DEMONSTRAÇÕES FINANCEIRAS ENGLISH MAR 11 …ri.banrisul.com.br/banrisul/web/arquivos/English_1Q11_Financial... · 4 FINANCIAL STATEMENTS MARCH 2011 Index Message from the CEO

2 FINANCIAL STATEMENTSMARCH 2011

Message from the CEO

On March 17, 2011, we took in themanagement of Banco do Estado do RioGrande do Sul with a very clear purpose: towork for the strengthening of Banrisul and toimprove its soundness, prestige andconfidence gained over 82 years in business.

Brazil and Rio Grande do Sul, in particular,experience a favorable economic momentand it is for management to takeopportunities responsively. In coordinatedmanners with the productive sectors, withgovernment actions and with society, ourcommitment is to leverage and structure newbusinesses by delivering strong results toshareholders and by fomenting developmentin the communities where Banrisul operates.

Our management will be based on fourpillars: as a regional bank, we will work hardto gain scale and, to this end, we wish toexpand the credit portfolio and to continuethe project to expand the branch network;investments in innovation will bemaintained, not only with regards to thetechnological apparatus, but fundamentallyand primarily in the improvement anddevelopment of staff; excellence standardswill be sought in the control and managementof administrative costs; and improving qualityin customer service constitutes a priorityfocus of our administration.

Strongly identified with the localenvironment, Banrisul has its own andhospitable way to treat its customers. Wewant to further enhance the feeling ofproximity, efficiency, ease and, dare we say,of affection with our people. Therefore, wecount on the engagement of a dedicatedboard of employees.

The new officers are aligned in their goalsand aware of the greatness of thisoctogenarian Institution, attested to by theirnumbers. The net profit of R$211.3 millionachieved in the first quarter of 2011 is 73.4%higher than the same period last year. TheBank has R$33.0 billion in assets, of whichR$17.9 billion in the loan portfolio, with agrowth of 21.5% in the last twelve months.Funds raised and under managed totaledR$25.3 billion in March 2011, an increase of13.1% over the same month last year.Shareholders’ equity totaled R$4.0 billion atend-March, with a 23.3% annualized returnon average equity.

The full success of our strategies, focused onresults and competence to obtainorganizational alignment, will gain strengthwith the commitment to create more andmore a partnership bond of amongcustomers, shareholders, stakeholders and

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Túlio Luiz ZaminCEO

the Institution. And as a public bank, theproximity to the State Government providesopportunities to leverage business and

promote actions supportive of the economicdevelopment of both the state and thecountry.


Index

Message from the CEO........................................................................................ 2Management Report ............................................................................................... 6

Economic Scenario .............................................................................................. 7Business Strategy ................................................................................................ 9Consolidated Performance ................................................................................. 10

Net Income .......................................................................................................... 10Shareholders' Equity ........................................................................................... 10Total Assets ......................................................................................................... 11Taxes and Contributions ..................................................................................... 11

Operational Performance ................................................................................... 11Funds Raised and Under Management ............................................................... 12Securities ............................................................................................................. 12Loan Operations .................................................................................................. 12

Products, Services and Channels ......................................................................... 14Banricompras....................................................................................................... 17Banrisul´s Correspondent Banks......................................................................... 17Virtual Branch - Home and Office Banking ........................................................ 17Banrifone and Branch Call Center ...................................................................... 17Bidding Eletronic ................................................................................................. 18Credit Cards ......................................................................................................... 18Insurance, Private Pension and Capitalization .................................................. 18

Public Sector Activities ....................................................................................... 19Banrisul's Customer Service Network ................................................................. 20Subsidiaries ........................................................................................................ 21Corporate Governance........................................................................................ 22

Overview ............................................................................................................. 22Banrisul's Corporate Governance Structure ....................................................... 22Shareholding Structure ....................................................................................... 23Investor Relations and Communication Policy .................................................. 23Interest on Capital and Dividends Payout Policy ............................................... 24

Internal Controls and Compliance ....................................................................... 25Risk Management ............................................................................................... 25Basel Ratio ........................................................................................................... 27

Technological Modernization .............................................................................. 29Marketing ........................................................................................................... 30Human Resources ............................................................................................... 30Corporate Responsibility .................................................................................... 31

Awards ................................................................................................................ 32Acknowledgements ............................................................................................ 32

Index of GraphsGraph 1: Net Income ................................................................................................ 10Graph 2: Shareholders' Equity ................................................................................. 10

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Graph 3: Total Assets Growth ................................................................................... 11Graph 4: Growth of Funds Raised and Under Management.................................... 12Graph 5: Securities Growth ...................................................................................... 13Graph 6: Loan Operations Growth ........................................................................... 14Graph 7: Commercial Credit Growth - Individuals and Companies ....................... 15Graph 8: Banricompras ............................................................................................. 17Graph 9: Shareholding Structure ............................................................................. 23Graph 10: Market Value X Shareholders' Equity ..................................................... 24Graph 11: Interest on Own Capital - Quartely Payments ........................................ 24

Financial Statements ............................................................................................... 33 Balance Sheet ..................................................................................................... 34 Statement of Income .......................................................................................... 38 Cash Flow ............................................................................................................ 39 Statement of Value Added .................................................................................. 40 Statement of Changes in Shareholders' Equity ................................................... 41 Notes to the Financial Interim Statements ......................................................... 42

Note 01 - Operations .......................................................................................... 43Note 02 - Presentation of the Financial Statement ........................................... 43Note 03 - Significant Accounting Pratices .......................................................... 44Note 04 - Interbank Investments ....................................................................... 48Note 05 - Securities and Derivatives .................................................................. 48Note 06 - Restricted Deposits ............................................................................. 50Note 07 - Loans, Lease Operations and Other Receivable with Credit Characteristics 51Note 08 - Other Receivables .............................................................................. 53Note 09 - Permanent Assets ............................................................................... 54Note 10 - Deposits and Money Market Funding ................................................ 55Note 11 - Borrowings .......................................................................................... 55Note 12 - Onlendings .......................................................................................... 56Note 13 - Other Payables .................................................................................... 56Note 14 - Reserves, Contingent Assets and Liabilities ...................................... 57Note 15 - Income from Services Rendered ........................................................ 58Note 16 - Income from Bank Fees ...................................................................... 59Note 17 - Other Administrative Expenses ......................................................... 59Note 18 - Other Operating Income ..................................................................... 59Note 19 - Other Operating Expenses .................................................................. 60Note 20 - Shareholders' Equity - Banrisul .......................................................... 60Note 21 - Commitments, Guarantees and Other ............................................... 61Note 22 - Income Tax and Social Contribution ................................................... 62Note 23 - Fundação Banrisul de Seguridade Social and Cabergs - Caixa de

Assistência dos Empregados do Banco do Estado do Rio Grande do Sul ... 64Note 24 - Financial Instruments and Financial Risks Management .................. 65Note 25 - Transactions with Related Parties ...................................................... 68Note 26 - Impact from the Adoption of the International Financial ReportingStandards ............................................................................................................. 72Note 27 - Authorization for Completion of the Financial Statements .............. 73

Reports................................................................................................................. 74


WE PRESENT THE MANAGEMENT REPORT AND FINANCIAL STATEMENTS OF BANCO DOESTADO DO RIO GRANDE DO SUL S.A. FOR THE FIRST QUARTER OF 2011, PREPARED INACCORDANCE WITH THE RULES OF THE BRAZILIAN SECURITIES AND EXCHANGE COMMISSION(COMISSÃO DE VALORES MOBILIÁRIOS – CVM) AND THE CENTRAL BANK OF BRAZIL.

ManagementReport

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Economic Scenario

The economic environment in 1Q11 was marked bythe conjunction of several sources of uncertainty,especially at international level, leading to highervolatility and inflation pressures. However, theseuncertainty elements regarding the future scenariodid not compromise the performance and therecovery of major economies in the period. Amongthe most relevant factors, the rising of commodity

prices, especially agricultural and oil, had a relevant participation, originating, on the onehand, from severe drought and adverse weather conditions in some major grain producingregions, which resulted in considerable crop shrinkages, and by prolonged geopoliticalconflicts in Arabian countries with direct consequences on the world oil supply.

In this context, Brazil showed a positive economic growth rate, still strongly supported byconsumer spending, which in turn has been grounded on the strong increase of payroll andthe credit offering last year. Inflation rates have remained under pressure, on account ofshocks arising from external uncertainties, especially in commodity prices, but also from theoverheating of consumption and economic activity which reflected in pressures on servicesprices.

Such pressures were partially offset by the appreciation of the Real that occurred, on onehand, from the continuous improvement of the external perception about the trajectory ofthe Brazilian economy and from the high interest rate differential that still there is and,secondly, from the Dollar’s general loss of value, linked to excessive liquidity in internationalmarkets. And yet, market expectations proved pessimistic throughout the period, signalingfurther deterioration of the inflationary picture and reduced growth rate, so that the monetaryauthority made adjustments in the economic policy, raising the benchmark interest rate in100 basis points to 11.75% per annum, in addition to other macro prudential measures likeraising taxes on credit on the credit, increasing reserve requirements rates and capitalrequirements for banks.

In the local environment, the main indicators show that the economy of Rio Grande do Sul hasbeen showing moderate performance in the early months of 2011 compared to 2010, followingthe dynamics of the rest of the country. According to data released by the Federation ofIndustries of Rio Grande do Sul – FIERGS, the state industry is in an evident process ofaccommodation, whose beginning coincided with the reversal of post-crisis fiscal stimulus.This scenario, however, has not affected the levels of investment and business confidence,which remain high, sustained especially by the strength of the domestic market. Regarding


the agricultural sector, the estimate for the grain harvest of the first quarter of this yearalready exceeds the harvest obtained in 2010 and, coupled with rising food prices, contributesto the good performance of the sector in the State.

As for the trade balance of the State of Rio Grande do Sul, the proceeds from exports in thefirst months of this year presented a significant growth, taking into account the level next tostagnation in the previous year. In 1Q11, exports reached USD3.8 billion, an increase of 39.4%over 1Q10. With this result, the State again positions itself among the major exporting Brazilianstates, accounting for 7.4% of Brazil’s exports. On the other hand, imports remain high,sustained by the exchange rate and domestic market expansion, increasing 5.6% in the firstquarter of the year.

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Business Strategy

In operational terms, business strategies translate into the expansion of net interest income,increase in service revenue and, mainly, in tight control of administrative expenses, butwithout losing sight of the commitment, as a public bank, to be aligned to State’s projects.

To achieve the guidance disclosed to the market at the end of 2010 and to implement strategiesthat allow Banrisul to remain as the best institution in customers’ perceived value in themedium and the long term, as well as to strengthen its partnership with the State Governmentto help facilitate public policies are objectives to be pursued through the implementation ofthe strategy supported by four pillars: (i) quality of services, (ii) expansion of the branchnetwork and the credit portfolio, (iii) investments in technology; and (iv) maintain standardsof excellence in cost management and control.

A friendly bank, a bank that facilitates the doing of financial transactions, a bank that offersproducts and services that meet the customers’ needs is only possible when there is a perfectbond between material and human resources available. To broaden the perception ofBanrisul’s value, as pointed out by customers in a recent research, and to ensure to non-banking customers access to banking products are examples of the great challenges of thecurrent management.

To expand the service network and the loan portfolio, the existing installed customer basewill be heavily worked, as well as the branch expansion of the branch network that will takeplace across two fronts: (i) the opening of branches in faster developing cities in the statepole and (ii) further market insertion in the state of Santa Catarina, as there are cultural andsocioeconomic similarities with Rio Grande do Sul and, therefore, great synergy and positiveresponse from entrepreneurs in that community.

The segments of debit and credit cards and pension and capitalization should also have amore consistent performance in the coming years. Growth strategy will be implementedthrough dynamic marketing actions and operations focused on specific niches.

The alignment to projects of the State projects will be possible through measures that includeaccess to real estate and microcredit lines and the implementation of alternatives to financethe agricultural sector. In the coming months, mechanisms that contribute to improving therelationship with micro and small companies, to recovering of the informal economy and toextending the possibilities of access of C and D classes to consumption credit should be inplace.

The expansion of businesses, channels, branch network and new credit instruments will bepossible through technological innovations supported by investments and by a vision ofinformation technology focused on customer service improvements.


Consolidated Performance Net Income

Banrisul’s net income totaled R$211.3 million in 1Q11, R$89.5 million or 73.4% above theresult recorded in the same period in 2010, due by the growth of credit and treasury revenuesand service fees, and of the decrease of administrative costs and expenses with creditprovisions. The performance reflects the expansion of the volume of credit transactions andthe rigid control over operational costs.

Graph 1: Net Income - R$ Million

Shareholders’ Equity

At the end of 1Q11, Banrisul’s shareholders’ equity totaled R$4,009.0 million, growing 15.2%in twelve months as the result of the incorporation of the net income net of dividend andinterest on equity payments and provision. Return on average shareholders’ equity in 1Q11reaches 23.3% per annum.

Graph 2: Shareholders’ Equity - R$ Million

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Total Assets

Total assets amounted to R$32,951.0 million at the end of 1Q11, a 10.3% increase in relation tothe R$29,864.6 million recorded in the same period of 2010 derived from the credit expansionleveraged by the growth of the commercial credit on Individuals and Companies’ segments.

Graph 3: Total Assets Growth - R$ Million

Taxes and Contributions

In 1Q11, Banrisul collected and provisioned R$149.4 million in taxes and contributions, whiletaxes retained and passed through levied directly on financial intermediation and otherpayments amounted to R$120.3 million.


Securities

The balance of investments in securities stood at R$9,789.3 million in March 2011, a year-on-year reduction of 1.6% or R$159.8 million. This balance includes interbank investments net ofresale and repurchase agreement liabilities.

Operational Performance

Funds Raised and Under Management

Funds Raised and Under Management totaled R$25,289.8 million in March of 2011, up 13.1%or R$2,921.1 million in twelve months. Banrisul has maintained its retail funding policy.

The balance of time deposits reached R$10,935.0, a 24.2% or R$2,130.8 increase over March2010, and make up 43.2% of total funding. Savings deposits reduced 6.2% or R$355.5 million,ending 1Q11 with a balance of R$5,336.7 million, and account for 21.1% of the total fundsraised and under management. Demand deposits, which account for 11% of total funding,increased 44.5% or R$855.8 million year-over-year and reached the balance of R$2,778.5million. Assets under management totaled R$6,227.6 at the end of 1Q11, R$378.7 million or6.5% over March 2010. The year-on-year growth of demand and time deposits is due to thedeactivation of the automatic credit transfer mechanism from checking account to savingsdeposits, reflected in the migration of funding to other deposits, besides the inception ofnew types of time deposits.

Graph 4: Growth of Funds Raised and Under Management - R$ Million

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*Net of Matched transactions

The relative flattish year-on-year behavior of the securities portfolio results from the policyof allocating funding into credit assets.

As confirmed by internal technical studies, Banrisul has a strong financial capacity and intendsto hold securities classified as “held-to-maturity” pursuant to Article 8 of the Central Bank ofBrazil Circular Letter no.3068 of November 8, 2001.

Graph 5: Securities Growth* - R$ Million


At the end of 1Q11 commercial loan operations (non ear-marked credit) to individuals totaledR$7,796.4 million, accounting for 56.3% of the commercial portfolio and 43.5% of all loanoperations. The 20.5% or R$1,327.9 million year-on-year increase is particularly due to thegrowth of payroll loans.

Own payroll loan portfolio amounted to R$3,569.3 million in March 2011, 23.0% above thebalance recorded in the same month of 2010. Acquired payroll loan portfolio amounted toR$2,209.9 million in 1Q11, a 12.1% year-on-year increase.

Loan Operations

In 1Q11, Banrisul’s loan portfolio totaled R$17,939.6 million, 21.5%or R$3,173.9 million above the R$14,765.7 million recorded inthe same quarter of 2010. Accounting for 77.8% of such growth,the commercial credit portfolio increased from R$11,370.6 millionto R$13,838.5 million, rising 21.7% or R$2,467.9 million in twelvemonths.

At the end of March 2011, credit operations of AA to C ratings,representative of normal risk according to Resolution no. 2682/99 of the Central Bank of Brazil, accounted for 89.1% of the credit

portfolio, with a balance of R$15,981.1 million. Credit operations rated D to G (risk level 1),amounted to R$1,516.1 million, equal to 8.5% of the loan portfolio. Risk level 2, composedsolely by operations rated H that require provisions of 100%, represented 2.5% or R$442.4million of the total loan portfolio.

Graph 6: Loan Operations Growth - R$ Million

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The other credit portfolios also showed favorable performance in the quarter. The balance ofreal estate loans reached R$1,354.1 million in March 2011, an increase of R$232.3 million or20.7% in twelve months. Mortgage portfolio is one of the major lines for the evolution ofcredit in the coming years. From the first quarter of 2011 on, this particular credit portfolio hasbecome available to customers at all Banrisul branches located outside the state of Rio Grandedo Sul, agreements making available to federal and private companies’ employees mortgageloans at privileged conditions were signed and, with a view to strengthening the civilconstruction sector and the associated construction companies, agreement with home builderswere signed too.

At the end of March 2011, rural lending amounted to R$1,337.9 million, an increase of R$291.4million or 27.8% over 1Q10. In 1Q11, Banrisul announced three new programs to the agriculturalsector: financing for the acquisition and renovation of rural machinery and equipment,proceeds from mandatory rural credit allocation to finance investments in sheep industryand credit lines in preparation to 2011 winter crops and to the sales of the products from 2010summer crops. During this quarter, investment programs based on onlendings from BDNESwere extended, 84 agreements were signed and the Bank was present in 20 agricultural fairsin the State.

Commercial loan operations targeted to Companies increased R$1,140.0 million or 23.3%,totaling R$6.042.1 million at the end of March 2011, and accounted for 43.7% of the commercialcredit portfolio and for 33.7% of the loan book. Working capital lines increased 29.1% year-on-year, and reached the balance of R$4,430.1 million in 1Q11.

Graph 7: Commercial Credit Growth – Individuals and Companies - R$ Million


The long-term finance portfolio totaled R$755.9 million in the end of 1Q11, an increase ofR$176.2 million or 30.4% over the balance recorded in 1Q10. Transactions using BNDES card isone of the key drivers to increase the long-term credit portfolio in the coming months.

ACC and ACE (pre- and post-shipment export financing operations) totaled R$450.8 million atthe end March 2011. In 1Q11, final sales operations and CCI and FINIMP products,representative of import transactions, were increased, performance in line with marketmovements and the Brazilian Real appreciation. The use of digital signature in foreign exchangecontracts was also implemented.

Microcredit, one of the credit modalities through which Banrisul will align itself to governmentto help execute public policy projects, presented a balance of R$342.9 million in 1Q11, 14.4%over the same period in 2010. Joint efforts with small entrepreneurs, micro and smallcompanies, the redemption of the informal economy and increasing access to consumptionopportunities for C and D classes fall within the scope of policies established for the comingmonths.

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Graph 8: Banricompras

Financial Transactions - R$ Million Transactions - Million

Products, Services and Channels Banricompras

Banricompras is an electronic at sight, in installments or fixed date payment system availableto cardholders of Banrisul’s debit cards, and comprises today 91,000 affiliated establishments.At the end of 1Q11, 18.0 million transactions were carried out within its network, with afinancial turnover of R$1,215.5 million, a year-on-year increase of 10.4% and 16.6%,respectively.

Since March 2011, the Banricompras network is operating as acquirer, enabling affiliatedestablishments to accept credit and debit cards from other issuers in Banrisul’s POS unities.The acquiring business started with MasterCard, strengthening Banricompras network andenhancing customer loyalty.

Banrisul’s Correspondent Banks

At the end of 1Q11, Banrisul had approximately 2,000 correspondent banks, a flexible,alternative customer banking service at extended business hours. In this quarter, 14.0 milliontransactions were recorded with a financial turnover of R$3,532.0 million, an increase of10.5% over 1Q10.

Virtual Branch – Home and Office Banking

In 1Q11, 23.1 million operations totaling R$20,248.8 million were carried out through AgênciaVirtual Banrisul (Banrisul Virtual Branch. In relation to 1Q10, the number of transactions grew3.0% and the financial turnover, 4.0%.

Banrifone and Branch Call Center

Banrisul offers to customers Banrifone and Branch Call Center services, relationship channelsby telephone. During 2010, Banrifone electronic service had 1.3 million accesses, 156.100 ofthem operator assisted, and a financial turnover of R$61.3 million, information services aside.Over the same period, 322,100 phone calls were made to the Branch Call Center, representingR$6.7 million in financial turnover.


Electronic Bidding

From January to March 2011, Pregão On Line Banrisul (Banrisul Online Bidding website), amodern internet purchase portal directed to public companies indirectly controlled by theState and to local municipal governments, hosted 7,000 bidding processes that totaled R$173.2million on purchases of goods and service procurement. Banrisul was user of the Biddingservice in 87 events that totaled R$12.0 million in purchases and service procurement, withsavings of R$2.5 million in relation to the R$14.5 million originally estimated for purchases.

Credit Cards

Credit cards and debit cards now constitute an important focus of Banrisul‘s business andmarketing policies, aimed at expanding its market share in the segment of card issuers. Theexpansion of the cards base will also provide for greater results within the industry economicchain, via new affiliation to Banricompras network.

At the end of 1Q11, Banrisul had a base of 324,000 Visa and MasterCard credit card holders,10.4% higher than in 1Q10, with a financial turnover of R$231.0 million in 3.1 milliontransactions, 29.2% and 24% higher than March 2010, respectively. Average tickets increasedby 3.1% for purchases and 5.4% for withdrawals in twelve months.

Insurance, Private Pension and Capitalization

Revised in this quarter, Banrisul’s business policy includes as one of its priorities to boost themarketing of insurance, private pension and capitalization products, whose results shouldshow up throughout the year. In the first quarter of 2011, campaigns to increase sales ofcapitalization, auto insurance and individual and group life insurance products were launched.

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Public Sector Activities

Grounded on the mission of being the State’s financialagent to promote the economic and socialdevelopment of Rio Grande do Sul, Banrisul constantlyenters into partnerships, actions and agreements withthe public sector.

Among the actions taken together with the JudiciaryBranch and the Prosecutor’s Office, it is highlighted theinception, in December 2010, of the Judicial AutomatedPermit product, enabling the ease and safe withdrawal of automated escrow deposits. In thefirst quarter of 2011, more than 6,000 documents were operated through the new procedure,with a financial turnover equivalent to R$53.1 million.

Operational agreements that provide access to real estate financing with privileged conditionswere signed in January 2011, to include magistrates and civil servants from the JudiciaryBranch, and in March 2011, to include members and servants from the Prosecutor’s Office.

Within the state public sector, another important achievement was the project ReintegrationCard, a partnership between the State Government and Banrisul, with the collaboration ofthe Department of Public Safety and the Superintendence for Correctional Services, whichprovides for the opening of individual paycheck accounts to collect payments from prisonlabor and the build-up of savings, aiming at promoting social inclusion and income generation.

At the federal level, the Bank signed in the first quarter of 2011 an agreement for the payrollwith the Universidade Federal Fronteira Sul (UFFSul), through the Integrated Human ResourcesManagement System (SIAPE).

As the financial agent of the INSS in the State of Rio Grande do Sul, Banrisul carried out, duringthe first quarter of 2011, the payment of more than 78,000 new beneficiaries, which now haveaccess to exclusive products such as the Banricompras card, allowing its use in thousands ofaffiliated establishments in the state.

Within the municipal public sector, the most relevant initiatives are those related to theDigital Teacher program and to the municipal pension funds. Since the second half of 2010,Banrisul has carried out action to extent the Digital Teacher Program, incepted as an initiativeof the State Government, to local teachers, resulting in the participation of 56 municipalitiesthat ended up in the financing of 2,500 notebooks. Banrisul also held meetings with portfoliomanagers from municipal pension funds to explain the impacts of Resolution no. 3922 of theCentral Bank of Brazil in their funding allocations, during which information, rules, guidanceand framework of their financial investments were provided.


Banrisul´s Customes Service Network

By the end of March 2011,Banrisul served its customersin 1,240 points, distributed in439 branches (398 in Rio Grandedo Sul, 24 in Santa Catarina, 15in other Brazilian states, one inNew York and one in GrandCayman), 278 banking servicestations and 523 electronicservice stations. In Rio Grandedo Sul, the Bank is present in413 municipalities, covering98% of the population and theGDP of the state.

Trindade Branch - Florianópolis

Eletronic Service Station - Brasília Passo da Areia Branch - Bourbon Shopping - Porto Alegre

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Subsidiaries

Banrisul S.A. Administradora de Consórcios – The Company ended 1Q11 with 23,100 activegroups and with a loan portfolio of R$635.4 million. In 2010 alone, 1,066 letters of credit weregranted to customers, equivalent to R$25.9 million for the purchase of goods. Sales increasedby 93% in relation to 1Q10. Net income in 2010 totaled R$3.3 million.

Banrisul S.A. Corretora de Valores Mobiliários e Câmbio – In the first quarter of 2011, theCompany brokered R$215.7 million in the stock market, of which 58.4% through Home Broker.Net income for 1Q11 totaled R$ 776.000.

Banrisul Armazéns Gerais S.A. – The Company carried out, in the first quarter of 2011, 2,199import and 4,118 export orders, using over 90% of its operating capacity. Net income in theperiod was R$198,000. Listed among the business expansion strategies are the continuousimprovement of procedures, the control of administrative and operational costs, the searchfor new customers, the optimal use of storage space, the expansion of specific operations(platform) at the Rio Grande seaport and the progressive occupation of the area (3.00 Ha).

Banrisul Serviços Ltda. – Responsible for Refeisul brand, Banrisul Serviços Ltda. operates inthe southern region of Brazil in the segments of meal and food vouchers, fuel, gifts, privatelabel and benefit cards. On a daily basis, more than 370,000 customers use Refeisul products.In the first three months of 2011, 2.9 million transactions were carried out, 23% above thesame period last year. Net profit was R$5.1 million in 1Q11.

99.6% ON70.5% PNA13.0% PNB57.0% Total

0.4% ON29.5% PNA87.0% PNB43.0% Total

State of RioGrande do Sul

OtherShareholders´

Banco do Estadodo Rio Grande do Sul S.A.

Banrisul S.A.Adm. Consórcios

Banrisul S.A.CVMC

Banrisul ArmazénsGerais S.A

Banrisul ServiçosLtda.

99.6% Total 98.7% Total 99.5% Total 99.8% Total


Corporate Governance

Overview

Since July 2007 listed on BM&F Bovespa SA‘s Corporate Governance Level 1, Banrisul meetsthe requirements of its level of listing and also requirements of other levels of corporategovernance, in line with best market practices, on behalf of greater transparency, fairnessand proper accountability, while enhancing credibility and the interest of investors andcustomers.

Corporate governance practices create incentives and monitoring mechanisms, ensuring thatthe Banrisul’s behavior is market oriented. They also confirm the interest in improving andstrengthening relations with its controlling shareholders, the Board of Administration, FiscalCouncil, Board of executive Officers, independent auditors, oversight bodies and other relatedparties and stakeholders.

Such practices are important, especially in times of administrative changes such as occurredduring the first quarter of this year, yet without significant changes in Banrisul’s businessmanagement, reinforcing its role as a state-controlled, market-oriented publicly held company.

The first quarter of 2011 also marks the termination of the contract with Deloitte ToucheTohmatsu Auditores Independentes and its replacement by Ernst & Young Terco AuditoresIndependentes S/S. The hiring of the new independent auditor was based on Competition 97/2010 bidding process, in compliance to the provisions of Law no. 8666 of June 21, 1993(Procurement Law), which sets forth the rules of bidding and public contracts involving thepublic administration, and to which Banrisul is subjected to by being a mixed-capital companydirectly controlled by the State of Rio Grande do Sul.

The participation of the Boards of Administration and Fiscal Council in the decision-makingstructure, the management model focused on profitability and quality of operations and theadoption of Corporate Governance policies give Banrisul strength and recognition, as reflectedin the proper performance within the banking industry.

Banrisul’s Corporate Governance Structure

Banrisul’s Corporate Governance Structure is composed by the following:

Board of Executive Officers and Committees: Banrisul’s management is conducted by theChief Executive Officer and other Executive Officers, who are assisted by strategicallyrelevant bodies acting in the form of committees composed of employees in charge ofvarious areas of the Bank.

Board of Administration: responsible for establishing Banrisul’s general business policies,including its long-term strategy, it its composed by a minimum of five and a maximum ofnine board members, all of them shareholders, being at least 20% independentshareholders, for a unified two-year term;

Audit Committee: connected to the Board of Directors, the Committee is composed ofthree members appointed by the Board, with at least one of them with proven knowledge

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in the accounting and auditing areas. The term of office is one year and may be renewedfor the same period upon prior authorization from the Central Bank of Brazil;

Fiscal Council: responsible for the adequacy of management activities with the dutiesestablished by law and by Bylaws, it is composed of five members, one chosen by thepreferred shareholders, and five alternate members for one-year.

Shareholding Structure

The Government of the State of Rio Grande do Sol, as the main shareholder, have control overthe election of the Board of Administration and, therefore, over Banrisul’s management andoperations. However, the Bank’s free float is above the minimum of 25% required by CorporateGovernance Level 1: 42.8% of its total shares are held by shareholders without any connectionwith the Institution. Banrisul’s shareholding structure is presented in the following graph.

Graph 9: Shareholding Structure

Investor Relations and Communication Policy

A transparent relationship with clients and investors is built through the disclosure of dataand information to the market, communication that allows broader and timely knowledge ofthe Bank’s business.

Banrisul’s Investor Relations website, available in Portuguese and English, provides clear,detailed and timely information for the Bank’s shareholders, institutional investors,individuals, market analysts and other interested stakeholders.

The significance of these events is reflected on Banrisul’s trading volume. At the end ofMarch 2011, the Bank’s PNB stock (BRSR6) ranked 72nd among the 100 most-traded stocks onBM&F Bovespa (75th in twelve months).

Banrisul’s market value in March 2011, represented by the total number of outstanding sharesmultiplied by the closing price of its PNB stock, was 105% higher than shareholders’ equity inthe same period.


REGION SHAREHOLDERS % SHARES %

BRAZIL 55,543 98.99% 241,687,496 59.10%

EUROPE 218 0.39% 90,616,535 22.16%

NORTH AMERICA 251 0.45% 55,032,662 13.46%

ASIA 64 0.11% 17,882,060 4.37%

OCEANIA 15 0.03% 1,688,290 0.41%

CENTRAL AMERICA 14 0.02% 1,554,815 0.38%

SOUTH AMERICA 6 0.01% 417,619 0.10%

AFRICA 1 0.00% 95,000 0.02%

TOTAL 56,112 100% 408,974,477 100%

Graph 10: Market Value X Shareholders’ Equity

The table below shows the geographic distribution of shareholders by number and numberof Banrisul’s shares held.

Interest on Capital and Dividends Payout Policy

Since early 2008, Banrisul has maintained the policy of paying interest on equity on a quarterlybasis and, historically, has remunerated its shareholders by paying interest on capital anddividends above the minimum level required.

In the first quarter of 2011, R$56.8 million net of income taxes were paid/provisioned as

interest on own equity and dividends.

Graph 11: Interest on Own Capital – Quarterly Payments

25

Internals Controls and Compliance

To strengthen the system of internal controls, Banrisul has adoptedpolicies aimed at spreading the culture of internal controls, ensuringcompliance with rules, procedures and standards established by lawand enforcement agencies.

The internal controls policy establishes guidelines that seek toperiodically reinforce the alignment of internal controls with the goalsrelated to global business strategies and other institutional policiesset by the management.

The area in charge of internal control monitors activities in order to ensure compliance withregulations, the use and the effectiveness of controls in the many processes of the institution,to prevent and reduce risks inherent to business.

The spread of a controlling culture and the maintenance of an ethical environment areguaranteed by a set of rules, regulations and codes that guide employees in their activities toincorporate the values and ethical principles of the Organization.

Money Laundering Prevention - MLP

The Bank has established specific prevention processes and systems in order to ensure thatits activities are conducted in an environment of adequate controls to prevent risks related tothe crime of money laundering.

In this context, Banrisul maintains dedicated staff devoted to the execution of tasks focusedon the prevention of money laundering, which is responsible for reviewing legislation andprocedures and developing training programs for all employees.

The “Know Your Customer” process is continually reviewed and disseminated, emphasizingthe importance of timely, qualified customer information gathered at the beginning of eachand every business relationship, mitigating the risks of having the Bank’s services and productsused to legitimize illicit activities.

Risk Management

At Banrisul, risk management seeks to align the Bank’s activities to the standards recommendedby the New Capital Requirement Accord - Basel II, with a view to adopting the best practicesof the market and maximizing return for investors, from the best possible combination ofasset allocation and the use of required capital.

At the end of 2010, PWC - Consultores Associados was hired, as the result of the biddingprocess no. 0000045/2010, to provide specialized consulting services aimed at implementingthe framework of integrated management of corporate risks. In the first quarter of 2011, thecompany hired held meetings with key stakeholders in order to diagnose the state of currentcorporate risk management, in order to qualify the risk management practices and makecontinuous improvement actions.


Credit Risk

The credit risk assessment structure at Banrisul is based on the principle of joint technicaldecision. The Bank operates with different credit limits encompassing from the vast branchnetwork to the branch management and the credit and risk committees at the Head Office, aprocess that both ensures an offer of credit based on technically predefined credit limits andsets the maximum risk exposure that it is willing to operate with each customer, individual orcompany, considering the risk/benefit ratio.

Internal policies adopted by Banrisul to measure credit risk and credit operations considerthree basic components with respect to the counterparty: (i) the probability of default by theborrower or counterparty with respect to their contractual obligations; (ii) current exposuresto counterparty and its likely future behavior, from which the exposure to default is identified;and (iii) the likely rate of recovery of unfulfilled obligations (losses due to default). Theseassessments of credit risk, which reflect the perspectives of losses required by the BaselCommittee, are monthly incorporated to the operational management of the Bank.

Simultaneously, Banrisul assesses individually the probability of counterparty default, usingclassification tools designed for different categories of counterparties. Such tools, whichwere developed internally and combine statistical analysis with the opinions of the creditteam, are validated, when deemed appropriate, by comparison with available external data.For the corporate segment, the Bank has adopted techniques that evaluate companies underthe financial, management, marketing and production prisms, with periodic reviews alsotake in consideration current and prospective economic and competitive environments, towhich companies are input.

Market Risk

Market risk arises due to market fluctuations that may cause losses to the institution. Theseoscillations can occur in the prices of financial assets and liabilities or in determining variablessuch as, among others, interest rates, exchange rates, price indexes.

Banrisul monitors the market risk using statistical methodologies, Value at Risk (VaR) andSensitivity Tests among them, which seek to simulate and determine, with a degree ofreliability, the maximum levels of expected loss over a certain period of time, both in normalmarket conditions and in stress and volatility scenarios.

Market monitoring reports and the daily review of Banrisul’s assets and liabilities portfolios,as well as other operational procedures, allow monitoring, preventing and correcting possibleimbalances, ensuring the soundness of the institution.

Liquidity Risk

Liquidity risk relates to the inability to meet cash requirements, i.e. the occurrence ofmismatches in financial flows between assets and liabilities and the resulting consequenceson the Bank’s ability to raise funds when fulfilling its obligations.

27

Banrisul jointly monitors liquidity and market risk by observing cash flow projections andpossible changes in its structure resulting from alterations in the macroeconomic scenario,which may affect market funding and allocation.

Concerning to the asset side, different scenarios designed for the evolution of credit portfolioand settlement of financial instruments are considered. Moreover, as to the liabilities, theassumptions made include the possibility of early redemptions and difficulties in maintainingthe current funding structure.

Operational Risk

As required by Resolution no. 3380/06 of the Central Bank of Brazil, Banrisul has defined theinstitutional policy and the processes, procedures and systems necessary to implement thestructure for managing operational risk. The disclosure of the operational risk managementpolicy to the Bank’s employees is published in internal communications and consolidatedthrough the appropriate rules.

The main responsibilities of the operational risk management group are to identify, assess,monitor, control and mitigate operational risks at Banrisul, including those resulting fromoutsourced services. They group is composed by the Board of Administration and the Boardof Executive Officers, the Committee for the Management of Internal Controls, CorporateRisk Management Unit, the Comptroller, the branches and Head Offices areas, and the internalcontrols executive. More information about the structure of operational risk management isavailable at http://www.banrisul.com.br/Investor Relations/Corporate Governance/Operational Risk/ Operational Risk Management Structure.

All Banrisul’s employees, trainees and subcontractors are required to adopt behavioralmeasures to avoid risk exposure, within the limits of their assignments.

Basel Ratio

The Basel Ratio is the relation between the Base Equity (Reference Equity – RE) and weightedrisks (Required Reference Equity – RRE), according to current regulations, showing thecompany’s solvency. The minimum required by the National Monetary Council (CMN) is 11%.CMN also determines that the minimum amount of the Reference Equity must be equal tothe sum of the parcels calculated for credit, market and operational risks.

In 1Q11, Banrisul Basel Ratio was 15.4%, higher than the minimum required and allowing anincrease of up to R$9,847 million in new business. The reduction from 1Q10 was primarilydriven by the growth of the loan book, resulting in an increased capital allocation to cover thecorresponding risk. The same behavior was observed In relation to Banrisul’s financial andeconomic consolidated group, when the Basel ratio decreased from 17.0% to 15.8%.


Of the portions that compose the RRE, operational risk stands out with a variation resultingfrom the increase of revenues and from the market risk portion having suffered the mismatcheffects over assets and liabilities positions.

Referring to other parcels that comprise the RRE, the operational risk increased due toincreased revenue in the period and the evolution of the market risk was affected by themismatch of asset and liability positions.

The Risk Management Report is available at http://www.banrisul.com.br/Investor Relations/Corporate Governance/Operational Risk/Risk Management Report.

29

Technological Modernization

Investments in hardware, software and maintenance of assets

totaled R$46.4 million in 1Q11. Technology-related initiatives

undertaken in the first quarter of 2011 focused largely on the

implementation of actions aimed at ensuring a safer payment

environment, further use of digital certification and encryption

projects, business continuity and IT assets security

management, training, culture dissemination and

consciousness.

In the first quarter of 2011, various security requirements

necessary to meet the card acquiring business which initiated

with the MasterCard brand were implemented, ensuring that

Banrisul is adherent to PCI (Payment Card Industry) safety standards. The Bank is the only

institution in Latin America member to PCI board of advisors, directly influencing the definition

of rules to be applied worldwide. The new communication structure for Web POS equipment

used by Banricompras network guarantees security layers combined with the use of a high

security communication protocol, improving digital certification and the individual access by

affiliated store, allowing a better communication management of this segment of the

network.

Encryption and digital certification projects also add a higher level of security to the Bank’s

relationships channels. Computer authentication features based on digital certificates have

been incorporated to the current system used by Banrisul’ correspondent banks. The Bank’s

web environment systems are now authenticated with digital identity smartcards, increasing

security and access validation to products. The digital identity certificates have incorporated

alerts of due date proximity to avoid problems from unavailability of access.


Marketing

Banrisul maintains the strategy of offering financial products and services that meet customer

needs. In recent years, Banrisul became benchmark among the Brazilian public banks. Using

the most modern information technology, the Bank has received many distinctions and

recognitions that demonstrate businesses competitiveness of strengthen its image.

Besides the institutional focus, the 2011 marketing plan includes deeper alignment with the

business strategy of the Bank. In this sense, marketing activities will aim at the Bank’s expansion

and growth, with and approach to communication and directed to the different profiles of

individual and corporate customers.

Moreover, expanding the customer base will be supported by the portfolio of products and

services, especially credit, cards and Banricompras. Another strategic pillar of the commercial

and marketing policies is the repositioning of credit and debit cards.

Thus, since March 2011 Banricompras network has been acting as acquirer for other card flags,

enabling shops to accept other credit and debit cards aside from Banrisul’s on Banricompras’

POS machines. This process, which began with the MasterCard flag, provides further robustness

and sustainability to Banricompras network, as well as customer loyalty.

It is worth emphasizing that the marketing strategy is geared to business in order to maintain

Banrisul’s positioning as the leader in the southern region of Brazil and as the best Brazilian

bank on customers’ perceived value, as demonstrated in a recent research.

Human Resources

Banrisul ended the first quarter of 2011

with 9,703 employees and 2,165 trainees.

By the end of March 2011, 206 training

courses were performed, with 2,090

participants. In these qualification

programs, the Bank invested R$2.2

million, of which R$131,500 were directed

to college programs, R$78,800 in post-

graduation programs and R$93,900 in

language courses.

31

Corporate Responsibility

Through its economic, social and environmental

practices, Banrisul seeks be an agent of

transformation, either by mobilizing its

workforce, by actions within the community or

whether through actions that impact the

environment.

Banrisul Recycling Program celebrated its 10th

anniversary in March 2011, having recycled 4,084

tons of paper, the equivalent of approximately spared 65,000 trees. Waste management, by

adequacy of consumption, sale and reuse, generated savings of R$4 million in the same

period. Among the materials the Recycling Program managed are included fluorescent lamps,

diskettes, CDs and toners. The disposal of household batteries has been extended to the

community through the Battery Collector project, which has already collected nearly four

tons of batteries since its inception.

To integrate Banrisul’s branches located by the sea with the community, the Recycling Program

promoted the exhibition Blue Amazon and Coastal Erosion, in partnership with the Federal

University of Rio Grande (Furg) and the Federal University of Rio Grande do Sul (UFRGS). The

exhibition is displayed in banners, in which the processes of coastal erosion in Southern

Brazil, the Brazilian territorial sea and the preservation of ecosystems are addressed. Artisanal

fisheries in the region of the Lagoa dos Patos estuary is also featured among the topics

presented.

The sustainability approach is also present in initiatives that involve the workforce. The

Banribike program offers safe space for bicycle parking and stimulates changes in the daily

lives of employees, strengthening the implementation of new proposals of alternative

transportation and the use of bike paths that may mitigate the effects of climate changes.


Awards

January 2011. Banrisul Brand is featured in world ranking

The value of the brand Banrisul in 2011 reached R$532 million, up 12.5% compared to last year.The outcome is part of a survey prepared by the British consultancy Brand Finance, whichexamined the 500 largest financial institutions in several countries. Banrisul’s goodwill appearsin the 319th position in the ranking Global Banking 500 by Brand.

January 2011. Banrisul is one of the best reputed companies in Rio Grande do Sul.

The Bank was one of the winners of the Corporate Reputation award given by Tomorrowmagazine, which showed Rio Grande do Sul’s most prestigious corporations, as the outcomeof a study by Trojan Brand Consultancy. Banrisul has reached the Prestige of Corporate Brandlevel equivalent to 32.41 points and was presented in all fields covered by the survey:“Confidence and Admiration”, “Innovation Capacity”, “Quality of Products and Services”,“Social and Environmental Responsibility” and “History and Evolution”.

March 2011. Banrisul is highlighted in the study Brands of Who Decides.

Banrisul is highlighted in the study Marks of Who Decides, in the 13th edition of the surveyconducted by Jornal do Comércio and the company Qualidata, as one of the most rememberedbrand in the “Bank” and “Savings Deposits” categories.

AcknowledgmentsThe Bank’s strength, reputation and confidence achieved throughout its history are the resultof the respect that is preserved in the relationship with employees, customers, stakeholdersand shareholders. At the end of another quarter of good results, Banrisul thanks its competentand qualified staff for their commitment and dedication, and the Government of the State ofRio Grande do Sul, shareholders and customers for their trust and support.

The Management

33

FinancialStatements


March 31, 2011 and 2010(In Thousands of Reais)

Balance Sheet

Banrisul Banrisul ConsolidatedASSETS 2011 2010 2011 2010

CURRENT ........................................................................ 17,081,039 16,896,396 17,163,001 16,960,526CASH ................................................................................. 382,679 357,121 382,722 357,163INTERBANK INVESTMENTS (Note 04) ............................. 2,516,191 4,073,664 2,534,616 4,090,814

Money Market Investments ....................................... 2,146,340 3,944,469 2,164,765 3,961,619Interbank Deposits ..................................................... 369,851 129,195 369,851 129,195

SECURITIES AND DERIVATIVES (Note 05) ....................... 3,152,762 2,952,365 3,162,405 2,955,811Own Portfolio ............................................................... 2,520,609 1,197,921 2,530,246 1,201,362Linked to Repurchase Commitments ....................... 632,153 1,715,729 632,153 1,715,729Derivatives ................................................................... - 16,541 - 16,541Linked to Guarantees ................................................. - 22,174 - 22,174Privatization Certificates ............................................ - - 6 5

INTERBANK ACCOUNTS .................................................... 2,093,909 1,677,589 2,093,909 1,677,589Payments and Receipts Pending Settlement .......... 166,203 191,292 166,203 191,292Restricted Deposits (Note 06)

Central Bank of Brazil .............................................. 1,896,780 1,459,747 1,896,780 1,459,747Agreements .............................................................. 4,079 - 4,079 -Correspondents ........................................................ 26,847 26,550 26,847 26,550

INTERBRANCH ACCOUNTS ............................................... 47,350 105,183 47,350 105,183Third-party Funds in transit ....................................... 1,545 66,916 1,545 66,916Internal Transfers of Funds ....................................... 45,805 38,267 45,805 38,267

LENDING OPERATIONS (Notes 07) .................................. 7,895,696 6,745,231 7,895,696 6,745,231Lending Operations

Public Sector ............................................................. 32,178 40,401 32,178 40,401Private Sector ............................................................ 8,278,902 7,154,513 8,278,902 7,154,513

Allowance for Loan Losses ........................................... (415,384) (449,683) (415,384) (449,683)LEASE OPERATIONS (Note 07) ......................................... 38,021 45,591 38,021 45,591

Lease ReceivablesPublic Sector ............................................................. 704 1,062 704 1,062Private Sector ............................................................ 39,497 45,750 39,497 45,750

Allowance for Doubtful Lease Receivables ............ (2,180) (1,221) (2,180) (1,221)OTHER RECEIVABLES (Note 08) ....................................... 937,337 917,474 990,923 960,545

Foreign Exchange Portfolio ........................................ 436,476 410,950 436,476 410,950Income Receivable ..................................................... 42,238 35,102 36,329 30,391Trading Accounts ......................................................... - - 3,632 3,754Specific Credits ............................................................ - - 25 22Other ............................................................................. 500,366 506,636 556,767 551,088Allowance for Losses on Other Receivables ........... (41,743) (35,214) (42,306) (35,660)

OTHER ASSETS .................................................................. 17,094 22,178 17,359 22,599Temporary Investiments ............................................ - 232 - 232Allowance for Losses ................................................. - - - -Other Assets ................................................................ 1,799 4,899 1,946 5,213Allowance for Valuation ............................................ - (572) - (572)Prepaid Expenses ....................................................... 15,295 17,619 15,413 17,726

35

Banrisul Banrisul ConsolidatedASSETS (cont’d) 2011 2010 2011 2010

LONG-TERM ASSETS ........................................................ 15,433,558 12,528,158 15,452,298 12,548,917SECURITIES AND DERIVATIVES (Note 05) ....................... 5,520,962 4,801,594 5,526,142 4,804,403

Own Portfolio ............................................................... 3,973,548 3,801,684 3,973,548 3,801,684Linked to Repurchase Commitments ....................... 870,003 248,048 870,003 248,048Derivatives ................................................................... - 132,474 - 132,474Linked to Central Bank of Brazil ................................ 609,131 551,566 609,131 551,566Linked to Guarantees ................................................. 68,280 67,822 73,460 70,631

INTERBANK ACCOUNTS .................................................... 615,624 455,366 615,624 455,366Restricted Deposits (Note 06)

National Housing System ....................................... 615,624 455,366 615,624 455,366LENDING OPERATIONS (Notes 07) .................................. 8,409,474 6,470,640 8,409,474 6,470,640

Lending Operations .................................................... - -Public Sector ............................................................. 88,998 87,277 88,998 87,277Private Sector ............................................................ 9,007,362 6,963,856 9,007,362 6,963,856

Allowance for Loan Losses ........................................... (686,886) (580,493) (686,886) (580,493)LEASING OPERATIONS (Note 07) ..................................... 37,296 38,920 37,296 38,920

Lease ReceivablesPublic Sector ............................................................. 1,948 2,398 1,948 2,398Private Sector ............................................................ 39,088 43,804 39,088 43,804

Allowance for Doubtful Lease Receivables ............ (3,740) (7,282) (3,740) (7,282)OTHER RECEIVABLES (Note 08) ....................................... 841,306 742,569 854,866 760,690

Foreing Exchange Portfolio ........................................ 9,801 8,439 9,801 8,439Other ............................................................................. 860,167 822,737 873,727 840,858Allowance for Losses on Other Receivables ........... (28,662) (88,607) (28,662) (88,607)

OTHER ASSETS .................................................................. 8,896 19,069 8,896 18,898Other Assets ................................................................ 18,218 20,897 18,218 20,726Allowance for Valuation ............................................ (10,030) (8,828) (10,030) (8,828)Prepaid Expenses ....................................................... 708 7,000 708 7,000

PERMANENT ASSETS ....................................................... 658,244 645,047 335,680 355,120INVESTIMENTS ................................................................. 338,226 305,468 7,660 7,758

Investments in Domestic Subsidiaries (Note 02 (c)) 331,420 298,563 - -Other Investiments ..................................................... 11,599 11,888 12,926 13,214Allowance for Losses ................................................. (4,793) (4,983) (5,266) (5,456)

PROPERTY AND EQUIPMENT IN USE (Note 09 (a)) ......... 165,433 170,731 172,448 178,131Real Estate ................................................................... 120,361 121,068 130,622 131,326Other ............................................................................. 480,662 447,524 485,945 452,636Accumulated Depreciation ........................................ (435,590) (397,861) (444,119) (405,831)

INTANGIBLE (Note 09 (b)) ............................................... 154,585 168,848 155,572 169,231Intangible Assets ....................................................... 362,517 315,020 363,504 315,403Accumulated Amortization ........................................ (207,932) (146,172) (207,932) (146,172)

TOTAL ASSETS .................................................................. 33,172,841 30,069,601 32,950,979 29,864,563


Banrisul Banrisul ConsolidatedLIABILITIES AND SHAREHOLDERS’ EQUITY 2011 2010 2011 2010

CURRENT ........................................................................ 23,110,328 22,077,674 22,886,215 21,870,483DEPOSITS (Note 10) ....................................................... 14,594,497 13,433,771 14,352,707 13,239,972

Demand Deposits ...................................................... 2,781,597 1,931,335 2,778,536 1,922,782Saving Deposits ......................................................... 5,336,711 5,692,219 5,336,711 5,692,219Interbank Deposits ................................................... 11,582 91,129 11,582 91,129Time Deposits ............................................................ 6,464,188 5,709,529 6,225,459 5,524,250Other Deposits ........................................................... 419 9,559 419 9,592

MONEY MARKET FUNDING (Note 10) .......................... 1,502,156 1,963,777 1,433,844 1,901,905Own Portfolio .............................................................. 1,502,156 1,963,777 1,433,844 1,901,905

INTERBANK ACCOUNTS .................................................. 221,421 212,376 221,421 212,376Receipt and Payment Pending Settlement ........... 221,130 212,062 221,130 212,062Correspondents .......................................................... 291 314 291 314

INTERBRANCH ACCOUNT ............................................... 193,754 212,368 193,754 212,368Third-party Funds in Transit .................................... 193,486 212,121 193,486 212,121Internal Transfers of Funds ..................................... 268 247 268 247

BORROWINGS (Note 11) ............................................... 608,640 542,393 608,640 542,393Domestic Borrowings - Other Institutions ........... - 9,048 - 9,048Foreign Borrowings ................................................... 608,640 533,345 608,640 533,345

DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS(Note 12) ...................................................................... 324,613 387,363 324,613 387,363National Treasury ...................................................... 61,634 55,463 61,634 55,463National Economic and Social Development

Bank (BNDES) ........................................................... 137,569 221,331 137,569 221,331Federal Savings and Loan Bank (CEF) .................... 11,378 5,439 11,378 5,439National Equipment Financing Authority

(FINAME) ................................................................... 114,032 105,130 114,032 105,130FOREING ONLENDINGS (Note 12) ............................... 35,635 47,995 35,635 47,995

Foreign Onlendings .................................................. 35,635 47,995 35,635 47,995DERIVATIVES (Note 05 (d)) ........................................... - 12,952 - 12,952

Derivatives .................................................................. - 12,952 - 12,952OTHER PAYABLES (Note 13) ............................................ 5,629,612 5,264,679 5,715,601 5,313,159

Collected Taxes and Other ....................................... 128,723 110,952 128,723 110,952Foreign Exchanges Portfolio .................................... 27,734 33,731 27,734 33,731Social and Statutory .................................................. 36,460 38,410 36,549 38,482Tax and Social Security ............................................. 171,172 107,359 179,919 113,574Trading Account and Intermediation ..................... - - 3,564 2,499Financial and Development Funds ....................... 4,639,815 4,368,763 4,639,815 4,368,763Other ............................................................................. 625,708 605,464 699,297 645,158

37

Banrisul Banrisul ConsolidatedLIABILITIES AND SHAREHOLDERS’ EQUITY (cont’d) 2011 2010 2011 2010

LONG-TERM LIABILITIES ................................................. 6,053,520 4,511,923 6,054,009 4,512,386DEPOSITS (Note 10) ....................................................... 4,709,500 3,279,878 4,709,500 3,279,878

Time Deposits ............................................................ 4,709,500 3,279,878 4,709,500 3,279,878BORROWINGS ................................................................. 2,572 - 2,572 -

Foreign Borrowings (Note 11) ................................. 2,572 - 2,572 -DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS

(Note 12) ...................................................................... 778,408 643,655 778,408 643,655National Treasury ...................................................... 10,253 12,048 10,253 12,048National Economic and Social Development

Bank (BNDES) ........................................................... 489,314 458,719 489,314 458,719Federal Savings and Loan Bank (CEF) .................... 36,394 20,306 36,394 20,306National Equipment Financing Authority

(FINAME) ................................................................... 242,447 152,582 242,447 152,582FOREING ONLENDINGS (Note 12) ............................... 5,071 - 5,071 -

Foreign Onlendings .................................................. 5,071 - 5,071 -DERIVATIVES (Note 5 (d)) .............................................. - 33,685 - 33,685

Derivatives .................................................................. - 33,685 - 33,685OTHER PAYABLES (Note 13) ............................................ 557,969 554,705 558,458 555,168

Tax and Social Security ............................................. 398,250 389,727 398,250 389,727Other ............................................................................. 159,719 164,978 160,208 165,441

MINORITY INTEREST .................................................... - - 1,762 1,690SHAREHOLDERS' EQUITY (Note 20) ............................ 4,008,993 3,480,004 4,008,993 3,480,004

Capital ......................................................................... 2,900,000 2,600,000 2,900,000 2,600,000Capital Reserves ........................................................ 4,511 6,171 4,511 6,171Profit Reserves ........................................................... 956,177 808,138 956,177 808,138Assets valuation adjustment (Note 05 (b)) .......... (6,262) (5,983) (6,262) (5,983)Retained Earnings ..................................................... 154,567 71,678 154,567 71,678

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......... 33,172,841 30,069,601 32,950,979 29,864,563



Statement of Income

Banrisul Banrisul Consolidated 2011 2010 2011 2010

FINANCIAL INCOME ........................................................ 1,296,072 1,065,955 1,299,888 1,067,817Lending Operations ...................................................... 958,469 763,595 958,469 763,595Lease Operations .......................................................... 3,670 4,425 3,670 4,425Securities ........................................................................ 276,508 235,488 280,324 237,350Foreign Exchange .......................................................... 8,023 19,522 8,023 19,522Compulsory Investments ............................................. 49,402 42,925 49,402 42,925

FINANCIAL EXPENSES ..................................................... 688,069 577,609 683,057 573,999Funding Operations ..................................................... 396,548 307,656 391,528 303,990Borrowings, Assignments and Onlendings ............. 153,071 114,679 153,071 114,679Derivatives ..................................................................... - 1,852 - 1,856Operations of Sale or Transfer of Financial Assets 3 - 3 -Allowance for Loan Losses (Note 07 (d)) ................. 138,447 153,422 138,455 153,474

GROSS PROFIT FROM FINANCIAL OPERATIONS .............. 608,003 488,346 616,831 493,818OTHER OPERATING INCOME (EXPENSES) ....................... (282,741) (310,306) (285,432) (312,265)

Income from Services Rendered (Note 15) .............. 25,989 23,466 38,889 35,269Bank Fees Income (Note 16) ....................................... 132,691 114,622 132,689 114,618Equity in Subsidiaries (Note 02 (c)) ........................... 9,249 5,661 - -Personnel Expenses ..................................................... (239,216) (211,997) (240,885) (214,046)Other Administratives Expenses (Note 17) .............. (167,565) (206,683) (170,730) (209,005)Tax Expenses .................................................................. (52,623) (46,224) (54,540) (47,888)Other Operating Income (Note 18) ............................ 64,648 46,549 66,543 45,687Other Operating Expenses (Note 19) ......................... (55,914) (35,700) (57,398) (36,900)

INCOME FROM OPERATIONS .......................................... 325,262 178,040 331,399 181,553INCOME BEFORE TAXES ON INCOME AND EMPLOYEEPROFIT SHARING ............................................................ 325,262 178,040 331,399 181,553INCOME TAX AND SOCIAL CONTRIBUTION (Note 22 (a)) (101,536) (44,860) (107,640) (48,338)EMPLOYEE PROFIT SHARING .......................................... (12,407) (11,312) (12,407) (11,312)MINORITY INTEREST ....................................................... - - (33) (35)NET INCOME ................................................................... 211,319 121,868 211,319 121,868

Number of Outstanding Shares (Thousands) ......... 408,974 408,974 - -Earning per Thousand Shares (R$) ............................ 516,71 297,98 - -

39


Cash Flow


Adjustes to Net Income ...................................................... 395,807 308,888 406,536 315,360Net Income ........................................................................ 211,319 121,868 211,319 121,868

Adjustment to Net Income:Depreciation and Amortization ..................................... 27,255 25,613 27,420 25,784Equity in Subsidiaries ..................................................... (9,249) (5,661) - -Dividends Received Fron Subsidiaires ......................... 138,447 153,422 138,455 153,474Reserve for Securitization Losses .................................. (182) (2,093) (182) (2,093)Reserve for Contingencies .............................................. 31,722 23,167 33,077 24,000Deferred Income Tax and Social Contribution ............. (3,505) (7,428) (3,553) (7,673)

Variação de Ativos e Obrigações ....................................... (322,365) (1,558,420) (333,056) (1,564,448)Valuation adjustment to Equity ...................................... (813) (136) (813) (136)(Increase) Decrease in Interbank Deposits ................. (153,123) (2,417) (153,123) (2,417)(Increase) Decrease in Securities .................................. (163,294) (354,658) (162,801) (353,897)(Increase) Decrease in Derivatives ............................... - 1,869 - 1,869(Increase) Decrease in Interbank and Interbranch

Accounts ......................................................................... 634,507 (117,295) 634,507 (117,295)(Increase) Decrease in Lending Operations ................ (951,204) (1,500,147) (951,204) (1,500,147)(Increase) Decrease in Lease Operations .................... (606) 4,633 (606) 4,633(Increase) Decrease in Other Receivables ................... (92,948) (24,314) (102,896) (24,622)Increase (Decrease) in Other Assets ............................. 3,579 4,373 3,617 4,360Increase (Decrease) in Deposits ................................... 14,216 155,230 9,202 150,105Increase (Decrease) in Money Market Funding ........... 122,110 (106,116) 122,684 (104,592)Increase (Decrease) in Borrowing ................................. 132,500 139,726 132,500 139,726Increase (Decrease) in Other Liabilities ...................... 132,711 240,832 135,877 237,965

NET CASH USED IN OPERATING ACTIVITIES ......................... 73,442 (1,249,532) 73,480 (1,249,088)

CASH FLOW PROVIDED BY INVESTING ACTIVITIESDisposal of Investiments ................................................ - 2 - 2Disposal of Property and Equipment in Use ................ 57 66 30 66Acquisition of Investiments ........................................... - (9) - (2)Acquisition of Property and Equipment in use ............ (13,975) (16,073) (13,981) (19,294)Acquisition of Intangible Assets ................................... (1,295) (3,731) (1,295) (3,731)

NET CASH USED IN INVESTMENT ACTIVITIES ...................... (15,213) (19,745) (15,246) (22,959)

CASH FLOW FROM FINANCING ACTIVITIESInterest on Capital Paid .................................................. (56,752) (50,190) (56,752) (50,190)Change in Minority Interest ............................................ - - 83 35

NET CASH USED IN FINANCING ACTIVITIES ......................... (56,752) (50,190) (56,669) (50,155)

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS 1,477 (1,319,467) 1,565 (1,322,202)Cash and Cash Equivalents ............................................. 403,281 411,158 403,321 411,220Interbank Investments (Note 03(n)) .............................. 2,235,788 5,222,087 2,254,128 5,241,952

CASH AND CASH EQUIVALENT AT THE BEGINNING OF THEPERIOD ........................................................................... 2,639,069 5,633,245 2,657,449 5,653,172

Cash ................................................................................... 382,679 357,121 382,722 357,163Interbank Investments (Note 03(n)) .............................. 2,257,867 3,956,657 2,276,292 3,973,807

CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD 2,640,546 4,313,778 2,659,014 4,330,970



Statement of Value Added


INCOME ........................................................................... 1,380,964 1,097,181 1,401,050 1,109,989Financial Income ........................................................... 1,296,083 1,065,966 1,301,384 1,067,890Services Rendered and Bank Fees Income ................. 158,680 138,088 171,578 149,887Allowance for loan losses ............................................ (138,447) (153,422) (138,455) (153,474)Other ................................................................................ 64,648 46,549 66,543 45,686

FINANCIAL INTERMEDIATION EXPENSES (b) ...................... 549,622 424,187 544,602 420,525INPUTS ACQUIRED FROM THIRD PARTIES (c) .................... 183,713 204,825 189,690 208,647

Materials, Energy and other ........................................ 149,733 172,318 153,381 175,465 Third-party Services ....................................................... 33,969 32,496 34,813 33,109Assets Value Recovery (Loss) ........................................ 11 11 1,496 73

GROSS VALUE ADDED (d=a-b-c) ....................................... 647,629 468,169 666,758 480,817DEPRECIATION AND AMORTIZATION (e) ........................... 27,255 25,613 27,721 25,784NET VALUE ADDED PRODUCED BY THE BANK (f=d-e) ....... 620,374 442,556 639,037 455,033VALUE ADDED RECEIVED IN TRANSFER (g) ....................... 9,249 5,661 - -

Equity in Subsidiaries .................................................. 9,249 5,661 - -VALUE ADDED FOR DISTRIBUTION (h=f+g) ....................... 629,623 448,217 639,037 455,033DISTRIBUTION OF VALUE ADDED ..................................... 629,623 448,217 639,037 455,033

Personnel ..................................................................... 217,897 192,869 219,501 194,794Salary ............................................................................ 164,804 148,784 166,144 150,408Benefits ........................................................................ 38,900 33,142 39,053 33,316F.G.T.S. ........................................................................... 14,193 10,943 14,304 11,070

Tax Fees and contributions ............................................ 187,885 121,524 195,971 126,790Federal ......................................................................... 178,340 112,624 185,807 117,318State .............................................................................. 148 115 150 118Municipality ................................................................. 9,397 8,785 10,014 9,354

Third-party capital compensation ................................... 12,522 11,956 12,213 11,546Rentals ......................................................................... 12,522 11,956 12,213 11,546

Shareholders' equity compensation ................................ 211,319 121,868 211,352 121,903Interest on Capital ...................................................... 56,752 50,190 56,752 50,190Retained Earnings ...................................................... 154,567 71,678 154,567 71,678Minority interest ......................................................... - - 33 35

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Notes to the interimFinancial Statements

43

Notes to the Interim FinancialStatements

NOTE 01 OperationsBanco do Estado do Rio Grande do Sul S.A. ('Banrisul') is a multiple-service bank, operatingcommercial, lending, financing and investment, mortgage loan, development, lease and investmentportfolios, including exchange, securities brokerage, and credit card and consortium management.Transactions are conducted within the context of a group of financial institutions that operate onan integrated basis in the financial market. Banrisul also operates as an instrument for the executionof the economic and financial policy of the state of Rio Grande do Sul, in conformity with the stategovernment's plans and programs.

NOTE 02 Presentation of the Financial Statements(a) The individual and consolidated financial statements have been prepared in accordance withBrazilian accounting practices applicable to financial institutions, and standards and instructionsfrom the Central Bank of Brazil and from the Brazilian Securities and Exchange Commission (CVM),include accounting practices and estimates concerning the recognition of allowances anddetermination of assets that comprise its securities portfolio. Actual results could differ fromthose estimated.

(b) Banrisul's individual financial statements include operations conducted in Brazil as well as theincorporation of its foreign branches (New York and Grand Cayman). Assets, liabilities and incomefrom foreign branches, before consolidation eliminations, are summarized as follows:

In Thousands of Reais 2011 2010

ASSETSSecurities ...................................................................................................... - 8,862Lending Operations ....................................................................................... 144,458 146,719

Operations in Brazil ................................................................................. 77,120 90,018 Other Lending Operations ...................................................................... 67,338 56,701

Other Assets ................................................................................................. 24,295 43,136Total Assets ......................................................................................... 168,753 198,717

LIABILITIESDeposits .............................................................................................. 57,155 79,485

Operations in Brazil ................................................................................. 13,965 27,066Other Liabilities ........................................................................................ 43,190 52,419

Other Liabilities ............................................................................................ 533 773Shareholders' Equity ..................................................................................... 111,065 118,459Total Liabilities and Shareholders' Equity ...................................................... 168,753 198,717

STATEMENT OF INCOMEFinancial Intermediation Income ......................................................... 1,492 1,555Financial Intermediation Expenses ...................................................... (270) (413)Other Expenses, Net ................................................................................. (446) (499)

Net Income for the period ............................................................................. 776 643

The effects of the exchange variation over operations in foreign branches are distributed inthe statement of income according to the nature of corresponding assets and liabilities.


NOTE 03 Significant Accounting Practices

(a) Results of operationsIncome and expenses are recorded on the accrual basis.

(b) Interbank InvestmentsRepresent funds invested in the interbank market, stated at present value, calculated on"pro rata die" basis, according to the variation of both the agreed index and the interest rate.

(c) Securities and DerivativesAccording to Central Bank of Brazil Circular no. 3068 of November 8, 2001 and complementary

MAIN INFORMATION ON INVESTMENTS IN SUBSIDIARIES:

In Thousands of ReaisBanrisul Banrisul S.A. Banrisul S.A. Banrisul

Armazéns Corretora de Val. Administradora ServiçosGerais S.A. Mob. e Câmbio de Consórcios Ltda. Total

Thousands of Shares

Common Shares ............................................... 696 10,000 89,216 - -Preferred Shares ............................................. - 19,608 - - -Shares ............................................................... - - - 2,780 -

Adjusted Ownership Interest (%) ...................... 99,498 98,693 99,683 99,785 -Capital ................................................................... 23,750 58,000 116,000 77,640 -Shareholders’ Equity ........................................... 24,984 72,104 134,305 101,740 -Lucro Líquido do Período ................................... 198 776 3,318 5,103 -Net Amounts Eliminated on Consolidation

(Note 25):Assets (Liabilities)

As of March 31, 2011 ....................................... 256 (65,531) (125,039) (121,685) (311,999)As of March 31, 2010 ....................................... 109 (59,845) (121,037) (98,869) (279,642)

Income (Expenses)

As of March 31, 2011 ....................................... (359) (1,173) (2,522) 242 (3,812)As of March 31, 2010 ....................................... (372) (641) (2,022) 265 (2,770)

Book Value of the Investment

As of March 31, 2011 ....................................... 24,858 71,162 133,879 101,521 331,420As of March 31, 2010 ....................................... 24,093 63,633 124,406 86,431 298,563

Equity in Subsidiaries

As of March 31, 2011 ....................................... 90 759 3,308 5,092 9,249As of March 31, 2010 ....................................... 128 1,482 2,685 1,366 5,661

The preparation of consolidated financial statements eliminated interests amongconsolidated companies, remaining balance and results of transactions. The portions ofincome in the quarter ended March 31, 2011 and shareholders' equity referring to minorityshareholders' interest have been highlighted.

(d) Financial Lease Operations are stated at present value in the Balance Sheet, and relatedincome and expenses, which represent the financial result of said operations, are grouped inLease Operations in the Statement of Income.

(c) The consolidated financial statements include the accounts of Banrisul, its foreign branchesand subsidiaries whose balance of investments, as of March 31, 2011, amounted to R$331,420thousand (2010 - R$298,563 thousand), and generated equity gains in subsidiaries on periodR$9,249 thousand (2010 - R$5,661 thousand), and are presented as follows:

45

regulation, are classified and assessed into three specific categories, in conformity with thefollowing accounting criteria:

i) Trading Securities - securities acquired for the purposes of being actively and frequentlytraded, adjusted to fair value, and realized and unrealized gains or losses recognized in thestatement of income.

ii) Available-for-Sale Securities - Include securities used as part of the strategy to manage riskof changes in interest rates and which may be traded as a result of these changes, changes inpayment conditions or other factors. These securities are adjusted to fair value, and incomeearned is recorded in the statements of income, whereas unrealized gains and losses fromchanges in fair value are recorded in a separate shareholders' equity caption, net of taxes,where applicable, denominated "Valuation Adjustments to Equity" until they are realizedthrough sale.Gains and losses, when realized, are recorded in the statement of income on the tradingdate, with a contra entry to a specific shareholders' equity account, net of taxes, whereapplicable.iii) Held-to-Maturity Securities - Include securities for which Management has the intent andfinancial capacity to hold to maturity and are stated at cost plus income earned. Financialcapacity is defined in cash flow projections, disregarding any possible sale of these securities.

Derivatives - Derivatives contracted together with other investment operations are stated atthe amounts of the income earned and expenses incurred on the accrual basis, with a contraentry to income (loss).

(d) Loans, Lease Transactions and Other Receivables with Credit CharacteristicsAll loans and lease transactions are classified based on Management's risk assessment, takinginto account the economic scenario, past experience and specific risks related to operations,debtors and guarantors, pursuant to National Monetary Council (CMN) Resolution no. 2682/99, which requires a periodic analysis of the portfolio and its classification into nine risklevels, from AA to H. A summary of this classification is presented in Note 07.

Loans and lease transactions are recorded at present value, calculated on a daily pro-ratabasis, based on the agreed index and interest rate, and are adjusted up to the sixtieth daypast-due. Thereafter, income is recognized only when received.

The risk of renegotiated assets are classified in accordance with the criteria established byNational Monetary Council (CMN) Resolution no. 2682/99, i.e. the rating assigned before therenegotiation is maintained and renegotiated loans previously written-off against theallowance and controlled in memorandum accounts are rated level H. Any gains onrenegotiation are recognized as revenue only when actually received.

(e) Other Receivables - Operations with Credit CardsUnbilled amounts are represented by receivables from cardholders for transactions in Visaand MasterCard banners. These amounts are accounted for as Notes and Credits Receivable,without credit characteristics, and transactions paid in installments when Banrisul is the issuer,and the outstanding balance of transactions paid by the minimum amount of the bill(Revolving), are reclassified as Loans.

(f) Allowance for loan losses, for doubtful lease receivables and for losses on other receivablesRecorded in an amount considered sufficient to cover possible considering the risk levelclassification of the customer based on periodic assessment of credit quality, and not only onthe minimum percentages required by the National Monetary Council (CMN) Resolution no.2682/99 when a default event occurs.


As of March 31, 2011, the total amount related to the allowance for loan losses, allowance fordoubtful lease receivables and losses and other receivables, as stated in Note 07, exceedsthe minimum amount required if only the rating of transactions based on the number of pastdue days is considered as set forth by National Monetary Resolution no. 2682/99. Thisprocedure has been adopted by Management since its publication to cover possible eventsnot captured by the credit-scoring model.

(g) Permanent AssetsPermanent assets are stated at acquisition cost, adjusted for inflation through December 31,1995, considering the following aspects:

· Investments in subsidiaries are accounted for under the equity method, based on the financialstatements prepared in conformity with the accounting practices adopted by the parentcompany, i.e., the Brazilian accounting practices applicable to financial institutions. Otherinvestments are stated at cost and adjusted based by allowances for permanent losses, whenapplicable;

· Depreciation of property and equipment in use under the straight-line method is based onthe expected economic useful lives of assets considering the minimum rates set annually bythe Central Bank of Brazil, and disclosed in Note 09;

· Intangible Assets consist, basically, of investments whose benefits will occur in the future.This group is represented by bank services contracts and software acquisition. Amortizationis calculated under the straight line method at the rates stated reported in Note 09; and

· Annually, Banrisul reviews intangible assets for impairment losses. When identified, lossesare charged to income.

(h) Assets and Liabilities Denominated in Foreign CurrencyThe assets and liabilities of foreign branches, as well as other assets and liabilities arisingfrom foreign currency transactions carried out by Banrisul and its subsidiaries were translatedat the exchange rate prevailing at the balance sheet date.

(i) Deposits, Money Market Funding, Borrowings and Onlendings and Financial andDevelopment FundStated at collectable amounts plus charges incurred through the balance sheet date,recognized on a pro rata die basis.

As prescribed by Laws 12069/04 and 12585/06 issued by the Rio Grande do Sul State Government,up to 85% of the escrow deposits made by third parties at Banrisul should be, if so requested,made available to the state of Rio Grande do Sul, and the remaining balance is retained atBanrisul for the creation of a fund. Escrow deposits transferred to the Rio Grande do SulGovernment are controlled in a memorandum account and the retained portion is classifiedas "Other Payables", as described in Note 21(a). Expenses on charges on the remaining balanceare recorded under "Expenses with Borrowings, Assignments and Onlendings".

(j) Contingent Assets and Liabilities and Tax, Labor and Civil RisksRecognition, measurement and disclosure of contingent assets and liabilities, and civilobligations are made in accordance with the criteria set forth by Resolution no. 3823 andTechnical Pronouncement CPC 25, issued by the Accounting Pronouncements Committee(CPC), recorded based on the legal counsel's opinion, using models and criteria which permitobtaining the most adequate measurement, despite the uncertainty about their period andthe final outcome amount. The criterion used according to the nature of the contingency is asfollows:

47

i) Contingent Assets- Not recognized in the financial statements, except when there isevidence of likely realization, and to which no further appeal can be made.

ii) Contingent Liabilities - Recognized in thefinancial statements when the risk of losing alawsuit or administrative claim is probable, based on the opinion of the Administration andof legal advisors, with a probable outflow of funds for the settlement of liabilities and whenthe amounts involved are measurable with sufficient security, as follows:

Reserve for Labor Contingencies – Recognized upon court notification of judicial discussioninvolving Banrisul, the risk of loss of which is deemed as probable. Amounts are determinedaccording to disbursement estimates by our Management, timely revised based oninformation received from our legal counsels, adjusted based on the amount of the depositrelated to the execution, when required.

Reserve for Civil Risks - Recognized upon court notice, and monthly adjusted based on theintended amount of indemnities, the evidence presented, and the legal counsel's evaluation- which considers previous court decisions, factual support, evidence produced in the recordsand legal decisions that might be rendered in the lawsuit, for the lawsuit loss risk.

Reserve for Tax and Social Security Contingencies - Refer basically to taxes whose lawfulnessor constitutionality is being challenged at administrative or judicial level and whose likelihoodof loss is - or has been in previous phases - deemed as probable and are recognized at the fullamount under dispute. For lawsuits with respective escrow deposits, amounts are not updatedexcept when Banrisul is authorized to withdraw the deposits on account of a favorable outcomeof the lawsuit.

(l) Income Tax and Social ContributionCalculated at the rate of 15% for social contribution tax and 15% (plus a 10% surtax pursuant tolegislation) for income tax on taxable income in the period, adjusted by permanentdifferences. Deferred income tax and social contribution were calculated based on the ratesin force on balance sheet date over the temporary additions and recorded under OtherReceivables, as contra entry of Income for the Period.

(m) Post-Employment BenefitsBanrisul sponsors a "defined benefit" plan to its employees that has been valued in compliancewith specific legislation. As required by Brazilian Accouting Standard Procedures (NPC) 26,issued by Brazilian Institute of Independent Auditors (Ibracon) and based on an appraisalreport issued by an independent actuary, Banrisul reviews the actuarial position of the planannually, as discussed in Note 23.

(n) Cash and Cash Equivalents in Cash Flow StatementInclude the balances of cash and cash equivalents and interbank investments, redeemablewithin 90 days from the date of investment. These highly-liquid investments, which arestated at cost plus income earned through the balance sheet dates, have maturities of up to90 days or no deadline for redemption and are subject to an immaterial risk of change invalue.


NOTE 04 Interbank Investments In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Money Market Investments ...................................................... 2,146,340 3,944,469 2,164,765 3,961,619Pending Setlement resales - Own Portfolio

Treasury Bills - LFT .................................................................. 1,860,342 3,514,470 1,860,342 3,514,470National Treasury Bills - LTN ................................................ - 350,000 - 350,000National Treasury Notes - NTN ............................................. 285,998 79,999 285,998 79,999Other ...................................................................................... - - 18,425 17,150

Interbank Deposits .................................................................... 369,851 129,195 369,851 129,195Interbank Deposits (*) .............................................................. 369,851 129,195 369,851 129,195

Total .......................................................................................... 2,516,191 4,073,664 2,534,616 4,090,814 (*) Out of the amount of R$369,851 thousand of interbank deposits, R$258,324 thousand have maturities of more thanninety days from date of application.

NOTE 05 Securities and DerivativesBreakdown of the portfolio of Securities and Derivatives:

In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Trading Securities ......................................................................... 2,126,060 1,922,911 2,127,639 1,924,313Available-for-sale Securities ...................................................... 1,692,708 1,246,591 1,700,772 1,248,635Held-to-Maturity Securities ........................................................ 4,854,956 4,435,442 4,860,136 4,438,251Derivatives .................................................................................... - 149,015 - 149,015Total .......................................................................................... 8,673,724 7,753,959 8,688,547 7,760,214

Current Assets .......................................................................... 3,152,762 2,952,365 3,162,405 2,955,811Long-Term Assets ...................................................................... 5,520,962 4,801,594 5,526,142 4,804,403

The fair value presented in the chart below were assessed as follows: Treasury Bills that holdactive negotiations are determined based on prices published by the ANBIMA; for shares ofPublicly-held Companies the average price of the last negotiation of the day is used; and forsecurities that have no price published, (mainly Salary Variation Compensation Fund - FCVS)Banrisul adopts as basis for calculation of the fair value, the value obtained by means ofinternal pricing technique.

(a) Trading SecuritiesComposed mainly of Federal Government Securities (Treasury Bills - LFT) registered at fairvalue.

Breakdown per Security Type: In Thousands of Reais


Tresury Bills - LFT ........................................................................... 2,126,060 1,922,911 2,126,060 1,922,911Shares of Publicly-Held Companies ........................................... - - 1,579 1,402Total .......................................................................................... 2,126,060 1,922,911 2,127,639 1,924,313

Breakdown per maturity: In Thousands of Reais

Banrisul Banrisul ConsolidatedAcquisition Market Acquisition Market

Maturity Cost Value Cost Value

Up to 3 months .............................................................................. - - 1,558 1,5791 to 3 years .................................................................................... 1,316,008 1,316,037 1,316,008 1,316,0373 to 5 years .................................................................................... 302,162 302,172 302,162 302,1725 to 15 years .................................................................................. 507,851 507,851 507,851 507,851Total in 2011 ............................................................................. 2,126,021 2,126,060 2,127,579 2,127,639Total in 2010 ............................................................................. 1,922,852 1,922,911 1,924,277 1,924,313

According to the Central Bank of Brazil regulations, these securities are classified in currentassets at their fair value.

49

(b) Available-for-Sale Securities

Breakdown of the Available-for-Sale Securities Portfolio by category per fair value:


Treasury Bills - LFT ......................................................................... 1,183,401 1,078,608 1,183,401 1,078,608Shares of Publicly - Held Companies ......................................... 12,294 12,684 12,296 12,836Privatization Certificates ............................................................ - - 6 5Fixed Income Fund Shares ........................................................... - 5,187 8,056 7,074Receivable Investment Funds Shares (*) .................................. 497,013 150,112 497,013 150,112Total .......................................................................................... 1,692,708 1,246,591 1,700,772 1,248,635

(*) Refers to 100% of the senior quotas of the Matone Credit Receivable Investment Fund - Payroll Loans administered byBTG Pactual Financial Services S.A., whose credit receivables are custodied at Deutsche Bank S.A. As the resources of theFund are invested in receivables, the redemption of quotas owned by Banrisul depend on the availability of funding, andmay require that Banrisul wait until the maturity of such credits (up to 72 months). The expected yield of the senior quotasis 114% of the DI rate.

Breakdown per maturity: In Thousands of Reais

Banrisul Banrisul ConsolidatedAcquisition Market Acquisition Market

Maturity Cost Value Cost Value

Without maturity ......................................................................... 519,765 509,307 527,827 517,3713 to 12 months .............................................................................. 130,666 130,667 130,666 130,6671 to 3 years .................................................................................... 969,577 969,585 969,577 969,5853 to 5 years .................................................................................... 83,139 83,149 83,139 83,149Total in 2011 ............................................................................. 1,703,147 1,692,708 1,711,209 1,700,772Total in 2010 ............................................................................. 1,256,637 1,246,591 1,258,681 1,248,635

The adjustment to fair value as of March 31, 2011, in the amount of R$10,439 thousand (2010- R$10,046 thousand), was recorded under a specific Shareholders' Equity account, net oftaxes of R$4,177 thousand (2010 - R$4,063 thousand), recorded in "Other Credits".

(c) Held-to-Maturity SecuritiesThe Portfolio of Held-to-Maturity Securities, by category, stated at cost plus income earned isas follows:

In Thousands of Reais Banrisul Banrisul Consolidated

Acquisition Market Acquisition Market Cost Value Cost Value

Federal Government SecuritiesTreasury Bills - LFT ................................................................... 4,665,206 4,665,325 4,670,386 4,670,505National Treasury Bills - NTN .................................................. 8,142 8,209 8,142 8,209Salary Variation Compensation Fund - FCVS ........................ 151,627 111,769 151,627 111,769

Other ............................................................................................... 6 6 6 6Mortgage-Backed Securities - LH ............................................... 27,210 27,210 27,210 27,210Certificate of Real Estate Receivables - CRI ............................. 2,765 2,765 2,765 2,765Total in 2011 ............................................................................. 4,854,956 4,815,284 4,860,136 4,820,464Total in 2010 ............................................................................. 4,435,442 4,397,910 4,438,251 4,400,719

The maturities of securities are as follows: In Thousands of Reais Banrisul Banrisul Consolidated

Maturity 2011 2010 2011 2010Up to 3 months .............................................................................. 8,148 8,867 8,148 8,8673 to 12 months .............................................................................. 378,580 836,063 378,580 836,0631 to 3 years .................................................................................... 2,160,682 350,381 2,160,682 350,3813 to 5 years .................................................................................... 1,229,787 2,827,657 1,234,967 2,830,4665 to 15 years .................................................................................. 926,132 253,624 926,132 253,624Over 15 years ................................................................................. 151,627 158,850 151,627 158,850Total .......................................................................................... 4,854,956 4,435,442 4,860,136 4,438,251Current Assets .......................................................................... 386,728 844,930 386,728 844,930Long-Term Assets ...................................................................... 4,468,228 3,590,512 4,473,408 3,593,321


(d) DerivativesUntil November 2010, Banrisul conducted swap transactions in order to mitigate the effectsof changes in fixed rates, exchange rates and reference rates (TR) on certain assets, resultingin the change of these rates into the SELIC variation. On December 7, 2010, Banrisul enteredinto the amendment to the assignment agreement with the State of Rio Grande do Sul,whereby it revoked the rate equalization clauses in the swap contracts, and offset adjustmentsto be received calculated through that base date in the amount of R$102.909 thousand withthe fair value of the Credits with National Housing System - Salary Variation CompensationFund (FCVS), not affecting Banrisul's income (loss).

As of March 31, 2010, the amounts were as follows:

Banrisul and Banrisul Consolidated In Thousands of ReaisNotional Up to 3 3 to 12 1 to 3 3 to 5 5 to 15 Over 15

Value months months years years years years 2010AssetsSELIC + Fixed Rate-FCVS 73,094 - - - 18 19,276 5,564 24,858SELIC + Fixed Rate 93,423 5,213 11,328 22,656 22,656 62,304 - 124,157LiabilitiesTR + Fixed Rate (73,094) (2,676) (9,643) (12,655) (6,203) (9,548) (854) (41,579)USD+BID+Fixed Rate (93,423) - (633) (1,156) (1,023) (2,246) - (5,058)Net Adjustment 2,537 1,052 8,845 15,448 69,786 4,710 102,378

The counterparty to the above mentioned swap transactions is the Rio Grande do Sul StateGovernment and these transactions were tied to the assignment of credits of the FCVS andborrowings from municipal governmental entities, with the same maturity dates as the mainoperations.

These swap transactions were designed to adjust the prices of transactions linked to themand, along with thse transactions, were subject to rates equivalent to those prevailing in themarket on the same date, since their maturity dates would be concurrent with those of theoriginal transactions and swap contracts not separately negotiated.

As of March 31, 2010, the amounts receivable and amounts payable were as follows:Banrisul and Banrisul Consolidated In Thousands of Reais

2010Derivatives

Adjustments Receivable - Short Term ................................................................................................... 16,541Adjustments Receivable - Long Term .................................................................................................... 132,474Adjustments Payable - Short Term ........................................................................................................ (12,952)Adjustments Payable - Long Term .......................................................................................................... (33,685)

Net Adjustment .................................................................................................................................. 102,378

In March 31, 2011, there was no derivative contract.

NOTE 06 Restricted DepositsBanrisul and Banrisul Consolidated In Thousands of Reais Description Interest Rate 2011 2010

Compulsory Deposits - Brazilian Central Bank ............................................................... 1,896,780 1,459,747Demand deposits and other funds ........... None ..................................................... 590,016 347,893Additional Reserve ...................................... SELIC ..................................................... 134,552 -Savings deposits .......................................... Saving account .................................... 1,062,136 1,072,230Other deposits ............................................. None ..................................................... 35,950 22,395Other deposits ............................................. TR .......................................................... 74,126 17,229

Credits with the National Housing System ..................................................................... 615,624 455,366Acquired portfolio ....................................... (*) ......................................................... 429,347 299,443Acquired portfolio ....................................... TR + Interest ........................................ 170,359 140,606Own portfolio ............................................... TR + Interest ........................................ 15,918 15,317

Correspondents ............................................. None ..................................................... 26,847 26,550Agreements ................................................... SELIC ..................................................... 4,079 -Total ................................................................................................................................ 2,543,330 1,941,663Current Assets ................................................................................................................ 1,927,706 1,486,297Long-term Assets ............................................................................................................ 615,624 455,366(*) Until November 2010, the yield on those credits was linked to a swap contract as detailed in Note 05 (d), resulting in a netyield equivalent to the Selic Rate close to a 1% p.a. on average. Beginning December 2010, the yield is fixed at 14.07% p.a.

51

National Housing System - Third-party Portfolio - From October 2002 to March 2005, Banrisulacquired from the Rio Grande do Sul State Government receivables from the Salary VariationCompensation Fund (FCVS). On December 7, 2010, pursuant to the cancellation of queequalization rate clause in the swap contracts, as stated in note 05, these receivables werepriced, through the addition to the acquisition cost of R$102.909 thousand thus offsettingadjustments receivable of swap contracts, as described in note 05 (d), without affecting netincome (loss). As of March 31, 2011, receivables are stated at cost plus income earned throughthe balance sheet date, at the amount of R$599,706 thousand (2010 - R$440,049 thousand).Their face value is R$797,257 thousand (2010 - R$761,199 thousand). These receivables will beconverted into CVS securities, pursuant to ratification and novation processes, these processesis out of the original deadline estimated by the Administration, and the past due amounts arepresented separately and restated by the variation of TR plus interest. Regardless of the non-definition of a maturity date, their fair values, upon the issue of the securities, couldsignificantly differ from the carrying amounts.

National Housing System - Own Portfolio - Refers to credits of the FCVS arising from Banrisul'sown mortgage loans portfolio that have already been approved by the FCVS's regulatorybody.

NOTE 07 Loans, Lease Operations and Other Receivable with CreditCharacteristics

The tables below show loans, lease and foreign exchange portfolio balances.

(a) Breakdown by Type of Operation and Risk Level:

Banrisul and Banrisul Consolidated In Thousands of ReaisAA A B C D E F G H 2011 2010

Loan and Discounted Receivables ........ 1,516,578 6,014,519 2,970,875 1,453,570 351,827 306,521 408,042 43,184 346,378 13,411,494 11,143,461Financing ................................................ 270,438 574,294 209,816 132,357 9,670 25,002 2,831 4,137 15,873 1,244,418 886,974Rural and Agro-Industrial Financing .... 213,909 458,994 306,225 171,908 60,827 31,441 26,955 13,936 54,128 1,338,323 1,047,363Real Estate Financing ............................ 456,874 397,145 216,554 122,641 101,552 20,030 23,075 683 15,574 1,354,128 1,121,807Infrastructure and Development

Financing .......................................... - 41,886 - 17,191 - - - - - 59,077 46,442Total Loans ........................................... 2,457,799 7,486,838 3,703,470 1,897,667 523,876 382,994 460,903 61,940 431,953 17,407,440 14,246,047

Lease Operations ................................... 9,397 27,928 22,420 8,611 5,926 2,433 2,182 95 2,245 81,237 93,014Advances on Foreign Exchange

Contracts (1) ..................................... 9,666 126,565 146,526 77,762 20,573 41,192 988 11,336 3,261 437,869 391,060Other Receivables - Foreign Exchange (2) 118 1,711 3,390 1,221 1,130 138 252 178 4,935 13,073 35,612Total Banrisul in 2011 .......................... 2,476,980 7,643,042 3,875,806 1,985,261 551,505 426,757 464,325 73,549 442,394 17,939,619Total Banrisul in 2010 .......................... 4,902,102 5,033,908 2,164,504 1,000,248 229,045 164,843 777,372 86,127 407,584 14,765,733

(1) Advances on foreign exchange contracts are classified as a reduction of "Other payables - Foreign exchange portfolio"(Note 13).(2) Other Receivables - Foreign exchange include receivables from foreign exchange contracts and receivables from exportcontracts.

(b) Client Breakdown per Maturity and Risk Levels:Banrisul and Banrisul Consolidated In Thousands of Reais

AA A B C D E F G H 2011 2010

Falling due (*) ..................................... 2,476,508 7,641,203 3,867,627 1,957,048 528,012 399,813 426,267 49,382 297,459 17,643,319 14,436,439Up to 180 days ...................................... 978,195 2,108,343 1,439,798 910,693 221,501 204,857 209,567 21,815 83,409 6,178,178 5,266,696181 to 360 days ..................................... 332,954 1,186,074 629,578 290,668 62,361 56,691 66,571 8,304 39,863 2,673,064 2,130,551Over 360 days ........................................ 1,165,359 4,346,786 1,798,251 755,687 244,150 138,265 150,129 19,263 174,187 8,792,077 7,039,192

Past-due .............................................. 472 1,839 8,179 28,213 23,493 26,944 38,058 24,167 144,935 296,300 329,294Up to 180 days ...................................... 472 1,839 8,179 28,213 23,493 26,506 36,592 23,428 86,941 235,663 230,298 181 to 360 days .................................... - - - - - 438 1,466 739 43,231 45,874 71,404Over 360 days ........................................ - - - - - - - - 14,763 14,763 27,592

Total Banrisul in 2011 .......................... 2,476,980 7,643,042 3,875,806 1,985,261 551,505 426,757 464,325 73,549 442,394 17,939,619Total Banrisul in 2010 .......................... 4,902,102 5,033,908 2,164,504 1,000,248 229,045 164,843 777,372 86,127 407,584 14,765,733

(*) Amounts up to 14 days past-due are included in the current.


(c) Portfolio Breakdown by Business Sector:Banrisul and Banrisul Consolidated In Thousands of Reais

2011 2010

Municipal Public SectorGovernment - direct and indirect administration .................................................. 106,637 110,025Corporate activity - Other services ........................................................................... 17,191 21,113

Total Public Sector ................................................................................................... 123,828 131,138

Private sectorRural ............................................................................................................................... 1,338,323 1,047,363Industry ......................................................................................................................... 3,531,798 3,163,900Commerce ..................................................................................................................... 2,145,239 1,689,830Services and other ....................................................................................................... 1,709,369 1,255,166Individuals (*) ................................................................................................................ 7,736,934 6,356,529Housing .......................................................................................................................... 1,354,128 1,121,807

Total Private Sector .................................................................................................. 17,815,791 14,634,595Total .......................................................................................................................... 17.939.619 14.765.733

(*) Includes R$2,209,671 thousand in 2011 (R$1,972,030 thousand in 2010) related to payroll acquired loan portfolio withco-obligation from selling bank.

(d) Changes in allowances for loan losses, doubtful lease receivables and other receivableswith credit characteristics:

The changes in allowances for losses on loan, lease and other receivables with loancharacteristics are as follows:Banrisul and Banrisul Consolidated In Thousands of Reais

2011 2010Opening balance ...................................................................................................... 1,101,923 1,016,754

Allowance recorded in the year ................................................................................. 138,447 153,153Write-offs to memorandum accounts ...................................................................... (84,372) (87,574)

Allowance for Loan Losses per risk level .................................................................. 1,155,998 1,082,333Allowance for loan losses

Current Assets .............................................................................................................. 415,384 449,683Long-Term Assets ......................................................................................................... 686,886 580,493

Allowance for doubtful lease receivablesCurrent Assets .............................................................................................................. 2,180 1,221Long-Term Assets ......................................................................................................... 3,740 7,282

Allowance for Loan losses for Other Receivables with Loan CharacteristicsCurrent Assets .............................................................................................................. 41,743 35,214Long-Term Assets ......................................................................................................... 6,065 8,440

(e) Breakdown of allowances for loans losses, doubtful lease receivables and other receivableswith credit characteristics per risk level:Banrisul and Banrisul Consolidated In Thousands of Reais

Recorded AllowanceMinimum Minimum

Risk Loan allowance required by allowance Additional allowanceLevel Portfolio Resolution 2.682/99 required (Note 03(f)) TotalAA 2,476,980 0.0% - 4,820 4,820A 7,643,042 0.5% 38,215 15,286 53,501B 3,875,806 1.0% 38,758 19,379 58,137C 1,985,261 3.0% 59,558 39,705 99,263D 551,505 10.0% 55,151 11,030 66,181E 426,757 30,0% 128,027 8,535 136,562F 464,325 50.0% 232,162 9,287 241,449G 73,549 70.0% 51,485 2,206 53,691H 442,394 100.0% 442,394 - 442,394

Total in 2011 17,939,619 1,045,750 110,248 1,155,998Total in 2010 14,765,733 1,005,738 76,595 1,082,333

Loans written off at loss in the quarter ended March 31, 2011 and controlled based on theadjusted amount until the date of the respective write-off in a memorandum accountamounted to R$84,372 thousand (2010 - R$87,574 thousand).

53

Recoveries of loans previously written off as loss have been recognized as income fromlending operations and amounted to R$19,863 thousand (2010 - R$11,355 thousand) in thequarter ended in March 31, 2011 net of losses generated from these recoveries.

NOTE 08 Other Receivables In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Foreign Exchange Portfolio ............................................................ 446,277 419,389 446,277 419,389Purchased foreign exchange, pending settlement ................... 431,352 401,908 431,352 401,908Term bills in foreign currency ....................................................... 1,353 47 1,353 47Rights on sale of foreign exchange .............................................. 18,717 18,209 18,717 18,209Advances in local currency ........................................................... (13,128) (11,596) (13,128) (11,596)Income receivable from advances .............................................. 7,983 10,821 7,983 10,821

Income receivable ......................................................................... 42,238 35,102 36,329 30,391Dividends and bonuses receivable ............................................. 5,909 4,711 - -Receivables from services rendered .......................................... 36,026 30,093 36,026 30,093Other ................................................................................................. 303 298 303 298

Negociation and intermediation of amounts ................................. - - 3,632 3,754Negociation and intermediation of amounts ............................ - - 3,632 3,754

Specific Credits ............................................................................... - - 25 22Specific Credits ............................................................................... - - 25 22

Sundry ............................................................................................. 1,360,533 1,329,373 1,430,494 1,391,946Advances to Loan Guarantee Fund .............................................. 52,456 71,729 52,456 71,729Advances to employees ................................................................ 19,699 18,625 20,946 18,686Advances for payment by our account ........................................ 619 529 6,602 7,372Deferred income tax and social contribution (Note22 (b)) ....... 621,184 605,441 625,607 611,253Escrow deposits (Note 14 (b)) ....................................................... 162,385 156,332 174,764 171,048Recoverable taxes .......................................................................... 35,023 35,665 38,565 39,691Reimbursable payments ............................................................... 86,661 79,171 87,163 79,224Notes and credits receivable (*) .................................................. 232,602 242,882 233,512 243,701Credit Cards ..................................................................................... 81,870 62,347 81,870 62,347Other debtors – Domestic ............................................................. 68,034 56,652 109,009 86,895

Allowance for losses on other receivables .................................... (70,405) (123,821) (70,968) (124,267)With credit characteristic ............................................................ (47,808) (43,654) (47,808) (43,654)Without credit characteristic ...................................................... (22,597) (80,167) (23,160) (80,613)

Total other receivables ................................................................... 1,778,643 1,660,043 1,845,789 1,721,235

Current assets ................................................................................. 937,337 917,474 990,923 960,545Long-term assets ............................................................................ 841,306 742,569 854,866 760,690

(*) Notes and Credit Receivables are described mainly as follows:

a) In the first quarter of 2005, as part of receivables recovery policy, Banrisul received as payment in kind bonds issued topay court ordered debts from companies under the same Economic Group. As of March 31, 2011, these bonds amount toR$90,184 thousand (2010 - R$83,486 thousand). These bonds are subject to the variation of the Extended NationalConsumer Price Index (IPCA-E) and interest index.

b) Other Receivables without credit characteristics, transactions with municipal governmental entities, in the amount ofR$87,836 thousand (R$90,269 thousand) related to receivables acquired from the Government of the State of Rio Grandedo Sul or its controlled entities, with yield of 1% to 8.5% p.a. plus the TR or IGPM variation, maturying through 2030.


NOTE 09 Permanent Assets

(a) Property and equipment

Banrisul In Thousands of ReaisNet Balance Net Balance

Rate Original Cost Depreciation in 2011 in 2010

Property in UseLand and Buildings in Use ............................................ 4% 120,361 (97,907) 22,454 23,151

OtherFurniture and Equipment in inventory ................... - 20,005 - 20,005 10,877Property and Equipment in Progress ..................... - 58 - 58 114Facilities ..................................................................... 10% 89,453 (77,902) 11,551 11,022Furniture and Equipment in Use ............................. 10% 71,931 (50,359) 21,572 21,472Other

Communication System ....................................... 10% 4,421 (3,887) 534 501Data Processing System ....................................... 20% 283,120 (196,598) 86,522 100,450Security System ..................................................... 10% 9,274 (6,737) 2,537 2,727Transportation System ......................................... 20% 2,400 (2,200) 200 417

Total in 2011 ............................................................... 601,023 (435,590) 165,433Total in 2010 ............................................................... 568,592 (397,861) 170,731

Banrisul Consolidated In Thousands of ReaisNet Balance Net Balance

Rate Original Cost Depreciation in 2011 in 2010

Property in UseLand and Buildings in Use ............................................ 4% 130,622 (102,698) 27,924 28,854

OtherFurniture and Equipment in inventory ................... - 20,005 - 20,005 10,877Property and Equipment in Progress ..................... - 58 - 58 115Facilities ..................................................................... 10% 90,650 (78,321) 12,329 11,905Furniture and Equipment in Use ............................. 10% 75,190 (53,011) 22,179 22,167Other

Communication System ....................................... 10% 4,422 (3,887) 535 501Data Processing System ....................................... 20% 283,880 (197,244) 86,636 100,510Security System ..................................................... 10% 9,274 (6,737) 2,537 2,727Transportation System ......................................... 20% 2,466 (2,221) 245 475

Total in 2011 ............................................................... 616,567 (444,119) 172,448Total in 2010 ............................................................... 583,962 (405,831) 178,131

(b) Intangible Assets In Thousands of Reais Banrisul Banrisul Consolidated

Net Net Net NetOriginal Balance Balance Balance Balance

Rate Cost Amortization in 2011 in 2010 in 2011 in 2010

Intangible AssetsRight from Acquisition of Payroll

operations (*)Public Sector ............................................ 20% 298,284 (170,157) 128,127 150,437 128,127 150,437 Private Sector ......................................... 20% 26,843 (7,913) 18,930 10,036 18,930 10,036

Software Acquisition ................................... 20% 36,422 (29,251) 7,171 8,303 7,171 8,303Other .............................................................. - 968 (611) 357 72 1,344 455Total in 2011 .............................................. 362,517 (207,932) 154,585 155,572Total in 2010 .............................................. 315,020 (146,172) 168,848 169,231

(*) It refers to agreements entered into with the public sector and private sector entities to ensure the exclusivity inbanking services for processing of payroll credit and priority access to the offering of payroll loans to employees, billcollection portfolio, supplier payment and other services. Such agreements are effective for five years and are amortizedover the agreement period. No indications that these assets are impaired were identified.

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NOTE 10 Deposits and Money Market Funding

Banrisul In Thousands of ReaisWithout Up to 3 to Over

maturity 3 months 12 months 12 months 2011 2010Deposits

Demand deposits (a) ............................... 2,781,597 - - - 2,781,597 1,931,335Savings deposits (a) ................................. 5,336,711 - - - 5,336,711 5,692,219Interbank deposits .................................. - - 11,582 - 11,582 91,129Time deposits(b) ....................................... 7,714 1,627,951 4,828,523 4,709,500 11,173,688 8,989,407Other deposits .......................................... 419 - - - 419 9,559

Total ........................................................... 8,126,441 1,627,951 4,840,105 4,709,500 19,303,997 16,713,649

Current liabilities ...................................... 14,594,497 13,433,771Long-term liabilities .................................. 4,709,500 3,279,878

Money market funding ..............................Own Portfolio ............................................ - 1,502,156 - - 1,502,156 1,963,777

Total ........................................................... - 1,502,156 - - 1,502,156 1,963,777

Banrisul Consolidated In Thousands of ReaisWithout Up to 3 to Over

maturity 3 months 12 months 12 months 2011 2010Deposits

Demand deposits (a) ............................... 2,778,536 - - - 2,778,536 1,922,782Savings deposits(a) .................................. 5,336,711 - - - 5,336,711 5,692,219Interbank deposits .................................. - - 11,582 - 11,582 91,129Time deposits (b) ...................................... 7,714 1,627,951 4,589,794 4,709,500 10,934,959 8,804,128Other deposits .......................................... 419 - - - 419 9,592

Total .......................................................... 8,123,380 1,627,951 4,601,376 4,709,500 19,062,207 16,519,850

Current liabilities ...................................... 14,352,707 13,239,972Long-term liabilities .................................... 4,709,500 3,279,878

Money market funding ..............................Own Portfolio ............................................ - 1,433,844 - - 1,433,844 1,901,905

Total .......................................................... - 1,433,844 - - 1,433,844 1,901,905

(a) Classified as without maturity since they can be redeemed immediately.(b) Consider the maturities set for each investment.

Time deposits are made by individuals and companies, with floating or fixed charges equivalentto 80% and 20% of the total portfolio, respectively. The average funding rate for floating-ratedeposits corresponds to 84.85% (2010 - 97.04%) of the CDI variation, and for fixed-rate deposits,to 8.67% (2010 - 8.33%) p.a.

Funding through money market purchase and sale commitments operations - own portfolio-, conducted with financial institutions, has an average funding rate of 100% of the CDI variation.

NOTE 11 Borrowings

Foreign Borrowings: represented by funds obtained from foreign banks to be used in foreignexchange commercial transactions subject to the variation of the corresponding currenciesplus annual interest rates from 2.0% to 6.50% (2010 - 2.00 % to 8.00%) with maximum term of1,826 days (2010 - 358 days).


NOTE 12 OnlendingsBanrisul and Banrisul Consolidated In Thousands of Reais

Domestic Onlendings Official Instituitions Foreign Onlendings Total 2011 2010 2011 2010 2011 2010

Up to 90 days ................................................ 265,896 269,924 16,608 20,544 282,504 290,46891 to 360 days .............................................. 58,717 117,439 19,027 27,451 77,744 144,8901 to 3 years ................................................... 336,014 293,056 4,606 - 340,620 293,0563 to 5 years ................................................... 197,066 158,219 465 - 197,531 158,219Over 5 years .................................................. 245,328 192,380 - - 245,328 192,380Total ........................................................... 1,103,021 1,031,018 40,706 47,995 1,143,727 1,079,013

Current liabilities ...................................... 324,613 387,363 35,635 47,995 360,248 435,358Long-term liabilities .................................. 778,408 643,655 5,071 - 783,479 643,655

Internal funds for onlending refer basically to funds from Official Institutions (BNDES - National Bank for Economic andSocial Development, FINAME - National Equipment Financing Authority and Caixa Econômica Federal - Federal Savings andLoan Bank). These liabilities mature on a monthly basis through Septembre 2024, and are subject to interest of 0.90% to8.00% (2010 - 0.90% to 2.00%) p.a., plus variation of the indexes (TJLP, U.S. dollar and Currency Basket) for floating-rateoperations and up to 11.00% (2010 - 11.00%) p.a. for fixed-rate operations. Funds are transferred to customers on thesame terms and with the same funding rates, plus commission on financial intermediation. These funds are collateralizedby the same guarantees received for the related loans.

NOTE 13 Other Payables In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Collected taxes and other ................................................................ 128,723 110,952 128,723 110,952Receipt of federal taxes ................................................................... 128,721 110,928 128,721 110,928Other .................................................................................................... 2 24 2 24

Foreign exchange portfolio .............................................................. 27,734 33,731 27,734 33,731Pending Setlement exchange sold .................................................. 18,498 18,132 18,498 18,132Foreign exchange purchased ........................................................... 447,105 406,654 447,105 406,654Advances on foreign exchange contracts (Note 07 (a)) ............... (437,869) (391,060) (437,869) (391,060)Other .................................................................................................... - 5 - 5

Social and statutory .......................................................................... 36,460 38,410 36,549 38,482Dividends and bonuses payable ..................................................... 24,053 27,064 24,142 27,136Bonuses and profit sharing payable .............................................. 12,407 11,346 12,407 11,346

Taxes and social security ................................................................... 569,422 497,086 578,169 503,301Taxes and contributions payable .................................................... 54,261 45,757 55,307 46,791Reserve for taxes and social contribution ..................................... 104,500 51,356 110,701 55,079Reserve for deferred taxes and contributions (Note 22 (b2)) .... 12,411 10,246 12,452 10,280Reserve for tax contingencies (Note 14 (b)) .................................. 398,250 389,727 399,709 391,151

Trading and intermediation of securities ......................................... - - 3,564 2,499Trading and intermediation of securities ...................................... - - 3,564 2,499

Financial and development funds .................................................... 4,639,815 4,368,763 4,639,815 4,368,763Payables for financial and development funds (Note 21 (a)) ..... 4,620,033 4,349,308 4,620,033 4,349,308Other .................................................................................................... 19,782 19,455 19,782 19,455

Sundry ............................................................................................... 785,427 770,442 859,505 810,599Cashier’s check .................................................................................. 1,425 1,678 1,425 1,678Creditors for unreleased funds ....................................................... 56,751 47,790 56,976 47,964Payables for acquisition of assets and rights ............................... 2,742 2,591 2,793 2,679Liabilities under government agreements ................................... 22,639 22,977 22,639 22,977Accrued vacation and related charges .......................................... 176,515 155,497 168,924 127,103Actuarial deficit of Fundação Banrisul (Note 23) ......................... 64,021 59,391 64,021 59,391Reserve for labor contingencies 14 (b)) ........................................ 112,305 97,885 123,854 113,557Brazilian Central Bank fines on foreign exchange

transactions (Note 14(f)(I)) ........................................................... 116,607 112,028 116,607 112,028Reserve for social security contingencies (Note 14 (f)(ii)) .......... 18,783 18,783 18,783 18,783Reserve for securitization losses (*) .............................................. 4,725 5,336 4,725 5,336Reserve for civil risk (Note 14 (b)) .................................................. 10,165 8,480 10,165 8,480Reserve for debts assumed with Grupo de Empresas

Seguradoras Brasileiras (GESB) arising from CompanhiaUnião de Seguros Gerais .............................................................. 7,051 7,710 7,051 7,710

FGTS (Severance Pay Fund) for amortization ................................ 2,649 2,561 2,649 2,561Sundry creditors – Domestic ........................................................... 61,483 83,028 130,087 134,938Card transactions payable .............................................................. 67,035 51,678 67,035 51,678Other .................................................................................................... 60,531 93,029 61,771 93,736

Total Other Payables ......................................................................... 6,187,581 5,819,384 6,274,059 5,868,327Current Liabilities ............................................................................ 5,629,612 5,264,679 5,715,601 5,313,159Long-Term Liabilities ........................................................................ 557,969 554,705 558,458 555,168(*) The management of Banrisul maintains provision for co-obligation of securitized receivables with the National Treasury,in the amount of R$40,351 thousand (2010 - R$43,019 thousand), controlled in a memorandum account, which are theresponsibility of agricultural borrowers.

57

NOTE 14 Reserves, Contingent Assets and LiabilitiesIn the normal course of their activities, Banrisul and its subsidiaries are party to tax, labor andcivil lawsuits at the judicial and administrative levels.

The provisions were calculated based on the opinion of the legal counselors, based on thebest measurement models and benchmarks available, despite the inherent uncertainty as tothe outcome. Banrisul records a reserve in the total amounts involved in lawsuits that havebeen assessed as probable loss.

Management believes that the reserves are sufficient to cover any losses arising from lawsuits.

(a) Contingent AssetsAs of March 31, 2011 no contingent assets were recorded.

(b) Changes in Provisions

Banrisul In Thousands of Reais Tax Labor Civil Other Total

Initial Balance at 12/31/2010 ....................... 393,470 111,894 9,575 134,164 649,103Recognition and Inflation Adjustment ......... 4,780 25,052 664 1,226 31,722Payment ............................................................ - (24,641) (74) - (24,715)Closing Balance at 03/31/2011 ..................... 398,250 112,305 10,165 135,390 656,110Guaranteed Deposits (Note 08) .................... - 90,247 53,581 18,557 162,385

Banrisul Consolidated In Thousands of Reais Tax Labor Civil Other Total

Initial Balance at 12/31/2010 ....................... 394,916 123,073 9,575 134,164 661,728Recognition and Inflation Adjustment ......... 4,793 26,442 664 1,226 33,125Reversal of Reserves ....................................... - (48) - - (48)Payment ............................................................ - (25,613) (74) - (25,687)Closing Balance at 03/31/2011 ..................... 399,709 123,854 10,165 135,390 669,118Guaranteed Deposits (Note 08) .................... 1,578 99,520 55,109 18,557 174,764

(c) Tax ProvisionsProvisions for tax contingencies relate primarily to liabilities related to taxes whose legalityor constitutionality is being challenged at the administrative or judicial levels, whoselikelihood of loss is or has been considered as probable and are recognized at the full amontunder dispute.

For lawsuits collateralized by escrow deposits, the amounts involved are not adjusted forinflation. When legal permits are issued as a result of a favorable outcome, the amounts areadjusted for inflation and withdrawn.

The main tax contingency refers to the income tax and social contribution on the deduction ofexpenses arising from the settlement of the actuarial deficit of the Banrisul Foundation,challenged by the Federal Revenue Service from 1998 to 2005 in the amount of R$398,250thousand. Banrisul, through its legal counsel, has been discussing the matter in court and, onrecorded a reserve for contingencies in the amount of the probable loss.

There are tax contingencies that, according to its nature, Banrisul considers his loss as possible,in amount of R$37,034 thousand. In accordance with accounting practices was not a reservefor contingencies.

(d) Labor ProvisionsRefer to lawsuits filed by unions and former employees claiming labor rights, in particular thepayment of overtime and other labor rights.

Recognized for labor claims filed against Banrisul when a court notification is received andthe likelihood of loss is considered as probable. The reserve is calculated according to thedisbursement estimated by our management, timely reviewed based on data received from


our legal counsel, and adjusted to the escrow deposit when required. Of the aforementionedreserve, R$73.707 thousand (consolidated - R$82,980 thousand) has been deposited in a escrowaccount. Additionally, R$16,540 thousand was required related to escrow deposits for appeals.

There are labor claims whose likelihood of loss, according to their nature, is considered byBanrisul as possible, in the approximate amount of R$37,411 thousand. In accordance withaccounting practices, no reserve for contingencies was recorded.

(e) Civil ProvisionsLawsuits for damages refer to compensation for property damage and/or pain and suffering,related to consumption relationships, in particular, matters relating to credit cards, consumercredit, checking accounts, banking collection and loans.

Recognized when a court notification is received and adjusted monthly based on the claimed,proofs producedand the assessment of the legal counsel, which considers jurisprudence,factual information gathered, proofs produced and court decisions on the lawsuit, taking intoaccount the risk of loss of the claim.

There is also an amount of R$53,581 thousand included in the balance of escrow depositsrelated to deposits made in conection to claims filed by third parties against Banrisul, whoselikelihood of loss is classified by our legal counsel as possible and remote.

(f) Othersi) On September 29, 2000, Banrisul received an assessment notice from the Central Bank ofBrazil in connection with administrative proceedings filed by that authority related tosupposed irregularities in foreign exchange transactions between 1987 and 1989. In an appealdecision at the administrative level, Banrisul was required to pay a fine equivalent to 100% ofthe amount of the supposedly irregular transactions. This decision is being challenged incourt by Management, which, on a conservative basis and in compliance with BACENrequirements, recorded a reserve in the amount of R$116,607 thousand for this contingency.

ii) INSS tax assessment notice related to social security contribution on compensation otherthan salary and on education allowance, whose likelihood of loss is classified by our legalcounsel as problably. A reserve in the amount of R$18,783 thousand was recorded.

NOTE 15 Income from Services Rendered


Funds Management ........................................................................ 14,683 13,321 16,176 15,122Collection of Debt Instruments ..................................................... 11,039 9,923 11,039 9,936Income from Refeisul ...................................................................... - - 5,642 4,886Income from Group Financing Management Fee ....................... - - 3,488 2,789Income from Brokerage of Operations ......................................... - - 759 1,062Other Income .................................................................................... 267 222 1,785 1,474Total ............................................................................................ 25,989 23,466 38,889 35,269

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NOTE 16 Income from Bank Fees In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Banricompras ................................................................................... 23,847 19,476 23,847 19,476Check Returns .................................................................................. 4,526 4,531 4,526 4,531Checking Account Debits ................................................................ 5,448 5,002 5,448 5,002Collection Services .......................................................................... 13,841 14,046 13,841 14,046Transactions with Checks ............................................................... 3,629 3,364 3,629 3,364Bank Fees from Checking Accounts ............................................... 70,944 58,200 70,944 58,200Credit Card ........................................................................................ 2,805 3,109 2,805 3,109Other Income from Fees ................................................................. 7,651 6,894 7,649 6,890Total ............................................................................................ 132,691 114,622 132,689 114,618

From the income amount of R$132,691 thousand for year the quarter ended March 31, 2011,R$66,848 thousand (2010 - R$56,948 thousand) arise from operations with individuals andR$65,843 thousand (2010 - R$57,674 thousand) from operations with legal entities.

NOTE 17 Other Administrative Expenses In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Data Processing and Telecommunication ................................... 32,356 42,892 33,669 43,950Security and Money Transportation ............................................. 19,375 20,330 19,375 20,330Amortization and Depreciation .................................................... 27,255 25,613 27,420 25,784Rentals .............................................................................................. 13,800 12,959 13,492 12,549Supplies ............................................................................................. 4,369 6,837 4,402 6,843Outside Services .............................................................................. 33,969 32,496 34,812 33,109Advertising, Promotions and Publicity (*) .................................... 11,238 40,245 11,471 40,389Maintenance .................................................................................... 5,603 5,694 5,647 5,755Water, Electricity and Gas ............................................................. 5,695 6,056 5,771 6,113Financial System Services .............................................................. 5,328 4,819 5,527 4,978Other .................................................................................................. 8,577 8,742 9,144 9,205Total ............................................................................................ 167,565 206,683 170,730 209,005

(*) Comprises mainly institutional advertising of R$2,701 thousand (2010 - R$14,361 thousand) and sponsorship of sportevents and clubs of R$7,513 thousand (2010 - R$22,481 thousand).

NOTE 18 Other Operating Income In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Recovery of Charges and Expenses ............................................... 13,493 12,758 15,151 11,609Reversal of Operating Reserves for:

Grupo de Empresas Seguradoras Brasileiras (GESB) ............. 194 - 194 -Labor .............................................................................................. - - 48 -Other .............................................................................................. 17,234 406 17,234 406Reserve for Securitization Losses ............................................ 266 2,093 266 2,093

Other Taxes without Credit Characteristics ................................ - 58 - 58Commission on Capitalization Cerficates ................................... 389 196 389 196Interbank Fees ................................................................................. 4,751 5,168 4,751 5,168Exchange Rate Adjustment ............................................................ - 2,633 - 2,633Credit Notes Receivable ................................................................. 2,231 3,648 2,231 3,648Reserve Fund - Escrow Deposit - Law no. 12069 ......................... 5,710 2,719 5,710 2,719Other Operating Income ................................................................. 20,380 16,870 20,569 17,157Total ............................................................................................ 64,648 46,549 66,543 45,687


NOTE 19 Other Operating Expenses In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Discount Granted from Renegotiations ....................................... 1,458 947 1,458 947Reserves for Labor Provisions (Note 14 (b)) ................................ 25,052 17,057 26,442 17,870Provision for Properties - Assets not in use ................................ 133 206 133 206Provision for Securitization Losses .............................................. 84 - 84 -Provision for Civil Lawsuits (Note 14 (b)) ..................................... 664 1,466 664 1,466Collection of Federal Taxes ............................................................ 859 428 859 428Inflation Adjustment of Reserve for Tax Contingencies(Social Contribution / Income Tax) - (Note 14 (b)) ........................ 4,780 3,721 4,793 3,741Lawsuits Indemnifications ............................................................ 30 1,995 30 1,995Inflation Adjustment of Brazilian Central Bank fines on

Foreign Exchange ......................................................................... 1,226 923 1,226 923Inflation Adjustment of Actuarial Deficit of Fundação Banrisul 2,417 2,047 2,417 2,047Provision for Debts Assumed with GESB ...................................... 31 578 31 578Exchange Adjustment - Foreign Branches .................................... 2,539 - 2,539 -Lawsuits ............................................................................................ 2,322 1,861 2,322 1,861Cards .................................................................................................. 778 1,271 778 1,271Credit Card Membership Program ................................................ 3,778 - 3,778 -Other Operating Expenses ............................................................. 9,763 3,200 9,844 3,567Total ............................................................................................ 55,914 35,700 57,398 36,900

NOTE 20 Shareholders’s Equity - Banrisul

(a) CapitalFully subscribed paid-up capital as of March 31, 2011 is R$2,900,000 thousand and it isrepresented by 408,974 thousand shares without par value as follows:

ON PNA PNB Total Amount % Amount % Amount % Amount %

Rio Grande do Sul State ................................. 204,199,859 99.59 2,721,484 74.52 26,086,957 13.03 233,008,300 56.97Fundação Banrisul de Seguridade Social

(pension plan) .......................................... 449,054 0.22 158,983 4.35 - 0.00 608,037 0.15Social Security Institute of Rio Grande do

Sul State .................................................... 44,934 0.02 168,612 4.62 - 0.00 213,546 0.05Market ........................................................... 349,527 0.17 602,780 16.51 174,192,287 86.97 175,144,594 42.83Total ............................................................ 205,043,374 100.00 3,651,859 100.00 200,279,244 100.00 408,974,477 100.00

Preferred shares do not carry voting rights and are entitled to the following payments:

Class A Preferred Shares:

i) Priority to receive a non-cumulative, preferred fixed dividend of six percent (6%) p.a.,calculated over the quotient resulting from the division of capital by the number of sharescomposing it;

ii) Right to take part, after the payment to Class B Common and Preferred Shares of a dividendequal to that paid to those shares, in the distribution of any other dividends or bonuses incash distributed by Banrisul, under equal conditions with Class B Common and PreferredShares, adding ten percent (10%) over the amount paid to those shares;

iii) Interest in capital increases deriving from the capitalization of reserves, under equalconditions of Class B Common and Preferred Shares and

iv) Priority in capital reimbursement, without premium.

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Class B Preferred Shares:i) Interest in capital increases deriving from the capitalization of reserves, under equalconditions of Class A Common and Preferred Shares and

ii) Priority in capital reimbursement, without premium.

(b) Allocation of IncomeNet Income for the year, adjusted in accordance with Law no. 6404/76, will have the followingallocations: (i) 5% to the Legal Reserve, which will not exceed 20% of Capital, (ii) 25% to theStatutory Reserve, and (iii) mandatory minimum dividends up to the limit of 25% of adjustednet income. The remaining net income will be allocated as decided in the Shareholders´Meeting.

The Statutory Reserve is intended to ensure funds for investments in the informationtechnology area, and is limited to 70% of paid-up capital.

In April 30,2010, the Ordinary and Extraordinary Shareholders' Meeting ratified and approvedthe proposal for the distribution of additional dividends for 2009 and 2010, equivalent to 15%of the Adjusted Net Income, totaling 40%.

The pay-out policy adopted by Banrisul aims to pay interest on capital in the maximumdeductible amount calculated in accordance with prevailing legislation, whith are includednet of whithholding income tax in the calculation of mandatory dividends for the fiscal year,as stated in our by-Laws.

As permitted by Law no. 9249/95 and CVM Resolution no. 207/96, Banrisul's management paidinterest on capital in the amount of R$56,752 thousand net referring to the first quarter 2011(2010 - R$50,190 thousand), to be credited to dividends, net of withholding income tax.

The payment of this interest on capital resulted in a tax benefit for Banrisul in the amount ofR$22,701 thousand (2010 - R$20,076 thousand) (Note 22 (a)).

NOTE 21 Commitments, Guarantees and Other(a) On April 22, 2004, State Law no. 12069, amended by Law no. 12585 of August 29, 2006, wasapproved, under which Banrisul must make available, when required, to Rio Grande do SulState up to 85% of the escrow deposits made by third parties at Banrisul (except for those inwhich the litigant is a municipality). The remaining amount not available is recorded in areserve fund to ensure the refund of said escrow deposits. As of March 31, 2011, the amountof escrow deposits made by third parties at Banrisul, adjusted through the balance sheet dateby the TR (managed prime rate) variation plus interest of 6.17% p.a., totaled R$6,663,033thousand (2010 - R$6,392,308 thousand), of which R$2,043,000 thousand (2010 - R$2,043,000thousand) was transferred to the State upon its request and written off from the respectiveequity accounts. The remaining balance, which makes up the aforementioned fund managedby Banrisul, is recorded in Other Payables - Financial and Development Funds (Note 13).

(b) Sureties and guarantees granted to customers amount to R$510,983 thousand (2010 -R$482,705 thousand), and are subject to financial charges and backed by the beneficiaries'sureties.

(c) Banrisul is responsible for the custody of 438,609 thousand securities of customers (2010 -386,804 thousand).

(d) Banrisul has co-obligations in import credits in the amount of R$61,769 thousand (2010 -R$52,163 thousand).


(e) Banrisul manages various funds and portfolios, which have the following net assets: In Thousands of Reais Banrisul Banrisul Consolidated 2011 2010 2011 2010

Investment funds (*) ........................................................................ 5,440,851 5,127,530 5,458,656 5,303,653Investment funds in investment fund quotas ............................ 124,690 92,526 246,524 92,526Fund to Guarantee the Liquidity of Rio Grande do Sul State Debt Securities .................................................................. 475,683 845,692 475,683 845,692Managed portfolios ......................................................................... 506,626 436,148 520,645 452,171Investment Clubs ............................................................................ - - 1,806 550Total ............................................................................................ 6,547,850 6,501,896 6,703,314 6,694,592

(*) The investments fund portfolios consist basically of fixed-rate and variable rate government bonds, and their carryingamounts already reflect mark-to-market adjustments at the balance sheet date.

(f) The subsidiary Banrisul S.A. Administradora de Consórcios is responsible for themanagement of 126 consortium groups (112 in 2010, in 2010), distributed among real estate,motorcycles, vehicles and tractors, gathering 23,883 active consortium members (20,598 in2010).

(g) Banrisul rents properties, manly used for branches, based on standard contracts whichmay be cancelled as its own criterion and include the right to opt for renewal and adjustmentclauses, classified as operating lease. Total future minimum payments of not-cancelable rentas of March 31, 2011 is R$118,989 thousand, of which R$33,643 thousand matures in up to oneyear, R$70,135 thousand from one to five years and R$15,211 thousand over five years.Payments for operating leases, recognized as expenses for the first quarter 2011, were R$12,522thousand.

NOTE 22 Income Tax and Social Contribution

(a) Conciliation of Expenses/Revenue with Income Tax and Social Contribution


Income for the Period before Taxes and Profit Sharing ............. 325,262 178,040 331,399 181,553Income Tax on Profit - Rate 25% .................................................... (81,316) (44,510) (82,850) (45,388)Social Contribution on Profit - Rate 9% ........................................ - - (401) (217)Social Contribution on Profit - Rate 15% ...................................... (48,789) (26,706) (49,041) (26,871)Total Income Tax and Social Contribution calculated at

Effective Rate .......................................................................... (130,105) (71,216) (132,292) (72,476)Adjustment of Fine on Foreign Exchange Operations ................ (491) (369) (491) (369)Profit Sharing .................................................................................... 4,963 4,525 4,963 4,525Interest on Capital .......................................................................... 22,701 20,076 22,701 20,076Equity in Subsidiaries and Foreing Exchange Adjustment

on Branches .................................................................................. 3,014 3,575 (1,016) 1,053Other Additions, Net of Exclusions ............................................... (1,618) (1,451) (1,505) (1,147)Total Income Tax and Social Contribution .................................. (101,536) (44,860) (107,640) (48,338)Current .............................................................................................. 105,042 51,451 111,193 55,171Deferred ............................................................................................ (3,505) (6,591) (3,553) (6,833)

(b) Deferred Income Tax and Social ContributionIn March 2011, Banrisul had Deferred Income Tax and Social Contribution Credits on temporarydifferences as follows:

(b1) Tax creditsTax credit balances, by origin and disbursements made, are as follows:

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Banrisul In Thousands of ReaisBalance on Balance on

12/31/2010 Recognition Realization 03/31/2011

Allowance for loan losses .............................................................. 452,612 54,081 47,554 459,139Reserve for labor contingencies ................................................... 44,758 10,021 9,857 44,922Reserve for tax contingencies ....................................................... 76,892 1,942 30 78,804Other temporary provisions .......................................................... 42,664 1,759 6,081 38,342Total tax credits on temporary differences ................................ 616,926 67,803 63,522 621,207Unrecorded credits ......................................................................... (23) - - (23)Total tax credits recorded .......................................................... 616,903 67,803 63,522 621,184Deferred tax liabilities ................................................................... (11,635) (776) - (12,411)Tax credits, net of deferred liabilities ........................................ 605,268 67,027 63,522 608,773

Banrisul Consolidated In Thousands of ReaisBalance on Balance on

12/31/2010 Recognition Realization 03/31/2011

Allowance for loan losses .............................................................. 452,612 54,081 47,554 459,139Reserve for labor contingencies ................................................... 48,559 10,717 10,428 48,848Reserve for tax contingencies ....................................................... 77,384 1,946 30 79,300Other temporary provisions .......................................................... 42,706 1,759 6,122 38,343Total tax credits on temporary differences ................................ 621,261 68,503 64,134 625,630Unrecorded credits ......................................................................... (23) - - (23)Total tax credits recorded .......................................................... 621,238 68,503 64,134 625,607Deferred tax liabilities ................................................................... (11,636) (816) - (12,452)Tax credits, net of deferred liabilities ........................................ 609,602 67,687 64,134 613,155

Expected realization of these receivables are as follows:

In Thousands of Reais Banrisul Banrisul Consolidated

Temporary Diferences Year Income Tax Social Contribution Total Total Recorded Total Recorded

2011 118,564 71,138 189,702 189,702 190,0002012 101,421 60,853 162,274 162,274 162,6662013 88,237 52,942 141,179 141,179 141,5712014 53,537 32,122 85,659 85,659 86,5472015 21,030 12,618 33,648 33,648 34,0402016 a 2018 4,977 2,986 7,963 7,963 9,1412019 a 2021 474 285 759 759 1,642Após 2021 14 9 23 - -Total in 03/31/2011 388,254 232,953 621,207 621,184 625,607Total in 03/31/2010 378,416 227,048 605,464 605,441 611,253

The total consolidated present value of tax credits is R$511,693 thousand, calculated basedon the expected realization of temporary differences at average funding rate projected forthe corresponding periods.

(b2) Deferred Tax LiabilitiesThe balance of the Reserve for Deferred Taxes and Contributions is represented by:


Excess Depreciation ........................................................................ (12,403) (10,237) (12,403) (10,236)Available for Sale Securities .......................................................... (8) (9) (8) (9)Adjustment to Fair Value of Trading Securities ........................... - - (41) (35)Total ............................................................................................ (12,411) (10,246) (12,452) (10,280)


NOTE 23 Fundação Banrisul de Seguridade Social e Cabergs - Caixa deAssistência dos Empregados do Banco do Estado do Rio Grande do Sul

Banrisul is the main sponsor of Fundação Banrisul de Seguridade Social ("Fundação Banrisul"),which is mainly engaged in supplementing the benefits covered and provided by the SocialSecurity to the employees of Banrisul, Banrisul Serviços, and Cabergs, and carrying out socialsecurity programs promoted by its sponsors.

On July 6, 2009, a new retirement benefit plan named Banrisulprev was approved and hasbeen offered to non members of the Benefit Plan I since then. This new variable contributionbenefit plan became effective in November 2009. As a result of the implementation of thisnew plan, new members are no longer allowed to join the Benefit Plan I.

To attain its objectives, Fundação Banrisul receives monthly contributions from its sponsorsand participants, which are calculated based on the monthly compensation of employeesand their beneficiaries. Banrisul's contribution amount of R$2,918 thousand (2010 - R$3,084thousand) for the quarter, which, as of March 31, 2011, corresponds to 3.17% (2010 - 3.51%) ofthe monthly payroll of employees' contribution salaries, was recorded in operating expenses.

Benefit Plan I - In the defined benefit type, Benefit Plan I provides retirement and survivorshipbenefits, sick pay, inmate pension, funeral allowance and annual bonus.

The active participant's normal contribution corresponds to the monthly amount equivalentto the result of the application of the following fees:

a) Fixed general percentage of 3% applicable to the contribution salary;

b) First additional percentage of 2% applicable to the contribution salary surplus (if any) onhalf of the highest Social Security benefit salary; and

c) Second additional percentage of 7% applicable to the contribution salary surplus (if any) onthe highest Social Security benefit salary.

Banrisul's remaining portion of the contracted debt related to this plan in the amount ofR$64,021 thousand as of March 31, 2011 (2010 - R$59,391 thousand) is recorded in Other Payables(Note 13). In addition to this deficit, Banrisul pays interest of 6% per year with final maturityin 2028, which is monthly adjusted based on the General Price Index - Domestic Availability(IGP-DI), through monthly adjustments and payments, and final maturity in 2028.

Banrisulprev - In the variable contribution type, Banrisulprev provides benefits with definedcontribution characteristics, such as regular retirement, early retirement and funeralallowance, and benefits with defined benefit characteristics, such as disability retirement,proportional benefits, sick pays, annual bonus, minimum benefit and survivorship benefit.

The participant's normal contribution is comprised of three portions:

a) Basic portion: 1% on the contribution salary;

b) Additional portion: may vary from 1% to 7.5% on the contribution salary portion that exceeds9 reference units; and

c) Variable portion: percentage applied on the contribution salary annually established bythe actuary to cover 50% of the costs of risk benefits and the plan's administrative expenses.

In addition to the regular contribution, the participant may opt to make a contribution notlower than 1 reference unit and not paid by the sponsor.

Banrisul's contributions are equal to the participants' normal contributions.

Medical and dental care - Banrisul offers medical and dental care to its employees and

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Fundação Banrisul's retirees through Cabergs.

As of December 31, 2010, the actuarial appraisal of post-employment benefits related todefined benefits, Banrisulprev and health care granted to its employees was as follows:

In Thousands of ReaisBenefit Banrisulprev Medical and

Plan I Plan Dental Care Total

Present obligation of actuarial obligations ................................ (2,787,358) (2,696) (129,621) (2,919,675)Fair value of Fundação Banrisul's assets ..................................... 2,636,530 1,977 110,322 2,748,829Gains /Losses and cost of unrecognized services ...................... 508,241 672 28,707 537,620Actuarial assets (liabilities) ........................................................ 357,413 (47) 9,408 366,774

The main actuarial assumptions used as December 31, 2010 are as follows:

Discount rate: 10.77% p.a.Expected return rate of pension plans' assets:

Defined benefit plan: 13,28% p.a.Variable contribution plan: 12.01% p.a.Medical and dental care: 10.69% p.a.

Future salary increase rate: 6.59% p.a.Increase in average costs: 7.64% p.a.Inflation: 4.50% p.a.Mortality table: AT - 2000.

NOTE 24 Financial Instruments and Financial Risks Management

Risk management is an essential, strategic tool for Banrisul. The inherent risks comprise fromthose easily identifiable, such as market, liquidity and credit risks, to those which are notdirectly identified as such, but also of extreme importance, such as operating and reputationalrisk, among others.

Banrisul seeks to align its activities with the standards set forth by the New Capital Accord -Basel II, by adopting best market practices to maximize profitability and to ensure the bestpossible combination of investments in assets and use of required capital. The systematicimprovement of risk policies, internal control systems and security standards aligned withBanrisul's strategic and market objectives are ongoing processes.

Credit risk: it is the possibility of Banrisul incurring losses related to the nonperformance ofa loan or financial obligation by the counterparty under the agreed terms.

Banrisul's risk assessment structure is based on the principle of joint technical decision.Banrisul defines different credit limits corresponding to the decision levels comprising fromthe widespread branch network (with various categories) to the credit and risk committees atthe Head Office. This process aims at expediting the concession of credit based on technicallypredefined limits, which establish Banrisul's risk exposure for every customer, in conformitywith the risk/return ratio.

The continuous, increasing use of statistical methodologies for assessing customers' risks,with the standardization of credit and business policies along with the optimization of thecontrols over registry information through a certification model, increased and strengthenedrisk assessments. The use of credit score and behavior score systems allowed establishingreapproved credit limits to individuals according to the risk ratings described in the statisticalmodels, which are conceptually more appealing when dealing with mass credit.


For the corporate segment, Banrisul evaluates companies under the financial, management,market and production standpoint, with periodic reviews that also take into account currentand future economic and competitive environments, adding companies to them. Themanagement of the credit risk exposure is based on a selective, conservative approach,pursuant the strategies set by Banrisul's management and technical areas.

(a) Credit Risk Assessment

Direct Lending and Onlendings by Financial Agents

Banrisul analyzis the potential default of each counterparty by using classification toolsdesigned for different categories of counterparties. Such internally developed tools combinestatistical analysis with the review of the credit area, and are validated, when appropriate, bycomparison with external available data. The classification tools are reviewed and updatedwhen necessary. Frequently, Management validates the classification performance and itspredictive power with respect to default events.

Default exposure is based on the amounts that may be due to Banrisul at the time ofdefault,e.g., in the case of a loan, it corresponds to the notional amount. Loan commitmentsinclude all amounts withdrawn in excess of the amount that may be withdrawn at the time ofdefault, if any.

Default loss or loss extent represents Banrisul's expectation regarding the amount of the lossresulting from an action, should the default occurs. This amount is expressed as percentageloss per unit of exposure and typically varies in accordance with the the category of thecounterparty, the type and level of the action and the availability of collaterals or creditmitigation instruments.

(b) Risk Limit Control and Mitigation PoliciesBanrisul manages, limits and controls credit risk concentrations whenever they are identified- particularly in relation to counterparties and groups.

Management manages assumed risk levels by setting limits on the extent of acceptable riskin relation to a specific borrower, or groups of borrowers and industry segments. These risksare continuously monitored and subject to annual or more frequently reviews when necessary.The limits on the level of credit risk by product and industry sector are approved by themanagement and by the Board of Administration, if applicable.

In the case of a counterparty, the exposure to any borrower, including financial agents, isadditionally restricted by sublimits that cover exposures recorded or not in the financialstatemens. The actual exposures in accordance with the established limits are monitored ona monthly basis.The credit risk exposure is also managed through the regular analysis of borrowers, currentand future, with respect to payments of principal and interest and change in limits whenappropriate.

c) Credit Related CommitmentsCredit related commitments represent unused portions of established limits by thecounterparty, normally attributed to working capital, overdraft accounts, credit cards, amongothers. They also refer to contracts whose funds will be released upon fulfillment of anycontractual condition, pursuant to the construction schedule, such as in some real estateagreements.

The contractual amount represents the maximum credit risk in such transactions, if thecounterparty actually uses the fund available. However, the exposure to losses resulting

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from these contracts is lower than the total funds to be released, since part of thesecommitments expires without being entirely used, either by customer's decision or atBanrisul's discretion which adopts criteria for the availability of these funds, as set forth incertain contractual clauses.

Market risk: Banrisul is exposed to market risks inherent in its trading activities, throughborrowings and loans / financing contracted based on various types of indexes. Banrisul hasan ongoing portfolio, management process, that encompasses the control over all positionsexposed to market risks, according to business objectives and better performance achievement.

This process takes into consideration factors that could adversely affect and change assetsand liabilities, including changes in interest and exchange rates, loss of the capacity of receivingdeposits and loss of customers to competitors, as well as other restrictions on lending andinvesting activities that may affect the fair value of products and securities, as established byregulatory measures issued by the monetary authorities.

The main component of market risk measurement includes an estimate of potential lossesunder adverse market conditions, for which the Value at Risk (VaR) methodology is used. VaRis a measure of the maximum expected loss on monetary values under normal marketconditions, within a ten-day period, with a desired level of probability of 99% used to measuremarket risk exposures of portfolios.

Additionally, due to the limitation of the VaR methodology, scenario analysis and measuresof sensitivity and calibration, stress tests are performed on a quarterly basis, based on specificscenarios for each risk factor in order to confirm Banrisul's financial health and its soundnessin a potential crisis, in order to protect Banrisul's equity and its operating results against suchadverse conditions.

Liquidity risk: arises from the potential inability to finance financial asset and perform therequired obligations on the respective maturity dates and from difficulties to settle positionsin the portfolio without incurring significant losses. Banrisul's liquidity risk is managed byanalyzing cash flows projections, based on different market scenarios. For asset positions,the growth of the credit portfolio and the settlement of financial instruments are taken intoaccount. For liabilities, the assumptions adopted include the possibility of making earlyredemptions and also lower-than-expected funding rollover.

The Corporate Risk Unit is responsible for managing Banrisul's consolidated liquidity, in orderto monitor the availability of funds to meet Banrisul's financial needs from the point of viewof funding and allocation, business and performance and business references, to avoidsignificant misadjustments which could jeopardize the Institution's liquidity and budgetplanning. Banrisul's controls are kept on a preventive standpoint, calculated according to therules of Resolution no. 2804/00 and Circular no. 3393/07, that establish monitoring consistentwith the positions assumed in financial markets, in order to emphasize the liquidity riskarising from such exposures. Daily Cash Flow, Portfolio Position Map, Maturity and CurrencyMismatch Map and Duration Maps, among other reports, are prepared to assist with themonitoring of these positions. This information is made available on a daily basis to the CFOand to the Market Risk Officer.

The Market and Liquidity Risk Report is monthly prepared, including the main events duringthe period to highlight current guidelines and policies and ensure compliance with exposurelimits for market and liquidity risks, through the approval of Banrisuling Management andEconomic Committees, the Board of Executive Officers and the Board of Administration.

Derivatives: Banrisul has not entered into "target forward swap" transactions or any otherleveraged derivative since its policies do not provide for non-hedging transactions for itsassets and liability positions.


On December 7, 2010, Banrisul amended its contracts, thus canceling its positions in derivatives- swap transactions - in effect as of March 31, 2010, as described in note 05.

Sensitivity analysis:Banrisul has no derivatives transactions in its portfolio as of March 31, 2011, therefore thesensitivity analysis table is not disclosed herein.

(d) Basel RatioIn July 2008, new rules for measuring regulatory capital entered into force the. Financialinstitutions and similar entities must maintain a minimum sharehoders' equity of 11% ofassets weighted by degrees of risk exposures to gold, foreign currencies and transactionssubject to operational risk and to variations to currency, interest rate, price of commodities,and price of shares classified in the trading portfolio, according to rules and instructions ofthe Brazilian Central Bank. Banrisul is included in this operational limit in the quarter endedin March 31, 2011.

In Thousands of Reais 2011

Reference Equity Level I .......................................................................................... 4,006,893Shareholders’ Equity ................................................................................................. 4,010,754Deferred Permanent Assets .................................................................................... 10,124Adjustment to Fair Falue - Securities and Derivatives ........................................ (6,263)

Reference Equity Level II ......................................................................................... (6,263)Adjustment to Fair Falue - Securities and Derivatives ........................................ (6,263)

Reference Equity (PR) ............................................................................................... 4,000,630Required Reference Equity (PRE) ............................................................................. 2,785,015

Amount Related to:Credit Risks (PEPR) ................................................................................................ 2,082,525Exchange Risks (PCAM) ......................................................................................... -Market Risks (PJUR) .............................................................................................. 311,408Share Prices Risks (PACS) ..................................................................................... 2,220Operating Risks (POPR) ........................................................................................ 388,862

Portion of Trading Porfolio Risks (RBAN) ................................................................... 21,880Margin Value or insufficiency (PR-PRE-RBAN) .......................................................... 1,193,735

Basel Ratio (Risk Agent/PRE) .................................................................................... 15.79%Permanent Assets Ratio ........................................................................................... 9.59%Permanent Assets Margin ........................................................................................ 1,808,249

NOTE 25 Transactions with Related PartiesBanrisul's commercial relations with the Rio Grande do Sul State Government and itssubsidiaries, Companhia Estadual de Energia Elétrica (CEEE), Companhia Rio-Grandense deSaneamento (CORSAN), Companhia de Gás do Rio Grande do Sul (SULGÁS), Centrais deAbastecimento do Rio Grande do Sul S.A. (CEASA), Companhia Estadual de Silos e Armazéns(CESA), Companhia Rio-Grandense de Artes Gráficas (CORAG), Companhia Rio-Grandense deMineração (CRM), Companhia de Indústrias Eletroquímicas - CIEL and Companhia deProcessamento de Dados do Estado do Rio Grande do Sul (PROCERGS), are described below:

Rio Grande do Sul State Government - On June 29, 2007, Cooperation Agreement no. 1959/2007 was entered into between Banrisul and Rio Grande do Sul State Government, underwhich Banrisul will provide to the Government, on an exclusive basis and for a five-yearperiod, banking services related to the payment of active and inactive servants, lifetime andspecial pensioners of the Executive Branch (Direct Administration), and pension planpensioners (Social Security of the Rio Grande do Sul State - IPERGS) and the Governmentmaintains the right to grant payroll loans to Banrisul. In view of the reciprocity of servicesprovided, under this Agreement Banrisul releases the Rio Grande do Sul State Governmentfrom costs related to the provision of banking services, such as the collection of revenue andstate taxes, debt to bank account, FGTS (severance pay fund) statement and mortgage loancollection services.

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Banrisul also provides services related to the financial transfers made by the governmentdepartments of amounts related to social programs and updates information related to inactiveservants and holders of special or lifetime pension plans of the Direct Administration. Theseservices are not paid.

Banrisul also pays the suppliers of the Public Finance System and processes changes relatedto the Cash Management Integrated System (SIAC), which is responsible for centralizing inone bank account the cash and cash equivalents of the Direct and Indirect State Administrationand its subsidiaries. These services are not paid.

Banrisul provides other services to foundations and government agencies, such as paymentservices through payment forms and the supply of meal and fuel tickets. For the quarterended March 31, 2011, these services generated fees in the amount of R$2,111 thousand.Banrisul offers a solution for the management of e-commerce through the Compras PregãoOn Line portal. This service is not paid.

Banrisul purchased FCVS credit rights, as described in note 06, and receivables assignmentagreements in March 31,2010, in the amount of R$471,419 thousand. These credit rights wereoriginally purchased at a discount and simultaneously hedged through a exchange rate swapcontract to the Selic index variation. On December 7, 2010, in order to simplify the structureof such transaction and the cash flows generated in the settlement dates, the parts amendedthe contract, as defined in note 05. The changes did not affect Banrisul's net income for theyear.

For the quarter ended March 31, 2011, Banrisul's lease agreements on the State Government'sproperties generated expenses in the amount of R$243 thousand.

Also, Banrisul has with the State Government an agreement whereby the State Governmentassigned 9 employees from the dissolved Caixa Econômica Estadual to Banrisul and received8 employees to work in Government departments and foundations. These employee-relatedcosts are refunded by the parties.

Companhia Estadual de Energia Elétrica (CEEE) - Banrisul is responsible for the provision ofbanking services related to personnel payment, including payroll loan operations. Thepayment of consumption accounts issued by CEEE and the supply of meal and fuel tickets isalso the responsibility of Banrisul, which for the quarter ended March 31, 2011 was paid R$895thousand to perform these services. Banrisul offers a solution for the management of e-commerce through the Pregão On Line portal.

Companhia Riograndense de Saneamento (CORSAN) - Banrisul is responsible for the provisionof banking services related to the payment of personnel, including payroll loan operations.The payment of consumption accounts issued by Corsan and the supply of fuel tickets is alsothe responsibility of Banrisul, which for the quarter ended March 31, 2011 was paid R$1,033thousand to perform these services. Banrisul offers a solutions fot the management of e-commerce through the Pregão On Line portal.

Banrisul intermediates the implementation of the financial flow expected from theagreements entered into by this company and the National Bank for Economic and SocialDevelopment (BNDES). There are no guarantees pledged and/or compensation related tothese operations.

SULGÁS, CEASA, CESA, CIEL, CORAG, CRM and PROCERGS - Banrisul is responsible for theprovision of banking services related to the payment of personnel and has an agreementwith SULGÁS, CEASA and CESA for payroll loan operations. Services related to the e-payment


issued by these Companies and the supply of meal and fuel tickets is also the responsibilityof Banrisul, which for the quarter ended March 31, 2011 was paid R$63 thousand to performthese services. Banrisul offers a solution for the management of e-commerce through thePregão On Line portal.

SULGÁS has investments whose yield is indexed to the CDI variation. Banrisul intermediatesthe implementation of the financial flow expected from the agreements entered into by thiscompany and the National Bank for Economic and Social Development (BNDES). There are noguarantees pledged and/or compensation related to these operations.

CaixaRS Agência de Fomento - Banrisul is responsible for the provision of banking servicesrelated to the payment of personnel, including payroll loan operations. The e-paymentservices and the supply of meal and fuel tickets is also the responsibility of Banrisul, whichfor the quarter ended March 31, 2011 was paid R$13 thousand to perform these services.Banrisul also manages purchases through the Compras Pregão On Line portal.

Based on Banrisul's employee assignment agreement, 7 employees were assigned. Theseemployee-related costs are refunded by the parties.

Banco Regional de Desenvolvimento do Extremo Sul (BRDE) - Banrisul is responsible for theprovision of banking services related to the payment of personnel, including payroll loanoperations to employees allocated in the Rio Grande do Sul State and is responsible for e-payment services.

Fundação Banrisul de Seguridade Social - As described in Note 23, Banrisul's debt contractedon March 31, 1998, related to the remaining portion of the actuarial deficit, amounts to R$64,021thousand. This. In addition to this deficit, Fundação Banrisul receives interest of 6% per yearwith final maturity in 2028, which is monthly adjusted based on the General Price Index -Domestic Availability (IGP-DI).

Banrisuls contribution to the employees post retirement benefit plan was R$2,918 thousandto Fundação Banrisul in the quarter ended March, 31 2011 as described in Note 23.

Banrisul is responsible for the provision of banking services related to the payment ofpersonnel, and the payment of retirement benefits and pension plans to Fundação Banrisul'sbeneficiaries. Fundação Banrisul also has an exclusive investment fund managed by Banrisul,which earned income of R$73 thousand on this service in the quarter ended March 31, 2011.Investments made by Fundação Banrisul at Banrisul earn yield at rates indexed to the CDIvariation.

For the quarter ended March 31, 2011, Banrisul's lease agreements on the Fundação Banrisul'sproperties generated expenses in the amount of R$1,328 thousand.

CABERGS - Caixa de Assistência dos Empregados do Banco do Estado do Rio Grande do Sul S.A.- Banrisul provides medical and dental care benefits to its employees and retirees generatingexpenses during the quarter ended March 31, 2011, of R$5,101 thousand.

Banrisul is responsible for providing banking services related to the payment of staff andsuppliers. Cabergs also has an exclusive investment fund managed by Banrisul which earnedincome of R$36 thousand on this service, in the quarter ended in March 31, 2011. Investmentsmade by Cabergs at Banrisul earn yields at rates indexed to the CDI variation.

Banrisul offers a solution for the management of electronic purchases through "Portal deCompras Pregão On Line" this service is not paid.

All interest-bearing transactions were contracted at rates compatible with the third-parties'rates prevailing on the transaction dates.

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Transactions with companies and subsidiaries are as follows:Banrisul In Thousands of Reais

Assets (Liabilities) Income (Expense) 2011 2010 2011 2010

Derivatives .................................................................................. - 102,378 - (1,852)State of Rio Grande do Sul Government .................................. - 102,378 - (1,852)

Collection Services ..................................................................... 5,072 5,072 - -State of Rio Grande do Sul Government .................................. 5,072 5,072 - -

Other Credits .............................................................................. 19,571 10,530 1,597 1,311State of Rio Grande do Sul Government .................................. 13,459 5,621 - -Subsidiaries .................................................................................. 6,112 4,909 1,597 1,311

Demand Deposits ....................................................................... (145,350) (141,695) - -State of Rio Grande do Sul Government .................................. (132,149) (120,025) - -Subsidiaries of State of Rio Grande do Sul Government ....... (10,146) (13,117) - -Subsidiaries .................................................................................. (3,055) (8,553) - -

Time Deposits ............................................................................. (238,735) (185,278) (3,234) (2,410)Empresas Controladas ............................................................... (238,735) (185,278) (3,234) (2,410)

Money Market Funding .............................................................. (543,994) (907,563) (20,372) (26,382)State of Rio Grande do Sul Government (*) ............................. (475,682) (845,691) (18,587) (25,125)Subsidiaries .................................................................................. (68,312) (61,872) (1,785) (1,257)

Other Payables ............................................................................ (85,843) (103,887) (3,429) (3,377)State of Rio Grande do Sul Government .................................. (13,398) (15,195) (243) (364)Banrisul foundation .................................................................... (64,436) (59,844) (2,796) (2,599)Subsidiaries .................................................................................. (8,009) (28,848) (390) (414)

Total ............................................................................................ (989,279) (1,220,443) (25,438) (32,710)

(*) These funds receive 100% of the CDI variation.

Banrisul Consolidated In Thousands of Reais Assets (Liabilities) Income (Expense) 2011 2010 2011 2010

Cash ............................................................................................ 18,424 17,151 480 403State of Rio Grande do Sul Government .................................. 18,424 17,151 480 403

Derivatives .................................................................................. - 102,378 - (1,852)State of Rio Grande do Sul Government .................................. - 102,378 - (1,852)

Collection Services ..................................................................... - 5,072 - -State of Rio Grande do Sul Government .................................. - 5,072 - -

Other Credits .............................................................................. 26,169 9,494 213 174State of Rio Grande do Sul Government .................................. 26,169 9,494 213 174

Demand Deposits ....................................................................... - (133,142) - -State of Rio Grande do Sul Government .................................. - (120,025) - -Subsidiaries of State of Rio Grande do Sul Government ....... - (13,117) - -

Money Market Funding .............................................................. (475,682) (845,691) (18,587) (25,125)State of Rio Grande do Sul Government (*) ............................. (475,682) (845,691) (18,587) (25,125)

Other Payables ............................................................................ (77,834) (75,039) (3,039) (2,963)State of Rio Grande do Sul Government .................................. (13,398) (15,195) (243) (364)Fundação Banrisul de Seguridade Social ................................ (64,436) (59,844) (2,796) (2,599)

Total ............................................................................................ (508,923) (919,777) (20,933) (29,363)

(*) These funds receive 100% of the CDI variation.

Management Fees

Yearly, the General Shareholders' Meeting resolves on:

a) The total annual compensation of Management, the Board of Administration and the AuditCommittee as stated in the Company's Bylaws; and

b) The allowance to cover Complementary Pension Plans Additional on behalf of the SeniorManagement, included in the Private Pension Plan for Banrisul and its subsidiaries'Management and Employees.


NOTE 26 Impact from the Adoption of the Internacional Financial ReportingStandards

During the process of convergence with international financial reporting standards, somestandards and their interpretations were issued by the Accounting Pronouncements

In 2010, the fixed maximum annual amount of R$403 thousand was defined as compensationand bonuses to individual members of the Board of Administration, Board of ExecutiveOfficers, Supervisory Board and Audit Committee.

In the quarter ended in March 31, 2011, the Management compensation is as follows:

In Thousands of ReaisShort Term Benefits paid to Senior Management 2011 2010Salaries .................................................................................................................................... 921 997Bonuses .................................................................................................................................... 3 3Social Security ......................................................................................................................... 226 240Total ................................................................................................................................ 1,150 1,240

Banrisul pays in full defined benefit pension plan to administrators who belong to the staff.In the quarter ended March 31, 2011, contributions to Banrisul Foundation Social Security aresummarized as follows:

In Thousands of ReaisPost-Employment Benefits 2011 2010Defined Contribution Pension Plan ..................................................................................... 5 6

Banrisul contracts a liability insurance for its officers and directors, and paid insurance premiumduring the year in the amount of R$298 thousand.

Banrisul does not offer any long-term benefits, termination of employment contracts orstock-based compensation for its Senior Management.

Additional information(1) According to existing legislation, financial institutions may not grant loans or advances to:

a) Directors and members of advisory, administrative or supervisory board and the like, aswell as their spouses and relatives up to the 2nd degree;

b) Individuals or entities that participate in their Equities, with more than 10%; and

c) legal entities whose capital involved, with more than 10%, the very financial institution,any directors or officers of the institution as well as their spouses and relatives up to the 2nddegree.

Thus, Banrisul does not make any loans or advances to any subsidiary, members of the Boardor the Executive Board and their families.

(2) ShareholdingExecutive Officers and members of the Board of Administration, the Fiscal Council and AuditCommittee had jointly the following Banrisul shareholding as of March 31, 2011.

Shares AmountVoting Shares 12Common Shares 141Total Shares 153

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Committee (CPC), which will be applicable to financial institutions only when approved bythe National Monetary Committee (CMN). Currently, financial institutions and otherinstitutions regulated by the Central Bank should adopt the following pronouncements:

Impairment of Assets (CPC 01);Statement of Cash Flows (CPC 03);Related Party Disclosures (CPC 05); andReserves, Contingent Liabilities and Contingent Assets (CPC 25).

CMN Resolution no. 3786/09 and the Central Bank of Brasil Official Letters no. 3472/09 and no.3516/10 established that financial institutions and other institutions authorized to operate bythe Central Bank of Brazil, incorporated as a public company or that are required to establishan Audit Committee shall, as of December 31, 2010, annually prepare and disclose up to 120days after the December 31 reporting date their consolidated financial statements preparedin accordance ith international financial reporting standards (IFRS), and following internationalpronouncements issued by the IASB - International Accounting Standards Board.

The financial statements for the year ended December 31, 2010, prepared in accordance withIFRS was made available on May 2nd, 2011, on the website www.banrisul.com.br/ir as well asat the Brazilian Securities Exchange Commission (Comissão de Valores Mobiliários - CVM -,www.cvm.gov.br). As per the management opinion, the reconciliation between net incomeand shareholders' equity as of March 31, 2011 are consistent with the amounts presented inthe reconciliations as of December 31, 2010.

NOTE 27 Autorization for Completion of the Interim Financial Statements

Banrisul's Board of Executive Officers authorized the completion of these interim financialstatements on May 02, 2011, which consider subsequent events occurred to this date thatmight affect these financial statements

TÚLIO LUIZ ZAMINCEO

FLAVIO LUIZ LAMMELVice-President

WERNER KÖHLERContador CRCRS 38.534

GUILHERME CASSELIVANDRE DE JESUS MEDEIROS

JOÃO EMÍLIO GAZZANAJONE LUIZ HERMES PFEIFFJULIMAR ROBERTO ROTTA

LUIZ CARLOS MORLINOfficers

Board of Executive Officers


Report


Deloitte Touche TohmatsuAuditores IndependentesCRC nº. 2 SP 011.609/O-8/F/RSFernando CarrascoContadorCRC nº. 1 SP 157.760/T/RS

Interim Financial Statements

Banco do Estado do Rio Grande do Sul S.A.Quarter ended March 31, 2011with Independent Auditor’s Report onInterim Information Review

(A free translation from Portuguese into English of Independent Auditor’s Review Reporton Interim Information, prepared in accordance with accounting practices adopted in Brazil)

Interim information review report

To theShareholders, Board of Directors and OfficersBanco do Estado do Rio Grande do Sul S.A.Porto Alegre - RS

Introduction

We have reviewed the individual and consolidated balance sheet of Banco do Estado doRio Grande do Sul S.A. (“Bank”) as of March 31, 2011 and the related statements ofincome, of changes in shareholders’ equity and of cash flows for the quarter then ended,including notes thereto.

Management is responsible for the preparation and fair presentation of this interim financialin accordance with the accounting practices adopted in Brazil, applicable to institutionsauthorized to operate by the Brazilian Central Bank. Our responsibility is to express aconclusion on this interim information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and international standards onreview. A review of interim information consists of inquiries, mainly of the officials in chargeof financial and accounting areas, and of the application of analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted in accordancewith International Standards on Auditing and consequently does not enable us to obtainassurance that we would become aware of all significant matters that might be identifiedin an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that theaccompanying individual and consolidated interim information does not present fairly, inall material respects, the Bank’s financial position at March 31, 2011, the performance ofits operations and cash flows for the quarter then ended, in accordance with the accountingpractices adopted in Brazil, applicable to institutions authorized to operate by the BrazilianCentral Bank.

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Other interim information

Value added

We have also reviewed the individual and consolidated statement of value added (SVA)for the quarter ended March 31, 2011, the presentation of which in the interim financialinformation is required in accordance with the regulations issued by Brazilian ExchangeCommission (CVM) and deemed to be supplementary information for the purposes ofthe Brazilian Central Bank and the National Monetary Council, which do not require thepresentation of the SVA. These statements were submitted to the same review proceduresdescribed above and, based on our review, we are not aware of any fact which makes usbelieve that they were not prepared, in all material respects, in accordance with theindividual and consolidated interim accounting information taken as a whole.

Review of prior quarter amounts

The individual and consolidated interim accounting information for the quarter ended March31, 2010, presented for comparison purposes, was previously reviewed by otherindependent auditors who issued their report dated April 30, 2010 with no modification.

Porto Alegre (RS), May 6, 2011

ERNST & YOUNG TERCOAuditores Independentes S.S.CRC2SP015199/O-6/F-RS

Flávio Serpejante PeppeAccountant CRC 1SP 172.167/O-6/S-RS

Guilherme Portella CunhaAccountant CRC-1RJ 106.036/O-5/S-RS


BOARD OF EXECUTIVE OFFICERS

TÚLIO LUIZ ZAMINCEO

FLÁVIO LUIZ LAMMELVice-President

GUILHERME CASSELIVANDRE DE JESUS MEDEIROS

JOÃO EMILIO GAZZANAJOSE LUIZ HERMES PFEIFF

JULIMAR ROBERTO GARCIA ROTTALUIZ CARLOS MORLIN

Officers

BOARD OF ADMINISTRATION

ODIR ALBERTO PINHEIRO TONOLLIERChairman

TÚLIO LUIZ ZAMINVice Chairman

ARIO ZIMMERMANNDÍLIO SÉRGIO PENEDO

FLÁVIO LAMMELJOÃO VERNER JUENEMANN

JOÃO ZANIMANOEL ANDRÉ DA ROCHARUBENS SALVADOR BORDINI

Board Members

WERNER KÖHLERAccountant CRCRS 38,534

GOVERNO DO ESTADODO RIO GRANDE DO SUL

Secretaria da FazendaBanco do Estado do Rio Grande do Sul

Documents

DEMONSTRAÇÕES FINANCEIRAS ENGLISH MAR 11 …ri.banrisul.com.br/banrisul/web/arquivos/English_1Q11_Financial... · 4 FINANCIAL STATEMENTS MARCH 2011 Index Message from the CEO