31/2011 314,799 2,397 317,196 15,740 95,700 73,526 132,230 12/31/2010 313,590 65,534 2,437 381,561 15,680 85,511 121,000 159,370

Statutory reserve (item 4 - Legal reserve - dividends - interest on own capital)

e) Dividends and interest on own capital Under the Banks bylaws, shareholders are entitled to minimum dividends of 25% of net income in the year, adjusted as defined by regulation. The Board of Directors proposed the General Shareholders Meeting the payment of dividends and interest on capital attributable to dividends equivalent to 50.0534% of the adjusted net income for the year. Dividends and interest on capital was as follows:
Specification 1. Net income for the year 2. Prior-year adjustments 3. Recorded legal reserve 4. Revaluation reserves transferred to retained earnings (accumulated losses) 5. Employees profit sharing (Note 24) 6. Calculation basis of dividends/interest on own capital 7. Interest own on capital in the year 8. Withholding income tax on interest on own capital 9. Interest on own capital attributed to dividends (item 7 plus item 8) 10. Interim interest on own capital adjusted by the SELIC rate 11. Additional interest on own capital (item 7 plus item 10) 12. Proposed dividends in the year 13. Interim dividends adjusted by the SELIC rate 14. Additional dividends (item 12 plus item 13) 15. Total attributed to shareholders (item 7 plus item 12) 50.0534% - Interest on own capital of R$ 0.80937744879 per common share (as at 12/31/2010: interest on own capital of R$ 1.331965889501 per common share) 12/31/2011 314,799 (15,740) 2,397 36,635 338,091 73,526 (99) 73,427 (66,478) 7,048 95,700 (95,700) 169,226 39,236 34,290 51,069 44,631 12/31/2010 313,590 65,534 (15,680) 2,437 44,238 410,119 121,000 (144) 120,856 (110,201) 10,799 85,511 (85,511) 206,511 64,569 56,431 45,631 39,880

- Interest on own capital of R$ 0.890315193449 per preferred share (as at 12/31/2010:

interest on own capital of R$ 1.465162478331 per preferred share) - Dividends of R$ 1,05345972612 per common share (as at 12/31/2010: Dividends of R$ 0,94130871072 per common share) - Dividends of R$ 1,15880569878 per preferred share (as at 12/31/2010: Dividends of R$ 1,0354395819 per preferred share)

The Bank calculated for preferred shares dividends and interest on own capital 10% higher that dividends/interest on own capital attributed to common shares, pursuant to Article 17, I, of Law 6404, of 12/15/1976, as reworded by Law 10303, of 10/31/ 2001 and the provision of Article 6, paragraph 2, of the Banks bylaws.

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Interest on own capital was accounted for in expenses, but, for purposes of disclosure of financial statements, has been reclassified to Retained earnings (accumulated losses). Total interest on own capital in the year generated a reduction in tax expenses of R$ 27,972. Employees profit sharing was added to the calculation basis of dividends and interest on capital, as established by Article 2 of Resolution 10, of 05/30/1995, of the CCE (Council for Coordination and Control of State-Owned Companies).

20.

OTHER OPERATING INCOME (EXPENSES)

Specification a) Income from services provided Investment funds management Funds and programs management Services provided b) Income from bank fees c) Personnel expenses Salaries Payroll charges Pension plan - CVM Resolution 600 Health care plan - CVM Resolution 600 Benefits, training, fees and compensation of interns d) Other administrative expenses Data processing Advertising and publicity Outside services Rentals, material and public utilities Travel expenses Communications Depreciation and amortization Asset maintenance and upkeep Surveillance, security and transportation Promotions, public relations and publications Financial system services Specialized technical services Insurance Court, Notary and Attorneys fees Trade Association Contribution and other Condominium fees, catering, kitchen and food FUNDECI (Science and Technology Development Fund) Other e) Tax expenses Cofins and PIS/PASEP (taxes on revenue) ISS (service tax) and IPTU (municipal real estate tax)/Improvement Other 2nd half 2011 690,624 7,728 574,302 108,594 15,300 (596,639) (310,480) (122,170) (32,652) (84,515) (46,822) (413,352) (67,097) (16,622) (142,606) (23,211) (7,996) (16,409) (13,952) (16,335) (17,685) (10,626) (10,066) (19,108) (2,125) (20,197) (355) (1,828) (10,000) (17,134) (96,622) (88,094) (7,584) (944) 12/31/2011 1,327,021 14,298 1,106,150 206,573 24,735 (1,081,293) (606,229) (235,373) (44,147) (109,239) (86,305) (775,242) (124,484) (29,309) (259,067) (44,698) (14,623) (30,519) (27,346) (31,612) (32,770) (19,874) (19,417) (34,580) (4,150) (50,248) (894) (3,586) (19,200) (28,865) (188,995) (173,177) (14,423) (1,395) 12/31/2010 1,233,992 12,630 923,079 298,283 12,768 (1,019,740) (532,497) (192,173) (98,600) (111,663) (84,807) (659,632) (123,984) (33,924) (178,752) (43,976) (14,775) (31,844) (25,551) (28,622) (26,525) (20,916) (17,082) (24,213) (3,813) (36,991) (956) (3,353) (16,200) (28,155) (173,182) (155,145) (15,416) (2,621)

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f) Other operating income Financial commission on investment funds management Negative exchange variation of loans obtained Reversal of Operating Provision on FNE transactions risks Recovery of charges and expenses Reversal of provisions for social contribution and income tax Reversal of operating provisions Interest and commissions Monetary adjustment Mark-to-market adjustments Monetary adjustment of taxes FNE - Recovery of amounts settled by the Bank Other g) Other operating expenses Exchange variation from exchange area Negative exchange variations on granted loans Negative adjustments on lending operations Discounts granted in renegotiations Interest on lending operations Tax risks Risks on FNE transactions Risks on FDNE transactions Labor lawsuits Civil lawsuits Other lawsuits Other contingent liabilities Hybrid debt/equity instruments FNE Compensation - Available Funds - Law 7827, Article 9-A FNE Compensation - Funds invested - Law 7827, Article 9-A Other TOTAL

574,230 428,100 6,903 11 6,734 2,019 386 1,627 39,074 112 52,728 36,536 (567,490) (5,188) (7,475) (1,052) (44,321) (7,709) (7,078) (250,907) (425) (13,460) (4,712) (96) (86,551) (64,069) (17,822) (41,439) (15,186) (393,949)

1,164,760 825,511 105,615 11 10,871 2,310 899 6,650 39,074 218 87,628 85,973 (1,019,815) (5,188) (82,425) (1,052) (48,509) (12,513) (12,881) (429,782) (1,316) (32,821) (20,584) (96) (86,551) (135,550) (34,892) (79,579) (36,076) (548,829)

927,571 691,906 99,578 847 8,703 131 8,229 2,868 4,420 181 56,614 54,094 (757,896) (964) (107,697) (160) (47,348) (18,175) (6,835) (406,384) (240) (40,428) (18,465) (10) (46,720) (33,063) (31,407) (436,119)

21.

INCOME TAX AND SOCIAL CONTRIBUTION a) Income tax and social contribution The Bank is subject to taxation on deemed income and pays income and social contribution taxes monthly on an estimated basis. Income tax expenses in the year of 2011 was R$ 181,082 (R$ 145,381 in 12/31/2010) and the social contribution tax expense was R$ 115,798 (R$ 93,598 in 12/31/2010), reconciled as shown below:

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BANCO DO NORDESTE DO BRASIL S.A.

a.1) Specification of the provision for income tax and social contribution expense Income before taxes on income, after interest on own capital and profit sharing Permanent additions/deductions Temporary additions/deductions Taxable income before utilization of tax loss carryforwards Offset of tax loss carryforwards Taxable income after utilization of tax loss carryforwards Current IRPJ/CSLL expenses, before tax incentives Deductions (tax incentives) Current IRPJ/CSLL expenses, after tax incentives Deferred IRPJ/CSLL expenses Total IRPJ/CSLL expenses % of current expenses in relation to income before taxation

Income tax 12/31/2011 12/31/2010 564,875 (51,043) 262,354 776,186 776,186 (193,024) 11,942 (181,082) (16,702) (197,784) 35.01% 366,676 108,644 280,319 755,639 (19,350) 736,289 (156,260) 10,879 (145,381) 40,558 (104,823) 28.59%

Social contribution 12/31/2011 12/31/2011 564,875 (51,252) 262,354 775,977 775,977 (115,798) (115,798) (10,021) (125,819) 22.27% 366,676 108,501 280,319 755,496 (20,354) 735,142 (93,598) (93,598) 24,335 (69,263) 18.89%

a.2) Specification of provision for income tax and social contribution Provision for income tax and social contribution expense Provision for taxes on the realization of revaluation reserve Provision for taxes on prior year adjustments Provision for income tax and social contribution Taxes for offset due to tax prepayments, including withholding taxes Adjustment for the period

Income tax 12/31/2011 12/31/2010 181,082 998 182,080 138,032 44,048 145,381 1,015 27,307 173,703 117,146 56,557

Social contribution 12/31/2011 12/31/2010 115,798 599 116,397 63,743 52,654 93,598 609 16,384 110,591 54,100 56,491

b) Tax credits on temporary differences Income tax and social contributions on temporary differences of allowances for doubtful accounts are recorded in conformity with the provisions of the following main standards: CMN Resolution 3059, of 12/20/2002 (amended by CMN Resolution 3355, of 03/31/2006), and Central Bank of Brazil Circular 3171, of 12/30/2002; and are based on technical studies performed on a six-monthly basis determining the probable realization of tax credits for a period of five years. In accordance with Central Bank of Brazil Circular Letter 3023, of 06/11/2002, the Bank recognized tax credits on adjustments to fair value of securities classified into the category available-for-sale securities. Changes in tax credits are shown below:
INCOME TAX Specification Opening balance as at 12/31/2010 (+) Credit recognition (-) Credit realization (=) Ending balance as at 12/31/2011 Temporary differences 173,336 73,511 (90,213) 156,634 Securities 8,671 2,259,150 (2,253,163) 14,658 SOCIAL CONTRIBUTION Temporary differences 104,017 44,120 (54,142) 93,995 Securities 5,202 1,355,490 (1,351,897) 8,795 TOTAL Temporary differences 277,353 117,632 (144,355) 250,629 Securities 13,873 3,614,640 (3,605,059) 23,453

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BANCO DO NORDESTE DO BRASIL S.A.

The balance of the income and social contribution tax, gains and losses, recognized in OTHER RECEIVABLES - other, is composed as follows:
Income tax Specification 1. Total temporary differences 2. Tax loss carryforwards 3. Total tax base (1 + 2) 4. Tax credits on temporary differences + tax loss carryforwards 5. Tax credits from mark-to-market of securities 6. Total tax credits ( 4 + 5) 7. Tax credits recognized in assets on temporary differences 8. Tax credits from mark-to-market of securities 9. Total tax credits (7 + 8) 10. Tax credits not recognized in assets ( 6 - "9) (1) 12/31/2011 3,262,708 3,262,708 815,678 14,658 830,336 156,634 14,658 171,292 659,044 12/31/2010 3,000,354 3,000,354 750,089 8,671 758,760 173,336 8,671 182,007 576,753 Social contribution 12/31/2011 3,262,708 3,262,708 489,406 8,795 498,201 93,995 8,795 102,790 395,411 12/31/2010 3,000,354 3,000,354 450,053 5,202 455,255 104,017 5,202 109,219 346,036

(1)

Not recorded in assets as they do not meet the realization requirements provided for in CMN Resolution 3355, of 03/31/2006.

The estimated realization of tax credits as of 12/31/2011 is as follows:

Realization of income tax credit Period Book value Present value Realization of social contribution tax credit Book value Present value Total Book value Present value

2012 2013 2014 2015 2016 TOTAL

56,063 13,045 10,401 13,266 63,859 156,634

51,096 10,765 7,802 9,069 39,826 118,558

33,638 7,827 6,240 7,960 38,330 93,995

30,658 6,459 4,681 5,442 23,904 71,144

89,701 20,872 16,641 21,226 102,189 250,629

81,754 17,224 12,483 14,511 63,730 189,702

The tax credits arising on the mark-to-market of securities determined at the present realizable value, pursuant to Central Bank of Brazil Circular 3068, of 11/08/2001, will be realized according to the maturities of the securities, as shown below:
Realization of income tax credit Period Book value 7,167 55 2,444 150 3,055 1,329 6 452 14,658 Present value 7,167 55 2,444 150 3,055 1,329 6 452 14,658 Realization of social contribution tax credit Book value 4,300 33 1,467 90 1,833 797 3 272 8,795 Present value 4,300 33 1,467 90 1,833 797 3 272 8,795 Book value 11,467 88 3,911 240 4,888 2,126 9 724 23,453 Total Present value 11,467 88 3,911 240 4,888 2,126 9 724 23,453

2012 2013 2014 2015 2016 2017 to 2019 2020 to 2022 2027 to 2029 TOTAL

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BANCO DO NORDESTE DO BRASIL S.A.

c)

Tax expenses
Specification Cofins and PIS/PASEP (taxes on revenue) ISS and IPTU/improvement contribution Other Total 2nd half 2011 (88,094) (7,584) (944) (96,622) 12/31/2011 (173,177) (14,423) (1,395) (188,995) 12/31/2010 (155,145) (15,416) (2,621) (173,182)

22.

PROVISIONS, CONTINGENT ASSETS AND OBLIGATIONS - TAX AND SOCIAL SECURITY

LIABILITIES

AND

LEGAL

a) Banco do Nordeste is a party to several administrative and judicial proceedings involving civil, tax, labor and other matters. To recognize a reserve and contingent liabilities, contingencies are classified in accordance with CMN Resolution 3823, of 12/16/2009 and BACEN Circular Letter 3429, of 02/11/2010. b) The assessment of the reserve and contingent liability, risk level of new lawsuits, and the reassessment of already existing lawsuits are made by the Legal Department, on case by case, and are classified according to the risk of loss, as probable, possible and remote. Such classification is based on the analysis of the following factors: i) reasonableness of the factual and legal arguments of the other party; ii) arguments and legal basis developed by Banco do Nordeste; iii) previous losses incurred by Banco do Nordeste final outcome in similar cases; iv) previous decisions of higher courts and supervisory authorities on the matters in litigation; v) decisions already made on each proceeding (decision, sentence, injunction, interim relief, writ of payment, writ of attachment, etc); and vi) existence of procedural errors in the administrative and judicial proceedings. c) Contingencies classified as probable losses are accounted for and represented by Civil Lawsuits (claiming compensation for pain and suffering and property damage, such as protest of notes, return of checks, and provision of information to credit reporting agencies, among others), Labor Lawsuits (claiming labor rights, in light of specific professional category legislation, such as overtime, salary equalization, job reinstatement, premium for transfer, termination pay, retirement supplementation including infringement notices issued by Regional Labor Offices and others), Tax and Social Security Lawsuits (represented by judicial and administrative proceedings involving federal and municipal taxes) and Other Lawsuits (such as infringement notices issued by Regional Councils that regulate the exercise of professions). Taking into consideration that the procedures adopted by Banco do Nordeste are in compliance with legal and regulatory provisions, Management understands that the reserves recorded are sufficient to cover losses arising from the respective judicial and administrative proceedings.

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BANCO DO NORDESTE DO BRASIL S.A.

d) The Bank recognized a provision for the total estimated loss on lawsuits classified as probable losses, as well as for those classified as Legal Obligation pursuant to the terms of BACEN Circular Letter 3429, of 02/11/2010, regardless of the legal counsels assessment of loss, and provisions are not applicable to lawsuits classified as possible and remote losses, as shown in the comparative chart for 12/31/2011 and 12/31/2010:
12/31/2011 Specification 1.PROVISION FOR TAX CONTINGENCIES (note 16.d) 1.1 Taxes - Legal Obligation 1.2Tax lawsuits 1.2.1 Legal Obligation 1.2.2 Other Obligations Probable Possible Remote 2.PROVISION FOR CONTINGENT LIABILITIES (note 16.h) 2.1Labor lawsuits Probable Possible Remote 2.2Civil lawsuits Probable Possible Remote (1) 2.3Other lawsuits Probable Possible Remote Base value Provision Quantity Provision 12/31/2010 Base value Quantity

82,269 850,647 1,063 849,584 29,246 617,180 203,158

82,269 30,309 1,063 29,246 29,246 -

1 201 10 191 -

74,847 554,803 551 554,252 26,127 363,126 164,999

74,847 26,678 551 26,127 26,127 -

1 179 7 172 -

263,035 182,824 31,463 48,748 2,519,657 106,653 467,538 1,945,466 697 140 556 1

182,824 182,824 106,653 106,653 140 140 -

802 4,984 44 -

226,032 161,863 25,716 38,453 1,834,025 92,970 350,839 1,390,216 3,947 65 1,770 2,112

161,863 161,863 92,970 92,970 65 65 -

802 4,590 65 -

Note: (1) The change in contingent liabilities classified as remote risk, related to civil lawsuits, as compared to December 31, 2010, was mainly due to: a) A lawsuit claiming compensation for pain and suffering, property damage, court costs, whose change in contingent liability totaled R$ 83,518; b) A lawsuit claiming payment of an extra contribution (CAPEF), whose change in contingent liability totaled R$ 95,596; and c) A lawsuit claiming refunding of unduly paid amounts, whose change in contingent liability totaled R$ 36,275. In the aggregate, changes in these lawsuits totaled the net amount of R$ 215,389.

e) Changes in the provision for contingent liabilities are as follows:

Specification i) Taxes (Legal Obligation) Opening balance Recognition Reversal/utilization/write-off Closing balance ii) Tax lawsuits (Legal Obligation) Opening balance Recognition Reversal/utilization/write-off Closing balance iii) Tax lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance 12/31/2011 74.847 8.933 (1.511) 82.269 551 512 1.063 26.127 4.916 (1.797) 29.246 12/31/2010 71.343 4.149 (645) 74.847 551 551 23.824 2.987 (684) 26.127

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BANCO DO NORDESTE DO BRASIL S.A.

iv) Labor lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance v) Civil lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance vi) Other lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance vii) Vacation Opening balance Recognition Reversal/utilization/write-off Closing balance viii) FNE Opening balance Recognition Reversal/utilization/write-off Closing balance ix) FDNE Opening balance Recognition Reversal/utilization/write-off Closing balance x) PROAGRO Opening balance Recognition Reversal/utilization/write-off Closing balance xi) Other contingent liabilities Opening balance Recognition Reversal/utilization/write-off Closing balance

161.863 34.203 (13.242) 182.824 92.970 23.836 (10.153) 106.653 65 159 (84) 140 52.818 68.777 (63.262) 58.333 1.177.757 429.774 (220.724) 1.386.807 277 1.316 1.593 3.299 3.299 86.551 86.551

150.741 44.785 (33.663) 161.863 95.338 38.025 (40.393) 92.970 567 12 (514) 65 39.346 67.870 (54.398) 52.818 956.261 409.232 (187.736) 1.177.757 37 240 277 3.299 3.299 -

f) The Bank has lawsuits handled by outside attorneys, most of which relates to loan collection actions, whose assessment of the contingent liabilities is performed by the Legal Department, pursuant to item b, mentioned above. g) Tax lawsuits classified as Legal Obligation pursuant to the terms of BACEN Circular Letter 3429 of 02/11/2010, whose amounts were presented in item d, subitems 1.1 and 1.2.1 discuss, respectively, IRPJ 1999 and ISSQN. h) Below, a brief description of the lawsuits involving the most relevant contingent liabilities in which the Bank is a party, classified as possible risk of loss. - Tax lawsuit filed to annul the tax assessment notice relating to the ISSQN levied on income from services provided. Estimates of financial losses from possible risks totals R$ 276,218 as at 12/31/2011. As the lawsuit was filed on 02/02/2011, there was no estimate of loss as at 12/31/2010.

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BANCO DO NORDESTE DO BRASIL S.A.

- Two tax lawsuits aiming at cancelling tax assessment notices referring to ISSQN levied on service provision income. Estimates of financial losses from possible risks, on base date 12/31/2011, represent, respectively, R$ 160,547 and R$ 108,879. As at 12/31/2010, they represented, respectively, R$ 131,730 and R$ 85,032, both with possible risk level. - Civil lawsuit filed to claim loss of profits and payment of management fees under the allegation of losses incurred due to the interruption of financial onlendings contracted for the construction of a commercial establishment. As at 12/31/2011, possible loss is estimated at R$ 83,321. As at 12/31/2010, remote loss from such lawsuit was estimated at R$ 1, whose amount was set in the complaint. - Civil lawsuit filed to claim refund of overpayment under the allegation of undue collection and withholding. As at 12/31/2011, possible loss is estimated at R$ 32,459. As at 12/31/2010, possible loss from this lawsuit was estimated at R$ 27,147. - A civil lawsuit claiming compensation for property damage, pain and suffering, and loss of profits as, allegedly, the Bank did not assume certain responsibilities as set forth by the Technical and Financial Cooperation Agreement and the Partnership Agreement, nor granted financing for the struthioculture activity (ostrich growing). As at 12/31/2011, and 12/31/2010, possible loss from this lawsuit is estimated at R$ 22,624 and R$ 18,921, respectively. i) Escrow and appeal deposits made to guarantee legal and administrative proceedings, recognized for probable, possible and/or remote contingent liabilities, are as follows:
Specification Labor claims Tax claims Civil claims TOTAL 12/31/2011 414,916 197,267 23,825 636,008 12/31/2010 162,830 169,532 16,878 349,240

j) Of the total provisions recognized in Provisions for Contingent Liabilities/FNE in 2011, the amount of R$ 72,753 refers to amounts recorded under BACEN Official Letter GTRJA/Cosup-03/2011/77, of 12/22/2011, based on the provisions of article 3 of CMN Resolution 2682, of 12/21/1999. k) The amount of R$86,551, recognized in Other Contingent Liabilities, refers to provisions arising from risk reclassification of 153 lending transactions, recommended by BACEN by means of Official Letter GTRJA/Cosup-03/2011/77, of 12/22/2011. This provision will be reversed or transferred to the relevant allowance account to meet credit risks, as the analysis of this reclassification occurs.

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BANCO DO NORDESTE DO BRASIL S.A.

23.

EMPLOYEES AND OFFICERS COMPENSATION As at 12/31/2011, the monthly compensation paid by the Bank to its employees is as follows in R$ 1.00:
Gross compensation (1) Maximum Minimum Average 12/31/2011 26,481,45 948,65 6,983,98

Note: (1) Includes overtime (including night shift premium), when actually worked.

As at 12/31/2011, the annual compensation paid by the Bank to the Executive Board, Board of Directors and Supervisory Board is as follows in R$ 1.00:
12/31/2011 Gross compensation Highest individual compensation Lowest individual compensation Average individual compensation Number of members (2) Gross compensation (1) Highest individual compensation Lowest individual compensation Average individual compensation Number of members (2) Gross compensation (1) Highest individual compensation Lowest individual compensation Average individual compensation Number of members (2) 32,591.00 32,591.00 32,838.88 6 Supervisory Board 32,591.00 32,591.00 32,475.56 5 30,889.33 30,889.33 30,311.52 5
(1)

12/31/2010 Executive Board

471,963.15 441,962.10 452,923.95 7 Board of Directors

461,242.05 356,538.74 400,675.96 7

30,889.33 30,889.33 30,292.26 6

Notes: (1) Amounts approved at the 58th Annual Ordinary Shareholders Meeting and the 88th Extraordinary Shareholders Meeting of Banco do Nordeste, both of which held on 04/01/2011. (2) The number of members corresponds to the annual average number of members of each body calculated on a monthly basis.

As at 12/31/2011, the Bank had 6,077 employees (5,993 as at 12/31/2010), a increase of 1.40% in the Banks headcount in the period.

24.

PROFIT SHARING In the year, the Bank accrued R$ 37,077, for profit sharing of the Banks employees and officers, being R$ 36,635 relating to employees profit sharing, equivalent to 21.65% of dividends and interest on own capital and 11.64% of net income the year.

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BANCO DO NORDESTE DO BRASIL S.A.

25.

EMPLOYEE BENEFITS Pursuant to CVM Resolution 600, of 10/07/2009, which approved Technical Pronouncement CPC 33 - Employee Benefits, the employee benefit policy and the accounting procedures adopted by Banco do Nordeste for recognizing its obligations are as follows: a) The Bank does not have: - Severance pay benefits; - Others Long-term benefits; - Stock-based compensation. b) Accounting policy adopted by the Bank to recognize actuarial gains and losses The policy adopted for the recognition of actuarial gains and losses, beginning December 2010, is in line with item 93 of the Appendix to CVM Resolution 600, that is, actuarial gains and losses are immediately recognized as revenue or expense. The policy previously adopted for the recognition of actuarial gains and losses was based on items 52 to 55 of the Appendix to CVM Resolution 371, i.e., the Bank recognized a portion of actuarial gains and losses in excess of the higher of: 10% of the present value of the defined benefit actuarial obligation and 10% of the fair value of the plans assets. c) General description of Benefit Plan Characteristics

c.1) Benefit Plan The Bank sponsors two benefit plans managed by the Caixa de Previdncia dos Funcionrios do Banco do Nordeste do Brasil (CAPEF), a private pension entity which provides the payment of social security supplementary benefits to participant employees and their beneficiaries. The Defined Benefit (BD) plan, which is not open to new participants since 11/26/1999, and the Variable Contribution (CV I) plan, authorized to operate through Administrative Rule MPS/PREVIC/DETEC 189, of 03/25/2010, started operations on 05/19/2010, when it received the first contributions. These plans offer retirement benefits for length of contribution, age and disability to the plan participants and pension benefits to their dependents. c.1.1) Actuarial Method Classified as defined benefit, the BD plan adopts the financial system of capitalization in the actuarial calculation of mathematical provisions related to all benefits offered to its participants and dependents.

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BANCO DO NORDESTE DO BRASIL S.A.

CV-I plan combines the characteristics of the defined contribution plan and the defined benefit plan, and is classified, pursuant to CVM Resolution 600, as a defined benefit plan. This plan adopts the financial system of capitalization in the actuarial calculation of mathematical reserves related to planned benefits and the coverage capital regime for the other benefits offered to its participants and dependents. c.1.2) Past-due Obligations and Contributions Due As at 12/31/2011, the Bank has no past due obligations or contribution debts referring to plans BD and CV I, neither informal practices that originate constructive obligations included in the measurement of the plans defined benefit obligation. c.1.3) Contribution Ratio (Participants/Sponsor) The ratio of participant contributions to Bank contributions meets the parity set by Constitutional Amendment 20, of 12/15/1998, with a contribution ratio of 1:1 as at 12/31/2011 (1:1, as at 12/31/2010). c.1.4) Actuarial Position

On 12/31/2011, the BD plan reported an actuarial surplus of R$ 3,645 (surplus of R$ 6,311 as at 12/31/2010), whose main impacts were gains on investments of R$ 238,201, reversal of contingencies of R$ 11,942, and expenditures of R$ 252,809, arising from increased plan obligations, payment of benefits and administrative expenses. There was a decrease in the mathematical reserves of the benefit plan by R$ 16,750, due to the review of the benefit plan funding by increasing the maximum contribution rate of the covered participants from 21.25% to 21.50%, beginning 01/01/2012. The CV I plans actuarial position as at 12/31/2011 is balanced, since all the existing actuarial liabilities, totaling R$ 63,785, have defined contribution. c.2) Health Care Plan

Banco do Nordeste is the sponsor of the health care plan managed by Caixa de Assistncia dos Funcionrios do Banco do Nordeste do Brasil - CAMED, whose primary purpose is to provide health care to its associates and dependents participating in the Natural Plan, through granting of subsidies to cover or reimburse health promotion, protection and recovery expenses. c.2.1) Past-due Obligations and Contributions Due As at 12/31/2011, the Bank has no past due obligations or contribution debts referring to this plan, neither informal practices that originate constructive obligations included in the measurement of the plans defined benefit obligation.

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BANCO DO NORDESTE DO BRASIL S.A.

c.2.2)

Contributions

The Natural Plan is funded primarily by contributions made by the associates, contributions related to the enrolment of natural dependents, financial protection and emergency service fees, financial co-participation paid by each associate for services utilized and matched contributions from sponsors. d) Reconciliation of the opening and closing balances of the obligations present value The reconciliation of the opening and closing balances of the obligations present value is shown below, according to actuarial valuations conducted by PROBUS Suporte Empresarial S/S Ltda., based on information provided by CAPEF, CAMED and the Bank, in compliance with the provisions of CVM Resolution 600:
CAPEF BD Plan Specification 1. Present value of actuarial obligations at beginning of year 2. Cost of current service 3. Interest cost 4. Cost of past service 5. Benefits Paid by the Plan (1) 6. Contributions from Members, Retirees, and Pensioners 7. Administrative expenses paid by the plan 8. Actuarial Losses (Gains) on Actuarial Obligation (2) 9. Present value of the Actuarial obligation, at the end of the year 12/31/2011 3.109.048 16.743 331.595 (256.183) 51.900 (7.765) (25.348) 3.219.990 12/31/2010 2.738.730 17.359 309.271 (239.416) 52.425 (7.786) 238.465 3.109.048 CV I Plan 12/31/2011 16.494 45.267 1.673 (52) (1.689) (1.162) 60.531 12/31/2010 18.024 (788) (742) 16.494 CAMED Natural Plan 12/31/2011 492.916 54.109 52.572 (68.015) 11.792 (15.501) 73.445 601.318 12/31/2010 469.032 39.443 52.965 (52.924) 10.201 (13.633) (12.168) 492.916

Notes: (1) CAMED: Natural Plan - Net of co-contributions made by members; (2) Equilibrium number.

e) Analysis of actuarial obligation Pursuant to CVM Resolution 600, of 12/31/2011, the present value of the actuarial obligation of the plans managed by CAPEF and CAMED, recorded as Liabilities in the Bank, is as follows: a) Private Pension Plan i. BD Plan: the actuarial obligations present value, amounting to R$ 3,219,990, is partially funded by plan assets in the amount of R$ 2,762,074, resulting in a present value of uncovered actuarial obligations of R$ 457,916; ii. CV I Plan: the actuarial obligations present value, in the amount of R$ 60,531, is fully funded by plan assets of the same amount, R$ 60,531; therefore, there are no uncovered actuarial obligations for that plan;

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BANCO DO NORDESTE DO BRASIL S.A.

b) Healthcare plan the actuarial obligations present value, in the amount of R$ 601,318, is partially funded by plan assets amounting to R$ 73,826, resulting in uncovered actuarial obligations present value of R$ 527,492. f) Reconciliation of the opening and closing of the fair value of plan assets:
CAPEF CAMED BD Plan CV I Plan Natural Plan 12/31/2011 12/31/2010 12/31/2011 12/31/2010 12/31/2011 12/31/2010 2,618,418 375,219 2,846 54,662 (256,183) 51,900 (7,765) (77,023) 2,762,074 2,255,509 296,148 3,477 55,871 (239,416) 52,425 (7,786) 202,189 2,618,418 16,494 2,336 22,707 22,559 (52) (1,689) (1,824) 60,531 9,049 8,975 (788) (742) 16,494 58,171 5,747 22,404 43,902 (68,015) 11,792 (15,501) 15,326 73,826 11,789 1,535 20,158 139,250 (52,924) 10,201 (13,633) (58,205) 58,171

Specification 1. Plan assets' fair value at beginning of year 2. Expected return on plan assets 3. Contributions received from active participants 4. Contributions received from the employer (1) 5. Benefits paid by the plan (2) 6. Contributions received from beneficiaries 7. Administrative expenses paid by the plan 8. Actuarial gains (losses) on the Plan assets (3) 9. Plan assets' fair value at the end of year

Notes: (1) CAPEF - BD Plan: Contributions related to active participants and beneficiaries; CAMED - Natural Plan: Contributions related to members and co-contributions paid by the employer; (2) CAMED - Natural Plan: Net of co-contributions paid by the members; (3) Equilibrium number.

g) Reconciliation of the obligations present value and plans assets value to assets and liabilities recognized in the balance sheet:
CAPEF BD Plan Specification 1. Present value of actuarial obligation 2. Fair value of plan assets 3. Present value of the uncovered actuarial obligation (1) - (2) 4. Liability recognized in the balance sheet 12/31/2011 3.219.990 (2.762.074) 457.916 457.916 12/31/2010 3.109.048 (2.618.418) 490.630 490.630 CV I Plan 12/31/2011 60.531 (60.531) 12/31/2010 16.494 (16.494) CAMED Natural Plan 12/31/2011 601.318 (73.826) 527.492 527.492 12/31/2010 492.916 (58.171) 434.745 434.745

h) Expense recognized in the statement of income:

Specification CAPEF BD Plan CV I Plan 12/31/2011 12/31/2010 12/31/2011 12/31/2010 17,359 (3,477) 309,271 (296,148) 36,276 26,495 89,776 45,267 (22,707) 1,673 (2,336) 662 22,559 18,024 (9,049) 8,975 CAMED Natural Plan 12/31/2011 12/31/2010 54,109 (22,404) 52,572 (5,747) 58,119 136,649 39,443 (20,158) 52,965 (1,535) 46,037 116,752

1. Cost of current service 16,743 2. Employees Contributions (1) (2,846) 3. Cost of interest 331,595 4. Expected return on plan assets (375,219) 5. Recognized actuarial (gain) loss in the period 51,675 6. Recognized cost of past service in the period 7. Expense recognized in Income 21,948 Note: (1) Contributions received from active participants

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BANCO DO NORDESTE DO BRASIL S.A.

i) Percentage of each plan assets main category in relation to plan assets total fair value:
CAPEF Specification BD Plan 12/31/2011 85.44% 4.81% 6.33% 3.41% 0.01% 12/31/2010 82.92% 5.79% 5.36% 3.55% 2.38% CVI Plan_ 12/31/2011 85.04% 14.96% 0.00% 0.00% 0.00% 12/31/2010 98.66% 0.00% 0.00% 0.00% 1.34% CAMED Natural Plan 12/31/2011 8.19% 91.13% 0.68% 0.00% 0.00% 12/31/2010 22.67% 45.91% 2.19% 0.00% 29.23%

Fixed income Variable income Real Estate Investments Loans and Financing Other Amounts included in plan assets fair values Financial instruments of the Bank In properties/other assets used by the Bank

1.36% 0.67%

1.45% 0.68%

0.00% 0.00%

0.00% 0.00%

8.19% 0.68%

68.58% 0.00%

j) Actual return of Plan assets:

Specification 1. Expected return on plan assets 2. Actuarial Gain (loss) on plan assets 3. Effective return of Plan assets (item 1 + item 2) CAPEF CAMED BD Plan CV I Plan Natural Plan 12/31/2011 12/31/2010 12/31/2011 12/31/2010 12/31/2011 12/31/2010 375,219 (77,022) 298,197 296,148 202,189 498,337 2,336 (1,824) 512 (742) (742) 5,747 15,324 21,071 1,535 (58,205) (56,670)

k) Present value of the obligation, fair value of assets, and surplus (deficit) in current semester and the last three years.
CAPEF Specification 12/31/2011 BD Plan CVM Resolution 600 12/31/2010 12/31/2009 12/31/2008 CV I Plan CVM Resolution 600 12/31/2011 12/31/2010

1. Defined benefit obligation 2. Plan assets 3. Surplus (deficit) 4. Experience adjustments on plan liabilities a. Amount b. Percentage 5. Experience adjustments on plan assets a. Amount b. Percentage

(3,219,990) 2,762,074 (457,916)

(3,109,048) 2,618,418 (490,630)

(2,738,730) 2,255,509 (483,221)

(2,240,717) 1,967,903 (272,814)

(60,531) 60,531 -

(16,494) 16,494 -

25,348 (0.79%)

(238,465) 7.67%

(392,699) 14.34%

1,162 (1.92%)

742 (4.50%)

(77.023) (2.79%)

202.189 7.72%

107.755 4.78%

(1.824) (3.02%)

(742) (4.50%)

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BANCO DO NORDESTE DO BRASIL S.A.

Specification 12/31/2011 1. Defined benefit obligation 2. Plan assets 3. Surplus (deficit) 4. Experience adjustments on plan liabilities a. Amount b. Percentage 5. Experience adjustments on plan assets a. Amount b. Percentage (601,318) 73,826 (527,492) (73,445) 12.21% 15,326 20.76%

CAMED Natural Plan 12/31/2010 (492,916) 58,171 (434,745) 12,168 (2.47%) (58,205) (100.06%)
CVM Resolution 600 12/31/2009 12/31/2008

(469,032) 11,789 (457,243) (72,418) 15.44% (6,670) (56.58%)

(366,769) 23,617 (343,152) -

l) 2012 Estimated contributions l.1) Opening Data

CAPEF Specification 1. Nominal discount rate at beginning of year 2. Nominal rate of expected return on plan assets at beginning of year 3. Projected interest payroll (1) 4. Cost of current service 5. Expected active participants contributions (1) 6. Fair value of plan assets at beginning of year 7. Present value of actuarial obligation at beginning of year Note: (1) Amounts extracted from the actuarial cash flow. BD Plan 10.75% 13.34% 50,274 21,794 3,344 2,762,074 3,219,990 CV I Plan 10.75% 14.41% 234,574 41,472 20,805 60,531 60,531 CAMED Natural Plan 10.75% 11.20% 56,580 21,570 73,826 601,318

l.2) Estimated Expected Cost:

CAPEF Specification 1. Cost of current service 2. Employee Contributions (1) 3. Cost of interest 4. Expected return on plan assets 5. Recognized actuarial (gain) loss for the period 6. Estimated Expenses to be recognized in income/losses for the period BD Plan 21,794 (3,344) 346,120 (368,461) 51,675 47,784 CV I Plan 41,472 (20,805) 6,507 (8,723) 662 19,113 CAMED Natural Plan 56,580 (21,570) 64,636 (8,269) 58,119 149,496

Note: (1) Employee contributions relate to active participants expected for the year.

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m) Assumptions used m.1) Biometric Assumptions:

BD Plans (CAPEF) and Natural Plan (CAMED) AT2000 Men IAPC experience - Weak (1) CAPEF experience - Weak (2) None

Specification General mortality table for active employees Disability mortality table Disability table Turnover table

CV I Plan (CAPEF) AT2000 Men IAPC experience - Weak (1) -

Notes: (1) The disability mortality table used results from the application of factor 0.5 on mortality rates of the original IAPC table; (2) The disability table used results from the application of factor 0.5 on disability rates of the original CAPEF experience table.

m.2) Economic Assumptions:

CAPEF % p.a. Specification Effective discount rate for actuarial obligation Future inflation rate Expected nominal return rate on plan assets Estimated effective salary increase rate Effective growth rate of the plan benefits Effective growth rate of INSS benefits Effective growth rate of social security expenses BD Plan 5,98 4,50 13,34 1,00 0,00 0,00 5,98 CV I Plan 5,98 4,50 14,41 0,00 0,00 5,98 CAMED % p.a. Natural Plan 5,98 4,50 11,20 1,00 0,00 3,20 5,98

m.3) Future inflation rate is used in the calculation of the Present Value of Actuarial Obligation to measure fluctuations in inflation rates due to the freezing, by annual cycles, of future contributions and benefits, this calculation also assumes the occurrence of the same inflation level for all salary, benefit, pension and economic variables of the plan. m.4) The actuarial evaluation method used is the Projected Unit Credit Method to determine the present value of the obligation, cost of current service and, when necessary, for the calculation of past service cost. n) Effect of the one percentage point increase and the one percentage point decrease in the assumed medical cost trend rates:
Effect of one percentage point change in the evolution rate of medical costs Effect on aggregate service and interest costs Effect on defined benefit obligation One percentage point increase 14,674 82,125 One percentage point decrease (7,762) (68,341)

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o) Additional comments o.1) Current expenses - obligations for the period, derived from the increase in the length of service provided by employees; o.2) Net actuarial (gains)/losses - obligations for the period, derived from changes in actuarial assumptions adopted or discrepancy between assumptions used and actual results. These obligations are recognized according to the rules for recognition of actuarial gains and losses - item b of this note; o.3) Cost of past service - obligations derived from the increase in post-employment benefits related to services provided by employees in past periods. The recognition of expenses related to cost of past service is based on items 96 to 101 of the Appendix to CVM Resolution 600; and o.4) There are no contingent liabilities related to post-employment benefit obligations in Banco do Nordeste.

26.

NORTHEAST CONSTITUTIONAL FINANCING FUND (FNE) a) The total assets of FNE, totaling R$ 37,747,461 (R$ 33,326,631 as at 12/31/2010) are recorded in the Banks memorandum accounts (Net assets of managed public funds). b) The Funds cash and cash equivalents, totaling R$ 4,576,207 (R$ 3,653,134 as at 12/31/2010), recorded in Other liabilities/Financial and development funds bears interest at extra-market rate. The expense of interest on cash and cash equivalents totaled R$ 445,076 (R$ 315,708 as at 12/31/2010). c) The allowance to cover the risk on FNE transactions is recognized pursuant to the following criteria: c.1) The Bank is free from operational risk in transactions contracted until 11/30/ 1998; c.2) For operations contracted beginning 12/01/1998, excluding Land Program financing lines granted under the PRONAF (groups A, B, A/C, Forest, Semiarid, Emergency, Flood and Drought), is 50 percent of the amount calculated pursuant to CMN Resolution 2682, of 12/21/1999; and c.3) The Bank assumes all the risks on credit renegotiated and reclassified FNE loan transactions, as set forth by Law 11775, of 09/17/2008, and transactions recognized in the Funds Interbank accounts, as prescribed by Ministry of Integration Administrative Rule 616, of 05/26/2003.

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The balances of financing and allowances accounted for in the Banks Contingent liabilities are as follows:
Risk rating AA A B C D E F G H TOTAL Balances 2,786,457 11,429,317 8,880,056 899,438 599,739 281,753 262,615 225,288 2,113,108 27,477,771 Allowance as at 12/31/2011 28,549 44,875 13,453 30,004 42,434 66,089 86,689 1,074,714 1,386,807 Allowance as at 12/31/2010 25,186 35,642 9,232 17,470 31,192 72,859 56,646 929,530 1,177,757

d) The Banks financial commission on transactions entered agreement by 11/30/1998 is zero. The Banks financial commission on transactions entered as agreement after this date is 3% p.a., when the risk is 50%, and 6% p.a. when the Bank is a direct party to the transaction backed by onlendings based on Art 9- A of Law 7827, of 09/27/1989. In operations reclassified for FNE based on Law 11775, of 09/17/2008, financial commission is 3% p.a. or 6% p.a., as regulated by Interministerial Rule 245, of 10/14/2008, of the Ministry of Finance and Ministry of National Integration. Income from financial commission totaled R$ 822,771 (R$ 690,226 as at 12/31/2010). e) The management fee of 3% p.a. is calculated on the Funds net equity, less the amounts linked to the onlending agreement entered into with the Bank, balances of onlendings to other institutions with the risk fully assumed by the Bank, and the balances of PRONAF investments (Groups B, A/C, Forest, Semiarid, Emergency, Flood and Drought), and is limited to 20% of the transfers made by the National Treasury each fiscal year. The management fee totaled R$ 993,540 (R$ 816,783 as at 12/31/2010).

27.

WORKERS ASSISTANCE FUND (FAT) The Workers Assistance Fund (FAT) is a special financial-accounting fund linked to the Ministry of Labor and Employment (MTE), whose purpose is to finance the Unemployment Insurance, Salary Bonus and Economic Development Programs. The main actions financed by the Bank with funds from FAT are as follow:
Specification Special Program to Fight Drought Effects PROGER URBANO - Investment FAT - Infrastructure PRONAF - Investment PROGER-RURAL - Cost PRONAF - Cost PROGER-RURAL - Investment PROTRABALHO - Investment PNMPO - National Program for Guided Productive Microcredit TOTAL TADE 16/2006 17/2006 18/2006 19/2006 20/2006 01/2007 02/2007 04/2007 01/2010 AMOUNT 2,036 19,097 274,523 812 1,661 1,410 22,182 139,932 97,106 558,759

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Funds derived from the Fund for Workers Assistance (FAT), recorded under Interestbearing special deposits, totaling R$ 622,390 (R$ 686,792 as at 12/31/2010) are subject to SELIC (Central Bank overnight rate) while they are not used in lending operations, and to TJLP after they are released to final borrowers. Available funds bearing interest at SELIC totaled R$ 50,795 (R$ 370,420 as at 12/31/2010). Pursuant to CODEFAT (Board of the Workers Assistance Fund) Resolution 439, of 06/02/2005, these funds began to be reimbursed to FAT on a monthly basis, with a minimum amount equivalent to 2% calculated on the total balance of each TADE (FAT Special Deposit Allocation Statement), plus cash that meets the following conditions, considering the period they remain in the Banks cash: - After 2 months, with respect to the reimbursements of the final borrowers, not reused in new financing:
Return of FAT resources Specification Special Program to Fight Drought Effects PROGER URBANO - Investment FAT - Infrastructure PRONAF - Investment PRONAF - Cost PROTRABALHO - Investment PNMPO - National Program for Guided Productive Microcredit TOTAL TADE Resolution 16/2006 17/2006 18/2006 19/2006 01/2007 04/2007 01/2010 Form (1) RA RA RA RA RA RA RA R.A. 2,635 26,066 120,350 344 118 43,277 8,332 201,122 SELIC rate 10 996 11,266 11 4 264 1,102 13,653 Available TMS (2) 85 13,293 20,404 192 69 3,320 13,432 50,795 12/31/2011 TJLP (3) used 9,838 62,810 249,455 484 77 159,625 89,306 571,595 TOTAL 9,923 76,103 269,858 676 146 162,945 102,738 622,389

Return of FAT resources Specification Special Program to Fight Drought Effects PROGER URBANO - Investment FAT Infrastructure (4) PRONAF - Investment PROGER RURAL - Cost PRONAF - Cost PROGER RURAL - Investment PROTRABALHO - Investment PNMPO - National Program for Guided Productive Microcredit TOTAL Notes: TADE Resolution 16/2006 17/2006 18/2006 19/2006 20/2006 01/2007 02/2007 04/2007 01/2010 Form (1) RA RA RA RA RA RA RA RA RA R.A. 3,169 20,950 8,389 296 496 92 3,186 52,103 402 89,083 SELIC rate 17 460 627 9 7 3 31 985 121 2,260 Available TMS (2) 155 18,200 328,476 200 73 3,535 19,781 370,420

12/31/2010 TJLP (3) used 11,776 60,448 50,731 782 182 192,453 316,372 TOTAL 11,931 78,648 379,207 982 255 195,988 19,781 686,792

(1) RA - Automatic Return (Monthly, 2% on balance) and AV - Available Balance less deposits made in the last 3 months and reimbursements in the last 2 months. (2) Funds yielding SELIC rate. (3) Funds yielding Long-term Interest Rate (TJLP). (4) Regarding FAT - Infrastructure, RA is 1% on the balance and deductible reimbursements refer to the last 4 months.

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28. RISK MANAGEMENT AND BASEL RATIO a) Risk and capital management Introduction and overview The Bank is exposed to the following risks arising from the use of financial instruments: - credit risk; - liquidity risk; - market risk; and - operational risk. Risk management structure The Executive Board is responsible for approving risk policies and subsequent reporting to the Board of Directors. The Control and Risk Executive Board coordinates the implementation of risk policies and monitors the performance of risk management areas. The Corporate Risk Management Committee analyzes and approves the risk management matters reported to senior management levels, as well as those to be implemented by lower management levels. Specific area coordinates the operational risk management and manages at corporate level: a) credit, liquidity, market and operational risks, b) proposes the definition of credit, liquidity, market and operational risk management methodologies and models; c) disseminates the risk management culture throughout the Bank. Risk management policy The corporate risk management policy sets forth guidelines and standards related to the Banks activities for credit, liquidity, market and operational risk management. The risks do not comprise solely threats since opportunities are also risk events, mainly at strategic level. Without ignoring the opportunities presented to the Bank, which are duly evaluated, the guidelines set in the Bank's corporate risk management policy are also focused on the management of risks affecting the attainment of corporate goals, including the related controls.

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a.1) Credit risk The credit risk is defined as the risk of incurring losses associated to the default by the borrower or counterparty of financial obligations under the agreed terms and conditions, the impairment of a loan agreement arising from the downgrading of the borrowers risk rating, the decrease in gains or returns, the advantages granted in renegotiations, and the costs of recovery. The credit risk comprises: - the counterpartys credit risk, including obligations related to derivatives; - the risk related to decisions taken by the government of the country where the borrower or counterparty is located, as well as problems with the conversion of amounts received; - the disbursement risk to honor guarantees, co-obligations, loan commitments or other similar operations; and - the risk of nonperformance of financial obligations under the terms agreed by the intermediary party or assignor of lending operations.
Exposures by economic sector Exposure 12/31/2011 27,900,112 1,527,360 26,372,752 2,854,921 835,083 242 6,563,170 4,414,467 262,718 1,165,074 196,285 5,983,626 4,097,166 14,879,825 12,631,707 4,415,402 8,216,305 188,842 1,147,537 911,739 1,872,530 44,652,467 12/31/2010 25,403,408 1,552,553 23,850,855 2,038,548 522,239 242 4,183,965 3,404,530 692,004 762,969 172,320 6,327,219 5,746,819 13,130,399 10,611,256 4,327,417 6,283,839 407,114 1,022,417 1,089,612 1,520,759 40,054,566

LENDING OPERATIONS AND CO-OBLIGATIONS Public sector Private sector Trade Foreign trade Housing Industry Infrastructure Financial intermediation Urban microfinancing Individuals Rural Other services MARKET OPERATIONS Federal Government Securities Repurchase agreements Other Interbank deposits Other securities Other operations OTHER ASSETS Total exposures

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a.2) Credit risk management The credit risk management guidelines comprise: 1) Risk limits: All lending operations are supported by risk limits. In general, these limits are approved by committees, from branches to the Executive Board, based on specific models to customers in the rural, industrial, commercial and service sectors. 2) Risk assessment: The risk limits are preceded by risk assessment, based on models prepared in accordance with the customer's and operation's characteristics, namely: i) smallsized customers, in terms of amounts of liabilities in the Bank, mainly comprised of small rural producers and micro urban entrepreneurs - the risk assessment comprises analysis of customers personal information and the operations conformity with the standards of each financing program, whose conditions aim at selectively meeting the borrowers needs; ii) medium-sized customers, in terms of amounts of liabilities in the Bank - adoption of specific risk assessment models, in accordance with the customers activities, upon selection of standard alternatives for risk factors considered; and iii) large-sized customers, in terms of amounts of liabilities in the Bank, including the holders of structured operations adoption of a risk fundamental model assessment, based on the individual and detailed analysis of each risk, supported by the findings, data and analysis arguments, including the application of criteria for acceptance of differentiated collaterals, allowing credit analysis under special conditions, considering the individuality and complexity of projects and operation with similar size. 3) Risk rating: All lending operations are subject to risk rating, based on the customers risk rating and grade of the lending operation, in accordance with its characteristics, value, term, collaterals and condition. In addition, credit risk management involves the constant flow of information, allows the identification, measurement, control and risk mitigation to ensure that Banco do Nordeste maintains its exposure to credit risks within reasonable parameters. Accordingly, several instruments are used, including: credit policies, management reports, risk rating system, performance indicators by macro sectors. 4) Asset evaluation by portfolio: The portfolio evaluation enables to identify, in its portfolio of products and customers, risk concentrations in order to adopt preventive and corrective measures related to the Bank's global risk management.

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5) Collaterals: The collateral policy for lending operations sets out parameters for the selection of collaterals and their evaluation. In view of the quality and sufficiency of collaterals provided, based on the customers risk assessment, the global risk rating, including customer and operation, may be granted higher or lower risk ratings. 6) Decision making process: Any approval in terms of risk limits is based on the level of authority by body. In accordance with their characteristics and amount, the limits may be analyzed and defined by the branches' credit assessment committees or the Operational Supporting Centers' risk limit approval committees, or also be decided by the customer risk limit approval committee of the General Executive Board, Executive Board or Board of Directors. a.3) Collaterals received The collaterals for lending operations are determined based on their quality and sufficiency in light of the customers risk assessment. The global risk rating, involving the customer and the related operation, may be granted higher or lower risk ratings. Operations above R$ 5,000, considered individually, amounting to R$ 6,394,184 as at 12/31/2011 (R$ 6,130,588 as at 12/31/2010), are backed by collaterals (leased chattels, mortgage and guarantee) and other guarantees (unsecured, guarantee of notes, guarantee funds, risk fund (FGPC), collateralization of shares, bank guarantees, among others). For all these transactions, the Bank requires coverage of at least 125% and, in case of collaterals, transactions should be measured at least once every two years, as long as there are material events involving the client or the transaction. b) Liquidity risk b.1) Liquidity risk management Liquidity risk is the possibility of occurring mismatches between tradable assets and payable liabilities that could affect the Banks payment ability. The liquidity risk may be aggravated by the market risk due to possible losses arising from the need to generate financial resources to settle assumed commitments, either due to difficulty in selling the asset without significant depreciation of value or raising funds.

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Liquidity is monitored on a daily basis in accordance with the limits set in the market and liquidity risk management policy approved by the Banks management. To this end, liquidity is projected for a 90-day period, considering the most conservative scenario, i.e., exposing the flow of amounts receivable to a maximum stress situation, where available funds are compared to the commitments estimated for the next 90 days, not considering total estimated amounts receivable. Liquidity levels also consider the possibility of accelerated settlement of borrowings and deposits without defined maturity date. For purposes of liquidity risk management, the Bank uses the methodologies below, which are reviewed and restated periodically: - overall balances of assets and liabilities by portfolio, by note, indicating possible mismatches by index and term; - GAP measuring possible mismatches between assets and liabilities related to terms, including the Bank's projected cash flow; - monitoring of limits established for installments in terms of liquidity risk exposure; - cash flow; and - exchange mismatch map. The information on liquidity risks is reported to the Management through daily reports, consolidated on an annual basis. The daily report on market and liquidity risk management includes the Bank's liquidity ratio represented by the ratio between available funds and commitments estimated for the next 90 days. Such index is strictly conservative because it disregards all reimbursement flows. Available funds comprising the liquidity ratio calculation basis include banking reserves, interbank deposits, repurchase agreements and own securities portfolio. The liquidity ratio for 2011 and 2010 is as follows:
Specification
2011 245.45% 227.39% 321.96% 175.15% 2010 290.82% 241.15% 312.57% 189.31%

As at June 30 Average for the last 12 months Maximum for the last 12 months Minimum for the last 12 months

As at 12/31/2011 and 12/31/2010, the maturities of funding, considering the projected future payment flows, including the related contractual rates, are as follows:

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12/31/2011 Specification Interbank deposits Time deposits Repurchase agreements Agribusiness Credit Note (LCA) TOTAL Available funds Up to 1 month 10,968 67,803 638,093 47,951 764,815 3,185,694 1 to 3 months 202,145 225,712 70,784 498,641 3 months to 1 year 379,955 1,524,753 81,907 1,986,615 1 to 5 years 2,884,486 72,531 2,957,017 Over 5 years 3,574,573 30,165 3,604,738

12/31/2010 Specification Interbank deposits Time deposits Repurchase agreements TOTAL Available funds Up to 1 month 144.831 44.489 461.206 650.526 3.869.499 1 to 3 months 53.968 384.187 438.155 3 months to 1 year 479.505 589.673 44.311 1.113.489 1 to 5 years 16.367 4.214.105 37.450 4.267.922 Over 5 years 3.189.624 3.189.624

b.2) Liquidity Contingency Plan The Liquidity Contingency Plan describes the guidelines to be adopted by the related areas in the case of liquidity crisis. Liquidity crisis corresponds to current or future events or threats affecting the Bank's payment capacity and that could not be resolved through regular treasury fund management measures. Liquidity crisis is characterized when: 1) there are insufficient available funds to perform its estimated obligations for a period of 90 days, regardless of the flow of receipts in the period; or 2) it is identified in advance, through monitoring of the Bank's cash flow, that the Bank does not have available funds sufficient to perform its obligations in the future. The specific risk management area is responsible for identifying the liquidity crisis. The operating measures to resolve the liquidity crisis will follow recommendations made by the special liquidity crisis management group. The special liquidity crisis management group will act during liquidity crisis or when projected scenarios show a potential lack of liquidity, and liquidity is recovered based on the bodys recommendations. The special liquidity crisis management group will act independently and cover all operating and business areas related to the liquidity crisis. The recommendations from the special liquidity crisis management group will be submitted to the analysis of Executive Board together with a grounded opinion.

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The strategic measures during the liquidity crisis will comprise: 1) External scope: -performance of operations and renegotiation of operations with financial institutions with which the Bank conducts interbank transactions; -performance of operations with monetary authorities; -renegotiation of operational conditions with customers with which the Bank conducts lending and borrowing operations; and -other strategies focused on solving the liquidity crisis. 2) Internal scope: - discontinuity of, changes in or suspension in the sale of products; - suspension of the concession of operating limits; - renegotiation of lending and borrowing operations, including accelerated receipts and extension of borrowing terms; - renegotiation of agreements with suppliers; and - other strategies focused on solving the liquidity crisis. The procedures adopted for solving the liquidity crisis include, but are not limited to, the following: - increase in the funding rate; - funding in new markets; - reduction or suspension of lending operations; - transfer of credit portfolio; - postponement or suspension of release of funds for contracted operations; - renegotiation of existing liabilities; - sale of assets; and - operations with monetary authorities. The abovementioned procedures do not follow a priority order and the special liquidity crisis management group will define the criteria, method and timetable for implementation of the recommendations in light of actual facts, their related effects and the time necessary to achieve the necessary goals. c) Market risk c.1) Market risk management Market risk is the possibility of depreciation of assets and/or increase in liability costs arising from changes in interest rates, exchange rates, and stock and commodity prices.

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In managing market risks, the Bank considers multiple scenarios, based on the following methodologies: 1) global Value at Risk (VaR), by portfolio, note and index; 2) global duration (assets and liabilities), by portfolio, note and index; 3) stress test; 4) GAP measuring possible mismatches between assets and liabilities in respect of terms, including the Bank's projected cash flow; 5) overall balances of assets and liabilities, by portfolio and note, including possible mismatches by indices; 6) monitoring of limits set for installments in terms of market risk exposure; and 7) exchange mismatch map. The preparation of daily, monthly, quarterly and annual managerial reports for management and supervisory bodies is critical to market risk management. Such reports include, among others, detailed information on and analysis of exposure levels of trading and non-trading portfolios, exchange exposure levels, liquidity levels and indices, and monitoring of limits of operations carried out with other financial institutions. In addition to these reports, the monitoring of market and liquidity risk exposure limits includes a warning system implemented in order to expedite the preparation of managerial information necessary for the decision-making process by the proper levels of authority, based on the following procedures:
Risk exposure limits

Control procedure If the exposure level exceeds 80% of the limit, the risk management area issues a warning to the area responsible for the financial operations.

Trading portfolio: 1% of portfolios value Non-trading portfolio: 5% of portfolios value

c.2) Trading and non-trading portfolios For purposes of market risk management, operations are classified into two portfolios: 1) Trading book: comprises trading or hedging transactions related to trading portfolios that are intended to be traded before their contractual terms, under normal market conditions, without non-trading clause. The trading portfolio composition is daily monitored by the risk management area using the marked-to-market value of operations.

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In order to monitor and control Trading Portfolio risks, Banco do Nordeste uses the parametric VaR, which measures the maximum expected loss of a portfolio within a period of time, considering a confidence level of 99%. The Value at Risk (VaR) of fixed rate transactions of the BNB Trading Portfolio, as at 12/31/2011, was R$ 290, compared to the portfolios net balance (assets less liabilities) of R$ 2,298,151. As at 12/31/2011, the VaR ratio was just 0.0126% of the net amount of the Trading Portfolio, well below the one-percent cap set by the Banks Risk Management Corporate Policy. The low exposure to the market risk of this portfolio arises from the fact that fixedrate transactions have a one-day maturity and are backed by Federal Government securities. 2) Non-trading portfolio: comprises operations not included in the trading portfolio and subject to market risks. Interest rate risk measurement and assessment of nontrading portfolio related to interest rates, exchange coupons, interest rates and price indices rate changes comply with the policies set by the Central Bank using widely known methodologies adopted by financial institutions based on the following parameters and assumptions: - VaR parameter; - normal distribution; - statistical parameters; - standard deviation of returns; - portfolio settlement term: 10 days; - historical rate analysis period: 1 year; - 12 points and their respective correlations; - Confidence level of 99%. VaR calculation is determined based on information provided by BM&FBOVESPA as regards to the rates used in the financial market for each risk factor.

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c.2.1) Market risk indicators The market risk indicators, at marked-to-market values, are summarized as follows:
Specification Marked-to-market currency exposure Trading portfolio interest rate risk (PJUR1) Commodity price variation risk (PCOM) Non-trading portfolio interest rate risk (RBAN) 12/31/2011 29,042 643 345 48,603 From 01/01/2011 to 12/31/2011 Average Maximum Minimum 34,479 709 1,501 57,975 110,465 2,035 16,894 86,526 1,567 257 280 40,848

Specification Marked-to-market currency exposure Trading portfolio interest rate risk (PJUR1) Commodity price variation risk (PCOM) Non-trading portfolio interest rate risk (RBAN)

12/31/2010 43,648 381 16,652 74,721

From 01/01/2010 to 12/31/2010 Average Maximum Minimum 51,879 895 21,227 47,351 90,299 1,863 30,543 81,296 11,267 195 16,652 16,048

c.2.2. Stress test The stress test, a tool used to analyze extreme scenarios, allows to foresee potential gains or losses in operations based on changes in interest rates, exchange rates or price indices, that could be adopted in the market under extreme conditions. The table below provides the results from stress tests of the non-trading portfolio (CnN) as at 12/31/2011, considering the factors that individually account for over 5% of the portfolio as set forth in items III and IV, article 2, of BACEN Circular 3365, of 09/12/2007. The operation basis adopted include marked-to-market values and is classified by risk factors. As regards to stress tests of changes in interest rates on fixed operations, the stress is applied at the DIxPRE rate and, as regards to the other operations, the stress is applied on the related coupon resulting in a new marked-to-market value. The stress test consisted of estimating the number of percentage points of parallel stress tests of the rates necessary to result in changes in the fair value of operations resulting in reductions equivalent to 5%, 10% and 20% of the Regulatory Capital (PR), according to the stress test of the rates comprising the Interest Rate Term Structures (ETTJs). The results from parallel stress tests, expressed in basis points and percentage points, are as follows:

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Risk type

Risk factor

Parallel stress test (annual rates) - Non-trading portfolio Loss of 5% Loss of 10% Loss of 20% Basis points
Percentage points

Basis points

Percentage points

Basis points

Percentage points

Price index coupon Interest rate coupon Fixed interest

IGP-M coupon TJLP coupon TR coupon Fixed interest

209.2 2.09 (509.0) (5.09) without stress 547.7 5.48

469.8 4.70 (844.5) (8.45) without stress 1,273.8 12.74

1,284.7 12.85 (1,281.0) (12.81) without stress 3,614.6 36.15

The stress scenarios for monthly interest rates in order to generate losses as from 5% of the Bank's Regulatory Capital (PR) are highly improbable. Considering the highest exposures as at 12/31/2011, linked to risk factors, fixed interest and TJLP, the stress for losses of 5% of the PR would amount to approximately 5.99 percentage points for the annual rate in case of fixed interest risk, and negative of 3.22 percentage points for the coupon rate in case of TJLP operations. c.3) Sensitivity analysis As set forth in CVM Instruction 475, of 12/17/2008, the sensitivity analysis was conducted in order to identify the main types of risks capable of generating losses to the Bank, considering alternative scenarios for the behavior of several risk factors of the operations comprising trading and non-trading portfolios, whose results are as follows:
Portfolio/risk factor Trading portfolio - Fixed interest Increase in interest rate 2,411,917 2,405,371 (6,546) 2,402,873 (9,044) Risk type Scenario 1 (probable) Balance Scenario 2 (change of 25%) Balance Loss Scenario 3 (change of 50%) Balance Loss

Non-trading portfolio - Dollar coupon - IGP coupon - IPCA coupon - TJLP coupon - TR coupon - Fixed interest Decrease in the dollar coupon Increase in the IGP coupon Decrease in the IPCA coupon Decrease in the TJLP coupon Increase in the TR coupon Increase in interest rate (4,370) 1,791,388 (366,953) (721,965) (1,423,929) 3,751,176 (12,160) 1,640,507 (412,158) (766,609) (1,426,330) 3,630,522 (7,790) (150,880) (45,205) (44,644) (2,401) (120,654) (13,969) 1,507,295 (465,173) (816,644) (1,428,002) 3,525,432 (9,599) (284,093) (98,220) (94,679) (4,073) (225,744)

For purposes of abovementioned calculations, Scenario 1, which presents the most probable situation, considered the net balances of portfolios, at marked-to-market values - considering the rates used at BM&FBOVESPA. As regards to Scenarios 2 and 3, changes of 25% and 50% were applied, respectively, on risk factors, and new net balances were estimated for the portfolios. Losses correspond to the differences between the balances of Scenario 1 and balances of Scenarios 2 and 3.

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The sensitivity analysis was also conducted for swap operations and their related hedged items as follows:
Nature of transaction Risk type
Increase in the reference rate BM&F DI x PRE Increase in the reference rate BM&FDI x Dollar

Financial instrument
SWAP DI x Pre Fixed assets Net exposure SWAP Dollar x DI Liabilities in FM Net exposure

Scenario 1
(453,504) 412,775 (40,729) 561,711 (577,234) (15,523)

Scenario 2
(438,918) 382,030 (56,888) 542,289 (560,841) (18,552)

Scenario 3
(425,420) 354,641 (70,779) 523,703 (545,413) (21,710)

Hedge

Hedge

As at 12/31/2011, market value losses were considered in the net exposure of scenarios 2 and 3 and, as regards to scenario 1, arising from increase in opportunity costs, in the fixed operations; and those arising from exchange coupon increase, in the operations in foreign currency. SWAP DI x Pre The method used to prepare the sensitivity analysis of swap DI x Pre transactions was to the survey the balances of fixed rate asset transactions and hedge (swap) transactions exposed to this type of risk (scenario 1), and determine the net exposure. The stresses related to scenarios 2 and 3 were applied to this result, as detailed below: Scenario 1 - refers to the current situation of risk exposure factors based on market information (BM&FBovespa). Under this scenario, 100% of the DI swap rate x fixed rate. Scenario 2 - Under this scenario, 125% of the DI swap rate x fixed rate. Scenario 3 - Under this scenario, 150% of the DI swap rate x fixed rate. SWAP Dollar x DI The method used to prepare the sensitivity analysis of swap dollar x DI transactions was to the survey the balances of liability transactions indexed to the dollar and hedge (swap) transactions exposed to this type of risk (scenario 1), and determine the net exposure. The stresses related to scenarios 2 and 3 were applied to this result, as detailed below: Scenario 1 - refers to the current situation of risk exposure factors based on market information (BM&FBovespa). Under this scenario, 100% of the DI swap rate x dollar.

F-69

BANCO DO NORDESTE DO BRASIL S.A.

Scenario 2 - Under this scenario, 125% of the DI swap rate x dollar. Scenario 3 - Under this scenario, 150% of the DI swap rate x dollar. d) Operational risk The operational risk results in potential, actual or recovered loss arising from human failures or errors in processes, systems or arising from external factors, including those related to legal issues. The operational risk management requires continuous commitment and involvement of all managers, employees and third parties, whose main purpose is to maintain at acceptable levels the probabilities and/or impacts from losses. The corporate operational risk management system aims at ensuring the compliance with the corporate policy and strategic planning of the Bank in accordance with governance principles and the policies set by the National Monetary Council (CMN), based on the timetable defined by the banking supervisory. Management is made through processes and subprocesses carried out on a dynamic and ongoing basis which ensures, through mitigating measures, acceptable risk exposure levels. The corporate operational risk management is strengthened through a specific organizational structure designed to support assessment and compliance related to the adoption of controls for all processes and operations carried out, mainly based on the provisions set forth in the institutional regulatory system. It is divided into two approaches: qualitative and quantitative approach. The qualitative approach comprises methodologies, control tools, mitigating measures and managerial reports that describe the control over processes carried out in all institutional areas and describe management by process and architecture design macroprocesses, processes and subprocesses - identification of risk, control, mitigation and corrective plan. The quantitative approach adopts measurement models, showing considerable improvements in the operational risk measurement stochastic model applied to the Bank, for purposes of allocation of capital to support expected and unexpected losses.

F-70

BANCO DO NORDESTE DO BRASIL S.A.

e) Operational Limits - Basel Accord As set forth in CMN Resolutions 3444 and 3490, of 02/28/2007 and 08/29/2007, respectively, and supplementary regulations, CMN set additional requirements for capital allocation, including new risk-exposed components: Credit Commitment Unconditionally or Unilaterally Non-Cancelable by the Bank; exposure to stock risk (PACS); exposure to risk of assets indexed to commodities prices (PCOM); exposure to risk of assets in foreign currency (PCAM); exposure to operational risk (POPR) and market risk of operations not classified in the trading portfolio (RBAN). The prevailing guidelines maintained the minimum capital allocation ratio by 11%, which is the ratio between a financial institutions regulatory capital (PR) and the total risks assumed in lending transactions, including collaterals offered and co-obligations, and market and operational risks as at December 31, 2011. As at December 31, 2011, the capital adequacy ratio (Extended Basel Index) of Banco do Nordeste was 16.32% (13.22% as at December 31, 2010), while PR was R$ 4,604,614 (R$ 3,248,273 as at December 31, 2010). The Required Regulatory Capital (PRE), which represents the consolidation of all risk exposures, with a capital allocation ratio of 11%, was R$ 3,054,085 as at December 31, 2011 (R$ 2,627,409 as at December 31, 2010). The Banks regulatory capital is as follows: i. Matching of PR with PRE
Specification 12/31/2011 4,604,614 2,302,307 2,302,307 3,054,085 2,619,648 642 345 433,450 48,603 1,501,926 16.58% 16.32% 12/31/2010 3,248,273 2,146,806 1,101,467 2,627,409 2,248,812 381 16,652 361,564 74,721 546,143 13.60% 13.22%

a) Regulatory Capital (PR) Tier I Tier II b) Required Regulatory Capital (PRE) . PEPR (1) . PJUR . PCOM . POPR c) RBAN amount Margin (a-b-c) Basel Ratio (BACEN Circular 3477, of 12/28/2009) Basel Ratio (including RBAN amount)

(1) 11% of Weighted Risk Factor Exposures, pursuant to Articles 11 to 16 of BACEN Circular 3360, of 09/12/2007.

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BANCO DO NORDESTE DO BRASIL S.A.

ii. Description of PR
Specification 12/31/2011 4,604,614 2,302,307 2,329,499 25,198 291 1,703 2,302,307 25,198
(1)

12/31/2010 3,248,273 2,146,806 2,177,338 28,064 291 2,177 1,101,467 28,064 1,101,848 28,445 -

a) Regulatory Capital (PR) Tier I

(+) Shareholders' equity (-) Revaluation reserves (-) Tax credits excluded (-) Deferred permanent assets Tier II (+) Revaluation reserves (+) Hybrid debt/equity instruments classified as Tier II of PR (+) Subordinated debt instruments (2) (-) Excess subordinated debt instruments (-) Tier II to Tier I Excess Capital

1,137,872 1,216,319 65,165 11,917

Notes: (1) The hybrid debt/equity instrument was entered into with the National Treasury Department with indefinite term. (2) The subordinated debt instruments were entered into with the Constitutional Fund to Finance the Northeast (FNE) with indefinite term.

On 12/22/2010, pursuant to the terms of Law 12249, of 06/11/2010, as amended by Provisional Act 513, of 11/26/2010, Banco do Nordeste and the Federal Government entered into a Loan Agreement, classified as Hybrid Debt/Equity Instruments (IHCD), in the amount of R$ 1,000,000, already paid in. On 02/21/2011, through Deorf/Cofil Letter 2011/00979, the Central Bank authorized the classification of such hybrid instrument as Tier II Capital. Such instrument was entered into for indefinite term. Information related to risk management, focusing on issues such as Regulatory Capital (PR) and the Required Regulatory Capital (PRE), as provided for in BACEN Circular 3477, of 12/28/2009, is available on www.bnb.gov.br under Relao com Investidores.

F-72

BANCO DO NORDESTE DO BRASIL S.A.

29.

RELATED-PARTY TRANSACTIONS a) Related-party transactions a.1) The main transactions with state-owned companies, autonomous government agencies, programs and funds controlled by the Federal Government are broken down:
Specification Assets Lending operations - Refinancing with Federal Government (Note 9.a.1) TOTAL Specification Liabilities Time deposit - FAT (Note 13.a.4 and Note 27) Domestic onlendings - Official Institutions (Note 14.c) National Treasury BNDES FINAME Other institutions Other liabilities Northeast Constitutional Financing Fund -FNE (Note 16.e) Hybrid debt/equity instruments (Note 16.f) Subordinated debt eligible for capital (Note 16.g) TOTAL 622,389 1,286,685 992 1,152,894 132,799 6,932,417 4,578,226 1,137,872 1,216,319 8,841,491 686,792 1,686,776 1,086 933,260 52,859 699,571 5,762,276 3,656,262 1,004,166 1,101,848 8,135,844 473,643 473,643 12/31/2011 533,239 533,239 12/31/2010 12/31/2011 12/31/2010

a.2) The main transactions with entities related to the Banks employees, Caixa de Previdncia (CAPEF) and Caixa de Assistncia Mdica (CAMED) are composed as follows:
Specification Liabilities Other liabilities - (Note 16.h) CAPEF CAMED TOTAL 985,408 457,916 527,492 985,408 925,375 490,630 434,745 925,375 12/31/2011 12/31/2010

F-73

BANCO DO NORDESTE DO BRASIL S.A.

b) Management compensation The compensation of the Board of Directors, Board of Executive Officers and Supervisory Board is shown below:
Specification Short-term benefits Attorneysfees Executive Board Board of Directors Supervisory Board Other Profit sharing TOTAL Specification Post-employment benefits TOTAL 2nd half 2011 1,684 1,391 1,202 98 91 115 178 1,684 2nd half 2011 12/31/2011 12/31/2010

3,344 2,612 2,239 194 179 336 396 3,344 12/31/2011

3,075 2,473 2,132 186 155 376 226 3,075 12/31/2010

109 109

200 200

84 84

The Bank does not have variable stock-based compensation and other long-term benefits and does not offer post-employment benefits to management, except for those comprising the headcount, which are the members of the Employees Social Security Plan of Banco do Nordeste do Brasil S.A. The Bank does not grant loans to its Executive Officers, members of the Board of Directors and the Supervisory Board, since this practice is forbidden to financial institutions governed by the Central Bank of Brazil.

30.

OTHER INFORMATION

a) Guarantees provided Co-obligations and risks related to guarantees provided by the Bank are composed as follows:
Specification Import financing Guarantee beneficiaries: - Individuals or non-financial legal entities - FNE - Other entities Receivables assignment co-obligations 12/31/2011 131,958 92,219 13,926,213 54,180 26,815 12/31/2010 110,589 92,919 12,093,509 40,745 29,549

F-74

BANCO DO NORDESTE DO BRASIL S.A.

b) Insurance The Banks chattels and properties and third parties properties are covered by an adequate insurance in the amount of R$ 405,649 (R$ 392,459 as at 12/31/2010), as follows:
Specification Chattels Properties Third parties properties Civil liability (aircraft) TOTAL 12/31/2011 137,144 264,485 2,863 1,157 405,649 12/31/2010 123,783 264,656 2,863 1,157 392,459

c) Convergence to International Financial Reporting Standards Since the first half of 2011, the Bank has disclosed its annual financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) on its website. The first financial statements available on the Banks website refer to the financial position as at 12/31/2010 (together with the 12/31/2009 financial statements, presented for comparative purposes). Although the Bank is not required to disclose statements under this new format, Management decided to do so voluntarily, as it understands that IASB Standards introduces new concepts for accounting records and procedures that provide enhanced information transparency and accuracy, thus making them aligned with the best corporate governance practices. The financial statements for the year ended 12/31/2011, comparatively to those as at 12/31/2010 are expected to be disclosed in the first half of 2012. The Banks management believes that differences in shareholders equity and net income under IFRS comparatively to those calculated under BACEN standards are not significantly different, since several IASB standards had already been adopted by financial institutions in Brazil. d) Approval of the Financial Statements The financial statements were approved by the Board of Directors at a meeting held on 02/07/2012.

____________________________________________________________________________

F-75

&

WK^/d/KE

F-76

Deloitte Touche Tohmatsu Av. Desembargador Moreira, 2120 Salas 201, 202 e 204 - Aldeota 60170-002 - Fortaleza - CE Brasil

Tel: + 55 (85) 3264-7050 Fax:+ 55 (85) 3264-7055 www.deloitte.com.br

(Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT AUDITORS REPORT ON THE FINANCIAL STATEMENTS

To the Board of Directors, Shareholders and Management of Banco do Nordeste do Brasil S.A. Fortaleza, CE

We have audited the financial statements of Banco do Nordeste do Brasil S.A. (the Bank), which comprise the accompanying balance sheet as of December 31, 2010 and the related statements of income, changes in shareholders equity, and cash flows for the year then ended and six-month period ended December 31, 2010, as well as a summary of significant accounting practices and other explanatory notes. Managements responsibility for the financial statements The Banks management is responsible for the preparation and fair presentation of these financial statements in accordance with Brazilian accounting practices applicable to entities authorized to operate by the Central Bank of Brazil (BACEN) as well as the internal controls deemed necessary for preparing financial statements that are free from material misstatement, whether due to fraud or error. Independent auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit, which was conducted in accordance with Brazilian and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

F-77

An audit involves performing selected procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the Banks financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Banks internal control. An audit also includes evaluating the appropriateness of accounting practices used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements taken as a whole. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the financial position of Banco do Nordeste do Brasil S.A. as of December 31, 2010, its financial performance and its cash flows for the year then ended and six-month period ended December 31, 2010, in conformity with Brazilian accounting practices applicable to entities authorized to operate by the Central Bank of Brazil (BACEN). Other matters Statement of value added We have also audited the statement of value added (DVA) for the year ended December 31, 2010, whose presentation is required for publicly-held companies by the Brazilian corporate law. Such information has been subjected to the auditing procedures above mentioned and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. The accompanying financial statements have been translated into English for the convenience of readers outside Brazil.

Fortaleza, February 4, 2011

DELOITTE TOUCHE TOHMATSU Auditores Independentes

Claudio Lino Lippi Engagement Partner

F-78

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A,
BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)

ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS (Note 4) INTERBANK INVESTMENTS (Note 5.a ) Money market investments Interbank deposits SECURITIES AND DERIVATIVES (Note 6 ) Own portfolio Held under repurchase commitments Derivative financial instruments Linked to guarantees INTERBANK ACCOUNTS Unsettled payments and receipts Restricted deposits: Deposits with the Central Bank of Brazil (Note 7.a) National Treasury - Rural Credit Funds (Note 7.a) Interbank onlendings Correspondents INTERDEPARTMENTAL ACCOUNTS Internal transfer of funds LENDING OPERATIONS Lending operations (Note 8.a) Public sector Private sector (Allowance for loan losses) (Note 8.a) OTHER RECEIVABLES Receivables for guarantees honored (Note 9) Foreign exchange portfolio (Note 10.a) Income receivable (note 9) Other receivables (Note 9) (Allowance for losses on other receivables) (Note 9) OTHER ASSETS Other assets (Allowance for devaluation) Prepaid expenses LONG-TERM ASSETS SECURITIES AND DERIVATIVES (Note 6 ) Own portfolio Held under repurchase commitments Derivative financial instruments Linked to guarantees INTERBANK ACCOUNTS Restricted deposits: National Treasury - Rural loan (Note 7.a) Financial Housing System (SFH) (Note 7.a) Interbank onlendings LENDING OPERATIONS Lending operations (Note 8.a) Public sector Private sector (Allowance for loan losses) (Note 8.a) OTHER RECEIVABLES (Note 9) Receivables for guarantees honored Other receivables (Allowance for loan losses on other receivables) (Note 9) PERMANENT ASSETS (Note 11) INVESTMENTS Other investments (Allowance for losses) PROPERTY, PLANT AND EQUIPMENT IN USE Real estate Real estate revaluation Other property, plant and equipment in use (Accumulated depreciation) DEFERRED CHARGES Organization and expansion costs (Accumulated amortization)
TOTAL ASSETS The accompanying notes are an integral part of these financial statements.

12/31/2010 10.838.392 82.391 3.872.110 3.451.521 420.589 1.026.946 809.265 210 217.471 238.268 2.320 230.048 3.971 805 1.124 285 285 4.224.164 4.470.238 58.378 4.411.860 (246.074) 1.380.525 8 521.843 25.570 851.425 (18.321) 13.703 6.702 (1.302) 8.303 12.753.269 6.739.820 6.293.647 437.948 95 8.130 32.474 329 27.718 4.427 5.910.740 6.245.600 1.209.193 5.036.407 (334.860) 70.235 12 155.592 (85.369) 192.055 1.429 6.732 (5.303) 188.219 132.615 111.628 151.302 (207.326) 2.407 6.096 (3.689)
23.783.716

12/31/2009 11.095.395 72.983 3.248.634 2.937.128 311.506 2.227.338 1.765.055 350.792 111.491 178.392 2.328 172.818 1.363 777 1.106 1 1 4.177.810 4.517.643 92.410 4.425.233 (339.833) 1.182.343 30 453.777 21.134 745.672 (38.270) 7.894 6.390 (1.476) 2.980 7.862.666 3.011.201 2.925.119 268 85.814 38.603 333 32.808 5.462 4.710.825 4.926.147 1.101.962 3.824.185 (215.322) 102.037 35 156.888 (54.886) 196.405 1.379 6.682 (5.303) 191.962 127.000 111.628 142.320 (188.986) 3.064 8.059 (4.995)
19.154.466

F-79

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S.A. BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES DEPOSITS (Note 12.a) Demand deposits Savings deposits Interbank deposits Time deposits Other deposits OPEN MARKET FUNDING (Note 12.b) Own portfolio Third parties portfolio FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES (Note 14) Payables for securities issued abroad INTERBANK ACCOUNTS Receipts and payments pending settlement INTERDEPARTMENTAL ACCOUNTS Third-parties funds in transit Internal transfer of funds BORROWINGS (Note 13.b) Domestic borrowings - Official institutions Foreign borrowings DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS (Note 13.c) National Treasury BNDES (National Bank for Economic and Social Development) FINAME (National Equipment Financing Authority) Other institutions DERIVATIVE FINANCIAL INSTRUMENTS (Note 6.c) Derivative financial instruments FOREIGN ONLENDINGS (Note 13.d) Foreign onlendings OTHER LIABILITIES Collected taxes and other (Note 15.a) Foreign exchange portfolio (Note 10.a) Social and statutory (Note 15.b) Tax and social security (Note 15.c) Trading account (Note 15.d) Financial and development funds (Note 15.e) Hybrid debt/ equity instruments(Note 16) Other (Note 15.h) LONG-TERM LIABILITIES DEPOSITS (Note 12.a) Demand deposits Interbank deposits Time deposits OPEN MARKET FUNDING (Note 12.b) Own portfolio FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES (Note 14) Payables for securities issued abroad BORROWINGS (Note 13.b) Domestic borrowings - Official institutions DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS (Note 13.c) National Treasury BNDES (National Bank for Economic and Social Development) FINAME (National Equipment Financing Authority) Other institutions DERIVATIVE FINANCIAL INSTRUMENTS (Note 6.c) Derivative financial instruments FOREIGN ONLENDINGS (Note 13.d) Foreign onlendings OTHER LIABILITIES Financial and development funds (Note 15.e) Hybrid debt/ equity instruments (Note 16) Subordinated debt eligible for capital (Note 17) Other (Note 15.h) DEFERRED INCOME Deferred income SHAREHOLDERS' EQUITY (Note 18) CAPITAL Brazilian residents CAPITAL RESERVE REVALUATION RESERVE EARNINGS RESERVES VALUATION ADJUSTMENTS TO EQUITY (TREASURY SHARES) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY The accompanying notes are an integral part of these financial statements.

12/31/2010 8.474.793 3.772.031 109.037 1.288.569 670.627 1.688.256 15.542 460.893 372.897 87.996 2.991 2.991 22 22 30.330 30.330 461.822 15.219 446.603 289.427 192 166.206 3.921 119.108 12.118 12.118 66.808 66.808 3.378.351 5.604 16.601 130.687 493.132 7 1.011.809 1.647 1.718.864 13.131.569 4.737.550 25.082 13.501 4.698.967 63.396 63.396 482.496 482.496 45.656 45.656 1.397.349 894 767.054 48.938 580.463 46.020 46.020 662.357 662.357 5.696.745 2.734.366 1.002.519 1.101.848 858.012 16 16 2.177.338 1.851.000 1.851.000 28.064 248.528 50.130 (384) 23.783.716

12/31/2009 8.110.117 3.197.499 142.577 1.381.500 364.753 1.301.556 7.113 445.678 350.670 95.008 13.128 13.115 13 644.553 14.031 630.522 313.523 182 182.186 14.940 116.215 15.979 15.979 63.653 63.653 3.416.104 3.269 7.523 238.115 464.557 1.237.069 1.465.571 8.971.610 3.135.228 32.763 20.018 3.082.447 56.126 56.126 1.120.001 982 561.610 14.390 543.019 20.592 20.592 658.740 658.740 3.980.923 2.402.693 622.064 956.166 14 14 2.072.725 1.652.000 1.652.000 502 30.501 271.976 118.130 (384) 19.154.466

F-80

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A, STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2010 (In thousands of Brazilian reais - R$, except earnings per share) 2nd half 2010 INCOME FROM FINANCIAL INTERMEDIATION Lending operations (Note 8.a.2) Securities transactions (Note 6.b) Derivative financial instruments (Note 6.d) Gains (losses) on foreign exchange transactions (Note 10.b) Gains (losses) on compulsory investments (Note 7.b) EXPENSES FROM FINANCIAL INTERMEDIATION Funding operations (Note 12.c) Borrowings and onlendings (Note 13.e) Allowance for loan losses (Note 8.e) GROSS INCOME FROM FINANCIAL INTERMEDIATION OTHER OPERATING INCOME (EXPENSES) (Note 19) Income from services provided Income from bank fees Personnel expenses Other administrative expenses Tax expenses Other operating income Other operating expenses INCOME FROM OPERATIONS NONOPERATING INCOME (EXPENSES) INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING INCOME TAX AND SOCIAL CONTRIBUTION (note 20) Provision for Income Tax Provision for Social Contribution Deferred income tax PROFIT SHARING NET INCOME INTEREST ON OWN CAPITAL (Note 18.f) Number of shares (in thousands) Earnings per share - R$ 1.298.470 794.535 510.734 (30.488) 18.297 5.392 (796.823) (339.148) (235.950) (221.725) 501.647 (231.123) 639.577 6.629 (560.764) (355.089) (92.670) 527.562 (396.368) 270.524 177 270.701 (32.998) (34.046) (25.789) 26.837 (34.168) 203.535 (62.934) 87.002 2,34 12/31/2010 2.431.267 1.489.809 888.770 (36.140) 73.161 15.667 (1.464.879) (591.142) (473.727) (400.010) 966.388 (436.119) 1.233.992 12.768 (1.019.740) (659.632) (173.182) 927.571 (757.896) 530.269 1.645 531.914 (174.086) (145.381) (93.598) 64.893 (44.238) 313.590 (121.000) 87.002 3,60 12/31/2009 2.005.203 1.214.532 739.243 (38.146) 86.778 2.796 (1.219.439) (381.160) (461.687) (376.592) 785.764 (126.657) 1.106.886 12.205 (890.476) (551.813) (144.214) 1.159.159 (818.404) 659.107 2.078 661.185 (160.487) (138.924) (86.380) 64.817 (41.686) 459.012 (110.000) 87.002 5,28

The accompanying notes are an integral part of these financial statements.

F-81

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A, STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2010 (In thousands of Brazilian reais - R$, except earnings per share) 2nd half 2010 INCOME FROM FINANCIAL INTERMEDIATION Lending operations (Note 8.a.2) Securities transactions (Note 6.b) Derivative financial instruments (Note 6.d) Gains (losses) on foreign exchange transactions (Note 10.b) Gains (losses) on compulsory investments (Note 7.b) EXPENSES FROM FINANCIAL INTERMEDIATION Funding operations (Note 12.c) Borrowings and onlendings (Note 13.e) Allowance for loan losses (Note 8.e) GROSS INCOME FROM FINANCIAL INTERMEDIATION OTHER OPERATING INCOME (EXPENSES) (Note 19) Income from services provided Income from bank fees Personnel expenses Other administrative expenses Tax expenses Other operating income Other operating expenses INCOME FROM OPERATIONS NONOPERATING INCOME (EXPENSES) INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING INCOME TAX AND SOCIAL CONTRIBUTION (note 20) Provision for Income Tax Provision for Social Contribution Deferred income tax PROFIT SHARING NET INCOME INTEREST ON OWN CAPITAL (Note 18.f) Number of shares (in thousands) Earnings per share - R$ 1.298.470 794.535 510.734 (30.488) 18.297 5.392 (796.823) (339.148) (235.950) (221.725) 501.647 (231.123) 639.577 6.629 (560.764) (355.089) (92.670) 527.562 (396.368) 270.524 177 270.701 (32.998) (34.046) (25.789) 26.837 (34.168) 203.535 (62.934) 87.002 2,34 12/31/2010 2.431.267 1.489.809 888.770 (36.140) 73.161 15.667 (1.464.879) (591.142) (473.727) (400.010) 966.388 (436.119) 1.233.992 12.768 (1.019.740) (659.632) (173.182) 927.571 (757.896) 530.269 1.645 531.914 (174.086) (145.381) (93.598) 64.893 (44.238) 313.590 (121.000) 87.002 3,60 12/31/2009 2.005.203 1.214.532 739.243 (38.146) 86.778 2.796 (1.219.439) (381.160) (461.687) (376.592) 785.764 (126.657) 1.106.886 12.205 (890.476) (551.813) (144.214) 1.159.159 (818.404) 659.107 2.078 661.185 (160.487) (138.924) (86.380) 64.817 (41.686) 459.012 (110.000) 87.002 5,28

The accompanying notes are an integral part of these financial statements.

F-82

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A,
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2010 (In thousands of Brazilian reais - R$) CAPITAL PAID-IN CAPITAL RESERVE OTHER CAPITAL CAPITAL INCREASE CAPITAL RESERVES OWN ASSETS LEGAL STATUTORY REVALUATION RESERVE EARNINGS RESERVES RETAINED VALUATION ADJUSTMENTS TO EQUITY EARNINGS (ACCUMULATED LOSSES) TREASURY SHARES TOTAL

BALANCES AS OF DECEMBER 31, 2008 VALUATION ADJUSTMENTS TO EQUITY CAPITAL INCREASE From Reserve: Transfer for capital increase Addition to Capital OTHER EVENTS Updating of membership certificates Acquisition of treasury shares Revaluation of assets: Reserve realization: Gross value Taxes NET INCOME Allocation: Reserves Dividends Interest on capital BALANCES AS OF DECEMBER 31, 2009 CHANGES FOR THE YEAR

1.299.000 -

380 -

32.938 -

50.266 -

353.707 -

61.228 56.902

1.797.519 56.902

353.000 -

353.000 (353.000) 122 -

(353.000) -

122

(384)

(384)

1.652.000 353.000

502 122

(4.061) 1.624 30.501 (2.437)

22.950 73.216 22.950

198.053 198.760 (154.947)

118.130 56.902

4.061 (1.624) 459.012 (221.003) (130.446) (110.000) -

(384) (384)

459.012 (130.446) (110.000) 2.072.725 275.206

BALANCES AS OF DECEMBER 31, 2009 PRIOR-YEAR ADJUSTMENTS CVM Resolution 600/2009 VALUATION ADJUSTMENTS TO EQUITY CAPITAL INCREASE From Reserve: Transfer for capital increase Capital increase OTHER EVENTS Revaluation of assets: Reserve realization: Gross value Taxes NET INCOME Allocation: Reserves Dividends Interest on capital BALANCES AS OF DECEMBER 31, 2010 CHANGES FOR THE YEAR

1.652.000

502

30.501

73.216

198.760

118.130

(384)

2.072.725

(68.000)

65.534 -

65.534 (68.000)

198.000

199.000 (198.000)

(502) -

(198.498) -

1.850.000 198.000

1.000 1.000

(502)

(4.061) 1.624 28.064 (2.437)

15.680 88.896 15.680

159.370 159.632 (39.128)

50.130 (68.000)

4.061 (1.624) 313.590 (175.050) (85.511) (121.000) -

(384) -

313.590 (85.511) (121.000) 2.177.338 104.613

BALANCES AS OF JUNE 30, 2010 PRIOR-YEAR ADJUSTMENTS CVM Resolution 600/2009 VALUATION ADJUSTMENTS TO EQUITY CAPITAL INCREASE From Reserve: Transfer for capital increase Capital increase OTHER EVENTS Revaluation of assets: Reserve realization: Gross value Taxes NET INCOME FOR THE PERIOD Allocation: Reserves Dividends Interest on capital

1.850.000

502

29.283

78.719

48.464

54.169

(384)

2.060.753

(4.039)

65.534 -

65.534 (4.039)

1.000

(502)

(498)

(2.031) 812 -

2.031 (812) 203.535

203.535

10.177 -

111.666 -

(121.843) (85.511) (62.934)

(85.511) (62.934)

BALANCES AS OF DECEMBER 31, 2010 CHANGES FOR THE PERIOD

1.850.000 -

1.000 1.000

(502)

28.064 (1.219)

88.896 10.177

159.632 111.168

50.130 (4.039)

(384) -

2.177.338 116.585

The accompanying notes are an integral part of these financial statements.

F-83

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A,

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2010 (In thousands of Brazilian reais - R$)
2nd half 2010 CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year/period Adjustments to net income: Depreciation and amortization Allowance for losses in investments Allowance for losses on other assets Allowance for loan losses Provision for contingent liabilities Deferred charges Deferred income Adjusted net income Interbank investments Interbank and interdepartmental accounts Lending operations Other receivables Other assets Deposits Open market funding (repurchase commitments) Funds from acceptance and issuance of securities Borrowings and onlendings Derivative financial instruments Other liabilities Valuation adjustments to equity Updating of membership certificates Income tax and Social contribution NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Available-for-sale securities Additions to investments Addition to property, plant and equipment in use Addition to assets not in use Disposal of investments Disposal of property, plant and equipment in use Disposal of assets not in use NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Dividends and interest on own capital paid Treasury shares Subordinated debt eligible for capital Hybrid debt/equity instruments NET CASH PROVIDED BY/ (USED IN) FINANCING ACTIVITIES Increase/(Decrease) in Cash and Cash equivalents REPRESENTED BY CASH AND CASH EQUIVALENTS At beginning of period At end of period Increase/(Decrease) in Cash and Cash equivalents The accompanying notes are an integral part of these financial statements. 203.535 313.590 459.012 12/31/2010 12/31/2009

12.835 58 221.725 (49.890) (84) (4) 388.175 (58.035) (11.641) (1.336.447) (96.380) (4.437) 1.640.977 68.751 485.487 219.634 21.980 1.421.869 (4.039) (95.164) 2.640.730

25.551 65 400.010 83.233 (842) 2 821.609 (48.890) (36.807) (1.588.942) (196.015) (5.215) 2.176.853 78.613 485.487 66.822 21.568 1.291.732 (68.000) (27.702) 2.971.113

25.511 400 60 376.592 (72.363) (405) (32) 788.775 1.298.483 (9.688) (3.153.792) (219.152) 3.051 2.196.067 145.111 335.553 18.591 (646.039) 56.902 122 (41.288) 772.696

(3.338.764) (31) (13.962) (690) 272 287 (3.352.888)

(4.124.807) (50) (20.580) (1.008) 270 351 (4.145.824)

588.855 (1.035) (36.616) (234) 376 252 1.198 552.796

(108.056) 52.273 1.004.166 948.383 236.225

(317.658) 479.783 1.004.166 1.166.291 (8.420)

(144.239) (384) 622.064 477.441 1.802.933

3.633.274 3.869.499 236.225

3.877.919 3.869.499 (8.420)

2.074.986 3.877.919 1.802.933

F-84

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S,A, STATEMENTS OF VALUE ADDED FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2010 (In thousands of Brazilian reais - R$) 2nd half 2010 % 12.31.2010 % 12.31.2009 %

REVENUES Financial intermediation Service provided and bank fees Allowance for loan losses Other income/expenses EXPENSES ON FINANCIAL INTERMEDIATION INPUTS PURCHASED FROM THIRD PARTIES Materials, electric power and other Outside services GROSS VALUE ADDED RETENTIONS Depreciation, amortization and depletion WEALTH CREATED BY THE ENTITY WEALTH FOR DISTRIBUTION DISTRIBUTION OF WEALTH PERSONNEL COMPENSATION Employees Profit sharing BENEFITS Pension plan (Capef and PGBL) Provisions (Post-employment benefits - CVM Resolution 600) Benefits - Other Severance Pay Fund (FGTS) TAXES AND CONTRIBUTIONS Federal State Municipal PAYMENTS TO THIRD PARTIES Rents SHAREHOLDERS' PAYMENTS INTEREST ON OWN CAPITAL Federal government Other DIVIDENDS Federal government Other RETAINED EARNINGS

1.881.160 1.298.470 646.206 (221.725) 158.209 (575.098) (326.935) (124.152) (202.783) 979.127 (12.835) (12.835) 966.292 966.292 966.292 532.042 335.891 301.723 34.168 173.587 8.697 99.696 65.194 22.564 215.396 206.615 38 8.743 15.319 15.319 148.445 62.934 59.236 3.698 85.511 80.487 5.024 55.090

55.1% 34,8%

18,0%

2,3%

1,6% 15,4% 6,5%

8,8%

5,7%

3.514.232 2.431.267 1.246.760 (400.010) 236.215 (1.064.869) (604.897) (252.445) (352.452) 1.844.466 (25.551) (25.551) 1.818.915 1.818.915 1.818.915 950.902 582.963 538.725 44.238 327.459 8.986 201.288 117.185 40.480 525.239 509.409 49 15.781 29.184 29.184 206.511 121.000 113.891 7.109 85.511 80.487 5.024 107.079

52,3% 32,1%

18,0%

2,2%

1,6% 11,4% 6,7%

4,7%

5,9%

3.155.352 2.005.203 1.119.091 (376.592) 407.650 (842.847) (496.313) (231.945) (264.368) 1.816.192 (25.511) (25.511) 1.790.681 1.790.681 1.790.681 838.855 498.944 457.258 41.686 306.688 899 205.993 99.796 33.223 462.824 449.490 33 13.301 29.990 29.990 240.446 110.000 102.564 7.436 130.446 122.782 7.664 218.566

46,8% 27,9%

17,1%

1,9%

1,7% 13,4% 6,1%

7,3%

12,2%

The accompanying notes are an integral part of these financial statements.

F-85

(Convenience Translation into English from the Original Previously Issued in Portuguese) BANCO DO NORDESTE DO BRASIL S.A. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated)
Contents of the Notes to the Financial Statements
Note 1- The Bank and its Characteristics Note 2- Basis of Preparation and Presentation of Financial Statements Note 3- Summary of Significant Accounting Practices Note 4 - Cash and Cash Equivalents Note 5 -Interbank Investments Note 6 - Securities and Derivatives Note 7 - Interbank Accounts - Restricted Deposits Note 8 - Loan Portfolio and Allowance for Loan Losses Note 9 - Other Receivables Note 10 - Foreign exchange portfolio Note 11 - Permanent Assets Note 12 - Deposits and Open Market Funding Note 13 - Borrowings and Domestic Onlendings Note 14 - Funds from Acceptance and Issuance of Securities Note 15 - Other Liabilities Note 16 - Hybrid Debt/Equity Instruments Note 17- Subordinated Debt Eligible for Capital Note 18 - Shareholders Equity Note 19 - Other Operating Income (Expenses) Note 20 - Income Tax and Social Contribution Note 21 - Provisions and Contingent Liabilities Note 22 - Employees and Officers Compensation Note 23 - Profit Sharing Note 24 - Employee Benefits Note 25 - Northeast Constitutional Financing Fund (FNE) Note 26- Workers Assistance Fund (FAT) Note 27 - Risk Management and Basel Ratio Note 28 - Related-Parties Transactions Note 29 - Other Information

1.

THE BANK AND ITS CHARACTERISTICS Banco do Nordeste do Brasil S.A. (the Bank) is a private legal entity operating regionally as a public financial institution established by Federal Law 1649 of 07/19/1952. The Bank was structured as a mixed economy, publicly-traded corporation and its mission is to operate, in the capacity of a public financial institution, as a catalytic agent in promoting the sustainable development of the Northeast, integrating it to the domestic economic dynamics. Banco do Nordeste is authorized to operate all the portfolios permitted for multiple service banks, except the mortgage loan portfolio. As an institution devoted to regional development, the Bank acts as the executive agent of public policies and is responsible for managing the Northeast Constitutional Financing Fund (FNE), - the main source of funds utilized by the Bank for long-term financing - and the operation of the National Family Farming Strengthening Program (PRONAF) in its jurisdiction. It is also the operator of the Northeast Investment Fund (FINOR) and the Northeast Development Fund (FDNE), the latter created in 2001 and altered in 2007 by Supplementary Law 125, which recreated the Northeast Development Authority (SUDENE). In 1998, the Bank created its Oriented Productive Microcredit Program (Crediamigo), a Production Microcredit Program that facilitates access to credit by thousands of small entrepreneurs who engage in production-related, product sale, and service activities. In addition to federal funds, the Bank has access to other sources of financing in the domestic and foreign markets through partnerships and alliances with domestic and foreign institutions, including multilateral institutions such as the World Bank and the Inter-American Development Bank (IDB).

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BANCO DO NORDESTE DO BRASIL S.A.

2.

BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS The financial statements have been prepared in accordance with Brazilian Corporate Law, as amended by Laws 11638 and 11941, of 12/28/2007 and 05/27/2009, respectively, and regulations of the National Monetary Council (CMN), the Central Bank of Brazil (BACEN), and the Brazilian Securities and Exchange Commission (CVM), and are presented in accordance with the Standard Chart of Accounts for National Financial Institutions (COSIF). The Banks financial statements are in conformity with the pronouncements issued by the Accounting Pronouncements Committee (CPC) in the process of convergence between the Brazilian accounting standards and the International Financial Reporting Standards (IFRS), as approved by the National Monetary Council (CMN), and the Brazilian Securities and Exchange Commission (CVM) standards that are in line with CMN rules, as follows: CPC 01 - Impairment of Assets (National Monetary Council (CMN) Resolution 3566, of 05/29/2008); CPC 03 - Statements of Cash Flows (CMN Resolution 3604, of 08/29/2008); CPC 05 - Related-Party Disclosures (CMN Resolution 3750, of 06/30/2009); and CPC 25 - Provisions, Contingent Liabilities and Contingent Assets (CMN Resolution 3823, of 12/16/2009); CPC 33 - Employee Benefits (CVM Resolution 600, of 10/07/2009).

3.

SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES a) Results of operations Revenue and expenses are recorded on the accrual basis, as detailed below: a.1) interest, charges and monetary or exchange variations on assets and liabilities are recorded on a daily pro rata basis; a.2) provisions, including accrued vacation, license award and 13th salary, are recorded monthly on an accrual basis; and a.3) assets are marked to market or adjusted to realizable value, if applicable.

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BANCO DO NORDESTE DO BRASIL S.A.

b) Current and long-term assets and liabilities Assets and receivables are stated at realizable values, plus income earned and currency adjustments and foreign exchange fluctuation, less unearned income or allowance, if applicable. Liabilities are stated at original amounts plus, if applicable, accrued interest and monetary and exchange variations, less deferred expenses. Available funds from FNE (Northeast Constitutional Financing Fund) are classified in current and long-term liabilities according to the expected outflow of funds. Receivables and payables are recorded in Current and Long-term Assets and Liabilities, respectively, according to maturity dates. Securities classified as Trading Securities, regardless of their maturity, are fully classified in current assets, in conformity with BACEN Circular 3068, of 11/08/2001. c) Cash and cash equivalents For purposes of the statement of cash flows, cash and cash equivalents correspond to the balances of cash and interbank investments immediately convertible into cash or with original maturity equal to or less than ninety days. d) Interbank investments Interbank investments are recorded at acquisition cost, plus income earned and adjusted for the provision for losses, when applicable. e) Securities Securities are recorded at cost, plus brokerage and other fees, and are classified and accounted for as described below: Trading securities - securities bought and held principally for the purpose of selling them in the short term and reported at fair value, with unrealized gains and losses included in income for the year; Available-for-sale securities - securities not classified as either trading securities or held-to-maturity securities and reported at fair value, net of taxes, with unrealized gains and losses reported in a separate component of shareholders equity; Held-to-maturity securities - securities that the enterprise has the positive intent and ability to hold to maturity and stated at acquisition cost, plus income earned, included in income for the year;

F-88

BANCO DO NORDESTE DO BRASIL S.A.

The classification of Available-for-sale securities and Held-to-maturity securities in current and long-term assets was determined according to their maturities, which does not mean the unavailability of the securities, which are of the highest quality and highly liquid. f) Derivative financial instruments Banco do Nordeste limits its operations in the derivative market to swap transactions intended solely to hedge its asset and liability positions, when necessary. Swap transactions are stated at fair value on monthly trial balances and balances and gains and losses are recorded in revenue or expense accounts. The fair value of swap transactions is calculated using the rates disclosed by the Brazilian Financial and Capital Markets Association (ANBIMA). g) Lending operations, advances on foreign exchange contracts, other receivables with loan characteristics and allowances for loan losses. Lending operations, advances on foreign exchange contracts, and other receivables with loan characteristics are classified in accordance with Managements judgment on risk level, taking into consideration the economic scenario, past experience and specific risks related to the operation, creditors and guarantors, considering the standards established by CMN Resolution 2682 of 12/21/1999, which require the periodic analysis of the portfolio and its rating into nine risk levels, where AA is the minimum risk and H is the maximum risk, as well as the classification of operations in arrears for more than 15 days as past due operations. Income from lending operations over 59 days past due, regardless of the risk level, is only recognized when realized. H-rated operations remain under this rating for six months, when they are then written off against the existing allowance and controlled for five years, no longer being included in the balance sheet. Renegotiated operations remain at least at the same risk level in which they were classified.

F-89

BANCO DO NORDESTE DO BRASIL S.A.

Renegotiated loans that have been written off against the allowance are rated as H, and possible recoveries are recognized as income when received. h) Prepaid expenses Refer to funds used in advanced payments, whose benefits or service rendering will occur in coming years. i) Permanent assets Investments are stated at cost, net of allowance for losses; Property, plant and equipment includes depreciation calculated under the straight-line method at the following annual rates: buildings - 4%; data processing systems and vehicles - 20%; tractors and motorcycles - 25%; and other items - 10%. Real estate includes the revaluation amount. Deferred charges include amortization calculated under the straight-line method at the annual rate of 20%. CMN Resolution 3617, of 09/30/2008, determines that any balances of property, plant and equipment and deferred charges existing before the Resolution came into effect that have been recorded based on prior standards should be maintained until such balances are actually written off. j) Income Tax, Social Contribution, PASEP and COFINS (taxes on revenue) IRPJ (corporate income tax) is calculated at the rate of 15% plus additional 10%, and Social Contribution (CSLL) is calculated at the rate of 15%, after the adjustments defined in tax law. Tax credits and deferred liabilities are calculated, basically, on temporary differences between accounting and tax income, on allowances for loans and doubtful accounts and on securities and derivatives fair value adjustments. In accordance with current regulation, the expected realization of tax credits is based on the projection of future earnings and on technical studies carried out every six months.

F-90

BANCO DO NORDESTE DO BRASIL S.A.

k) Employee Benefits The policy adopted for the recognition of actuarial gains and losses beginning December 2010 is consistent with the provisions of item 93 of the Appendix to CVM Resolution 600, that is, actuarial gains and losses are immediately recognized as revenue or expense. The policy adopted for the recognition of actuarial gains and losses was based on items 52 to 55 of the Appendix to CVM Resolution 371, i.e., the Bank recognized a portion of actuarial gains and losses in excess of the higher of: 10% of the defined benefit total actuarial obligation present value, and 10% of plan assets fair value. The effects of the first-time adoption of CVM Resolution 600, beginning 01/01/2009, have been fully recognized in the statements as of 12/31/2010, as detailed in item h of Note 24. l) Impairment assessment Non-financial assets are reviewed for impairment at least annually. m) Contingent assets and contingent liabilities and legal obligations Contingent assets, contingent liabilities and legal obligations are recognized, measured and disclosed according to the criteria defined in CMN Resolution 3823, of 12/18/2009. Contingent assets are recognized in the financial statements only when their realization can be reliably measured from evidences, which may be the final and unappealable decision on a lawsuit or the confirmation of its recoverability, either through the receipt or offset against another liability. Contingent liabilities are recognized in the financial statements when, based on the opinion of legal counsel and Management, the risk of loss on a judicial or administrative proceeding is considered probable, with probable outflow of funds to settle the obligations, the amounts involved can be reliably measured upon court reference/notification. Legal obligations derive from tax obligations and a provision in their full amount is recognized in the financial statements, regardless of the likelihood of success in ongoing lawsuits.

F-91

BANCO DO NORDESTE DO BRASIL S.A.

n) Use of estimates The preparation of the financial statements includes estimates and assumptions, such as the measurement of allowances for loan losses, estimates of certain financial instruments fair values, reserve for contingencies, impairment losses, other provisions, and the calculation of technical provisions for health care plan and pension plans. Actual results could differ from such estimates and assumptions.

4.

CASH AND CASH EQUIVALENTS

Specification Cash in local currency Cash in foreign currency Total cash Investments in securities (1) Interbank investments (1) Total cash and cash equivalents 12/31/2010 80,923 1,468 82,391 88,333 3,698,775 3,869,499 12/31/2009 70,284 2,699 72,983 680,747 3,124,189 3,877,919

(1) Refers to transactions whose maturity on the investment date is equal to or lower than 90 days and that are subject to an insignificant risk of change in fair value.

5.

INTERBANK INVESTMENTS
a) Breakdown
Specification a) Money market investments Resale agreements pending settlement - own portfolio Resale agreements pending settlement - third-party portfolio b) Interbank deposits Investments in foreign currency Interbank deposits TOTAL CURRENT 12/31/2010 3,451,521 3,363,525 87,996 420,589 13,475 407,114 3,872,110 3,872,110 12/31/2009 2,937,128 2,842,120 95,008 311,506 22,434 289,072 3,248,634 3,248,634

b) Income (loss) from interbank investments

Specification a) Income from money market investments Own portfolio Third-party portfolio b) Income from interbank deposits TOTAL (Note 6.b)
2nd half of 2010

12/31/2010 324,934 316,614 8,320 22,715 347,649

12/31/2009 155,948 146,051 9,897 76,723 232,671

191,809 187,016 4,793 11,194 203,003

F-92

BANCO DO NORDESTE DO BRASIL S.A.

6.

SECURITIES AND DERIVATIVES a) Securities The inflation adjusted cost (plus income earned) and the fair value of securities are as follows: a.1) SECURITIES PORTFOLIO
Specification Available-for-sale securities Held-to-maturity securities Swap differential receivable TOTAL CURRENT LONGTERM 12/31/2010 7,758,083 8,378 305 7,766,766 1,026,946 6,739,820 12/31/2009 5,208,854 29,417 268 5,238,539 2,227,338 3,011,201

a.2) AVAILABLE-FOR-SALE SECURITIES

12/31/2010 SPECIFICATION FIXED-INCOME SECURITIES Treasury bills
National Treasury Notes (NTN) Financial bills

COST 7,288,386 5,648,455 844,817 30,313 520,905 30,811 182,165 7,721 23,181 18 15,799 1,247 14,552 144,159 4,211 139,948 226,188 221,920 587 3,681 7,674,532 -

FAIR VALUE 7,259,257 5,646,915 844,253 30,313 520,204 30,811 182,165 4,583 13 14,552 14,552 258,673 506 258,167 225,601 221,920 3,681 7,758,083 -

MARK-TOMARKET (29,129) (1,540) (564) (701) (3,138) (23,181) (5) (1,247) (1,247) 114,514 (3,705) 118,219 (587) (587) 83,551 13,873 (47,294) 50,130

MATURITY YEAR

Debentures Bank credit notes (CCB) Promissory notes Federal government securities (FCVS) Federal government securities - Other (1) Agricultural debt securities INVESTMENT FUND SHARES Social development fund (FDS) Receivables Investment Fund (FIDC) shares VARIABLE-INCOME SECURITIES Other tax incentives (FINOR) Shares of publicly-traded companies LINKED TO GUARANTEES Treasury bills Federal government securities - Other (1) Debentures TOTAL Tax credit Provision for deferred taxes (note 15.c) TOTAL MARK-TO-MARKET

2011 to 2017 2015 2016 2012 to 2018 2011 to 2013 2011 2027 1993 2011 to 2015 Without maturity 2012 Without maturity Without maturity 2011 to 2015 1993 2018

F-93

BANCO DO NORDESTE DO BRASIL S.A.

12/31/2009 MARK-TOFAIR VALUE MARKET 4,578,504 3,399,303 405,555 54,248 718,550 828 20 67,518 67,518 365,527 364,920 607 197,305 197,305 5,208,854 (22,768) 55 (1,360) (846) (20,606) (11) (1,204) (1,204) 221,368 224,972 (3,604) (512) 9 (521) 196,884 11,261 (90,015) 118,130

SPECIFICATION FIXED-INCOME SECURITIES Treasury bills Debentures Bank credit notes (CCB) Promissory notes Federal government securities (FCVS) Federal government securities - Other (1) Agricultural debt securities INVESTMENT FUND SHARES Social development fund (FDS) Receivables Investment Fund (FIDC) shares VARIABLE-INCOME SECURITIES Shares of publicly-traded companies Other tax incentives (FINOR) LINKED TO GUARANTEES Treasury bills Federal government securities - Other (1) TOTAL Tax credit Provision for deferred taxes (note 15.c) TOTAL MARK-TO-MARKET

COST 4,601,272 3,399,248 406,915 54,248 718,550 1,674 20,606 31 68,722 1,204 67,518 144,159 139,948 4,211 197,817 197,296 521 5,011,970 -

MATURITY YEAR

2010 to 2015 2012 to 2018 2011 to 2013 2010 2027 1993 2010 to 2015 Without maturity 2012 to 2020 Without maturity Without maturity 2010 to 2015 1993

In view of the classification of assets in the category above, the amount of R$ 83,551 (R$ 196,884 as of 12/31/2009) was recorded in the Banks shareholders' equity, under Market-to-market. This adjustment, net of taxes, corresponds to R$ 50,130 (R$ 118,130 as of 12/31/2009). (1) The caption Government Securities - Other records cash investments in government securities called by the National Treasury as NUCL910801 with a maturity on 08/31/1993, not yet redeemed.

a.3) HELD-TO-MATURITY SECURITIES

12/31/2010
SPECIFICATION COST FAIR VALUE MATURITY YEAR COST

12/31/2009
FAIR VALUE MATURITY YEAR

FIXED-INCOME SECURITIES Investment Fund Shares - Northeast Entrepreneur National Treasury Notes (NTN) - P Investment Fund Shares - CRIATEC FGO (Fund for Collateral of Transactions) Investment Fund Shares - Northeast Energy FIP Brasil Agronegcios TOTAL
(*) Estimated maturity

8,378 1,608 421 5,200 231 918 8,378

8,378 1,608 421 5,200 231 918 8,378 2018(*) 2011(*) 2012 to 2014 2017(*) Without maturity

29,417 2,000 394 3,401 23,622 29,417

29,417 2,000 394 3,401 23,622 29,417 2023 2011(*) 2012 to 2014 2017(*)

F-94

BANCO DO NORDESTE DO BRASIL S.A. a.4) In October 2010, due to a specific, unusual, nonrecurring and unexpected event occurred after the classification date, the Bank reclassified Investment Fund shares of Nordeste Energia from Securities held to maturity to Securities available for sale. On said shares acquired in 2008 and sold on 10/15/2010 the Bank recorded gains amounting to R$ 7,500. a.5) The following criteria were adopted to determine the fair value of securities: Fixed-income Securities: average goodwill/negative goodwill in the secondary market, as disclosed by ANBIMA (National Association of Financial Market Institutions); Agricultural Debt Securities (TDA), Debentures, CCB and Promissory Notes: average goodwill/negative goodwill in the last trading registered with CETIP S.A. (Clearinghouse for the Custody and Financial Settlement of Securities). Variable-income securities: average quotation on the So Paulo Mercantile and Stock Exchange (BM&F BOVESPA).

b)

Income (loss) from securities transactions

Specification Interbank Investments (Note 5.b ) Interbank deposits (note 5.b) Fixed-Income Securities Variable-Income Securities TOTAL 2nd half of 2010 191,809 11,194 306,601 1,130 510,734 12/31/2010 324,934 22,715 537,428 3,693 888,770 12/31/2009 155,948 76,723 505,120 1,452 739,243

c)

Derivatives Banco do Nordeste operates under a conservative investment policy focused on investing strictly under the conditions and rates established by the sources of the funds in order to avoid any mismatching among assets and liabilities in terms of maturities, interest rates and indices. Banco do Nordeste employs a conservative portfolio management policy and limits its operations in the derivative market to swap transactions intended solely for hedging its asset and liability positions, when necessary. Swap transactions are recorded in balance sheet and memorandum accounts, according to their nature, in accordance with prevailing law and accounting standards.

F-95

BANCO DO NORDESTE DO BRASIL S.A.

The Bank has swap transactions registered with CETIP S.A. (Clearinghouse for the Custody and Financial Settlement of Securities) and the notional value of these transactions is recorded in memorandum accounts (notional amount) and the related book value is recorded under the captions Differential Payable and Differential Receivable, as shown below:
12/31/2010 NOTIONAL AMOUNT FAIR VALUE CURVE MARK-TO-MARKET POSITIVE NEGATIVE

SWAP CONTRACTS ASSET POSITION Foreign currency - dollar LIABILITY POSITION Interbank market (CDI) Fixed rate Foreign currency - dollar TOTAL

RECEIVABLE PAYABLE RECEIVABLE PAYABLE

(509,020) 544,399 1,053,419

305 305

(28,855) 29,283 58,138

148 148

(11,174) 17,459 28,633

157 157

(17,681) 11,824 29,505

12/31/2009 NOTIONAL AMOUNT FAIR VALUE RECEIVABLE CURVE MARK-TO-MARKET POSITIVE NEGATIVE

SWAP CONTRACTS

PAYABLE RECEIVABLE PAYABLE

ASSET POSITION Foreign currency - dollar LIABILITY POSITION Interbank market (CDI) Fixed rate Foreign currency - dollar TOTAL Swap transactions amounts in risk 7,891 805,706 813,597 268 268 184 36,386 36,570 12/31/2010 Amount 488,587 485,113 667,566 655,709 75 15,799 15,854 12/31/2009 Amount 920,919 901,049 553 553 109 20,892 21,001 -

MARKET RISK HEDGE ASSETS HEDGED ITEMS - LIABILITIES MARKET RISK HEDGE - LIABILITIES HEDGED ITEMS ASSETS

12/31/2010 Swap contracts mature as follows: Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years TOTAL Difference receivable 53 157 95 305 Difference payable 2,490 9,628 13,000 33,020 58,138

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BANCO DO NORDESTE DO BRASIL S.A.

12/31/2009 Swap contracts mature as follows: Difference receivable Difference payable

Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years 5 to 15 years TOTAL

181 87 268

2,424 13,555 16,375 3,935 281 36,570

The fair value of swap transactions is calculated using the rates disclosed by ANBIMA. The credit risk is determined using the correlation ratios and risk factors disclosed by the Central Bank of Brazil.
d) Income (loss) from derivative transactions
Specification Swap TOTAL 2nd half of 2010 (30,488) (30,488) 12/31/2010 (36,140) (36,140) 12/31/2009 (38,146) (38,146)

7.

INTERBANK ACCOUNTS - RESTRICTED DEPOSITS a) Restricted Deposits

Specification Mandatory payments - Savings Compulsory reserves - Cash funds National Housing System (SFH) National Treasury - Rural credit TOTAL 12/31/2010 196,368 33,680 27,718 4,300 262,066 12/31/2009 148,935 23,883 32,806 1,696 207,320

b) Income (loss) from compulsory investments

Specification Income from restricted deposits - Central Bank of Brazil Income from restricted deposits - SFH Income from restricted deposits - Rural credit Devaluation of restricted deposits TOTAL 2nd half of 2010 12/31/2010 12/31/2009

6,524 1,596 84 (2,812) 5,392

11,779 10,710 113 (6,935) 15,667

8,653 220 2,974 (9,051) 2,796

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8.

LOAN PORTFOLIO AND ALLOWANCE FOR LOAN LOSSES a) Loan portfolio and allowance for loan losses
12/31/2010 Specification Loans Current Long-term Other lines with loan features Current Long-term TOTAL Gross amount 10,715,838 4,470,238 6,245,600 571,930 547,862 24,068 11,287,768 Allowance (580,934) (246,074) (334,860) (71,984) (18,321) (53,663) (652,918) 12/31/2009 Gross amount 9,443,790 4,517,643 4,926,147 493,862 490,609 3,253 9,937,652 Allowance (555,155) (339,833) (215,322) (60,690) (34,460) (26,230) (615,845)

a.1) Loan portfolio

Specification Advances to depositors Loans Discounted notes Financing Financing in foreign currencies Refinancing with Federal Government (note 28.a.1) Rural and agro-industrial financing Real estate financing (1) Infrastructure and development financing Subtotal of lending operations Guarantees honored Income receivable from advances Debtors for purchase of assets Notes and credits receivables Advances on foreign exchange contracts (2) Subtotal of other items with loan features TOTAL LOAN PORTFOLIO 12/31/2010 1,417 4,882,670 170,113 1,716,722 24,311 533,239 1,961,023 243 1,426,050 10,715,838 20 9,896 2,298 40,526 519,190 571,930 11,287,768 12/31/2009 661 4,324,143 157,759 1,152,148 274,438 517,064 2,321,319 241 696,017 9,443,790 65 15,682 5,929 3,430 468,756 493,862 9,937,652

(1) Refer to transactions contracted before the discontinuance of real estate financing activities. (2) Accounts classified as OTHER PAYABLES/Foreign Exchange Portfolio.

a.2) Income from lending operations

Specification
Loans and discounted notes Financing Rural and agro-industrial financing Recovery of receivables written off as loss Guarantees honored Other TOTAL

2nd half of 2010

401,746 201,368 78,944 113,100 1 (624) 794,535

12/31/2010
759,469 403,112 171,478 156,964 1 (1,215) 1,489,809

12/31/2009
597,459 285,422 153,991 181,602 1 (3,943) 1,214,532

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BANCO DO NORDESTE DO BRASIL S.A. b) Breakdown by maturity b.1) Normal (1)

Business sector Rural Manufacturing Government Other services Trading Financial institutions Housing Individuals TOTAL
From 01 to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Over 360 days Total as of 12/31/2010 Total as of 12/31/2009

73,685 141,969 3,414 118,794 198,069 28,205 243 4,380 568,759

27,067 268,159 3,511 83,232 163,586 32,696 4,310 582,561

6,715 103,491 12,021 71,263 149,323 29,767 3,565 376,145

57,326 406,098 10,243 335,122 492,674 82,370 11,652 1,395,485

134,784 462,434 29,189 602,217 401,517 138,419 8,782 1,777,342

1,582,473 1,123,522 1,199,282 1,504,797 373,570 383,885 16,094 6,183,623

1,882,050 2,505,673 1,257,660 2,715,425 1,778,739 695,342 243 48,783 10,883,915

2,187,155 1,747,319 1,156,521 2,555,085 1,194,460 600,014 241 46,336 9,487,131

(1) Include past-due receivables up to 14 days.

b.2) Past-due
Current Business sector Rural Manufacturing Other services Trading Financial institutions Individuals TOTAL
From 01 to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Over 360 days Total as of 12/31/2010 Total as of 12/31/2009

151 6,628 1,634 4,787 1 363 13,564

113 1,859 1,640 5,983 1 275 9,871

195 1,278 3,221 6,222 1 184 11,101

2,737 3,449 19,927 11,135 3 898 38,149

5,347 4,189 6,006 16,579 7 845 32,973

23,641 14,810 13,136 32,981 3 1,473 86,044

32,184 32,213 45,564 77,687 16 4,038 191,702

74,906 73,729 30,894 42,209 3,490 225,228

Past-due Business sector Rural Manufacturing Other services Trading Financial institutions Individuals TOTAL
From 01 to 14 days 179 804 662 1,402 1 46 3,094 From 15 to 30 days 2,080 1,789 2,236 4,979 423 11,507 From 31 to 60 days 939 12,963 2,665 5,647 1 444 22,659 From 61 to 90 days 1,576 26,724 2,249 4,441 211 35,201 From 91 to 180 days 15,112 19,280 23,253 10,442 708 68,795 From 181 to 360 days 21,742 6,043 7,178 14,134 1,642 50,739 Over 360 days 18,642 245 346 757 166 20,156 Total as of 12/31/2010 60,270 67,848 38,589 41,802 2 3,640 212,151 Total as of 12/31/2009 73,390 71,476 31,768 44,156 4,503 225,293

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BANCO DO NORDESTE DO BRASIL S.A. c) Specification by risk level

12/31/2010
Risk rating AA A B C D E F G H TOTAL Current (1) 3,640,505 3,847,921 2,635,606 262,461 111,266 56,686 34,525 17,621 277,324 10,883,915 Past-due Total portfolio Allowance 19,239 26,743 8,581 12,991 27,833 40,518 42,544 474,469 652,918 Current (1) 3,346,521 3,224,154 2,232,913 329,704 99,756 26,867 9,584 7,526 210,106 9,487,131

12/31/2009
Past-due 20,996 16,746 61,476 17,079 23,653 16,929 293,642 450,521 Total portfolio 3,346,521 3,224,154 2,253,909 346,450 161,232 43,946 33,237 24,455 503,748 9,937,652 Allowance 16,121 22,539 10,394 16,123 13,184 16,618 17,118 503,748 615,845

3,640,505 3,847,921 38,743 2,674,349 23,563 286,024 18,644 129,910 36,090 92,776 46,511 81,036 43,157 60,778 197,145 474,469 403,853 11,287,768

(1) Include past-due receivables up to 14 days.

d) Change in allowance for the period

Specification Opening balance (+) Net allowance recognized in the period (-) Receivables written off as a loss in the period (=) Allowance for loan losses (+) Allowance for losses on other receivables without loan features (note 9e) (=) Allowance for loan losses balance 12/31/2010 615,845 392,528 (355,455) 652,918 31,706 684,624 12/31/2009 345,790 372,182 (102,127) 615,845 32,466 648,311

e) Breakdown of allowance expense balance

Specification
(+) Expenses on allowance for loan losses (+) Expenses on allowance for losses on other receivables (-) Reversals of operating allowances (=) Expense balance on allowance with loan features (+) Expense on allowance for losses on other receivables without loan features (-) Reversals of allowance for losses on other receivables without loan features (=) Expense balance on allowance for loan losses

2nd half of 2010 178,946 56,679 (13,651) 221,974 412 (661) 221,725

12/31/2010 356,324 57,357 (21,153) 392,528 8,630 (1,148) 400,010

12/31/2009 330,466 41,716 372,182 4,834 (424) 376,592

f) In the year, receivables that had been written off as loss were recovered in the amount of R$ 156,964 (R$ 181,602 as of 12/31/2009) and renegotiations of operations amounted to R$ 787,810 (R$ 514,613 as of 12/31/2009).

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g) Recovery of receivables with legal base In conformity with Law 11322, of 07/13/2006, Law 11775, of 09/17/2008, and Law 12249, of 06/11/2010, concerning rescheduling of debts arising from rural credit operations, that provides for rebates in the debit balance, discounts for prompt payment of installments, reduction of interest rate, and extension of payment terms of referred operations, a positive effect on the Banks income, referring to 12/31/2010, was recognized in the amount of R$ 89,582 (R$ 98,103 as of 12/31/2009). Pursuant to the mentioned laws, part of these transactions was acquired by the Northeast Constitutional Financing Fund (FNE):
Specification Income earned Recovery of operations written off from assets Expenses on discounts Net effect of allowances TOTAL 12/31/2010
54,611 28,998 (11,767) 17,740 89,582

12/31/2009
83,010 45,371 (9,448) (20,830) 98,103

9.

OTHER RECEIVABLES
Specification a) Receivables for guarantees honored b)Income receivable c) Other Tax credits - temporary differences (note 20.b) Tax credits - securities and derivatives (notes 6.a.2 and 20.b) Debtors from guarantee deposits Recoverable taxes and contributions From prepayments - SRF Regulation 90/92 Other amounts Tax incentive options Receivables Salary advances Payments to be refunded Recalculation, discounts, waivers and bonuses in BNDES transactions Recalculation, discounts, waivers and bonuses in FAT transactions Other amounts e)Allowance for losses on other receivables Receivables with loan features Receivables without loan characteristics (note 8.d) TOTAL CURRENT LONG-TERM 12/31/2010 20 25,570 1,007,017 277,353 13,873 367,471 177,148 170,353 6,795 26,748 40,526 2,111 8,110 8,320 27,142 58,215 (103,690) (71,984) (31,706) 928,917 858,682 70,235 12/31/2009 65 21,134 902,560 212,459 11,261 353,840 150,830 142,652 8,178 26,748 3,430 1,954 8,375 1,361 70,913 61,389 (93,156) (60,690) (32,466) 830,603 728,566 102,037

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10.

FOREIGN EXCHANGE PORTFOLIO a)Breakdown

Specification Assets - Other Receivables Foreign exchange purchased pending settlement Receivables for foreign exchange sold Advances received in local currency Income receivable from advances Current Assets Liabilities - Other Payables Foreign exchange purchased Foreign exchange sold pending settlement (Advances on foreign exchange contracts) Other Current Liabilities 12/31/2010 12/31/2009

511,266 2,883 (2,202) 9,896 521,843 532,891 2,855 (519,190) 45 16,601

435,819 3,930 (1,654) 15,682 453,777 472,306 3,926 (468,756) 47 7,523

b) Income (loss) from foreign portfolio

Specification Exchange gains Exchange losses TOTAL 2nd half of 2010 18,544 (247) 18,297 12/31/2010 12/31/2009 74,128 (967) 73,161 89,236 (2,458) 86,778

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11.

PERMANENT ASSETS
Specification a) Investments a.1) Other investments Tax incentive investments Shares Artworks and valuables a.2) Allowance for losses Tax incentive investments Shares b) Property and equipment b.1) Real estate Land Buildings b.2) Real estate revaluations Land Revaluations Buildings Revaluations b.3) Other property and equipment Facilities, furniture and equipment Data processing system Security system Transportation system Other b.4) Accumulated depreciation Real estate Other property and equipment c) Deferred charges c.1) Organization and expansion costs Leasehold improvements Software purchase and development c.2) Accumulated amortization Leasehold improvements Software purchase and development TOTAL 12/31/2010 1,429 6,732 5,011 944 777 (5,303) (5,010) (293) 188,219 132,615 6,567 126,048 111,628 10,930 100,698 151,302 63,401 56,177 9,549 16,135 6,040 (207,326) (155,715) (51,611) 2,407 6,096 6,055 41 (3,689) (3,664) (25) 192,055 12/31/2009 1,379 6,682 5,011 943 728 (5,303) (5,010) (293) 191,962 127,000 6,267 120,733 111,628 10,930 100,698 142,320 59,280 50,969 9,679 16,482 5,910 (188,986) (142,882) (46,104) 3,064 8,059 8,010 49 (4,995) (4,971) (24) 196,405

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BANCO DO NORDESTE DO BRASIL S.A. 12. DEPOSITS AND OPEN MARKET FUNDING a) Deposits
Specification 12/31/2010 12/31/2009

a.1) Demand deposits Foreign currency deposits Government deposits Restricted deposits Legal entities Individuals Other amounts a.2) Savings deposits Free savings deposits - individuals Free savings deposits - legal entities From related parties and institutions of the Financial System a.3) Interbank deposits a.4) Time deposits Time deposits Interest-bearing escrow deposits Interest-bearing special deposits /FAT - available funds Proger Urbano Proger Rural Pronaf Protrabalho Infrastructure Drought
PNMPO - National Program for Guided Productive Microcredit

Interest-bearing special deposits /FAT - invested funds Proger Urbano Proger Rural Pronaf Protrabalho Infrastructure Drought FINOR/cash and cash equivalents and reinvestments Law 8167 Other amounts a.5) Other deposits - Investment deposits TOTAL CURRENT LONG-TERM

134,119 31,487 20,446 39,117 30,369 9,363 3,337 1,288,569 740,681 546,832 1,056 684,128 6,387,223 5,048,516 202,751 370,420 18,200 273 3,535 328,476 155 19,781 316,372 60,448 964 192,453 50,731 11,776 447,569 1,595 15,542 8,509,581 3,772,031 4,737,550

175,340 39,503 38,044 53,483 34,584 7,400 2,326 1,381,500 606,679 774,539 282 384,771 4,384,003 3,411,764 56,327 48,479 19,129 3,651 182 17,973 6,972 572 346,775 56,857 58 1,371 218,297 56,413 13,779 520,404 254 7,113 6,332,727 3,197,499 3,135,228

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b) Open Market Funding

Specification Own portfolio Treasury bills Third-party portfolio Treasury bills National treasury notes TOTAL CURRENT LONG-TERM 12/31/2010 436,293 436,293 87,996 87,996 524,289 460,893 63,396 12/31/2009 350,670 350,670 95,008 25,871 69,137 445,678 445,678 -

c) Expenses of funding operations

Specification Expenses on raising deposits Time deposits Savings deposits Escrow deposits Interbank deposits Special deposits - FAT Other Expenses on money market funding operations Third-party portfolio Own portfolio TOTAL 2nd half of 2010 12/31/2010 12/31/2009 (311,422) (230,741) (28,803) (3,608) (9,162) (34,987) (4,121) (27,726) (4,770) (22,956) (339,148) (543,046) (393,896) (52,176) (5,446) (15,706) (68,306) (7,516) (48,096) (8,297) (39,799) (591,142) (336,945) (209,521) (41,105) (3,365) (10,476) (68,020) (4,458) (44,215) (9,902) (34,313) (381,160)

13.

BORROWINGS AND DOMESTIC ONLENDINGS a) Borrowings and Onlendings by Maturity:

0 to 3 months 3 to 12 months 1 to 3 Years 3 to 5 Years 5 to 15 years Over 15 years Total as of 12/31/2010 Total as of 12/31/2010

Specification Domestic borrowings Foreign borrowings Domestic onlendings Foreign onlendings TOTAL

103,487 169,517 10,245 283,249

15,219 343,116 119,909 56,563 534,807

22,828 214,091 138,732 375,651

22,828 352,691 142,399 517,918

494,571 308,394 802,965

335,997 72,832 408,829

60,875 446,603 1,686,776 729,165 2,923,419

70,157 630,522 1,433,524 722,393 2,856,596

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b) Borrowings
Specification Domestic borrowings - official institutions/Refinancing Foreign borrowings/Borrowings in foreign currency TOTAL CURRENT LONG-TERM Financial charges
TJLP+ 3 or 7.75 p.a. USD

12/31/2010 60,875 446,603 507,478 461,822 45,656

12/31/2009 70,157 630,522 700,679 644,553 56,126

c)

Domestic Onlendings - Official Institutions

Specification
National Treasury BNDES POC (credit facility granted by the BNDES agents to shareholders of medium-sized and small companies to buy shares in capital increases) Credit Facility for investment in agriculture FINAME (National Equipment Financing Authority) Programa Automtico (program that intended purchase of new machinery and equipment by companies based in Brazil) Farm Program Other institutions Pilot Support Project of Agrarian Reform MEPF-Banco da Terra - Land Fund and Agrarian Reform - Land Bank Banco da Terra- Land Bank - Fight against rural poverty TOTAL CURRENT LONG-TERM SELIC/TJLP / 6.0 SELIC/4 to 18.0 Extra Mkt rate./ 2 to 10.0 TJLP/IGPM/IPCA+1.5 TJLP/IGPM/IPCA+1.5 TJLP/IGPM/IPCA+1.5

Financial charges (p.a.)

IGP-DI+ 2.0 or 6.75 TJLP/IGPM/IPCA+1.5

12/31/2010 1,086 933,260 712,269 220,991 52,859 38,276 14,583 699,571 81,699 126,302 491,570 1,686,776 289,427 1,397,349

12/31/2009 1,164 743,796 428,032 315,764 29,330 15,960 13,370 659,234 82,259 137,604 439,371 1,433,524 313,523 1,120,001

d) Foreign Onlendings
Specification
Financial charges 12/31/2010 12/31/2009

(p.a.) IDB-Prodetur (Tourism Development Program with funds provided by the IDB) IDB-Other programs Other programs TOTAL CURRENT LONG-TERM
USD + 1.27 or UCBID + 3.19 USD + 1.27 USD + 6.0 722,200 6,456 509 729,165 66,808 662,357 714,419 7,974 722,393 63,653 658,740

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BANCO DO NORDESTE DO BRASIL S.A. e) Expenses on Borrowings and Onlendings

Specification Borrowings Domestic borrowings Onlendings Domestic Onlendings - Official Institutions National Treasury BNDES FINAME CEF Other institutions Foreign onlendings Foreign banks Financial and development funds TOTAL 2nd half of 2010 (2,632) (2,632) (50,908) (41,492) (54) (37,377) (1,631) (2,430) (9,416) (3,522) (178,888) (235,950) 12/31/2010 (5,484) (5,484) (121,605) (74,911) (108) (66,654) (3,268) (4,881) (46,694) (23,131) (323,507) (473,727) 12/31/2009 (6,109) (6,109) (71,115) (43,165) (59) (30,626) (3,019) (2) (9,459) (27,950) (10,355) (374,108) (461,687)

14.

FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES In November 2010, the Bank issued Senior Unsecured Notes amounting to US$ 300,000 in the international financial market, maturing in 5 years. The issuance was carried out at a coupon rate of 3.625% p.a., subject to semi-annual interest. The notes are not payable in installments; the principal is settled in R$/US$ thousand in a lump sum on the maturity date, as shown below:
Specification Eurobond - Senior Usecured Notes Amount issued U$ thousand 300,000 Nominal compensation 3.625% a.a Funding date 11/09/2010 Maturity 11/09/2015 12/31/2010 R$ thousand 485,487 12/31/2009 R$ thousand -

Swap transactions contracted to hedge US dollar liabilities from securities raised abroad against market fluctuations have been classified as hedge operations and are, therefore, adjusted to fair value, as shown below:
Specification Eurobond - Senior Usecured Notes Funding date 11/09/2010 Maturity 11/09/2015 Contract value 502,477 Adjusted to market (17,364) Provision for income tax 374 Market value on Market value on 12/31/2010 12/31/2009 485,487 -

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15.

OTHER LIABILITIES
Specification a) Collected taxes and other Funds from Proagro (program established to guarantee farmers to pay their costs of farming and cattle raising) IOF (tax on financial transactions payable) Other taxes b) Social and statutory Dividends and bonuses payable Profit sharing c) Tax and social security Provision for tax contingencies (note 21) Taxes payable Tax lawsuits Provision for deferred income and social contribution taxes Securities and derivatives (note 6.a.2) Revaluation of buildings and land (note 18.b) Provision for income and social contribution taxes (note 20.a) Income tax Social contribution Taxes payable d) Trading account e) Financial and development funds Northeast Constitutional Financing Fund (FNE) Other f) Subordinated debt eligible for capital (note 17) g) Hybrid debt & equity instruments (note 16) h) Other Provision for contingent liabilities (note 21.d) Labor lawsuits Civil lawsuits Other lawsuits FNE Onlending Full risk Shared risk FDNE PROAGRO Accrued liabilities allowances Employee benefits - CVM Resolution 600 Pension plan - CVM Resolution 600 (note 24.g) Health care plan - CVM Resolution 600 (note 24.g) Personnel expenses Other Other TOTAL CURRENT LONG-TERM 12/31/2010 5,604 12/31/2009 3,269

148 5,389 67 130,687 96,519 34,168 493,132 101,525 74,847 26,678 58,716 47,294 11,422 284,294 173,703 110,591 48,597 7 3,746,175 3,656,262 89,913 1,101,848 1,004,166 2,576,876 1,436,231 161,863 92,970 65 1,177,757 372 84,960 1,092,425 277 3,299 1,053,884 925,375 490,630 434,745 94,143 34,366 86,761 9,058,495 3,361,750 5,696,745

92 3,093 84 238,115 205,091 33,024 464,557 95,167 71,343 23,824 103,062 90,015 13,047 226,928 139,939 86,989 39,400 3,639,762 3,553,326 86,436 622,064 2,421,737 1,202,944 150,741 95,338 567 956,261 956,261 37 1,123,974 1,023,192 765,942 257,250 68,016 32,766 94,819 7,389,504 3,408,581 3,980,923

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16.

HYBRID DEBT/EQUITY INSTRUMENTS On December 22, 2010, pursuant to Law 12249, of 06/11/2010, as amended by Provisional Act 513, of 11/26/2010, Banco do Nordeste and the Federal Government entered into a Loan Contract, classified as Hybrid Debt/Equity Instruments (IHCD), in the amount of R$ 1,000,000, already paid in, having no maturity date. The Bank requested the Central Bank of Brazil to consider the transaction as Tier II Capital in Regulatory Capital (PR), under the terms of CMN Resolution 3444, of 02/28/2007, and is awaiting approval. Below are details on the transaction:
Specifications Hybrid debt/equity instruments Amount issued 1,000,000 Clearance IPCA+6,5715% a.a. Funding Date 12/22/2010 12/31/2010 1,004,166 12/31/2009 -

17.

SUBORDINATED DEBT ELIGIBLE FOR CAPITAL The Bank has subordinated debt contracts with the Northeast Constitutional Financing Fund (FNE), classified as Regulatory Capital Tier II, under the Subordinated Debts Eligible to Capital category, in accordance with CMN Resolution 3444, of 02/28/2007, and the Central Bank of Brazils authorization. The agreements have indeterminate term and establish that the funds not yet invested will yield the extramarket rate disclosed by the Central Bank of Brazil, and, when invested upon release to the borrowers under the financings contracted by Banco do Nordeste, will be updated at the charges agreed on in the corresponding credit instruments, pursuant to Article 9-A of Law 7827, of 09/27/1989. Breakdown is as follows:
Specifications Constitutional Fund to Finance the Northeast (FNE) Funds available (1) Funds invested (2) TOTAL 12/31/2010 1,101,848 319,417 782,431 1,101,848 12/31/2009 622,064 593,096 28,968 622,064

(1) Yielding extramarket rates disclosed by the Central Bank of Brazil, pursuant to article 9-A of Law 7827, of 09/27/1989. (2) Yielding rates agreed upon with borrowers, less del credere of the financial institution, pursuant to article 9-A of Law 7827, of 09/27/1989.

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BANCO DO NORDESTE DO BRASIL S.A. 18. SHAREHOLDERS' EQUITY a) Capital The Extraordinary Shareholders Meeting held on 03/30/2010 approved a capital increase of R$ 198,000 by using bylaws reserves, without issuance of new shares. Capital increased from R$ 1,652,000 to R$ 1,850,000. On 12/07/2010, the Extraordinary Shareholders Meeting approved a new capital increase of R$ 1,000, resulting from the merger of the Capital Reserve of R$ 502 and Statutory Reserve of R$ 498, without issuance of new shares. Therefore, capital increased from R$ 1,850,000 to R$ 1,851,000, represented by 87,001,901 registered, fully paid shares with no par value, distributed as follows:
Composition as of 12/31/2010 Common shares 46,595,279 1,473,704 15,000 400,792 48,484,775 Preferred shares 35,373,190 2,373,264 387,995 382,677 38,517,126 Total shares 81,968,469 3,846,968 402,995 783,469 87,001,901 % voting capital 96.10 3.04 0.03 0.83 100.00 % total capital 94.21 4.42 0.47 0.90 100.00

Shareholders Federal Government FND (National Development Fund) BNDESPAR Other (9,623 shareholders) TOTAL

Composition as of 12/31/2009 Common shares 46,595,279 1,473,704 22,785 393,007 48,484,775 Preferred shares 35,373,190 2,373,264 403,495 367,177 38,517,126 Total shares 81,968,469 3,846,968 426,280 760,184 87,001,901 % voting capital 96.10 3.04 0.05 0.81 100.00 % total capital 94.21 4.42 0.49 0.88 100.00

Shareholders Federal Government FND (National Development Fund) BNDESPAR Other (9,312 shareholders) TOTAL

b) Revaluation reserve The amount of R$ 28,064 (R$ 30,501 as of 12/31/2009) refers to the revaluation of property, plant and equipment in use, recognized on 02/26/1993. Said reserve will be maintained through its actual realization date either as a result of depreciation, writeoff or sale, pursuant to CMN Resolution 3565, of 05/29/2008. The realization occurred in the year totaled R$ 2,437 (R$ 2,437 as of 12/31/2009) and was included in the income allocation basis.

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c) Treasury shares The Bank holds 10,232 own shares, of which 8,088 are registered common shares (ON) and 2,144 are registered preferred shares (PN), bought back on 02/17/2009. These shares, whose market values on 12/31/2010 represent, respectively, R$ 41.50 and R$ 58.45 per share, are held in treasury to be later disposed of or cancelled. d) Prior-year Adjustments Adjustments to retained earnings or accumulated losses refer to the change in the accounting practice referring to employee benefits approved through CVM Resolution 600, of 10/07/2009, which revoked CVM Resolution 371, of 12/13/2000. Tax effects were duly determined pursuant to the provisions of article 273 of the Income Tax Regulation (Decree 3000, of 03/26/1999) (Note 24.h).
Specification Transition liability and Adjustment for the first-time adoption of CVM Resolution 600 Income tax and social contribution on net income Adjustment of tax effects, net CAPEF - BD Plan 12/31/2009 12/31/2008 (161,974) 64,790 (97,184) 471,190 (188,476) 282,714 CAMED - Natural Plan 12/31/2009 12/31/2008 TOTAL (61,785) 24,714 (37,071) (138,208) 55,283 (82,925) 109,223 (43,689) 65,534

e) Net Income - Allocations

Specification 1. Net income 2. Prior-year adjustment 3. Revaluation reserves transferred to retained earnings (accumulated losses) 4. Adjusted net income Legal reserve (item 1 x 5%) Dividends ( Note 18.f) Interest on own capital (note 18.f) Statutory reserve (item 4 - Legal reserve - dividends - interest on own capital) 12/31/2010 313,590 65,534 2,437 381,561 15,680 85,511 121,000 159,370 12/31/2009 459,012 2,437 461,449 22,950 130,446 110,000 198,053

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BANCO DO NORDESTE DO BRASIL S.A. f) Dividends and interest on own capital Under the Banks bylaws, shareholders are entitled to minimum dividends of 25% of net income for the year, adjusted as defined by regulations. The Board of Directors proposes to the Shareholders Meeting the payment of dividends and interest on own capital, attributed to the amounts of dividends equivalent to 50.3539% of the adjusted net income for the year. Dividends/interest on capital for 2010 were calculated as follows:
Specification 1. Net income for the year 2. Prior-year adjustments 3. Recorded legal reserve 4. Revaluation reserves transferred to retained earnings (accumulated losses) 5. Profit sharing 6. Calculation basis of dividends/interest on own capital 7. Interest on own capital 8. Withholding income tax on interest on own capital 9. Interest on own capital attributed to dividends (item 7 plus item 8) 10. Interim interest on own capital adjusted by the SELIC rate 11. Additional interest on own capital (item 7 plus item 10) 12. Proposed dividends 13. Total attributed to shareholders (item 11 plus item 12) - Interest on own capital of R$ 0.1188772382 per common share (as of 12/31/2009: interest on own capital of R$ 0.821275802532 per common share) - Interest on own capital of R$ 0.1307649615 per preferred share (as of 12/31/2009: interest on own capital of R$ 0.903403382611 per preferred share) - Dividends of R$ 0.94130871072 per common share (as of 12/31/2009: dividends of R$ 1.435941522571 per common share) - Dividends of R$ 1.0354395819 per preferred share (as of 12/31/2009: dividends of R$ 1.579535674974 per preferred share) 14. Total attributed to shareholders in the year (item 7 plus item 12) 12/31/2010 313,590 65,534 (15,680) 2,437 44,238 410,119 121,000 (144) 120,856 (110,201) 10,799 85,511 96,310 5,763 5,036 45,631 39,880 206,511 12/31/2009 459,012 (22,950) 2,437 41,686 480,185 110,000 (226) 109,774 (35,393) 74,607 130,446 205,053 39,813 34,794
69,610

60,836 240,446

The Bank calculated for preferred shares dividends and interest on own capital 10% higher that dividends/interest on own capital attributed to common shares, pursuant to Article 17, I, of Law 6404, of 12/15/1976, as reworded by Law 10303, of 10/31/ 2001 and the provision of Article 6, paragraph 2, of the Banks bylaws. Interest on own capital was accounted for in expenses, but, for purposes of disclosure of financial statements, has been reclassified to Retained earnings (accumulated losses). Total interest on own capital in the year generated a reduction in tax expenses of R$ 48,125.

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BANCO DO NORDESTE DO BRASIL S.A.

The employee profit sharing was added to the interest on own capital calculation basis, as established by Article 2 of Resolution 10, of 05/30/1995, of the CCE (Council for Coordination and Control of State-Owned Companies).

19.

OTHER OPERATING INCOME (EXPENSES)

Specification a) Income from services provided Investment funds management Funds and programs management Services provided b) Income from bank fees c) Personnel expenses Salaries Payroll charges Pension plan - CVM Resolution 600 (note 24) Health care plan - CVM Resolution 600 (note 24) Benefits, training, fees and compensation of interns d) Other administrative expenses Data processing Advertising and publicity Outside services Rentals, material and public utilities Travel expenses Communications Depreciation and amortization Asset maintenance and upkeep Surveillance, security and transportation Promotions, public relations and publications Financial system services Specialized technical services Insurance Court, Notary and Attorneys fees Trade Association Contribution and other Condominium fees, catering, kitchen and food FUNDECI (Science and Technology Development Fund) Other e) Tax expenses Cofins and PIS/PASEP (taxes on revenue) ISS (service tax) and IPTU (municipal real estate tax)/Improvement Other 2nd half of 2010 639,577 6,863 468,074 164,640 6,629 (560,764) (298,444) (117,555) (25,898) (73,798) (45,069) (355,089) (59,728) (14,167) (105,026) (22,426) (7,861) (17,083) (12,835) (14,039) (14,027) (11,177) (8,984) (13,753) (1,949) (26,070) (499) (1,742) (8,100) (15,623) (92,670) (81,747) (8,653) (2,270) 12/31/2010 1,233,992 12,630 923,079 298,283 12,768 (1,019,740) (532,497) (201,148) (89,625) (111,663) (84,807) (659,632) (123,984) (33,924) (178,752) (43,976) (14,775) (31,844) (25,551) (28,622) (26,525) (20,916) (17,082) (24,213) (3,813) (36,991) (956) (3,353) (16,200) (28,155) (173,182) (155,145) (15,416) (2,621) 12/31/2009 1,106,886 9,726 824,874 272,286 12,205 (890,476) (451,432) (155,843) (131,985) (74,008) (77,208) (551,813) (106,490) (32,470) (128,879) (44,050) (14,867) (30,531) (25,511) (27,004) (23,819) (15,540) (14,746) (21,066) (2,983) (12,080) (778) (2,840) (17,000) (31,159) (144,214) (130,158) (13,020) (1,036)

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BANCO DO NORDESTE DO BRASIL S.A.

f) Other operating income Financial commission on investment funds management Negative exchange variation of loans obtained Reversal of Operating Provision on FNE transactions risks Recovery of charges and expenses Reversal of provisions for social contribution and income tax Reversal of operating provisions Interest and commissions Monetary adjustment Monetary adjustment of taxes FNE - Recovery of amounts settled by the Bank Other g) Other operating expenses Exchange variation from exchange area Negative exchange variations on granted loans Negative adjustments on lending operations Discounts granted in renegotiations Interest on lending operations Tax risks Risks on FNE transactions Risks on FDNE transactions Labor lawsuits Civil lawsuits Other lawsuits Other operating provisions Other TOTAL

527,562 366,705 86,932 847 2,052 4,441 1,598 1,562 98 39,798 23,529 (396,368) (335) (76,785) (157) (25,389) (8,637) (5,439) (169,969) (131) (33,883) (5,583) (70,060) (231,123)

927,571 691,906 99,578 847 8,703 131 8,229 2,868 4,420 181 56,614 54,094 (757,896) (964) (107,697) (160) (47,348) (18,175) (6,835) (406,384) (240) (40,428) (18,465) (10) (111,190) (436,119)

1,159,159 554,751 363,393 13,001 14,789 123,028 4,775 3,981 12,038 48,166 21,237 (818,404) (359) (379,172) (15,112) (6,818) (13,027) (14,537) (282,231) (16,227) (24,621) (56) (4,451) (61,793) (126,657)

(*) Pension Plan and Health Care expenses for the year ended 12/31/2009 comply with the provisions of CVM Resolution 371, of 12/13/2000.

20.

INCOME TAX AND SOCIAL CONTRIBUTION a) Income tax and social contribution The Bank is subject to taxation on deemed income and pays income and social contribution taxes monthly on an estimated basis. Income tax expenses in 2010 was R$ 104,823 and the social contribution tax expense was R$ 69,263, reconciled as shown below:

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BANCO DO NORDESTE DO BRASIL S.A.

Income tax 12/31/2010 12/31/2009 a.1) Specification of the provision for income tax and social contribution expense Income before taxes on income, interest on own capital and profit sharing Permanent additions/deductions Temporary additions/deductions Taxable income before utilization of tax loss carryforwards Offset of tax loss carryforwards Taxable income after utilization of tax loss carryforwards Provision for income tax and social contribution Deductions (tax incentives) Expense on provision for income tax and social contribution Deferred tax assets Total current expenses % of current expenses in relation to income before taxation a.2) Specification of provision for income tax and social contribution Provision for income tax and social contribution expense Provision for taxes on the realization of revaluation reserve Provision for taxes on prior year adjustments Provision for income tax and social contribution Taxes for offset due to tax prepayments, including withholding taxes Adjustment for the period Social contribution 12/31/2010 12/31/2009

366,676 108,644 280,319 755,639 (19,350) 736,289 (156,260) 10,879 (145,381) 40,558 (104,823) 28.59%

509,499 19,800 299,140 828,439 (248,532) 579,907 (143,938) 5,014 (138,924) 40,511 (98,413) 19.32%

366,676 108,501 280,319 755,496 (20,354) 735,142 (93,598) (93,598) 24,335 (69,263) 18.89%

509,499 19,825 299,140 828,464 (248,539) 579,925 (86,380) (86,380) 24,306 (62,074) 12.18%

145,381 1,015 27,307 173,703 (117,146) 56,557

138,924 1,015 139,939 (100,069) 39,870

93,598 609 16,384 110,591 (54,100) 56,491

86,380 609 86,989 (44,986) 42,003

b) Tax credits on temporary differences Income tax and social contributions on temporary differences of allowances for doubtful accounts are recorded in conformity with the provisions of the following main standards: CMN Resolution 3059, of 12/20/2002 (amended by CMN Resolution 3,355, of 03/31/2006), and Central Bank of Brazil Circular 3171, of 12/30/2002; and are based on technical studies performed on a six-monthly basis. In accordance with Central Bank of Brazil Circular Letter 3023, of 06/11/2002, the Bank recognized tax credits on adjustments to fair value of securities classified into the category available-for-sale securities. Changes in tax credits are shown below:
INCOME TAX Specification Opening balance as of 12/31/2009 (+) Credit recognition (-) Credit realization (=) Ending balance as of 12/31/2010 Temporary differences 132,778 102,427 (61,869) 173,336 Securities 7,038 786,913 (785,280) 8,671 SOCIAL CONTRIBUTION Temporary differences 79,681 61,472 (37,136) 104,017 Securities 4,223 472,147 (471,168) 5,202 TOTAL Temporary differences 212,459 163,899 (99,005) 277,353 Securities 11,261 1,259,060 (1,256,448) 13,873

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BANCO DO NORDESTE DO BRASIL S.A.

The balance of the income and social contribution tax assets, recognized in OTHER RECEIVABLES - other, is composed as follows:
Income tax Specification 1. Total temporary differences 2. Tax loss carryforwards 3. Total tax base (1 + 2) 4. Tax credits on temporary differences + tax loss carryforwards 5. Tax credits from mark-to-market of securities 6. Total tax credits ( 4 + 5) 7. Tax credits recognized in assets 8. Tax credits from mark-to-market of securities 9. Total tax credits (7 + 8) 10. Tax credits not recognized in assets ( 6 - "9) 12/31/2010 3,000,354 3,000,354 750,089 8,671 758,760 173,336 8,671 182,007 576,753 12/31/2009 2,728,935 188,374 2,917,309 729,327 7,038 736,365 132,778 7,038 139,816 596,549 Social contribution 12/31/2010 3,000,354 3,000,354 450,053 5,202 455,255 104,017 5,202 109,219 346,036 12/31/2009 2,728,935 190,044 2,918,979 437,847 4,223 442,070 79,681 4,223 83,904 358,166

The estimated realization of tax credits as of 12/31/2010 is as follows:

Period 2011 2012 2013 2014 2015 TOTAL Realization of income tax credit Book value Present value 54,626 21,646 18,198 23,763 55,103 173,336 48,717 17,324 13,176 15,620 33,002 127,839 Realization of social contribution tax Book value credit Present value 32,777 12,987 10,919 14,258 33,076 104,017 29,230 10,394 7,906 9,372 19,810 76,712 Total Book value 87,402 34,633 29,117 38,021 88,179 277,352 Present value 77,947 27,718 21,082 24,992 52,812 204,551

The tax credits arising on the mark-to-market of securities determined at the present realizable value, pursuant to Central Bank of Brazil Circular 3068, of 11/08/2001, will be realized according to the maturities of the securities, as shown below:
Period 2010 2011 2012 2013 2014 2015 to 2017 2027 to 2029 TOTAL Realization of income tax credit Book value Present value 7,180 1 4 172 529 785 8,671 7,180 1 4 172 529 785 8,671 Realization of social contribution tax credit Book value Present value 4,308 1 2 103 317 471 5,202 4,308 1 2 103 317 471 5,202 Total Book value 11,488 2 6 275 846 1,256 13,873 Present value 11,488 2 6 275 846 1,256 13,873

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BANCO DO NORDESTE DO BRASIL S.A. 21. PROVISIONS AND CONTINGENT LIABILITIES a) Banco do Nordeste is a party to several administrative and judicial proceedings involving civil, tax, labor and other matters. To recognize a reserve and contingent liabilities, contingencies are classified in accordance with CMN Resolution 3823, of 12/16/2009 and BACEN Circular 3429, of 02/11/2010. b) The assessment of the reserve and contingent liability, risk level of new lawsuits, and the reassessment of already existing lawsuits are made by the Legal Department, on case by case, and are classified according to the risk of loss, as probable, possible and remote. Such classification is based on the analysis of the following factors: i) reasonableness of the factual and legal arguments of the other party; ii) arguments and legal basis developed by Banco do Nordeste; iii) previous losses incurred by Banco do Nordeste final outcome in similar cases; iv) previous decisions of higher courts and supervisory authorities on the matters in litigation; v) decisions already made on each proceeding (decision, sentence, injunction, interim relief, writ of payment, writ of attachment, etc); and vi) existence of procedural errors in the administrative and judicial proceedings. c) Contingencies classified as probable losses are accounted for and represented by Civil Lawsuits (claiming compensation for pain and suffering and property damage, such as protest of notes, return of checks, and provision of information to credit reporting agencies, among others), Labor Lawsuits (claiming labor rights, in light of specific professional category legislation, such as overtime, salary equalization, job reinstatement, premium for transfer, termination pay, retirement supplementation and others), Tax and Social Security Lawsuits (represented by judicial and administrative proceedings involving federal and municipal taxes) and Other Lawsuits (such as infringement notices issued by Regional Councils that regulate the exercise of professions and Regional Labor Offices). Taking into consideration that the procedures adopted by Banco do Nordeste are in compliance with legal and regulatory provisions, Management understands that the reserves recorded are sufficient to cover losses arising from the respective judicial and administrative proceedings. d) The Bank recognized a provision for the total estimated loss on lawsuits classified as probable losses, as well as for those classified as Legal Obligation pursuant to the terms of BACEN Circular 3429, of 02/11/2010, regardless of the legal counsels assessment of loss, and provisions are not applicable to lawsuits classified as possible and remote losses, as shown in the comparative chart for 12/31/2010 and 12/31/2009:

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BANCO DO NORDESTE DO BRASIL S.A.

12/31/2010
Specification 1.PROVISION FOR TAX CONTINGENCIES (note 15.c) 1.1 Taxes - Legal Obligation 1.2Tax lawsuits Base value Provision Number of shares Base value 12/31/2009 Provision Number of shares

1.2.1 Legal Obligation 1.2.2 Other Obligations

Probable Possible Remote 2.PROVISION FOR CONTINGENT LIABILITIES (note 15.h) 2.1Labor lawsuits Probable Possible Remote 2.2Civil lawsuits Probable Possible Remote (*) 2.3Other lawsuits Probable Possible Remote

74,847 554,803 551 554,252 26,127 363,126 164,999 226,032 161,863 25,716 38,453 1,834,025 92,970 350,839 1,390,216 3,947 65 1,770 2,112

74,847 26,678 551 26,127 26,127 161,863 161,863 92,970 92,970 65 65 -

01 179 07 172 802 4,590 65 -

71,343 425,965 425,965 23,824 239,696 162,445 203,029 150,741 20,670 31,618 895,909 95,338 233,178 567,393 15,959 567 8,319 7,073

71,343 23,824 23,824 23,824 150,741 150,741 95,338 95,338 567 567 -

01 160 160 890 4,271 133 -

(*) The change in the number of civil lawsuits classified as remote risk of loss is due, mainly, to the fact that the following lawsuits were classified as contingent liabilities: a) Payment of an extra contribution referring to pension plan benefits - R$ 488,483; b) Indemnity for pain and suffering and payment of fine R$ 105,504; and c) Indemnity for pain and suffering - R$ 59,843.

e) Changes in the provision for contingent liabilities are as follows:

Specification a) Taxes (Legal Obligation) Opening balance Recognition Reversal/utilization/write-off Closing balance b) Tax lawsuits (Legal Obligation) Opening balance Recognition Reversal/utilization/write-off Closing balance c) Tax lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance d) Labor lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance e) Civil lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance 12/31/2010 12/31/2009

71,343 4,149 (645) 74,847 551 551 23,824 2,987 (684) 26,127 150,741 44,785 (33,663) 161,863 95,338 38,025 (40,393) 92,970

65,217 6,286 (160) 71,343 15,560 8,264 23,824 176,657 20,540 (46,456) 150,741 77,859 26,732 (9,253) 95,338

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f) Other lawsuits (Other liabilities - other) Opening balance Recognition Reversal/utilization/write-off Closing balance g) Vacation Opening balance Recognition Reversal/utilization/write-off Closing balance h) FNE Opening balance Recognition Reversal/utilization/write-off Closing balance i) FDNE Opening balance Recognition Reversal/utilization/write-off Closing balance

567 12 (514) 65 39,346 67,870 (54,398) 52,818 956,261 409,232 (187,736) 1,177,757 37 240 277

529 57 (19) 567 33,592 46,984 (41,230) 39,346 817,003 282,214 (142,956) 956,261 37 37

f) The Bank has lawsuits handled by outside attorneys, most of which relates to loan collection actions, whose assessment of the contingent liabilities is performed by the Legal Area, pursuant to item b, mentioned above. g) Tax lawsuits classified as Legal Obligation pursuant to the terms of BACEN Circular 3429 of 02/11/2010, whose amounts were presented in item d, subitems 1.1 and 1.2.1 discuss, respectively, IRPJ 1999 and ISSQN. h) Below, a brief description of the lawsuits involving the most relevant contingent liabilities in which the BANK is a party, classified as possible risk of loss. - Two tax lawsuits aiming at cancelling tax assessment notices referring to ISSQN levied on service provision income. Estimates of financial losses from possible risks, on base date 12/31/2010, sum, respectively, R$ 131,730 and R$ 85,032. As of 12/31/2009, they represented, respectively, R$ 120,463 and R$ 74,676, both with possible risk level. - Civil lawsuit aiming to obtain an Indemnity for Pain and Suffering and Property Damages as, allegedly, the litigant was declared bankrupt. Possible estimated financial loss sums, on base date 12/31/2010, R$ 69,849. As of 12/31/2009, estimated financial loss for this lawsuit was R$ 100 with remote risk of loss. - Civil lawsuit claiming for refund as a result of undue collection and withholding. Possible estimated financial loss sums, on base date 12/31/2010, R$ 27,147. As of 12/31/2009, estimated financial loss for this lawsuit was R$ 22,723 with possible risk of loss.

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- Civil lawsuit claiming Indemnitiy for Pain and Suffering, Property Damage and Refund due to alleged noncompliance with responsibilities set forth in the Agreement. As of 12/31/2010, possible financial loss is estimated at R$ 18,921. As of 12/31/2009, financial loss on this lawsuit was estimated at R$ 15,838 with possible risk of loss. - Civil lawsuit claiming refund for alleged losses in a clothing project. As of 12/31/2010, possible financial loss is estimated at R$ 17,612. As of 12/31/2009, financial loss on this lawsuit was estimated at R$ 8,622 with possible risk of loss. - Civil lawsuit claiming Indemnity for Property Damage under the allegation that the amounts claimed were not financed. As of 12/31/2010, possible financial loss is estimated at R$ 13,967. As of 12/31/2009, financial loss on this lawsuit was estimated at R$ 20 with remote risk of loss.

22.

EMPLOYEES AND OFFICERS COMPENSATION The monthly compensation paid by the Bank to its employees and officers are as follows (in R$ 1.00):
Gross compensation Maximum Minimum Average Employees (1) 24,275.20 887.65 6,274.54 Officers (2) 26,734.89 23,520.81 -

(1) Includes overtime (including night shift premium), when actually worked. (2) Amounts approved by the 57th Annual Shareholders Meeting and the 84th Extraordinary Shareholders Meeting of Banco do Nordeste, both of which held on 03/30/2010.

As of 12/31/2010, the Bank had 5,993 employees (5,895 as of 12/31/2009), an decrease of 1.66% in the Banks headcount in the period.

23.

PROFIT SHARING In the year, the Bank accrued R$ 44,238 for profit sharing of the Banks employees and officers, being R$ 43,940 relating to employees profit sharing, equivalent to 21.28% of interest on own capital and 14.00% of net income for the year, as follows: - 9%, pursuant to Resolution 10, of 05/30/1995, issued by the Coordination and Control Board of Public Entities (CCE), and Letter 549/2010/SE-MF, of 06/14/2010, issued by the Department of Coordination and Control of State-Owned Companies of the Executive Secretariat of the Ministry of Planning, Budget and Management.

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- 2%, to be distributed to employees on a straight-line basis, with an individual cap of R$ 2,400.00, under a collective bargaining agreement made in 2010 between CONTRAF and FENABAN; - 3%, referring to the extra PLR installment, contingent upon the achievement of social project goals, in accordance with Letter BNB/GAPRE/1921, of 11/18/2010, forwarded to the Ministry of Finance.

24.

EMPLOYEE BENEFITS Pursuant to CVM Resolution 600, of 10/07/2009, which approved Technical Pronouncement CPC 33 - Employee Benefits, we present below information on the employee benefit policy and the accounting procedures adopted by Banco do Nordeste for recognizing its obligations: a) The Bank does not have: - Severance pay benefits; - Others Long-term benefits; - Stock-based compensation. b) Accounting policy adopted by the Bank to recognize actuarial gains and losses The policy adopted for the recognition of actuarial gains and losses, beginning December 2010, is in line with item 93 of the Appendix to CVM Resolution 600, that is, actuarial gains and losses are immediately recognized as revenue or expense. The policy previously adopted for the recognition of actuarial gains and losses was based on items 52 to 55 of the Appendix to CVM Resolution 371, i.e., the Bank recognized a portion of actuarial gains and losses in excess of the higher of: 10% of the defined benefit total actuarial obligation present value, and 10% of plan assets fair value. The effects of the first-time adoption of CVM Resolution 600, beginning as of 01/01/2009, have been fully recognized in the statements as of 12/31/2010, as detailed in item h of this Note. c) General Description of Benefit Plan Characteristics c.1) Benefit Plan The Bank sponsors two benefit plans managed by the Caixa de Previdncia dos Funcionrios do Banco do Nordeste do Brasil (CAPEF), a private pension entity which provides the payment of social security supplementary benefits to participant employees and their beneficiaries.

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The Defined Benefit (BD) plan, which is not open to new participants since 11/26/1999, and the Variable Contribution (CV I) plan, authorized to operate through Administrative Rule MPS/PREVIC/DETEC 189, of 03/25/2010, started operations on 05/09/2010, when it received the first contributions. These plans offer retirement benefits for length of contribution, age and disability to the plan participants and pension benefits to their dependents. c.1.1) Actuarial Method Classified as defined benefit, the BD plan adopts the financial system of capitalization in the actuarial calculation of mathematical provisions related to all benefits offered to its participants and dependents. CV-I plan combines the characteristics of the defined contribution plan and the defined benefit plan, and is classified, pursuant to CVM Resolution 600, as a defined benefit plan. This plan adopts the financial system of capitalization in the actuarial calculation of mathematical reserves related to planned benefits and the coverage capital regime for the other benefits offered to its participants and dependents. c.1.2) Past-due Obligations and Contributions Due As of 12/31/2010, the Bank has no past due obligations or contribution debts referring to plans BD and CV I, neither informal practices that originate constructive obligations included in the measurement of the plans defined benefit obligation. c.1.3) Contribution Ratio (Participants/Sponsor) The ratio of participant contributions to Bank contributions meets the parity set by Constitutional Amendment 20, of 12/15/1998, with a contribution ratio of 1:1 as of 12/31/2010 (1:1, as of 12/31/2009).

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c.1.4)

Actuarial Position In December 2010, the BD plan reported an actuarial surplus of R$ 6,311 (versus a surplus of R$ 12,850 on 12/31/2009), as a result of the positive impact of the investments, in the amount of R$ 375,455, and expenditures amounting to R$ 381,994, referring to the increase in plan obligations, payment of benefits and administrative expenses, as well as changes in contingencies and social security fund. The main event was the change in the obligations of the benefit plan totaling R$ 123,088 due to the review of the benefit plan funding that resulted in a reduction of the maximum contribution rate of the covered participants from 23% to 21.25%, beginning 01/01/2011. The CV I plans actuarial position as of 12/31/2010 is balanced, since all the existing actuarial liabilities, totaling R$ 17,537, have defined contribution.

c.2)

Health Care Plan Banco do Nordeste is the sponsor of the health care plan managed by Caixa de Assistncia dos Funcionrios do Banco do Nordeste do Brasil - CAMED, whose primary purpose is to provide health care to its associates and dependents participating in the Natural Plan, through granting of subsidies to cover or reimburse health promotion, protection and recovery expenses.

c.2.1)

Past-due Obligations and Contributions Due As of 12/31/2010, the Bank has no past due obligations or contribution debts referring to this plan, neither informal practices that originate constructive obligations included in the measurement of the plans defined benefit obligation.

c.2.2)

Contributions The Natural Plan is funded primarily by contributions made by the associates, contributions related to the enrolment of natural dependents, financial protection and emergency service fees, financial co-participation paid by each associate for services utilized and matched contributions from sponsors.

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d) Reconciliation of the opening and closing balances of the obligations present value The reconciliation of the opening and closing balances of the obligations present value is shown below, according to actuarial valuations conducted by PROBUS Suporte Empresarial S/S Ltda., based on information provided by CAPEF, CAMED and the Bank, in compliance with the provisions of CVM Resolution 600:
CAMED BD Plan Specification 1. Present value of actuarial obligations at beginning of year 2. Cost of current service 3. Interest cost 4. Cost of past service 5. Benefts Paid by the Plan (1) 6. Contributions from Members, Retirees, and Pensioners 7. Administrative expenses paid by the plan 8. Foreign exchange change and/or Business Combination 9. Reductions and/or Settlements 10. Actuarial Losses (Gains) on Actuarial Obligation (2) 11. Present value of the Actuarial obligation, at end of year 12/31/2010 2,738,730 17,359 309,271 (239,416) 52,425 (7,786) 238,465 3,109,048 12/31/2009 2,240,718 16,956 283,473 (242,145) 54,815 (7,786) 392,699 2,738,730 CV I Plan 12/31/2010 18,024 (788) (742) 16,494 12/31/2009 Natura Plan 12/31/2010 469,032 39,443 52,965 (52,924) 10,201 (13,633) (12,168) 492,916 12/31/2009 366,769 28,054 46,400 (44,232) 7,570 (7,947) 72,418 469,032

Notes: (1) Net of co-contributions made by members; (2) Break-even number.

e)

Analysis of actuarial obligation Pursuant to CVM Resolution 600, of 12/31/2010, the present value of the actuarial obligation of the plans managed by CAPEF and CAMED, recorded as Liabilities in the Bank, is as follows: a) Private Pension Plan i. BD Plan: the actuarial obligations present value, amounting to R$ 3,109,048, is partially funded by plan assets in the amount of R$ 2,618,418, resulting in a present value of uncovered actuarial obligations of R$ 490,630; ii. CV I Plan: the actuarial obligations present value, in the amount of R$ 16,494, is fully funded by plan assets of the same amount, R$ 16,494; therefore, there are no uncovered actuarial obligations for that plan;

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b)

Healthcare plan the actuarial obligations present value, in the amount of R$ 492,916, is partially funded by plan assets amounting to R$ 58,171, resulting in uncovered actuarial obligations present value of R$ 434,745;

f)

Reconciliation of the opening and closing of the fair value of plan assets:
CAPEF BD Plan CV I Plan 12/31/2010 9,049 8,975 (788) (742) 16,494 12/31/2009 CAMED Natural Plan 12/31/2010 11,789 1,535 20,158 139,250 (52,924) 10,201 (13,633) (58,205) 58,171 12/31/2009 23,617 2,489 10,773 26,189 (44,232) 7,570 (7,947) (6,670) 11,789

Specification 1. Plan assets' fair value at beginning of year 2. Expected return on plan assets 3. Contributions received from active participants 4. Contributions received from the employer (1) 5. Benefits paid by the plan (2) 6. Contributions received from beneficiaries Pensioners 7. Administrative expenses paid by the plan 8. Foreign exchange changes and/or Business combination 9. Settlements 10. Actuarial gains (losses) on the Plan assets (3) 11. Plan assets' fair value at end of year

12/31/2010 2,255,509 296,148 3,477 55,871 (239,416) 52,425 (7,786) 202,189 2,618,418

12/31/2009 1,967,903 313,290 3,437 58,238 (242,144) 54,815 (7,786) 107,755 2,255,509

Note: (1) Contributions related to active participants, beneficiaries and co-contributions paid by the employer; (2) Net of co-contributions paid by the members; (3) Equilibrium Break-even number.

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BANCO DO NORDESTE DO BRASIL S.A. g) Reconciliation of the obligations present value and plan assets value to assets and liabilities recognized in the balance sheet.
CAPEF BD Plan CV I Plan 12/31/2010 12/31/2009 12/31/2010 12/31/2009 3,109,048 (2,618,418) 490,630 490,630 2,738,730 (2,255,509) 483,221 (26,495) 456,726 16,494 (16,494) CAMED Natural Plan 12/31/2010 12/31/2009 492,916 (58,171) 434,745 434,745 469,032 (11,789) 457,243 457,243

Specification 1. Present value of actuarial obligation 2. Fair value of plan assets 3. Present value of the uncovered actuarial obligation (1) - (2) 4. Unrecognized actuarial gains (losses) 5. Unrecognized cost of past service 6. Amount not recognized as asset due to the Limit of Item 58(b) 7. Refund Right fair value recognized as asset 8. Other amounts recognized in the balance sheet 9. Liability recognized in the balance sheet

h)

Transition liability and Adjustment for the first-time adoption of CVM Resolution 600, of 10/07/2009.

Considering the initial adoption, as of 01/01/2009, the CPC Pronouncement 33, approved by CVM Resolution 600, became necessary to determine the transitional liability concerning of 12/31/2008, both the DB Plan (CAPEF) and for the Natural Plan (CAMED). This transitional liability representing the value of actuarial liability based on the new accounting policy in line with the new determination of the CVM, as determined by its item 154, which is shown below:
Specification 1. Present value of actuarial obligation 2. Fair value of plan assets 3. Present value of Uncovered Obligations (item 1 - item 2) 4. Unrecognized cost of past service 5. Unrecognized actuarial gains 6. Transition liability as of 12/31/2008 (item 3- item 4) CAPEF - BD
2,240,717 (1,967,903) 272,814 (52,991) 219,823

12/31/2008 CAMED - Natural

366,769 (23,617) 343,152 343,152

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Also considering that actuarial obligations with both benefit plans were already recognized in the balance sheet, in compliance with the provisions of CVM Resolution 371, the recalculation of obligations required the adjustment of such liabilities, both in the amount already recognized in the balance sheet as of 12/31/2008, and the balance sheet as of 12/31/2009, as shown below:
Specification
1. Liability recognized as of 12/31/2008, determined in accordance with CVM Resolution 371 2. Transition Liability recognized as of 12/31/2008, determined in accordance with CVM Resolution 600 3. (Increase)/Decrease in liabilities as of 12/31/2008 - Adjustment referring to 2008 (item 1 - item 2) 4. Liability recognized as of 12/31/2009, determined in accordance with CVM Resolution 371 5. Liability recognized as of 12/31/2009, determined in accordance with CVM Resolution 600 6. (Increase)/Decrease in liabilities as of 12/31/2009 - Adjustment referring to 2009 (item 4 - item 5) 7. Adjustment to Years 2008 and 2009 (item 6 - item 3) CAPEF - BD Plan CAMED Natural Plan TOTAL

691,013 219,823 471,190 765,942 456,726 309,216 (161,974)

204,944 343,152 (138,208) 257,250 457,243 (199,993) (61,785)

895,957 562,975 332,982 1,023,192 913,969 109,223 (223,759)

Regarding the adjustments for 2008: i. For CAPEF - BD Plan, the transition liability totaled R$ 219,823, which when compared to the obligation already recognized through 12/31/2008, determined based on CVM Resolution 371, in the amount of R$ 691,013, represents a reduction of R$ 471,190 in the obligation for 2008. This variation, net of tax effects (note 18.d), was immediately recognized in the balance sheet as of 12/31/2010, in conformity with item 155 of CVM Resolution 600 and CPC Pronouncement 23, approved by CVM Resolution 592, of 09/15/2009, as a contra entry to Retained Earnings/Accumulated Losses, as it refers to a change in accounting policy. ii. For CAMED - Natural Plan, the transition liability totaled R$ 343,152, which when compared to the obligation already recognized through 12/31/2008, determined based on CVM Resolution 371, in the amount of R$ 204,944, represents an increase of R$ 138,208 in the obligation for 2008. iii. This variation, net of tax effects (note 18.d), was immediately recognized in the balance sheet as of 12/31/2010, in conformity with item 155 of CVM Resolution 600 and CPC Pronouncement 23, approved by CVM Resolution 592, of 09/15/2009, as a contra entry to Retained Earnings/Accumulated Losses, as it refers to a change in accounting policy.

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Regarding the adjustments for 2009: i. For CAPEF - BD Plan, the liability to be recognized as of 12/31/2009, totaled R$ 456,726, which, when compared to the obligation already recognized through 12/31/2009, determined based on CVM Resolution 371, in the amount of R$ 765,942, represents a reduction of R$ 309,216 in the obligation for 2009. Considering that the reduction of the obligation for 2008 was R$ 471,190, the change related to 2009 was an increase of R$ 161,974 in the obligation. This variation, net of tax effects (note 18.d), was immediately recognized in the balance sheet as of 12/31/2010, in conformity with item 155 of CVM Resolution 600 and CPC Pronouncement 23, approved by CVM Resolution 592, of 09/15/2009, as a contra entry to Retained Earnings/Accumulated Losses, as it refers to a change in accounting policy. ii. For CAMED - Natural Plan, the liability to be recognized as of 12/31/2009 totaled R$ 457,243, which when compared to the obligation already recognized through 12/31/ 2009, determined based on CVM Resolution 371, in the amount of R$ 257,250, represents an increase of R$ 199,993 in the obligation for 2009. iii. Considering that the increase in the obligation referring to 2008 was R$ 138,208, the change related to 2009 was an increase of R$ 61,785. This variation, net of tax effects (note 18.d), was immediately recognized in the balance sheet as of 12/31/2010, in conformity with item 155 of CVM Resolution 600 and CPC Pronouncement 23, approved by CVM Resolution 592, of 09/15/2009, as a contra entry to Retained Earnings/Accumulated Losses, as it refers to a change in accounting policy. The Variable Contribution Plan (CVI) started operations on 05/19/2010 and, therefore, there is no transition liability.
i) Expense recognized in the statement of income:
CAPEF CV I Plan BD Plan 12/31/2010 12/31/2009 12/31/2010 12/31/2009 17,359 (3,477) 309,271 (296,148) 36,276 26,495 89,776 16,956 (3,437) 283,473 (313,290) 284,944 26,495 295,141 18,024 (9,049) 8,975 CAMED Natural Plan 12/31/2010 12/31/2009 39,443 (20,158) 52,965 (1,535) 46,037 116,752 28,054 (10,773) 46,400 (2,489) 79,088 140,280

Specification 1. Cost of current service 2. Employees Contributions (1) 3. Cost of interest 4. Expected return on plan assets 5. Recognized actuarial (gain) loss for the year 6. Recognized cost of past service for the year 7. Effect from Reductions/Settlements 8. Expense recognized in Income

Note: (1) Contributions received from active participants

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j)

Percentage of each plan assets main category in relation to plan assets total fair value
CAPEF BD Plan 12/31/2010 12/31/2009 82.92% 5.79% 5.36% 0.00% 5.93% 1.28% 0.68% 84.59% 5.48% 5.33% 0.00% 4.59% 1.69% 0.75% CAMED Natural Plan 12/31/2010 12/31/2009 22.67% 45.91% 2.19% 0.00% 29.23% 68.58% 0.00% 4.64% 7.54% 5.07% 10.47% 72.28% 4.64% 0.00%

Specification Fixed income Variable income Real Estate Investments Loans and Financing Other Amounts included in plan assets fair values Financial instruments of the Bank In properties/other assets used by the Bank

CV I Plan 12/31/2010 98.66% 0.00% 0.00% 0.00% 1.34% 0.00% 0.00%

k)

Actual return of Plan assets

Specification 1. Expected return on plan assets 2. Actuarial Gain (loss) on plan assets 3. Effective return of Plan assets (item 1 + item 2)
CAPEF BD Plan CV I Plan 12/31/2010 12/31/2009 12/31/2010 12/31/2009 296,148 202,189 498,337 313,290 107,755 421,045 (742) (742) CAMED Natural Plan 12/31/2010 12/31/2009 1,535 (58,205) (56,670) 2,489 (6,670) (4,181)

l)

Present value of the obligation, fair value of assets, and surplus (deficit) in current years and the last four years.
CAPEF BD Plan CVM Resolution 600 Specification 1. Defined benefit obligation 2. Plan assets 3. Surplus (deficit) 4. Experience adjustments on plan liabilities a. Amount b. Percentage 5. Experience adjustments on plan assets a. Amount b. Percentage 202,189 7.72% 107,755 4.78% 123,545 6.58% 20,867 1.26% (742) (4.50%) (238,465) 7.67% (392,699) 14.34% 31,504 (1.26%) 13,516 (0.56%) 742 (4.50%) 12/31/2010 12/31/2009 12/31/2008 CVM Resolution 371 12/31/2007 12/31/2006 CV I Plan Del. CVM 6000 12/31/2010

(3,109,048) 2,618,418 (490,630)

(2,738,730) 2,255,509 (483,221)

(2,240,717) 1,967,903 (272,814)

(2,495,576) 1,878,756 (616,820)

(2,400,309) 1,663,253 (737,056)

(16,494) 16,494 -

Note: For 2006 and 2007, the reported amounts were calculated in accordance with CVM Resolution 371.

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CAMED
Natural Plan CVM Resolution 600 12/31/2009 (469,032) 11,789 (457,243) (72,418) 15.44% (6,670) (56.58%) CVM Resolution 371 12/31/2007 12/31/2006 (351,221) 16,677 (334,544) (1,220) 0.35% (3,239) (19.42%) (322,212) 12,968 (309,244) (10,159) 3.15% (1,500) 11.57%

Specification 1. Defined benefit obligation 2. Plan assets 3. Surplus (deficit) 4. Experience adjustments on plan liabilities a. Amount b. Percentage 5 Experience adjustments on plan assets a. Amount b. Percentage

12/31/2010 (492,916) 58,171 (434,745) 12,168 (2.47%) (58,205) (100.06%)

12/31/2008 (366,769) 23,617 (343,152) -

Note: For 2006 and 2007, the reported amounts were calculated in accordance with CVM Resolution 371.

m)

Estimated contributions m.1) Opening Data

CAPEF

Specification 1. Nominal discount rate at beginning of year 2. Nominal rate of expected return on plan assets at beginning of year 3. Projected interest payroll (1) 3. Cost of current service 4. Expected active participants contributions (1) 5. Fair value of plan assets at beginning of year 6. Present value of actuarial obligation at beginning of year

BD Plan 2011 10.67% 14.33% 50,353 19,794 3,377 2,618,418 3,109,048

CV I Plan 2011 10.14% 14.16% 214,867 37,507 19,048 16,494 16,494

CAMED Natural Plan 2011 10.67% 9.81% 38,242 19,672 58,171 492,916

Note: Amounts extracted from the actuarial cash flow.

m.2) Estimated Expected Cost

CAPEF BD Plan Specification 1. Cost of current service 2. Employee Contributions (1) 3. Cost of interest 4. Expected return on plan assets 5. Expected return on Refund Right Recognized as Asset (item 104 A of the Appendix to CVM Resolution 600) 6. Recognized actuarial (gain) loss for the year 7. Recognized cost of past service for the year 8. Effect from Reduction/Settlements 9. Effect of the limitation of item 58 (b) of the Appendix to CVM Resolution 600 10. Estimated Expenses to be recognized in income/losses for the year 2011 CV I Plan 2011 CAMED Natural Plan 2011

19,794 (3,377) 331,595 (375,219) 36,276 9,069

37,507 (19,048) 1,673 (2,335) 17,797

38,242 (19,672) 52,572 (5,707) 46,037 111,472

Note: Employee contributions relate to active participants expected for the year.

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n) Assumptions used n.1) Biometric Assumptions:

BD Plans (CAPEF) and Natural Plan (CAMED)

Specification General mortality table for active employees Disability mortality table Disability table Turnover table

CV I Plan (CAPEF) AT2000 Man IAPC experience - Weak (1) -

AT2000 Man IAPC experience Weak (1) CAPEF experience Weak (2) None

Notes: (1) (2)

The disability mortality table used results from the application of factor 0.5 on mortality rates of the original IAPC table; The disability table used results from the application of factor 0.5 on disability rates of the original CAPEF experience table.

n.2) Economic Assumptions:

CAPEF Specification
Effective discount rate for actuarial obligation: Future inflation rate Expected nominal return rate on plan assets: Estimated effective salary increase rate Effective growth rate of the plan benefits Effective growth rate of INSS benefits Effective growth rate of social security expenses BD Plan 5.9% p.a. 4.5% p.a. 14.33% p.a. 1.0% p.a. 0.0% p.a. 0.0% p.a. -

CAMED Natural Plan

5.9% p.a. 4.5% p.a. 9.81% p.a. 1.0% p.a. 0.0% p.a. 0.0% p.a. 3.3% p.a.

CV I Plan
5.4% p.a. 4.5% p.a. 14.16% p.a. 1.0% p.a. 0.0 % p.a. 0.0% p.a. -

n.3) Future inflation rate is used in the calculation of the Present Value of Actuarial Obligation to measure fluctuations in inflation rates due to the freezing, by annual cycles, of future contributions and benefits, this calculation also assumes the occurrence of the same inflation level for all salary, benefit, pension and economic variables of the plan. n.4) The actuarial evaluation method used is the Projected Unit Credit Method to determine the present value of the obligation, cost of current service and, when necessary, for the calculation of past service cost. o) Effect of the one percentage point increase and the one percentage point decrease in the assumed medical cost trend rates.
Effect of one percentage point change in the evolution rate of medical costs One percentage point increase One percentage point decrease

Effect on aggregate service and interest costs Effect on defined benefit obligation

10,331 70,356

(8,427) (58,409)

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p) Additional comments

p.1) Current expenses - obligations for the year, derived from the increase in the length of service provided by employees; p.2) Net actuarial (gains)/losses - obligations for the year, derived from changes in actuarial assumptions adopted or discrepancy between assumptions used and actual results. These obligations are recognized according to the rules for recognition of actuarial gains and losses - item b of this note; p.3) Cost of past service - obligations derived from the increase in post-employment benefits related to services provided by employees in past periods. The recognition of expenses related to cost of past service is based on items 96 to 101 of the Appendix to CVM Resolution 600; and p.4) There are no contingent liabilities related to post-employment benefit obligations in Banco do Nordeste.

25.

NORTHEAST CONSTITUTIONAL FINANCING FUND (FNE) a) The net assets of FNE, totaling R$ 33,326,631 (R$ 29,454,928 as of 12/31/2009) are recorded in the Banks memorandum accounts (Net assets of managed public funds). b) The Funds cash and cash equivalents, totaling R$ 3,653,134 (R$ 3,550,828 as of 12/31/2009), recorded in Other liabilities/Financial and development funds bears interest at non-market rate. The expense of interest on cash and cash equivalents totaled R$ 315,708 (R$ 370,855 as of 12/31/2009). c) The allowance to cover the risk on FNE transactions is recognized pursuant to the following criteria: c.1) The Bank is free from operational risk in transactions contracted until 11/30/ 1998; c.2) For operations contracted beginning 12/01/1998, excluding Land Program financing lines granted under the PRONAF (groups A, B, A/C, Forest, Semiarid, Emergency, Flood and Drought), is 50 percent of the amount calculated pursuant to CMN Resolution 2682, of 12/21/1999; and c.3) The Bank assumes all the risks on credit renegotiated and reclassified FNE loan transactions, as set forth by Law 11775, of 09/17/2008, and transactions recognized in the Funds Interbank accounts, as prescribed by Ministry of Integration Administrative Rule 616, of 05/26/2003.

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BANCO DO NORDESTE DO BRASIL S.A. The balances of financing and allowances accounted for in the Banks Contingent liabilities are as follows:
Risk rating AA A B C D E F G H TOTAL Balances 3,230,893 10,020,011 7,138,394 616,726 347,755 202,921 290,417 159,474 1,810,238 23,816,829 Allowance as of 12/31/2010 25,186 35,642 9,232 17,470 31,192 72,859 56,646 929,530 1,177,757 Allowance as of 12/31/2009 21,158 27,616 7,253 50,008 28,037 55,317 65,485 701,388 956,261

d) The Banks del credere on transactions entered agreement by 11/30/1998 is zero. The Banks del credere on transactions entered as agreement after this date is 3% p.a., when the risk is 50%, and 6% p.a. when the Bank is a direct party to the transaction backed by onlendings based on Art 9- A of Law 7827, of 09/27/1989. In operations reclassified for FNE based on Law 11775, of 09/17/2008, del credere is 3% p.a. or 6% p.a., as regulated by Interministerial Rule 245, of 10/14/2008, of the Ministry of Finance and Ministry of National Integration. Income from del credere totaled R$ 690,226 (R$ 554,509 as of 12/31/2009). e) The management fee of 3% p.a. is calculated on the Funds net equity, less the amounts linked to the onlending agreement entered into with the Bank, balances of onlendings to other institutions with the risk fully assumed by the Bank, and the balances of PRONAF investments (Groups B, A/C, Forest, Semiarid, Emergency, Flood and Drought), and is limited to 20% of the transfers made by the National Treasury each fiscal year. The management fee totaled R$ 816,783 (R$ 757,613 as of 12/31/2009).

26.

WORKERS ASSISTANCE FUND (FAT) The Workers Assistance Fund (FAT) is a special financial-accounting fund linked to the Ministry of Labor and Employment (MTE), whose purpose is to finance the Unemployment Insurance, Salary Bonus and Economic Development Programs. The main actions financed by the Bank with funds from FAT are as follows:
Specification Special Program to Fight Drought Effects PROGER-URBANO Investment FAT - Infrastructure PRONAF Investment PROGER-RURAL - Cost PRONAF - Cost PROGER-RURAL - Investment PROTRABALHO Investment TOTAL
TADE AMOUNT

TADE 16/2006 TADE 17/2006 TADE 18/2006 TADE 19/2006 TADE 20/2006 TADE 01/2007 TADE 02/2007 TADE 04/2007

3,671 14,305 51,452 2,301 1,703 4,889 24,367 151,082 253,770

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BANCO DO NORDESTE DO BRASIL S.A.

Funds derived from the Fund for Workers Assistance (FAT), recorded under Interestbearing special deposits, totaling R$ 686,792 (R$ 395,254 as of 12/31/ 2009) are subject to SELIC (Central Bank overnight rate) while they are not used in lending operations, and to TJLP after they are released to final borrowers. Available funds bearing interest at SELIC total R$ 370,420 (R$ 48,479 as of 12/31/2009). Pursuant to CODEFAT (Board of the Workers Assistance Fund) Resolution 439, of 06/02/2005, these funds began to be reimbursed to FAT on a monthly basis, with a minimum amount equivalent to 2% calculated on the total balance of each TADE (FAT Special Deposit Allocation Statement), plus cash that meets the following conditions, considering the period they remain in the Banks cash: - After 2 months, with respect to the reimbursements of the final borrowers, not reused in new financing.
Return of FAT resources 12/31/2010 Available TMS (2) TJLP (3) used TOTAL TADE Resolution

Specification Special Program to Fight Drought Effects PROGER - URBANO Investment FAT Infrastructure PRONAF Investment PROGER - RURAL Cost PRONAF Cost PROGER RURAL Investment PROTRABALHO Investment PNMPO- Programa Nacional de Microcrdito Produtivo Orientado TOTAL

Form (1)

R.A.

SELIC rate

16/2006 17/2006 18/2006 19/2006 20/2006 01/2007 02/2007 04/2007 01/2010

RA RA RA RA RA RA RA RA RA

3,169 20,950 8,389 296 496 92 3,186 52,103 402 89,083

17 460 627 9 7 3 31 985 121 2,260

155 18,200 328,476 200 73 3,535 19,781 370,420

11,776 60,448 50,731 782 182 192,453 316,372

11,931 78,648 379,207 982 255 195,988 19,781 686,792

Return of FAT resources

12/31/2009 Available TMS (2) TJLP (3) used TOTAL

Specification Special Program to Fight Drought Effects PROGER - URBANO Investment FAT - Infrastructure PRONAF Investment PROGER - RURAL Cost PRONAF Cost PROGER RURAL Investment PROTRABALHO Investment TOTAL

TADE Resolution

Form (1)

R.A.

SELIC rate

16/2006 17/2006 18/2006 19/2006 20/2006 01/2007 02/2007 04/2007

RA RA RA RA RA RA RA RA

3,812 14,233 5,529 376 1,411 152 7,132 62,745 95,390

32 73 601 8 60 4 264 481 1,523

572 19,129 6,973 138 488 44 3,162 17,973 48,479

13,780 56,857 56,413 1,081 11 289 47 218,297 346,775

14,352 75,986 63,386 1,219 499 333 3,209 236,270 395,254

Notes: (1) RA - Automatic Return (Monthly, 2% on balance) and AV - Available Balance less deposits made in the last 3 months and reimbursements in the last 2 months. (2) Funds yielding SELIC rate. (3) Funds yielding Long-term Interest Rate (TJLP). (4) Regarding FAT - Infrastructure, RA is 1% on the balance and deductible reimbursements refer to the last 4 months.

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BANCO DO NORDESTE DO BRASIL S.A. 27. RISK MANAGEMENT AND BASEL RATIO a) Risk management The Banks corporate governance tools include an internal control structure periodically reviewed to maintain an adequate monitoring of operational, credit, market and liquidity risks. The Banks operational risk management methodology follows the guidelines of the Basel Committee and the requirements of the Basel II Accord, prioritizing the identification of possible risks existing in the different processes of the Bank, the implementation and monitoring of key indicators and mechanisms to mitigate identified risks. Potential losses arising from the operational risk are stored in the Banks accounting information retrieval system database, with necessary qualifications for follow-up of occurrences identified, allowing the development and use of control tools. The credit risk is managed through risk evaluation models, review and development of risk assessment models, and credit granting limits based on the risk rating of customers and their operations, in accordance with the parameters set forth in National Monetary Council Resolution 2682, of 12/21/1999. In addition, credit risk management involves the constant flow of information, which, after collected and analyzed, allows the identification, measurement, control and risk mitigation to ensure that Banco do Nordeste maintains its exposure to credit risks within reasonable parameters. Accordingly, several instruments are used, including: credit policies, management reports, risk rating system, performance indicators by macro sectors and management of the allowance for doubtful accounts expenses. Banco do Nordeste do Brasil, acting as a Government agency responsible for fostering the development of the Northeast region, follows best financial market practices to identify, measure and control market risks inherent to the positions assumed by the Entity. Market and liquidity risks are monitored based on the volatility in interest rates, currencies and share indices, and the prices for the Banks loan and investment portfolios. The Bank uses its in-house developed proprietary treasury risk management software, which comprises the calculation of the Value at Risk (VaR), the Duration global (assets and liabilities) by portfolio, security and index, estimated cash flows, with identification of any maturity mismatching between assets and liabilities, and global balances of assets and liabilities, by portfolio and by security, indicating possible mismatches by currency. Liquidity is monitored on a daily basis, according to the limits defined for cash and cash equivalents, indicating the margin for trading and enforcement of the Treasury Policy.

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Monitoring of market risk management of Banco do Nordeste is guided by the Risk Management Corporate Policy, which defines guidelines for the negotiation of the Banks assets and establishes operating limits for the assumption of positions entailing several risk factors. In accordance with BACEN Circular 3354 of 06/27/2007 and 3365 of 09/12/2007, for management purposes, transactions exposed to market risk are separated into the following portfolios: Trading Portfolio: includes purchase transactions with resale agreement, sale transactions with repurchase agreement and trading securities, in accordance with BACEN Circular 3068 of 11/08/2001. Non-Trading Portfolio: includes transactions subject to market risk and not included in the Trading Portfolio. In order to monitor and control Trading Portfolio risks, Banco do Nordeste uses the parametric VaR, which measures the maximum expected loss of a portfolio within a period of time, considering a confidence level of 99%, and using information from 60 useful days. The Value at Risk (VaR) of fixed rate transactions of the BNB Trading Portfolio, as of 12/31/2010, was R$ 381, compared to the portfolios net balance (assets less liabilities) of R$ 2,900. As of 12/31/2010, the VaR ratio was just 0.013% of the net amount of the Trading Portfolio, well below the one-percent cap set by the Banks Risk Management Corporate Policy. The low exposure to the market risk of this portfolio arises from the fact that fixed-rate transactions have a one-day maturity and are backed by Federal Government securities. Information related to risk management, focusing on issues such as Regulatory Capital (PR) and the Required Regulatory Capital (PRE), as provided for in BACEN Circular 3477, of 12/28/2009, is available on www.bnb.gov.br under Relao com Investidores.

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b) Sensitivity analysis As permitted by Article 3, Paragraph 1, item V of CVM Instruction 475, of 12/17/ 2008, Trading Portfolio balances were not considered in the sensitivity analysis due to its immaterial risk. For sensitivity analysis purposes, Non-trading Portfolio balances, except for hedging derivatives, were not considered because the included transactionsbasically loan transactions, fund raising and securitiesremain in the portfolio until their corresponding maturities, at contractual interest rates. Therefore, changes in interest rates due to market volatility do not have a material financial and accounting impact on the estimated results of the Non-trading Portfolio. In compliance with Article 4 of CVM Instruction 475 of 12/17/2008, we present below the Sensitivity Analysis Schedule with swap transactions and their corresponding hedged items.
Nature of transaction Risk type Financial instrument
Pre-SWAP x DI

Scenario 1 (668,014) 679,186 11,172 488,242 (486,705) 1,537

Scenario 2 (646,388) 624,436 (21,952) 461,809 (466,492) (4,683)

Scenario 3 (626,433) 575,965 (50,468) 437,078 (447,981) (10,903)

Hedge

Increase in interest rate

Fixed rate assets Net exposure

Hedge

DI SWAP x Dollar Increase in foreign currency quotation (FM) Liabilities in FM Net exposure

As of 12/31/2010, the risks likely to cause losses were as follows: increase in the opportunity cost for fixed income transactions and increase in dollar quotation for foreign-currency transactions. Pre-SWAP x DI The method used to prepare the sensitivity analysis of pre-swap x DI transactions was to the survey the balances of fixed rate asset transactions and hedge (swap) transactions exposed to this type of risk, and determine the net exposure. The stresses related to scenarios 1, 2 and 3 were applied to this result, as detailed below:

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Scenario 1 - refers to the current situation of risk exposure factors based on market information (BM&FBovespa). Under this scenario, 100% of the DI swap rate x fixed rate (position as of 12/31/2010) was applied. Scenario 2 - Under this scenario, 125% of the DI swap rate x fixed rate (position as of 12/31/2010) was applied. Scenario 3 - Under this scenario, 150% of the DI swap rate x fixed rate (position as of December 31, 2010) was applied. DI SWAP x Dollar The method used to prepare the sensitivity analysis of DI swap x dollar transactions was to the survey the balances of liability transactions indexed to the dollar and hedge (swap) transactions exposed to this type of risk, and determine the net exposure. The stresses related to scenarios 1, 2 and 3 were applied to this result, as detailed below: Scenario 1 - refers to the current situation of risk exposure factors based on market information (BM&FBovespa). Under this scenario, 100% of the DI swap rate x dollar (position as of 12/31/2010) is applied. Scenario 2 - Under this scenario, 125% of the DI swap rate x dollar (position as of 12/ 31/2010) was applied. Scenario 3 - Under this scenario, 150% of the DI swap rate x dollar (position as of 12/31/2010) was applied.

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c)

Exposure to currency risk As of 12/31/2010, the net balance of sold foreign exchange exposure arising on transactions containing a clause for foreign currency adjustment totaled R$ 32,712 (R$ 29,580 as of 12/31/2009 - short position), as shown below:
12/31/2010 Assets Cash and cash equivalents Interbank investments Lending operations Other receivables Unhedged assets (swaps) Hedged assets (swaps) Total 1,468 13,474 642,663 555,369 1,212,974 488,587 1,701,561 2,698 22,434 644,538 710,257 1,379,927 1,379,927 12/31/2009

12/31/2010 Liabilities Deposits Interdepartmental accounts Domestic borrowings and onlendings Foreign borrowings and onlendings Other payables Unhedged liabilities (swaps) Hedged liabilities (swaps)
Total

12/31/2009 39,503 13,115 1 722,393 634,495 1,409,507 1,409,507

31,486 30,330 1,214,652 457,805 1,734,273 1,734,273

The Bank manages its currency risk by limiting its exposure to residual values, strictly observing the percentage set by the Central Bank of Brazil and the Banks Corporate Policy for Risk Management.

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Exchange rate mismatches, marked to market, are calculated on a daily basis and their values are shown below. This mismatch is measured in accordance with BACEN Circular 3389, of 06/25/2008, and is less than 5% of Regulatory Capital as of 12/31/2010, which is the limit established by the Banks Management Risk Corporate Policy.
Specification

CURRENCY
Dollar Euro Yen Swiss franc TOTAL

ASSETS

12/31/2010 LIABILITIES 1,309,416 77,107 31 1,386,554

12/31/2009 ASSETS 1,640,672 15,843 16 1,656,553 LIABILITIES 1,685,182 13,008 1,698,190

1,262,122 79,607 17 60 1,341,806

d) Operational Limits - Basel Accord The guidelines in effect (CMN Resolutions 3444 and 3490, of 02/28/2007 and 08/29/2007, respectively) maintained at 11% the minimum capital adequacy ratio which is the ratio of a financial institutions regulatory capital to total risks assumed in asset transactions, including guarantees provided, and market and operational risks for 12/31/2010. As of 12/31/2010 the Banks asset-to-equity ratio (Basel ratio) was 13.22% (12.99% as of 12/31/2009), whereas the regulatory capital was R$ 3,248,273 (R$ 2,692,406 as of 12/31/2009). Required Regulatory Capital, which refers to the consolidation of all exposures to risk, with a capital allocation ratio of 11%, was R$ 2,627,409 as of 12/31/ 2010 (R$ 2.280.220 as of 12/31/2009). In July 2009 and June 2010, BNB entered into subordinated debt agreements with FNE and was authorized by the Central Bank of Brazil to consider the amounts under these agreements as Tier II Capital, with a positive impact on the Banks Basel Ratio.

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The table below shows the Basel ratio calculation:

Specification a) Regulatory Capital (RC) Tier I Tier II b) Required Regulatory Capital (RRC) . PEPR (1) . PJUR . PCOM . POPR c) RBAN amount Margin (a-b-c) Basel Ratio (BACEN Circular 3477, of 12/24/2009) Basel Ratio (including RBAN amount) 12/31/2010 12/31/2009

3,248,273 2,146,806 1,101,467 2,627,409 2,248,812 381 16,652 361,564 74,721 546,143 13.60% 13.22%

2,692,406 1,973,582 718,824 2,280,220 2,025,320 442 18,416 236,042 33,163 379,023 12.99% 12.80%

(1) 11% of Risk-weighted Exposures risk, pursuant to Articles 11-16 of BACEN Circular 3360, of 9/12/2007.

On December 22, 2010, pursuant to the terms of Law 12249, of 06/11/2010, as amended by Provisional Act 513, of 11/26/2010, Banco do Nordeste and the Federal Government entered into a Loan Contract, classified as Hybrid Debt/Equity Instruments (HDEI), in the amount of R$ 1,000,000, already paid in. This contract has no maturity date and, after the approval of the Central Bank of Brazil, which has already been requested, will allow BNB to increase its total Regulatory Capital (RC). If we consider the position as of 12/31/2010, RC would be R$ 4,252,439 and the Basel index would be 17.80%.

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28.

RELATED-PARTIES TRANSACTIONS a) Related parties transactions a.1) The main transactions with state-owned companies, autonomous government agencies, programs and funds controlled by the Federal Government are broken down:
Specification Assets Lending operations - Refinancing with Federal Government (note 8.a.1) Total 533,239 533,239 517,064 517,064 12/31/2010 12/31/2009

Specification Liabilities Time deposit - FAT (note 12.a.4 and note 26) Domestic onlendings - Official Institutions (note 13.c) National Treasury BNDES FINAME Other institutions Other liabilities Northeast Constitutional Financing Fund -FNE (note 15.e) Hybrid debt/equity instruments Subordinated debt eligible for capital (note 15.f) Total

12/31/2010 686,792 1,686,776 1,086 933,260 52,859 699,571 5,762,276 3,656,262 1,004,166 1,101,848 8,135,844

12/31/2009 395,254 1,433,524 1,164 743,796 29,330 659,234 4,175,390 3,553,326 622,064 6,004,168

a.2) The main transactions with entities related to the Banks employees, Caixa de Previdncia (CAPEF) and Caixa de Assistncia Mdica (CAMED) are composed as follows:
Specification Liabilities Other liabilities - (notes 15.h and 24.g) CAPEF CAMED Total 12/31/2010 925,375 490,630 434,745 925,375 12/31/2009 1,023,192 765,942 257,250 1.023,192

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b) Management compensation The total compensation of the Board of Directors, Board of Executive Officers and Supervisory Board is shown below:
Specification Short-term benefits Fixed compensation (Fees) Variable compensation (Profit Sharing) TOTAL 12/31/2010 3,001 2,702 299 3,001 12/31/2009 2,928 2,566 362 2,928

The Bank does not have variable stock-based compensation and other long-term benefits and does not grant loans to its Executive Officers, members of the Board of Directors and the Supervisory Board, since this practice is forbidden to financial institutions governed by the Central Bank of Brazil.

29.

OTHER INFORMATION a) Guarantees provided Co-obligations and risks related to guarantees provided by the Bank are composed as follows:
Specification Import financing Guarantee beneficiaries: - Individuals or non-financial legal entities - FNE - Other entities Receivables assignment co-obligations 12/31/2010 110,589 92,919 12,093,509 40,745 29,549 12/31/2009 157,733 69,618 10,371,382 6,758 36,651

b) Insurance The Banks chattels and properties and third parties properties are covered by an adequate insurance in the amount of R$ 392,459 (R$ 383,570 as of 12/31/2009), as follows:
Specification Chattels Properties Third parties properties Civil liability (aircraft) TOTAL 12/31/2010 123,783 264,656 2,863 1,157 392,459 12/31/2009 125,063 257,350 1,157 383,570

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c)

Law 11945, of 06/04/2009 The Bill of Conversion Law 4 of 2009 (resulting from Provisory Act 451 of 2008) was converted into Law 11945 of 06/04/2009, published in the Federal Official Gazette of 06/05/2009. Article 28 thereof amends Article 15 of Law 7827, of 09/27/1989, supporting debt settlements carried out by federal financial institutions managing Constitutional Funds which were performed in compliance with the banking practices and regulations of the respective institutions and which were subject to legal challenges and collected at the financial equivalent of assets liable to attachment of direct debtors and their respective guarantors, in relation to transactions contracted with funds from Financing Constitutional Funds, also permitting the reopening of renegotiations for the settlement of debts by the financial equivalent of the current value of assets liable to attachment. The operating procedures for the new settlements based on Law 11945, of 06/04/2009, were regulated by Resolution 30 of the Board of the Agency for the Development of the Northeast Region (SUDENE), issued on 04/ 29/2010. On 10/22/2010, Banco do Nordeste established in its operating manual the procedures to classify settlements through the network of Assets Restructuring Management and Branches.

d)

Convergence with International Accounting Standards CMN Resolution 3786, of 09/24/2009, and BACEN Circulares 3472, of 10/23/2009, and 3516, of 12/23/2010, established that financial institutions and other institutions authorized to operate by BACEN as a publicly-owned company or company obliged to form an Audit Committee, should, beginning as of 12/31/2010, prepare and disclose its consolidated financial statements on an annual basis, prepared in accordance with international financial reporting standards (IFRS), and the international standards issued by IASB - International Accounting Standards Board. Accordingly, in addition to disclosing its individual financial statements in accordance with the accounting practices adopted in Brazil applicable to the institutions authorized to operate by the Central Bank of Brazil (BACEN), the Bank will disclose on its website financial statements, beginning 12/31/2010, comparable to the immediately prior year, in conformity with the international financial reporting standards (IFRS), in an effort to provide shareholders with further enhanced disclosures, ultimately contributing to achieve the Banks objectives, including raising capital abroad. The financial statements for 2010 and 2009 under IFRS will be disclosed through 04/29/2011.

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Considering that the process of convergence with IFRS has not yet been completed, the effects on the Banks net income and shareholders' equity have not been quantified. However, adjustments may be expected mainly in relation to the following matters: d.1) Impairment of Loans and Receivables; d.2) Deferral of Banking Fees, Commissions and Other Financial Costs Under the Effective Interest Rate Method; d.3) Statement of comprehensive income; and d.4) Deferred income tax and social contribution on IFRS adjustments, when applicable. e) Approval of the Financial Statements The financial statements were approved by the Board of Directors at a meeting held on 02/04/2011.
Fortaleza, February 4, 2011

The Executive Board

_____________________________________________________________________________

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BANCO DO NORDESTE DO BRASIL S.A. Av. Pedro Ramalho, 5700 Fortaleza, Cear Brazil INDEPENDENT AUDITORS Deloitte Touche Tohmatsu Auditores Independentes Av. Desembargador Moreira 2120, offices 201 through 204 Fortaleza, Cear Brazil TRUSTEE, PAYING AGENT, REGISTRAR AND TRANSFER AGENT The Bank of New York Mellon 101 Barclay Street, Floor 4 East New York, New York 10286 Unites States of America LISTING AGENT FOR LUXEMBOURG, PAYING AGENT AND TRANSFER AGENT FOR LUXEMBOURG The Bank of New York Mellon (Luxembourg) S.A. Vertigo Building Polaris 2-4 rue Eugne Ruppert L-2453 Luxembourg Luxembourg PRINCIPAL PAYING AGENT The Bank of New York Mellon Trust (Japan), Ltd. Marunouchi Trust Tower, Main 1-8-3 Marunouchi Chiyoda-Ku, Tokyo, 100-8580 Japan LEGAL ADVISERS To the Issuer as to U.S. law Clifford Chance U.S. LLP 31 West 52nd Street New York, NY 10019-6131 United States of America as to Brazilian law Machado, Meyer, Sendacz e Opice Advogados Av. Brigadeiro Faria Lima, 3144-11th floor Jardim Paulistano So Paulo 01451-000 Brazil To the Initial Purchasers as to U.S. law Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 United States of America

U.S.$300,000,000 4.375% Senior Notes due 2019 BofA Merrill Lynch HSBC Ita BBA BTG Pactual Espirito Santo Investment Bank

May 3, 2012