Bancolombia S A : Management Report 1Q24

Bancolombia Clasificación - Interna

Quarterly Report

January - March 2024

Bancolombia S.A.

Address:

Carrera 48 # 26-85

Medellín, Colombia

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Bancolombia Clasificación - Interna

ISSUER'S CURRENT SECURITIES

As of March 31, 2024

Type of Share	Common Share	Preferred Share
Trading System	Stock Exchange	Stock Exchange
Stock Exchanges	Colombian Stock Exchange (BVC)	Colombian Stock Exchange (BVC)
Shares in Circulation	509,704,584	452,122,416
Shareholders	16,806	25,425
Issuance amount	509,704,584	452,122,416
Amount placed	509,704,584	452,122,416

Bancolombia S.A. also has a Level III ADR listed on the New York Stock Exchange (NYSE). Each ADR represents four preferred shares.

GRUPO BANCOLOMBIA INTERNATIONAL BONDS LEVELS IN USD (As of March 31, 2024)

Isin

Bond

Amount

Yield

Price L

G-Spread

Subordinates

US05968LAK89

BCOLO SUB-27

USD $750 MM

6.85%

100.185

241

US05968LAL62

BCOLO SUB-29

USD $550 MM

7.61%

97.604

281

Common

US05968LAM46

BCOLO SR 25

USD $482 MM

6.14%

97.518

99

US06034LAB62

BANISTMSR 27

USD $400 MM

6.415%

93.602

194

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Contents

1. MANAGEMENT'S DISCUSSION & ANALYSIS ON THE RESULTS OF THE OPERATION AND THE
   FINANCIAL SITUATION OF THE ISSUER, IN RELATION TO THE RESULTS REPORTED IN THE QUARTERLY

FINANCIAL STATEMENTS	4
Consolidated Balance Sheet Grupo Bancolombia	4
Assets		4
Loan Portfolio		4
Goodwill and Intangibles		5
Funding		5
Shareholders' Equity and Regulatory Capital	6
Consolidated Income Statement Grupo Bancolombia	6
Net Interest Income		6
Net Interest Margin		7
Fees and Income from Services	7
Other Operating Income		8
Dividends Received, and Share of Profits	8
Asset Quality, Provision Charges and Balance Sheet Strength	8
Operating Expenses		9
Taxes		9
Stand Alone Balance Sheet Bancolombia S.A.	11
Stand Alone Income Statement Bancolombia S.A.	12
II. QUANTITATIVE AND QUALITATIVE ANALYSIS OF THE MARKET RISK TO WHICH THE ISSUER IS
EXPOSED AS A RESULT OF ITS ACTIVITIES AND SENSITIVE TO MARKET VARIATIONS	12
Interest Risk Exposure (Banking Book)	13

1. MATERIAL VARIATIONS THAT HAVE OCCURRED IN THE RISKS TO WHICH THE ISSUER IS EXPOSED, OTHER THAN MARKET RISK, AND THE MECHANISMS IMPLEMENTED TO MITIGATE THEM14

Liquidity Risk	14
Credit Risk	15
Country Risk	16
Operational Risk	17
Other Relevant Risk	18
IV. MATERIAL CHANGES IN THE INFORMATION REPORTED IN THE CORPORATE GOVERNANCE
ANALYSIS CHAPTER OF THE ANNUAL REPORT	24
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1. MATERIAL CHANGES PRESENTED IN THE FINANCIAL STATEMENTS OF THE ISSUER BETWEEN THE REPORTED QUARTER AND THE DATE OF TRANSMISSION OF THE INFORMATION 25

VI. MATERIAL CHANGES THAT HAVE OCCURRED IN PRACTICES, PROCESSES, POLICIES AND INDICATORS IN RELATION TO SOCIAL AND ENVIRONMENTAL CRITERIA, INCLUDING CLIMATE

CRITERIA. 25

VII. GLOSSARY OF TERMS	26
ANNEXES	26
i.	CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS	26
ii.	STAND ALONE INTERIM FINANCIAL STATEMENTS	26

1. MANAGEMENT'S DISCUSSION & ANALYSIS ON THE RESULTS OF THE OPERATION AND
   THE FINANCIAL SITUATION OF THE ISSUER, IN RELATION TO THE RESULTS REPORTED IN THE QUARTERLY FINANCIAL STATEMENTS

Consolidated Balance Sheet Grupo Bancolombia

Assets

As of March 31, 2024, the Bank's assets totaled COP 336,956 billion, decreasing 1.7% compared to 4Q23. Unlike the previous quarter, less excess liquidity implied a reduction in cash balances, allocating these resources to reduce loans with banks and meet loan origination needs, also considering a slower pace in deposits collection.

The Colombian peso depreciated 0.5% against the US dollar during the first quarter of 2024 and appreciated 17.3% in the last 12 months. The average exchange rate was 9.5% lower in 1Q24 versus 4Q23, and 17.6% in the last 12 months.

Loan Portfolio

In 1Q24, gross loans grew 2.5% compared to 4Q23 (2.3% when excluding FX) and declined 2.6% compared to 1Q23. During the last 12 months peso-denominated loans increased 5.4% and dollar-denominated loans (calculated in in USD) decreased 16.5%.

As of March 31, 2024, Banco Agricola operations in El Salvador, Banistmo in Panama and BAM in Guatemala represented 25.1% of total gross loans. Gross loans denominated in currencies other than COP, generated by operations in Central America, the international operation of Bancolombia Panamá, Puerto Rico and the USD denominated loans in Colombia, accounted for 31.5% of the portfolio, and increased 5.7% in the quarter (when calculated in USD).

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Allowances for loan losses decreased 0.1% during the quarter and totaled COP 16,202 billion or 6.2% of the gross loans at the end of the quarter.

In 1Q24, the loan book at a consolidated level presented a significant reactivation after a decreasing path during all quarters of 2023. The better origination dynamics in commercial explain the remarkable increase in the quarter, both in Colombian pesos and especially in foreign currency.

Quarterly Bancolombia S.A. reports a growth of 0.6% in its gross portfolio, Banistmo up 2.5% (calculated in USD), Banco Agricola up 4.0% (calculated in USD) and Banco Agromercantil up 3.5% (calculated in USD). Some particular loan disbursements to business groups from corporate segments led the highest balance in all geographies. Adversely, retail loans reflected a sustained contraction as shown in 2023 on a consolidated basis, driven by lower appetite in Colombia and Panama amid a scenario of high interest rates. The decrease in Bancolombia S.A. stands out, highlighting the performance of personal loans and credit card with a sharper decrease. Banco Agricola, for its part, is the only geography that presents better disbursement dynamics in retail, specifically in unsecured personal loans.

Investment Portfolio

As of March 31, 2024, the Bank net investment portfolio totaled COP 28,403 billion, increasing 10.6% from the end of 4Q23 and decreasing 8.3% from the end of 1Q23. When analyzing financial assets investment, there was an increase in debt securities and the trading portfolio at Bancolombia S.A. as a strategy for the expansionary monetary policy in place during 2024. Repos and simultaneous purchases operations decreased in line with a lower liquidity compared to the previous quarter and the greater origination needs as mentioned before. At the end of 1Q24, the investment portfolio in debt securities had a duration of 17.6 months and a yield to maturity of 9.0%.

Goodwill and Intangibles

At the end of 1Q24, the Bank's goodwill and intangibles totaled COP 8,527 billion, up 0.4% compared to 4Q23. This quarterly variation is mainly explained by the slight depreciation of the COP against the USD and the restatement of foreign subsidiaries balances.

Funding

As of March 31, 2024, the Bank's liabilities totaled COP 299,506 billion, down 1.4% from the end of 4Q23, and down 3.8% compared to 1Q23.

Customer deposits totaled COP 244,810 billion (81.7% of liabilities) at the end of 1Q24, decreasing 1.3% compared to 4Q23, partially offset by the 0.5% currency depreciation with a

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marginal effect by the restatement of foreign subsidiaries balances. Net loans to deposits ratios was 99.7% at the end of 1Q24 higher than the 95.9% ratio from 4Q23, basically because of the greater change of the loan balance.

The deposit mix posted a quarterly contraction in saving accounts, with a greater percentage reduction in checking accounts mainly in the corporate segment. The decrease in savings accounts took place to a greater extent for the operation in Colombia (-4.0%), however, they continue to represent the main source of funding weighting 39% of the total. Lower balances in savings accounts and checking accounts were offset by growth in time deposits, particularly in digital time deposits from retail customers.

Loans with banks presented a reduction of 9.8% in the quarter, mainly in foreign currency balances and is due to the still good liquidity position of the bank. In debt securities, the maturity of a subordinated bond in local currency explains the variation in the balance during the period.

Shareholders' Equity and Regulatory Capital

Shareholders' equity attributable to the owners of the parent company at the end of 1Q24 was COP 36,486 billion, decreasing by 4.2% compared to 4Q23 and decreasing 1.2% when compared to 1Q23. In March of 2024 the General Shareholders' Meeting approved the proposal for distribution of profits for a total of COP 3.4 trillion. Dividends approved mainly explain the quarterly reduction in equity and capital ratio.

The Bank's solvency ratio under Basel III was 12.31% in 1Q24 standing 81 basis points above the minimum level required by the regulator in Colombia, while the basic capital ratio (Tier

1. stood at 10.45%, 195 basis points above the minimum regulatory capital level (value to fully comply with the new capital requirements in the fourth year of the Basel III phase-in period). The reduction in solvency levels is mainly due to the earning distribution. The tangible capital ratio, defined as shareholders' equity minus goodwill and intangible assets divided by tangible assets, was 8.28% at the end of 1Q24.

Consolidated Income Statement Grupo Bancolombia

Net income attributable to equity holders of the parent company was COP 1,663 billion in 1Q24, or COP 1,744.92 per share (USD $ 1.80 per ADR). This profit represents an increase of 14.9% compared to 4Q23, mainly as a result of lower provision charges and operating expenses. The company´s annualized return on equity ("ROE") was 17.4% for 1Q24 and 16.1% for the last 12 months.

Net Interest Income

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Bancolombia Clasificación - Interna

Net interest income totaled COP 5,158 billion in 1Q24, 1.5% lower than 4Q23. The decrease in the total balance results from the combination of lower interest income in the investment portfolio and in the lending business. Interest income and valuation of financial instruments was COP 664 billion, which represents a reduction of 5.7% in the quarter. The variation follows the valuation of the public debt securities portfolio in Colombia. It is worth noting that the result in investments is positive, liquidity operations are performing well and the lower expenses on liability liquidity operations contributed to the outcome. Additionally, interest expenses decreased in line with the lower cost of funding.

Net Interest Margin

The annualized net interest margin on investments in 1Q24 stood at 3.7%, impacting the total annualized NIM on a consolidated basis that decreased 15 bps and reached 7.1%.

The annualized net interest margin of the loan portfolio was 7.6%, 4 basis points below 4Q23 and 24 basis points below 1Q23. The performance of the lending business was relatively stable amid a higher balance in the loan book and lower interest rates on assets. The lower yield on loans was favorably offset by lower interest expenses.

Savings accounts decreased 2.2% compared to 4Q23, and checking accounts decreased 3.2%. The annualized weighted average cost of deposits was 5.24% in 1Q24, decreasing 42 basis points compared to 4Q23.

During the first months of the year, the Central bank in Colombia has continued its monetary policy interest rate cuts that started in December 2023. This behavior has favored the total cost of financing for the Bank that began a decreasing path from the last quarter of 2024 and signaled a significant reduction in 1Q24 due to the gradual repricing of interest rate-sensitive liabilities.

Fees and Income from Services

During 1Q24, total fees and commissions, net totaled COP 1,001 billion, down 2.4% compared to 4Q23, and 0.1% compared to 1Q23.

Credit and debit card fees and commercial establishments revenues revealed a quarterly decrease due to a seasonal effect of the first months of the year with a lower volume of transactions and banking operations when compared to the fourth quarter.

Bancassurance division similarly presented a revenue contraction as a result of lower originations in consumer and therefore a lower number of policy distributions, as well as the increase in the volume of claims causing a reduction in profits distribution.

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Higher fee expenses in 1Q24 are due to an increase in the cost of data processing in banking services and higher royalties to credit-debit card franchises associated with transactional flows.

Other Operating Income

Total other operating income was COP 629 billion in 1Q24, down 32.9% compared to 4Q23. Income from operating leases was COP 460 billion in 1Q24, a decrease of 2.3% compared to 4Q23 and an increase of 10.1% compared to 1Q23. The better performance on an annually basis was driven by an improvement in customer financial lease agreements at Bancolombia S.A. and customer rental contracts of vehicles at Renting Colombia and higher income in property rentals from "FCP Fondo Inmobiliario Colombia".

Dividends Received, and Share of Profits

Total dividends and other net income from equity participation was COP 85 billion in 1Q24, with a quarterly increase explained by a specific effect from 4Q23 when impairment charges in associates and joint businesses corresponding to TUYA S.A. because of the market valuation carried out in 4Q23 impacted the results.

Asset Quality, Provision Charges and Balance Sheet Strength

The principal balance for past due loans (those that are overdue for more than 30 days) totaled COP 13,299 billion at the end of 1Q24 and represented 5.3% of total gross loans, whereas 90-daypast-due loans totaled 8,359 billion and represented 3.3%, both ratios increased quarterly largely due to a greater number of commercial clients becoming delinquent, especially small, and medium enterprises. During the quarter, charge-offs totaled COP 1,478 billion, lower than the previous quarter mostly by improvements in retail.

The coverage, measured by the ratio of allowances for loans losses (principal) to PDLs (overdue 30 days), was 110.7% at the end of 1Q24, decreasing compared to 120.0% at the end of 4Q23. The deterioration of the loan portfolio (new past due loans including charge- offs) was COP 2,420 billion, impacted by commercial loans becoming past-due.

Provision charges (net of recoveries) totaled COP 1,315 billion in 1Q24, decreasing 23.7% compared to 4Q23. In general, it is worth highlighting the better performance of consumer portfolio in Colombia, Panama, and El Salvador, which has a considerable impact on the better cost of credit. On the other hand, macroeconomic variables represented a release due to updated forecasts in Colombia. Finally, it is worth noting the recoveries carried out from

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large exposures that were previously impaired and meant a reduction in the provisioning expense for the commercial segment.

Provisions as a percentage of average gross loans were 2.0% annualized for 1Q24 and 2.6% for the last 12 months. The Bank maintains a strong balance sheet supported by an adequate level of loan loss reserves. Allowances (for the principal) for loan losses totaled COP 14,723 billion, or 5.8% of total loans at the end of 1Q24, lower when compared to 4Q23.

Operating Expenses

During 1Q24, operating expenses totaled COP 3,179 billion, decreasing 8.1% compared to 4Q23 and increasing 3.5% compared to 1Q23.

The efficiency ratio was 46.2% and 46.7% in the last twelve months. Personnel expenses (salaries, bonus plan payments and compensation) totaled COP 1,335 billion in 1Q24, down 0.3% from 4Q23 and up 0.9% from 1Q23. General expenses declined 13.0% in the quarter and grew 5.4% compared to 1Q23. The quarterly performance is due to seasonality, mainly in some areas such as advertising, technology fees and cash transportation, among others. In the annual analysis, it is worth noting the salary increases for labor expenses, and in general expenses, the largest local taxes other than income tax, the expenses of the rental and use business, the maintenance and licensing expenses of technology grow due to business transformation and migration to the cloud. The quarterly behavior is due to seasonality, mainly in some areas such as advertising, technology fees and cash transportation, among others. In the annual analysis, it is worth noting the salary increases for labor expenses, and in general expenses, the largest local taxes other than income tax, the expenses of the rental business (Renting Colombia), technology maintenance and licensing expenses associated with business transformation projects and cloud migration.

As of March 31, 2024, Bancolombia had 34,483 employees, owned 856 branches, 6,086 ATMs, 35,104 banking agents and served more than 30 million customers.

Taxes

Bancolombia consolidated income tax for 1Q24 was COP 695 billion. On a consolidated basis, the lower effective tax rate when compared to the statutory tax rate is a result of the application of tax benefits in Colombia such as exempt income for social housing in mortgages and investments in productive fixed assets. Additionally, due to the tax benefits in Guatemala, El Salvador, and Panama, corresponding to exempt yields on government- issued securities. Finally, it is worth noting the earnings of the foreign subsidiaries with lower tax rates when compared to Colombia, which also contributed to a lower result.

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