2014 UCPB Annual Report

UCPB Annual Report 20142


MESSAGE FROMTHE CHAIRMAN


5 5Message from the Chairman


REPORT FROMTHE PRESIDENT ANDCHIEF EXECUTIVE OFFICER

6 UCPB Annual Report 2014

7 7Report from the President and Chief Executive Officer

UCPB Annual Report 201488 UCPB Annual Report 2014

FINANCIALHIGHLIGHTS

9 9Financial Highlights


OPERATIONALHIGHLIGHTS


11 11Operational Highlights


BRANCHBANKING


13 13Branch Banking


OURCLIENTS


15 15Branch Banking


OURCLIENTS


17 17Branch Banking


CONSUMERBANKING


19 19Consumer Banking


OURCLIENTS


21 21Consumer Banking 21Consumer Banking


CORPORATE ANDCOMMERCIAL BANKING

23 23Corporate and Commercial Banking


OURCLIENTS

25 25Corporate and Commercial Banking


TREASURYBANKING


27 27Consumer Banking


TRUSTBANKING


29 Trust Banking 29


HUMANRESOURCES


31 Human Resources 31


MARKETING


33 Marketing 33


CORPORATE SOCIALRESPONSIBILITY

35 3535Corporate Social Responsibilty


CORPORATE SOCIALRESPONSIBILITY

37 3737Corporate Social Responsibilty


RISKMANAGEMENT


39 39Risk Management


CORPORATEGOVERNANCE


73 73Corporate Governance

UCPB Annual Report 201484 85 84 85Corporate GovernanceUCPB Annual Report 2014


as of March 2015

BOARD OFDIRECTORS


89 89Board of Directors


as of March 2015

ADVISORYCOUNCIL


97 9797Advisory Council

99 9999Advisory Council


as of March 2015

MANAGEMENTCOMMITTEE


101 101Management Committee


SENIOROFFICERSas of March 2015

OFFICE OF THE PRESIDENT

JERONIMO U. KILAYKODirector, President and CEO

ELPIDIO B. MISOLAS, JR.Vice PresidentSecurity Offi cer

ANA LENINA P. ESTAVILLOAssistant Vice President 1Offi ce of the President

MARIA TERESA T. PALOMOAssistant Vice President 1Offi ce of the President

BANK COMPLIANCE DIVISION

ARTURO D. SAYAO, JR.Vice President, Chief Compliance Offi cer and HeadBank Compliance Division

ESTER T. SALCEDOAssistant Vice President 2 and HeadLiaison, Monitoring andOperations Department

RAQUEL M. BURGOSAssistant Vice President 1Monitoring and ComplianceTesting Department

AMADO T. DE LEON, JR.Assistant Vice President 1 and HeadAnti-Money Laundering Department

ROBERTO V. FIESTAAssistant Vice President 1Liaison, Monitoring and Operations Department

BRANCH BANKING GROUP

EDMOND E. BERNARDOExecutive Vice President and HeadBranch Banking Group

FRANCISCO M. BASA, JR.Vice President and HeadVisayas Region

NOEL T. CALALANGVice President and HeadBranch Banking Support Division

CYNTHIA C. DE RIVERAVice President and HeadCustomer Quality Management Division

RONALDO E. ELAMPAROVice President and HeadMetro Manila 6 Region

NATIVIDAD R. FRANCISCOVice President and HeadMetro Manila 5 Region

JOCELYN T. GOMEZVice President and HeadSouth Luzon Region

ANTHONY EVAN A. LLUCHVice President and HeadMetro Manila 1 Region

MANUEL R. MACAMVice President and HeadMetro Manila 7 Region

SAMUEL L. SANTOSVice President and HeadNorth-Central Luzon Region

MONINA A. SUNGAVice President and HeadMetro Manila 4 Region

SUSAN C. DESAMEROAssistant Vice President 2 and HeadMetro Manila 3 Region

ALEXANDER L. DIMACUHAAssistant Vice President 2 and HeadMindanao Region

GUILLERMA M. ESPIRITUAssistant Vice President 2and HeadMetro Manila 2 Region

MA. ANA T. ABALAAssistant Vice President 2Branch ManagerUCPB San Andres Branch

RENE A. ALIMAGNOAssistant Vice President 2Branch ManagerUCPB Batangas Branch

CLARA JEAN F. ARCEAssistant Vice President 2Branch ManagerUCPB Ortigas Branch

HERMILO A. BAGABALDOAssistant Vice President 2Branch ManagerUCPB Lacson-Galo Branch

EVANGELINE R. BALASBASAssistant Vice President 2Branch ManagerUCPB Boni Avenue Branch

CRISPULO B. BALTAZAR, JR.Assistant Vice President 2Branch ManagerUCPB Solano Branch

ROSITA A. CARREONAssistant Vice President 2Branch ManagerUCPB Mindanao Avenue Branch

VOLTAIRE REX C. CASTROAssistant Vice President 2Branch ManagerUCPB Bohol Avenue Branch

ROWENA Z. CATOLOSAssistant Vice President 2Branch ManagerUCPB Pioneer Branch

SOCORRO S. CHUAAssistant Vice President 2Branch ManagerUCPB T. M. Kalaw Branch

MERLINE S. DELA CRUZAssistant Vice President 2Branch ManagerUCPB Main Offi ce Branch

ELIZABETH B. DEEAssistant Vice President 2Branch ManagerUCPB Elcano Branch

ROSALINDA T. DOMINGOAssistant Vice President 2Branch ManagerUCPB Salcedo Branch

MA. THERESA T. DYAssistant Vice President 2Branch ManagerUCPB Dela Rosa Branch

CHONA LESLIE R. GOCOAssistant Vice President 2Branch ManagerUCPB Calapan Branch

JOSE JERIC E. GOMEZAssistant Vice President 2Branch ManagerUCPB San Pablo Branch

103

LOLITA A. GONZALESAssistant Vice President 2Branch ManagerUCPB BF Parañaque Branch

NEBELLEE M. GUMBANAssistant Vice President 2Branch ManagerUCPB San Pedro-Davao Branch

JOEL VICTOR P. JAVIERAssistant Vice President 2Branch ManagerUCPB Ayala Avenue Branch

CEZARIO B. LARIOSAssistant Vice President 2Branch ManagerUCPB Tanauan Branch

MA. CECILIA V. LIMAssistant Vice President 2Branch ManagerUCPB Velez Branch

JUAN P. LIWAGAssistant Vice President 2Branch ManagerUCPB McKinley Hill Branch

EVA MARIE N. MAGNOAssistant Vice President 2Branch ManagerUCPB Cambridge Branch

MERVYN NICASIO L. MAGNO, JR.Assistant Vice President 2Branch ManagerUCPB Butuan Branch

GINA S. MERCADOAssistant Vice President 2Branch ManagerUCPB P. Ocampo Branch

ROMEO G. MILLERAAssistant Vice President 2Branch ManagerUCPB Sucat Branch

ELIZABETH D. ORBEAssistant Vice President 2Branch ManagerUCPB Caloocan Branch

FIEL AMOR J. PACLEBAssistant Vice President 2Branch ManagerUCPB Tordesillas Branch

JESSICA S. PANGILINANAssistant Vice President 2Branch ManagerUCPB Tarlac Branch

CRISANTIAGO T. PAROJINOGAssistant Vice President 2Branch ManagerUCPB Cogon Branch

NEPTALI F. RAMOSAssistant Vice President 2Branch ManagerUCPB Calamba Branch

JOSE MARI V. REYESAssistant Vice President 2 and HeadBranch Services Department

ROLANDO V. ROBIÑOLAssistant Vice President 2Branch ManagerUCPB Laguna Branch

CRISTINA B. ROBLEDOAssistant Vice President 2Branch ManagerUCPB Commonwealth Branch

MA. DINAH V. SACROAssistant Vice President 2Branch ManagerUCPB Puyat-Bautista Branch

RAYMUNDO A. SARANZAAssistant Vice President 2Branch ManagerUCPB Tagbilaran Branch

FERDINAND Y. SENOAssistant Vice President 2Branch ManagerUCPB F. Ramos Branch

DAISY B. SERNEOAssistant Vice President 2Branch ManagerUCPB Baclaran Branch

MA. THERESA D. TAMAYOAssistant Vice President 2Branch ManagerUCPB F.B. Harrison Branch

LEILA O. TERTEAssistant Vice President 2Branch ManagerUCPB Lucena - Guinto Branch

JAIME C. YU, JR.Assistant Vice President 2Branch ManagerUCPB Cauayan Branch

CESAR C. ANGCONAssistant Vice President 1Branch ManagerUCPB San Juan (Bacolod) Branch

MARISSA D. AUYONGAssistant Vice President 1Branch ManagerUCPB P. Tuazon Branch

VICTORIA C. BERNALAssistant Vice President 1Branch ManagerUCPB Muñoz Branch

YOUNG ALLANIEL O. BUMANGLAGAssistant Vice President 1Branch ManagerUCPB Surigao Branch

SOLOMON L. CANGAssistant Vice President 1Branch ManagerUCPB SM City Cebu Branch

CIELITO L. CELADAAssistant Vice President 1Branch ManagerUCPB Quirino Highway Branch

CARNITA D. CHINGAssistant Vice President 1 and HeadBranch Automation Support Department

ERLINDA P. DACANAYAssistant Vice President 1Branch Manager PoolMetro Manila 3 Region

FLORENCE L. DORIAAssistant Vice President 1 and HeadOperations Support Department

CLARISSA R. DULATREAssistant Vice President 1Branch ManagerUCPB Pasong Tamo Extension Branch

LAURA T. ECHAVEZAssistant Vice President 1Branch Manager, Annapolis Branch

JESUS PROSPERO K. ESTARISAssistant Vice President 1Branch ManagerUCPB Mandaluyong Branch


Senior Officers


ROSARIO L. FERNANDOAssistant Vice President 1Branch ManagerUCPB West Avenue Branch

GLENDA V. GALLOAssistant Vice President 1Branch ManagerUCPB Robinsons Galleria Branch

MARITA A. GISONAssistant Vice President 1Branch ManagerUCPB Paniqui Branch

MERCEDITAS ASUMPTION A. GUEVARAAssistant Vice President 1Branch ManagerUCPB Jaro Branch

ROMANA M. HIZONAssistant Vice President 1Branch ManagerUCPB Paso de Blas Branch

HELENE JOY S. JOMANTOCAssistant Vice President 1Branch ManagerUCPB Mabini Branch

ALERIS A. JOVENAssistant Vice President 1Customer Relations Offi cer

SULPICIA A. LARAAssistant Vice President 1 Branch ManagerUCPB Dumaguete Branch

MARY GRACE B. LOPEZAssistant Vice President 1 Branch ManagerUCPB Aquino Avenue Branch

ARTURO A. MACAM, JR.Assistant Vice President 1Branch ManagerUCPB Banaue Branch

JONATHAN M. MALIGAYAAssistant Vice President 1Branch ManagerUCPB Daet Branch

RODRIGO H. PADAAssistant Vice President 1Branch ManagerUCPB Tektite Branch

LORELEI P. PLETEAssistant Vice President 1Branch ManagerUCPB Vigan Branch

MA. LOURDES CARIDAD B. PONCEAssistant Vice President 1Branch ManagerUCPB Jones Avenue Branch

JOSE ANTONIO J. ROSADOAssistant Vice President 1Branch ManagerUCPB Iznart Branch

GRACE S. SABINOAssistant Vice President 1Branch ManagerUCPB Limay Branch

RITA C. SAMBRANOAssistant Vice President 1Branch ManagerUCPB Magsaysay Branch

MARY ANN H. SALGADOAssistant Vice President 1Branch ManagerUCPB Libertad Branch

GUILBERT P. SAMPEDROAssistant Vice President 1Branch ManagerUCPB Global City Branch

MARIA THERESA C. SANTOSAssistant Vice President 1Branch ManagerUCPB Sto. Tomas Branch

LORNA D. SICATAssistant Vice President 1Branch ManagerUCPB Lipa - Recto Branch

EDGAR V. YABESAssistant Vice President 1Branch ManagerUCPB Dagupan Branch

DOREEN C. YAPAssistant Vice President 1Branch ManagerUCPB Clark Field Branch

NATALIE R. VILLANUEVAAssistant Vice President 1Branch ManagerUCPB Tuguegarao Branch

CORPORATE ANDCONSUMER BANKING GROUP

HIGINIO O. MACADAEG, JR.Executive Vice President and HeadCorporate and Consumer Banking Group

Corporate andCommercial Banking Division

JOSEPHINE S. BAGAMASBADAssistant Vice President 1Financial Institutions Desk Offi cer

Metro ManiIa 1 Team

CARINA FRANCESCA C. UYFirst Vice President and Team Head

MILAGROS A. CRUZAssistant Vice President 2Relationship Manager

MARY JEAN A. GOAssistant Vice President 2Relationship Manager

DAYNARD V. GOMEZAssistant Vice President 1Relationship Manager

MARIE ANGELA G. NGAssistant Vice President 1Relationship Manager

MARIA CARLA L. PADUAAssistant Vice President 1Relationship Manager

JOSE ENRIQUE L. SALVADORAssistant Vice President 1Relationship Manager

Metro Manila Team 2

RAMON L. FERNANDEZ, JR.Vice President and Team Head

CYNTHIA Q. CAMACHOAssistant Vice President 2Relationship Manager

JOSE JONAS M. COCHICO IIIAssistant Vice President 2Relationship Manager

MA. CARMELA G. FELICIDARIOAssistant Vice President 2Relationship Manager


105

RUFINO T. RIVERA IIIAssistant Vice President 2Relationship Manager

ALBERTO C. COBANGBANGAssistant Vice President 1Relationship Manager

REGINA TERESA P. RODRIGUEZAssistant Vice President 1Relationship Manager

Metro Manila Team 3

ALEXANDER M. BORJAVice President and Team Head

JOSE R. SEGUI, JR.Assistant Vice President 1Relationship Manager

Luzon Team

RICHMOND U. TANVice President and Team Head

MARIA CECILIA D. CALINGOAssistant Vice President 1Relationship Manager

CHARITY M. VERGARAAssistant Vice President 1Relationship Manager

Visayas / Mindanao Team

ANGELITO S. ESTANISLAOVice President and Team Head

DINAH P. CENIZAAssistant Vice President 2Relationship Manager

MA. CRISTINA J. CORONAAssistant Vice President 2Relationship Manager

TERESITA F. SOLITARIAAssistant Vice President 2Relationship Manager

MA. FLOREBETH O. VILLAPAZAssistant Vice President 2Relationship Manager

MA. CARMELA C. DELA VEGAAssistant Vice President 1Relationship Manager

MARK KENNY MACROHONAssistant Vice President 1Relationship Manager

RONALDO G. MANGUBATAssistant Vice President 1Relationship Manager

Asset Managementand Disposition Division

RAYMOND C. ALONZOVice President and HeadAsset Management andDisposition Division

Remittance Marketing Division

VICTOR RUBEN L. TUASONVice President and HeadRemittance Marketing Division

Consumer Banking Division

PHILIP S. PABELICOFirst Vice President and HeadConsumer Banking Division

LEONCIO M. ESTACIONVice President and HeadCollection and Asset Recovery Department

CHARON B. WAMBANGCOVice President and HeadReal Estate Loans Department

KRISTINE MARIE G. CUEVASAssistant Vice President 2 and HeadPersonal Loans Department

VICTOR C. DELA CRUZ, JR.Assistant Vice President 2 and HeadMetro Manila Business Center

CAROLINA O. ZAVALAAssistant Vice President 2 and HeadConsumer Finance Business Centers

REGINA P. CABLINGAssistant Vice President 1 andAccount Offi cerReal Estate Loans Department

ANDREI G. CAOILEAssistant Vice President 1 andAccount Offi cerReal Estate Loans Department

CRISANTY JORGE L. DAVIDAssistant Vice President 1and Offi cer-in-ChargeVehicle Finance Department

HUMAN RESOURCES GROUP

STELLA MA. A. FULGENCIOVice President and HeadHuman Resources Group

TERESITA B. ANGELESAssistant Vice President 1 and HeadEmployee Services Department

FRANCO C. LOYOLAAssistant Vice President 1 and HeadRecruitment and Engagement Department

INFORMATION TECHNOLOGYAND METHODS GROUP

RAMON B. TAÑAFRANCAExecutive Vice President and HeadInformation Technology andMethods Group

MELVIN P. GUANZONSenior Vice President and HeadInformation Technology Division

ERIBERTO C. CONTRERASVice President and HeadData Center Services Department

RAMONA E. CRUZVice President and HeadConsulting and DevelopmentServices Department 2

GIL V. OBIASVice President and HeadIT Support and Compliance Department

MANUEL JOEY A. REGALAVice President and HeadInformation Security Department

IRMA C. SURTIDAVice President and HeadProductivity and Methods Department

JANETTE L. TEMPONGKOVice President and HeadConsulting and DevelopmentServices Department 1

CARIDAD P. ABADAssistant Vice President 2 and HeadTrading Section

JESSE EPHRAIM C. ALMONTEAssistant Vice President 2and Systems Project Offi cerProduct & Developers Pool Section


Senior Officers



JONES J. BALLESTEROSAssistant Vice President 2 and HeadTelecoms Section

DANILO U. CUAAssistant Vice President 2 and HeadProgrammers Pool Section

ELENORA C. CUAAssistant Vice President 2 and HeadEngineering Section

IMELDA T. GONZALESAssistant Vice President 2and Systems Project Offi cerCore Banking Section

MA. ELISA D. IBANAAssistant Vice President 2 and HeadAutomation Project Oversight Section

AUGUSTO M. JOCSON, JR.Assistant Vice President 2 and HeadPlanning Services Section

JAIME D. LAMBINOAssistant Vice President 2 and HeadDelivery Channel Section

GERONIMO S. MANGUBAT IIAssistant Vice President 2 and HeadUser Support Section

JULIET D. PERIABRASAssistant Vice President 2and Systems Project Offi cerTrade Finance Project Team

MICHAEL S. RABENAAssistant Vice President 2 and HeadComputer Operations Section

MA. ELENA I. REFULGENTEAssistant Vice President 2 and HeadAutomation Support Section

WILLIAM P. BRILLANTESAssistant Vice President 1 and HeadNetwork Management Unit

WILFREDO H. CALAPATANAssistant Vice President 1 and HeadQuality Control and Training Section

RUCEL F. JAVIERAssistant Vice President 1 and Head System Infrastructure Section

OMAR P. PINEDAAssistant Vice President 1 and Offi cer in ChargeTechnical Services Department

ALFREDO R. TORRESAssistant Vice President 1 and HeadShift Operations Unit

INTERNAL AUDIT DIVISION

PINKY S. DEREQUITOFirst Vice President and HeadInternal Audit Division

LILIA M. DIOKNOVice President and HeadInformation Systems Audit Department

MA. LUZ H. CANTORIAAssistant Vice President 2 and HeadHead Offi ce Audit Department

ANNA RUTH F. MONTEMAYORAssistant Vice President 2 and HeadLoans Audit Services Department

MA. ESTHER T. VERANAssistant Vice President 1 and HeadBranch Audit Services Department

NELSON J. MONTEMAYORAssistant Vice President 1Audit Offi cer

OFFICE OF THECORPORATE SECRETARY

ATTY. ILDEFONSO R. JIMENEZSenior Vice Presidentand Corporate Secretary

ATTY. MARGARITA MARIA A. NACPILAssistant Vice President 2 andAssistant Corporate Secretary

LEGAL SERVICES GROUP

ATTY. JOSE A. BARCELONSenior Vice President and HeadLegal Services Group

ATTY. MARIA ANGELICA L. RAYELFirst Vice President and HeadLending, Investment andMarketing Department

ATTY. CESAR G. DAVIDVice President and HeadRemedial and Enforcement Department

ATTY. HILDA B. GUZMANVice President and HeadBranch, Trust and Operations Department

ATTY. JONATHAN M. ACOSTAAssistant Vice President 2 and HeadConsumer Loans, ROPA and Replevin Department

ATTY. CRISPIN V. AMORANTOAssistant Vice President 2and Legal Offi cerBranch, Trust and Operations Department

ATTY. JOSIEBETH P. BASAAssistant Vice President 2and Legal Offi cerLending, Investment andMarketing Department

ATTY. ART BERNARD D. BERNALESAssistant Vice President 2and Legal Offi cerLending, Investment andMarketing Department

ATTY. CECILIA M. CABATITAssistant Vice President 2and Legal Offi cerBranch, Trust and Operations Department

ATTY. ISMAEL ANDREW P. ISIPAssistant Vice President 2and Legal Offi cerRemedial and Enforcement Department

ATTY. JASON ROBERT M. PAREDESAssistant Vice President 2and Legal Offi cerRemedial and Enforcement Department

ATTY. FRANCISCO BENITO A. SAAVEDRAAssistant Vice President 2and Legal Offi cerRemedial and Enforcement Department

ATTY. KABAITAN G. VALMONTEAssistant Vice President 2and Legal Offi cerRemedial and Enforcement Department

ATTY. MIGNONETTE C. ALDAYAssistant Vice President 1and Legal Offi cerBranch, Trust and Operations Department

ATTY. MARIE CHRISTINE E. AVARICIOAssistant Vice President 1and Legal Offi cerLending, Investment andMarketing Department

107

ATTY. ROBERTO M. BUENAVENTURAAssistant Vice President 1and Legal Offi cerRemedial and Enforcement Department

MARKETING GROUP

CHARINA D. BALANQUITAssistant Vice President 2 andOffi cer in Charge

MARIA CARMEN D. AMBROSIOAssistant Vice President 2 and Business Development Offi cer Product Sales Department

JOSEPHINE L. CALUAGAssistant Vice President 2 and HeadMarketing Services Department

MARY ERICA RUTH VIVIANE C. DIAGOAssistant Vice President 2 and HeadProduct Management Department

OPERATIONS GROUP

EVANGELINA P. SAMONTEExecutive Vice President and HeadOperations Group

ARNEL A. VALLESFirst Vice President and HeadInternational Banking and Treasury Operations Division

BENJAMIN P. APANVice President and HeadLoans Operations Division

JOJI S. NORICOFirst Vice President and HeadCredit Administration Division

MARIO A. GULLEAssistant Vice President 2 and HeadClearing Center

RAMONITA C. MENDOZAAssistant Vice President 2 and HeadLoans Documentation DepartmentCredit Administration Division

ELZEBER O. MURALLOSAssistant Vice President 2 and HeadRemittance Services DepartmentInternational Banking and TreasuryOperations Division

REMIGIO T. VARGASAssistant Vice President 2 and HeadCredit Appraisal & Investigation DepartmentCredit Administration Division

ROMEO L. ALONZOAssistant Vice President 1 and HeadForeign Operations DepartmentInternational Banking and Treasury Operations Division

AMIE F. BALANAssistant Vice President 1 and HeadTreasury AccountingInternational Banking and Treasury Operations Division

JUSTINIANO M. BABATEAssistant Vice President 1 and HeadTrade Services DepartmentInternational Banking and TreasuryOperations Division

MANUEL L. CINCOAssistant Vice President 1 and HeadCredit Appraisal & InvestigationDepartment –VISMIN

MARILOU C. DANNUGAssistant Vice President 1 and HeadLoans Documentation DepartmentCredit Administration Division

AGNELLUS RAYMUND JAY R. DATOCAssistant Vice President 1 and HeadCredit Review and Evaluation DepartmentCredit Administration Division

TEODORA B. GARCIAAssistant Vice President 1and Team LeaderCredit Review and Evaluation DepartmentCredit Administration Division

NIDA C. LIMAssistant Vice President 1 and HeadLocal Operations DepartmentInternational Banking and Treasury Operations Division

RISK MANAGEMENT DIVISION

RYAN B. BUTALIDFirst Vice PresidentChief Risk Offi cer and HeadRisk Management Division

REBECCA M. LIMAssistant Vice President 2 and HeadCredit Risk Department

JOANNA A. FLORESAssistant Vice President 1 and HeadInformation Security Compliance Section

JOY T. TANAssistant Vice President 1 and HeadOperational Risk Department

SUPPORT SERVICES GROUP

CESAR A. RUBIOChief Finance Offi cerExecutive Vice President and HeadSupport Services Group

CYNTHIA A. ALMIREZFirst Vice President and ControllerControllership Division

MARGARITA A. GUADINESFirst Vice President and HeadStrategic Planning and Analysis Division

ALEXANDER L. ANDRESAssistant Vice President 2 and HeadSubsidiaries FinancialAccounting DepartmentControllership Division

LINDA S. ORTIZAssistant Vice President 2 and HeadGeneral Services DepartmentCorporate Services Division

CRISOLOGO F. SAGNIPAssistant Vice President 2 and HeadFinancial Accounting DepartmentControllership Division

CARLITO I. SANTOSAssistant Vice President 2Administrative Control Offi cerCorporate Services Division

LORENA P. ALCOVERAssistant Vice President 1 and HeadBudget and PlanningStrategic Planning and Analysis Division

LEMUEL J. DIMAANOAssistant Vice President 1 and HeadCorporate Real Estate DepartmentCorporate Services Division

TREASURY BANKING GROUP EULOGIO V. CATABRAN IIIExecutive Vice President and HeadTreasury Banking Group


Senior Officers



RICHARD Q. LIMFirst Vice President and HeadForeign Currency Trading

ARTURO I. LIPIO, JR.First Vice President and HeadDebt Capital Markets Department

MANUEL C. MADRIDEJOSVice President and HeadPeso Denominated Trading Department

ULYSSES G. MINAVice PresidentDebt Capital Markets DepartmentInvestment Banking Origination

SHEILA S. ANGAssistant Vice President 2 and HeadFund Management Department

SANDRA S. GOAssistant Vice President 2Debt Capital Markets DepartmentInstitutional Fixed Income Sales

MA. CHRISTINE D. PAGKALINAWANAssistant Vice President 2Debt Capital Markets DepartmentInstitutional & Retail Fixed Income Sales

MELIZA B. ZULUETAAssistant Vice President 2Debt Capital Markets DepartmentFixed Income Sales

DONNA LYN V. ABESAssistant Vice President 1Debt Capital Markets DepartmentRetail Fixed Income Sales

APRIL HOPE J. BAUTISTAAssistant Vice President 1Debt Capital Markets Foreign Exchange Sales

GLENN CONRAD N. JAOAssistant Vice President 1Trading DepartmentTreasuries

MA. ANGELICA M. OLIVAAssistant Vice President 1Trading DepartmentEquities

TRUST BANKING GROUP

ALEXANDRA C. DEVERASTrust Offi cerFirst Vice President and HeadTrust Banking Group

STEPHEN S. SEVIDALFirst Vice PresidentChief Investment Offi cer and HeadTrading and Execution Department

RAMON ANTONIO C. TORRESFirst Vice President and HeadManaged Portfolios Department

MA. CATALINA M. CRUZVice President and HeadTrust Sales Department

DELIA E. MERLEVice President and HeadTrust Operations Division

MARIA VICTORIA C. MENDOZAAssistant Vice President 2 and HeadInvestment Evaluation and Special Trust Department

MA. ISABEL G. LORENZOAssistant Vice President 1Portfolio Manager

CHRISTINE B. PENAFIELAssistant Vice President 1Portfolio Manager

UCPB-CIIF FOUNDATION INC.UCPB-CIIF FINANCE AND

DEVELOPMENT CORPORATION

EDGARDO C. AMISTADPresident

SUBSIDIARIES

UCPB LEASING & FINANCE CORPORATION

FRANCO P. MAGALONGPresident

MERCY K. CHUAAssistant Vice President 1Team Head

VIRGINIA P. FUGOSOAssistant Vice President 1Team Head

MA. LUISA P. GOPICOAssistant Vice President 1Compliance Offi cer

MICHAEL ROBERT L. MENDOZAAssistant Vice President 2Marketing Head

UCPB SAVINGS BANK

ANGEL H. MOJICAPresident

EMMANUEL L. ABESAMISVice President and HeadBranch Banking Division

CORAZON R. GUEVARRAVice President and HeadCommercial Lending Division

EVANGELINE P. REYESVice President and HeadControllership Division

MENCHIE E. LAGACAssistant Vice President 2 and HeadTreasury Division

WILFREDO S. BAUTISTAAssistant Vice President and HeadInformation Technology Division

ATTY. ALEXANDER L. PAULINOAssistant Vice President and HeadLegal Services Division

RICO C. DE GUZMANAssistant Vice President 1 and HeadCredit Administration Division

NARISA BERLIN R. DURANAssistant Vice President 2 andRisk Management Offi cer

CARLO MAGNO ROBERT P. YAMSUANAssistant Vice President 1 and HeadConsumer Lending – Auto Loans Department

ROSALINA A. GESLANIAssistant Vice President and HeadInternal Audit Division

UCPB SECURITIES INC.

VINCENT K. DE LEONPresident

109

DepositsPeso Accounts• Multi-One• ATM Peso Savings Account• Passbook Peso Savings Account• Regular Checking Account• Kiddie Max Foreign Currency Accounts• US$ Savings Account• Euro Savings Account• Japanese Yen Savings Account• GBP Savings Account Time Deposits• Peso Time Deposit• US$ Time Deposit Remittance ServicesU-remit Accounts• U-remit ATM Savings Account• U-remit Passbook Savings Account• U-remit US$ Savings Account• U-remit Peso Checking Account Inward Remittances Through Tie-Ups and Correspondent Banks• U-remit System• Direct Credit to UCPB Accounts• Direct Credit to Local Bank Accounts• Cash Pick Up over UCPB Branches• Cash Pick Up over MLhuillier Branches• Payout Centers for:

- Coinstar, Uniteller, EzRemit, Cash Express, AFTAB, Maybank, Iremit, TranFast

Cash ManagementCollections• Bills Payment

- Over-the-Counter Collection Facility

- Electronic Channels (ATM, Internet, Telebanking and Mobile Phone Banking payments)

- Automatic Debit Arrangement• Point-of-Sale (POS) Collection Service• Internet Payment Gateway• Post-Dated Check Warehousing with

Online Facility (PDC.Biz)• National Government Collections • Night Depository Service• Corporate Collection Service• Deposit Pick-Up / Cash Delivery

Service

Disbursements• Checkwriter.Biz (Online Check Disbursement Facility)

- MCWriter- Corporate Checkwriter

• UCPB eMoney Card• Payroll Facilities

- CM Payroll (Payroll Crediting Facility)

- Payroll Max (Payroll Software for Salary Preparation and Crediting)

• BIR-eFPS• U-remit System (online remittance

system)

Account Management• Automatic Transfer Arrangement• Sweep Facility• Customized Statement of Account

Electronic Banking Facilities• UCPB CM.biz (Corporate Internet

Banking)• UCPB Connect (Retail Internet

Banking)• UCPB Mobile Phone Banking Service

(iOS, Android and Java App)• UCPB Telebanking• UCPB Automated Teller Machines

- On-site and Off-site Deployment- Mobile ATM Service

Government Payments• BIR• SSS• PhilHealth• Bureau of Customs

Special Services• Conduit Clearing Arrangement with

Online Facility (CCA.Biz)• Depository and Custodianship Service• SSS Pension Crediting• Direct Deposit for US Pensioners• SSS Sickness and Maternity Benefi ts

Payment Thru the Bank

Consumer LoansAuto Loans• Brand New, Second Hand, Refi nancing,

Fleet Financing

Home Loans• Condominiums, Townhouses, Houses

and Lots• Refi nancing, Construction, Multi-

Purpose Loans

Personal Loans• Your Easy Salary Loan (YES Loans)• Salary Loans (Corporate Arrangements)• UCPB Credit Card

Small Business Loans• Term Loan• Promissory Note (PN) Line• Franchise Loan

Commercial CreditNon-Trade Short-Term Loan• Omnibus Line• Promissory Note-Peso/Foreign Currency• Bridge Financing• Check Discounting• Domestic/Foreign Bills Purchase• Foreign Currency Settlement• Account Receivable Discounting• Committed Credit Line• Short-Term Loan Non-Trade Long-Term Loan • Term Loan-Peso/Foreign Currency• Term Loan/Syndicated-Peso/Foreign

Currency• Term Loan-Special Funding (DBP, LBP, SSS)• Term Loan with Guarantee GFSME,

SPGFC, HIGC, LGUGC and PHILEXIM Trade Financing• Documentary Credit-Foreign /

Domestic• Standby Letter of Credit – Foreign /

Domestic • Trust Receipt Financing• Shipside Bond/Bank Guarantee• Documents Against Acceptance• Documents Against Payment• Open Account Arrangement• Direct Remittance• Advance Payment• Collection of Custom Duties and Taxes • (E2M)• Export Documentary Credit Advising• Export Advance• Export Bills Purchase• Export Bills for Collection TreasuryPeso-Denominated Investments:Government Securities• Treasury Bills• Retail / Treasury Notes• ROP US$ Denominated Debts• BSP$ Denominated DebtsPrime Corporate BondsRepurchase Agreement US Dollar-Denominated Investments:• Republic of the Philippines (ROP)

Dollar Bonds• Prime Corporate Bonds• Commercial Papers

Foreign Exchange• Spot Transactions• Forward Transactions

PRODUCTS& SERVICES

Products and Services


TrustPersonal Trust Services• Living Trust Account• Individual Agency Accounts (IMA)• Administratorship• Executorship• Guardianship• Safekeeping• Escrow - Buy and Sell, Capital Gains,

POEA Corporate Trust Services• Institutional Agency Account (IMA)• Employee Benefi t Fund Management• Mortgage Trust Indenture• Loan Agency• Pre-Need Fund Management• Safekeeping• Escrow - Buy and Sell, POEA

Unit Investment Trust Funds• UCPB Cash Management Fund• UCPB Peso Bond Fund• UCPB Balanced Fund• UCPB High Dividend Fund• UCPB Equity Fund• UCPB US$ Money Market Fund

UCPB LEASING ANDFINANCE CORPORATION

Lease Financing• Financial Lease• Amortized Commercial Loan• Receivable Financing

UCPB SECURITIES, INC. Equities Trading – Philippine MarketLodgement of SecuritiesUpliftment of Securities

UCPB SAVINGS BANK, INC.

Deposits• Peso Accounts

- Passbook Peso Savings Account- ATM Savings Account- Stratifi ed Savings Account- Regular Current Account- Current Account with Automatic

Transfer Arrangement (ATA)- Cheque Plus

• Time Deposits- Certifi cate of Peso Time Deposit- Long Term Time Deposit

Cash Management• Conduit Clearing Arrangement• Deposit Pick up Service• Cash Delivery Service• Payroll Service Arrangement

Consumer Loans• Auto Loans

- Brand New/Second-hand- Refi nancing- Fleet Financing

• Real Estate Loans- Residential vacant lot, House and

lot, Townhouse, Condominium- Acquisition, Construction,

Refi nancing, Multi-Purpose Loan

• Personal Loans- Cash Loan- Salary Loan

• Branch Originated Loans- Back-to-Back Loan- Domestic Bills Purchase- Salary Loans- Payroll Service Plan Loan (PSPL) -

for public school teachers- Payroll Service Non Dep-Ed (PSND) –

for local government units- Time Plan Loan (TPL) – for private

entities- Cash Loan

Commercial Loans• Small Business Loans

- Term Loan- Promissory Note (PN) Line

• Short-Term Loans- Promissory Note (PN) Line- Check Discounting- Invoice Discounting

• Long-Term Loan

- Peso Term Loan - Contract-to-Sell (CTS) Financing- Purchase of Receivables

Other Services- Acceptance of PhilHealth Payments- Peso Telegraphic Transfer- Rental of Safety Deposit Box- Sale of Managers Check

PRODUCTS& SERVICES

111

STATEMENT OF MANAGEMENT’S RESPONSIBILITYFOR FINANCIAL STATEMENTS

The management of United Coconut Planters Bank and Subsidiaries (the “Group”) is responsible for the preparation and fair presentation of the fi nancial statements as of and for the years ended December 31, 2014 and 2013, including the additional components attached therein, in accordance with the prescribed fi nancial reporting framework indicated therein. This responsibility includes designing and implementing internal controls relevant to the preparation and fair presentation of the unconsolidated fi nancial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Board of Directors reviews and approves the unconsolidated fi nancial statements and submits the same to the stockholders.

R. G. Manabat & Co., the independent auditors appointed by the stockholders, has audited the fi nancial statements of the Group in accordance with Philippine Standards on Auditing, and in its report to the stockholders, has expressed its opinion on the fairness of presentation upon completion of such audit.

MENARDO R. JIMENEZChairman of the Board

JERONIMO U. KILAYKOPresident and Chief Executive Offi cer

CESAR A. RUBIOChief Finance Offi cer


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and the StockholdersUnited Coconut Planters Bank and Subsidiaries

Report on the Financial Statements

We have audited the accompanying consolidated fi nancial statements of United Coconut Planters Bank (the “Bank” or the “Parent Bank”) and Subsidiaries (collectively referred to as the “Group”) and the separate fi nancial statements of the Parent Bank, which comprise the consolidated and separate statements of fi nancial position as at December 31, 2014 and 2013, and the consolidated and separate statements of income, consolidated and separate statements of comprehensive income, consolidated and separate statements of changes in equity, and the consolidated and separate statements of cash fl ows for the years then ended, and notes, comprising a summary of signifi cant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated fi nancial statements of the Group and separate fi nancial statements of the Parent Bank in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated and separate fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated and separate fi nancial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate fi nancial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated and separate fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated and separate fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide the bases for our qualifi ed audit opinion.

Bases for Qualifi ed Opinion

As discussed in Note 1 to the fi nancial statements, the Parent Bank embarked on a 10-year Rehabilitation Plan (the “Rehabilitation Plan”) as part of the Financial Assistance Agreement entered into with the Philippine Deposit Insurance Corporation (PDIC) on July 7, 2003. The Rehabilitation Plan and subsequent amendments thereof allow the recording of certain items which, although allowed by the Bangko Sentral ng Pilipinas (BSP), are not in accordance with Philippine Financial Reporting Standards (PFRSs). The Rehabilitation Plan was approved by the BSP on January 10, 2005. On May 15, 2008, as endorsed by the PDIC, the Monetary Board of the BSP, in its Resolution No. 590, approved the amended Rehabilitation Plan of the Parent Bank which involves the following: (a) issuance of 12.0 billion Capital Notes to PDIC; (b) authority to accept deposits from the National Government, Local Government Units and

Government-Owned and Controlled Corporations; (c) staggered booking of unbooked valuation reserves and deferred charges for 10 years starting January 2008; (d) waiver of certain monetary penalties; and (e) continued access to the BSP rediscounting facility. On February 26, 2009, the Monetary Board of the BSP, in its Resolution No. 345, approved to defer the start of the staggered booking of the unbooked valuation reserves and deferred charges to January 1, 2009 and exempt the Parent Bank from sanctions that may be imposed for its non-compliance with the 10.0% capital adequacy ratio and all the capital-based regulatory ratios for the year 2008 until such time that the Parent Bank’s amended Rehabilitation Plan is fully implemented. As a result of the Parent Bank’s request to BSP relative to its recapitalization plan, on May 23, 2014, the Monetary Board in its Resolution No. 822, approved additional regulatory relief including the updating of its remaining unbooked valuation reserves and deferred charges using the outstanding balance of P18.6 billion based on an independent valuation commissioned by the Parent Bank, to be amortized on a straight line basis.

In relation to (a) above and as discussed in Note 25 to the fi nancial statements, the 12.0 billion Capital Notes issued to PDIC in 2009 should have been presented as a fi nancial liability and not as an equity instrument in the statements of fi nancial position because of its contingent settlement provision. As allowed by the BSP and in keeping with the objectives of the Rehabilitation Plan, the Parent Bank has presented the Capital Notes in the equity section of the statements of fi nancial position. Had the Parent Bank presented the Capital Notes as fi nancial liability, total liabilities would have increased and total equity would have decreased by 12.0 billion in the consolidated and separate statements of fi nancial position as at December 31, 2014 and 2013.

Audited Financial Report

113

In relation to (c) above under the amended Rehabilitation Plan as at December 31, 2008, (i) the Parent Bank did not book credit and impairment losses on AFS fi nancial assets, loans and receivables, investment properties, and other assets totaling 13.4 billion, and (ii) deferred the recognition of losses on sale and dacion en pago settlement totaling 15.7 billion. Pursuant to the amended Rehabilitation Plan, these 29.1 billion unbooked valuation reserves and deferred losses, which were determined using BSP rules and regulations on impairment provisioning as at December 31, 2008 have been booked by the Parent Bank on a staggered basis starting in 2009 as allowed and approved by the BSP. Accordingly, as discussed in Notes 1, 14 and 15, the Parent Bank recognized 3.7 billion and 2.6 billion of this amount in 2014 and 2013, respectively, by a charge to defi cit for each of the two years and not to the opening balance of surplus (defi cit) of the earliest year presented. PFRSs require the recognition of impairment and losses on sale and other forms of settlement losses in the period incurred.

As at December 31, 2014 and 2013, the remaining unbooked valuation reserves and deferred losses, based on the updated balance approved by the BSP in 2014 and the affordability table previously approved in 2008, amounted to 14.5 billion and 24.5 billion, respectively.

As discussed in Notes 14 and 15 to the fi nancial statements, under PFRSs, as at December 31, 2014 and 2013, the Parent Bank’s assets referred to in (i) above were determined to be impaired. The Parent Bank deferred the full recognition of the credit and impairment losses and instead recognized credit and impairment losses in its fi nancial statements in accordance with the BSP-approved staggered basis of recognition. PFRSs require the recognition of credit and impairment losses during the period when impairment was incurred. The booking of the losses arising from the sale of nonperforming loans (NPLs) and real and other properties acquired (ROPA) referred to in Note 14 and in (ii) of the preceding paragraph amounting to 14.1 billion and 16.0 billion as at December 31, 2014 and 2013, respectively, was deferred by the Parent Bank. PFRSs require the foregoing losses to be recognized in full in the period such losses were incurred. Had the Parent Bank recognized in full the credit and impairment losses and the losses arising from the foregoing sale of NPLs and ROPA in the years when these were incurred as required by PFRSs, total assets and equity in the consolidated and separate statements of fi nancial position would have decreased by 14.7 billion as at December 31, 2014, and net income in the consolidated and separate statements of income would have decreased by 575.5 million in 2014. Had the Parent Bank recognized in full the credit and impairment losses and the losses arising from the foregoing sale of NPLs and ROPA in the years when these were incurred as required by PFRSs, total assets and equity in the consolidated and separate statements of fi nancial position would have decreased by 16.0 billion as at December 31, 2013, and net income in the consolidated and separate statements of income would have increased by 12.7 million in 2013.

As discussed in Note 13 to the fi nancial statements, the Parent Bank did not recognize the related accumulated depreciation on certain investment properties referred to in (i) above in 2013 and prior years. In 2014, the Parent Bank recognized the accumulated depreciation amounting to 1.3 billion by a charge to defi cit of 2014 and not to the opening balance of surplus (defi cit) of the earliest year presented. The unrecognized accumulated depreciation in 2013 and prior years amounted to 1.4 billion. PFRSs require that depreciation expense be recognized on depreciable investment properties. Had the Parent Bank recognized the related accumulated depreciation on certain investment properties in the period when this was incurred, total assets and equity would have decreased by 1.4 billion as at December 31, 2013, and net income would have decreased by 37.0 million in 2013.

As discussed in Note 9, on various dates in 2011, the Parent Bank sold held-to-maturity (HTM) investments with aggregate carrying amount of 3.2 billion thereby realizing gains of 0.3 billion. As a result of these disposals, the Parent Bank is prohibited under PFRS from classifying any fi nancial asset as HTM investments in 2011 until 2013. However, the Monetary Board, in its Resolution No. 2141 dated December 20, 2012, approved the request of the Parent Bank to exempt its P28.0 billion investment in government securities classifi ed as HTM investments, which were funded from the 30.0 billion savings deposits maintained by the National Government with the Parent Bank as part of the concessions granted under the amended Rehabilitation Plan, as discussed in (b) above, from the “tainting provision” under Subsection x388.5(b) and Appendix 33 of the Manual of Regulations for Banks and retain classifi cation of such securities under the HTM investments portfolio. PFRSs require that tainted HTM investments be reclassifi ed to available-for-sale (AFS) fi nancial assets. At the end of the tainting period, these investments should be reclassifi ed from AFS fi nancial assets to HTM investments with the carrying value, i.e. the fair value of the AFS fi nancial assets at the time of the reclassifi cation as the new cost of the HTM investment. The net unrealized gain on the AFS fi nancial assets during the tainting period should then be amortized using the effective interest method over the remaining term of the securities. As at December 31, 2014 and 2013, the Parent Bank continues to classify these government securities with aggregate carrying amount of 27.9 billion and 28.0 billion, respectively, and fair value of 31.5 billion and 32.5 billion, respectively, as HTM investments. Had the Parent Bank reclassifi ed these investments to AFS fi nancial

assets during the tainting period and reclassifi ed the same to HTM investments once the tainting period lapsed, total assets and net unrealized gain on AFS fi nancial assets, which is included in the equity section of the statements of fi nancial position, of the Group and of the Parent Bank, would have increased by 3.6 billion and 4.6 billion as at December 31, 2014 and 2013, respectively, other comprehensive income would have increased by 82.8 million in 2013 and net income would have increased by 109.2 million in 2014.

Had the matters discussed in the preceding paragraphs been accounted for by the Parent Bank in accordance with PFRSs, total assets, liabilities and equity in the consolidated and separate statements of fi nancial position would have decreased by 11.1 billion, increased by 12.0 billion and decreased by 23.1 billion, respectively, as at December 31, 2014, and decreased by 12.8 billion, increased by 12.0 billion and decreased by 24.8 billion, respectively, as at December 31, 2013, and net income in the consolidated and separate statements of income would have decreased by 466.2 million and 49.7 million in 2014 and 2013, respectively.

Qualifi ed Opinion

In our opinion, except for the effects of the matters described in the Bases for Qualifi ed Opinion paragraphs, the consolidated fi nancial statements present fairly, in all material respects, the consolidated fi nancial position of the Group as at December 31, 2014 and 2013, and its consolidated fi nancial performance and its consolidated cash fl ows for the years then ended in accordance with Philippine Financial Reporting Standards. Also, in our opinion, except for the effects of the matters described in the Bases


for Qualifi ed Opinion paragraphs, the separate fi nancial statements of the Parent Bank present fairly, in all material respects, the unconsolidated fi nancial position of the Parent Bank as at December 31, 2014 and 2013, and its unconsolidated fi nancial performance and its unconsolidated cash fl ows for the years then ended in accordance with Philippine Financial Reporting Standards.

Emphasis of Matters

Without further qualifying our opinion, we draw attention to Notes 1,12, 25 and 29 to the fi nancial statements which discuss the Supreme Court decision on two cases involving (a) the ownership of certain sequestered shares in the Parent Bank by the Presidential Commission on Good Government (PCGG); and (b) the ownership over the Coconut Industry Investment Fund (CIIF) Companies, the Fourteen CIIF Holding Companies and the shares of stock in San Miguel Corporation (SMC) held by the Fourteen CIIF Holding Companies, together with all dividends declared, paid and issued thereon as well as any increments thereto arising from, but not limited to, exercise of pre-emptive rights, and the Executive Orders issued by the President of the Republic of the Philippines regarding the inventory, reconveyance, utilization and privatization of coco levy assets. The Executive Orders reference the Supreme Court decision that a majority of the sequestered shares of stock of the Parent Bank, which was paid from the Coconut Consumers Stabilization Fund, is owned by the Republic of the Philippines for the benefi t of the coconut farmers, thus making it a part of the coco levy assets. It also discusses that the recapitalization plan by way of privatization was approved by the President of the Republic of the Philippines. Since the impact on the Parent Bank and its subsidiaries of the Executive Orders and the Supreme Court decision, particularly the manner by which the reconveyance, utilization and privatization of the coco levy assets will be undertaken, including the recapitalization by way of privatization of the Parent Bank, cannot be fully assessed at this time, the Board of Directors and management believe that, as at December 31, 2014, it is reasonable to maintain the status quo and continue with the normal business operations of the Parent Bank including how it is accounting for and valuing its investment in the CIIF Companies.

Report on the Supplementary Information Required Under Revenue Regulations No. 15-2010 of the Bureau of Internal Revenue

Our audits were conducted for the purpose of forming an opinion on the basic separate fi nancial statements of the Parent Bank taken as a whole. The supplementary information in Note 35 to the fi nancial statements is presented for purposes of fi ling with the Bureau of Internal Revenue and is not a required part of the basic separate fi nancial statements of the Parent Bank. Such supplementary information is the responsibility of the management of the Parent Bank. The supplementary information has been subjected to the auditing procedures applied in our audits of the basic separate fi nancial statements of the Parent Bank. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic separate fi nancial statements of the Parent Bank taken as a whole.

R.G. MANABAT & CO.

CARMEL LYNNE M. BALDEPartnerCPA License No. 0099677BSP Accredited, Category A, valid until December 17, 2017SEC Accreditation No. 1055-A, Group A, valid until April 30, 2015Tax Identifi cation No. 205-133-498BIR Accreditation No. 08-001987-24-2014 Issued January 22, 2014; valid until January 21, 2017PTR No. 4748098MC Issued January 5, 2015 at Makati City

March 31, 2015Makati City, Metro Manila

CARMEL LYNNE M. BALDE

115 Audited Financial Report

UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESSTATEMENTS OF FINANCIAL POSITION

(Amounts in Thousands)

December 31

Consolidated Parent Bank

Note 2014 2013 2014 2013ASSETSCash and Other Cash Items 7,477,991 6,478,104 7,041,100 6,228,587Due from Bangko Sentral ng Pilipinas (BSP) 7, 33 41,903,197 67,708,866 40,645,833 66,068,191Due from Other Banks 7 2,253,958 1,885,130 2,165,147 1,782,435Interbank Loans Receivable and SPURA 8 11,808,804 1,260,277 11,308,804 1,260,277Financial Assets at Fair Value through Profit or

Loss 9 996,050 1,137,990 565,994 806,204

Available-for-Sale Financial Assets - net 9, 15 27,620,929 26,305,198 27,381,666 25,954,042Held-to-Maturity Investments - net 9 28,030,756 28,097,374 27,890,328 27,955,913Loans and Receivables - net 10, 15 115,953,528 105,577,237 102,713,602 94,586,982Property and Equipment - net 11, 34 1,960,134 2,135,154 1,725,918 1,945,415Investments in Subsidiaries and Associates - net 12, 15 8,755,071 8,622,301 3,376,121 4,088,540Investment Properties - net 13, 15 2,501,920 5,480,627 3,294,630 5,180,700Deferred Tax Assets - net 24 382,039 211,630 172,767 61,009Intangible and Other Assets - net 14, 15, 34 20,746,885 21,693,833 17,576,153 18,516,860

270,391,262 276,593,721 245,858,063 254,435,155

LIABILITIES AND EQUITYLiabilitiesDeposit Liabilities 16, 28

Demand 29,483,489 26,480,932 28,749,990 26,042,833Savings 130,065,581 123,334,081 127,364,039 120,652,463Time 51,508,390 73,345,095 45,804,972 68,170,043Long term negotiable certificates of deposits 9,484,079 9,463,973 9,484,078 9,463,973

220,541,539 232,624,081 211,403,079 224,329,312

Bills Payable and Securities Sold Under Repurchase Agreements 17 12,851,929 12,901,308 11,036,987 11,855,814

Retirement Liability 27 794,573 342,452 722,796 294,361Accrued Taxes, Interest and Other Expenses 18 594,993 644,006 534,281 603,081Income Tax Payable 65,363 59,636 6,314 1,798Deferred Tax Liabilities - net 24 19,961 21,102 — —Other Liabilities 19 16,173,034 10,582,313 15,075,748 9,543,862

251,041,392 257,174,898 238,779,205 246,628,228

EQUITYEquity Attributable to Equity Holders of the

Parent BankCommon stock 25 1,484,843 1,484,843 1,484,843 1,484,843Capital notes 25 12,000,000 12,000,000 12,000,000 12,000,000Surplus reserves 26 155,006 154,139 155,006 154,139Surplus (deficit) 6,674,374 7,265,220 (5,530,203) (4,273,974)Net unrealized losses on available-for-sale

financial assets 9 (474,240) (1,336,170) (516,728) (1,372,517)

Remeasurement losses on retirement plan (568,437) (233,644) (510,760) (199,758)Equity in net unrealized losses on available-for-

sale financial assets of associates 12 (269) (233) — —

Equity in remeasurement gains on retirement plans of associates 12 2,892 265 — —

Equity in cumulative translation adjustments of an associate 12 (94) 37 — —

Cumulative translation adjustments (3,300) 14,194 (3,300) 14,194

19,270,775 19,348,651 7,078,858 7,806,927

Non-controlling Interest 79,095 70,172 — —

19,349,870 19,418,823 7,078,858 7,806,927

270,391,262 276,593,721 245,858,063 254,435,155

See Notes to the Financial Statements.


UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESSTATEMENTS OF INCOME


Years Ended December 31


Note 2014 2013 2014 2013INTEREST INCOMELoans and receivables 10 7,849,042 6,964,582 6,403,865 5,696,746Trading and investment securities 9 3,542,147 3,547,927 3,500,010 3,517,138Due from BSP and other banks 7 310,148 251,064 305,794 245,461Interbank loans receivable and SPURA 8 32,178 2,872 3,759 2,403

11,733,515 10,766,445 10,213,428 9,461,748

INTEREST AND FINANCE CHARGESDeposit liabilities 16 2,430,832 2,662,768 2,301,944 2,549,087Bills payable 17 400,197 413,087 299,860 345,969

2,831,029 3,075,855 2,601,804 2,895,056

NET INTEREST INCOME 8,902,486 7,690,590 7,611,624 6,566,692

OTHER INCOME - Net

Trading and securities gains - net 9 174,234 1,427,321 144,481 1,420,996Service charges, fees and commissions 22 968,412 853,557 708,680 592,123Gains or assets sold 434,035 44,125 424,688 32,686Foreign exchange gains - net 125,688 161,916 125,686 161,906Income from trust operations 116,741 137,508 116,741 137,508Gains (losses) on foreclosures 45,404 (10,319) 27,388 (37,102)Miscellaneous 22 305,365 237,306 132,446 133,526

2,169,879 2,851,414 1,680,110 2,441,643

TOTAL OPERATING INCOME 11,072,365 10,542,004 9,291,734 9,008,335

OPERATING EXPENSESCompensation and fringe benefits 27 2,260,901 1,961,160 1,980,664 1,718,828Taxes and licenses 1,193,400 877,581 1,038,208 748,006Occupancy expense 598,209 591,168 540,534 537,058Depreciation and amortization 11, 13, 14 653,049 544,945 585,161 481,256Insurance 488,946 436,957 457,307 413,340Security, clerical and messengerial 443,333 417,224 411,069 388,452Credit and impairment losses 15 276,979 245,656 — 100,000Litigation and assets acquired 74,484 113,018 62,610 102,711Miscellaneous 23 975,868 960,750 866,209 851,967

6,965,169 6,148,459 5,941,762 5,341,618

INCOME BEFORE SHARE IN NET INCOME OF ASSOCIATES 4,107,196 4,393,545 3,349,972 3,666,717

SHARE IN NET INCOME OF ASSOCIATES 12 130,310 120,872 — —

INCOME BEFORE INCOME TAX 4,237,506 4,514,417 3,349,972 3,666,717

INCOME TAX EXPENSE 24 1,098,102 978,827 885,334 805,108

NET INCOME 3,139,404 3,535,590 2,464,638 2,861,609

Attributable to:

Equity holders of the Parent Bank 3,130,021 3,524,964 2,464,638 2,861,609Non-controlling interest 9,383 10,626 — —

3,139,404 3,535,590 2,464,638 2,861,609



UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESSTATEMENTS OF COMPREHENSIVE INCOME




Note 2014 2013 2014 2013

NET INCOME 3,139,404 3,535,590 2,464,638 2,861,609

OTHER COMPREHENSIVE INCOME (LOSS)Items that may not be reclassified to profit or

lossNet change in remeasurement losses on

retirement plan 27 (335,429) (18,817) (311,002) (13,836)

Net change in equity in remeasurement gains (losses) on retirement plans of associates 2,627 (1,955) — —

(332,802) (20,772) (311,002) (13,836)

Items that may be reclassified to profit or loss

Change in net unrealized gains (losses) on available-for-sale financial assets 9 862,106 (1,982,294) 855,789 (1,960,097)

Equity in net unrealized losses on available-for-sale financial assets of associates 12 (36) (1,153) — —

Translation adjustments (17,494) 15,962 (17,494) 15,962Equity in translation adjustments of associates 12 (131) (266) — —

844,445 (1,967,751) 838,295 (1,944,135)

511,643 (1,988,523) 527,293 (1,957,971)

TOTAL COMPREHENSIVE INCOME 3,651,047 1,547,067 2,991,931 903,638

Total comprehensive income attributable to:

Equity holders of the Parent Bank 3,642,124 1,536,893

Non-controlling interest 8,923 10,174

3,651,047 1,547,067



UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITY


Consolidated

Equity Attributable to Equity Holders of the Parent Bank

Other Comprehensive Income

Common Stock (Note 25)

Capital Notes(Note 25)

Surplus Reserves(Note 26) Surplus (Deficit)

Net UnrealizedGains (Losses)on Available-

for-Sale Financial Assets

(Note 9)

RemeasurementsLosses on

Retirement Plan(Note 27)

Equity in Net Unrealized

Losses on Available-for-Sale Financial

Assets of Associates(Note 12)

Equity in Remeasurement

Gains on Retirement Plans

of Associates(Note 12)

Equity in Cumulative Translation

Adjustments of an Associates

(Note 12)

Cumulative Translation

Adjustments TotalNon-controlling

Interest Total

Balance at January 1, 2014 1,484,843 12,000,000 154,139 7,265,220 ( 1,336,170) ( 233,644) ( 233) 265 37 14,194 19,348,651 70,172 19,418,823Amortization of unbooked valuation reserves and losses — — — (3,720,000) — — — — — — (3,720,000) — (3,720,000)Transfer of reserves — — 867 (867) — — — — — — — — —Net income — — — 3,130,021 — — — — — — 3,130,021 9,383 3,139,404Items that may not be reclassified to profit or loss:

Net change in remeasurement losses on retirement plan — — — — — (334,793) — — — — (334,793) (636) (335,429)Net change in equity in remeasurement gains (losses) on retirement plan of associates — — — — — — — 2,627 — — 2,627 — 2,627

Items that may be reclassified to profit or loss:Change in net unrealized gains (losses) on available-for-sale financial assets — — — — 861,930 — — — — — 861,930 176 862,106

Equity in net unrealized losses on available-for-sale financial assets of associates — — — — — — (36) — — — (36) — (36)

Translation adjustments — — — — — — — — — (17,494) (17,494) — (17,494)Equity in translation adjustments of an associate — — — — — — — — (131) — (131) — (131)

Total comprehensive income — — — 3,130,021 861,930 (334,793) (36) 2,627 (131) (17,494) 3,642,124 8,923 3,651,047Balance at December 31, 2014 1,484,843 12,000,000 155,006 6,674,374 ( 474,240) ( 568,437) ( 269) 2,892 ( 94) ( 3,300) 19,270,775 79,095 19,349,870

Forward

Consolidated

Equity Attributable to Equity Holders of the Parent Bank


Common Stock (Note 25)

Capital Notes(Note 25)

Surplus Reserves(Note 26) Surplus (Deficit)

Net UnrealizedGains (Losses)on Available-

for-Sale Financial Assets

(Note 9)



Equity in Net Unrealized

Losses on Available-for-Sale Financial

Assets of Associates(Note 12)

Equity in Remeasurement

Gains on Retirement Plans

of Associates(Note 12)

Equity in Cumulative Translation

Adjustments of an Associates(Note 12)


Adjustments TotalNon-controlling

Interest Total

Balance at January 1, 2013 1,484,843 12,000,000 149,664 6,364,731 645,801 ( 214,956) 920 2,220 303 ( 1,768) 20,431,758 59,998 20,491,756Amortization of unbooked valuation reserves and losses — — — (2,620,000) — — — — — — (2,620,000) — (2,620,000)Transfer of reserves — — 4,475 (4,475) — — — — — — — — — Net income — — — 3,524,964 — — — — — — 3,524,964 10,626 3,535,590 Items that may not be reclassified to profit or loss:

Net change in remeasurement losses on retirement plan — — — — — (18,688) — — — — (18,688) (129) (18,817)Net change in equity in remeasurement gains (losses) on retirement plan of associates — — — — — — — (1,955) — — (1,955) — (1,955)

Items that may be reclassified to profit or loss:Change in net unrealized gains (losses) on available-for-sale financial assets — — — — (1,981,971) — — — — — (1,981,971) (323) (1,982,294)

Equity in net unrealized losses on available-for-sale financial assets of associates — — — — — — (1,153) — — — (1,153) — (1,153)

Translation adjustments — — — — — — — — — 15,962 15,962 — 15,962Equity in translation adjustments of an associate — — — — — — — — (266) (266) — (266)

Total comprehensive income — — — 3,524,964 (1,981,971) (18,688) (1,153) (1,955) (266) 15,962 1,536,893 10,174 1,547,067Balance at December 31, 2013 1,484,843 12,000,000 154,139 7,265,220 ( 1,336,170) ( 233,644) ( 233) 265 37 14,194 19,348,651 70,172 19,418,823

Forward


119

UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITY


Parent Bank


Common Stock (Note 25)Capital Notes

(Note 25)Surplus Reserves

(Note 26) Surplus (Deficit)

NetUnrealized

Gains (Losses)on Available-

for-SaleFinancial Assets

(Note 9)




Adjustments Total

Balance at January 1, 2014 1,484,843 12,000,000 154,139 ( 4,273,974) ( 1,372,517) ( 199,758) 14,194 7,806,927

Amortization of unbooked valuation reserves and losses — — — (3,720,000) — — — (3,720,000)

Transfer of reserves — — 867 (867) — — — —Net income — — — 2,464,638 — — — 2,464,638Items that may not be reclassified to profit or loss:

Net change in equity in remeasurement gains (losses) on retirement plan — — — — — (311,002) — (311,002)Items that may be reclassified to profit or loss:

Change in net unrealized gains (losses) on available-for-sale financial assets — — — — 855,789 — — 855,789Translation adjustments — — — — — — (17,494) (17,494)

Total comprehensive income — — — 2,464,638 855,789 (311,002) (17,494) 2,991,931

Balance at December 31, 2014 1,484,843 12,000,000 155,006 5,530,203 ( 516,728) ( 510,760) ( 3,300) 7,078,858

Balance as of January 1, 2013 1,484,843 12,000,000 149,664 ( 4,511,108) 587,580 ( 185,922) ( 1,768) 9,523,289

Amortization of unbooked valuation reserves and losses — — — (2,620,000) — — — (2,620,000)

Transfer of reserves — — 4,475 (4,475) — — — —

Net income — — — 2,861,609 — -— — 2,861,609Item that may not be reclassified to profit or loss:

Net change in equity remeasurement gains (losses) on retirement plan — — — — — (13,836) — (13,836)

Items that may be reclassified to profit or loss:

Change in net unrealized gains (losses) on available-for-sale financial assets — — — — (1,960,097) — — (1,960,097)

Translation adjustments — — — — — — 15,962 15,962

Total comprehensive income — — — 2,861,609 (1,960,097) (13,836) 15,962 903,638

Balance at December 31, 2013 1,484,843 12,000,000 154,139 ( 4,273,974) ( 1,372,517) ( 199,758) 14,194 7,806,927


119Audited Financial Report


UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESSTATEMENTS OF CASH FLOWS


Years Ended December 31Consolidated Parent Bank

Note 2014 2013 2014 2013CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax 4,237,506 4,514,417 3,349,972 3,666,717Adjustments for:

Depreciation and amortization 11, 13, 14 653,049 544,945 585,161 481,256Credit and impairment losses 15 276,979 245,656 — 100,000Retirement expense charged to profit or loss 27 159,298 154,858 145,667 143,127Mark-to-market (gains) losses on financial assets

at fair value through profit or loss 9 (53,454) 106,222 (38,698) 92,896

Amortization of discounts on held-to-maturity investments 66,618 61,823 65,585 60,862

Amortization of discounts on long term negotiable certificates of deposits 16 20,106 20,106 20,106 20,106

(Gains) losses on foreclosures (45,404) 10,319 (27,388) 37,102Gains on assets sold (434,035) (44,125) (424,688) (32,686)Share in net income of associates 12 (130,310) (120,872) — —Contributions to retirement fund 27 (175,566) (141,315) (161,522) (127,272)Trading gains on available-for-sale financial assets 9 (132,617) (1,237,013) (129,532) (1,222,621)

Changes in operating assets and liabilities:Decrease (increase) in the amounts of:

Financial assets at fair value through profit or loss 195,394 (416,326) 278,909 (76,503)Loans and receivables (10,653,270) (17,450,160) (8,126,620) (15,089,272)Other assets (408,257) 78,253 (667,297) 79,471

Decrease (increase) in the amounts of:Deposit liabilities (12,102,649) 59,836,560 (12,946,338) 56,693,010Accrued taxes, interest and other expenses (49,014) (61,328) (68,800) (29,609)Other liabilities 5,590,722 1,213,613 5,531,886 1,012,282

Cash generated from (absorbed by) operations (12,984,904) 47,315,633 (12,613,597) 45,808,866Income taxes paid (1,130,529) (1,044,147) (859,289) (816,443)Net cash provided by (used in) operating activities (14,115,433) 46,271,486 (13,472,886) 44,992,423

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Available-for-sale financial assets (13,587,420) (58,415,454) (13,420,209) (58,115,455)Property and equipment 11 (437,549) (295,674) (339,807) (199,503)Software costs 14 (49,819) (139,530) (49,484) (138,280)

Investment in a subsidiary — — (125,000) — Proceeds from sale of:

Available-for-sale financial assets 13,030,873 54,554,000 12,742,369 54,354,633Property and equipment 215,435 16,335 158,070 11,480Investments properties 1,122,489 673,467 1,164,662 606,612

Net cash provided by (used in) investing activities 294,009 (3,606,856) 130,601 (3,480,513)

CASH FLOWS FROM FINANCING ACTIVITIESSettlements of bills payable ( 180,379,685) ( 122,414,413) ( 178,413,373) ( 119,630,779)Availments of bills payable 180,330,306 120,398,219 177,594,546 117,618,599

Net cash used in financing activities (49,379) (2,016,194) (818,827) (2,012,180)

TRANSLATION ADJUSTMENT (17,624) 15,695 (17,494) 15,962

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,888,427) 40,664,131 (14,178,606) 39,515,692

Forward




Note 2014 2013 2014 2013CASH AND CASH EQUIVALENTS AT BEGINNINGOF YEAR

Cash and other cash items 6,478,104 5,978,605 6,228,587 5,834,451Due from Bangko Sentral ng Pilipinas 7, 33 65,307,917 25,853,466 63,667,242 25,278,402Due from other banks 7 1,885,130 1,707,401 1,782,435 1,582,171Interbank loans receivable and securities purchased

under resale agreements 8, 33 1,260,277 727,825 1,260,277 727,825

74,931,428 34,267,297 72,938,541 33,422,849

CASH AND CASH EQUIVALENTS AT ENDOF YEAR

Cash and other cash items 7,477,991 6,478,104 7,041,100 6,228,587Due from Bangko Sentral ng Pilipinas 7, 33 39,502,248 65,307,917 38,244,884 63,667,242Due from other banks 7 2,253,958 1,885,130 2,165,147 1,782,435Interbank loans receivable and securities purchased

under resale agreements 8, 33 11,808,804 1,260,277 11,308,804 1,260,277

61,043,001 74,931,428 58,759,935 72,938,541

OPERATING CASH FLOWS FROM INTERESTInterest received 2,767,870 2,292,490 1,986,431 2,195,515Interest paid 8,062,300 9,042,626 10,163,761 9,042,626



UNITED COCONUT PLANTERS BANK AND SUBSIDIARIESNOTES TO FINANCIAL STATEMENTS

(Amounts in Thousands Except Number of Shares and Unless Otherwise Stated)

1. Corporate Information

United Coconut Planters Bank (the “Bank”, “UCPB” or the “Parent Bank”) is a universal bank incorporated in the Philippines on May 10, 1963. On January 26, 2012, the Board of Directors (BOD) approved the calling of a stockholders’ meeting of the Parent Bank to approve the extension of its corporate life. On May 2, 2012, a resolution was unanimously approved and adopted at a special meeting of stockholders, extending the life of the Parent Bank for another 50 years from and after May 10, 2013, and for this purpose, amending the Parent Bank’s Articles of Incorporation. On August 14, 2012, the Philippine Securities and Exchange Commission (SEC) approved the renewal of the Parent Bank’s corporate life for another 50 years up to 2063.

The Parent Bank and its subsidiaries (the “Group”) are engaged in all aspects of fi nancial services such as banking, fi nancing, leasing, real estate and stock brokering. As a bank, the Parent Bank is organized to provide expanded commercial banking services such as deposit products, loans and trade fi nance, domestic and foreign fund transfers, treasury, foreign exchange, investment banking and trust services. In addition, the Parent Bank is allowed by the Bangko Sentral ng Pilipinas (BSP) to engage in generally-authorized plain vanilla derivatives. The Parent Bank was authorized to engage in trust operations in June 1963 and in foreign currency deposit operations in October 1977. At the end of 2014, the Parent Bank and UCPB Savings Bank, Inc. (USB) have 188 and 40 branches, respectively, and 291 and 39 automated teller machines, respectively, located nationwide. The Parent Bank’s registered address and main offi ce is at UCPB Building, Makati Avenue, Makati City.

The following are the wholly and majority-owned subsidiaries of the Parent Bank as at December 31, 2014 and 2013:

Subsidiary

EffectivePercentage

of Ownership Principal Activity

Country ofIncorporation/

OperationFunctional

Currency

Real Estate:Balmoral Resources Corporation (BRC) 100.00 Real estate

developmentPhilippines Philippine peso

Green Homes Development, Inc (GHDI) 100.00 Real estate development

Philippines Philippine peso

UCPB Properties Macaria Homes Corporation (UPI-MHC)

100.00 Real estate development


Financial Markets:UCPB Leasing and Finance Corporation

(ULFC)100.00 Leasing and

financingPhilippines Philippine peso

United Foreign Exchange Corporation (UFEC) 100.00 Foreign exchange


UCPB Securities, Inc. (USI) 100.00 Stock brokering Philippines Philippine pesoUCPB Savings Bank, Inc.(USB) 97.37 Thrift banking Philippines Philippine peso

As banking institutions, the Parent Bank’s and USB’s operations are regulated and supervised by the BSP. In this regard, the Parent Bank and USB are required to comply with the rules and regulations of the BSP such as those relating to maintenance of reserve requirements on deposit liabilities and deposit substitutes and those relating to the adoption and use of safe and sound banking practices as promulgated by the BSP. The Parent Bank and USB are subject to the provisions of the General Banking Law of 2000 [Republic Act (RA) No. 8791].

Rehabilitation PlanOn July 7, 2003, the Parent Bank entered into a Financial Assistance Agreement (the “Agreement” or FAA) with the Philippine Deposit Insurance Corporation (PDIC). The fi nancial assistance from PDIC amounting to P20.0 billion has three components: a. 8.0 billion direct purchase of nonperforming loans;b. 7.0 billion in Tier 2 capital with a cost to the Parent Bank of 5.0% due in 2013; andc. 5.0 billion purchase of nonperforming loans with buyback by 2013.

On February 26, 2004, PDIC endorsed to the BSP for approval the Parent Bank’s 10-year Business/Rehabilitation Plan (the “Rehabilitation Plan”). Part of the Rehabilitation Plan is the Parent Bank’s business strategy that has the following elements: (1) separation of the “bad bank” from the “good bank”; (2) right-sizing and streamlining of operations to reduce costs;


and (3) capital-raising which aims to withstand the limitation brought about by the unresolved ownership issues. The BSP approved the Rehabilitation Plan on January 10, 2005, including the following concessions: (a) temporary relief by reducing the risk-weighted capital ratio to 8.0% for a period of three years up to 2007 or until such time that the Parent Bank is able to comply with the required 10.0% capital adequacy ratio (CAR), whichever comes earlier; and (b) staggered booking of required valuation reserves for 10 years.

Amendments to the Rehabilitation Plan and Conversion of PDIC Financial Assistance to Interim Tier 1 Capital NotesThe Monetary Board (MB), in its Resolution No. 590 dated May 15, 2008, decided to:

1. Approve the amended 10-Year Rehabilitation/Business Plan (2008-2017) of the Parent Bank and grant to the Parent Bank (the “Issuer”) the authority to issue 12.0 billion Interim Tier 1 Capital Notes (the “Capital Notes” or “Notes”) to PDIC which will qualify as Interim Tier 1 capital (Note 25), provided that:

a. The Capital Notes to be issued meet the minimum features under BSP Circular No. 595 dated January 11, 2008; and

b. UCPB’s Articles of Incorporation shall be amended to:

i. increase its authorized capital of 3.3 billion to an amount that will cover the amount of the Capital Notes; and

ii. remove the ownership limitation in the Parent Bank, which is 1.0% of the issued and outstanding preferred and common shares, for a stockholder who is not a stockholder as at December 31, 1979.

2. Grant to UCPB the following concessions:

a. Authority to accept deposits from the National Government (NG), Local Government Units (LGUs) and Government-Owned and Controlled Corporations (GOCCs), with the ceiling of 5.9 billion increased by the amount that the NG will deposit with the Parent Bank;

b. Consider the government securities (GS) purchased out of the 30.0 billion deposit of the NG as alternative/eligible compliance with the liquidity reserves and liquidity fl oor requirement;

c. Stagger the booking of the unbooked valuation reserves and deferred charges aggregating to 27.9 billion consistent with the Parent Bank’s approved 10-year Business/Rehabilitation Plan, provided that subsequent valuation reserves to be required in excess of the 27.9 billion shall be immediately booked and no dividend shall be declared while the concession is in effect;

d. Waiver of certain monetary penalties; and

e. Continued access to the BSP Rediscounting Facility, subject to a rediscount ceiling of 1.5 billion.

The aforementioned MB approval was further clarifi ed under MB Resolution No. 687 issued on June 17, 2008, which states that “UCPB’s Articles of Incorporation shall be amended prior to the conversion of the Capital Notes to capital stock”.

On May 15, 2008, the PDIC Board, in its Resolution No. 2008-05-073, approved the conversion of PDIC’s 12.0 billion Financial Assistance into Capital Notes eligible as Interim Tier 1 capital. On July 25, 2008, the Republic of the Philippines (ROP), PDIC, Presidential Commission on Good Government (PCGG) and the Parent Bank executed a Memorandum of Agreement (MOA), for the strengthening of the Parent Bank’s capital through the issuance of Capital Notes consistent with BSP rules and regulations, and subscription thereof by PDIC via the conversion of PDIC’s outstanding 2003 Financial Assistance of 12.0 billion. In addition, the MOA provides for the maintenance by the ROP of at least 25.0 billion but not to exceed 30.0 billion of deposits in the Parent Bank.

The government deposits shall be used to (i) establish and maintain a pool of government securities and (ii) open, as part of UCPB’s compliance with the statutory reserves on the government deposits, a demand deposit account (DDA) with the BSP. The aggregate of items (i) and (ii) shall at all times be in the same amount as the government deposits.

On March 31, 2009, the 2003 FAA and the Subscription Agreement were amended and signed, respectively, by the PDIC, UCPB and PCGG (only for Amended 2003 FAA). On the same date, the Parent Bank issued the Capital Notes, which has no maturity date and has the following features:

1. Dividend/Coupon Rate - Dividend/Coupon rates as follows:• 2.0% from April 1, 2009 to March 31, 2011;• 4.0% from April 1, 2011 to March 31, 2013; • 8.0% from April 1, 2013 to March 31, 2015;• 12.0% from April 1, 2015 to March 31, 2017; and• 14.0% from April 1, 2017 onwards.

The Issuer shall have full and absolute discretion: (i) whether or not to declare and pay coupons on the Notes, and (ii) over the amount and timing of coupon payments, in the event that, in the exercise of its discretion, the Issuer decides to declare and pay coupons. The Issuer shall, every time it declares and pays dividends on its common shares, likewise pay


coupons on the Notes. Coupons on the Notes may be declared and paid only: (i) to the extent that the Issuer has suffi cient profi ts and/or retained earnings distributable; and (ii) if, after such declaration and payment, the Issuer shall be able to meet the capital adequacy and liquidity thresholds, determined in accordance with BSP regulations prevailing at the time of declaration and payment of coupons.

Coupons on the Notes shall be non-cumulative. Moreover, the Issuer shall have full control and access to any waived coupon payments. The Notes have no step-up provisions in the coupon rate in conjunction with the redemption option.

2. Repayment/Redemption of the Capital Notes - Redemption of the Notes shall be subject to prior written BSP approval. The Capital Notes may be redeemed, in whole or in part, at the sole option of the Issuer, anytime after fi ve (5) years from the date of issuance of the Notes. However, the option granted to the Issuer may be exercised within fi ve (5) years from the date of issuance of the Notes upon the infusion of suffi cient capital which is neither smaller in size nor lower in quality than the Notes, unless the Issuer’s capital adequacy ratio remains more than adequate after redemption of the Notes. In the event of insolvency of the Issuer, the Holder shall be, immediately and without need for demand, entitled to repayment of the Notes.

3. Assignability - The Holder may assign or transfer the Capital Notes to any person or entity provided prior written notice of such assignment or transfer is given to the Issuer.

4. Conversion Right - At any time, the Holder of the Notes shall have the right to convert the Notes, in whole or in part, to Special Preferred Shares of the Issuer which, in turn, shall be convertible into Common Shares. The Issuer shall ensure that its Articles of Incorporation and By-laws shall be amended to accommodate all the rights of the Holder under the Notes. The conversion right provided herein shall be superior to the redemption option of the Issuer. Accordingly, in the event the Issuer serves notice to the Holder of the exercise of a redemption option, the Holder shall have 45 days to notify the Issuer and the BSP in writing that instead of being repaid pursuant to the redemption, the Holder shall instead convert the Notes to Special Preferred Shares.

5. Conversion Price - The Notes shall be convertible to Special Preferred Shares or Common Shares with an aggregate par value of 12.0 billion at the time of conversion.

6. Failure to Comply with Obligations - In case the Issuer fails to perform any of its material obligations under the Notes, including the conversion of the Notes into Special Preferred Shares or Common Shares, then the Notes shall become due and demandable, and the Holder shall have the following rights:

a) Collect the principal of the Notes in the amount of 12.0 billion and interest at the rate of 14.0%; and

b) Institute such proceedings to enforce any of the obligations of the Issuer if the Issuer continues to fail to perform its material obligation within 30 days from written notice of the Holder.

The Subscription Agreement includes an Insolvency of the Issuer clause with the following consequences:

a) If the Issuer becomes insolvent, PDIC shall, within fi fteen (15) days after it acquires knowledge of the occurrence of the Issuer’s insolvency, give the Issuer a written notice declaring all the Notes then outstanding, including all accrued coupon thereon, to be due and payable immediately, and upon any such declaration the same shall be immediately due and payable, subject only to subordination.

b) Paragraph (a) is further subject to the condition that PDIC may rescind and annul such declaration and its consequences, upon such terms, conditions, and agreements, if any, as it may determine, but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right of PDIC consequent thereto.

Subordination mentioned under paragraph (a) means that the Notes are not deposits of the Issuer and are not guaranteed or insured by the Issuer or any party related to the Issuer or covered by any other arrangement that legally or economically enhances the priority of the claim of the Holder as against the depositors, other creditors and holders of Lower Tier 2 and Upper Tier 2 capital instruments, if any, of the Issuer.

In order to accommodate the conversion of the Capital Notes to Special Preferred Shares or Common Shares, should the Holder of the Capital Notes decide to convert, the proposed amendment to the Parent Bank’s Articles of Incorporation was approved at the regular BOD meeting on April 28, 2009 with the written assent of at least 2/3 of the Parent Bank’s stockholders. The proposed amendments include:

a) Reclassifying (i) 1,002,829,769 unissued common shares of the Parent Bank and (ii) 750,000,000 unissued preferred shares of the Parent Bank, all with a par value of P1.00 per share, into 1,752,829,769 Special Preferred Shares;

b) Denying pre-emptive right over the issuance of special preferred and common shares for the conversion of special preferred shares and the Capital Notes; and

c) Deletion of ownership limitation in the Parent Bank, which is 1.0% of the issued and outstanding preferred and common shares, for a stockholder who is not a stockholder as at December 31, 1979.

In March 2011, the Parent Bank fi led with the SEC the application for the amended Articles of Incorporation to address these proposed amendments. The SEC approved the said amendments on May 10, 2011 (Note 25).


Staggered Booking of Required Valuation Reserves and Deferred ChargesOn February 26, 2009, the MB, in its Resolution No. 345, decided to:

1. Approve the year 2009 as the start of the 10-year rehabilitation period (2009-2018) of the Parent Bank instead of 2008 as contained in the Parent Bank’s Rehabilitation Plan approved by the MB under Resolution No. 590 dated May 15, 2008;

2. Exempt the Parent Bank from sanctions that may be imposed for its non-compliance with the 10.0% CAR and all the capital-based regulatory ratios for the year 2008 until such time that the Parent Bank’s Rehabilitation Plan is fully implemented; and

3. Approve the:

a. Reversal of all previous staggered bookings of unbooked valuation reserves and amortization of deferred losses, based on the Special Purpose Vehicle (SPV) formula that the Parent Bank has been providing starting 2007 in accordance with the original rehabilitation program approved by the BSP on January 10, 2005 (the Parent Bank’s Surplus as at January 1, 2008 was restated to consider the effect of the amortization of valuation reserves);

b. Deferment of any staggered booking or amortization of unbooked valuation reserves and deferred losses (UVR/DL) until the Parent Bank’s recapitalization is completely in place starting January 2009 and to accordingly revise the schedule of the staggered booking of unbooked valuation reserves and amortization of deferred losses following the concept of affordability per the latest approved business plan by the BSP; and

c. Temporary relief from full compliance with the required 10.0% CAR as provided under Section 34 of the General Banking Law of 2000 by reducing the Parent Bank’s CAR to 8.0% for a period of three years up to 2011 or until such time that the Parent Bank is able to comply with the required 10.0% CAR, whichever comes fi rst.

As at December 31, 2008, the unbooked valuation reserves that the Parent Bank will recognize on a staggered basis starting January 2009, as allowed by the BSP, amounted to 29.1 billion. This consists of the (a) 27.9 billion unbooked valuation reserves and deferred charges allowed to be staggered in the MB Resolution No. 590 dated May 15, 2008, and (b) 1.2 billion additional unbooked valuation reserves that will be recognized on a staggered basis arising from the reversal

of previously amortized valuation reserves due to the resetting of the start of amortization of the unbooked valuation reserves and deferred charges as allowed under MB Resolution No. 345 dated February 26, 2009. The unbooked valuation reserves and deferred charges were determined based on the criteria set by the BSP which differs from Philippine Financial Reporting Standards (PFRSs) in certain respects.

In 2013, UCPB set in motion its recapitalization plan by having, on December 18, 2013, a resolution unanimously approved and adopted at a special meeting of stockholders to increase its authorized capital stock within the range of P14.7 billion to 37.2 billion.

UCPB also requested certain regulatory reliefs from the BSP relative to its recapitalization plan. On May 23, 2014, the MB, in its Resolution No. 822, approved the following effective until December 31, 2018:

1. Exemption from compliance with Basel III capital requirements and to continue capital compliance under Basel II guidelines;

2. Continue the following regulatory reliefs granted pursuant to UCPB’s 10-year rehabilitation plan:

a. Recognition as interim Tier 1 capital of the P12.0 billion Capital Notes issued to the PDIC as long as the notes are outstanding and held by the PDIC;

b. Staggered booking of the remaining UVR/DL; and

c. To remain as a government depository bank, subject to compliance with applicable regulations of the Department of Finance.

3. Allow updating of its remaining UVR/DL using the outstanding 18.6 billion balance based on the Sycip Gorres Velayo & Co.’s (SGV & Co.) independent valuation, to be amortized on a straight line basis;

4. Exclusion from recapitalization transaction of UCPB’s proprietary interest in the Coconut Industry Investment Fund Oil Mills Group (CIIF-OMG) valued at 8.6 billion as at December 31, 2013 and representing 11% equity participation by providing full provision for losses thereon; and

5. Exemption from the requirement, as a universal bank, to list its shares in the Philippine Stock Exchange.

The MB further approved, in its resolution No. 823 dated May 22, 2014, the following additional regulatory reliefs:

1. To allow UCPB to open new branches even with Basel II capital adequacy ratio of at least 10 percent until December 2016; and

2. To waive the licensing fees for additional 50 branches, subject to compliance with the provisions on branch establishment under Section X151 of the Manual of regulations for banks, including branch processing fees.


The balance of unbooked valuation reserves and deferred charges amounted to nil and 14.1 billion, respectively as at December 31, 2014 and 2.6 billion and 16.0 billion, respectively as at December 31, 2013.

A portion of the sequestered shares of the Parent Bank was the subject of legal cases on which the Supreme Court has issued its fi nal decision in 2012 whereby such shares are declared conclusively owned by the Republic of the Philippines for the benefi t of the coconut farmers (Notes 12 and 25).

On March 18, 2015, President Benigno S. Aquino III of the Republic of the Philippines issued Executive Order No. 179 (Providing the Administrative Guidelines for the Inventory and Privatization of Coco Levy Assets) and No. 180 (Providing the Administrative Guidelines for the Reconveyance and Utilization of Coco Levy Assets for the Benefi t of the Coconut Farmers and the Development of the Coconut Industry, and For Other Purposes), together referred to as the “EOs”.

The EOs mandate the inventory, reconveyance, utilization and privatization of coco levy assets to ensure that the Coco Levy Fund and Coco Levy Assets will only be utilized for the benefi t of the coconut farmers and the Philippine coconut industry. The EOs defi ne coco levy funds as all funds created or sourced from the Coconut Levy imposed by the government, including the Coconut Industry Investment Fund (CIIF) and the Coconut Consumers Stabilization Fund (CCSF). The Parent Bank was appointed administrator of the CIIF under Presidential Decree (PD) No. 1468, s. 1978 “Revised Coconut Industry Code”. Coco levy assets meanwhile refer to the money, assets or properties, whether real or personal, tangible or intangible, wherever situated, arising from or otherwise funded by or acquired through the use or by means of any of the coco levy funds, directly or indirectly, including but not limited to shares, rights, and interests, whether vested, contingent, expectant, choate or inchoate, and any and all fruits, income, interest, or profi ts derived from these assets including those acquired in exchange or substitution thereof. The EOs reference the Supreme Court decision that a majority of the sequestered shares of stock of the Parent Bank, which was paid from the CCSF, is owned by the Republic of the Philippines for the benefi t of the coconut farmers, thus making it a part of the coco levy assets.

Also on March 18, 2015, the Offi ce of the President approved the recapitalization of the Parent Bank, by way of privatization, to be implemented by a Committee composed of representatives from the Governance Commission for Government-Owned or Controlled Corporations (GCG), PDIC, PCGG, Privatization and Management Offi ce (PMO), and UCPB.

While the implementation of the EOs and the Supreme Court decision, particularly the manner by which the reconveyance, utilization and privatization of the Coco Levy Assets will be undertaken, including the recapitalization by way of privatization of the Parent Bank, has not yet been defi ned by the implementing authorities, the BOD and Management believes that, as at December 31, 2014, it is reasonable to maintain the status quo and continue with the normal business operations of the Parent Bank, its subsidiaries and associates. Moving forward, the impact on the Group of the EOs, the Supreme Court decision, as well as the recapitalization of the Parent Bank, will be assessed by the Board and Management. Furthermore, the Parent Bank believes that, as at December 31, 2014, it is reasonable to maintain the status quo in its accounting for its investments in associates.

2. Basis of Preparation

Statement of ComplianceThe accompanying fi nancial statements have been prepared in accordance with PFRSs, except for the following accounting treatments which were permitted by the BSP for prudential reporting purposes:

• staggered amortization of unbooked valuation reserves (UVR) and deferred losses (DL) on sale and dacion en pago settlement (Note 1);

• presentation of Interim Tier 1 Capital Notes as an equity instrument instead of as a fi nancial liability in the statements of fi nancial position (Notes 1 and 25); and

• non-reclassifi cation of held-to-maturity (HTM) investments, comprising mainly of government securities bought using the 30.0 billion deposit of the NG with the Parent Bank, as HTM investments as at December 31, 2013 to AFS fi nancial assets

despite breaching the tainting rule of PAS 39, Financial Instruments: Recognition and Measurement in 2011 (Note 9).

PFRSs are based on International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board. PFRSs consist of PFRSs, Philippine Accounting Standards (PASs), and Philippine Interpretations issued by the Financial Reporting Standards Council.

The consolidated fi nancial statements of the Group and the separate fi nancial statements of the Parent Bank were authorized for issue by the BOD on March 31, 2015.


Basis of MeasurementThe fi nancial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date:

Items Measurement Bases

Financial assets and liabilities at fair value through profi t or loss (FVPL)

Fair value

Available-for-sale (AFS) fi nancial assets Fair value

Retirement asset/liability Fair value of plan assets less present value of the defi ned benefi t obligation

Functional and Presentation CurrencyThe fi nancial statements of the Parent Bank refl ect the accounts maintained in the Regular Banking Unit (RBU) and Foreign Currency Deposit Unit (FCDU). The fi nancial statements individually prepared for these units are combined after eliminating inter-unit accounts.

The functional currency of the RBU and FCDU is the Philippine peso (PHP) and United States dollar (USD), respectively. For fi nancial reporting purposes, FCDU accounts and foreign currency-denominated accounts in the RBU are translated into their equivalents in Philippine peso (Note 3, Foreign Currency Translation).

Each entity in the Group determines its own functional currency and items included in the fi nancial statements of each entity are measured using that functional currency. The functional currency of all the subsidiaries is the Philippine peso.

The consolidated fi nancial statements of the Group and separate fi nancial statements of the Parent Bank are presented in Philippine peso, and all values are rounded off to the nearest thousand pesos ( 000) except as otherwise indicated.

Basis for ConsolidationThe consolidated fi nancial statements of the Group include the fi nancial statements of the Parent Bank and the wholly- and majority-owned subsidiaries of the Parent Bank as disclosed in Note 1.

The fi nancial statements of the subsidiaries are prepared for the same reporting period as those of the Parent Bank, using consistent accounting policies.

All signifi cant intra-group balances, transactions, income and expenses, and profi ts and losses resulting from intra-group transactions are eliminated in full.

Subsidiaries are fully consolidated from the date when control is transferred to the Parent Bank. Control is achieved when the Parent Bank is exposed to, or has rights, to variable returns through its power over an entity and has the ability to affect those returns through its power over the entity. The Parent Bank, to have power over an entity, must have the practical ability to exercise those rights. In the same situations where potential voting rights exist, these are taken into account if the Parent Bank has the practical ability to exercise those rights.

Where voting rights are not relevant in deciding whether the Parent Bank has power over an entity, the assessment of control is based on all facts and circumstances. Where it is not immediately clear where control rests, an analysis of the purpose and design of the entity, including determining which party has power over the activities which most affect its returns and whether there are any additional rights held that may confer such power, is undertaken.

The acquisition method of accounting is used when subsidiaries are acquired by the Parent Bank. The cost of an acquisition is measured at the fair value of the consideration, including contingent consideration, given at the date of exchange. Acquisition-related costs are recognized as an expense in the statements of income in the period in which they are incurred. The acquired identifi able assets, liabilities, and contingent liabilities are generally measured at their fair values at the date of acquisition. The results of operations and other comprehensive income of subsidiaries acquired or disposed of during the year are included in the consolidated statements of income and statements of comprehensive income, respectively, from the date of acquisition or up to the date of disposal, as appropriate. Consolidation of subsidiaries ceases when control is transferred out of the Group.

The Parent Bank re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

The results of subsidiaries acquired or disposed of are included in the consolidated statements of income up to the date of disposal. When a change in ownership interest in a subsidiary occurs which results in loss of control over the subsidiary, the Parent Bank:

• derecognizes the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost;

• derecognizes the carrying amount of any non-controlling interest in the former subsidiary at the date when control is lost (including any components of other comprehensive income (OCI) attributable to them);


• reclassifi es to statements of income, or transfers directly to surplus (defi cit) if required by other PFRSs, the amounts recognized in OCI in relation to the subsidiary;

• recognizes the fair value of the consideration received, if any, from the transaction, event or circumstance that resulted in the loss of control;

• recognizes the fair value of any investment retained; and

• recognizes any resulting difference as a gain or loss in statements of income.

Until December 31, 2010, UCPB Properties, Inc. (UPI) was a wholly-owned subsidiary of the Parent Bank. On March 1 and 23, 2011, the BOD and stockholders of UPI and BRC, respectively, approved a Plan of Merger where UPI shall be merged into and be part of BRC, and its separate corporate existence shall cease by operation of law effective January 1, 2011. On July 13, 2011, the SEC approved the Certifi cate of Filing of the Articles and Plan of Merger. The merger was accounted for in accordance with the pooling of interest method where the identifi able assets acquired and liabilities assumed from UPI were recognized by BRC at their carrying values in UPI’s books.

On June 2, 2011, the Parent Bank’s interest in UPI-MHC increased from 50% to 100% (Note 12).

In the Parent Bank’s separate fi nancial statements, investments in subsidiaries are carried at cost, less accumulated impairment in value. Dividends earned are reported as dividend income when the right to receive the payment is established (i.e. the date of shareholders’ approval).

Non-controlling InterestsNon-controlling interests represent the portion of statements of income, other comprehensive income and the net assets not owned, directly or indirectly, by the Group and are presented separately in the consolidated statements of income, consolidated statements of comprehensive income and within equity in the consolidated statements of fi nancial position, separately from equity attributable to the Parent Bank. Any losses applicable to the non-controlling interests are allocated against the interests of the non-controlling interest even if this results in the non-controlling interests having a defi cit balance.

Changes in Parent Bank’s ownership interest in a subsidiary that do not result in the Parent Bank losing control of the subsidiary are treated as equity transactions with owners of the Parent Bank.

3. Summary of Signifi cant Accounting Policies

The accounting policies set out below have been applied consistently to all years presented in these fi nancial statements, and have been applied consistently by the Group, except for the changes in accounting policies as explained below.

Adoption of New or Revised Standards, Amendments to Standards and InterpretationsThe Group and the Parent Bank have adopted the following amendments to standards beginning January 1, 2014, and accordingly changed its accounting policies. Except as otherwise indicated, the adoption of these amendments to standards did not have any signifi cant impact on the Group’s and the Parent Bank’s fi nancial statements.

• Offsetting Financial Assets and Financial Liabilities (Amendments to PAS 32, Financial Instruments: Presentation). These amendments clarify that:

• an entity currently has a legally enforceable right to set-off if that right is:- not contingent on a future event; and- enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the

entity and all counterparties; and • gross settlement is equivalent to net settlement if and only if the gross settlement mechanism has features that:

- eliminate or result in insignifi cant credit and liquidity risk; and- process receivables and payables in a single settlement process or cycle.

• Measurement of Short-term Receivables and Payables (Amendment to PFRS 13, Fair Value Measurement). Amendment to PFRS 13, Fair Value Measurement, is part of the Annual Improvements to PFRS 2010-2012 Cycle. The amendment clarifi es that, in issuing PFRS 13 and making consequential amendments to PAS 39, Financial Instruments: Recognition and Measurement, and PFRS 9, Financial Instruments, the intention is not to prevent entities from measuring short-term receivables and payables with no stated interest rate at their invoiced amounts without discounting, if the effect of not discounting is immaterial.

• Recoverable Amount Disclosures for Non-Financial Assets (Amendments to PAS 36, Impairment of Non-fi nancial Assets). These narrow-scope amendments to PAS 36, address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments clarifi ed that the scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal.


Foreign Currency TranslationEach entity in the Group determines its own functional currency and items included in the fi nancial statements of each entity are measured using that functional currency. The functional currency of the Parent Bank’s subsidiaries is the Philippine peso.

The fi nancial statements of the Parent Bank refl ect the accounts maintained in the RBU and FCDU with functional currencies of Philippine peso and USD, respectively.

Transactions in foreign currencies are initially recorded at the functional rate of exchange at the date of transaction. Foreign currency-denominated monetary assets and liabilities of the Group are translated into their respective functional currencies based on the Philippine Dealing System (PDS) closing rate prevailing as at the reporting date and PDS weighted average rate (PDSWAR) for the reporting period for income and expenses. Foreign exchange differences arising from foreign currency transactions and restatements of foreign currency-denominated assets and liabilities are credited or charged against the statements of income in the period in which the rates change.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

As at the reporting date, the assets and liabilities of the FCDU of the Parent Bank are translated from its functional currency into the Parent Bank’s presentation currency, the Philippine peso, at PDS closing rate prevailing at the reporting date, and their income and expenses are translated at PDSWAR for the year. Exchange differences arising from translation of the FCDU balances to the functional currency of the Parent Bank are taken directly to the statements of the comprehensive income. Upon remittance of the FCDU’s net income to the RBU, the deferred cumulative amount recognized in the statements of comprehensive is recognized under the “Foreign exchange gains - net” in the statements of income.

Financial Instruments - Recognition and MeasurementDate of RecognitionRegular way purchases and sales of fi nancial assets that require delivery of assets within the time frame generally established by regulation or convention in the market, except for derivatives, are recognized on the settlement date. Settlement date is the date when the transaction is settled by delivery of the assets that are the subject of the agreement. Settlement date accounting refers to: (a) the recognition of an asset on the day it is received by the Group, and (b) the derecognition of an asset and recognition of any gain or loss on disposal on the day that it is delivered by the Group. Any change in the fair value of the fi nancial asset to be received is recognized in the statements of income for fi nancial assets at FVPL and in the statements of comprehensive income for AFS fi nancial assets. Deposits, amounts due to banks and customers, loans and receivables and spot transactions are recognized when cash is received by the Group or advanced to the borrowers.

Derivatives are recognized on trade date - the date that the Group becomes a party to the contractual provisions of the instrument. Trade date accounting refers to: (a) the recognition of an asset to be received and the liability to pay for it on the trade date, and (b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

Initial Recognition of Financial InstrumentsThe classifi cation of fi nancial instruments at initial recognition depends on the purpose for which the fi nancial instruments were acquired or incurred and whether they are quoted in an active market, and for HTM investments, the ability and intention to hold the investment until maturity. All fi nancial assets and fi nancial liabilities are recognized initially at fair value plus any directly attributable cost of acquisition or issue, except in the case of fi nancial assets and fi nancial liabilities at FVPL. The Group categorizes its fi nancial assets as: fi nancial assets at FVPL, differentiating those that are held-for-trading (HFT) and those designated as such, HTM investments, AFS fi nancial assets, and loans and receivables. Financial liabilities are categorized into fi nancial liabilities at FVPL and other fi nancial liabilities. Management determines the classifi cation on an instrument-by-instrument basis at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

Deposit Liabilities to the GovernmentAs allowed by Philippine Interpretations Committee (PIC) Q&A No. 2008-02, Accounting for Government Loans with Low Interest Rates, the Parent Bank initially recognized the deposit liabilities received as part of the Rehabilitation Plan at nominal amounts and these are not revalued.

Fair Value MeasurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability refl ects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with suffi cient frequency and volume to provide pricing information on an ongoing basis.


If there is no quoted price in an active market, then the Group uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The fair value measurement of a non-fi nancial asset takes into account a market participant’s ability to generate economic benefi ts by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

‘Day 1’ Difference Where the transaction price in a non-active market is different from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable market, the Company recognizes the difference between the transaction price and fair value (a ‘Day 1’ difference) in the statements of income. In cases where non-market observable data is used, the difference between the transactions price and model value is only recognized in the separate statements of comprehensive income when the inputs become observable or when the instrument is derecognized. For each transaction, the Company determines the appropriate method of recognizing the ‘Day 1’ difference amount. Subsequently, that difference is recognized in the statements of income on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

Financial Assets or Financial Liabilities at FVPLThis category includes HFT fi nancial assets, fi nancial assets or liabilities designated at FVPL and derivatives recorded at FVPL.

a. HFT Financial AssetsHFT fi nancial assets are recorded in the statements of fi nancial position at fair value. Changes in fair value relating to the HFT positions are recognized in the statements of income under “Trading and securities gains - net” account. Interest earned or incurred is recognized as “Interest income” or “Interest and fi nance charges,” respectively, in the statements of income, while dividends earned are recognized as Dividends included under “Miscellaneous income” account when the right to receive payment has been established.

Included in this classifi cation are the Group’s investments in debt and equity securities which have been acquired principally for the purpose of selling in the near term.

b. Financial Assets or Liabilities Designated at FVPLFinancial assets and liabilities classifi ed in this category are designated by management on initial recognition. Management may only designate an instrument at FVPL upon initial recognition when the following criteria are met, and designation is determined on an instrument-by-instrument basis:

• The designation eliminates or signifi cantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or

• The assets and liabilities are part of a group of fi nancial assets, fi nancial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

• The fi nancial instrument contains an embedded derivative, unless the embedded derivative does not signifi cantly modify the cash fl ows or it is clear, with little or no analysis, that it would not be separately recorded.

Financial instruments designated at FVPL are initially recognized in the statements of fi nancial position at fair value. Changes in fair value on fi nancial instruments designated at FVPL are recorded in “Trading and securities gains - net” in the statements of income. Interest earned or incurred is recognized as “Interest income” or “Interest expense,” respectively, in the statements of income.

As at December 31, 2014 and 2013, the Group does not have fi nancial assets or fi nancial liabilities designated at FVPL.

c. Derivatives Recorded at FVPLThe Parent Bank is a counterparty to derivative contracts, such as foreign exchange forward contracts. These derivatives are entered into as a service to customers, as a means of reducing or managing their respective foreign exchange exposures and for trading purposes. Such derivative fi nancial instruments are initially recorded at fair value on the date when the derivative contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising from changes in fair values of derivatives (except those accounted for as accounting cash fl ow hedges and hedges in net investment in foreign operation) are taken directly to “Trading and securities gains - net” in the statements of income. Derivatives are carried as assets when the fair value is positive and liabilities when the fair value is negative.

AFS Financial AssetsAFS fi nancial assets are those which are designated as such or do not qualify to be classifi ed as fi nancial assets at FVPL, HTM investments or loans and receivables. These are purchased and held indefi nitely, and may be sold in response to liquidity requirements or changes in market conditions. Included in this classifi cation are the Group’s investments in government and private debt securities and quoted and unquoted equity securities. Unquoted equity securities are carried at cost less impairment in value, if any.


After initial measurement, AFS fi nancial assets are subsequently measured at fair value. The effective yield component of AFS debt securities, as well as the impact of restatement on foreign currency-denominated AFS debt securities, is reported in the statements of income. The unrealized gains and losses arising from the fair valuation of AFS fi nancial assets are excluded, net of tax, from reported earnings and are recognized as OCI and accumulated in “Net unrealized losses on available-for-sale fi nancial assets” account in the equity section of the statements of fi nancial position.

When the instrument is disposed of, the cumulative gain or loss previously recognized in OCI is recognized as “Trading and securities gains - net” in the statements of income as a reclassifi cation adjustment. Where the Group holds more than one investment in the same security, these are deemed to be disposed of on a specifi c identifi cation basis.

Interest earned on holding AFS fi nancial assets are reported as “Interest income” using the effective interest method. Dividends earned on holding AFS fi nancial assets are recognized in the statements of income as Dividends included under “Miscellaneous income” account when the right to receive payment has been established. This is the ex-dividend date for listed equity securities and the date of shareholders approval for unlisted equity securities. The losses arising from impairment of such investments are recognized as part of the “Credit and impairment losses” account in the statements of income.

HTM InvestmentsHTM investments are quoted non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturities for which the Group’s management has the positive intention and ability to hold to maturity. After initial measurement, these investments are carried at amortized cost using the effective interest method, less any impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate (EIR). The amortization is included in “Interest income” in the statements of income. The losses arising from impairment of such investments are recognized in the statements of income under “Credit and impairment losses”. The effects of restatement on foreign currency-denominated HTM investments are recognized in the statements of income.

If the Group was to sell more than an insignifi cant amount of HTM investments before maturity (other than in certain specifi c circumstances), the entire category would be tainted and would have to be reclassifi ed as AFS fi nancial assets. Furthermore, the Group would be prohibited to classify any fi nancial assets as HTM investments for the following two years.

If the tainting period (i.e. two full fi nancial years) has already passed, it becomes appropriate to reclassify the AFS fi nancial assets back to HTM investments. The fair value of the AFS fi nancial asset on the date of reclassifi cation becomes its new cost. Any previous gain or loss on that asset that has been recognized in other comprehensive income shall be amortized to profi t or loss over the remaining life of the HTM investment using the effective interest method. Any difference between the new cost and maturity amount shall also be amortized over the remaining life of the fi nancial asset using the effective interest method, similar to the amortization of a premium and a discount. If the fi nancial asset is subsequently impaired, any gain or loss that has been recognized in other comprehensive income is reclassifi ed from equity to profi t or loss.

Loans and Receivables, Cash and Other Cash Items, Due From BSP and Other Banks, Interbank Loans Receivables and Securities Purchased under Resale Agreements (SPURA)

These are fi nancial assets with fi xed or determinable payments and fi xed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and as such are not categorized as fi nancial assets at FVPL or AFS fi nancial assets. They also do not include those for which the Group may not recover substantially all of its initial investments, other than because of credit deterioration.

After initial measurement, loans and receivables are subsequently measured at amortized cost using the effective interest method, less allowance for credit and impairment losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in “Interest income” in the statements of income. The losses arising from impairment are recognized in “Credit and impairment losses” in the statements of income.

Loans and receivables include cash and other cash items, due from BSP and other banks, interbank loans receivables and SPURA.

Cash and Cash EquivalentsFor purposes of reporting cash fl ows, cash and cash equivalents consist of cash and other cash items, due from BSP and other banks, interbank loans receivable and SPURA with the BSP that are convertible to known amounts of cash, with original maturities of three (3) months or less from dates of placements and that are subject to insignifi cant risk of changes in value.

Repurchase and Reverse Repurchase AgreementsSecurities sold under agreements to repurchase at a specifi ed future date (‘repos’) are not derecognized from the statements of fi nancial position. The corresponding cash received, including accrued interest, is recognized in the statements of fi nancial position as securities sold under repurchase agreements (SSURA) under “Bills Payable and Securities Sold Under Repurchase Agreements” and is considered as a loan to the Group, refl ecting the economic substance of such transaction.


Conversely, securities purchased under agreements to resell at a specifi ed future date (‘reverse repos’) are not recognized in the statements of fi nancial position. The corresponding cash paid including accrued interest, is recognized in the statements of fi nancial position as SPURA under “Interbank Loans Receivables”, and is considered a loan to the counterparty with the securities considered as collateral. The difference between the purchase price and resale price is treated as interest income and is accrued over the life of the agreement using the effective interest method.

Other Financial LiabilitiesIssued fi nancial instruments or their components, which are not designated at FVPL, are classifi ed as liabilities under deposit liabilities, bills payable and SSURA or other appropriate fi nancial liability accounts, where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another fi nancial asset to the holder, or to satisfy the obligation other than by the exchange of a fi xed amount of cash or another fi nancial asset for a fi xed number of own equity shares. The components of issued fi nancial instruments that contain both liability and equity elements are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component on the date of issue.

After initial measurement, other fi nancial liabilities not qualifi ed as and not designated at FVPL, are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR.

Reclassifi cation of Financial AssetsA fi nancial asset is reclassifi ed out of the FVPL category when the following conditions are met:

• the fi nancial asset is no longer held for the purpose of selling or repurchasing it in the near term; and

• there is a rare circumstance.

A fi nancial asset that is reclassifi ed out of the FVPL category is reclassifi ed at its fair value on the date of reclassifi cation. Any gain or loss already recognized in the statements of income is not reversed. The fair value of the fi nancial asset on the date of reclassifi cation becomes its new cost or amortized cost, as applicable.

For a fi nancial asset reclassifi ed out of the AFS fi nancial assets category to loans and receivables or HTM investments, any previous gain or loss on that asset that has been recognized in OCI is amortized to the statements of income over the remaining life of the investment using the effective interest method.

Any difference between the new amortized cost and the expected cash fl ows is also amortized over the remaining life of the asset using the effective interest method. If the asset is subsequently determined to be impaired then the amount recorded in equity is recycled to the statements of income.

Derecognition of Financial Assets and LiabilitiesFinancial AssetsA fi nancial asset (or, where applicable a part of a fi nancial asset or part of a group of fi nancial assets) is derecognized when:

• the rights to receive cash fl ows from the asset have expired; or

• the Group retains the right to receive cash fl ows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the Group has transferred its rights to receive cash fl ows from the asset and either: (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained the risks and rewards of the asset but has transferred the control of the asset.

Where the Group has transferred its rights to receive cash fl ows from an asset or has entered into a “pass-through” arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial LiabilitiesA fi nancial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statements of income.

Impairment of Financial AssetsThe Group assesses at each reporting date whether there is objective evidence that a fi nancial asset or a group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has (have) an impact on the estimated future cash fl ows


of the fi nancial asset or the group of fi nancial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing signifi cant fi nancial diffi culty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other fi nancial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash fl ows, such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortized CostFor fi nancial assets carried at amortized cost, which includes HTM investments and loans and receivables, the Group fi rst assesses whether objective evidence of impairment exists individually for fi nancial assets that are individually signifi cant, or collectively for fi nancial assets that are not individually signifi cant.

For individually assessed fi nancial assets, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows (excluding future credit losses that have not been incurred). The present value of the estimated future cash fl ows is discounted at the fi nancial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR, adjusted for the original credit risk premium. The calculation of the present value of the estimated future cash fl ows of a collateralized fi nancial asset refl ects the cash fl ows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is recognized as “Credit and impairment losses” in the statements of income. Interest income continues to be recognized based on the original EIR of the asset.

If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is credited to “Credit and impairment losses” in the statements of income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

A write-off is made when all or part of a claim is deemed uncollectible. Write-offs are charged against previously established allowance for credit losses. Recoveries in part or in full of amounts previously written off are credited to “Miscellaneous income” account in the statements of income.

If the Group determined that no objective evidence of impairment exists for an individually assessed fi nancial asset, whether signifi cant or not, it includes the asset in a group of fi nancial assets with similar credit risk characteristics and that group of fi nancial assets is collectively assessed for impairment. Those characteristics are relevant to the estimation of future cash fl ows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.

For the purpose of a collective evaluation of impairment, fi nancial assets are grouped on the basis of the industry of the borrower. Future cash fl ows in a group of fi nancial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to refl ect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash fl ows refl ect, and are directionally consistent with changes in related observable data from period to period (such changes in property prices, payment status, or other factors that are indicative of incurred losses in the Group and their magnitude). The methodology and assumptions used for estimating future cash fl ows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

Certain consumer loans are assessed for impairment collectively because these receivables are not individually signifi cant. The allowance for impairment losses is determined based on the results of the net fl ow to write-off methodology. Net fl ow tables are derived from account-level monitoring of monthly peso movements between different age buckets, from one day past due to 360 days past due. The net fl ow to write-off methodology relies on the historical data of net fl ow tables to establish a percentage (“net fl ow rate”) of receivables that are current or in any state of delinquency (i.e. 30, 60, 90, 120, 150, 180 and 360 days past due) as at reporting date that will eventually result in write-off. The gross provision is then computed based on the outstanding balances of receivables as at the reporting date and the net fl ow rates determined for the current and each delinquency bucket.

The carrying amount of the fi nancial asset at amortized cost is reduced by the impairment loss (included under “Credit and impairment losses”) directly for all fi nancial assets at amortized cost with the exception of Loans and receivables, where the carrying amount is reduced through the use of an allowance account. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collaterals have been realized. The amount of impairment loss is recognized as “Credit and impairment losses” in the statements of income.

Restructured LoansWhere possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews restructured loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR. The difference between the recorded value of the original loan and the


present value of the restructured cash fl ows, discounted at the original EIR, is recognized in “Credit and impairment losses” in the statements of income.

If a renegotiation or modifi cation of terms of an existing loan agreement is such that the cash fl ows of the modifi ed loan agreement are substantially different from those of the original loan agreement, then the original loan agreement is derecognized and the modifi ed fi nancial asset is recognized as a new loan agreement and initially measured at fair value.

AFS Financial AssetsFor AFS fi nancial assets, the Group assesses at each reporting date whether there is objective evidence that a fi nancial asset or group of fi nancial assets is impaired.

In the case of AFS equity securities, objective evidence of impairment would include a signifi cant or prolonged decline in the fair value of the investment below its cost. The Group treats ‘signifi cant’ generally as 20.0% and ‘prolonged’ as greater than twelve (12) months. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that fi nancial asset previously recognized in the statements of income - is removed from equity and recognized in the statements of income. Impairment losses on equity securities are not reversed through the statements of income. Increases in fair value after impairment are recognized directly in OCI.

If there is objective evidence that there is impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset.

In the case of AFS debt securities, the Group assesses individually whether there is objective evidence of impairment based on the same criteria as fi nancial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the statements of income. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash fl ows for the purpose of measuring impairment loss. Such accrual is recorded as part of “Interest income” in the statements of income. If, in a subsequent year, the fair value of a debt investment increased and the increase can be objectively related to a credit event occurring after the impairment loss was recognized in the statements of income, the credit loss is reversed through the statements of income.

As discussed in Note 1, as approved by BSP Resolution No. 5 dated May 15, 2008, the Parent Bank, as allowed by the BSP, has deferred the recognition of valuation reserves aggregating to 13.4 billion. As allowed by the BSP, these unbooked valuation reserves were recognized on a staggered basis starting January 2009. The Parent Bank recognizes the amortization as a charge to defi cit (Note 15).

Offsetting Financial InstrumentsFinancial assets and fi nancial liabilities are offset and the net amount reported in the statements of fi nancial position, if and only if, there is a legally enforceable right to offset the recognized amounts and there is an intention to either settle on a net basis, or to realize the asset and settle the liability simultaneously.

Operating SegmentsAn operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by Senior Management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete fi nancial information is available.

Segment results that are reported to Senior Management acting (as one body) as chief operating decision maker, include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets (primarily the Group’s main offi ce), main offi ce expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property and equipment, and intangible assets other than goodwill (Note 31).

Revenue RecognitionRevenue is recognized to the extent that it is probable that economic benefi ts will fl ow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding taxes.

Determining whether the Group and the Parent Bank are Acting as Principal or AgentThe Group and the Parent Bank assess their revenue arrangements against the following criteria to determine whether they are acting as a principal or an agent:

• whether the Group and the Parent Bank have primary responsibility for providing the services;

• whether the Group and the Parent Bank have discretion in establishing prices; and

• whether the Group and the Parent Bank bear the credit risk.


The Group has determined that they are acting as principal in their revenue arrangements except for its brokerage transactions and fi duciary activities where the Group acts in a fi duciary capacity such as nominee, trustee or agent. The Group recognizes income from fi duciary activities under “Service charges, fees and commissions” in the statements of income.

The following specifi c recognition criteria must also be met before revenue is recognized:

Interest IncomeFor all fi nancial instruments measured at amortized cost and interest-bearing HFT and AFS fi nancial assets, interest income is recorded at the EIR which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the fi nancial instrument or a shorter period, where appropriate, to the net carrying amount of the fi nancial asset or fi nancial liability. The calculation takes into account all contractual terms of the fi nancial instrument (e.g., prepayment options), including any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses.

Once the recorded value of a fi nancial asset or group of similar fi nancial assets has been reduced due to an impairment loss, interest income should be recognized using the original EIR applied to the new carrying amount.

Service Charges and PenaltiesService charges and penalties are recognized only upon collection or accrued when there is reasonable degree of certainty as to its collectibility.

Fee and Commission IncomeThe Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories:

a. Fee Income Earned from Services that are Provided Over a Certain Period of TimeFees earned for the provision of services over a period of time are accrued over that period. These fees include investment fund fees, custodian fees, fi duciary fees, commission income, credit related fees, asset management fees, portfolio and other management fees, and advisory fees. Loan commitment fees for loans that the Group allows drawdown on committed lines subject to fulfi llment of conditions are deferred (together with any incremental costs) and recognized as an adjustment to the EIR on the loan.

b. Fee Income from Providing Transaction ServicesFees arising from negotiating or participating in the negotiation of a transaction for a third party - such as underwriting fees, corporate fi nance fees, and brokerage fees for the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses - are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfi lling the corresponding criteria. Loan syndication fees are recognized in the statements of income when the syndication has been completed and the Group retains no part of the loans for itself or retains part at the same EIR as for the other participants.

Dividend IncomeDividend income is recognized when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and usually the date when shareholders have approved the dividend for unlisted equity securities.

Trading and Securities Gains - netTrading and securities gains represent results arising from trading activities including all gains and losses from changes in fair value of fi nancial assets held for trading and derivatives, and gains and losses from disposal of fi nancial assets at FVPL, AFS fi nancial assets and HTM investments.

Gains (Losses) on Foreclosed AssetsGains or losses on foreclosed assets is recognized upon collection of existing receivable through foreclosure of asset used as collateral as the difference between the fair market value of the foreclosed asset and the net carrying value of the receivable settled.

Gains on Assets SoldGains on assets sold are recognized upon sale of properties as the difference between the selling price and the carrying amount of the properties sold.

Gains (Losses) on Sale of ReceivablesGains or losses on sale of receivables is recognized upon sale of receivables, without recourse, as the difference between the selling price and the carrying value of receivables sold.

Real Estate RevenueReal estate sales are generally accounted for under the full accrual method. Under this method, the gain on sale is recognized when: (a) the collectibility of the sales price is reasonably assured; (b) the earnings process is virtually complete; and (c) the seller does not have a substantial continuing involvement with the subject properties. If any of the criteria under the full accrual is not met, the deposit method applies until all the conditions for recording a sale are met.


Pending recognition of sale, cash received from buyers are presented under the reservation deposit account which is shown as “Other liabilities” account in the liabilities in the statements of fi nancial position.

Rent IncomeRent income arising on leased properties is accounted for on a straight-line basis over the lease terms on ongoing leases and is recognized in the statements of income under “Miscellaneous income”.

MiscellaneousMiscellaneous income represents income from sale of services and is recognized when the service is rendered.

Expense RecognitionExpenses are recognized when decrease in future economic benefi ts related to a decrease in an asset or increase in liability has arisen that can be measured reliably. Expenses are recognized when incurred or when the related revenue is earned.

Interest and Finance ChargesInterest expense for all interest-bearing fi nancial liabilities is recognized in the statements of income using the EIR of the fi nancial liabilities to which they relate. Finance charges are recognized in the statements of income using the EIR of the fi nancial liabilities to which they relate.

Operating ExpensesOperating expenses constitute costs which arise in the normal business operation and are recognized when incurred.

Taxes and LicensesThis includes all other taxes, local, and national and are recognized when incurred.

Property and EquipmentLand is stated at cost less any impairment in value, and depreciable properties including buildings, leasehold improvements, and furniture, fi xtures and equipment are stated at cost less accumulated depreciation and amortization, and any impairment in value.

The initial cost of the Group’s property and equipment consists of its purchase price, including import duties, taxes and any directly attributable cost to bring the property and equipment to its working condition and location for its intended use. Expenditures incurred after the property and equipment have been put into operation, such as repairs and maintenance, are charged against operations in the year the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefi ts expected to be obtained from the use of an item of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment.

Depreciation is calculated on the straight-line method over the estimated useful life of the depreciable assets. Leasehold improvements are amortized over the shorter of the terms of the covering leases and the estimated useful lives of the improvements.

The range of estimated useful life of property and equipment follow:

Number of Years

Buildings and improvements 10 - 50Furniture, fi xtures and equipment 3 - 10Leasehold improvements 5 - 10

The depreciation and amortization method and useful life are reviewed periodically to ensure that the method and period of depreciation and amortization are consistent with the expected pattern of economic benefi ts from items of property and equipment.

An item of property and equipment is derecognized upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss arising from derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statements of income as “Gains on assets sold” in the year the asset is derecognized.

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amounts (see accounting policy on Impairment of Non-fi nancial Assets).

Fully depreciated assets are retained in the accounts until they are no longer in use and no further depreciation is charged to current operations.

The Group’s paintings recognized in furniture, fi xture and equipment, under “Property and Equipment - net,” are recorded at cost and are not being subjected to depreciation.


Investments in AssociatesThe Group’s investments in associates are accounted for using the equity method of accounting. Associates pertain to all entities over which the Group has signifi cant infl uence but not control, generally accompanying a shareholding of between 20.0% and 50.0% of the voting rights. The Group classifi es its interests in joint arrangements as either jointly controlled operations (if the Group has rights to the assets, and the obligations to the liabilities, relating to an arrangement) or joint ventures (if the Group has rights only to the net assets of an arrangement). In making such assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Joint venture pertains to the Group’s interest in a jointly controlled entity, whereby the venturers have contractual arrangement that establishes control over the economic activities of the entity.

Under the equity method, investments in associates and joint venture are carried in the statements of fi nancial position at cost plus post-acquisition changes in the Group’s share of the net assets of the associate and joint venture. Goodwill relating to an associate is included in the carrying value of the investment and is not amortized. The Group’s share in an associate’s and joint venture’s post-acquisition profi ts or losses is recognized in the statements of income, and its share of post-acquisition movements in the associates and joint venture’s equity reserves is recognized in OCI. When the Group’s share of losses in its associates and joint venture equals or exceeds its interest in the associates and joint venture, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associates and joint venture. Profi ts and losses resulting from transactions between the Group and its associates and joint venture are eliminated to the extent of the interest in the associates and joint venture.

After the application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on the Group’s investments in associates and joint venture. The Group determines at each reporting date whether there is any objective evidence that the investment in associates and joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment and its carrying value and recognizes the impairment loss in the statements of income (see accounting policy on Impairment of Non-fi nancial Assets).

Upon loss of signifi cant infl uence over the associate, the Group accounts for the remaining investment in accordance with PAS 39 from that date, provided that the associate does not become a subsidiary or a joint venture. The Group recognizes in the statements of income any difference between the fair value of any retained investment and any proceeds from disposing of the part interest in the associate, and the carrying amount of the investment at the date when signifi cant infl uence is lost.

Upon loss of joint control and provided the former jointly controlled entity does not become a subsidiary or associate, the Group measures and recognizes its remaining investment at its fair value. Any difference between the carrying amount of the former jointly controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is recognized in the statements of income. When the remaining investment constitutes signifi cant infl uence, it is accounted for as an investment in an associate.

Upon loss of joint control and provided the former associate or jointly controlled entity becomes a subsidiary, the Group discontinues the use of the equity method from the date when its investment ceases to be an associate or joint venture and accounts for its investment in accordance with PFRS 3, Business Combinations. In a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in statements of income or OCI, as appropriate.

In the Parent Bank’s separate fi nancial statements, investments in associates and joint venture are carried at cost, less allowance for impairment losses.

Jointly Controlled OperationsA jointly controlled operation involves the use of assets and other resources of the Group and other venturers rather than the establishment of a corporation, partnership or other entity. The Group accounts for the assets it controls and the liabilities and expenses it incurs, and the share of the income that it earns from the sale of goods or services by the joint venture.

Investment PropertiesInvestment properties are measured initially at cost, including transaction costs. An investment property acquired through an exchange transaction is initially measured at fair value of the asset acquired unless the fair value of such an asset cannot be measured in which case the investment property acquired is measured at the carrying amount of the asset given up. Foreclosed properties are classifi ed under “Investment properties” account upon: a) entry of judgment in case of judicial foreclosure; b) execution of the sheriff’s certifi cate of sale in case of extra-judicial foreclosure; or c) notarization of the deed of dacion in case of dation in payment (dacion en pago).

Subsequent to initial recognition, depreciable investment properties are carried at cost less accumulated depreciation and impairment in value. However, as discussed in Note 13, the Parent Bank did not recognize depreciation on certain investment properties in 2013 and prior years.

Investment properties are derecognized when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefi t is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognized in the statements of income under “Gains on assets sold” in the year of retirement or disposal.


Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are normally recognized in the statements of income in the year in which the costs are incurred.

Depreciation is calculated on a straight-line basis using the remaining useful lives from the time of acquisition of the investment properties but not to exceed 50 years for buildings and improvements.

Transfers are made to investment properties when, and only when, there is a change in use evidenced by ending of owner occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment properties when, and only when, there is a change in use evidenced by commencement of owner occupation or commencement of development with a view to sale.

Impairment test is conducted when there is an indication that the carrying amount of the asset may not be recovered. An impairment loss is recognized for the amount by which the property’s carrying amount exceed its recoverable amount, which is the higher of the property’s fair value less costs to sell and value in use (see accounting policy on Impairment of Non-fi nancial Assets).

Real Estate InventoriesReal estate inventories are stated at the lower of cost and net realizable value (NRV). Cost shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. NRV is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Intangible AssetsIntangible assets consist of software costs and exchange trading right. An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefi ts that are attributable to it will fl ow to the Group.

Software CostsSoftware costs (presented under “Intangible and other assets” in the statements of fi nancial position) are capitalized on the basis of the cost incurred to acquire and bring to use the specifi c software. These costs are amortized over three to ten years on a straight-line basis. Costs associated with maintaining the computer software programs are recognized as expense when incurred. The amortization period and the amortization method for software cost are reviewed periodically to be consistent with the changes in the expected useful life or the expected pattern of consumption of future economic benefi ts embodied in the asset.

Exchange Trading RightThe exchange trading right is an intangible asset that is regarded as having an indefi nite useful life as there is no foreseeable limit to the period over which this asset is expected to generate net cash infl ow for the Group. Exchange trading right (presented under “Intangible and other assets” in the statements of fi nancial position) is carried at the amount allocated from the original cost of the exchange membership seat of USI (after a corresponding allocation was made to the value of the Philippine Stock Exchange shares) less impairment in value. USI does not intend to sell the exchange trading right in the near future.

Chattel Properties AcquiredChattel properties acquired include chattel mortgage properties acquired in settlement of loan receivables. These are stated at cost, which is the fair value at recognition date, less accumulated depreciation and any impairment in value. The Group and the Parent Bank applies the cost model in accounting for other properties acquired. Depreciation is computed on a straight-line basis over the estimated useful life of 3 to 5 years. The estimated useful life and the depreciation method are reviewed periodically to ensure that the period and the method of depreciation are consistent with the expected pattern of economic benefi ts from items of other properties acquired.

Land Held-for-SaleLand held-for-sale is initially recorded at cost. The cost of lots includes the acquisition cost of land and cost for development and improvement of the properties. Subsequently, land held-for-sale are valued at the lower of cost and NRV.

Interoffi ce Float ItemsInteroffi ce fl oat items pertain to the net of due from head offi ce/branches/agencies and due to head offi ce/branches/agencies accounts resulting from the elimination of reciprocal accounts in the consolidation process. In the preparation of consolidated statements, the reciprocal accounts are eliminated and the resulting difference, if any, shall be reported under “Interoffi ce Float Items (Debit Balance)” if a debit, or under “Interoffi ce Float Items (Credit Balance)” if a credit. Individual subsidiary ledger accounts for each branch/agency is being maintained by the Head Offi ce. Sub-control accounts shall be maintained for items which are unresponded and outstanding for sixty (60) calendar days or more. Inter-offi ce fl oat items are recorded at carrying amount and adjusted by recording impairment if there is an evidence that fl oats can no longer be resolved.

Creditable Withholding TaxesCreditable withholding tax resulting from sale of foreclosed properties, interest, discounts, commissions and other fees withheld from the Group and the Parent Bank are recorded at its carrying value.


Impairment of Non-fi nancial Assets The Group assesses at each reporting date whether there is any indication that an asset may be impaired. Non-fi nancial assets include property and equipment, investment properties, investment in subsidiaries and associates, software costs, exchange trading right, and other assets. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s (CGU) fair value less cost to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

For assets excluding exchange trading right, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statements of income.

For exchange trading right, impairment is determined by assessing the recoverable amount of the asset at each reporting date. Where the recoverable amount is less than the carrying amount of the asset, an impairment loss is recognized immediately in the statements of income. Impairment losses cannot be reversed for subsequent increases in the recoverable amount in future periods.

Determination of Fair Value of Non-fi nancial AssetsFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group and the Parent Bank.

The fair value of an asset is measured using the assumptions that market participants would use when pricing the asset, assuming that market participants act in their economic best interest.

A fair value measurement of a non-fi nancial asset takes into account a market participant’s ability to generate economic benefi ts by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group and the Parent Bank use valuation techniques that are appropriate in the circumstances and for which suffi cient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

External valuers are involved for valuation of signifi cant assets, such as investment properties. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfi llment of the arrangement is dependent on the use of a specifi c asset or assets and the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:

(a) there is a change in contractual terms, other than a renewal or extension of the arrangement; or

(b) a renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the lease term; or

(c) there is a change in the determination of whether fulfi llment is dependent on a specifi ed asset; or

(d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gives rise to the reassessment for scenarios (a), (c) or (d) above, and at the date of renewal or extension period for scenario (b).


Group as LesseeFinance leases, which transfer to the Group substantially all the risks and benefi ts incidental to the ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments and included in “Property and equipment” account with the corresponding liability to the lessor included in “Other liabilities” account in the statements of fi nancial position. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recorded under “Interest and fi nance charges” account in the statements of income.

Capitalized leased assets are depreciated over the shorter of the estimated useful lives of the assets or the respective lease terms, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Leases where the lessor retains substantially all the risks and benefi ts of ownership of the assets are classifi ed as operating leases. Operating lease payments are recognized as an expense in the statements of income on a straight-line basis over the lease term.

Group as Lessor Finance leases, where the Group transfers substantially all the risks and benefi ts incidental to the ownership of the leased item to the lessee, are included under “Loans and receivables” account in the statements of fi nancial position. A lease receivable is recognized at an amount equivalent to the net investment (asset cost) in the lease. All income resulting from the receivable is included under “Interest income” account in the statements of income. Leases where the Group does not transfer substantially all the risks and benefi ts of ownership of the assets are classifi ed as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as the rent income. Contingent rent is recognized as revenue in the year in which this is earned.

Residual Value of Leased Assets and Deposits on Finance LeasesThe residual value of leased assets, which approximates the amount of guaranty deposit paid by the lessee at the inception of the lease, is the estimated proceeds from the sale of the leased asset at the end of the lease term. At the end of the lease term, the residual value of the leased asset is generally applied against the guaranty deposit of the lessee when the lessee decides to buy the leased asset.

Retirement Benefi tsThe Group has funded non-contributory defi ned benefi t retirement plans. The retirement cost of the Group is calculated annually by an independent actuary using the projected unit credit method. Under this method, the current service cost is the present value of retirement benefi ts payable in the future with respect to services rendered in the current year.

The calculation of defi ned benefi t obligations is performed on a periodic basis by a qualifi ed actuary. When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefi ts available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefi ts, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net retirement liability, which comprise remeasurement gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Group determines the net interest expense (income) on the net retirement liability (asset) for the period by applying the discount rate used to measure the defi ned benefi t obligation at the beginning of the annual period to the then net retirement liability (asset), taking into account any changes in the net retirement liability (asset) during the period as a result of contributions and benefi t payments. Net interest expense and other expenses related to defi ned benefi t plans are recognized in the statements of income.

When the benefi ts of a plan are changed or when a plan is curtailed, the resulting change in benefi t that relates to past service or the gain or loss on curtailment is recognized immediately in the statements of income.

The Group recognizes gains and losses on the settlement of a defi ned benefi t plan when the settlement occurs.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.

The expense relating to any provision is presented in the statements of income, net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and, where appropriate, the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as “Interest and fi nance charges” in the statements of income.


Contingent Liabilities and Contingent AssetsContingent liabilities are not recognized in the fi nancial statements but are disclosed in the notes to the fi nancial statements unless the possibility of an outfl ow of resources embodying economic benefi ts is remote. Contingent assets are not recognized but are disclosed in the notes to the fi nancial statements when an infl ow of economic benefi ts is probable.

Related PartiesParties are considered to be related if one party has the ability, directly or indirectly, to control or exercise signifi cant infl uence over the other party in making fi nancial and operating decisions. Parties are also considered to be related if they are subject to common control or common signifi cant infl uence. Related parties may be individual or corporate entities. Transactions between related parties are based on terms similar to those offered to non-related parties.

Income TaxesCurrent Tax. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted as of the statements of fi nancial position date. This includes fi nal tax and regular corporate income tax (RCIT) or minimum corporate income tax (MCIT).

Deferred Tax. Deferred tax is recognized in respect of temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carryforward benefi ts of unused tax credits from the excess of MCIT over the RCIT and unused net operating loss carry over (NOLCO), to the extent that it is probable that suffi cient taxable profi t will be available against which the deductible temporary differences, and the carryforward benefi ts of unused tax credits from MCIT and unused NOLCO can be utilized, except:

• where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profi t will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are applicable in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at reporting date.

Current tax and deferred tax are recognized in the statements of income except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists, to set off current tax assets against current tax liabilities and the deferred taxes related to the same taxable entity and the same taxation authority.

Value-Added Tax (VAT). Revenues, expenses and assets are recognized net of the amount of VAT, except:

• where the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables that are stated with the amount of tax included.

The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of fi nancial position.


EquityCommon stock is measured at par value for all shares issued and outstanding. When the shares are sold at a premium, the difference between the proceeds and the par value is credited to “Additional paid-in capital” account. Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees, printing costs and taxes are chargeable to “Additional paid-in capital” account. If the additional paid-in capital is not suffi cient, the excess is charged to defi cit.

When the Parent Bank issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued.

“Surplus (defi cit)” represents accumulated earnings (losses) of the Group and the Parent Bank and amortization of UVR/DL charged directly to surplus (defi cit) for the year, as discussed in Note 1 to the fi nancial statements.

Dividends on Common SharesDividends on common shares are recognized as a liability and deducted from equity when approved by the BOD of the Parent Bank and its subsidiaries, PDIC and the BSP, in the case of cash dividends; and the BOD, shareholders of the Parent Bank and its subsidiaries, PDIC and the BSP in the case of stock dividends. Dividends declared during the year but are approved by the BSP after the reporting date is dealt with as an event after the reporting period.

Debt Issue CostsIssuance, underwriting and other related expenses incurred in connection with the issuance of debt instruments are deferred and amortized over the terms of the instruments using the effective interest method. Unamortized debt issue costs are included in the measurement of the related carrying value of the debt instrument in the statements of fi nancial position.

Events After the Reporting DateAny post-year-end event that provides additional information about the Group’s position at the reporting date (adjusting event) is refl ected in the fi nancial statements when material. Post-year-end events that are not adjusting events, if any, are disclosed in the notes to the fi nancial statements when material to the fi nancial statements.

Fiduciary ActivitiesAssets and income arising from fi duciary activities together with related undertakings to return such assets to customers are excluded from the fi nancial statements where the Parent Bank and a subsidiary act in a fi duciary capacity such as nominee, trustee or agent.

New or Revised Standards, Amendments to Standards and Interpretations Not Yet AdoptedA number of new or revised standards and amendments to standards are effective for annual periods beginning after January 1, 2014, and have not been applied in preparing these fi nancial statements. Unless otherwise indicated, none of these is expected to have a signifi cant effect on the fi nancial statements.

The Group will adopt the following new standard, amendments to standards and interpretations on the respective effective dates.

To be Adopted on January 1, 2015

• Annual Improvements to PFRSs: 2010 - 2012 and 2011 - 2013 Cycles - Amendments were made to a total of nine standards, with changes made to the standards on business combinations and fair value measurement in both cycles. Most amendments will apply prospectively for annual periods beginning on or after July 1, 2014. Earlier application is permitted, in which case the related consequential amendments to other PFRSs would also apply. Special transitional requirements have been set for amendments to the following standards: PAS 16, Property, Plant and Equipment, PAS 38, Intangible Assets and PAS 40, Investment Property. The following are the said improvements or amendments to PFRSs, which are applicable to the Group:

• Scope of portfolio exception (Amendment to PFRS 13, Fair Value Measurement). The scope of the PFRS 13 portfolio exception - whereby entities are exempted from measuring the fair value of a group of fi nancial assets and fi nancial liabilities with offsetting risk positions on a net basis if certain conditions are met - has been aligned with the scope of PAS 39 and PFRS 9.

PFRS 13 has been amended to clarify that the portfolio exception potentially applies to contracts in the scope of PAS 39 and PFRS 9 regardless of whether they meet the defi nition of a fi nancial asset or fi nancial liability under PAS 32 - e.g. certain contracts to buy or sell non-fi nancial items that can be settled net in cash or another fi nancial instrument.

• Restatement of accumulated depreciation (amortization) on revaluation (Amendments to PAS 16 and PAS 38). The amendments clarify the requirements of the revaluation model in PAS 16 and PAS 38, recognizing that the restatement of accumulated depreciation (amortization) is not always proportionate to the change in the gross carrying amount of the asset. PAS 16 and PAS 38 have been amended to clarify that, at the date of revaluation: the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset - e.g. restated in proportion to the change in the carrying amount or by reference to observable market data; and the accumulated depreciation (amortization) is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses; or the accumulated depreciation (amortization) is eliminated against the gross carrying amount of the asset.


• Defi nition of ‘related party’ (Amendment to PAS 24, Related Party Disclosures). The defi nition of a ‘related party’ is extended to include a management entity that provides key management personnel (KMP) services to the reporting entity, either directly or through a group entity. For related party transactions that arise when KMP services are provided to a reporting entity, the reporting entity is required to separately disclose the amounts that it has recognized as an expense for those services that are provided by a management entity; however, it is not required to ‘look through’ the management entity and disclose compensation paid by the management entity to the individuals providing the KMP services. The reporting entity will also need to disclose other transactions with the management entity under the existing disclosure requirements of PAS 24 - e.g. loans.

• Inter-relationship of PFRS 3, Business Combinations and PAS 40 (Amendment to PAS 40). PAS 40 has been amended to clarify that an entity should assess whether an acquired property is an investment property under PAS 40 and perform a separate assessment under PFRS 3 to determine whether the acquisition of the investment property constitutes a business combination. Entities will still need to use judgment to determine whether the acquisition of an investment property is an acquisition of a business under PFRS 3.


• Clarifi cation of Acceptable Methods of Depreciation and Amortization (Amendments to PAS 16 and PAS 38). The amendments to PAS 38, Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortization methods for intangible assets is inappropriate. This presumption can be overcome only when revenue and the consumption of the economic benefi ts of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue.

The amendments to PAS 16, Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. This is because such methods refl ect factors other than the consumption of economic benefi ts embodied in the asset - e.g. changes in sales volumes and prices.

The amendments are effective for annual periods beginning on or after January 1, 2016, and are to be applied prospectively. Early application is permitted.

• Equity Method in Separate Financial Statements (Amendments to PAS 27). The amendments allow the use of the equity method in separate fi nancial statements, and apply to the accounting not only for associates and joint ventures, but also for subsidiaries.

The amendments apply retrospectively for annual periods beginning on or after January 1, 2016. Early adoption is permitted.

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates). The amendments address an inconsistency between the requirements in PFRS 10 and in PAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The amendments require that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

The amendments apply prospectively for annual periods beginning on or after January 1, 2016. Early adoption is permitted.


• PFRS 9, Financial Instruments (2014). PFRS 9 (2014) replaces PAS 39 and supersedes the previously published versions of PFRS 9 that introduced new classifi cations and measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). PFRS 9 includes revised guidance on the classifi cation and measurement of fi nancial assets, including a new expected credit loss model for calculating impairment, guidance on own credit risk on fi nancial liabilities measured at fair value and supplements the new general hedge accounting requirements published in 2013. PFRS 9 incorporates new hedge accounting requirements that represent a major overhaul of hedge accounting and introduces signifi cant improvements by aligning the accounting more closely with risk management.

The new standard is to be applied retrospectively for annual periods beginning on or after January 1, 2018 with early adoption permitted.

The Group and the Parent Bank will assess the impact of these new standards on the fi nancial statements upon adoption.


4. Signifi cant Accounting Judgments and Estimates

The preparation of the consolidated fi nancial statements and the separate fi nancial statements of the Parent Bank in compliance with PFRSs requires the Group to make judgments and estimates that affect the reported amounts of assets, liabilities, income and expenses and the disclosures of contingent assets and contingent liabilities. Future events may occur which can cause the judgments and assumptions used in arriving at the estimates to change. The effects of any change in estimates are refl ected in the fi nancial statements as they become reasonably determinable.

Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The following are the critical judgments and key assumptions that have a signifi cant risk of material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year:

Judgments

a) Going ConcernThe Group’s management has made an assessment of the Group’s and the Parent Bank’s ability to continue as a going concern and are satisfi ed that the Group and the Parent Bank have the resources to continue in business for the foreseeable future. Though the Parent Bank’s losses prior to 2005, including the losses not recognized as discussed in Notes 14 and 15, brought its capital below the required minimum capital requirement for a universal bank, the Parent Bank’s management has taken active steps in ensuring its continued liquidity and has commenced the process to implement its capital build-up plan pursuant to the FAA with PDIC and the MOA that was signed with the ROP, PDIC and PCGG (Notes 1 and 25). As at December 31, 2014 and 2013, considering the regulatory relief mentioned in Note 1, the Parent Bank has already complied with the risk-based capital adequacy ratio of 10% under Basel II. Thus, the fi nancial statements continue to be prepared on a going concern basis.

b) Operating Leases

Group as LessorThe Group has entered into commercial property leases for its investment property portfolio. Based on factors such as retention of ownership title to the leased property, period of lease contract relative to the estimated useful economic life of the leased property and bearer of executory costs, the Group has determined that it retains all the signifi cant risks and rewards of ownership of these properties, and so accounts for these as operating leases.

Group as LesseeThe Group has entered into leases for premises it uses for its operations. The Group has determined, based on the evaluation of the lease agreement that all signifi cant risks and rewards of ownership of the properties remain with the lessors and so accounts for these as operating leases.

c) Finance LeasesULFC has entered into fi nance leases in which it has determined, based on the evaluation of the lease agreement, that it transfers all the signifi cant risks and rewards of ownership of the properties it leases out. The lessees have the option to purchase the leased assets at a price that is expected to be suffi ciently lower than the fair value at the date the option becomes exercisable and the lease term is for the major part of the economic life of the asset and at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset.

d) Fair Value of Financial InstrumentsWhere the fair values of fi nancial assets and fi nancial liabilities recorded in the statements of fi nancial position cannot be derived from active markets, these are determined using internal valuation techniques using generally accepted market valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. These judgments may include considerations of liquidity and model inputs such as correlation and volatility for longer-dated derivatives. Refer to Note 6 to the fi nancial statements for the fair values and the measurement bases of the fi nancial instruments.

e) HTM InvestmentsThe classifi cation under HTM investments requires signifi cant judgment. In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity other than in certain specifi c circumstances - for example, selling an insignifi cant amount close to maturity - it will be required to reclassify the entire portfolio as AFS fi nancial assets. The investments would therefore be measured at fair value and not at amortized cost.

f) Financial Assets not Quoted in an Active MarketThe Group classifi es fi nancial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on whether a fi nancial asset is quoted in an active market is the determination on whether quoted prices are readily and regularly available, and whether those prices represent actual and regularly occurring market transactions on an arm’s length basis.


g) Embedded DerivativesWhere a hybrid instrument is not classifi ed as fi nancial assets at FVPL, the Group evaluates whether the embedded derivative should be bifurcated and accounted for separately. This includes assessing whether the embedded derivative has a close economic relationship to the host contract.

h) ContingenciesThe Group is currently involved in legal proceedings. The estimates of the probable costs for the resolution of claims have been developed in consultation and with the aid of the legal counsel handling the Group’s defense in these matters and are based upon an analysis of potential results. Management does not believe that the outcome of these matters will affect the results of operations. It is probable, however, that future results of operations could be materially affected by changes in the estimates or in the effectiveness of the strategies relating to these proceedings (Note 30).

i) Functional CurrencyPAS 21, Effects of Changes in Foreign Exchange Rates, requires management to use its judgment to determine the entity’s functional currency such that it most faithfully represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In making this judgment, the entities within the Group consider the following:

a) the currency that mainly infl uences sales prices for fi nancial instruments and services;b) the currency in which funds from fi nancing activities are generated; andc) the currency in which receipts from operating activities are usually retained.

Based on the economic substance of the underlying circumstance relevant to the Group and the Parent Bank, the functional currency of the Group and the Parent Bank has been determined to the PHP. The PHP is the currency of the primary economic environment in which the Group and the Parent Bank operates. It is the currency that mainly infl uences the income and costs arising from the Group and the Parent Bank’s operations.

j) Sequestration of Shares of the Parent Bank and the Coconut Industry Investment Fund (CIIF) Oil Mills by the Republic of the PhilippinesAs discussed in Notes 12, 25 and 29, to the fi nancial statements, the Group is involved in legal proceedings on the ownership of shares of the Parent Bank (Civil Case No. 0033-A) and CIIF Oil Mills (Civil Case No. 0033-F), which were subject of the January 2012 decision issued by the Supreme Court in the Philippine Coconut Producers Federation, Inc. (“COCOFED”), et al. case. The motion for the reconsideration of the January 2012 decision has been denied with fi nality on September 4, 2012. The Supreme Court decision became fi nal and executory and has been recorded in the Book of Entries of Judgment on December 10, 2014. A writ of execution has yet to be served by the Sandiganbayan.

CIIF Oil Mills pertains to the following companies:

• Granexport Manufacturing Corporation (GMC)• Legaspi Oil Company, Inc. (LOCI)• Cagayan de Oro Oil Company Inc. (COOCI)• San Pablo Manufacturing Corporation (SPMC)• Southern Luzon Coconut Oil Mills Co, Inc. (SLCOMI)• Iligan Coconut Industries, Inc. (ICII)

On December 28, 2012, the Parent Bank fi led a Special Civil Action for Declaratory Relief seeking clarifi cation on the Parent Bank’s proportionate right, title and interest in the CIIF Companies, as well as the Parent Bank’s indirect equity in the 14 Holding Companies and the CIIF Block of San Miguel Corporation (SMC) shares. The case, docketed as Civil Case No. 12-1251 before Regional Trial Court of Makati Branch 59, was consolidated with Civil Case No. 12-152, which is a similar action fi led by United Coconut Planters Life Assurance Corporation (“Cocolife”) with respect to its proportionate right, title and interest in the CIIF Companies on September 25, 2013. The PCGG, through the Offi ce of the Solicitor General, has sought the dismissal of the cases, but failed to obtain a favorable ruling from the trial court. Consequently, the PCGG elevated the matter to the Supreme Court via a Petition for Certiorari with a prayer for a Temporary Restraining Order (TRO). The Supreme Court has yet to resolve the petition. In the interim, a TRO has been issued enjoining the trial court from conducting further proceedings in the cases fi led by the Parent Bank and Cocolife.

CIIF Companies pertains to the following companies:

• CIIF Oil Mills• CIIF 14 Holding Companies• UCPB-CIIF Finance and Development Corporation (UCFCDC)• UCPB-CIIF Foundation, Inc. (UCFI)• United Coconut Planters International (UCPI)

Estimates

a) Impairment of Loans and ReceivablesThe Group reviews its individually signifi cant loans and receivables at each reporting date to assess whether an impairment loss should be recorded in the statements of income. In particular, judgment by management is required in the estimation of the amount and timing of future cash fl ows when determining the impairment loss. In estimating


these cash fl ows, the Group makes judgments about the borrower’s fi nancial situation and the NRV of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Loans and receivables that have been assessed individually and found not to be impaired and all individually insignifi cant loans and advances are then assessed collectively, in groups of assets with similar characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. The collective assessment takes account of data from the loan portfolio, concentrations of risks and economic data.

The carrying values of loans and receivables and the related allowance for credit and impairment losses of the Group and the Parent Bank are disclosed in Notes 10 and 15 to the fi nancial statements.

b) Fair Values of Structured Debt Instruments and DerivativesThe fair values of structured debt instruments and derivatives that are not quoted in active markets are determined using valuation techniques such as discounted cash fl ow analysis and standard option pricing models. Where valuation techniques are used to determine fair values, they are reviewed by qualifi ed personnel independent of the area that created them. All models are reviewed before they are used and to the extent practicable, models use only observable data. Changes in assumptions about these factors could affect the reported fair value of the fi nancial instruments. All of the Parent Bank’s structured investments matured in 2013.

c) Valuation of Unquoted Equity SecuritiesThe Group’s investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are carried at cost, less allowance for impairment losses.

As at December 31, 2014 and 2013, the carrying value of unquoted AFS equity securities (included under AFS fi nancial assets) amounted to 651.5 million, and 638.2 million, respectively, for the Group and 651.0 million and 637.7 million, respectively, for the Parent Bank (Note 9).

d) Impairment of AFS Equity SecuritiesThe Group determines that AFS equity securities are impaired when there has been a signifi cant or prolonged decline in the fair value below its cost. This determination of what is signifi cant or prolonged requires judgment. The Group treats ‘signifi cant’ generally as 20.0% or more of the original cost of investment, and ‘prolonged’ as greater than 12 months. In making this judgment, the Group evaluates among other factors, the normal volatility in share price for quoted equity securities and the future cash fl ows and the discount factors for unquoted equity securities.

In addition, impairment may be appropriate when there is evidence of deterioration in the fi nancial health of the investee, industry and sector performance, changes in technology, and operational and fi nancing cash fl ows. As at December 31, 2014 and 2013, allowance for impairment losses on certain AFS equity securities amounted to 876.2 million and 641.3 million, respectively, for the Group and 876.2 million and 641.2 million, respectively, for the Parent Bank. As at December 31, 2014 and 2013, the carrying value of AFS equity securities included under “AFS fi nancial assets” account in the statements of fi nancial position amounted to 1.2 billion, for the Group and 1.0 billion for the Parent Bank (Notes 9 and 15).

e) Impairment of AFS Debt Investments The Group determines that AFS debt investments are impaired based on the same criteria used for fi nancial assets carried at amortized cost.

The Group and the Parent Bank determined that there is no evidence of impairment on its AFS debt investments. As at December 31, 2014 and 2013, the carrying value of AFS debt investments (included under AFS fi nancial assets) amounted to 27.3 billion and 25.8 billion, respectively, for the Group and 27.2 billion and 25.6 billion, respectively, for the Parent Bank (Note 9).

f) Impairment of Non-fi nancial AssetsProperty and Equipment, Investment Properties, Land Held-for-Sale, Software Cost Exchange Trading Right and Other AssetsThe Group assesses impairment on assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The factors that the Group considers important which could trigger an impairment review include the following:

• signifi cant underperformance relative to expected historical or projected future operating results;• signifi cant changes in the manner of use of the acquired assets or the strategy for overall business; and• signifi cant negative industry or economic trends.

An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.

In 2014 and 2013, there were no indicators of impairment on the Group’s and the Parent Bank’s property and equipment, software costs and exchange trading right that could trigger an impairment review.

As at December 31, 2014 and 2013, the carrying value of property and equipment for the Group amounted to 2.0 billion and 2.2 billion, respectively, and 1.7 billion and 1.9 billion, respectively, for the Parent Bank (Note 11).


As at December 31, 2014 and 2013, the carrying value of land held-for-sale for the Group amounted to 1.7 billion and 2.0 billion, respectively, and 1.6 billion and 2.0 billion, respectively, for the Parent bank amounted to (Note 14).

As at December 31, 2014 and 2013, the carrying value of software costs amounted to 367.4 million and 422.1 million, respectively, for the Group and 364.9 million and 418.3 million, respectively, for the Parent Bank (Note 14).

As at December 31, 2014 and 2013, the carrying value of the Group’s exchange trading right amounted to 1.5 million for both years (Note 14).

The recoverable amount of investment properties is determined based on unadjusted appraised values. As at December 31, 2014 and 2013, the carrying value of investment properties amounted to 2.5 billion and 5.5 billion, respectively, for the Group and 3.3 billion and 5.2 billion, respectively, for the Parent Bank. Allowance for impairment losses as at December 31, 2014 and 2013 amounted to 2.1 billion and 1.2 billion, respectively, for the Group and 1.0 billion and 1.3 billion, respectively, for the Parent Bank (Note 13).

Investments in Subsidiaries and AssociatesThe Group and the Parent Bank assess impairment on their investments in subsidiaries and associates whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Among others, the factors that the Group and the Parent Bank consider important which could trigger an impairment review on its investments in subsidiaries, and associates include the following:

• deteriorating or poor fi nancial condition;• recurring net losses; and• signifi cant changes (i.e., technological, market, economic, or legal environment in which the subsidiary, associate

and jointly controlled entity operates) with an adverse effect on the subsidiary, associate or jointly controlled entity have taken place during the period, or will take place in the near future.

An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is determined based on the asset’s fair value less cost to sell, which considers the estimated realizable and settlement amounts of the assets and liabilities of the subsidiary or associate.

As at December 31, 2014 and 2013, the carrying values of the Group’s investment in associates amounted to 8.8 billion and 8.6 billion, respectively. As at December 31, 2014 and 2013, the carrying values of the Parent Bank’s investments in subsidiaries and associates amounted to 3.4 billion and 4.1 billion, net of allowance for impairment losses amounting to 1.0 billion and 0.2 billion, respectively (Notes 12 and 15).

g) Estimated Useful Lives of Property and Equipment, Investment Properties and Software Costs The Group reviews on an annual basis the estimated useful lives of property and equipment, depreciable investment properties and software costs based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological developments and market behavior. It is possible that future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property and equipment, depreciable investment properties and software costs would decrease their respective balances and increase the recorded depreciation and amortization expense.

As at December 31, 2014 and 2013, the carrying value of depreciable property and equipment for the Group amounted to 1.9 billion and 2.1 billion, respectively, and 1.7 billion and 1.9 billion, respectively, for the Parent Bank (Note 11).

As at December 31, 2014 and 2013, the carrying value of depreciable investment properties amounted to 1.7 billion and 2.8 billion, respectively, for the Group and 1.6 billion and 2.7 billion, respectively, for the Parent Bank (Note 13). In

2013 and in prior years, the Parent Bank did not recognize depreciation on its investment properties from the “bad bank” assets as required under PAS 40.

h) Recognition of Deferred Tax AssetsDeferred tax assets are recognized for all unused tax losses and credits to the extent that it is probable that taxable income will be available against which the losses can be utilized. Signifi cant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income together with future tax planning strategies.

The Group reviews its deferred tax assets at each reporting date and reduces the carrying amount to the extent that it is no longer probable that suffi cient taxable income will be available to allow all or part of the deferred tax asset to be utilized. The estimates of future taxable net income indicate that certain temporary differences will be realized in the future. The recognized net deferred tax assets and unrecognized deferred tax assets for the Group and the Parent Bank are disclosed in Note 24.

i) Retirement Benefi tsThe cost of retirement plan is determined using an actuarial valuation technique, the projected unit credit method. Under this method, the current service cost is the present value of retirement benefi ts payable in the future with respect to services rendered in the current year. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to signifi cant uncertainty.


The assumed discount rates were determined using the market yields on Philippine government bonds with terms consistent with the expected employee benefi t payout as at the reporting date. Refer to Note 27 to the fi nancial statements for the details of assumptions used in the calculation. While the Group believes that the assumptions are reasonable and appropriate, signifi cant differences between actual experiences and assumptions may materially affect the cost of employee benefi ts and related obligations.

As at December 31, 2014 and 2013, the Group’s net retirement asset included under “Intangible and other assets” in the statements of fi nancial position amounted to 3.4 million and 3.9 million (Note 14), respectively, while its net retirement liability amounted to 794.6 million and P342.5 million, respectively. The Parent Bank’s net retirement liability amounted to 722.8 million and 294.4 million as at December 31, 2014 and 2013, respectively (Note 27).

j) NRV of Real Estate InventoriesThe Group determines the net realizable value of its real estate inventories based on its estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. In determining the net realizable value of the real estate inventories, management considers whether those real estate inventories are damaged or if their selling prices have declined. Likewise, management also considers whether the estimated costs of completion or the estimated costs to be incurred to make the sale have increased. The amount and timing of recorded expenses for any period would differ if different estimates were utilized. As at December 31, 2014 and 2013, real estate inventories of the Group amounted to 3.1 billion (Note 14).

5. Financial Risk Management

a. IntroductionThe entities within the Group manage their respective fi nancial risks separately. The subsidiaries have their own risk management procedures but are structured similar to that of the Parent Bank. To a certain extent, the respective risk management programs and objectives are the same across the Group.

The Parent Bank’s activities are principally related to the use of fi nancial instruments. The Parent Bank accepts deposits from customers at rates set by the Treasury Group depending on the volume of placements, and for various periods, and seeks to earn above-average interest margins by investing these funds. The Parent Bank seeks to increase these margins by consolidating short-term funds and lending for longer periods at higher rates, while maintaining suffi cient liquidity to meet all claims that might fall due.

The Parent Bank also trades in fi nancial instruments where it takes positions to take advantage of short-term market movements in bonds and shares of stocks.The Parent Bank has exposure to the following risks from its use of fi nancial instruments:

• Credit Risk• Liquidity Risk• Market Risk

There has been no change to the Bank’s exposure to fi nancial risks (i.e. credit risk, liquidity risk and market risk) or the manner in which it manages and measures the risks since prior fi nancial year.

Risk Management FrameworkTo manage the fi nancial risk for holding fi nancial assets and liabilities, the Parent Bank operates an integrated risk management system to address the risks it faces in its banking activities, including credit, liquidity and market risks. The Parent Bank’s risk management objective is to adequately and consistently identify measure, control and monitor the risk profi le inherent in the Parent Bank’s activities. The Parent Bank’s Risk Oversight Committee (ROC) has an overall responsibility for the creation and oversight of the Parent Bank’s corporate risk policy and is actively involved in the assessment, planning, review, approval, and monitoring of risk areas and measures taken to manage these risks in the Parent Bank’s organization. The Parent Bank also has in place an authorization structure that defi nes and sets limits on the type and value of transactions that each position can approve.

Within the Parent Bank’s overall risk management system, the Risk Management Division (RMD) is responsible for managing these risks in a more detailed and proactive fashion on a continuing basis through performance of risk and return analysis.

Credit RiskCredit risk is the risk of fi nancial loss to the Group if a counterparty to a fi nancial instrument fails to meet its contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits.

Management of Credit RiskThe Parent Bank manages its credit risk and loan portfolio through a stringent process of loan approval. The screening process is directed by the senior offi cers of the Parent Bank’s Corporate and Consumer Banking Group (CCBG). The process establishes the creditworthiness of the loan applicant based on best credit practices, and takes into consideration the current business condition and medium-term potential of the industry in which the loan applicant operates in.


In compliance with BSP requirements, the Parent Bank established in December 2004 an Internal Credit Risk Rating (ICRR) system for the purpose of measuring credit risk for corporate borrowers in a consistent manner, as accurately as possible, and thereafter uses the risk information for business and fi nancial decision making. The ICRR system covers corporate borrowers with asset size of above 15.0 million, requiring three-year historical fi nancial information obtained from fi nancial statements audited by SEC-accredited auditing fi rms.

On a continuing basis, the Parent Bank generates credit risk ratings for existing loan accounts to assess their performance and to determine which account will be retained, expanded, or phased out. A separate review of the loan portfolio is conducted by the Risk Management Division to assess the quality of individual accounts and the concentration of the Parent Bank’s credit exposures.

Maximum Exposure to Credit Risk after Collateral Held or Other Credit EnhancementsThe Group’s maximum exposure to credit risk is equal to the carrying value of its fi nancial assets except for certain secured loans and receivables from customers shown below:

Consolidated2014 2013

Gross Maximum ExposureMaximum

Fair Value of Collaterals*

NetExposure

FinancialEffect of

Collaterals



NetExposure

FinancialEffect of

CollateralsLoans and receivables:

Receivables from customersCorporate loans 73,629,087 44,174,073 29,455,014 44,174,073 71,449,505 58,376,148 13,073,357 58,376,148Consumer loans 38,459,146 10,285,081 28,174,065 10,285,081 30,753,240 16,991,254 13,761,986 16,991,254

Sales contracts receivable 1,834,961 22,355 1,812,606 22,355 527,053 1,230,424 — 527,054113,923,194 54,481,509 59,441,685 54,481,509 102,729,798 76,597,826 26,835,343 75,894,456

*includes fair values of hold-outs on deposits, real estate mortgages and chattel mortgages

Parent2014 2013



NetExposure

FinancialEffect of

Collaterals



NetExposure

FinancialEffect of

CollateralsLoans and receivables:

Receivables from customersCorporate loans 65,478,326 38,215,065 27,263,261 38,215,065 65,556,794 54,815,659 10,741,135 54,815,659Consumer loans 33,538,935 8,243,893 25,295,042 8,243,893 25,698,562 14,400,859 11,297,703 14,400,859

Sales contracts receivable 1,744,602 22,355 1,722,247 22,355 427,452 1,101,003 — 427,452100,761,863 46,481,313 54,280,550 46,481,313 91,682,808 70,317,521 22,038,838 69,643,970

*includes fair values of hold-outs on deposits, real estate mortgages and chattel mortgages

The Group holds collateral against loans and receivables to customers in the form of hold-out on deposits, real estate mortgage, chattel mortgage, mortgage trust indenture, standby letters of credit or bank guaranty, government guaranty, assignment of receivables, pledge of shares, personal and corporate guaranty and other forms of security. Fair market value is based on the value of the collateral assessed at the time of borrowing and are updated upon renewal of the loan. Collateral is generally not held over loans and advances to banks, except when securities are held as part of reverse repurchase and securities borrowing activity.

On the disposal of the Group’s foreclosed assets, the policy is to dispose these at the earliest possible time. Sale is facilitated by offering incentives to the Parent Bank’s accredited brokers and through negotiated terms.

Excessive Risk ConcentrationCredit risk concentrations can arise whenever a signifi cant number of borrowers have similar characteristics and are affected similarly by changes in economic or other conditions. The Parent Bank analyzes the credit risk concentration to an individual borrower, related group of accounts, industry, geographic, internal rating buckets, currency, term and security.

For risk concentration monitoring purposes, the fi nancial assets are broadly categorized into: (1) loans and receivables, (2) trading and investment securities, (3) loans and advances to banks, and (4) others. To mitigate risk concentration, the Group has established a regular monitoring system to spot breaches in regulatory and internal limits.


An analysis of concentration of credit risk (at net amount) at the reporting date is shown below:

Consolidated2014

Loans andReceivables

Trading and Investment

Securities (a)

Loans andAdvances to

Banks (b) Others (c) TotalReal estate, renting and business activities 37,139,850 2,422,713 — — 39,562,563Wholesale and retail trade, repair of motor

vehicles, motorcycles, personal and household goods

15,974,840 — — — 15,974,840

Manufacturing 16,014,995 253,358 — — 16,268,353Financial intermediaries 9,415,654 6,673,372 13,562,761 — 29,651,787Transport, storage and communication 6,915,854 1,779,354 — — 8,695,208Government 1,580,864 45,069,709 42,403,198 2,500 89,056,271Construction 2,860,134 85,934 — — 2,946,068Agriculture, hunting and forestry and fishing 1,517,619 — — — 1,517,619Other community, social and personal

services activities 30,146,994 1,243,565 — 3,080,032 34,470,591

121,566,804 57,528,005 55,965,959 3,082,532 238,143,300Less: Unearned interest discount 296,330 — — — 296,330

Allowance for credit and impairment losses 5,316,946 876,230 — — 6,193,176

115,953,528 56,651,775 55,965,959 3,082,532 231,653,794

a. Comprised of Financial assets at FVPL, AFS fi nancial assets and HTM investments.b. Comprised of Due from BSP, Due from other banks and Interbank loans receivable and SPURA.c. Comprised of Letters of credit.

Consolidated2013



Securities (a)




18,632,327 — — — 18,632,327

Manufacturing 17,057,632 347,246 — — 17,404,878Financial intermediaries 11,812,056 4,966,240 3,145,407 — 19,923,703 Transport, storage and communication 10,228,857 851,166 — 573 11,080,596Government 2,353,431 47,171,383 67,708,866 2,500 117,236,180Construction 2,047,166 81,316 — — 2,128,482Agriculture, hunting and forestry and fishing 1,884,444 — — — 1,884,444Other community, social and personal


111,353,631 56,181,856 70,854,273 3,631,655 242,021,415 Less: Unearned interest discount 289,126 — — — 289,126


105,577,237 55,540,562 70,854,273 3,631,655 235,603,727



Parent Bank2014



Securities (a)




15,974,840 — — — 15,974,840

Manufacturing 15,097,536 253,358 — — 15,350,894Financial intermediaries 8,113,558 6,673,372 13,473,951 — 28,260,881Transport, storage and communication 6,915,854 1,779,354 — — 8,695,208Construction 2,860,134 85,934 — — 2,946,068Agriculture, hunting and forestry and fishing 1,406,669 — — — 1,406,669Government 1,580,864 44,451,352 40,645,833 — 86,678,049Other community, social and personal




102,713,602 55,837,988 54,119,784 3,080,032 215,751,406

a. Comprised of Financial assets at FVPL, AFS fi nancial assets and HTM investments. b. Comprised of Due from BSP, Due from other banks and Interbank loans receivable and SPURA.c. Comprised of Letters of credit.

Consolidated2013



Securities (a)




18,632,327 — — — 18,632,327

Manufacturing 16,171,823 343,675 — — 16,515,498Financial intermediaries 10,397,038 4,890,085 3,042,712 — 18,329,835Transport, storage and communication 10,228,857 849,360 — — 11,078,217Construction 2,047,166 81,316 — — 2,128,482Agriculture, hunting and forestry and fishing 1,841,426 — — — 1,841,426Government 1,483,228 46,516,316 66,068,191 — 114,067,735Other community, social and personal




94,586,982 54,716,159 69,110,903 3,628,582 222,042,626


Credit Quality per Class of Financial AssetsThe credit quality of fi nancial assets is assessed and managed using external and internal ratings.

Loans and Receivables The credit quality is generally monitored using the 10-grade ICRR system which is aligned with BSP’s rating system and integrated in the credit process particularly in loan pricing and provision for credit losses. The model on risk ratings is assessed and updated regularly. Validation of the risk rating is performed by the RMD to maintain accurate and consistent risk ratings across the credit portfolio.


The following table shows the description of credit quality of commercial loans:

Credit Quality ICRR System Grade Description

High grade1 Excellent2 Strong3 Good

Standard grade

4 Satisfactory5 Acceptable6 Watchlist7 Especially mentioned

Substandard grade 8 Substandard9 Doubtful

Impaired 10 Loss

1 - ExcellentThe rating is given to a borrower with a very low probability of going into default in the coming year. The borrower has a high degree of stability, substance and diversity and has access to public markets to raise substantial amounts of funds at any time; has a very strong debt service capacity and has conservative balance sheet leverage. The track record of the borrower in terms of profi t is very good and exhibits highest quality under virtually all economic conditions.

2 - StrongThis rating is given to borrowers with low probability of going into default in the coming year. Normally has a comfortable degree of stability, substance and diversity. Under normal market conditions, borrower has good access to public markets to raise funds. Borrower has a strong market and fi nancial position with a history of successful performance. Overall debt service capacity is deemed very strong; critical balance sheet ratios are conservative.

3 - GoodThis rating is given to smaller corporations with limited access to public capital markets or to alternative fi nancial markets. Probability of default is quite low and it bears some degree of stability and substance. However, borrower may be susceptible to cyclical changes and more concentration of business risk, by product or by market. Typical for this type of borrower is the combination of comfortable asset protection and an acceptable balance sheet structure. The debt service capacity of the borrower is strong and has reported profi ts for the past three years and is expected to be profi table again in the current year.

4 - SatisfactoryThis rating is given to a borrower where clear risk elements exist, the probability of default is somewhat greater and normally has limited access to public markets. The probability is refl ected in volatility of earnings and overall performance. The borrower should be able to withstand normal business cycles, but any prolonged unfavorable economic period would create deterioration beyond acceptable levels. The borrower has the combination of reasonably sound asset and cash fl ow protection with adequate debt service capacity and has reported profi ts in the past year and is expected to report a profi t in the current year.

5 - AcceptableThis rating is given to a borrower whose risk elements are suffi ciently pronounced to withstand normal business cycles but any prolonged unfavorable economic and/or market period would create an immediate deterioration beyond acceptable levels. The risk to this borrower is still acceptable as there is suffi cient cash fl ow either historically or expected for the future; new business or projected fi nance transaction; an existing borrower where the nature of the exposure represents a higher risk because of extraordinary developments but for which a decreasing risk within an acceptable period can be expected.

6 - WatchlistThis rating is given to a borrower which incurs net losses and has salient fi nancial weaknesses, specifi cally in profi tability, refl ected on its fi nancial statements. Credit exposure is not at risk of loss at the moment but performance of the borrower has weakened and unless present trends are reversed, could lead to losses.

7 - Especially MentionedThis rating is given to a borrower that exhibits potential weaknesses that deserve management’s close attention. No immediate threat to the repayment of the loan exists through normal course of business but factors may exist that could adversely affect the credit worthiness of the borrower.

8 - SubstandardThis rating is given to a borrower where repayment of the loan, through normal course of business, may be in jeopardy due to adverse events. There exists the possibility of future losses to the institution unless given closer supervision.

9 - DoubtfulThis rating is given to a borrower who is unable or unwilling to service debt over an extended period of time and near future prospects of orderly debt service is doubtful. Existing facts, conditions, and values make full collection or liquidation highly improbable and in which substantial loss is probable.

10 - LossThis rating is given to a borrower whose loans or portions thereof are considered uncollectible. The collectible amount, with no collateral or which collateral is of little value, is diffi cult to measure and more practical to write-off than to defer even though partial recovery may be obtained in the future.


The Parent Bank only subjects commercial loans with ICRR of 8 to 10 to specifi c impairment test.

Due from BSP, due from other banks and interbank loans receivable and SPURA are classifi ed as high grade since these are deposited in/or transacted with reputable banks which have low probability of insolvency. Unquoted debt securities classifi ed as loans are classifi ed as high grade based on external credit ratings.

The table below shows credit quality per class of fi nancial assets, based on the Parent Bank’s rating system (gross of allowance for credit and impairment losses and unearned discount):

Consolidated2014

Neither Past Due nor Impaired

High Grade (a)

StandardGrade (b)

Sub-standardGrade (c) Unrated

Past Duebut not

Impaired Impaired TotalDue from BSP 41,903,197 — — — — — 41,903,197Due from other banks 2,253,958 — — — — — 2,253,958Interbank loans receivable and SPURA 11,808,804 — — — — — 11,808,804

55,965,959 — — — — — 55,965,959Loans and receivables:Receivables from customers:

Corporate loans 39,083,478 22,867,573 2,423,852 3,966,529 1,993,255 3,294,400 73,629,087Consumer loans 36,778,062 112,996 — — 954,600 613,488 38,459,146

Unquoted debt securities 4,508,253 — — — — — 4,508,253Sales contracts receivable 28,723 42,966 5 1,465,685 4,603 292,979 1,834,961Accrued interest receivable 397,498 223,876 22,079 1,122,831 18,580 76,792 1,861,656Accounts receivable 34,675 11,765 2 544,761 782 247,886 839,871Other receivables 184 387,710 — — — 152 388,046Other assets - security deposit

with Philippine Clearing House Corporation (PCHC)

45,784 — — — — — 45,784

80,876,657 23,646,886 2,445,938 7,099,806 2,971,820 4,525,697 121,566,804136,842,616 23,646,886 2,445,938 7,099,806 2,971,820 4,525,697 177,532,763

a. Includes Loans and receivables with an ICRR system Grade of 1-4b. Includes Loans and receivables with an ICRR system Grade of 5-7c. Includes Loans and receivables with an ICRR system Grade of 8-9

Consolidated2013


High Grade (a)

StandardGrade (b)

Sub-standard

Grade (c) Unrated

Past Duebut not

Impaired Impaired TotalDue from BSP 67,708,866 — — — — — 67,708,866Due from other banks 1,885,130 — — — — — 1,885,130Interbank loans receivable and SPURA 1,260,277 — — — — — 1,260,277


Corporate loans 32,809,963 28,647,270 1,707,484 3,385,062 1,728,960 3,170,766 71,449,505Consumer loans 26,886,510 211,886 — 298,578 2,610,899 745,367 30,753,240

Unquoted debt securities 5,438,282 — — — — — 5,438,282Sales contracts receivable 79,242 — — 75,288 18,116 354,407 527,053Accrued interest receivable 1,246,883 208,518 68,310 228,289 2,831 54,728 1,809,559Accounts receivable 36,424 616 — 170,584 72 688,730 896,426 Other receivables — 479,566 — — — — 479,566 Other assets - security deposit


— 59,932 — — — — 59,932

66,497,304 29,607,788 1,775,794 4,157,801 4,360,878 5,013,998 111,413,563137,351,577 29,607,788 1,775,794 4,157,801 4,360,878 5,013,998 182,267,836



Parent Bank2014


High Grade (a)

StandardGrade (b)

Sub-standardGrade (c) Unrated

Past Duebut not

Impaired Impaired TotalDue from BSP 40,645,833 — — — — — 40,645,833Due from other banks 2,165,147 — — — — — 2,165,147Interbank loans receivable 11,308,804 — — — — — 11,308,804


Corporate loans 31,514,336 22,734,367 2,412,949 3,966,529 1,895,179 2,954,966 65,478,326Consumer loans 32,369,545 — — — 642,252 527,138 33,538,935

Unquoted debt securities 4,250,629 — — — — — 4,250,629Sales contracts receivable — — — 1,465,685 — 278,917 1,744,602Accrued interest receivable 394,842 161,589 22,077 1,122,831 18,488 76,749 1,796,576Accounts receivable — — — 682,252 — 231,889 914,141Other receivables — — — — — — —Other assets - security deposit


— — — — — — —

68,529,352 22,895,956 2,435,026 7,237,297 2,555,919 4,069,659 107,723,209122,649,136 22,895,956 2,435,026 7,237,297 2,555,919 4,069,659 161,842,993


Consolidated2013


High Grade (a)

StandardGrade (b)

Sub-standard

Grade (c) Unrated

Past Duebut not

Impaired Impaired TotalDue from BSP 66,068,191 — — — — — 66,068,191Due from other banks 1,782,435 — — — — — 1,782,435Interbank loans receivable 1,260,277 — — — — — 1,260,277


Corporate loans 28,891,400 26,134,020 1,630,693 4,321,696 1,496,896 3,082,089 65,556,794Consumer loans 22,292,920 — — 298,051 2,447,403 660,188 25,698,562

Unquoted debt securities 5,176,947 — — — — — 5,176,947Sales contracts receivable — — — 194,636 — 232,816 427,452Accrued interest receivable 1,246,871 140,064 68,310 234,106 2,830 54,728 1,746,909Accounts receivable — — — 288,436 — 673,073 961,509Other receivables — — — 125,000 — — 125,000

57,608,138 26,274,084 1,699,003 5,461,925 3,947,129 4,702,894 99,693,173126,719,041 26,274,084 1,699,003 5,461,925 3,947,129 4,702,894 168,804,076


Trading and Investment SecuritiesIn ensuring the quality of its trading and investment portfolio, the Parent Bank uses the credit risk rating from published data providers like Moody’s, Standard & Poor’s (S&P), Fitch, and such other rating agencies as may be approved by the Monetary Board of the BSP.


The table below shows the credit risk rating of trading and investment securities (gross of allowance for credit and impairment losses):

Consolidated2014

AAA to BBB- BB+ to B-CCC to D

and Unrated TotalFinancial assets at FVPL:

Debt securities:Government 471,919 — — 471,919 Private 192,193 — 22,074 214,267

Equity securities:Quoted 240,007 — 35,077 275,084

Derivative assets 34,539 — 241 34,780938,658 — 57,392 996,050

AFS financial assets:Debt securities:

Government 16,560,516 — — 16,560,516Private 9,810,373 — 908,973 10,719,346

Equity securities:Quoted 169,254 — 396,517 565,771Unquoted — — 651,526 651,526

26,540,143 — 1,957,016 28,497,159HTM investments:

Government debt securities 28,030,756 — — 28,030,75655,509,557 — 2,014,408 57,523,965

Consolidated2013



Debt securities:Government 709,593 — — 709,593Private 81,641 — 11,104 92,745

Quoted equity securities 213,320 18 83,162 296,500Derivative assets 31,605 74 7,473 39,152

1,036,159 92 101,739 1,137,990AFS financial assets:

Debt securities:Government 16,525,830 1,840,982 — 18,366,812Private 6,407,034 655,676 321,547 7,384,257

Equity securities:Quoted 7,877 79,657 469,714 557,248Unquoted 320 — 637,855 638,175

22,941,061 2,576,315 1,429,116 26,946,492HTM investments:

Government debt securities 28,097,374 — — 28,097,37452,074,594 2,576,407 1,530,855 56,181,856


Parent Bank2014



Debt securities:Government 63,558 — — 63,558Private 192,193 — 22,074 214,267

Equity securities:Quoted 218,312 — 35,077 253,389

Derivative assets 34,539 — 241 34,780508,602 — 57,392 565,994

AFS financial assets:Debt securities:

Government 16,490,950 — — 16,490,950Private 9,810,372 — 908,973 10,719,345

Equity securities:Quoted — — 396,517 396,517Unquoted — — 651,010 651,010

26,301,322 — 1,956,500 28,257,822HTM investments:

Government debt securities 27,890,328 — — 27,890,32854,700,252 — P2,013,892 56,714,144

Parent Bank2013



Debt securities:Government 385,970 -— — 385,970Private 81,641 — 11,104 92,745

Quoted equity securities 212,561 — 75,776 288,337Derivative assets 31,605 74 7,473 39,152

711,777 74 94,353 806,204AFS financial assets:

Debt securities:Government 16,335,847 1,840,982 — 18,176,829Private 6,407,034 655,676 321,547 7,384,257

Equity securities:Quoted — — 396,517 396,517Unquoted 320 — 637,339 637,659

22,743,201 2,496,658 1,355,403 26,595,262HTM investments:

Government debt securities 27,955,913 — — 27,955,91351,410,891 2,496,732 1,449,756 55,357,379

Aging analysis of past due but not impaired loans and receivables is shown below:

Consolidated2014

Within1 Year

More than1 Year Total

Receivables from customers:Corporate loans 1,608,712 384,543 1,993,255Consumer loans 369,975 584,625 954,600

Accrued interest receivable 17,215 1,365 18,580Accounts receivable 684 98 782Sales contracts receivable 770 3,833 4,603

1,997,356 974,464 2,971,820


Consolidated2013

Within1 Year


Receivables from customers:Corporate loans 1,437,160 291,800 1,728,960Consumer loans 2,190,586 420,313 2,610,899

Accrued interest receivable 2,208 623 2,831Accounts receivable 72 — 72Sales contracts receivable 18,116 — 18,116

3,648,142 712,736 4,360,878

Parent Bank2014

Within1 Year


Receivables from customers:Corporate loans 1,549,625 345,554 1,895,179Consumer loans 251,232 391,020 642,252

Accrued interest receivable 17,215 1,273 18,4881,818,072 737,847 2,555,919

Parent Bank2013

Within1 Year


Receivables from customers:Corporate loans 1,272,700 224,196 1,496,896Consumer loans 2,138,539 308,864 2,447,403

Accrued interest receivable 2,208 622 2,8303,413,447 533,682 3,947,129

Past Due but not Impaired Loans and ReceivablesThese are loans and receivables where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of the level of collateral available or status of collection of amounts owed to the Group.

Impaired Loans and Receivables and Investment SecuritiesImpaired loans and receivables and investment securities are loans and receivables and investment securities for which the Group determines that it is probable that it will be unable to collect all principal and interest due based on the contractual terms of the promissory note and securities agreements.

The total fair value of collaterals of impaired loans and receivables amounted to 885.4 million in 2014 and 509.8 million in 2013, for the Group and 744.5 million in 2014 and 395.2 million in 2013, for the Parent Bank. These collaterals consist of hold-outs on deposits, real estate mortgages, chattel mortgages, equity securities and leased assets.

Liquidity Risk Liquidity risk is generally defi ned as the current and prospective risk to earnings or capital arising from the Group’s inability to meet its obligations when they become due.

The Parent Bank closely monitors the current and prospective maturity structure of its resources and liabilities and the market condition to guide pricing and asset/liability allocation strategies to manage its liquidity risks. Liquidity risks are monitored and managed by using the Maximum Cumulative Outfl ow limits and funding diversifi cation/concentration limits.

In addition, the Parent Bank manages liquidity risk by holding suffi cient liquid assets of appropriate quality to ensure short-term funding requirements are met and by maintaining a balanced loan portfolio which is repriced on a regular basis. In addition, the Parent Bank seeks to maintain suffi cient liquidity to take advantage of interest rate and exchange rate opportunities when they arise.


The table below shows the maturity profi le of the fi nancial assets used for liquidity management and the maturity profi le of fi nancial liabilities based on contractual undiscounted cash fl ows:

Consolidated2014

On DemandWithin1 Year

Beyond1 Year Total

Financial AssetsCash and other cash items 7,477,991 — — 7,477,991Due from BSP 39,502,248 2,400,949 — 41,903,197Due from other banks 2,253,958 — — 2,253,958Interbank loans receivable — 11,808,804 — 11,808,804Financial assets at FVPL* 464,836 531,214 — 996,050AFS financial assets* 1,262,457 24,809,615 8,844,819 34,916,891Loans and receivables** 4,537,627 45,922,154 68,500,987 118,960,768

55,499,117 85,472,736 77,345,806 218,317,659Financial LiabilitiesDeposit liabilities:

Demand 29,483,489 — — 29,483,489Savings** 134,832,873 — — 134,832,873Time** 10,029,551 35,541,063 5,999,276 51,569,890LTNCD** — — 9,519,289 9,519,289

174,345,913 35,541,063 15,518,565 225,405,541Bills payable and SSURA** 1,321,659 10,246,561 1,312,324 12,880,544Accrued interest and other expenses*** 21,157 514,320 — 535,477Other liabilities:

Bills purchased - contra — 5,025,556 — 5,025,556Cash letters of credit 302,752 5,890,180 — 6,192,932Accounts payable 64,109 1,909,563 78,021 2,051,693Margin deposits — 53,942 — 53,942Manager’s check 32,066 1,075,078 — 1,107,144Deposit on lease contracts 67,635 103,999 268,655 440,289Outstanding acceptances 20,353 67,086 — 87,439Due to PDIC — 207,139 — 207,139Due to Treasury of the Philippines — 75,379 — 75,379Derivative liabilities — 13,759 — 13,759Miscellaneous — 340,176 — 340,176

176,175,644 61,063,801 17,177,565 254,417,010

*Includes equity securities, based on expected disposal**Includes future interest payments***Excludes accrued taxes

Consolidated2013


Beyond1 Year Total

Financial AssetsCash and other cash items 6,478,104 — — 6,478,104Due from BSP 63,667,241 1,640,676 2,400,949 67,708,866Due from other banks 1,885,130 — — 1,885,130Interbank loans receivable 1,259,277 1,000 — 1,260,277Financial assets at FVPL* 39,152 1,097,694 — 1,136,846AFS financial assets* 1,297,049 25,031,907 908,514 27,237,470Loans and receivables** 1,686,602 51,906,897 64,884,543 118,478,042


Demand 26,480,932 — — 26,480,932Savings** 123,823,233 — — 123,823,233Time** — 65,778,399 7,723,568 73,501,967LTNCD** — 580,143 10,549,249 11,129,392

150,304,165 66,358,542 18,272,817 234,935,524


Consolidated2013


Beyond1 Year Total

Bills payable and SSURA** 98,470 13,569,494 1,139,731 14,807,695Accrued interest and other expenses*** — 600,736 — 600,736Other liabilities: — —

Bills purchased - contra — 4,908,793 — 4,908,793Cash letters of credit — 808,472 — 808,472Accounts payable — 1,691,338 — 1,691,338Margin deposits — 475,251 — 475,251Manager’s check — 1,143,941 — 1,143,941Deposit on lease contracts — — 452,197 452,197Outstanding acceptances — 38,459 — 38,459Due to PDIC — 214,390 — 214,390Due to Treasury of the Philippines — 76,069 — 76,069Derivative liabilities — 400 — 400Miscellaneous — 238,928 — 238,928

150,402,635 90,124,813 19,864,745 260,392,193


Parent Bank2014


Beyond1 Year Total

Financial AssetsCash and other cash items 7,041,100 — — 7,041,100Due from BSP 38,244,884 2,400,949 — 40,645,833Due from other banks 2,165,147 — — 2,165,147Interbank loans receivable — 11,308,804 — 11,308,804Financial assets at FVPL* 34,780 531,214 — 565,994AFS financial assets* 1,260,390 24,807,990 8,555,433 34,623,813Loans and receivables** 1,135,615 41,998,392 60,009,214 103,143,221


Demand 28,749,990 — — 28,749,990Savings** 132,131,331 — — 132,131,331Time** 6,355,739 34,416,467 5,094,265 45,866,471LTNCD** — — 9,519,289 9,519,289

167,237,060 34,416,467 14,613,554 216,267,081Bills payable and SSURA** 1,321,659 8,604,536 1,139,407 11,065,602Accrued interest and other expenses*** — 493,360 — 493,360Other liabilities: —

Bills purchased - contra — 5,025,556 — 5,025,556Cash letters of credit 302,752 5,890,180 — 6,192,932Accounts payable — 1,751,460 78,021 1,829,481Margin deposits — 53,942 — 53,942Manager’s check — 1,075,078 — 1,075,078Deposit on lease contracts — - — — Outstanding acceptances 20,353 67,086 — 87,439Due to PDIC — 207,139 — 207,139Due to Treasury of the Philippines — 71,630 — 71,630Derivative liabilities — 13,759 — 13,759Miscellaneous — 28,892 — 28,892

168,881,824 57,699,085 15,830,982 242,411,891



Parent Bank2013


Beyond1 Year Total

Financial AssetsCash and other cash items 6,228,587 — — 6,228,587Due from BSP 63,667,242 — 2,400,949 66,068,191Due from other banks 1,782,435 — — 1,782,435Interbank loans receivable 1,259,277 1,000 — 1,260,277Derivative assets 39,152 — — 39,152Financial assets at FVPL* — 767,052 — 767,052AFS financial assets* 1,297,049 25,023,212 396,517 26,716,778Loans and receivables** 1,388,852 45,141,059 57,139,249 103,669,160


Demand 26,042,833 — — 26,042,833Savings** 120,734,330 — — 120,734,330Time** — 60,873,963 7,421,288 68,295,251LTNCD** — 580,143 10,549,249 11,129,392

146,777,163 61,454,106 17,970,537 226,201,806Bills payable and SSURA** — 11,559,774 1,131,127 12,690,901Accrued interest and other expenses*** — 568,603 — 568,603Other liabilities:

Bills purchased - contra — 4,908,793 — 4,908,793Cash letters of credit — 808,472 — 808,472Accounts payable — 1,480,506 — 1,480,506Margin deposits — 475,251 — 475,251Manager’s check — 1,082,934 — 1,082,934Outstanding acceptances — 38,459 — 38,459Due to PDIC — 214,390 — 214,390Due to Treasury of the Philippines — 71,743 — 71,743Derivative liabilities — 400 — 400Miscellaneous — 28,716 — 28,716

146,777,163 82,692,147 19,101,664 248,570,974


Market RiskMarket risk is the risk of loss to future earnings, fair values or future cash fl ows that may result from changes in the market rates and prices of a fi nancial instrument. Trading portfolios are exposed to market risk because the values of trading positions are sensitive to changes in market prices. Assets and liabilities portfolios are affected by market risks because the revenues derived from these activities, such as securities gains and losses and net interest income are sensitive to changes in interest and foreign exchange rates. The Parent Bank’s market risk originates from its holdings of foreign exchange instruments, debt securities, equity securities and derivatives.

Market risks are monitored on a daily basis by the RMD, which functions independently from the business units. The Group uses various loss limits and risk measurement methodologies as follows:

• Stop loss limits• Loss alert limits• Position limits• Mark-to-market valuation• Value-at-Risk (VaR)• Earnings-at-Risk (EaR)

VaR Methodology Assumptions and ParametersThe Parent Bank computes the statistical VaR to estimate the maximum potential loss that can be incurred in its trading books under normal market conditions given a specifi ed confi dence level and holding period. VaR is one of the key measures in the Parent Bank’s management of market risk. The Parent Bank uses a 1-day and a 10-day holding period for its foreign exchange VaR and interest rate VaR, respectively. The Parent Bank adopts a historical simulation approach using a 99.0% confi dence level and a one year observation period in its VaR calculation.

The Parent Bank’s VaR limit is agreed annually by the Treasury Group and RMD. This is presented to the ROC and the Board based on the tolerable risk appetite of the Parent Bank. Monitoring reports, which include the VaR fi gures and exposures to VaR limits are sent to the risk-taking units on a daily basis. These are also reported monthly to the ROC.


The VaR fi gures are backtested against actual and unrealized profi t and loss of the trading book to validate the robustness of the VaR model. While VaR measures risk during times of normality, it is supplemented with stress testing, which is used to measure the potential effect of a crisis or low probability event. The RMD conducts stress testing to measure and monitor market risks in extreme market conditions. Results of backtesting and stress testing are reported to the ROC on a monthly basis.

Although VaR is an important tool for measuring market risk, the assumptions on which the model is based do give rise to the following limitations:

• The holding period assumes that it is possible to hedge or dispose of positions within that period. This is considered to be a realistic assumption in almost all cases but may not be the case in situations in which there is severe market illiquidity for a prolonged period;

• A 99.0% confi dence level does not refl ect losses that may occur beyond this level. Even within the model used, there is a one percent probability that losses could exceed the VaR;

• VaR is calculated on an end-of-day basis and does not refl ect exposures that may arise on positions during the trading day;

• The use of historical data as a basis for determining the possible range of future outcomes may not always cover all possible scenarios, especially those of an exceptional nature;

• The VaR measure is dependent upon the Parent Bank’s position and the volatility of market prices; and

• The VaR of an unchanged position reduces if the market price volatility declines and vice versa.

EaR Methodology Assumptions and ParametersThe Bank uses gap analysis to measure the sensitivity of its assets and liabilities to interest rate fl uctuations, specifi cally by the EaR or the risk of deterioration in interest income over the next 12 months due to unfavorable movements in interest rates. It also subjects the EaR values to various interest rate shocks to determine the impact on earnings in the banking book.

This analysis allows the Bank to measure the impact of changes in interest rates on the accrual portfolio or reported earnings. The repricing gap for a particular time bucket is calculated by subtracting the interest rate sensitive liabilities in each time bucket from interest rate sensitive assets. The difference in the amount of maturing assets and liabilities will provide the Bank with an indication of its exposure to the risk of potential changes in net interest income.

Among the assumptions used for the computation of EaR are:

1. Annual re-pricing on amortized loans2. Based on maturity for bullet payments; and3. Payment date based on farthest maturity4. Behavior of non-maturing deposits

A summary of the VaR position of the trading portfolios of the Parent Bank as at December 31, 2014 and 2013 is as follows:

2014At Dec 31 Average Maximum Minimum

Foreign currency risk 6,419 5,689 18,609 34Interest rate risk 1,821 9,213 45,743 1,248


Foreign currency risk 3,004 3,771 12,648 6Interest rate risk 16,078 25,323 128,111 2,047

The total interest rate risk VaR of the fi xed income instruments in the portfolios of the Parent Bank as at December 31, 2014 and 2013 is as follows:


Interest rate risk VaR 222,134 495,020 843,799 194,175


Interest rate risk VaR 647,353 577,071 1,032,966 230,601

The limitations of the VaR methodology are recognized by supplementing VaR limits with other position and sensitivity limit structures, including limits to address potential concentration risks within each trading portfolio. In addition, the Parent Bank conducts stress tests to determine the fi nancial impact of a variety of exceptional market scenarios on individual trading portfolios and the Parent Bank’s overall position.


Interest Rate RiskInterest rate risk arises from the possibility that changes in interest rates will affect future cash fl ows or fair values of fi nancial instruments.

The Parent Bank measures the sensitivity of its assets and liabilities to interest rate fl uctuations by way of gap analysis. The analysis provides the Parent Bank with a measure of the impact of changes in interest rates on the accrual portfolio or reported earnings (the risk exposure of future accounting income). The repricing gap is calculated by subtracting the interest rate sensitive liabilities in each time bucket from interest rate sensitive assets to produce repricing gap for that particular time bucket. The difference in the amount of assets and liabilities maturing would then give the Parent Bank an indication of its exposure to the risk of potential changes in net interest income.

A positive gap occurs when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities and is favorable to the Parent Bank during a period of rising interest rates since it is in a better position to invest in higher yielding assets more quickly than it would need to refi nance its interest bearing liabilities. Conversely, during a period of falling interest rates, a positively gapped position could result in a restrained growth for or even declining net interest income.

A negative gap occurs when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets and this is unfavorable to the Parent Bank during a period of rising interest rates. It is a disadvantageous position because it would need to refi nance its maturing interest bearing liabilities at a higher level. Conversely, during a period of falling interest rates, a negatively gapped position is favorable to the Parent Bank because it can take advantage of lower repricing and refunding cost leading to improved net interest income.

The Group also monitors its exposure to fl uctuations in interest rates by measuring the impact of interest rate movements on its interest income. This is done by modeling the impact and doing a sensitivity scenario analysis of various changes in interest rates to the Group’s interest-related income and expenses.

The following table sets forth the repricing gap position of the Parent Bank as at December 31, 2014 and 2013 (in millions):

2014Up to 1Month

1 to 3 Months

3 to 6 Months

6 to 12 Months Total

Financial AssetsDue from BSP 4,200 — — — 4,200Due from other bank — — — 1,986 1,986 Interbank loans receivable 5,308 5,309Loans and receivables 798 26,442 6,539 708 34,487Financial assets at FVPL — — — — — AFS financial assets 8,302 1,036 — — 9,338

18,608 27,478 6,539 2,694 55,320Financial LiabilitiesDeposit liabilities:

Demand 3,463 3,463Savings 127,078 127,078Time 33,688 4,662 817 1,556 40,733

Bills payable 8,783 1,115 — — 9,898173,012 5,777 817 1,566 181,172

Repricing Gap ( 154,404) 21,701 5,722 1,128 ( 125,853)Cumulative Gap (154,404) (132,703) (126,981) (125,853) —

2013Up to 1Month

1 to 3 Months

3 to 6 Months

6 to 12 Months Total

Financial AssetsDue from BSP 32,400 — 844 204 33,448Due from other bank — — — 2,096 2,096 Interbank loans receivable 614 — — — 614Loans and receivables 780 29,186 4,560 597 35,123Financial assets at FVPL 3 — — 9 12AFS financial assets 5,501 501 — — 6,002

39,298 29,687 5,404 2,906 77,295Financial LiabilitiesDeposit liabilities:

Demand 3,125 3,125Savings 102,256 102,256Time 46,385 16,202 8,065 742 71,394

Bills payable 9,872 853 — — 10,725 161,638 17,055 8,065 742 187,500

Repricing Gap ( 122,340) 12,632 ( 2,661) 2,164 ( 110,205)Cumulative Gap (122,340) (109,708) (112,369) (110,205) —

*** Revised disclosure for 2013 and 2014 to conform with BSP requirements.


To address the negative gap, the Parent Bank continually assesses various options such as fi xing liabilities to fi ve (5) years and beyond by offering a more attractive high yielder. Simultaneously, the Parent Bank could also go underweight on long duration investments to narrow the gap. It also continues to implement previous strategies such as issuing LTNCD. The Group also monitors its exposure to fl uctuations in interest rates by measuring the impact of interest rate movements on its interest income. This is done by modeling the impact and doing a sensitivity scenario analysis of various changes in interest rates to the Group’s interest-related income and expenses.

The following table sets forth, for the period indicated, the impact of changes in interest rates on the Parent Bank’s net interest income:

2014Changes in interest rates (in basis points) +50 -50 +100 -100Change on annualized net interest income:PHP 36,273 ( 36,273) 44,624 ( 44,624)USD 5,272 (5,272) 7,029 (7,029)

41,545 ( 41,545) 51,653 ( 51,653)

2013Changes in interest rates (in basis points) +50 -50 +100 -100Change on annualized net interest income:PHP ( 32,108) 32,108 ( 71,925) 71,925USD (14,119) 14,119 (21,179) 21,179

( 46,227) 46,227 ( 93,104) 93,104

Given the repricing position of the assets and liabilities of the Parent Bank as at December 31, 2014 and 2013, if interest rates increased by 100 basis points, the Parent Bank would expect annualized interest income to increase by 51.7 million and decrease by 93.1 million, respectively. The EaR computation is being prepared monthly.

The following tables demonstrate the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Bank’s mark-to-market gain/loss on fi nancial assets at FVPL and equity arising from mark-to-market gain/loss on AFS fi nancial assets (amounts in millions).

ConsolidatedImpact of Changes in Interest Rates on

Mark-to-Market Gain/Loss on Financial Assets at FVPL*Increase (Decrease) in Basis Points) +50 -50 +100 -100 +50 -50 +100 -100

Change on market-to-market gain/loss on financial assets at FVPL ( 9,083) 9,083 ( 18,156) 18,156 ( 22,542) 22,542 ( 45,074) 45,074

* There is no other impact on the Bank’s equity other than those already affecting the statements of income

Impact of Changes in Interest Rates on Equity**2014 2013

Increase (Decrease) in Basis Points) +50 -50 +100 -100 +50 -50 +100 -100

Change on market-to-market gain/loss on AFS financial assets ( 598,865) 599,045 ( 1,197,559) 1,198,289 ( 663,010) 663,680 ( 1,325,470) 1,328,010

**The impact on the Bank’s equity already excludes the impact on transactions affecting the statements of income

ParentImpact of Changes in Interest Rates on

Mark-to-Market Gain/Loss on Financial Assets at FVPL*Increase (Decrease) in Basis Points) +50 -50 +100 -100 +50 -50 +100 -100

Change on market-to-market gain/loss on financial assets at FVPL ( 9,073) 9,073 ( 18,146) 18,146 ( 22,532) 22,532 ( 45,064) 45,064

* There is no other impact on the Parent Bank’s equity other than those already affecting the statements of income

Impact of Changes in Interest Rates on Equity**2014 2013

Increase (Decrease) in Basis Points) +50 -50 +100 -100 +50 -50 +100 -100

Change on market-to-market gain/loss on AFS financial assets ( 595,815) 595,815 ( 1,191,629) 1,191,629 ( 654,040) 654,040 ( 1,308,080) 1,308,080

**The impact on the Parent Bank’s equity already excludes the impact on transactions affecting the statements of income


Foreign Currency RiskForeign currency risk is the probability of loss to earnings or capital arising from changes in foreign exchange rates. The Group takes on exposure to effects of fl uctuations in the current foreign currency exchange rates on its fi nancial performance and cash fl ows.

The Parent Bank actively manages its exposure to effects of fl uctuations in foreign currency exchange rates. Foremost among its guidelines is maintaining foreign currency exposure within the existing regulatory guidelines. This is a level believed to be relatively conservative for a fi nancial institution engaged in that type of business. Banks are required by the BSP to match the foreign currency liabilities with the foreign currency assets held in the FCDU. In addition, the BSP requires a 30.0% liquidity reserve on all foreign currency liabilities held in the FCDU.

The Parent Bank’s policy is to maintain foreign currency exposure within acceptable limits and within existing regulatory guidelines. The Parent Bank believes that its foreign currency exposure on its assets and liabilities is within conservative limits for a fi nancial institution engaged in this type of business.

The Group does not present a sensitivity analysis on the impact on profi t and loss and equity based on the reasonably possible change of foreign currency since its subsidiaries’ exposure to foreign currency risk is minimal.

The following tables summarize the Parent Bank’s exposure to foreign exchange risk as at December 31, 2014 and 2013. Included in the table are the Parent Bank’s assets and liabilities at carrying amounts in PHP, categorized by currency (amounts in USD):

2014USD Others Total

AssetsCash and due from BSP 12,901 7,157 20,058Due from other banks 36,398 128,243 164,641Interbank loans receivable 118,690 — 118,690Financial assets at FVPL 5,493 — 5,493AFS financial assets 208,672 3,953 212,625HTM investments — — — Loans and receivables 45,738 — 45,738Other assets 1,039 — 1,039

428,931 139,353 568,284LiabilitiesDeposit liabilities 363,851 86,720 450,571Bills payable 25,479 — 25,479Accrued taxes, interest and other expenses 340 — 340Other liabilities 84,624 53,506 138,130

474,294 140,226 614,520Net Exposure ( 45,363) ( 873) ( 46,236)

2013USD Others Total

AssetsCash and due from BSP 11,077 1,625 12,702Due from other banks 33,268 8,606 41,874Interbank loans receivable 28,365 — 28,365Financial assets at FVPL 2,757 — 2,757AFS financial assets 249,158 3,952 253,110HTM investments — — — Loans and receivables 182,715 — 182,715Other assets 2,849 — 2,849

510,189 14,183 524,372LiabilitiesDeposit liabilities 441,640 3,976 445,616Bills payable 25,479 — 25,479Accrued taxes, interest and other expenses 428 — 428Other liabilities 46,563 6,491 53,054

514,110 10,467 524,577Net Exposure ( 3,921) 3,716 ( 205)

165

The following table sets forth, for the period indicated, the impact of reasonably possible changes in foreign exchange rates on the Parent Bank’s net income and equity:

2014 2013

Changein Currency

Rate in %Effect on

Net IncomeEffect on

Equity

Changein Currency

Rate in %Effect on

Net IncomeEffect on

EquityCurrencyUSD +3.02% (61,266) (61,266) 1% (1,741) (1,741)

-3.02% 61,266 61,266 -1% 1,741 1,741

+0.07% (1,420) (1,420) 1% (1,741) (1,741)-0.07% 1,420 1,420 -1% 1,741 1,741

CurrencyOthers +9.25% (72,691) (72,691) 1% 1,650 1,650

-9.25% 72,691 72,691 -1% (1,650) (1,650)

+0.09% (707) (707) 1% 1,650 1,650-0.09% 707 707 -1% (1,650) (1,650)

Other currencies include British pound (GBP), Euro (EUR), Japanese yen (JPY), Australian dollar (AUD), Singapore dollar (SGD), Hong Kong dollar (HKD) and Swiss franc (CHF).

Equity Price RiskEquity price risk is the risk of loss arising from movements in equity prices. The Parent Bank manages its exposures to equity prices by way of stop loss limits. The BOD approves limits on the amount of potential loss that may be undertaken, which is monitored daily by the RMD and reported to the ROC.

The Group and the Parent Bank’s equity price risk emanates from its securities which are fi nancial instruments classifi ed as fi nancial assets at FVPL and AFS fi nancial assets. The Group and the Parent Bank measures the sensitivity of its investment securities by using PSE index (PSEi) fl uctuations.

Given the repricing position of the HFT quoted equity securities of the Parent Bank, if PSEi increased by 5%, the Parent Bank would expect the net unrealized gains on HFT securities to increase by 12.67 million in 2014 and the net unrealized losses on HFT securities to decrease by 14.41 million in 2013. Conversely, if PSEi decreased by 5%, the Parent Bank would expect the unrealized gains on HFT securities to decrease by 12.67 million in 2014 and the unrealized losses on HFT securities to increase by 14.41 million in 2013.

As at December 31, 2014 and 2013, given the repricing position of the AFS quoted equity securities of the Group, if PSEi increased by 5%, the Group would expect the net unrealized loss on AFS fi nancial assets to decrease by 8.06 million and 15.24 million, respectively. Conversely, if PSEi decreased by 5%, respectively, the Group would expect the net

unrealized loss on AFS fi nancial assets to increase by 8.06 million and 15.24 million, respectively. The effect of equity price fl uctuations on AFS fi nancial assets of the Parent Bank is insignifi cant, therefore, the Parent Bank’s sensitivity analysis was not included in the above discussion.

Changes in prices of AFS fi nancial assets do not affect the statements of income until sale or disposal of such assets or if there are indications of impairment.

6. Fair Value Measurement

The methods and assumptions used by the Group and the Parent Bank in estimating the fair value of fi nancial instruments are:

Cash and Other Cash Items, Due from BSP and Other Banks and Interbank Loans Receivable and SPURACarrying amounts approximate fair values considering that these accounts consist mainly of overnight deposits and fl oating rate placements, except for certain amounts under “Due from BSP” representing placements in trust for the PDIC as part of the Rehabilitation Plan (Notes 1 and 16).

Trading and Investment SecuritiesFair values of debt securities (fi nancial assets at FVPL, AFS fi nancial assets and HTM investments) and equity securities (fi nancial assets at FVPL and AFS fi nancial assets) are generally based on quoted market prices. Where the debt securities are not quoted or the market prices are not readily available, the Group used internal valuation techniques using generally accepted market valuation models such as discounted cash fl ow methodology. For equity securities that are not quoted, the investments are carried at cost less allowance for impairment losses due to the unpredictable nature of future cash fl ows and the lack of suitable methods of arriving at a reliable fair value.

Derivative InstrumentsFair values are based on quoted market prices provided by independent parties, or prices derived using acceptable valuation models.



Loans and ReceivablesFair values of loans and receivables are estimated using the discounted cash fl ow methodology, using current incremental lending rates for similar types of loans. Where the instrument reprices on a quarterly basis or has a relatively short maturity, the carrying amounts approximate fair values.

Deposit Liabilities and Bills PayableCarrying amounts of demand and savings deposit liabilities approximate fair value considering that these are due and demandable. Carrying amounts of bills payable approximates fair value due to their short term maturities. Fair values of time deposit liabilities and LTNCDs are estimated using the discounted cash fl ow methodology, using current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued.

Other LiabilitiesCarrying amounts of other liabilities approximate fair values in view of the relatively short-term maturities of these instruments except for deposits on lease contracts with fair value estimated using discounted cash fl ow method.

The Group’s measurement of fair value for fi nancial and non-fi nancial assets and liabilities is recurring.

The Group uses the following hierarchy for determining and disclosing the fair value of fi nancial instruments by valuation technique:

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2: other techniques for which all inputs which have a signifi cant effect on the recorded fair value are observable, either directly or indirectly; and

• Level 3: techniques which use inputs which have a signifi cant effect on the recorded fair value that are not based on observable market data.

The following table shows an analysis of fi nancial instruments recorded at fair value and those for which fair values are disclosed by level of the fair value hierarchy:

2014Consolidated

Carrying Value Level 1 Level 2 Level 3

Total Fair Value

Assets Measured at Fair ValueFinancial Assets at FVPL Debt securities:

Government 471,919 471,919 — — 471,919Private 214,267 214,267 — — 214,267

Quoted equity securities 275,084 275,084 — — 275,084Derivative assets 34,780 — 34,780 — 34,780

996,050 961,270 34,780 — 996,050AFS Financial Assets Debt securities:

Government 16,560,516 16,560,516 — — 16,560,516Private 10,719,346 10,719,346 — — 10,719,346

Quoted equity securities 565,771 565,771 — — 565,77127,845,633 27,845,633 — — 27,845,633

Assets for which Fair Values are Disclosed Financial AssetsHTM investments:

Government debt securities 28,030,756 31,650,628 — — 31,650,628Loans and receivables:

Receivable from customersCorporate loans 73,629,087 — 76,828,841 — 76,828,841Consumer loans 38,459,146 — 34,554,001 — 34,554,001

Unquoted debt securities 4,508,253 — — 4,503,201 4,503,201Sales contracts receivable 1,834,961 — 333,013 — 333,013Accounts receivable 839,871 — 292,458 — 292,458

147,302,074 31,650,628 112,008,313 4,503,201 148,162,142176,143,757 60,457,531 112,043,093 4,503,201 177,003,825

Financial Liabilities for which Fair Valuesare Disclosed

Deposit liabilities:Time 51,508,390 — 50,164,836 — 50,164,836LTNCD 9,484,078 9,951,377 — — 9,951,377

60,992,468 9,951,377 50,164,836 — P60,116,213

167

2013Consolidated


Total Fair Value




1,137,990 1,098,838 39,152 — 1,137,990AFS Financial Assets Debt securities:






Unquoted debt securities 5,438,282 — — 4,667,465 4,667,465Sales contracts receivable 527,053 — 483,196 — 483,196Accounts receivable 896,426 — 472,258 — 472,258

137,161,880 32,726,716 109,117,211 4,667,465 146,511,392164,608,187 60,133,871 109,156,363 4,667,465 173,957,699



82,809,068 9,386,659 72,801,581 — 82,188,240

2014Parent


Total Fair Value







forward



2014Parent


Total Fair Value




Unquoted debt securities 4,250,629 — — 4,227,362 4,227,362Sales contracts receivable 1,744,602 — 255,611 — 255,611Accounts receivable 914,141 — 282,270 — 282,270

133,816,961 31,522,507 100,797,678 4,227,362 136,547,547161,989,768 59,660,534 100,832,458 4,227,362 164,720,354


Deposit liabilities:Time 45,804,972 — 44,455,233 — 44,455,233 LTNCD 9,484,078 9,951,377 — — 9,951,377

55,289,050 9,951,377 44,455,233 — 54,406,610

2013Parent


Total Fair Value










Unquoted debt securities 5,176,947 — — 4,376,356 4,376,356Sales contracts receivable 427,452 — 394,604 — 394,604Accounts receivable 961,509 — 426,995 — 426,995

125,777,177 32,508,091 94,071,250 4,376,356 130,955,697152,540,984 59,232,746 94,110,402 4,376,356 157,719,504



77,634,016 9,386,659 72,801,581 — 82,188,240

Instruments included in Level 3 include those for which there is currently no active market and are recorded at cost less accumulated allowance for impairment losses.

169

As at December 31, 2014 and 2013 the following tables show the Parent Bank’s reconciliation from the beginning balances to the closing balances of fi nancial assets with fair value measurement under Level 3 of the fair value hierarcy:

Consolidated Parent Bank2014 2013 2014 2013

Balance at beginning of year 4,667,465 7,163,591 4,376,356 6,865,869Transfer into Level 3 from Level 2 — — — — Movement in balance due to unrealised gain and

purchases (164,264) (2,496,126) (148,994) (2,489,513)

Balance at end of year 4,503,201 4,667,465 4,227,362 4,376,356

Estimated fair value of assets and liabilities classifi ed as Level 3 items are considered not material relative to the overall size of the Parent Bank’s assets and liabilities recorded at fair value.

During the years ended December 31, 2014 and 2013, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurement.

7. Due from Bangko Sentral ng Pilipinas and Other Banks

Due from BSP consists of:


Demand deposit account 37,703,197 35,308,866 36,445,833 33,668,191Special deposit account 4,200,000 32,400,000 4,200,000 32,400,000

41,903,197 67,708,866 40,645,833 66,068,191

The BSP demand deposit account is interest-free while the special deposit account earned average annual interest of 2.5% and 2.0% in 2014 and 2013, respectively. Included in the demand deposit account is P2.4 billion which is being used by the Parent Bank to comply with reserve requirements of the BSP under the amended rehabilitation plan (Notes 1 and 16).

In 2014 and 2013, interest income on placements with BSP amounted to 299.6 million and 233.5 million, respectively, for the Group and 281.4 million and 228.5 million, respectively, for the Parent Bank.

Due from other banks consists of:


Local currency 223,031 200,012 134,323 97,440Foreign currency 2,030,927 1,685,118 2,030,824 1,684,995

2,253,958 1,885,130 2,165,147 1,782,435

Due from other banks earned average annual interest of 0.01% to 0.25% and 0.01% to 0.08%, respectively, for local currency, and 0.01% to 0.13% and 0.01% to 0.12%, respectively, for foreign currency, in 2014 and 2013, respectively. In 2014 and 2013, interest income on placements with other banks amounted to 10.5 million and 17.6 million, respectively, for the Group and 24.4 million and 17.0 million, respectively, for the Parent Bank.

8. Interbank Loans Receivable and Securities Purchased Under Resale Agreements


Interbank loans receivable 5,308,804 1,260,277 5,308,804 1,260,277SPURA 6,500,000 — 6,000,000 —

11,808,804 1,260,277 11,308,804 1,260,277

Interbank loans receivable have original maturities from respective placement dates of one (1) day to three (3) months and earn annual interest ranging from 2.0% to 2.5% and from 2.0% to 4.3% for Philippine peso-denominated receivables and from 0.05% to 0.12% and from 0.02% to 0.13% for US dollar-denominated receivables in 2014 and 2013, respectively.

Interest income on interbank loans receivable amounted to 32.2 million in 2014 and 2.9 million in 2013, for the Group, and 3.8 million in 2014 and 2.4 million in 2013, for the Parent Bank.



9. Trading and Investment Securities

Financial Assets at FVPLThis account consists of the following:


Held-for-tradingDebt securities:

Government 471,919 709,593 63,558 385,970Private 214,267 92,745 214,267 92,745

686,186 802,338 277,825 478,715Quoted equity securities 275,084 296,500 253,389 288,337

961,270 1,098,838 531,214 767,052Derivative assets 34,780 39,152 34,780 39,152

996,050 1,137,990 565,994 806,204

Philippine peso-denominated debt securities classifi ed as fi nancial assets at FVPL earn annual interest ranging from 1.6% to 10.1% and from 2.5% to 8.8% in 2014 and 2013, respectively.

US dollar-denominated debt securities classifi ed as fi nancial assets at FVPL earn annual interest ranging from 2.8% to 9.5% and 2.1% to 7.0% in 2014 and 2013, respectively.

AFS Financial AssetsThis account consists of the following:

Consolidated Parent BankNote 2014 2013 2014 2013

Debt securities:Government 16,560,516 18,366,812 16,490,950 18,176,829Private 10,719,346 7,384,257 10,719,346 7,384,257

27,279,862 25,751,069 27,210,296 25,561,086Equity securities:

Quoted 565,771 557,248 396,517 396,517Unquoted 651,526 638,175 651,009 637,659

1,217,297 1,195,423 1,047,526 1,034,17628,497,159 26,946,492 28,257,822 26,595,262

Less allowance for credit and impairment losses 15 876,230 641,294 876,156 641,220

27,620,929 26,305,198 27,381,666 25,954,042

Philippine peso-denominated debt securities classifi ed as AFS fi nancial assets earn annual interest ranging from 1.6% to 10.1% and from 1.6% to 8.5% in 2014 and 2013, respectively.

US dollar-denominated debt securities classifi ed as AFS fi nancial assets earn annual interest ranging from 2.8% to 9.5% and from 2.8% to 8.6% in 2014 and 2013, respectively.

The Group and the Parent Bank’s investment in quoted equity securities are all quoted through the Philippine Stock Exchange (PSE). These include investments in public utilities and other private companies.

Unquoted equity securities represent long-term investments of the Group and the Parent Bank and are not actively traded in the market. The Group and the Parent Bank do not intend to sell these securities in the near future.

The Group’s and the Parent Bank’s investments in unquoted equity shares include shares of stock of ASEAN Finance Corporation (AFC), with acquisition cost of SGD 5.0 million ( 168.2 million and 175.8 million as at December 31, 2014 and 2013, respectively). As at December 31, 2014 and 2013, the related allowance for impairment losses on such equity securities amounted to 35.2 million and 36.8 million, respectively.

Investments in unquoted equity securities also include investments in public utilities and other private companies.

171

The movements of net unrealized (losses) gains on AFS fi nancial assets are as follows:


Balance at beginning of year ( 1,336,170) 645,801 ( 1,372,517) 587,580Unrealized gains (losses) during the year 997,577 (745,037) 985,321 (737,476)Amounts realized in statements of income (135,647) (1,236,934) (129,532) (1,222,621)Balance at end of year ( 474,240) ( 1,336,170) ( 516,728) ( 1,372,517)

As at December 31, 2014 and 2013, the net unrealized gains on AFS fi nancial assets presented in equity attributable to AFS fi nancial assets of USI, is net of deferred tax liabilities amounting to 20.1 million and 20.3 million, respectively, for the Group. The Parent Bank did not recognize DTA on the net unrealized losses on AFS fi nancial assets for both years (Note 24).

HTM InvestmentsHTM investments as at December 31, 2014 and 2013 are composed of government securities which earn annual interest ranging from 7.8% to 8.9% both in 2014 and 2013.

On various dates in 2011, the Parent Bank sold HTM investments with aggregate carrying amount of 3.2 billion thereby realizing gains of 0.3 billion. As a result of these disposals, the Parent Bank is prohibited under PFRS from classifying any fi nancial asset as HTM since 2011 and until 2013. On December 20, 2012, the BSP approved the exemption of the remaining HTM investments from the “tainting rule” as required per MORB Subsection X388.5 (b), however, the Parent Bank is prohibited from using the HTM account for other debt securities investments from 2011 to 2013. PFRS require that tainted HTM investments be reclassifi ed to available-for-sale (AFS) fi nancial assets. At the end of the tainting period, these investments should be reclassifi ed from AFS fi nancial assets to HTM investments with the carrying value, i.e. the fair value, of the AFS fi nancial assets at the time of the reclassifi cation as the new cost of the HTM investment. The net unrealized gain on the AFS fi nancial assets during the tainting period should then be amortized using the effective interest method over the remaining term of the securities. Accordingly, as at December 31, 2014 and 2013, the Parent Bank continues to classify government securities as HTM investments with an aggregate carrying amount of 27.9 billion and 28.0 billion, respectively, and with fair value of 31.5 billion and 32.5 billion, respectively. The Parent Bank’s remaining HTM investments were funded from the 30.0 billion savings deposits maintained by the National Government with the Parent Bank as part of the concessions granted by the Monetary Board, in its resolution No. 590, in the Amended Rehabilitation Plan (Note 16). Had the Parent Bank reclassifi ed these HTM investments to AFS fi nancial assets, total assets and net unrealized gain on AFS fi nancial assets, which are included in the equity section of the statements of fi nancial position, of the Parent Bank, would have increased by 3.6 billion and 4.6 billion as at December 31, 2014 and 2013, respectively, other comprehensive income would have increased by 82.3 million in 2013 and income would have increased by 109.2 million in 2014.

Interest Income and Trading and Securities GainsFor the years ended December 31, 2014 and 2013, interest income on trading and investment securities follows:


Financial assets at FVPLGovernment securities 39,611 58,889 19,832 48,041Private 9,007 6,736 9,007 6,736

AFS financial assetsGovernment securities 701,226 775,409 693,510 770,182Private 624,691 534,783 624,691 534,783

HTM investmentsGovernment securities 2,167,612 2,172,110 2,152,970 2,157,396

3,542,147 3,547,927 3,500,010 3,517,138

For the years ended December 31, 2014 and 2013, trading and securities gains - net consist of the following:


Financial assets at FVPLHFT securities

Realized ( 15,651) 212,116 ( 27,563) 206,857Unrealized 53,454 (106,222) 38,698 (92,896)

Derivatives 23 996 23 99637,826 106,890 11,158 114,957

AFS financial assets 132,617 1,237,013 129,532 1,222,621HTM investments — — — — Unquoted debt securities classified as loans 3,791 83,418 3,791 83,418

174,234 1,427,321 144,481 1,420,996



Derivative Financial InstrumentsThe Parent Bank is a counterparty to derivative contracts, such as interest rate swaps. These derivatives are entered into as a service to customers, as a means of reducing or managing their respective interest rate exposures and for trading purposes. Such derivative fi nancial instruments are initially recorded at fair value on the date when the derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and liabilities when the fair value is negative.

The succeeding table shows the fair values of the derivative fi nancial instruments of the Parent Bank, recorded as derivative assets or derivative liabilities, together with the notional amounts. The notional amount is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of the derivative are measured.

The notional amounts indicate the volume of transactions outstanding as at December 31, 2014 and 2013 and are not indicative of either market risk or credit risk.

2014Assets Liabilities Notional Amounts

Freestanding derivatives:Forward exchange sold — — US$— Warrants 31,836 — US$68Forward exchange bought 2,944 13,759 US$105,000

34,780 13,759

2013Assets Liabilities Notional Amounts

Freestanding derivatives:Forward exchange sold 105 400 US$17,000Warrants 31,605 — US$68Forward exchange bought 7,442 — US$6,000

39,152 400

The movements in the fair values of the derivative assets and liabilities follow:

2014 2013Balance at beginning of year 38,752 78,064Changes in fair value during the year (5,061) (17,315)Fair value of settled contracts (12,670) (21,997)Balance at end of year 21,021 38,752

The decrease in the value of the derivative fi nancial instrument pertains to the maturity of the Parent Bank’s investment in 2013 where the range accrual embedded derivative was valued using a valuation technique.

Changes in fair value of derivatives other than currency forwards amounting to 0.02 million and 1.0 million in 2014 and 2013, respectively, are included under “Trading and securities gains - net” account in the statements of income. Changes in fair value of currency forwards amounting to 12.7 million and 18.3 million gain in 2014 and 2013, respectively, are included under “Foreign exchange gains (losses) - net” account in the statements of income.

10. Loans and Receivables

This account consists of:


Receivables from customers:Corporate loans 73,629,087 71,449,505 65,478,326 65,556,794Consumer loans 38,459,146 30,753,240 33,538,935 25,698,562

112,088,233 102,202,745 99,017,261 91,255,356Less unearned discounts 296,330 289,126 31,892 39,448

111,791,903 101,913,619 98,985,369 91,215,908Unquoted debt securities 4,508,253 5,438,282 4,250,629 5,176,947Accrued interest receivable 1,861,656 1,809,559 1,796,576 1,746,909Sales contracts receivable 1,834,961 527,053 1,744,602 427,452Accounts receivable 839,871 896,426 914,141 961,509Other receivables 433,830 479,566 — 125,000

121,270,474 111,064,505 107,691,317 99,653,725Less allowance for credit and impairment losses 15 5,316,946 5,487,268 4,977,715 5,066,743

115,953,528 105,577,237 102,713,602 94,586,982

173

In 2014 and 2013, unquoted Philippine peso-denominated debt securities consist of private securities with EIR ranging from 5.0% to 8.7% and from 5.3% to 9.3%, respectively.

Unquoted debt securities consist of private securities with EIR ranging from 2.13% to12.58% in 2014 and from 2.10% to 12.60% in 2013, respectively. In 2008, the Parent Bank entered into a sale agreement covering its zero coupon-bearing bonds with total face amount of US$44.7 million ( 2.1 billion). The objective of this sale agreement was to convert the zero coupon-bearing bonds into a coupon-earning instrument. Based on the derecognition principles of PAS 39, the sale did not qualify for derecognition because the signifi cant risks and rewards on the bonds remained with the Parent Bank. The remaining unquoted debt securities as at December 31, 2013 amounting to US$12.2. million ( 501.8 million) were sold in 2014.

Sales contracts receivable arise mainly from the sale of foreclosed properties booked under “Investment properties” account. Accounts receivable mainly consists of amounts due from customers and other parties under open-account arrangements, claims such as tax refund and insurance proceeds, receivables from employees, receivable from BSP and other miscellaneous receivables.

Other receivables include residual value of lease contracts receivable and advances to subsidiaries.

Accrued interest receivable consists of accrued interest on:


Receivables from customers 912,341 881,223 861,961 833,869Held-to-maturity investments 542,224 542,224 541,014 541,013Available-for-sale financial assets 328,055 314,485 326,603 311,915Unquoted debt securities 52,232 55,022 47,066 49,897Financial assets at FVPL 9,044 10,362 2,564 4,387Sales contract receivable 2,458 4,503 2,458 4,503Due from BSP 656 — 656 — Others 14,646 1,740 14,254 1,325

1,861,656 1,809,559 1,796,576 1,746,909

Interest income on loans and receivables consist of:


Receivables from customers 7,423,156 6,409,872 6,007,058 5,176,950Unquoted debt securities 342,588 447,822 323,553 427,203Sales contracts receivable 42,304 52,212 37,849 47,614Restructured loans 40,994 54,676 35,405 44,979

7,849,042 6,964,582 6,403,865 5,696,746

Regulatory ReportingAs at December 31, 2014 and 2013, the breakdown of receivables from customers by type of security is as follows:


Amount % Amount % Amount % Amount %Secured by

Real estate mortgage 21,070,562 18.80 19,084,146 18.67 18,932,102 19.12 17,374,362 19.04 Chattel mortgage 7,697,839 6.87 7,966,982 7.80 6,962,756 7.03 6,136,181 6.72 Assignment of deposits 70,668 0.06 859,750 0.84 34,601 0.03 859,750 0.94 Rights other than above 1,564,190 1.40 — — 5,300 0.01 — — Others* 5,788,692 5.16 5,511,308 5.39 5,704,841 5.76 3,729,999 4.09

36,191,950 32.29 33,422,186 32.70 31,639,599 31.95 28,100,292 30.79 Unsecured 75,896,283 67.71 68,780,559 67.30 67,377,662 68.05 63,155,064 69.21

112,088,233 100.00 102,202,745 100.00 99,017,261 100.00 91,255,356 100.00

*Others include parent bank and third-party guarantees.



As at December 31, 2014 and 2013, information on the concentration of credit as to industry of receivables from customers follows:


Amount % Amount % Amount % Amount %Real estate, renting and business

activities 31,048,332 27.70 28,496,840 27.88 30,734,173 31.04 26,086,594 28.59

Wholesale and retail trade, repair of motor vehicles, motorcycles, personal and household goods

18,012,516 16.07 18,339,674 17.94 15,902,084 16.06 17,633,278 19.32

Manufacturing 15,837,705 14.13 16,696,075 16.34 15,024,086 15.17 15,982,266 17.51Transport, storage and communication 6,484,320 5.79 11,093,969 10.85 6,330,546 6.39 10,168,204 11.14Financial intermediaries 7,538,504 6.73 7,540,612 7.38 6,281,725 6.34 8,097,884 8.87Agriculture, hunting and forestry,

fishing 2,599,770 2.32 3,169,082 3.10 1,400,929 1.41 1,836,487 2.01

Construction 2,867,635 2.56 2,212,701 2.17 2,845,585 2.87 2,033,753 2.23Government 55,278 — 58,959 0.05 55,278 0.05 58,959 0.06Other community, social and personal

services activities 27,347,843 24.40 14,305,707 14.00 20,410,963 20.61 9,318,483 10.21

111,791,903 99.70 101,913,619 99.71 98,985,369 99.94 91,215,908 99.94Unearned discounts 296,330 0.30 289,126 0.29 31,892 0.06 39,448 0.06

112,088,233 100.00 102,202,745 100.00 99,017,261 100.00 91,255,356 100.00

The BSP considers that loan concentration exists when the total loan exposure to a particular industry exceeds 30.0% of the total loan portfolio. The Group’s RMD constantly monitors the credit risk concentration of the Parent Bank.

Current banking regulations allow banks with no unbooked valuation reserves and capital adjustments to exclude from nonperforming classifi cation those receivables from customers classifi ed as “Loss” in the latest examination of the BSP which are fully covered by allowance for credit losses, provided that interest on said receivables shall not be accrued.

As at December 31, 2014 and 2013, nonperforming loans (NPLs) not fully covered by allowance for credit losses follow:


Total NPLs 5,959,638 5,249,753 5,416,218 4,791,103Less NPLs fully covered by allowance for credit

and impairment losses 2,940,450 2,221,189 2,850,604 2,153,920

3,019,188 3,028,564 2,565,614 2,637,183

Under banking regulations, NPLs shall, as a general rule, refer to loan accounts whose principal and/or interest remain unpaid for thirty (30) days or more after due date or after they have become past due in accordance with existing rules and regulations. This shall apply to loans payable in lump sum and loans payable in quarterly, semi-annual or annual installments, in which case, the total outstanding balance thereof shall be considered nonperforming.

In the case of receivables that are payable in monthly installments, the total outstanding balance thereof shall be considered nonperforming when three (3) or more installments are in arrears. In the case of receivables that are payable in daily, weekly or semi-monthly installments, the total outstanding balance thereof shall be considered nonperforming at the same time that they become past due in accordance with existing BSP regulations (i.e., the entire outstanding balance of the receivable shall be considered as past due when the total amount of arrearages reaches ten percent (10.0%) of the total receivable balance.) Restructured receivables which do not meet the requirements to be treated as performing receivables shall also be considered as NPLs.

The breakdown of restructured receivables from customers follows:


Corporate loans 1,011,633 3,039,494 858,234 1,158,618Consumer loans 70,586 63,568 11,363 5,965

1,082,219 3,103,062 869,597 1,164,583

As at December 31, 2014 and 2013, restructured receivables from customers considered as NPLs amounted to 219.5 million and 390.8 million, respectively.

175

11. Property and Equipment

The composition of and movements in property and equipment account follow:

Consolidated2014

Note LandBuildings and

Improvements

Furniture,Fixtures and

EquipmentLeasehold

Improvements TotalCostBalance at beginning of year 154,015 1,304,534 2,766,649 968,417 5,193,615Additions 2,540 47,985 265,860 121,164 437,549Disposals (60,686) (5,596) (132,698) (77,818) (276,798)Write-offs — — (142,749) — (142,749)Balance at end of year 95,869 1,346,923 2,757,062 1,011,763 5,211,617Accumulated Depreciation and

AmortizationBalance at beginning of year — 737,202 1,902,788 361,185 3,001,175Depreciation and amortization 13 — 77,173 290,595 89,083 456,851Disposals — (14) (62,391) (1,389) (63,794)Write-offs — — (142,749) — (142,749)Balance at end of year — 814,361 1,988,243 448,879 3,251,483Net Book Value at End of Year 95,869 532,562 768,819 562,884 1,960,134

Consolidated2013


Improvements


EquipmentLeasehold

Improvements TotalCostBalance at beginning of year 154,641 1,278,506 2,610,550 886,888 4,930,585Additions — 36,530 169,680 89,464 295,674Disposals (626) (10,502) (13,581) (7,935) (32,644)Write-offs — — (138,325) — (138,325)Balance at end of year 154,015 1,304,534 2,628,324 968,417 5,055,290Accumulated Depreciation and

AmortizationBalance at beginning of year — 671,505 1,640,344 281,049 2,592,898Depreciation and amortization 13 — 71,521 273,430 85,455 430,406Disposals — (5,824) (10,986) (5,319) (22,129)Write-offs — — (138,325) — (138,325) Balance at end of year — 737,202 1,764,463 361,185 2,862,850

Net Book Value at End of Year 154,015 567,332 863,861 607,232 2,192,440

Parent Bank2014


Improvements


EquipmentLeasehold

Improvements TotalCostBalance at beginning of year 90,888 1,279,465 2,410,689 859,761 4,640,803Additions 2,540 38,664 214,652 83,951 339,807Disposals (3,400) (5,597) (115,349) (75,741) (200,087)Write-offs — — (4,426) — (4,426)Balance at end of year 90,028 1,312,532 2,505,566 867,971 4,776,097Accumulated Depreciation and

AmortizationBalance at beginning of year — 729,814 1,630,280 335,294 2,695,388Depreciation and amortization 13 — 75,472 256,188 74,534 406,194Disposals — (14) (46,963) — (46,977)Write-offs — — (4,426) — (4,426)Balance at end of year — 805,272 1,835,079 409,828 3,050,179Net Book Value at End of Year 90,028 507,260 670,487 458,143 1,725,918



Parent Bank2013


Improvements


EquipmentLeasehold

Improvements TotalCostBalance at beginning of year 91,514 1,262,010 2,419,982 817,375 4,590,881 Additions — 27,731 129,032 42,740 199,503Disposals (626) (10,276) — (354) (11,256)Write-offs — — (138,325) — (138,325)Balance at end of year 90,888 1,279,465 2,410,689 859,761 4,640,803 Accumulated Depreciation and

AmortizationBalance at beginning of year — 664,784 1,525,423 262,495 2,452,702 Depreciation and amortization 13 — 70,626 243,182 72,799 386,607 Disposals — (5,596) — — (5,596)Write-offs — — (138,325) — (138,325)Balance at end of year — 729,814 1,630,280 335,294 2,695,388 Net Book Value at End of Year 90,888 549,651 780,409 524,467 1,945,415

As at December 31, 2014 and 2013, the cost of fully depreciated property and equipment still in use amounted to 2.44 billion and 956.9 million, respectively, for the Group and 1.47 billion and 817.6 million, respectively, for the Parent Bank.

Write-offs in 2014 and 2013 pertain to fully depreciated property and equipment.

12. Investments in Subsidiaries and Associates


Acquisition cost:Wholly-owned subsidiaries:

BRC — — 2,970,130 2,970,130ULFC — — 525,000 400,000GHDI — — 287,489 287,489USI — — 35,000 35,000UPI-MHC — — 14,451 14,451

Majority-owned subsidiaryUSB — — 370,781 370,781

— — 4,202,851 4,077,851USI 15 — — (1,038,930) (201,511)

— — 3,163,921 3,876,340Acquisition cost:

Associates:UCFDC (10.26% owned) 100,000 100,000 100,000 100,000LOCI (17.50% owned) 56,000 56,000 56,000 56,000SPMC (12.77% owned) 25,000 25,000 25,000 25,000SLCOMI (17.48% owned) 24,950 24,950 24,950 24,950GMC (2.84% owned) 6,250 6,250 6,250 6,250

212,200 212,200 212,200 212,200Accumulated equity in net income: —

Balance at beginning of year 8,410,032 8,289,160 — — Share in net income of associates 130,310 120,872 — — Balance at end of year 8,540,342 8,410,032 — —

Equity in net unrealized (losses) gains on AFS financial assets of associates (269) (233) — —

Equity in remeasurement gains on retirement plans of associates 2,892 265 — —

Equity in translation adjustments of an associate (94) 37 — —

8,542,871 8,410,101 — — 8,755,071 8,622,301 3,376,121 4,088,540

177

Investments in CIIF CompaniesThe Parent Bank established signifi cant infl uence over UCFDC, LOCI, SPMC, SLCOMI and GMC through its direct ownership in such investee companies and through the exercise of its fi duciary functions as administrator of the CIIF. In addition, the Parent Bank has indirect investments in Cagayan de Oro Oil Co., Inc. (CDOOCI) and Iligan Coconut Industries, Inc. (ICII). LOCI, SPMC, SLCOMI, GMC, CDOOCI and ICII, herein referred to as the “CIIF Companies”, were established from the CIIF. The CIIF formed part of the CCSF, otherwise known as the coconut levy fund, which was created in 1973 by PD No. 276 “Establishing a Coconut Consumers Stabilization Fund”.

The CIIF Companies wholly own, collectively, the fourteen CIIF Holding Companies whose funds were invested in 33,133,266 common shares of SMC (the “CIIF block of SMC shares”) as of 1983 that were sequestered by the PCGG in May 1986.

The ownership of the CIIF block of SMC shares, as well as the CIIF Companies, became the subject of legal proceedings before the Sandiganbayan and Supreme Court (Note 29).

As discussed in Notes 4 and 25, to the fi nancial statements, the Group is involved in legal proceedings on the ownership shares of the Parent Bank (Civil Case No. 0033-A) and CIIF Oil Mills (Civil Case No. 0033-F), which were subject of the January 2012 decision issued by the Supreme Court in the Philippine Coconut Producers Federation, Inc. (“COCOFED”), et al. case. The motion for the reconsideration of the January 2012 decision has been denied with fi nality on September 4, 2012. The Supreme Court decision became fi nal and executory and has been recorded in the Book of Entries of Judgment on December 10, 2014.

On December 28, 2012, the Parent Bank fi led a Special Civil Action for Declaratory Relief seeking clarifi cation on the Parent Bank’s proportionate right, title and interest in the CIIF Companies as stockholder, as well as the Parent Bank’s indirect equity in the fourteen CIIF Holding Companies and the SMC shares.

As discussed in Note 4, the case, docketed as Civil Case No. 12-1251 before Regional Trial Court of Makati Branch 59, was consolidated with Civil Case No. 12-152, which is a similar action fi led by Cocolife with respect to its proportionate right, title and interest in the CIIF Companies on September 25, 2013. The PCGG, through the Offi ce of the Solicitor General, has sought the dismissal of the cases, but failed to obtain a favorable ruling from the trial court. Consequently, the PCGG elevated the matter to the Supreme Court via a Petition for Certiorari with a prayer for a TRO. As at December 31, 2013, the Supreme Court has yet to resolve the petition. In the interim, a TRO has been issued enjoining the trial court from conducting further proceedings in the cases fi led by the Bank and Cocolife.

The following tables present the separate fi nancial information of signifi cant associates of the Parent Bank as at and for the years ended December 31, 2014 and 2013:

2014Statements of Financial Position Statements of Income

Country of Incorporation Total Assets

TotalLiabilities

GrossIncome*

OperatingIncome (Loss)

NetIncome

LOCI Philippines 28,112,291 893,326 ( 173,114) 334,443 327,123GMC Philippines 16,719,905 1,555,152 54,557 129,998 126,979SPMC Philippines 16,123,518 566,038 241,131 251,790 256,599UCFDC Philippines 1,181,510 7,995 87,501 36,473 34,116SLCOMI Philippines 8,318,190 219 175,087 172,740 172,652

*Represents sales less cost of sales

2013Statements of Financial Position Statements of Income

Country of Incorporation Total Assets

TotalLiabilities

GrossIncome*

OperatingIncome (Loss)

NetIncome

LOCI Philippines 28,828,855 1,978,257 87,277 401,656 397,135GMC Philippines 16,593,270 1,594,257 200,519 11,794 254,837SPMC Philippines 15,887,927 562,867 161,141 (118,651) 173,583UCFDC Philippines 1,149,108 9,399 103,984 40,330 34,116SLCOMI Philippines 8,144,469 706 174,256 171,103 171,810

*Represents sales less cost of sales

As discussed in Note 1 to the fi nancial statements, EOs were issued by the President of the Republic of the Philippines along with the approval of the recapitalization of the Parent Bank in 2015. These relate to the decision about the ownership of and the inventory, reconveyance, utilization and privatization of coco levy assets including the CIIF Companies.



Assignment of Investment in a Joint VentureOn May 3, 1996, UPI entered into a Joint Venture Agreement with Macaria Homes Corporation (MHC) to establish a joint venture corporation, UPI-MHC, which shall engage in the real estate development of properties located in Biñan and Sta. Rosa, Laguna, utilizing a self-contained community concept, including facilities for social and recreational, commercial and institutional use and to sell house and lot packages within such community at a profi t or rate of return mutually agreed upon by both UPI and MHC.

In 2010, UPI assigned its investment in and advances to UPI-MHC amounting to 6.3 million and 86.7 million, respectively, to the Parent Bank to settle its outstanding loans payable amounting to 74.5 million. The fair value of the net assets of UPI-MHC at assignment date was 20.0 million and the fair value of the 50.0% ownership interest transferred to the Parent Bank was 10.0 million. Gain recognized in 2010 by the Parent Bank from the assignment, included as Others under “Miscellaneous income” in the statements of income, amounted to 20.9 million.

On August 1, 2011, the Parent Bank received 49.0 million from UPI-MHC as return of its capital of 6.3 million and partial settlement of advances to the joint venture in the amount of 42.7 million.

On August 31, 2011, the Parent Bank’s co-venturer in UPI-MHC assigned its investment in and advances to UPI-MHC amounting to 6.3 million and 52.1 million, respectively, to the Parent Bank as consideration for certain investment properties amounting to 39.6 million. The fair value of the net assets of UPI-MHC at assignment date was 21.4 million and the fair value of the 50.0% ownership interest transferred to the Parent Bank was 10.7 million. Gain recognized by the Parent Bank from the assignment, included as “Others” under “Miscellaneous income” in the statements of income, amounted to 22.8 million (net of incidental expenses amounting to 0.4 million). With the assignment, UPI-MHC became a wholly-owned subsidiary of the Parent Bank.

13. Investment Properties

Investment properties consist of foreclosed real estate properties and investments in real estate. The difference between the fair value of the asset upon foreclosure and the carrying value of the loan is recognized as “Gains (losses) on foreclosures” in the statements of income.



Improvements Total LandBuildings and

Improvements TotalCostBalance at beginning of year 3,269,382 3,501,670 6,771,052 3,644,471 3,509,801 7,154,272Additions 230,267 940,992 1,171,259 126,557 172,591 299,148Disposals (662,935) (201,001) (863,936) (509,356) (171,082) (680,438)Reclassifications — — — 7,710 (9,640) (1,930)Prior year PFRS adjustments (157,255) (936,480) (1,093,735) — — — Balance at end of year 2,679,459 3,305,181 5,984,640 3,269,382 3,501,670 6,771,052Accumulated Depreciation Balance at beginning of year — 41,297 41,297 — 32,094 32,094Depreciation and amortization — 79,658 79,658 — 19,474 19,474Disposals — (112,934) (112,934) — (10,271) (10,271)Prior year PFRS adjustments — 1,396,710 1,396,710 — — — Balance at end of year — 1,404,731 1,404,731 — 41,297 41,297Allowance for Impairment

Losses 15

Balance at beginning of year 564,793 684,335 1,249,128 516,221 616,666 1,132,887Provision for (reversal of)

impairment loss — — — (17,624) — (17,624)

Amortization of unbooked valuation reserves charged directly to deficit

1,287,414 2,177,399 3,464,813 — — —

Disposals (43,774) (6,428) (50,202) (18,084) (6,602) (24,686)Reclassifications 76,568 (2,662,318) (2,585,750) 84,280 74,271 158,551Balance at end of year 1,885,001 192,988 2,077,989 564,793 684,335 1,249,128Net Book Value at End of Year 794,458 1,707,462 2,501,920 2,704,589 2,776,038 5,480,627

179

Parent Bank2014 2013


Improvements Total LandBuildings and

Improvements TotalCostBalance at beginning of year 3,029,679 3,445,577 6,475,256 3,402,101 3,465,139 6,867,240Additions 199,756 915,256 1,115,012 106,797 147,626 254,423Disposals (635,020) (189,587) (824,607) (486,929) (157,548) (644,477)Reclassifications — — — 7,710 (9,640) (1,930)Prior year PFRS adjustments (157,255) (936,480) (1,093,735) — — Balance at end of year 2,437,160 3,234,766 5,671,926 3,029,679 3,445,577 6,475,256Accumulated Depreciation Balance at beginning of year — 27,853 27,853 — 17,522 17,522Depreciation and amortization — 76,125 76,125 — 14,925 14,925Disposals — (109,589) (109,589) — (4,594) (4,594)Prior year PFRS adjustments — 1,396,710 1,396,710 — — — Balance at end of year — 1,391,099 1,391,099 — 27,853 27,853Allowance for Impairment

Losses 15

Balance at beginning of year 560,655 706,048 1,266,703 514,165 615,848 1,130,013Amortization of unbooked

valuation reserves charged directly to deficit

1,287,414 2,177,399 3,464,813 — —

Disposals (42,315) (2,701) (45,016) (16,433) (6,602) (23,035)Reclassifications (1,030,535) (2,669,768) (3,700,303) 62,923 96,802 159,725Balance at end of year 775,219 210,978 986,197 560,655 706,048 1,266,703Net Book Value at End of Year 1,661,941 1,632,689 3,294,630 2,469,024 2,711,676 5,180,700

The aggregate market value of investment properties as at December 31, 2014 and 2013 amounted to 5.8 billion and 5.3 billion, respectively, for the Group and 5.4 billion and 4.9 billion, respectively, for the Parent Bank. The investment properties are measured at fair value on a recurring manner, based on valuations made by independent and/or in-house appraisers. Valuations were derived on the basis of recent sales of similar properties in the same area as the investment properties and taking into account the economic conditions prevailing at the time the valuations were made and are classifi ed as Level 2 in the fair value hierarchy. The Group is exerting continuing efforts to dispose these properties.

Rental income on investment properties of the Group and the Parent Bank amounted to 15.3 million and 15.0 million in 2014 and 9.4 million and 8.8 million in 2013, respectively.

Direct operating expenses on investment property for the Group and the Parent Bank amounted to 74.5 million and 63.6 million in 2014 and 113.0 million and 102.7 million in 2013, respectively.

Depreciation and AmortizationThe details of depreciation and amortization recognized in the statements of income follow:


Property and equipment 11 456,851 430,406 406,194 386,607Investment properties 13 79,658 19,474 76,125 14,925Intangible and other assets: 14

Software costs 104,522 81,570 102,842 79,707Others 12,018 13,495 — 17

653,049 544,945 585,161 481,256

In 2013 and in prior years, the Parent Bank did not recognize depreciation on its investment properties pertaining to the “bad bank” (as defi ned in Note 1), as required under PAS 40, Investment Property. As at December 31, 2014 and 2013, the unbooked accumulated depreciation amounted to nil and 1.4 billion, respectively. In 2014, the Parent Bank booked adjustments to accumulated depreciation amounting to 1.3 billion to 0.1 billion for the investment properties attributable to the “bad bank”, by a charge to defi cit in 2014 and deferred charges, respectively, instead of charging the said adjustments to the opening balance of surplus (defi cit) of the earliest year presented. PFRSs require that depreciation expense be recognized on depreciable investment properties. Had the Parent Bank recognized the related accumulated depreciation on certain investment properties in the period when this was incurred, total assets and equity would have decreased by 1.4 billion as at December 31, 2013, and net income would have decreased by P37.0 million in 2013. These adjustments made by the Parent Bank in 2014 include an adjustment to cost amounting to 1.1 billion and are presented as “Prior year PFRS adjustments” in the investment properties rollforward table above.

Others include depreciation on other assets acquired by the Group.



14. Intangible and Other Assets



Deferred charges 14,110,442 15,973,772 14,110,442 15,973,772Real estate inventories 3,062,451 3,122,413 — — Land held-for-sale 1,654,995 1,968,060 1,568,110 1,968,060Interoffice float items 987,076 904,164 987,076 912,464Creditable withholding tax 644,609 596,539 635,932 507,619Software costs 367,407 422,110 364,915 418,273Chattel properties acquired 336,464 189,833 336,464 167,140Prepaid expenses 68,854 57,685 62,480 50,369Documentary stamps on hand 27,618 32,282 15,394 22,656Sundry debit 16,678 18,425 9,048 10,531Retirement asset 27 3,419 3,857 — — Exchange trading right 1,500 1,500 — — Others 860,291 795,710 779,010 711,186

22,141,804 24,086,350 18,868,871 20,742,070Less allowance for credit impairment losses 15 1,394,919 2,449,803 1,292,718 2,225,210

20,746,885 21,636,547 17,576,153 18,516,860

Sundry debit includes suspense accounts for inward clearing of checks and other deposit-related charges.

Others include deposits on rentals, and power and water meters, and restricted cash held by a foreign fi nancial institution.

Interoffi ce fl oat items include interoffi ce accounts classifi ed as “loss” and are part of “bad bank” assets. These accounts are fully provided for as at December 31, 2014 and 2013.

As at December 31, 2014 and 2013, the latest transacted price of the exchange trading right (as provided by the Philippine Stock Exchange) amounted to 8.5 million.

The composition of and movements in deferred charges of the Parent Bank follow:

2014

Loss on saleof NPLs

Loss on Sale of Investment

Properties

Loss on Sale of Land

Held-for-Sale Others* TotalBalance at January 1 10,952,911 3,479,029 106,056 1,435,776 15,973,772Additions — 97,211 4,002 — 101,213Amortizations (1,347,050) (427,870) (13,043) (176,580) (1,964,543)Balance at December 31 9,605,861 3,148,370 97,015 1,259,196 14,110,442

*includes loss on sale of investments in Available-for-sale fi nancial assets

2013

Loss on saleof NPLs

Loss on Sale of Investment

Properties

Loss on Sale of Land

Held-for-Sale Others* TotalBalance at January 1 10,952,911 3,419,659 42,420 1,435,776 15,850,766Additions — 59,370 63,636 — 123,006Balance at December 31 10,952,911 3,479,029 106,056 1,435,776 15,973,772

*includes loss on sale of investments in Available-for-sale fi nancial assets

Deferred charges pertain to losses incurred from sale of NPLs, investment properties, land held-for-sale and investment securities.

As discussed in Note 1 to the fi nancial statements, the BSP has allowed the Parent Bank to defer the losses on sale and dacion en pago settlement of up to 15.7 billion and to start amortization in 2009. Any additional losses on the sale of investment properties pertaining to the “bad bank” (Note 1) were allowed by the BSP to be deferred provided that the losses deferred do not exceed the approved UVR and deferred losses of 29.1 billion. Had the Parent Bank booked these losses in the years they were incurred, net of credit and impairment losses, total assets and equity of both the Group and the Parent Bank would have decreased by 14.7 billion and 16.0 billion in 2014 and 2013, respectively, and net income of both the Group and Parent Bank would have decreased by 575.5 million and 12.7 million in 2014 and 2013, respectively.

181

Real estate inventories pertain mainly to the real estate inventories of BRC, GHDI and UPI-MHC. The carrying value of the real estate inventories as at December 31, 2014 and 2013 amounted to 3.1 billion.

Movements in software costs of the Group and the Parent Bank follow:


Balance at beginning of year 422,110 364,150 418,273 359,700Additions 49,819 139,530 49,484 138,280Amortization 13 (104,522) (81,570) (102,842) (79,707)Balance at end of year 367,407 422,110 364,915 418,273

Land Held-for-SaleThe Parent Bank entered into various memoranda of agreement (MOA) for the development of various parcels of land as follows:

a) In 2005, the Parent Bank entered into a MOA with a third party individual (as co-landowner) and Sta. Lucia Realty and Development, Inc. (SLRD - as the developer) for the development of land located in Alfonso, Cavite into a subdivision. The parties agreed that the Parent Bank and the third party individual will contribute the land and SLRD shall contribute its expertise as a developer. In consideration of the services to be rendered, SLRD is entitled to receive 47.0% of the saleable lots, while the Parent Bank and the third party individual are entitled to 35.0% and 18.0% of the saleable lots, respectively. The construction has been completed and selling activities are actively being performed by the Parent Bank’s accredited marketing agency.

b) In 2006, the Parent Bank entered into a MOA with Century Properties Inc. (CPI) for the development of land located along H.V Dela Costa Street, Salcedo Village, Makati City into a multi-storey mixed-used condominium building. The parties agreed that the Parent Bank will contribute the land and CPI shall contribute its expertise as a developer. CPI shall invite individuals and other parties who wish or intend to own a condominium unit and for said parties to contribute funds to answer for the costs of construction and other related expenses. In consideration of the services to be rendered by CPI, the Parent Bank shall transfer/convey to CPI 80.0% of the saleable units and parking spaces. In 2010, the construction of the multi-storey condominium was completed and all the units (except for parking spaces) have been turned over to the buyers/owners. This transaction resulted in a loss (included in Deferred charges under “Intangible and other assets” in the statements of fi nancial position to be booked on a staggered basis as allowed by BSP) in 2011 amounting to 5.3 million. The agreement was concluded in 2011. However, there are several parking spaces that remain unsold to date.

c) In 2006, the Parent Bank entered into a MOA with Tagaytay Grasslands Company, Inc. (TGCI) for the development of land located in Nasugbu, Batangas into a hotel and beach club, parking spaces and condominiums. The parties agreed that the Parent Bank will contribute the land and TGCI shall contribute its expertise as a developer and fi nancial capital by way of funding the development and all related expenses of the hotel and beach club, parking spaces and condominiums, and related site development and improvements. In consideration of the services to be rendered by TGCI, the Parent Bank shall transfer/convey to TGCI 62.0% of the saleable units of the hotel and beach club and condominiums and 50% of the parking spaces. As at December 31, 2014 the construction of several sites are still in progress. Units from completed sites are marketed by the Parent Bank’s accredited marketing agency.

In addition to the items above, UPI-MHC reclassifi ed its remaining landholdings amounting to 57.3 million as “Land held-for-sale” which will be used as payment for the cash advances made by UCPB on behalf of UPI-MHC (Note 34).

As at December 31, 2014 and 2013, the Parent Bank recognized advances from customers (included in Accounts payable under “Other liabilities” in the statements of fi nancial position) amounting to 250.6 million and 206.4 million, respectively, representing collections from units sold.

15. Allowance for Credit and Impairment Losses

Changes in the allowance for credit and impairment losses follow:


Balance at beginning of year:AFS financial assets: 9

Quoted equity securities 396,010 — 396,010 90,918Unquoted equity securities 245,284 337,400 245,210 246,406

641,294 337,400 641,220 337,324Forward




Loans and receivables: 10Receivables from customers:

Corporate loans 3,293,572 4,621,075 3,174,604 4,644,735Consumer loans 1,522,009 552,325 1,244,388 273,482

Sales contracts receivable 72,190 338,426 70,050 322,485Accounts receivable 479,958 69,051 463,717 47,019Accrued interest receivable 113,984 56,494 113,984 51,463

5,481,713 5,637,371 5,066,743 5,339,184Investments in subsidiaries and associates 12 — — 201,511 201,511Investment properties 13 1,249,128 1,132,887 1,266,703 1,130,013Other assets: 14

Land held-for-sale 869,408 355,611 771,985 355,611Real estate inventories — 114,529 — — Chattel properties acquired 40,459 8,125 35,452 7,961Others 1,539,936 362,240 1,417,773 274,248

2,449,803 840,505 2,225,210 637,8209,821,938 7,948,163 9,401,387 7,645,852

Credit and impairment losses 276,979 245,656 — 100,000Disposals (57,597) (26,025) (49,649) (23,035)Amortization of unbooked valuation

reserves directly charged to deficit 3,720,000 2,620,000 3,720,000 2,620,000

Foreign currency revaluation (1,386) 28,241 (1,386) 28,241Reclassifications/reallocation (3,411,103) (18,871) (3,293,325) — Accounts written-off (682,747) (969,671) (605,311) (969,671)

(155,854) 1,879,330 (229,671) 1,755,535Balance at end of year:

AFS financial assets: 9Quoted equity securities P394,298 P396,010 P394,298 P396,010Unquoted equity securities 481,932 245,284 481,858 245,210

876,230 641,294 876,156 641,220Loans and receivables: 10

Receivables from customers:Corporate loans 3,237,608 3,293,572 3,294,413 3,174,604Consumer loans 911,907 1,522,009 544,379 1,244,388

Sales contracts receivable 227,618 72,190 225,478 70,050Accounts receivable 698,594 479,958 682,252 463,717Accrued interest receivable 241,219 119,539 231,193 113,984

5,316,946 5,487,268 4,977,715 5,066,743Investments in subsidiaries and associates 12 — — 1,038,930 201,511Investment properties 13 2,077,989 1,249,128 986,197 1,266,703Other assets: 14

Land held-for-sale 535,000 869,408 483,606 771,985Real estate inventories — — — — Chattel properties acquired 16,344 40,459 13,275 35,452Others 843,575 1,539,936 795,836 1,417,773

1,394,919 2,449,803 1,292,717 2,225,2109,666,084 9,827,493 9,171,715 9,401,387

Below is the breakdown of provision for (reversal of) credit and impairment losses:


Loans and receivables: 10Receivables from customers:

Corporate loans 232,894 143,828 — 100,000Consumer loans 28,843 75,721 — —

Accounts receivable — 1,616 — — Sales contracts receivable — — — — Accrued interest receivable — — — —

261,737 221,165 — 100,000Investment properties 13 11,317 (17,624) — — Other assests 3,925 42,115 — —

276,979 245,656 — 100,000

As discussed in Note 1, the BSP has allowed the Parent Bank to defer recognition of credit and impairment losses on AFS fi nancial assets, loans and receivables, investment properties and other assets amounting to 13.4 billion as at December 31, 2008. BSP also allowed deferral of losses on sale and dacion en pago settlement amounting to 15.7 billion as at

183

December 31, 2008. As allowed by the BSP, the Parent Bank is to amortize the unbooked valuation reserves and deferred losses over 10 years starting in 2009 based on the affordability plan approved by the BSP. On May 9, 2013, the MB, through Resolution No. 759, approved the direct charge to surplus (defi cit) of the amortization of the UVR/DL.

On May 23, 2014, the MB in its Resolution No. 822 approved to update the remaining UVR/DL based on Sycip Gorres Velayo & Co.’s (SGV & Co.) independent valuation amounting to P18.6 billion, to be amortized on a straight line basis (2014 to 2018).

In 2014 and 2013, amortization recognized by the Parent Bank as a direct charge to defi cit amounted to 3.7 billion and 2.6 billion, respectively.

Had the Parent Bank recognized in full the credit and impairment losses in the years they were incurred, net of losses on sale of investment properties pertaining to the “bad bank”, total assets and equity of both the Group and the Parent Bank would have decreased by 14.7 billion and P16.0 billion in 2014 and 2013, respectively, and net income of both the Group and Parent Bank would have decreased by 575.5 million and 12.7 million in 2014 and 2013, respectively.

The Parent Bank submits to the BSP quarterly impairment assessments based on the ICRR system on assets pertaining to the “bad bank” from 2009 to September 2014. The table below shows the comparative information in terms of carrying amount and unbooked valuation reserves as per the Rehabilitation Plan against balances as at 2014 and 2013. As at December 31, 2014, the Bank implemented impairment assessments on old bank assets under PFRS:

Per Rehabilitation Plan* As at December 31, 2014

Carrying Amount

Unbooked Valuation Reserves and

Deferred Charges Carrying Amount


Deferred ChargesLoans and receivables 13,460,000 2,978,000 898,541 156,773 Investment properties** , Land

held-for-sale, real estate inventories, INMES

24,188,040 8,725,000 10,685,423 4,104,995

Other assets 1,771,000 1,375,000 1,346,219 1,346,219 AFS financial assets — 397,000 396,517 394,298Deferred Charges, net 9,809,000 15,694,000 14,110,442 14,110,442 Total 49,228,040 29,169,000 27,437,142 20,112,727 Less booked valuation reserves — — — 6,002,285

49,228,040 29,169,000 27,437,142 14,110,442

*as per 2008 BSP approved Rehabilitation Plan**includes depreciation

Per Rehabilitation Plan* As at December 31, 2013

Carrying Amount


Deferred Charges Carrying Amount


Deferred ChargesLoans and receivables 13,460,000 2,978,000 1,366,922 423,068Investment properties** , Land

held-for-sale, real estate inventories, INMES

24,188,040 8,725,000 11,145,076 7,376,315

Other assets 1,771,000 1,375,000 1,474,567 1,421,533AFS financial assets — 397,000 396,517 396,009Deferred Charges, net 9,809,000 15,694,000 16,005,160 16,005,160Total 49,228,040 29,169,000 30,388,242 25,622,085Less booked valuation reserves — — — 4,715,802

49,228,040 29,169,000 30,388,242 20,906,283

*as per 2008 BSP approved Rehabilitation Plan**includes depreciation

As at December 31, 2014 and 2013, the carrying amount of the assets assessed for impairment amounted to 27.4 billion and P30.4 billion, respectively, and the unbooked valuation reserves and deferred charges amounted to 14.1 billion and 20.9 billion, respectively. The 14.1 billion unamortized deferred charges as at December 31, 2014 is net of the advance amortization of 0.4 billion resulting from a reclassifi cation of excess booked reserves. The decrease in carrying amount, from 49.2 billion to 27.4 billion, resulted from collections of loans and receivables, sales of investment properties, foreclosures, redemptions and amortization of deferred charges.

In 2014 and 2013, the Parent Bank was in compliance with the amount of allowance required per PFRSs.

Amortization of UVR for the year follows:

2014 2013AFS Financial assets 235,539 305,091Loans and receivables — 1,317,088Investment properties 3,464,813 — Other assets 19,648 997,821

3,720,000 2,620,000



16. Deposit Liabilities

Philippine peso-denominated deposit liabilities bear annual interest rates ranging from 0.3% to 6.3% both in 2014 and 2013; 0.3% to 1.0% and 0.3% to 2.0% in 2014 and 2013, respectively, for US dollar-denominated deposit liabilities.

As discussed in Note 1, as part of the concessions granted to the Parent Bank by the MB under Resolution No. 590 dated May 15, 2008 under the amended rehabilitation plan, the Parent Bank is authorized to accept deposits from the NG, LGUs and GOCCs, with the ceiling of 5.9 billion increased by the amount that the NG will deposit with the Parent Bank. As at December 31, 2014 and 2013, the savings deposits of the NG amounted to 30.0 billion. 27.6 billion of the 30.0 billion was used to purchase government securities which the Parent Bank is using to comply with liquidity reserves and liquidity fl oor requirements of the BSP. These government securities are classifi ed as HTM investments (Note 9). The balance of P2.4 billion is included in the demand deposit account under “Due from BSP” (Note 7).

Long Term Negotiable Certifi cates of Deposits Due 2016 (LTNCD Series 1)On November 25, 2010, the Parent Bank issued 6.3% fi xed coupon rate (EIR of 6.5%) Unsecured LTNCD at par value of 4.5 billion. The LTNCD matures on February 25, 2016, subject to pre-termination by the Parent Bank in whole, but not in part, in accordance with BSP rules. The fair value of LTNCD Series 1 amounted to P4.5 billion as at December 31, 2014 and 2013.

The issuance of the foregoing LTNCD under the terms approved by the BOD was approved by the BSP on October 19, 2010.

Long Term Negotiable Certifi cates of Deposits Due 2016 (LTNCD Series 2)On August 19, 2011, the Parent Bank issued 6.0% fi xed coupon rate (EIR of 6.3%) Unsecured LTNCD at par value of 3.2 billion. The LTNCD matures on November 19, 2016, subject to pre-termination by the Parent Bank in whole, but not in part, in accordance with BSP rules. The fair value of LTNCD Series 2 amounted to 3.1 billion as at December 31, 2014 and 2013.

Long Term Negotiable Certifi cates of Deposits Due 2017 (LTNCD Series 3)On May 21, 2012, the Parent Bank issued 5.9% fi xed coupon rate (EIR of 6.1%) unsecured LTNCD at par value of 1.9 billion. The LTNCD matures on August 21, 2017, subject to pre-termination by the Parent Bank in whole, but not in part, in accordance with BSP rules. The fair value of LTNCD Series 3 amounted to 1.8 billion as at December 31, 2014 and 2013.

The issuance of series 2 and 3 of the foregoing LTNCD under the terms approved by the BOD was approved by the BSP on May 20, 2011.

On February 3, 2011, November 11, 2011 and May 21, 2012 the Parent Bank listed its 4.5 billion LTNCD Series 1 due 2016, 3.2 billion LTNCD Series 2 due 2016 and 1.9 billion LTNCD Series 3 due 2017, respectively, in the Philippine Dealing and

Exchange Corp. (PDEX) subject to its Trading and Settlement Operating Guidelines. The Parent Bank’s LTNCD Series 1, 2 and 3 are traded and settled in accordance with PDEX rules, procedures and guidelines. The Parent Bank incurred debt issue costs amounting to 53.4 million, 33.5 million and 18.9 million on the LTNCD Series 1, 2 and 3, respectively. The movements in unamortized debt issue costs in 2014 and 2013 follow:

Consolidated and Parent Bank

2014 2013Balance at beginning of year 55,316 75,422Issuances — — Amortization (20,106) (20,106)Balance at the end of the year 35,210 55,316

On May 27, 2014 and March 29, 2012, BSP issued Circular Nos. 832 and 753 implementing the rates of required reserves against deposit and deposit substitute liabilities in local currency of the Parent Bank and USB equivalent to 20.0% and 8.0%, respectively, in 2014 and 18.0% and 6.0%, respectively, in 2013. The Parent Bank and USB were in compliance with such regulations as at December 31, 2014 and 2013.

The total liquidity and statutory reserves as reported to the BSP follows:


Demand deposit account 37,703,197 35,308,866 36,445,833 33,668,191

Interest expense on deposit liabilities follow:


Demand 44,461 34,658 42,341 33,724Savings 600,604 452,962 599,626 438,951Time 1,185,500 1,574,916 1,059,710 1,476,180LTNCD 600,267 600,232 600,267 600,232

2,430,832 2,662,768 2,301,944 2,549,087

185

17. Bills Payable and Securities Sold Under Repurchase Agreements

This account consists of the following:


SSURA 11,036,987 11,855,814 11,036,987 11,855,814Borrowings from local banks 1,814,942 1,045,494 — —

12,851,929 12,901,308 11,036,987 11,855,814

Bills payable bear annual interest rates ranging from 0.4% to 2.9% and 0.7% to 6.1% in 2014 and 2013, respectively. Interest expense on bills payable amounted to 400.2 million in 2014 and 413.1 million in 2013 for the Group, and 299.9 million in 2014 and 346.0 million in 2013, for the Parent Bank.

18. Accrued Taxes, Interest and Other Expenses



Accrued benefits to employees 201,139 227,323 199,964 224,245Accrued interest payable 159,520 197,624 145,621 189,998Accrued taxes payable 59,516 43,270 40,921 34,478Accrued rent payable 39,908 34,203 38,816 33,212Accrued security and janitorial services 16,247 18,457 15,296 17,074Accrued utilities 11,646 7,623 8,893 5,452Accrued repairs and maintenance 9,304 10,118 9,015 9,869Accrued other expenses 97,713 105,388 75,755 88,753

594,993 644,006 534,281 603,081

Accrued other expenses include accruals for various operating expenses such as insurance, marketing, and contractual services.

19. Other Liabilities



Bills purchased - contra 5,025,556 4,908,793 5,025,556 4,908,793Cash letters of credit 6,192,932 808,472 6,192,932 808,472Accounts payable 2,051,693 1,691,338 1,829,481 1,480,506Manager’s checks 1,107,144 1,143,941 1,075,078 1,082,934Deposit on lease contract 440,289 452,197 — — Other credits 429,786 471,724 358,424 378,741Due to PDIC 207,139 214,390 207,139 214,390Withholding tax payable 113,622 57,875 103,026 51,658Outstanding acceptances 87,439 38,459 87,439 38,459Due to Treasury of the Philippines 75,379 76,069 71,630 71,743Margin deposits 53,942 475,251 53,942 475,251Sundry credit 34,178 4,476 28,450 3,799Derivative liabilities 9 13,759 400 13,759 400Miscellaneous 340,176 238,928 28,892 28,716

16,173,034 10,582,313 15,075,748 9,543,862



20. Maturity Profi le of Assets and Liabilities

The following tables present the assets and liabilities by contractual maturity, settlement, and expected recovery dates:


DueWithin

One Year

DueBeyond

One Year Total

DueWithin

One Year

DueBeyond

One Year TotalFinancial Assets - at grossCash and other cash items 7,477,991 — 7,477,991 6,478,104 — 6,478,104Due from BSP 39,502,248 2,400,949 41,903,197 65,307,917 2,400,949 67,708,866Due from other banks 2,253,958 — 2,253,958 1,885,130 — 1,885,130Interbank loans receivable and SPURA 11,808,804 — 11,808,804 1,260,277 — 1,260,277Financial assets at FVPL 996,050 — 996,050 1,137,990 — 1,137,990AFS financial assets — 28,497,159 28,497,159 — 26,946,492 26,946,492HTM investments — 28,030,756 28,030,756 — 28,097,374 28,097,374Loans and receivables:

Receivables from customers 50,077,303 62,010,930 112,088,233 55,442,070 46,760,675 102,202,745Unquoted debt securities 16,650 4,491,603 4,508,253 119,336 5,318,946 5,438,282Accrued interest receivable 1,861,656 — 1,861,656 1,809,559 — 1,809,559Sales contracts receivable 335,705 1,499,256 1,834,961 213,450 313,603 527,053Accounts receivable 839,871 — 839,871 370,023 526,403 896,426Other receivables 433,830 — 433,830 354,566 125,000 479,566

Other assets — 168,286 168,286 31,105 229,542 260,647115,604,066 127,098,939 242,703,005 134,409,527 110,718,984 245,128,511

Non-financial Assets - at grossProperty and equipment — 5,211,617 5,211,617 — 5,055,290 5,055,290Investments in subsidiaries and

associates — 8,755,071 8,755,071 — 8,622,301 8,622,301

Investment properties — 5,984,640 5,984,640 — 6,771,052 6,771,052Deferred tax assets — 382,039 382,039 — 211,630 211,630Other assets 113,150 21,860,368 21,973,518 77,287 23,748,416 23,825,703

113,150 42,193,735 42,306,885 77,287 44,408,689 44,485,976

115,717,216 169,292,674 285,009,890 134,486,814 155,127,673 289,614,487

Less:Unearned interest discount 296,330 289,126Accumulated depreciation and

amortization 4,656,214 2,904,147

Allowance for credit and impairment losses 9,666,084 9,827,493

270,391,262 276,593,721Financial LiabilitiesDeposit liabilities

Demand 29,483,489 — 29,483,489 26,480,932 — 26,480,932Savings 130,065,581 — 130,065,581 123,334,081 — 123,334,081Time 43,791,346 7,717,044 51,508,390 64,525,408 8,819,687 73,345,095LTNCD — 9,484,079 9,484,079 — 9,463,973 9,463,973

203,340,416 17,201,123 220,541,539 214,340,421 18,283,660 232,624,081Bills payable and SSURA 12,851,929 — 12,851,929 12,901,308 — 12,901,308Accrued interest and other expenses 535,477 — 535,477 600,736 — 600,736Other liabilities — — —

Bills purchased-contra 5,025,556 — 5,025,556 4,908,793 — 4,908,793Cash letters of credit 6,192,932 — 6,192,932 808,472 — 808,472Accounts payable 2,051,693 — 2,051,693 1,691,338 — 1,691,338Manager’s checks 1,107,144 — 1,107,144 1,143,941 — 1,143,941Deposits on lease contracts — 440,289 440,289 — 452,197 452,197Due to PDIC 207,139 — 207,139 214,390 — 214,390Outstanding acceptances 87,439 — 87,439 38,459 — 38,459Due to Treasurer of the Philippines 75,379 — 75,379 76,069 — 76,069Margin deposits 53,942 — 53,942 475,251 — 475,251Derivative liabilities 13,759 — 13,759 400 — 400Miscellaneous 340,176 — 340,176 238,928 — 238,928

231,882,981 17,641,412 249,524,393 237,438,506 18,735,857 256,174,363 Forward

187


DueWithin

One Year

DueBeyond

One Year Total

DueWithin

One Year

DueBeyond

One Year TotalNon-financial LiabilitiesRetirement liability 794,573 794,573 — 342,452 342,452Deferred tax liabilities — 19,961 19,961 — 21,102 21,102Accrued taxes payable 59,516 — 59,516 43,270 — 43,270Income tax payable 65,363 — 65,363 59,636 — 59,636Withholding taxes payable 113,622 — 113,622 57,875 — 57,875Other liabilities 34,178 429,786 463,964 4,476 471,724 476,200

272,679 1,244,320 1,516,999 165,257 835,278 1,000,535

232,155,660 18,885,732 251,041,392 237,603,763 19,571,135 257,174,898

Liquidity surplus (gap) 19,349,870 19,418,823


DueWithin

One Year

DueBeyond

One Year Total

DueWithin

One Year

DueBeyond

One Year TotalFinancial Assets - at grossCash and other cash items 7,041,100 - 7,041,100 6,228,587 - 6,228,587Due from BSP 38,244,884 2,400,949 40,645,833 63,667,242 2,400,949 66,068,191Due from other banks 2,165,147 - 2,165,147 1,782,435 - 1,782,435Interbank loans receivable and SPURA 11,308,804 - 11,308,804 1,260,277 - 1,260,277Financial assets at FVPL 565,994 - 565,994 806,204 - 806,204AFS financial assets - 28,257,823 28,257,823 - 26,595,262 26,595,262HTM investments - 27,890,328 27,890,328 - 27,955,913 27,955,913Loans and receivables:

Receivables from customers 37,006,331 62,010,930 99,017,261 38,907,570 52,347,786 91,255,356Unquoted debt securities 16,650 4,233,979 4,250,629 113,164 5,063,783 5,176,947Sales contracts receivable 245,346 1,499,256 1,744,602 186,959 240,493 427,452Accrued interest receivable 1,796,576 - 1,796,576 1,746,909 - 1,746,909Accounts receivable 914,141 - 914,141 298,655 662,854 961,509Other receivable - - - - 125,000 125,000

Other assets - 160,345 160,345 31,105 224,175 255,28099,304,973 126,453,610 225,758,583 115,029,107 115,616,215 230,645,322

Non-financial Assets - at grossProperty and equipment - 4,776,097 4,776,097 - 4,640,803 4,640,803Investments in subsidiaries and

associates - 4,415,051 4,415,051 - 4,290,051 4,290,051

Investment properties - 5,671,926 5,671,926 - 6,475,256 6,475,256 Deferred tax assets - 172,767 172,767 - 61,009 61,009Other assets 86,921 18,621,602 18,708,523 52,451 20,434,339 20,486,790

86,921 33,657,443 33,744,364 52,451 35,901,458 35,953,909

99,391,894 160,111,053 259,502,947 115,081,558 151,517,673 266,591,231

Less:Unearned interest discount 31,892 P39,448Accumulated depreciation and

amortization 4,441,277 2,723,241

Allowance for credit and impairment losses 9,171,715 9,401,387

245,858,063 254,435,155Financial LiabilitiesDeposit liabilities

Demand 28,749,990 - 28,749,990 26,042,833 - 26,042,833Savings 127,364,039 - 127,364,039 120,652,463 - 120,652,463Time 38,087,928 7,717,044 45,804,972 59,638,079 8,531,964 68,170,043LTNCD - 9,484,078 9,484,078 - 9,463,973 9,463,973

194,201,957 17,201,122 211,403,079 206,333,375 17,995,937 224,329,312

Forward




DueWithin

One Year

DueBeyond

One Year Total

DueWithin

One Year

DueBeyond

One Year TotalBills payable and SSURA 11,036,987 — 11,036,987 11,855,814 — 11,855,814Accrued interest and other expense 493,360 — 493,360 568,603 — 568,603Other liabilities:

Bills purchased-contra 5,025,556 — 5,025,556 4,908,793 — 4,908,793Cash letters of credit 6,192,932 — 6,192,932 808,472 — 808,472Margin deposits 53,942 — 53,942 475,251 — 475,251Accounts payable 1,829,481 — 1,829,481 1,480,506 — 1,480,506Manager’s checks 1,075,078 — 1,075,078 1,082,934 — 1,082,934Outstanding acceptances 87,439 — 87,439 38,459 — 38,459Due to PDIC 207,139 — 207,139 214,390 — 214,390Due to Treasurer of the Philippines 71,630 — 71,630 71,743 — 71,743Derivative liabilities 13,759 — 13,759 401 — 401Miscellaneous 28,892 — 28,892 28,715 — 28,715

220,318,152 17,201,122 237,519,274 227,867,456 17,995,937 245,863,393Non-financial LiabilitiesRetirement liability — 722,796 722,796 — 294,361 294,361Deferred tax liabilities — — — — — — Accrued taxes payable 40,921 — 40,921 34,478 — 34,478Income tax payable 6,314 — 6,314 1,798 — 1,798Withholding taxes payable 103,026 — 103,026 51,658 — 51,658Other liabilities 28,450 358,424 386,874 3,799 378,741 382,540

178,711 1,081,220 1,259,931 91,733 673,102 764,835

220,496,863 18,282,342 238,779,205 227,959,189 18,669,039 246,628,228

Liquidity surplus (gap) 7,078,858 7,806,927

21. Operating Lease Contracts

The Group leases the premises of most of its offi ces and branches for periods ranging from one (1) to 20 years from the date of the contracts, which terms are renewable upon the mutual agreement of the parties. Rent expense charged to operations (included under “Occupancy expense” account in the statements of income) amounted to 394.0 million and 358.7 million in 2014 and 2013, respectively, for the Group and 351.3 million and 322.6 million in 2014 and 2013, respectively, for the Parent Bank.

Future minimum rentals payable under non-cancelable operating leases are as follows:


Within one year 284,941 571,635 247,223 492,995After one year but not more than five years 607,556 552,979 541,123 465,233After more than five years 215,670 164,808 162,517 124,851

1,108,167 1,289,422 950,863 1,083,079

22. Other Income

Service charges, fees and commissions consist of the following:


Service charges 715,256 600,959 478,287 366,551Bank commissions 151,469 142,583 131,318 119,069Fees and other commissions 101,687 110,015 99,075 106,503

968,412 853,557 708,680 592,123

Fees and other commissions include loan servicing fees and underwriting fees.

189

Miscellaneous income consists of the following:


Transaction fees 52,740 50,871 52,740 50,871Income from assets acquired 27,474 14,485 27,022 13,428Rent income 28 24,981 28,798 33,514 31,334Dividends 12,677 8,697 3,327 18,447Recovery of written-off accounts 10,037 4,151 6,308 — Others 177,456 130,304 9,535 19,446

305,365 237,306 132,446 133,526

Others include referral fees, income from customer’s forfeitures, penalty charges and overages.

23. Miscellaneous Expenses

This account consists of the following:


Representation and entertainment 24 180,975 194,081 174,786 187,595Postage, telephone, cable and telegram 137,090 125,970 119,874 109,758Supervision and examination fees 105,197 98,861 102,095 96,383Travelling expense 97,983 101,106 88,140 91,534Management and other professional fees 81,716 68,754 67,681 56,344Stationery and supplies used 73,202 81,784 63,342 71,729Computer-related expense 65,627 54,049 61,429 52,108Advertising 46,572 38,901 45,247 38,511Fuel and lubricant 43,415 86,388 34,966 78,055Fees and commission 31,708 25,951 30,339 22,922Fines, penalties and other charges 24,588 10,790 21,123 9,285Freight expense 12,122 12,649 8,366 9,612Membership fees 9,772 9,825 9,338 9,317Miscellaneous 65,901 51,641 39,483 18,814

975,868 960,750 866,209 851,967

24. Income and Other Taxes

Under Philippine tax laws, the RBU of the Parent Bank and its subsidiaries are subject to percentage and other taxes (presented as “Taxes and licenses” account in the statements of income) as well as income taxes. Percentage and other taxes paid consist principally of gross receipts tax (GRT) and documentary stamp taxes (DST). Income taxes include corporate income tax, as discussed below, and 20.0% fi nal taxes paid, which is a fi nal withholding tax on gross interest income from government securities and other deposit substitutes.

The regular corporate income tax (RCIT) rate is 30.0%. Interest allowed as a deductible expense is reduced by an amount equivalent to 33.0% of interest income subjected to fi nal tax.

The regulations also provide for minimum corporate income tax (MCIT) of 2.0% on modifi ed gross income and allow NOLCO. The MCIT and NOLCO may be applied against the Parent Bank’s income tax liability and taxable income, respectively, over a three-year period from the year of incurrence.

Current tax regulations also provide for the ceiling on the amount of entertainment, amusement and recreation (EAR) expense that can be claimed as a deduction against taxable income. In 2014 and 2013, EAR amounted to 181.0 million and 194.1 million, respectively, for the Group and 174.8 million and P187.6 million, respectively, for the Parent Bank (Note

23). Under the regulation, EAR expense allowed as a deductible expense for a service company like the Parent Bank and some of its subsidiaries are limited to the actual EAR paid or incurred but not to exceed 1.0% of net revenue.

In 2011, the BIR issued Revenue Regulations (RR) No. 4-2011 which requires banks to allocate and claim as deduction only those costs and expenses attributable to RBU to arrive at the taxable income of the RBU subject to regular income tax. Any cost or expense related with or incurred for the operations of the FCDU are not allowed as deduction from the RBU’s taxable income. In computing for the amount allowable as deduction from RBU operations, all costs and expenses should be allocated between RBU and FCDU by specifi c identifi cation or by allocation of common expenses that cannot be specifi cally identifi ed for a particular unit.



FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income (interest income from residents) is subject to 10.0% income tax. In addition, interest income on deposit placements with other FCDUs and offshore banking units (OBUs) is taxed at 7.5%. Income derived by the FCDU from foreign currency transactions with non-residents, OBUs, local commercial banks including branches of foreign banks is tax-exempt while interest income on foreign currency loans from residents other than OBUs or other depository banks under the expanded system is subject to 10.0% income tax.

Income tax expense (benefi t) consists of:


Current:Final tax 785,391 746,334 763,616 735,185RCIT 250,510 237,527 — — MCIT 100,196 78,698 100,189 78,698

1,136,097 1,062,559 863,805 813,883Deferred (37,995) (83,732) 21,529 (8,775)

1,098,102 978,827 885,334 805,108

The reconciliation of the statutory income tax to the effective income tax is shown below:


Statutory income tax 1,232,154 1,325,263 1,004,991 1,100,015Tax effects of:

FCDU income (185,606) (295,648) (185,606) (295,648)Nondeductible expenses 445,088 487,145 418,507 490,779Movement on unrecognized DTA 86,408 150,138 78,819 131,483Tax paid and tax-exempt income (250,213) (246,380) (250,148) (234,445)Expired NOLCO 1,927 784 — — Nontaxable income (231,656) (442,475) (181,229) (387,076)

Effective income tax 1,098,102 978,827 885,334 805,108

Components of net deferred tax assets shown in the consolidated statements of fi nancial position follow:


Deferred tax asset on: Allowance for credit and impairment losses 204,970 151,201 — — Unrealized loss on foreclosures 4,692 3,710 — — Accumulated depreciation on investment

properties 12,836 9,261 — —

Provision for accrual of expenses — 2,198 — — Retirement liability 240,479 102,735 216,838 88,308MCIT — — — — Others 10,678 11,674 5,400 8,170

473,655 280,779 222,238 96,478Deferred tax liability on:

Unrealized gain on foreclosure (1,053) (1,756) — — Expense on LTNCD (7,653) (11,359) (7,653) (11,359)Lease income differential between finance

and operating lease method (41,092) (41,010) — —

Unrealized gain on financial assets FVPL (16,402) 4,034 (16,402) (5,052)Others (25,416) (19,058) (25,416) (19,058)

(91,616) (69,149) (49,471) (35,469)Net deferred tax assets P382,039 211,630 172,767 61,009

Deferred tax charged to OCIRemeasurement loss on retirement plan ( 231,479) (P99,940) ( 218,898) ( 85,611)

Deferred tax credited (charged) to statements of income 150,560 111,690 ( 46,131) ( 24,602)

191

Components of net deferred tax liabilities are as follows:


Deferred tax asset on: Remeasurement loss on retirement plan 333 225Allowance for credit and impairment losses 140 124Unrealized loss on foreclosures — — Accumulated depreciation on investment properties — — Others 1,044 1,047

1,517 1,396Deferred tax liability on:

Unrealized gain on AFS financial assets (20,118) (20,276)Retirement asset (1,359) (1,382)Lease income differential between finance and operating lease method — — Unrealized gain on foreclosure — — Others (1) (840)

(21,478) (22,498)Net deferred tax liabilities ( 19,961) (P 21,102)Deferred tax charged to OCIRemeasurement loss on retirement plan P333 P225Unrealized gain on AFS financial assets (20,118) (20,276)

( 19,785) 20,051)Deferred tax credited (charged) to statements of income ( 176) ( 1,051)

The Group and the Parent Bank did not set up deferred tax asset on the following temporary differences


Allowance for credit and impairment losses 9,191,748 9,408,487 9,171,715 9,401,387NOLCO 4,120 10,547 — — Unrealized loss on AFS financial assets 516,728 1,377,317 516,728 1,372,517MCIT 253,531 255,154 253,523 255,076Accrued expense 63,040 76,541 63,040 76,541Unrealized foreign exchange loss — — — — Accumulated depreciation on investment

properties 1,395,855 31,652 1,391,098 27,852

Unrealized loss on foreclosures 130,663 130,663 130,663 130,663Unrealized loss on financial assets at FVPL 72,641 72,641 72,641 72,641Remeasurement loss on retirement plan 24,173 1,472 — —

11,652,499 11,364,474 11,599,408 11,336,677

Management believes that the future income tax benefi ts arising from these temporary differences are not likely to be realized in the coming years.

The breakdown of NOLCO with the corresponding validity periods follow:

ConsolidatedYear Incurred Amount Applied/ Expired Balance Expiry Year

2014 45 — 45 20172013 2,179 — 2,179 20162012 1,896 — 1,896 20152011 6,472 6,472 — 2014

10,592 6,472 4,120

As at December 31,2014, the Bank has no unutilized NOLCO.

Details of the MCIT are as follows

ConsolidatedYear Incurred Amount Applied/ Expired Balance Expiry Year

2014 100,196 — 100,196 20172013 78,326 — 78,326 20162012 75,009 — 75,009 20152011 70,108 70,108 — 2014

323,639 70,108 253,531



Parent BankYear Incurred Amount Applied/ Expired Balance Expiry Year

2014 100,188 — 100,188 20172013 78,326 — 78,326 20162012 75,009 — 75,009 20152011 70,030 70,030 — 2014

323,553 70,030 253,523

25. Capital

As at December 31, 2014 and 2013, the Parent Bank’s equity consists of:

ConsolidatedNote 2014 2013

Common stock - 1 par value: 1Authorized shares - 1,497,170,231shares in 2013 and 2012 Subscribed - 1,497,170,231 shares (net of subscription receivable of 12,327) 1,484,843 1,484,843Special preferred stock - P1 par value: 1 — — Authorized shares - 1,752,829,769 shares in 2013 — — Capital notes 1 12,000,000 12,000,000

13,484,843 13,484,843

Common SharesA substantial portion of the outstanding common shares of the Parent Bank remains sequestered as a result of the sequestration orders issued by the PCGG on June 26, 1986 (Civil Case No. 0033-A). Court proceedings on the ownership issue have gone on since then with the Sandiganbayan and the Supreme Court. In the meantime, PCGG exercises the right to vote on the sequestered shares of the Parent Bank.

On July 11, 2003, the Sandiganbayan promulgated its “Partial Summary Judgment” granting the ROP’s “Motions for Partial Summary Judgment” and stated that 65.0% of the Parent Bank’s shares of stock, which form part of the 72.2% charged by the Philippine Coconut Authority (PCA) to the Coconut Consumers Stabilization Fund (CCSF), are conclusively owned by the ROP and that the Parent Bank’s shares registered in the name of defendant Cojuangco and those of his dummies and nominees belong to the ROP as the true and benefi cial owner.

On May 11, 2007, the Sandiganbayan ruled that there are no more triable issues that have to be addressed that would necessitate the presentation of evidence by the parties. The Sandiganbayan had rendered Partial Summary Judgment promulgated on July 11, 2003 that practically excluded any other issue concerning the ownership of the 72.2% shares of the Parent Bank, which the Court has declared to be owned by the government.

As the Sandiganbayan had already declared PD 755 to be constitutionally infi rm: “(i) for having allowed the use of the CCSF to benefi t directly private interests by the outright and constitutional grant of absolute ownership of the UCPB (formerly First United Bank or “FUB”) shares paid for by PCA entirely with the CCSF to the undefi ned “coconut farmers”, which negated or circumvented the national policy or public purpose declared by PD No. 755 to accelerate the growth and development of the coconut industry and achieve its vertical integration; and (ii) for having unduly delegated legislative power to the PCA,” there appears to be no other issue on ownership, such defense of defendants COCOFED, et al. which seeks to prove during trial will necessarily fail and would only be a futile effort.

On May 28, 2007, COCOFED, et. al., fi led a Class Action Petition for Review on Certiorari praying that the Supreme Court: (i) annul and set aside the Partial Summary Judgment dated July 11, 2003; (ii) annul and set aside the Partial Summary Judgment dated May 7, 2004 (Note 29), and Resolution dated May 11, 2007, of the Sandiganbayan; (iii) dismiss with prejudice, the two cases in so far as COCOFED, et. al., and the more than one million coconut farmers who are similarly situated are concerned; and (iv) lift the sequestration orders of the PCGG issued and levied over the sequestered assets.

However, in its Resolution dated June 5, 2007, the Sandiganbayan declared that “in view of its judgment declaring ownership in favor of the government of the subject UCPB shares, the Partial Summary Judgment is now considered a fi nal and appealable judgment.”

On January 24, 2012, the Supreme Court denied the petition of COCOFED, et. al., and affi rmed the resolutions issued by the Sandiganbayan on June 5, 2007, that there is no more necessity of further trial with respect to the issue of ownership of: (i) the sequestered UCPB shares, (ii) the CIIF block of SMC shares, and (iii) the CIIF Companies as they have been fi nally adjudicated in the Partial Summary Judgment dated July 11, 2003 and May 7, 2004.

On February 14, 2012, COCOFED et. al., fi led a Motion for Reconsideration (the “Motion”) of the decision rendered by the Supreme Court on January 24, 2012, citing certain substantial and grave errors of fact. The Motion was denied with fi nality by the Supreme Court on September 4, 2012.

193

On December 18, 2013, a resolution was unanimously approved and adopted at a special meeting of stockholders to increase the Parent Bank’s authorized capital stock within the range of 14.7 billion to 37.2 billion.

The Supreme Court decision on Civil Case No. 0033-A became fi nal and executory and has been recorded in the Book of Entries of Judgment on December 10, 2014.

On March 18, 2015, President Benigno S. Aquino III of the Republic of the Philippines issued Executive Order No. 179 (Providing the Administrative Guidelines for the Inventory and Privatization of Coco Levy Assets) and No. 180 (Providing the Administrative Guidelines for the Reconveyance and Utilization of Coco Levy Assets for the Benefi t of the Coconut Farmers and the Development of the Coconut Industry, and For Other Purposes), together referred to as the “EOs” (Note 1).

Special Preferred SharesOn May 10, 2011, the SEC approved the amendments on the Articles of Incorporation of the Parent Bank including the reclassifi cation of 1,002,829,769 unissued common shares and 750,000,000 unissued preferred shares of the Parent Bank, all with par value of 1.0 per share into 1,752,829,769 perpetual, non-cumulative, special preferred shares.

In the event of winding up, the holder(s) of Special Preferred Shares shall have no priority claim in respect of principal and dividends on the Special Preferred Shares which is higher than or equal to that of the depositors, other creditors and holders of Lower Tier 2 and Upper Tier 2 capital instruments, if any, of the Parent Bank. However, the rights and claims of such holder(s) of the Special Preferred Shares, in the event of winding up, are superior to the rights and claims of holder(s) of Common Stock.

No stockholder of the Parent Bank shall have any pre-emptive right or preferential right to purchase or subscribe to: (i) the 1,752,829,769 Special Preferred Shares stated above, (ii) any additional Special Preferred Shares, (iii) any unissued Common Stock upon conversion of Special Preferred Shares, and (iv) any unissued Common Stock upon conversion of the Interim Capital Notes of the Parent Bank, with (ii), (iii) and (iv) becoming operative upon an increase in the authorized capital stock of the Parent Bank.

Capital NotesAs fully discussed in Note 1, the Parent Bank originally obtained 12.0 billion fi nancial assistance from PDIC on July 7, 2003 consisting of a 7.0 billion 5.0% Unsecured Subordinated debt due in 2013 and 5.0 billion proceeds from sale of NPLs with buyback by 2013. However, on March 31, 2009, the ROP, PDIC, PCGG and the Parent Bank agreed to convert the PDIC fi nancial assistance into Capital Notes. On the same date, the Parent Bank issued 12.0 billion Interim Tier 1 Capital Notes (the “Capital Notes” or “Notes”) to PDIC which will qualify as Interim Tier 1 capital. As discussed also in Note 1, the Capital Notes has no maturity date but shall become due and demandable if the Parent Bank fails to perform any of its material obligations under the Notes. As not all such obligations are within the control of the Parent Bank, the Capital Notes does not qualify as an equity instrument under PAS 32, Financial Instruments: Presentation. Under PAS 32, the Capital Notes should be presented as a fi nancial liability in the statements of fi nancial position. However, as allowed by the BSP and in keeping with the objectives of the Rehabilitation Plan, the Parent Bank has presented the Capital Notes in the equity section of the statements of fi nancial position.

Capital ManagementThe primary objectives of the Group’s capital management are to ensure that it complies with externally imposed capital requirements and it maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholders’ value.

The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital structure, or issue capital securities. No changes were made in the objectives, policies and processes from the previous years.

The breakdown of the Group’s risk-weighted assets as of December 31, 2014 and 2013 as reported to the BSP follows (amounts in millions):


Credit risk-weighted assets 163,300 151,795 149,920 140,329Market-risk weighted assets 1,793 1,460 1,520 1,245Operational risk-weighted assets 15,940 15,021 13,669 13,086Total risk-weighted assets 181,033 168,276 165,109 154,660

On October 29, 2014, BSP issued Circular No. 854 amending Subsection X111.1 of the MORB regarding the minimum capitalization requirement applicable for the Bank (universal banks with more than 100 branches) from 2.4 billion and P20.0 billion effective November 13, 2014. Banks which comply with the new capital levels shall submit to the BSP a certifi cation to this effect within 30 calendar days from the date of the effectivity of the circular while banks which are not meeting the required minimum capital must submit to the BSP an acceptable capital build-up program within 1 year from the date of effectivity of the circular.

Regulatory Qualifying CapitalUnder existing BSP regulations, the determination of the Parent Bank’s compliance with regulatory requirements and ratios is based on the amount of the Parent Bank’s “unimpaired capital” (regulatory net worth) as reported to the BSP, which is determined on the basis of regulatory accounting policies which differ from PFRSs in some respects.

The amount of surplus funds available for dividend declaration is also determined on the basis of regulatory net worth after considering certain adjustments.



The BSP sets and monitors compliance to minimum capital requirements for the Parent Bank. In implementing current capital requirements, BSP issued Circular No. 538 which implemented the Revised Risk-Based Capital Adequacy Framework under Basel II effective July 1, 2007. It requires the Parent Bank to maintain a prescribed risk-based capital adequacy ratio (expressed as a percentage of qualifying capital to risk-weighted assets) of not less than 10.0%. The Parent Bank is also required to maintain a minimum Tier 1 capital ratio of 6.0% (in millions).

The Parent Bank’s RBCAR, as submitted to the BSP as at December 31, 2014 and 2013 are shown in the table below (amounts in millions):


Tier 1 capital 19,619 20,463 19,566 20,393Tier 2 capital 1,549 1,339 1,437 1,232Gross qualifying capital 21,168 21,802 21,003 21,625Less required deductions 907 1,915 4,230 5,756Total qualifying capital 20,261 19,887 16,773 15,869

Risk weighted assets 181,033 168,276 165,109 154,660

Tier 1 capital ratio 10.52% 11.21% 10.16% 10.26%Total capital ratio 11.19% 11.82% 10.16% 10.26%

The regulatory qualifying capital of the Group and of the Parent Bank consists of Tier 1 (core) and Tier 2 (supplementary) capital. Tier 1 capital is comprised of common stock, Capital Notes and surplus (defi cit) including current year profi t and surplus reserves less required deductions such as unbooked valuation reserves (except for the P14.1 billion deferral of losses as at December 31, 2014 as discussed in Notes 1 and 15). Tier 2 composed upper tier 2 and lower tier 2. Upper tier 2 consists of preferred stock, revaluation increment reserve, general loan loss provision and deposit for common stock subscription. Lower tier 2 consists of the unsecured subordinated debt. BSP Circular 560 dated January 31, 2007, which took effect on February 22, 2007, requires the deduction of unsecured loans, other credit accommodations and guarantees granted to subsidiaries and affi liates from capital accounts for purposes of computing CAR.

As at December 31, 2014 and 2013, considering the regulatory relief mentioned in Note 1, the Parent Bank had already complied with the required RBCAR. Also, as discussed in Note 1, on February 26, 2009, the MB of the BSP exempted the Parent Bank from sanctions that may be imposed for its non-compliance with the 10.0% CAR and all capital-based regulatory ratios for the year 2008 until such time that the Parent Bank’s Rehabilitation Plan is fully implemented and approved the Parent Bank’s request for temporary relief by reducing the Parent Bank’s CAR to 8.0% for a period of three years up to 2011 or until such time that the Parent Bank is able to comply with the required 10.0% CAR, whichever comes fi rst.

BASEL IIIOn January 15, 2013, the BSP issued Circular 781 which contains the revised risk-based capital adequacy framework for the Philippine Banking system in accordance with the Basel III standards. The said Circular took effect on January 1, 2014. The following are the revised minimum capital requirements for UBs and KBs and their subsidiary banks and quasi-banks (QBs):

• 6.0% Common Equity Tier 1 (CET1)/Risk-Weighted Assets (RWAs);• 7.5% Tier 1 Capital/RWAs, and • 10.0% Total Qualifying Capital (Tier1 plus Tier2)/RWAs.

The Qualifying Capital must consist of the sum of the following elements, net of required deductions: Tier 1-‘going concern’ [(CET1) plus Additional Tier 1 (ATI)] and Tier 2-‘gone concern’. A bank/quasi-bank must ensure that any component of capital included in qualifying capital complies with all the eligibility criteria for the particular category of capital in which it is included. The Circular further describes the elements/criteria that a domestic bank should meet for each capital category. Regulatory adjustments and calculation guidelines for each capital category are also discussed.

In conformity with the Basel III standards, a Capital Conservation Buffer (CCB) of 2.5% of RWAs, comprised of CET1 capital, has been required of U/KBs and their subsidiary banks and quasi-banks. This buffer is meant to promote the conservation of capital and build up of adequate cushion that can be drawn down by banks to absorb losses during fi nancial and economic stress. The restrictions on distribution that a bank must meet at various levels of CET1 capital ratios are established, as shown in below table. Restrictions will be imposed if a bank has no positive earnings, has CET1 of not more than 8.5% [Common Equity Tier (CET) Ratio of 6% plus conservation buffer of 2.5%] and has not complied with the minimum 10% CAR.

Level of CET 1 capital Restriction on Distributions<6.0 No distribution6.0%-7.25% No distribution until more than 7.25% CET1 capital is met>7.25%-8.5% 50% of earnings may be distributed>8.5% No restriction on the distribution

On April 14, 2014, the Parent Bank requested confi rmation from the BSP that compliance by UCPB on CAR requirements will be consistent with the rehabilitation parameters until 2018.

195

On May 23, 2014, the MB in its Resolution No. 822 approved the following until 2018:

1. Exemption from compliance with the Basel III capital requirement and to continue capital compliance under the Basel II guidelines;

2. Continue the following regulatory reliefs granted pursuant to UCPB’s 10-year rehabilitation plan:

a. Recognition of interim TIER 1 capital of the 12 billion Capital Notes issued to the PDIC as long as the notes are outstanding and held by PDIC;

b. Staggered booking of the remaining UVR/DL; and

c. To remain as a government depository bank, subject to compliance with applicable regulations of the Department of Finance.

3. Allow updating of its remaining UVR/DL using the outstanding P18.6 billion balance based on Sycip Gorres Velayo & Co.’s (SGV & Co.) independent valuation, to be amortized on a straight line basis (2014 to 2018);

4. Exemption from the requirement, as a universal bank, to list its shares in the Philippine Stock Exchange.

On March 18, 2015, two executive orders were approved by the President of the Republic of the Philippines in relation to the Supreme Court decision on September 4, 2012 and Entries of Judgment on December 10, 2014, as follows:

a. Executive Order No. 179 which provides the administrative guidelines for the inventory and privatization of Coco Levy assets; and

b. Executive Order No. 180 which provides the administrative guidelines for the reconveyance and utilization of Coco Levy assets for the benefi t of the coconut farmers and the development of the coconut industry, and for other purposes.

On June 27, 2014, the BSP issued Circular No. 839, Real Estate Stress Test (REST) Limit for Real Estate Exposures which provides the implementing guidelines on the prudential REST limit for universal, commercial, and thrift banks on their aggregate real estate exposures. The prudential REST limits which shall be complied with at all times are 6.0% of CET 1 and 10% risk-based capital adequacy ratio, on a solo and consolidated basis, under a prescribed write-off rate.

26. Surplus Reserves


2014 2013Reserve for trust business 123,006 122,139Reserve for self-insurance 26,000 26,000Reserve for contingencies 6,000 6,000

155,006 154,139

In compliance with existing BSP regulations, 10.0% of the Parent Bank’s income from trust business is appropriated to surplus reserves. This yearly appropriation is required until the surplus reserve for trust business equals 20.0% of the Parent Bank’s regulatory net worth (Note 29).

In 2014 and 2013, the amount of 0.9 million and 4.5 million was added to Reserve for trust business, respectively.

Reserve for self-insurance represents the amount set aside to cover losses due to fi re, defalcation by and other unlawful acts of the Parent Bank’s personnel or third parties.

Reserve for contingencies represents the accumulated amount set aside for possible or unforeseen losses, decrease of shrinkage in the book value of the bank’s assets, or for undeterminable liabilities not otherwise recorded such as those arising from lawsuits, defaults on obligations and unexpected differences.



27. Retirement Plan and Other Employee Benefi ts

Expenses recognized for salaries and employee benefi ts are presented below:


Salaries and wages 1,256,106 1,164,326 1,051,707 981,107Compulsory social security and other contributions 67,947 60,709 58,140 52,244Bonus 197,948 217,614 197,950 217,614Other fringe benefits 479,580 276,815 434,725 243,437Short-term medical benefits 100,022 86,838 92,475 81,299Retirement expense - defined benefit plan 159,298 154,858 145,667 143,127

2,260,901 1,961,160 1,980,664 1,718,828

The Parent Bank and its signifi cant subsidiaries have funded noncontributory defi ned benefi t retirement plans (the “Plans”) covering its regular and permanent employees. Contributions and costs are determined in accordance with the actuarial studies made for the Plans. Annual cost is determined using projected unit credit method.

The retirement plans of the Parent Bank, USB and USI comply with the minimum retirement benefi t specifi ed under RA No. 7641, the “New Retirement Law.”

All offi cers and employees of the Parent Bank, including those assigned in subsidiaries but excluding those hired on a temporary, seasonal, consulting, and contractual basis are eligible for membership in the Plans. Retiring members shall be entitled to retirement benefi ts equivalent to a certain percentage of the fi nal Effective Gross Monthly Compensation as defi ned in the Plans multiplied by the number of years of service, with one complete month treated as 1/12 of a year.

Claims for settlement of benefi ts shall be fi led with the Board of Trustees (BOT) in a prescribed form to be accomplished by the Member, in case of retirement, separation, or disability, or by his designated benefi ciaries in case of death.

The control, administration of the retirement plan and management of the fund is vested in the BOT. The retirement plan’s accounting and administrative functions are undertaken by the Operations Department under the Trust Banking Group.

The Parent Bank’s latest actuarial valuation date is December 31, 2014. Valuations are obtained on a periodic basis. The fair value of plan assets in the actuarial valuation was calculated using projected December 31, 2014 balances based on the November 30, 2014 Fund Report.

As at December 31, 2014 and 2013, the principal actuarial assumptions used in determining net retirement liability for the USB’s, USI’s and the Parent Bank’s retirement plans are shown below:

2014 2013

ParentBank USB USI

ParentBank USB USI

Average remaining working life 15 years 16 years 16 years 16 years 16 years 16 yearsDiscount rate 4.60% 4.80% 4.70% 5.60% 6.00% 6.00%Future salary increases 5.00% 6.00% 5.00% 4.50% 6.00% 5.00%

The amounts of retirement benefi t liability recognized in the statements of income under “Compensation and fringe benefi ts” account and statements of comprehensive income under “Remeasurement gains (losses) on retirement plan” follow:


Components of retirement liability recorded in profit or lossCurrent service cost 140,161 137,352 129,183 128,120Net interest expense:

Interest expense 115,497 116,753 110,522 112,508Interest income (96,360) (99,247) (94,038) (97,501)

Retirement expense - defined benefit plan 159,298 154,858 145,667 143,127Components of retirement liability recorded in OCIRemeasurement (gain) loss on defined benefits obligation (563,134) 6,002 (528,999) 12,857Remeasurement loss on plan assets 83,950 (32,883) 84,709 (32,622)Net remeasurement loss (479,184) (26,881) (444,290) (19,765)Total components of retirement liability recognized during the year ( 319,886) 127,977 ( 298,623) 123,362

197

The movements in remeasurement loss in equity follow:


Balance at the beginning of the year 333,809 308,183 285,368 265,603Remeasurement gains (losses) during the

year from: Present value of defined benefit obligation

552,774 (6,002) 528,999 (12,857)

Fair value of plan assets (83,950) 32,883 (84,709) 32,622Others (2,384) (1,255) — —

466,440 25,626 444,290 19,765Total remeasurement loss before tax effect 800,249 333,809 729,658 285,368Tax effect 24 231,812 100,165 218,898 85,610Balance at the end of year - net of tax 568,437 233,644 510,760 199,758

The net retirement liability recognized in the statements of fi nancial position are as follows:


Present value of defined benefit obligation 2,658,940 2,056,529 2,543,129 1,973,605Fair value of plan assets (1,867,786) (1,717,934) (1,820,333) (1,679,244)Net retirement liability 791,154 338,595 722,796 294,361

Net retirement (assets) liabilities are recognized in the following accounts in the statements of fi nancial position:


Retirement liability 794,573 342,452 722,796 294,361Intangible and other assets 14 (3,419) (3,857) — —

91,154 338,595 722,796 294,361

The movements in the present value of defi ned benefi t retirement obligation are as follows:


Balance at beginning of year 2,056,529 2,009,195 1,973,605 1,939,795Current service cost 140,161 137,352 129,183 128,120Interest expense 115,497 116,753 110,522 112,508Benefits paid (206,024) (198,828) (199,180) (193,961)Remeasurement (gains) losses on retirement

plan arising from:Change in financial assumptions 419,845 (61,181) 416,188 (63,842)Change in demographic assumptions 20,108 (4,985) — (6,195)Experience adjustment 112,824 58,223 112,811 57,180Balance at end of year 2,658,940 2,056,529 2,543,129 1,973,605

The movements in the fair value of plan assets follow:


Balance at beginning of year 1,717,934 1,708,921 1,679,244 1,681,054Interest income 96,360 99,247 94,038 97,501Contributions paid 175,566 141,315 161,522 127,272Benefits paid (206,024) (198,828) (199,180) (193,961)Remeasurement gains (losses) on retirement plan 83,950 (32,721) 84,709 (32,622)Balance at end of year 1,867,786 1,717,934 1,820,333 1,679,244



In 2014 and 2013, actual return on plan assets amounted to 180.3 million and 66.6 million, respectively, for the Group and 178.7 million and 64.9 million, respectively, for the Parent Bank.

The Group and the Parent Bank expect to contribute 223.4 million and 203.7 million, respectively, to its defi ned benefi ts retirement plan in 2015.

The major categories of plan assets at carrying values and fair values based on December 31, 2014 Fund Report follow:


AFS securities:Government and other debt securities 516,932 569,524 491,757 544,707Quoted equity securities 904,840 747,147 898,485 744,569Unquoted equity securities 66,905 66,905 66,405 66,405

Cash and other assets 367,982 347,748 355,788 336,881Total plan assets 1,856,659 1,731,324 1,812,435 1,692,562Liabilities incurred by the plan 4,092 13,390 4,027 13,318Fair value of plan assets 1,852,567 1,717,934 1,808,408 1,679,244

Sensitivity AnalysisReasonably possible changes at the reporting date to one of the relevant actuarial assumptions, with all other assumptions constant, would have affected the net retirement liability of the Parent Bank, USB and USI by the amounts shown below:

Parent BankDiscount Rate Salary Increase Rate-0.50% +0.50% -0.50% +0.50%

Present value of the defined benefit obligation 2,712,501 2,388,845 2,398,730 2,699,899

Fair value of plan assets 1,820,333 1,820,333 1,820,333 1,820,333Net retirement liability 892,168 568,512 578,397 879,566

USBDiscount Rate Salary Increase Rate-0.50% +0.50% -0.50% +0.50%

Present value of the defined benefit obligation 122,884 103,611 104,159 122,150

Fair value of plan assets 40,898 40,898 40,898 40,898Net retirement liability 81,986 62,713 63,261 81,252

USIDiscount Rate Salary Increase Rate-0.50% +0.50% -0.50% +0.50%

Present value of the defined benefit obligation 3,426 2,874 2,887 3,409

Fair value of plan assets 6,555 6,555 6,555 6,555Net retirement liability 3,129 3,681 3,668 3,146

Although the analysis does not take account of the full distribution of cash fl ows expected under the Plans, it does provide an approximation of the sensitivity of the assumption shown.

These defi ned benefi t plans expose the Group to actuarial risks, such as longevity risk, interest rate risk, and market risk.

The BOT reviews the level of funding required for the retirement fund. Such a review includes the asset-liability matching (ALM) strategy and investment risk management policy. The Parent Bank’s ALM objective is to match maturities of the plan assets to the retirement benefi t obligation as they fall due. The Group monitors how the duration and expected yield of the investments are matching the expected cash outfl ows arising from the retirement benefi t obligations.

199

28. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise signifi cant infl uence over the other party in making fi nancial and operating decisions. Parties are also considered to be related if they are subject to common control or common signifi cant infl uence.

In the ordinary course of business, the Parent Bank has various transactions with its affi liates and with certain directors, offi cers, stockholders and related interests (DOSRI). These transactions usually arise from normal banking activities such as lending, borrowing, deposit arrangements and trading of securities, among others. Under existing policies of the Parent Bank, these transactions are made substantially on the same terms as with other individuals and businesses of comparable risks.

Under existing policies of the Group, these loans are made on substantially the same terms as loans granted to other individuals and businesses of comparable risks. Existing banking regulations limit the amount of individual loans to DOSRI, 70.0% of which must be secured, to the total of their respective deposits and book value of their respective investments in the lending company within the Group. In the aggregate, loans to DOSRI generally should not exceed the respective total equity or 15.0% of the total loan portfolio of the Group, whichever is lower. In 2014 and 2013, interest income on DOSRI loans amounted to 13.8 million and 51.7 million, respectively.

On March 15, 2004, the BSP issued Circular No. 423 which provides for the amended defi nition of DOSRI accounts. The following table shows information relating to DOSRI loans:


Total outstanding DOSRI accounts* 254,200 225,087 249,304 222,005Unsecured DOSRI loans 42,927 42,809 41,480 41,085Percent of DOSRI accounts granted prior to effectivity of BSP

Circular No. 423 to total loans 0.21% 0.22% 0.23% 0.24%

Percent of DOSRI accounts granted after effectivity of BSP Circular No. 423 to total loans 0.21% 0.22% 0.23% 0.24%

Percent of DOSRI accounts to total loans 0.21% 0.22% 0.23% 0.24%Percent of unsecured DOSRI accounts to total DOSRI accounts 16.89% 19.02% 16.64% 18.51%Percent of past due DOSRI accounts to total DOSRI accounts* 1.23% 1.69% 1.26% 1.71%Percent of nonperforming DOSRI loans to total DOSRI loans 1.23% — 1.26% —

*As reported to the BSP

On January 31, 2007, BSP Circular No. 560 was issued providing the rules and regulations that govern loans, other credit accommodations and guarantees granted to subsidiaries and affi liates of banks and quasi-banks. Under the said circular, the total outstanding exposures to each of the Parent Bank’s affi liates shall not exceed 10.0% of bank’s net worth, the unsecured portion of which shall not exceed 5.0% of such net worth. Further, the total outstanding exposures to subsidiaries and affi liates shall not exceed 20.0% of the net worth of the lending bank. BSP Circular 560 took effect on February 15, 2007.

As at December 31, 2014 and 2013, the total outstanding loans, other credit accommodations and guarantees to each of the Parent Bank’s subsidiaries and affi liates did not exceed 10.0% of the Parent Bank’s net worth, as reported to the BSP, and the unsecured portion did not exceed 5.0% of such net worth and the total outstanding loans, other credit accommodations and guarantees to all such subsidiaries and affi liates represent 5.7% and 8.6%, respectively, of the Parent Bank’s net worth.

On February 27, 2012, BSP issued Circular No. 749 which provides guidelines on Intra-Group transactions. Under this circular, signifi cant transactions between the Parent Bank and subsidiaries/affi liates should be reported to the BSP.

The account balances with respect to transactions of the Parent Bank with its subsidiaries as at and for the years ended December 31, 2014 and 2013 is as follow (amounts in millions):

Elements of TransactionsStatements of

Financial Position Amounts

Statements of Income Amounts Terms and Conditions

Related Party Nature of Transaction 2014 2013 2014 2013 2014 2013

USB Loans and receivable — 4,000 — — — On-demand; unsecuredAccounts receivable — 53,545 — — — On-demand; unsecuredDeposit liabilities 166,043 92,681 — — On-demand; 0.25% On-demand; 0.25%Interest income — — 107 6,245 — —Interest expense — — 136 134 — —Rent income — — 6,674 6,654 3 years 3 years



Elements of Transactions

Statements of Financial Position

AmountsStatements of

Income Amounts Terms and ConditionsRelated Party Nature of Transaction 2014 2013 2014 2013 2014 2013

ULFC Loans and receivable — 870,250 — — —30, 31 and 33 days;

4.75%; unsecuredOn-demand;

Accounts receivable — 138 — — — unsecuredAccrued interest income — 1,493 — — — —Deposit liabilities 471,018 187,963 — — On-demand; 0.25% On-demand; 0.25%Interest income — — 11,001 45,799 — —Interest expense — — 332 151 — —Rent income — — 1,343 1,794 3 years 5 years

USI Loans and receivable — 111 — — — On-demand; unsecuredAccounts receivable 213 157 — — On-demand; unsecured On-demand; unsecuredDividends receivable — 5,000 — — — —

Deposit liabilities 40,641 67,468 — — On-demand; unsecured 0.25%; 1%

On-demand; unsecured 0.25%; 1%

Interest expense — — 214 241 — —Rent income — — 809 742 3 years 3 years

BRC Loans and receivable — 98,468 — — — 35 days; 6%; unsecuredAccrued interest income — 4,325 — — — —

Deposit liabilities 70,461 78,586 — — On-demand; 0.25%; 35 days; 1.38%

On-demand; 0.25%;35 days; 1.75%

Interest income — — 429 6,137 — —Interest expense — — 127 152 — —

GHDC Deposit liabilities 67,404 50,714 — — On-demand; 0.00% On-demand; 0.25%UPI-MHC Accounts receivable 108,676 106,004 — — On-demand; unsecured On-demand; unsecured

Deposit liabilities 38 39 — — On-demand; 0.25% On-demand; 0.2%5UFEC Deposit liabilities 1,457 1,005 — — On-demand; 0.25% On-demand; 0.25%

Interest expense — — 3 2 — —

Transactions with SubsidiariesFor the years ended December 31, 2014 and 2013, transactions of the Parent Bank with its subsidiaries involving fi nancial assets at FVPL and AFS fi nancial assets include outright sales totaling 0.9 billion and 2.3 billion, respectively, and outright purchases totaling 0.9 billion and 2.2 billion, respectively. Combined gains (losses) on sale of fi nancial assets at FVPL and AFS fi nancial assets included as part of “Trading and securities gains - net” account in the Parent Bank’s statements of income in 2014 and 2013 amounted to 10.5 million and 21.0 million, respectively.

In 2014 and 2013, the Parent Bank purchased lease contracts and other loans receivables from ULFC, on a without recourse basis, with a total price of 2.0 billion and 873.2 million, respectively.

The Parent Bank has lease agreements with some of its subsidiaries in 2014 and 2013 with monthly rental of 0.6 million for both years, for periods ranging from one to three years. The lease agreements include the share of the subsidiaries in the maintenance of the building. The income related to these agreements, is included as rent income under “Miscellaneous income” in the Parent Bank’s statements of income.

Accounts receivable from UPI-MHC pertains to expenses paid by the Parent Bank, which were subsequently billed for reimbursement by the Parent Bank.

Transactions with AssociatesThe account balances with respect to transactions of the Parent Bank with its associates as at and for the years ended December 31, 2014 and 2013 follow:

Elements of Transactions

Statements of Financial Position

AmountsStatements of

Income Amounts Terms and ConditionsRelated Party Nature of Transaction 2014 2013 2014 2013 2014 2013

LOCI Loans and receivable — 387,441 — — — 56 - 125 days; 3.80% and 4%; unsecured

Accrued interest income — 589 — — — —Deposit liabilities 5,804 22,532 — — On-demand; 0.25% On-demand; 0.25%Interest income — — — 11,352 — —Interest expense — — 64 103 — —Trust fees from CIIF — — 926 478 — —

201

Elements of TransactionsStatements of

Financial Position Amounts

Statements of Income Amounts Terms and Conditions

Related Party Nature of Transaction 2014 2013 2014 2013 2014 2013

SPMC Loans and receivable 36,746 13,041 — — 60 days; non-interest bearing; unsecured 60 days; 0%; unsecured

Deposit liabilities 56,962 19,632 — — On-demand; 0.25% On-demand; 0.25%Interest income — — — — — —Interest expense — — 71 52 — —Trust fees from CIIF — — 180 173 — —

SLCOMI Deposit liabilities 1,312 409 — — On-demand; 0.25% On-demand; 0.25%Interest expense — — 2 2 — —Trust fees from CIIF — — 6 13 — —

GMC Loans and receivable 546,240 415,033 — — 55 - 134 days; 4%; unsecured

36 - 122 days; 3.80% and 4%; unsecured

Deposit liabilities 27,363 42,800 — — On-demand; 0.25% On-demand; 0.25%Interest income — — 5,779 16,423 — —Interest expense — — 103 122 — —Trust fees from CIIF — — 579 581 — —

UCFDC Deposit liabilities 122,830 46,091 — — On-demand; 0.25% On-demand; 0.25%Interest expense — — 77 52 — —Rent income — — 1,544 1,540 3 years 3 yearsTrust fees from CIIF — — 2,061 2,098 — —

The compensation of the key management personnel of the Group in 2014 and 2013 presented as part of “Compensation and fringe benefi ts” account in the statements of income:


Short-term employee benefits 357,715 342,815 339,928 322,502Post-employment benefits 81,377 109,728 79,886 109,716

439,092 452,543 419,814 432,218

Transactions with Retirement PlanThe Parent Bank’s retirement plan is managed and administered by the Operations Department under the Trust Banking Group. The fair values and carrying values of the plan assets amounted to P1.8 billion and P1.7 billion, respectively, as at December 31, 2014 and 2013.

Related information on assets, liabilities and profi t or loss of the retirement fund as at and for the years ended December 31, 2014 and 2013 follows:

2014 2013AFS securities:

Government and other debt securities 491,757 544,707Quoted equity securities 898,485 744,569Unquoted equity securities 66,405 66,405

Due from banks 234,178 231,874Loans and receivables 11,903 8,507Investment properties 109,707 96,500Total plan assets 1,812,435 1,692,562 Trust fee payable 2,743 P2,629Other liabilities 1,284 10,689Total plan liabilities 4,027 13,318

Plan income 2014 2013Interest income 36,036 43,368Dividend income 24,031 22,936Other income 43,598 101,193

103,665 P167,497

Plan expense 2014 2013Provision for (reversal of) impairment losses on equity securities — ( 758)Trust fees 10,600 10,619Other expenses 3,058 3,068

13,658 12,929



The Parent Bank’s retirement plan assets are invested in various debt and equity instruments, such as government securities, corporate papers, and equity securities traded in Philippine Stock Exchange (PSE), and investment in BSP’s special deposit account and placements with other banks. As at December 31, 2014 and 2013, the plan includes investment in 2,500 shares of Mastercaterers, Inc. (MCI), an affi liate, classifi ed under unquoted equity securities.

Investment properties include 193 parking slots located at Forbes Tower Condominium which are currently under various lease agreements.

As at December 31, 2014 and 2013, Due from banks includes Time Certifi cate of Deposit amounting to 82.9 million and P41.4 million, respectively, from the Parent Bank, and nil and 1.0 million, respectively, from USB. These are short-term time deposits with maturities ranging from 5 to 23 days and with interest rates ranging from 0.4% to 2.0%. Total interest income on deposits with the Parent Bank and USB amounted to 0.2 million in 2014 and 1.2 million in 2013.

During the year, the transactions of the fund with the Parent Bank and its subsidiaries are as follows:

Category/Transaction Amount of the Transaction

Parent Bank Time Certificate of DepositPurchase 4,937,770Collection 4,580,004Savings Deposit Purchase 4,937,770Collection 4,580,736

USB Time Certificate of DepositPurchase 159,132Collection 184,403Savings Deposit Purchase 161,932Collection 184,942

Other than savings and time deposits with the Parent Bank and USB, the Parent Bank’s retirement plan does not have investments in securities, whether debt or equity, issued by the Parent Bank as at December 31, 2014 and 2013.

As at December 31, 2014 and 2013, the Parent Bank’s contribution to its defi ned benefi ts retirement plan amounted to 161.5 million and 127.3 million, respectively (Note 27). Benefi ts paid out of the Parent Bank’s plan assets amounted to 199.2 million and 194.0 million in 2014 and 2013, respectively (Note 27).

Transactions with Other Related PartyRelated interest income from Stepan Philippines, Inc., a related party through the associates, amounted to nil and 0.6 million in 2014 and 2013, respectively.

29. Trust Operations

Securities and other properties amounting to 92.0 billion and 94.9 billion as at December 31, 2014 and 2013, respectively, held by the Parent Bank in fi duciary or agency capacity (for a fee) for its customers, are not included in the statements of fi nancial position since these are not properties of the Parent Bank (Note 30).

In compliance with the requirements of the General Banking Law of 2000 relative to the Parent Bank’s trust functions:

a. Investments in government securities with total face value of 1.0 billion and 1.5 billion (included under AFS fi nancial assets) as at December 31, 2014 and 2013 are deposited with the BSP as security for the Parent Bank’s faithful compliance with its fi duciary obligations; and

b. 10.0% of the Parent Bank’s trust income is transferred to surplus reserve. This yearly transfer is required until the surplus reserve for trust function is equivalent to 20.0% of the Parent Bank’s authorized capital stock. Income from trust operations is reported net of the related expenses.

As at December 31, 2014 and 2013, the reserve for trust business amounted to 123.0 million and 122.1 million, respectively, and is shown as part of “Surplus reserves” in the statements of fi nancial position (Note 26). The amount of surplus for appropriation recognized by the Parent Bank in 2014 and 2013 in compliance with BSP requirement amounted to 0.9 million and 4.5 million, respectively. As at December 31, 2014 and 2013, the cumulative unrecognized appropriation amounted to 186.9

million and 186.0 million, respectively.

203

On March 5, 1981, the BSP directed the Parent Bank to record in its Trust Banking Group the investments made by the Bank out of CIDF/CIIF as part of the Bank’s trust assets subject to Section 65 of RA No. 337, as amended, and Memorandum to All banks - DSE dated February 17, 1970 as to the amount of securities to be deposited to the BSP for the faithful performance of its trust duties. The investment should be properly supported and documented for the Parent Bank’s continuing evaluation and analysis in terms of profi tability and viability as well as to provide BSP with a concrete date to evaluate the Parent Bank’s compliance with PD 1468 and Letter of Instructions No. 926 “Rationalization of the Coconut Oil Milling Industry.”

The Parent Bank has investments in LOCI, SPMC, SLCOMI and GMC. The CIIF forms part of the CCSF, otherwise known as the coconut levy fund which was created in 1973 by PD No. 276. These CIIF companies have investments in 14 Holding Companies whose funds were invested in SMC shares that were sequestered by the PCGG in May 1986.

The ownership of the CIIF block of SMC shares, as well as the CIIF companies, became the subject of legal proceedings before the Sandiganbayan and Supreme Court.

On January 24, 2012, the Supreme Court declared that the CIIF block of SMC shares of stock totaling 33,133,266 shares as of 1983 together with all the dividends declared, paid and issued thereon as well as any increments thereto arising from, but not limited to, exercise of pre-emptive rights are declared owned by the government to be used only for the benefi t of all coconut farmers and for the development of the coconut industry and ordered reconveyed to the government. The Supreme Court affi rmed the resolution issued by the Sandiganbayan on June 5, 2007, that there is no more necessity of further trial with respect to the issue of ownership of the CIIF block of SMC shares, and the CIIF Companies as they have been fi nally adjudicated in the Partial Summary Judgment dated July 11, 2003 and May 7, 2004.

On February 14, 2012, COCOFED et. al., fi led a Motion for Reconsideration on the decision rendered by the Supreme Court on January 24, 2012, citing certain substantial and grave errors of fact. The Motion for Reconsideration was denied with fi nality by the Supreme Court on September 4, 2012. The Supreme Court decision became fi nal and executor and has been recorded in the Book of Entries of Judgment on December 10, 2014.

On December 28, 2012, the Parent Bank fi led a Special Civil Action for Declaratory Relief seeking clarifi cation on the Parent Bank’s proportionate right, title and interest in the CIIF Companies, as well as the Parent Bank’s indirect equity in the 14 Holding Companies and the CIIF block of SMC shares. The case, docketed as Civil Case No. 12-1251 before Regional Trial Court of Makati Branch 59, was consolidated with Civil Case No. 12-152, which is a similar action fi led by United Coconut Planters Life Assurance Corporation (Cocolife) with respect to its proportionate right, title and interest in the CIIF Companies on 25 September 2013. The PCGG, through the Offi ce of the Solicitor General, has sought the dismissal of the cases, but failed to obtain a favorable ruling from the trial court. Consequently, the PCGG elevated the matter to the Supreme Court via a Petition for Certiorari with a prayer for a TRO. The Supreme Court has yet to resolve the petition. In the interim, a TRO has been issued enjoining the trial court from conducting further proceedings in the cases fi led by the Bank and Cocolife.

As discussed in Note 1 to the fi nancial statements, EOs were issued by the Republic of the Philippines along with the approval of the recapitalization of the Parent Bank in 2015. These relate to the decision about the ownership of and the inventory, reconveyance, utilization and privatization of coco levy assets including the CIIF companies.

30. Commitments and Contingent Liabilities

In the normal course of the Group’s operations, there are various outstanding commitments and contingent liabilities which are not refl ected in the accompanying fi nancial statements. The Group recognizes in its books any losses and liabilities incurred in the course of its operations as soon as these become determinable and quantifi able. No material loss or liability is anticipated to be recognized in the accompanying fi nancial statements as a result of these commitments and transactions.

The following is a summary of contingencies and commitments at their peso-equivalent contractual amounts arising from off-balance sheet items:


Trust department accounts 29 91,997,192 94,925,135 91,997,192 94,925,135Standby letters of credit 1,764,350 2,107,305 1,764,350 2,107,305Sight import letters of credit outstanding 1,035,688 1,173,227 1,035,688 1,173,227Spot exchange sold — 355,160 — 355,160Usance import letters of credit outstanding 279,994 348,050 279,994 348,050Outward bills for collection 24,692 153,874 24,692 153,874Others 5,883,558 2,055,741 5,866,279 2,036,158

100,985,474 101,118,492 100,968,195 101,098,909

The Group received various letter notices and preliminary assessment notices from the Bureau of Internal Revenue (BIR) for taxable years 1998 to 2002. The Group, and all other banks with FCDU operations, was assessed for the FCDU’s GRT and DST. The assessments were protested on the basis of their legality. Compromise settlements were made with the BIR and the Group is still waiting for the issuance of the tax clearance.



The Group is defendant in various cases pending in courts for alleged claims against the Group, the outcome of which are not fully determinable at present. However, in the opinion of the Group’s management, the liabilities or losses, if any, arising from these claims is not material and should be recorded upon their fi nal determination.

Defi ciency Tax AssessmentsThe BIR has issued a Final Assessment Notice (FAN) for the 2011 taxable year pursuant to Cost Allocation under RR 4-2011. The noted tax defi ciencies amounted to P934.9 million. On April 28, 2015, the Makati Regional Trial Court issued a Writ of Preliminary Injunction enjoining the BIR from enforcing RR 4-2011.

Tax CaseAs at December 31, 2014, the Parent Bank has an ongoing case with the Supreme Court on FCDU GRT for the year 2001, and with Court of Tax Appeals on FCDU GRT and Income Tax Covering Year 2006.

31. Segment Information

The Group’s operating businesses are recognized and managed separately according to the nature of services provided and the different markets served with each segment representing a strategic business unit. The Group derives revenues from the following main operating business segments:

Branch Banking GroupThe Branch Banking Group (BBG) oversees the operation of the Group’s branches and ATM networks, which are the primary sales and distribution platforms for products and services. Its primary tasks are to: solicit deposits; cross-sell and distribute all of the Group’s products and services, as allowed by regulation; generate sales leads for specialized products; and manage customer relationships.

Corporate and Consumer Banking GroupThe Corporate and Consumer Banking Group (CCBG) manages the Group’s loan portfolio. It has a Consumer Banking Division to handle the consumer loan market, a Corporate and Commercial Banking Division to handle the corporate and institutional loan markets, and a Remittance Marketing Division for the overseas remittance market. Apart from credit lines, the Corporate and Commercial Banking Division also provides transactional banking, trade fi nance, foreign exchange, trust banking, fi nancial advisory and capital markets solutions to its corporate and institutional clients.

The CCBG also oversees the Group’s equity brokerage business through USI and the Group’s lease fi nancing business through ULFC.

Treasury GroupThe Treasury Group (TG) manages the Group’s assets and liabilities. Working with the Asset and Liability Committee, TG recommends the pricing strategy for deposits and loans to ensure that deposit-taking units offer competitive yields to generate the funding requirements of the Group, and the lending units, in turn, offer rates that will attract the targeted borrowers. In addition, TG manages the regulatory reserve requirements of the Group as well as ensures its liquidity position. The TG also engages in fi xed income securities and foreign exchange trading.

USBThe Group considers USB as one operating business segment. USB manages the Group’s consumer loan market particularly focusing on public school teachers and employees of local government units. USB also provides services such as deposit-taking, domestic fund transfers and treasury.

Other SegmentsThis segment includes other segments that provide support to its core activities.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on net income before income tax, which is measured in a manner consistent with that in the statements of income.

Segment assets are those operating assets that are employed by a segment in its operating activities and that either directly attributable to the segment or can be allocated to the segment on a reasonable basis.

Segment liabilities are those operating liabilities that result from the operating activities of a segment and that are either directly attributable to the segment or can be allocated to the segment on a reasonable basis.

The Group’s assets producing revenues are located in the Philippines (i.e. one geographical location), therefore, geographical segment information is no longer presented.

The Group has no signifi cant customers which contribute 10.0% or more of the consolidated revenue, net of interest expense.

Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on the Group’s cost of capital. There are no other material items of income or expense between business segments.

205

Segment information as at and for the year ended December 31, 2014 and 2013 as follows:

2014

BBG CCBG TreasuryOther

Segments USB Total

Interest income 35,292 5,974,155 4,183,780 300,368 1,239,920 11,733,515 Interest expense (1,617,196) — (984,608) (85,245) (143,980) (2,831,029)

Net interest (expense) income (1,581,904) 5,974,155 3,199,172 215,123 1,095,940 8,902,486 Depreciation and amortization (230,006) — — (369,566) (53,477) (653,049)Reversal of (provision for) credit and

impairment losses — — — (41,207) (235,772) (276,979)Net interest (expense) income after

depreciation and impairment (1,811,910) 5,974,155 3,199,172 (195,650) 806,691 7,972,458Other income 884,735 432,565 (269,412) 982,928 269,373 2,300,189Other expenses (1,016,779) (282,482) (158,247) (4,013,317) (564,316) (6,035,141)Net income or loss before income tax (1,943,954) 6,124,238 2,771,513 (3,226,039) 511,748 4,237,506Income tax expense (53) (22,512) (711,258) (209,294) (154,985) (1,098,102)

Net income (loss) for the year ( 1,944,007) 6,101,726 2,060,255 ( 3,435,333) 356,763 3,139,404

Total assets 201,552,343 14,134,679 26,894,824 14,467,292 13,342,124 270,391,262Total liabilities 203,496,350 8,032,953 25,355,815 2,821,569 11,334,705 251,041,392

2013

BBG CCBG TreasuryOther

Segments USB Total

Interest income 42,597 5,202,552 4,197,074 273,372 1,050,850 10,766,445 Interest expense (1,793,125) (5,599) (1,096,333) (60,301) (120,497) (3,075,855)

Net interest (expense) income (1,750,528) 5,196,953 3,100,741 213,071 930,353 7,690,590Depreciation and amortization (254,967) — — (242,428) (47,550) (544,945)Reversal of (provision for) credit and

impairment losses — (100,000) — (45,908) (99,748) (245,656)

Net interest (expense) income after depreciation and impairment (2,005,495) 5,096,953 3,100,741 (75,265) 783,055 6,899,989

Other income 4,903,211 (3,067,006) 103,441 760,508 272,132 2,972,286Other expenses (881,935) (267,152) (183,734) (3,534,404) (490,633) (5,357,858)

Net income or loss before income tax 2,015,781 1,762,795 3,020,448 (2,849,161) 564,554 4,514,417Income tax expense (138) (26,551) (676,124) (115,507) (160,507) (978,827)

Net income (loss) for the year 2,015,643 1,736,244 2,344,324 ( 2,964,668) 404,047 3,535,590

Total assets 215,308,995 2,691,298 30,117,044 16,689,936 11,786,448 276,593,721Total liabilities 213,265,012 2,607,795 29,123,015 3,060,759 9,118,317 257,174,898

32. Financial Performance

The following basic ratios measure the fi nancial performance of the Group and the Parent Bank before the effects of the adjustments related to the exceptions discussed in the Statement of Compliance under Note 2 to the fi nancial statements for the years ended December 31, 2014 and 2013:


2014 2013 2014 2013

Return on average equity (a/b) 16.20% 17.71% 31.10% 33.02%a. Net income 3,139,404 3,535,590 2,464,638 2,861,609b. Average equity 19,384,345 19,955,290 7,442,893 8,665,108Return on average assets (c/d) 1.15% 1.43% 0.99% 1.26%c. Net income 3,139,404 3,535,590 2,464,638 2,861,609d. Average total assets 273,492,490 247,616,437 250,146,609 227,435,001Net interest margin (e/f) 4.49% 4.37% 4.12% 3.98%e. Net interest income 8,902,486 7,690,590 7,611,624 6,566,692f. Average earning assets 198,395,368 175,972,973 184,917,934 165,133,951

The Group’s and the Parent Bank’s fi nancial performance are computed based on regulatory capital submitted to the BSP as required by Subsection X190.4, Disclosure requirement in the notes to the audited fi nancial statements, of the Manual of Regulations for Banks (MORB).



33. Notes to Statements of Cash Flows

The following is a summary of noncash activities of the Group and the Parent Bank:


2014 2013 2014 2013Additions to investment properties in

settlement of loans 1,171,259 299,148 1,115,012 254,423

Increase in sales contracts receivable from sale of investment properties 56,818 133,638 51,419 107,555

1,228,077 432,786 1,166,431 361,978

The amounts of Due from BSP considered as cash equivalents follow:


2014 2013 2014 2013

Due from BSP 41,903,197 67,708,866 40,645,833 66,068,191Less amount not considered as cash

equivalents 2,400,949 2,400,949 2,400,949 2,400,949

39,502,248 65,307,917 38,244,884 63,667,242

The amounts not considered as cash equivalents are those maturing within a period of greater than three months.

34. Reclassifi cation of Accounts

Certain accounts in the December 31, 2013 Group fi nancial statements have been reclassifi ed to conform to the December 31, 2014 fi nancial statements’ presentation and to better refl ect the nature of the accounts.

ConsolidatedAs Previously

Presented Reclassification As ReclassifiedProperty and equipment 2,192,440 (57,286) 2,135,154Intangible and other assets 21,636,547 57,286 21,693,833

In 2013, there is an ongoing negotiation with MHC to dacion the remaining landholdings within twelve (12) months from the reporting date. This will be used as payment for the cash advances made by UCPB. Thus, the property was reclassifi ed as “Noncurrent assets held-for-sale” account under “Intangible and other assets” in the statements of fi nancial position and measured at the lower of carrying amount and fair value less cost of disposal.

Such reclassifi cations resulted to a more appropriate presentation of accounts and did not have any impact to total comprehensive income in 2014 and 2013.

The above reclassifi cation has also no effect on the information in the statements of changes in equity for the period reported. Accordingly, the management did not present statements of fi nancial position at the beginning of the earliest comparative period.

207

35. Supplementary Information Required Under Revenue Regulations No. 15-2010 of the Bureau of Internal Revenue (BIR)

In addition to the disclosures mandated under PFRSs, and such other standards and/or conventions as may be adopted, companies are required by the BIR to provide in the notes to the fi nancial statements, certain supplementary information for the taxable year.

The amounts relating to such information may not necessarily be the same with those amounts disclosed in the fi nancial statements which were prepared in accordance with PFRSs. The following is the tax information required for the taxable year ended December 31, 2014 reported and/or paid by the Parent Bank:

Gross Receipt TaxUnder the Philippine tax laws, fi nancial institutions are subject to percentage and other taxes as well as income taxes. Percentage and other taxes paid by the Parent Bank consist principally of GRT and DST.

Details of the Parent Bank’s income and related GRT accounts in 2014 are as follows:

Gross Receipts GRTInterest income 9,458,683 389,681Other income 1,229,372 86,056

10,688,055 475,737

Other Taxes and LicensesIn 2014, other taxes and licenses of the Parent Bank consist of:

AmountDocumentary stamps tax* 620,723Fringe benefit tax 165,623Local taxes 34,755Others 1,087

822,188

*Includes DST charged to the Parent Bank’s clients/customers

Withholding TaxesDetails of total remittances in 2014 and balance of withholding taxes as at December 31, 2014 are as follows:

Total Remittances BalanceFinal withholding taxes 294,736 23,564Withholding taxes on compensation and benefits 406,782 74,814Expanded withholding taxes 57,214 4,648

758,732 103,026

Defi ciency Tax AssessmentsThe BIR has issued a Final Assessment Notice (FAN) for the 2011 taxable year pursuant to Cost Allocation under RR 4-2011. The noted tax defi ciencies amounted to 934.9 million. On April 28, 2015, the Makati Regional Trial Court issued a Writ of Preliminary Injunction enjoining the BIR from enforcing RR 4-2011.

Tax CaseAs at December 31, 2014, the Parent Bank has an ongoing case with the Supreme Court on FCDU GRT for the Year 2001, and with Court of Tax Appeals on FCDU GRT and Income Tax Covering Year 2006.



METRO MANILA

CALOOCAN / MALABON / NAVOTAS / VALENZUELA

CITIES

10th Avenue – Caloocan 10th Avenue corner A. Mabini St. Caloocan City(02) 351-3959; 351-7209 (02) [email protected]

Caloocan 283 EDSA corner Gen. Tinio St., Morning Breeze Subdivision, Caloocan City(02) 361-9779; 361-9729(02) 366-0428 (fax)[email protected]

Grace Park Solid Tech Services Building205 Rizal Avenue Extensioncorner 6th Avenue, Grace ParkCaloocan City(02) 365-7305 to 07(02) 362-1266 (fax)[email protected]

Karuhatan 246 McArthur HighwayKaruhatan, Valenzuela City(02) 291-5224 to 25(02) 293-1390 (fax)[email protected]

Malabon 153 M.H. Del Pilar corner Gov. A. Pascual Tinajeros, Malabon City(02) 352-4776; 352-6119(02) 442-6900 (fax)[email protected]

Malanday UCPB Building, McArthur Highway corner P. Adriano St. Malanday, Valenzuela City(02) 445-8825; 794-6316(02) 292-3657 (fax)[email protected]

Navotas Lot 1 Lapu-Lapu Avenuecorner North Bay BoulevardNavotas City(02) 355-5588; 282-3881(02) 282-3880 (fax)[email protected]

Paso de Blas Servando Building, Brgy. Paso de Blas, Valenzuela City(02) 332-8515; 291-1099(02) 293-2811 (fax)[email protected]

QUEZON CITY

Acropolis The Village Center187 E. Rodriguez, Jr. Avenue Bagumbayan (Libis), Quezon City(02) 635-6872; 438-1177(02) 655-4614 (fax)[email protected]

Anonas Hi-Top Supermart, Aurora Boulevard cor. F. Castillo St.Project 4, Quezon City(02) 421-0753 to 54(02) 913-8301 (fax)[email protected]

Araneta Avenue Doña Nena Building, 425 Araneta Avenue cor. Bayani St., Quezon City(02) 732-9087; 713-1838(02) 731-2260 (fax)[email protected]

Aurora Boulevard 725 Aurora BoulevardNew Manila, Quezon City(02) 584-9752 to 55(02) 584-9751 (fax)[email protected]

Banaue PPSTA Dormitory Building245 Banaue St., Quezon City(02) 732-5131; 732-5132(02) 712-6388 (fax)[email protected]

Batasan Sweet Haven Square Building, Commonwealth Avenue corner Villongco Street, Quezon City(02) 430-9066; 951-0188(02) 951-1998 (fax)[email protected]

Blue Ridge 190 Katipunan Avenue corner Raja Matanda StreetBlue Ridge, Quezon City(02) 647-1089; 647-1515(02) 647-1499 (fax)[email protected]

Bohol Avenue UCPB Building, Sgt. Esguerra Street corner Quezon AvenueSouth Triangle, Quezon City(02) 926-7626; 927-5606(02) 922-2098 (fax)[email protected]

Cambridge Coronet Building, Cambridge St.corner Aurora Boulevard Cubao, Quezon City(02) 912-2339 to 40(02) 912-2341 (fax)[email protected]

Commonwealth Avenue UCPB Building, 125 Commonwealth Avenue, Diliman, Quezon City(02) 931-9395 to 96(02) 931-0471 (fax)[email protected]

Del Monte-Bonifacio 161 Del Monte AvenueQuezon City(02) 367-0072; 415-2792(02) 367-0073 (fax)[email protected]

Diliman J&L Building, 23 Matalino St.Quezon City(02) 921-6217; 921-9688(02) 922-1030 (fax)[email protected]

E. Rodriguez 2 Judge Jimenez Streetcorner E. Rodriguez Sr. Avenue, Brgy. Pinagkaisahan Cubao, Quezon City(02) 726-8649; 726-1063(02) 726-1067 (fax)[email protected]

Lagro St. Andrew BuildingQuirino Highway, Lagro Novaliches, Quezon City(02) 930-7291; 930-7293(02) 930-7276 (fax)[email protected]

Loyola Heights SMRC Building, 331 Katipunan Avenue, Loyola Heights Quezon City(02) 927-6672 to 75(02) 433-4308 (fax)[email protected]

Mindanao Avenue UCPB Building, 14 Mindanao Avenue, Dominic SubdivisionTandang Sora, Quezon City(02) 453-8616; 929-3718(02) 983-9477 (fax)[email protected]

Muñoz 304 Roosevelt Avenue corner M.H. del Pilar StreetSan Francisco del MonteQuezon City(02) 372-2421; 372-2422(02) 372-2423 (fax)[email protected]

New Manila Cortes Building, 958E. Rodriguez, Sr. AvenueQuezon City(02) 722-5474; 722-4714(02) 721-8658 (fax)[email protected]

Novaliches UCPB Building, 937 Quirino Highway, NovalichesQuezon City(02) 939-5590; 419-1609(02) 939-6435 (fax)[email protected]

BRANCHES AND SUBSIDIARIES

209 Branches and Subsidiaries

P. Tuazon STG Building, 190 P. Tuazon St. corner 10th AvenueCubao, Quezon City(02) 911-7221; 911-7202(02) [email protected]

Quirino Highway 380 Oeshram BuildingSangandaan, Quirino HighwayNovaliches, Quezon City(02) 938-6863 to 64(02) 938-6865 (fax)[email protected]

Roosevelt Avenue Tres Hermanas, Inc. BuildingRoosevelt Avenue corner Quezon Avenue, Quezon City(02) 372-4740 to 41(02) 372-4739 (fax)[email protected]

Tomas Morato F.C. Building, 290 Tomas Morato Avenue, Quezon City(02) 922-1694; 924-7505(02) 924-6783 (fax)[email protected]

Visayas Avenue Far East Asia Commercial Complex, 282 Visayas Avenue corner Congressional Avenue, Quezon City(02) 924-5504; 924-5107(02) 924-5884 (fax)[email protected]

Welcome Rotonda 299 E. Rodriguez AvenueQuezon City(02) 740-8462 to 64(02) 712-9751 (fax)[email protected]

West Avenue CBT Building, 60 West Avenue, Quezon City(02) 371-9796; 374-2143(02) 374-3048 (fax)[email protected]

SAN JUAN

Annapolis Atlanta Centre BuildingAnnapolis St., GreenhillsSan Juan City(02) 722-7176; 726-6662(02) 722-8197 (fax)[email protected]

Greenhills A&E Building, Ortigas Avenue, Greenhills, San Juan(02) 722-6961 to 62(02) 721-3393 (fax)[email protected]

N. Domingo UCPB Building, 120 N. Domingo Street, San Juan City(02) 726-0521; 744-5564(02) 724-8008 (fax)[email protected]

PASIG / ORTIGAS CENTER

Hanston Square Hanston Square Building17 San Miguel AvenueOrtigas Center, Pasig City(02) 706-0937 to 39(02) 706-0434 (fax)[email protected]

Ortigas Emerald Building14 F. Ortigas Jr. AvenueOrtigas Center, Pasig City(02) 636-0680; 631-6415(02) 631-6413 (fax)[email protected]

Pasig UCPB Building, 12 Dr. Sixto Antonio Avenue, Kapasigan Pasig City(02) 641-0336; 641-0338(02) 641-3451 (fax)[email protected]

Pioneer San Buena Building9 Shaw Boulevard corner Pioneer Street, Pasig City(02) 631-3261 to 62(02) 631-3271 (fax)[email protected]

Robinsons Galleria Galleria Corporate CenterEDSA corner Ortigas AvenueQuezon City(02) 633-4951; 637-1688(02) 632-9550 (fax)[email protected]

San Miguel San Miguel Properties CenterSt. Francis Avenue, Ortigas Center, Mandaluyong City(02) 632-0855 to 57(02) 632-0862 (fax)[email protected]

Shaw-Escriva Tune Hotel, Lot 5 Block 4, Shaw Boulevard, Barangay San Antonio, Pasig City(02) 633-9276 to 78(02) [email protected]

Tektite West Tower, Philippine Stock Exchange Center, Exchange Road, Ortigas Center, Pasig City(02) 638-6756; 638-6758(02) 638-6759 (fax)[email protected]

MANDALUYONG

Boni Avenue Jemtee Building, 677 Boni Ave.corner Aliw St., Mandaluyong City(02) 533-7652; 532-2315;(02) 532-1944 (fax)[email protected]

Kalentong 214 Romualdez Streetcorner Kalentong StreetMandaluyong City(02) 532-0771; 718-0246(02) 531-0959 (fax)[email protected]

Mandaluyong 358 Shaw BoulevardMandaluyong City(02) 727-5233; 727-1842(02) 726-2192 (fax)[email protected]

MARIKINA

Concepcion David Building, Bayan-Bayanan Avenue, Concepcion Marikina City(02) 942-2328 to 29(02) 948-4020 (fax)[email protected]

Marikina 20 Sumulong HighwaySto. Niño, Marikina City(02) 646-9639; 646-9641(02) 646-9640 (fax)[email protected]

RIZAL

Antipolo Circumferential RoadBarangay San RoqueAntipolo City(02) 696-7804; 630-1091(02) 696-7806 (fax)[email protected]

Cainta UCPB Building, Felix AvenueJunction, Cainta, Rizal(02) 655-4050 to 52(02) 655-3037 (fax)[email protected]

Masinag Silicone Valley BuildingSumulong HighwayAntipolo City(02) 682-3018; 682-3013(02) 681-5843 (fax)[email protected]

Q. Plaza Q. Plaza Commercial Complex, Imelda Avenue corner Marcos Highway Cainta, Rizal(02) 645-7068; 645-2547(02) 645-2541 (fax)[email protected]

Taytay Fortunil Building, National Road, San Juan, Taytay, Rizal(02) 658-6986 to 89(02) 658-6990 (fax)[email protected]



MANILA

Binondo 509-513 Q. Paredes StreetBinondo, Manila(02) 242-5961 to 62(02) 242-5665 (fax)[email protected]

Elcano601-603 Elcano corner San Nicolas Streets, Binondo, Manila(02) 244-4251 to 53(02) 242-9405 (fax)[email protected]

Escolta FUB Building, David Street Escolta, Manila(02) 243-1326 to 29(02) 241-4869 (fax)[email protected]

Juan LunaFirst Binondo Centre Building524 Juan Luna StreetBinondo, Manila(02) 243-1980; 243-1982(02) 243-1981 (fax)[email protected] MalateGolden Empire Tower1322 Roxas Boulevardcorner Padre FauraErmita, Manila(02) 567-0020; 353-3325(02) 526-7455 (fax)[email protected]

P. Ocampo Torre Lorenzo BuildingTaft Avenue corner P. Ocampo Malate, Manila(02) 536-3119; 536-3120(02) 523-1766 (fax)[email protected]

P. Paterno 713 P. Paterno StreetQuiapo, Manila(02) 733-4239; 733-4941(02) 733-4225 (fax)[email protected]

San Andres Marc 2000 Tower, 1973 Taft Avenue corner San Andres Street Malate, Manila(02) 524-5426; 524-8116(02) 524-8107 (fax)[email protected]

Soler Aceada Building, 949-951 Soler Street, Binondo, Manila(02) 245-0216; 245-0016(02) 245-0011 (fax)[email protected]

T.M. Kalaw Traveller’s Life Building490 T.M. Kalaw corner Cortada Street, Ermita, Manila(02) 522-4775; 522-0746(02) 524-0504 (fax)[email protected]

Tomas Mapua Hian Chiong Building725 Tomas Mapua Street Sta. Cruz, Manila(02) 733-3367; 734-3158(02) 733-3359 (fax)[email protected] United Nations Avenue Medical Center Manila Building, U.N. Avenue corner Gen. Luna Street, Ermita, Manila(02) 521-3089; 521-3091(02) 521-3090 (fax)[email protected]

MAKATI

Main Office Branch UCPB Corporate Offices7907 Makati Avenue, Makati City(02) 811-9243; 811-9889(02) 811-9222 (fax)[email protected]

Aguirre PET Building, 114 Aguirre St.Legaspi Village, Makati City(02) 892-3778; 817-8217(02) 892-3757 (fax)[email protected]

Ayala Avenue Ayala Life - FGU Center6811 Ayala Avenue, Makati City(02) 845-1630; 845-1240(02) 845-1265 (fax)[email protected]

Chino Roces Alegria Building, 2229 Don Chino Roces Avenue, Makati City(02) 816-4675; 819-1223(02) 893-1657 (fax)[email protected]

Dela Rosa Asian Mansion I Building109 Dela Rosa StreetLegaspi Village, Makati City(02) 894-4445; 812-8433(02) 815-2163 (fax)[email protected]

Guadalupe Tan Hock BuildingP. Burgos corner EDSAGuadalupe Nuevo, Makati City(02) 882-0364; 882-4311(02) 882-4577 (fax)[email protected]

Herrera Coherco Corporate Center116 V.A. Rufino StreetLegaspi Village, Makati City(02) 813-2990; 813-2992(02) 817-8829 (fax)[email protected]

J.P. Rizal 905 J.P. Rizal cor. Santiago St.Brgy. Poblacion, Makati City(02) 899-7237; 899-7235(02) 899-7236 (fax)[email protected]

Makati Avenue Somerset Olympia Condominium, Makati Avenue corner Sto. Tomas Street Urdaneta Village, Makati City(02) 892-1511 to 14(02) 813-2288 (fax)[email protected]

Marvin Plaza Marvin Plaza Building, Don Chino Roces Avenue, Makati City(02) 893-0480; 840-3502(02) 893-0485 (fax)[email protected]

Metropolitan Avenue Bormaheco CondominiumMetropolitan Avenue corner Zapote Street, Makati City(02) 899-4128; 897-1647(02) 899-1751 (fax)[email protected]

Pasay Road Ginbo Building, 824 Arnaiz Avenue, San Lorenzo VillageMakati City(02) 813-6501; 813-6483(02) 813-6497 (fax)[email protected]

Pasong Tamo Extension OPVI Building (formerly Jannov Plaza), 2295 Pasong Tamo Extension, Makati City(02) 893-1586; 810-5805(02) 892-5169 (fax)[email protected]

Puyat – Bautista Majalco Building, Senator Gil Puyat Avenue cor. Bautista St.Palanan, Makati City(02) 815-1324 to 26(02) 893-2852 (fax)[email protected]

Reposo - J.P. Rizal Margarita Building, 748 J.P. Rizal Street, Brgy. Poblacion, Makati City(02) 553-0393 to 95(02) 553-0396 (fax)[email protected]

SalcedoPhilcox Building, 172 Salcedo St. Legaspi Village, Makati City(02) 893-4251; 892-6916(02) 894-0430 (fax)[email protected]


211

Tordesillas Three Salcedo Place Condominium,102 Tordesillas Street, Salcedo VillageMakati City(02) 843-4022 to 23(02) 843-4024 (fax)[email protected]

Valero Antel 2000 Corporate Center121 Valero StreetSalcedo Village, Makati City(02) 887-5255 to 57(02) 887-5258 (fax)[email protected]

TAGUIG

32nd Street BGC F1 Building, 32nd StreetBonifacio Global City, Taguig(02) 478-0834; 478-0357(02) 478-7623 (fax)[email protected]

Global City Fort Palm Spring Building30th Street corner 1st AvenueBonifacio Global City, Taguig(02) 659-3749; 659-3753(02) 846-5609 (fax)[email protected]

McKinley Hill IPC BuildingUpper McKinley RoadFort Bonifacio, Taguig(02) 519-1800; 478-7139(02) 519-1655 (fax)[email protected]

The Fort Forbes Wood Heights Condominium, Rizal Drive, Bonifacio Global City, Taguig(02) 856-6045 to 47(02) 856-6049 (fax)[email protected]

PASAY CITY

Coral Way Fly Ace Corporate Center13 Coral Way, Central Business Park, Pasay City(02) 808-6680; 808-6684(02) 808-6703 (fax)[email protected]

F.B. Harrison AIMS Building, A. Arnaiz Avenue corner F.B. Harrison Street, Pasay City(02) 551-9381; 831-5790(02) 833-2919 (fax)[email protected]

Malibay 715 EDSA, Malibay, Pasay City(02) 889-9467 to 69(02) 844-3644 (fax)[email protected]

MUNTINLUPA /PARAÑAQUE / LAS PIÑAS

Alabang Civic Prime Building2501 Civic corner Market DriveFilinvest Corporate CityAlabang, Muntinlupa City(02) 846-7445 to 46(02) 856-4294 (fax)[email protected]

Aquino Avenue Sky Freight BuildingAquino AvenueParañaque City(02) 854-5292; 854-5293(02) 854-5689 (fax)[email protected]

Baclaran 4010 Airport Road Baclaran, Parañaque City(02) 853-9746 to 47(02) 852-1251 (fax)[email protected]

BF Parañaque EJV Building, 21 Aguirre AvenueBF Homes, Parañaque City(02) 836-4945; 836-4937(02) 836-4946 (fax)[email protected]

Bicutan J&M Mendoza BuildingDoña Soledad Avenue corner Argentina StreetBetter Living SubdivisionParañaque City(02) 824-3337; 823-5260(02) 821-9774 (fax)[email protected]

Las Piñas URCI Townhomes, Alabang Zapote Road, Pamplona 3Las Piñas City(02) 871-1883; 519-5377(02) 873-2896 (fax)[email protected]

Madrigal Richville Corporate Center1314 Commerce Avenue Extension Madrigal Business ParkAyala Alabang, Muntinlupa City(02) 807-2927 to 28(02) 807-2930 (fax)[email protected]

Muntinlupa Elizabeth Center BuildingNational Road, PutatanMuntinlupa City(02) 862-0025 to 26(02) 862-0027 (fax)[email protected]

Sucat 8415 Dr. A. Santos AvenueBrgy. San Antonio, SucatParañaque City(02) 825-0839; 829-2517(02) 825-0841 (fax)[email protected]

Zapote UCPB Building, Real StreetAlabang-Zapote RoadLas Piñas City(02) 873-0939; 873-0207(02) 873-0217 (fax)[email protected]

NORTH-CENTRAL LUZON

BAGUIO CITY

Baguio UCPB Building, T. Claudio and Calderon Streets, Baguio City(074) 442-3132; 443-4685(074) 442-3133 (fax)[email protected]

ILOCOS NORTE /ILOCOS SUR

Laoag Bueno Building, J.P. Rizal corner E. Ruiz Streets, Laoag City(077) 771-4475; 772-2037(077) 771-5800 (fax)[email protected]

Vigan UCPB Building, M.L. Quezon Avenue, Vigan City(077) 722-2720; 632-0086(077) 722-2719 (fax)[email protected]

LA UNION

La Union Unison Realty BuildingQuezon AvenueSan Fernando, La Union(072) 242-0491; 888-5733(072) 242-0492 (fax)[email protected]

PANGASINAN

Dagupan UCPB Building, A.B. Fernandez Avenue corner Herrero StreetDagupan City(075) 522-0709; 529-3744(075) 522-0914 (fax)[email protected]

Urdaneta UCPB Building, Alexander St. Urdaneta City(075) 568-1003; 656-2208(075) 568-2828 (telefax)[email protected]

CAGAYAN

Tuguegarao A. Luna and A. Bonifacio Streets, Tuguegarao City(078) 844-1060 to 61(078) 844-1059 (fax)[email protected]

ISABELA

Cauayan C. Uy Building, National Highway Cauayan City, Isabela(078) 652-3116; 662-1323(078) 652-3117 (fax)[email protected]

Santiago UCPB Building, National Highway corner Camacam Street, Santiago, Isabela(078) 305-2561; 305-2903(078) 682-7097 (fax)[email protected]


Branches and Subsidiaries


NUEVA VIZCAYA

Solano J.P. Rizal Street, Poblacion Solano, Nueva Vizcaya(078) 326-5487; 326-5047(078) 326-5619 (fax)[email protected]

BATAAN

Balanga UCPB BuildingDon M. Banzon AvenueBalanga City(047) 237-2765; 237-0692(047) 237-2875 (fax)[email protected]

Limay UCPB BuildingRoman National Highway Alangan, Limay, Bataan(047) 244-5890; 244-5891(047) 244-5892 (fax)[email protected]

BULACAN

Balagtas Roma Building, 491 McArthur Highway, San Juan, Balagtas Bulacan(044) 693-2748; 769-1224(044) 769-1900 (fax)[email protected]

Baliuag PVR BuildingBenigno S. Aquino Avenue Baliuag, Bulacan(044) 766-3227 to 28(044) 766-7703 (fax)[email protected]

Meycauayan Sarmiento Building McArthur Highway, Calvario Meycauayan, Bulacan(044) 815-2389; 840-8923(044) 815-3300 (fax)[email protected]

NUEVA ECIJA

Cabanatuan Ramoso Building, Burgos Avenue corner A. Bonifacio Street, Cabanatuan City(044) 463-2558; 463-1941(044) 463-2168 (fax)[email protected]

ZAMBALES

Olongapo UCPB Building, 1869 Rizal Avenue, West Bajac-BajacOlongapo City(047) 223-4870; 222-3478(047) 222-3046 (fax)[email protected]

Subic Royal Sky Plaza, Royal Gateway District, Argonaut Highway Subic Bay Freeport Zone(047) 252-7447; 252-3851(047) 252-2421 (fax)[email protected]

PAMPANGA

Angeles UCPB Building, Sto. Rosario corner Plaridel StreetsAngeles City(045) 625-9818; 888-2754(045) 888-1672 (fax)[email protected]

Clark Field Lilly Hill Plaza, C.M. Recto Avenue, Clark Freeport ZonePampanga(045) 599-3472 to 73(045) 599-3474 (fax)[email protected]

San Fernando U2 Building, McArthur Highway, Dolores, San Fernando, Pampanga(045) 961-4581; 961-4582(045) 963-1942 (fax)[email protected]

TARLAC

Paniqui UCPB Building, National Highway, Paniqui, Tarlac(045) 931-0225(045) 931-0554 (fax)[email protected]

Tarlac Que Kian Juat BuildingF. Tanedo Street, San Nicolas Tarlac City(045) 982-0158; 982-3028(045) 982-0159 (fax)[email protected]

SOUTHERN LUZON

BATANGAS

Batangas UCPB Building, C. Tirona corner P. Zamora StreetsBatangas City(043) 723-3490; 300-3490(043) 723-0250 (fax)[email protected]

Lemery UCPB Building, Ilustre Avenue corner Gen. Luna Street, Lemery, Batangas(043) 214-2588; 411-1019(043) 411-1362 (fax)[email protected]

Lipa - Big Ben Big Ben Commercial BuildingAyala Highway, Lipa City(043) 756-7131; 312-0103(043) 756-7130 (fax)[email protected]

Lipa – Recto Wood Heights BuildingC.M. Recto Avenue, Lipa City(043) 756-1811; 756-2311(043) 756-1312 (fax)[email protected]

Sto. Tomas NDN Building, 34 JP Laurel Highway, Brgy. San Roque Sto. Tomas, Batangas(043) 784-8360; 784-8210(043) 784-8226 (fax)[email protected]

Tanauan P&G Commercial ComplexJP Laurel Highway, Tanauan City(043) 778-6801 to 03(043) 778-6804 (fax)[email protected]

CAVITE

Dasmariñas Toledo Building, 2-A Sampaloc 1, Aguinaldo Highway, Dasmariñas, Cavite(046) 416-6956 to 57(046) 416-6953 (fax)[email protected]

Imus Maliksi Building,Tanzang Luma, Aguinaldo Highway Imus, Cavite(046) 471-0306; 471-2494(02) 529-8608 (fax)[email protected]

Molino Solagrande CenterMolino, Bacoor, Cavite(046) 476-0500; 476-0503(046) 476-0504 (fax)[email protected]

Rosario UCPB Building, Gen. Trias Drive, Rosario, Cavite(046) 438-3712 to 14(02) 529-8818 (fax)[email protected]

LAGUNA

Biñan UCPB Building, Biñan Business Center, National Highway, Platero, Biñan, Laguna(049) 411-3889; 411-3899(02) 520-6724 (fax)[email protected]

Calamba Lazaro and Borres BuildingNational Road, CrossingCalamba, Laguna(049) 545-2252; 545-2902(02) 520-8837 (fax)[email protected]


213

Laguna UCPB BuildingKm. 32 Old National Highway, San Pedro, Laguna(02) 808-4193; 808-5374(02) 808-3934 (fax)[email protected]

San Pablo UCPB Building, Rizal Avenue corner P. Alcantara StreetSan Pablo City(049) 562-0977; 562-7721(049) 562-5120 (fax)[email protected]

Sta. Cruz UCPB Building, P. Guevarra and P. Burgos StreetsSta. Cruz, Laguna(049) 501-2590; 810-0728(049) 808-2003 (fax)[email protected]

Sta. Rosa Phase 2 A, Block 5, Lot 3BSanta Rosa Estates CommercialSta. Rosa – Tagaytay RoadSta. Rosa, Laguna(049) 508-4451 to 52(049) 508-4452 (fax)[email protected]

QUEZON

Gumaca Dalisay Building, Antonio Luna and Bonifacio StreetsGumaca, Quezon(042) 421-1312; 317-6304(042) 317-7712 (fax)[email protected]

Lucena – Centro Quezon Avenuecorner San Fernando StreetLucena City(042) 373-1431; 660-7080(042) 373-7138 (fax)[email protected]

Lucena – Guinto UCPB Building, Quezon Avenue corner Leon Guinto Street, Lucena City(042) 710-2417; 660-3667(042) 710-3659 (fax)[email protected]

MINDORO

Calapan Baniway Building, J.P. Rizal Street, Brgy. San VicenteCalapan City(043) 288-5678; 288-5252(043) 288-1733 (fax)[email protected]

San Jose Lopez Jaena Street, San JoseOccidental Mindoro(043) 491-1014(043) 491-2038 (fax)[email protected]

ALBAY

Legaspi UCPB Building, Quezon Avenue, Legaspi City(052) 480-8721; 820-6450(052) 480-7881 (fax)[email protected]

CAMARINES NORTE/CAMARINES SUR

Daet UCPB Building, F. Pimentel Street, Daet, Camarines Norte(054) 721-1353; 440-3294(02) 429-0035 (fax)[email protected]

Naga UCPB BuildingEvangelista Street, Naga City(054) 811-2414(054) 473-9172 (telefax)[email protected]

BICOL

Masbate UCPB Building, Quezon Avenue corner Rosero Stairway, Masbate(056) 582-0994; 333-2252(056) 333-3477 (fax)[email protected]

Sorsogon UCPB Building, Magsaysay Avenue and Rizal Streets Sorsogon City(056) 211-2058(056) 421-5004 (telefax)[email protected]

WESTERN VISAYAS

AKLAN

KALIBO Kalibo, UCPB BuildingMartelino Street, Kalibo, Aklan(036) 262-3303; 268-4319(036) 500-7513 (fax)[email protected]

CAPIZ

Roxas Gaisano Building, Arnaldo Boulevard, Roxas City(036) 621-1850; 621-3547(036) 621-0239 (fax)[email protected]

ILOILO

Iznart UCPB Building, Iznart StreetIloilo City(033) 335-0741; 337-8843(033) 338-1471 (fax)[email protected]

Jaro UCPB BuildingRizal Avenue and Libertad St.Jaro, Iloilo City(033) 320-3477; 329-0746(033) 320-1948 (fax)[email protected]

Mabini J&B Building, Mabini StreetIloilo City(033) 337-8008; 335-0429(033) 335-0415 (fax)[email protected]

BACOLOD

Lacson-Galo UCPB Building, Lacson corner Galo Street, Bacolod City(034) 433-7521 to 25(034) 433-4085 (fax)[email protected]

Libertad UCPB Building, P. Hernaez and Doña Juliana Streets, Bacolod City(034) 434-7862; 435-0278(034) 435-2258 (fax)[email protected]

North Drive Northpoint BuildingNorth Drive, Bacolod City(034) 434-1370 to 72(034) 434-1373 (fax)[email protected]

San Juan UCPB Building, San Juan Street corner Luzuriaga St. Bacolod City(034) 433-7990; 435-4299(034) 434-5437 (fax)[email protected]

CENTRAL VISAYAS

BOHOL

Tagbilaran UCPB Building C.P. Garcia Avenue, Tagbilaran City(038) 411-3262; 501-7891(038) 411-5204 (fax)[email protected]

CEBU

Banilad TPE Building, Banilad RoadCebu City(032) 346-9252; 346-9234(032) 344-1181 (fax)[email protected]

Carbon UCPB BuildingManalili and Progreso Streets Cebu City(032) 256-1571; 255-3382(032) 254-1922 (fax)[email protected]

F. Ramos Yap Building, Ramos StreetBrgy. Cogon, Cebu City(032) 255-8497; 256-3772(032) 255-8498 (fax)[email protected]

Jones Avenue UCPB Building, Osmeña Boulevard, Cebu City(032) 253-1251 to 53(032) 256-2901 (fax)[email protected]




Mabolo AMV Bros. Building, Almendras and F. Cabahug Streets, Mabolo, Cebu City(032) 233-2123; 233-1500(032) 232-7389 (fax)[email protected]

Mandaue UCPB Building, National Highway, Mandaue, Cebu City(032) 345-2894 to 96(032) 346-2579 (fax)[email protected]

Mango Avenue Gen. Maxilom AvenueCebu City(032) 233-7771; 233-7566(032) 233-7778 (fax)[email protected]

SM City – Cebu Lower Ground FloorSM City Cebu, Reclamation Area, Cebu City(032) 231-7971 to 72(032) 231-7973 (fax)[email protected]

DUMAGUETE

Dumaguete UCPB Building, Real and San Jose Streets Dumaguete City(035) 225-4444; 422-7806(035) 225-4445 (fax)[email protected]

EASTERN VISAYAS

LEYTE

Tacloban UCPB Building, Zamora Street, Tacloban City(053) 832-0031; 832-0003 (053) 325-8682 (fax)[email protected]

SAMAR

Calbayog UCPB Building, Gomez and Nijiaga Streets Calbayog City(055) 209-1456; 209-1384(055) 209-3024 (fax)[email protected]

MINDANAO

ZAMBOANGA

Pagadian Rizal Avenue, Sta. Lucia District, Pagadian City(062) 214-1409; 214-1526(062) 241-1410 (fax)[email protected]

Zamboanga UCPB Building, Rizal corner Corcuera Streets, Zamboanga City(062) 991-7791; 991-4576(062) 991-1484 (telefax)[email protected]

NORTHERN MINDANAO

CAGAYAN DE ORO

Cogon Chee BuildingOsmeña & Lim Ket Kai Avenue, Cagayan de Oro City(08822) 726-581; 725-135(088) 857-1840 (fax)[email protected]

Velez Leonila Building, Apolinar Velez and Pacana StreetsCagayan de Oro City(088) 856-4474; 852-1860(088) 856-4420 (fax)[email protected]

LANAO DEL NORTE

Iligan UCPB BuildingMabini & Aguinaldo StreetsIligan City(063) 492-3317; 221-3317(063) 221-6218 (fax)[email protected]

MISAMIS OCCIDENTAL

Oroquieta UCPB Building, Washington Street, Oroquieta City(088) 531-1123 to 24(088) 531-1444 (fax)[email protected]

Ozamiz UCPB Building, Rizal Avenue & Laurel Street, Ozamiz City(088) 521-0322; 521-0323(088) 521-1516 (fax)[email protected]

DAVAO REGION

Bajada DASI Building, JP Laurel Avenue, Davao City(082) 305-2887; 305-2890(082) 222-5917 (fax)[email protected]

Palma Gil Cocolife Building, C.M. Recto Avenue corner Palma Gil St., Davao City(082) 222-0900 to 02(082) 222-0903 (fax)[email protected]

R. Magsaysay UCPB Building, R. Magsaysay corner Sales Streets, Davao City(082) 221-2933; 226-3950(082) 221-7608 (fax)[email protected]

San Pedro UCPB Business CenterSan Pedro Street, Davao City(082) 221-3227; 226-3865(082) 300-2600 (fax)[email protected]

SOCKSARGEN

COTABATO

Cotabato UCPB Building, Magallanes corner Don Rufino Alonzo St.Cotabato City(064) 421-2640; 421-3229(064) 421-9227 (fax)[email protected]

Kidapawan UCPB Building, Quezon Boulevard, Kidapawan City(064) 288-1520; 288-1787(064) 288-1421 (fax)[email protected]

GENERAL SANTOS CITY

General Santos UCPB Building, Santiago Boulevard & Magsaysay Avenue, General Santos City(083) 552-3783; 301-0089(083) 301-4948 (fax)[email protected]

CARAGA REGION

BUTUAN

Butuan St. Joseph Parish HallEster Luna Street, Butuan City(085) 341-1010; 342-8624(085) 815-4090 (fax)[email protected]

SURIGAO

Surigao UCPB Building, San Nicolas and Diaz Streets, Surigao City(086) 231-7151; 231-7153(086) 826-0299 (fax)[email protected]

CONSUMER FINANCEBUSINESS CENTERS

HEAD OFFICEGround Floor, UCPB Corporate Offices, 7907 Makati Avenue, Makati City811-9000 local 9117811-9106 or 07 (telefax)

BACOLODUCPB Building, Lacson corner Galo Street, Bacolod City(034) 435-2259 (telefax)

BATANGASNDN Building, 34 JP Laurel Highway, Brgy. San Roque Sto. Tomas, Batangas(043) 702-3759 (telefax)

CAGAYAN DE OROChee Building, Osmeña & Lim Ket Kai AvenueCagayan de Oro City(088) 880-7207 (telefax)


215

CEBUUCPB Building, Jones Avenue corner Visitacion StreetCebu City(032) 254-7976 (telefax)

DAGUPANUCPB Building, A.B. Fernandez Avenue corner Herrero Street Dagupan City(075) 522-1516 (telefax)

DAVAOUCPB Business CenterSan Pedro Street, Davao City (082) 221-9552(082) 221-7642 (telefax)

ILOILOUCPB Building, Rizal Avenue and Libertad Street, Jaro Iloilo City(033) 320-3790 (telefax)

NAGA UCPB Building, Evangelista Street, Naga City(054) 472-4483 (telefax)

PAMPANGAUCPB Building, Sto. Rosario corner Plaridel StreetsAngeles City(045) 888-3632 (telefax)

SUBSIDIARIES

UCPB LEASING ANDFINANCE CORPORATION

HEAD OFFICE14/F UCPB Corporate OfficesMakati Avenue, Makati City

Marketing(02) 811-9488(02) 811-9613 (fax)

Operations(02) 811-9607

UCPB SAVINGS BANK

HEAD OFFICE18th Floor, UCPB Corporate Offices, 7907 Makati Avenue, Makati City(02) 811-9080(02) 811-9000 loc. 7231

METRO MANILA

C.M. Recto Saint Augustine Law BuildingSan Sebastian College- Recoletos,C.M. Recto, Sampaloc, Manila(02) 734-6262; 734-6276(02) 734-6277 (telefax)

Rizal AvenueTan Han Chi Place1558 Rizal Avenue corner Mayhaligue StreetSta. Cruz, Manila(02) 309-9558; 743-7426(02) 743-0750 (telefax)

Sta. Cruz M.F. Tiaoqui BuildingPlaza Sta. CruzSta. Cruz, Manila(02) 733-0258; 733-7860 (02) 733-0262 (telefax)

RIZAL

Morong 600 T. Claudio StreetSan Pedro, Morong, Rizal(02) 653-0281(02) 653-0282 (telefax)

San Mateo 44 General Luna StreetBrgy. Banaba, San Mateo, Rizal(02) 661-6146; 661-6149(02) 584-9023 (telefax)

Tanay F.T. Catapusan StreetPlaza Aldea, Tanay, Rizal(02) 654-0880(02) 654-0818 (telefax)

CENTRAL /NORTHERN LUZON

TARLAC

Pangasinan Avenida Rizal and Artacho St., Lingayen, Pangasinan(075) 632-4751(075) 632-4747 (telefax)

Sta. Ignacia URI Building, Romulo Highway, Poblacion West Sta. Ignacia, Tarlac(045) 606-3380 to 82(045) 606-3379 (telefax)

BULACAN

Malolos Paseo Del CongresoCatmon, Malolos, Bulacan(044) 794-0022; 794-0188(044) 794-0021 (telefax)

SOUTHERN LUZON

CAVITE

Tanza 7 A. Soriano HighwayDaang Amayo 1, Tanza, Cavite(046) 437-1162; 437-1167(02) 529-8970 (telefax)

LAGUNA

Alaminos Del Pilar StreetPoblacion Alaminos, Laguna(049) 521-0309(049) 567-1296 (telefax)

Nagcarlan E.A. Fernandez corner E. Lucido StreetsPoblacion, Nagcarlan, Laguna(049) 563-3489(049) 563-3488 (telefax)

Sta. Rosa UCPB Building, National Highway, Brgy. BalibagoSta. Rosa, Laguna(049) 508-1784; 508-1785(049) 530-8192 (telefax)

QUEZON

Atimonan Quezon and C.O. Reyes Streets, Brgy. Zone II, Atimonan, Quezon(042) 316-5314 (telefax)

Calauag Arguelles corner Quezon StreetsBarangay 5, Calauag, Quezon(042) 301-7320(042) 301-8300 (telefax)

Lucban Rizal Avenue cornerSan Luis Street, Barangay 8Lucban, Quezon(042) 911-1495(042) 540-4213 (telefax)

TayabasQuezon Avenuecorner General Luna Streets Tayabas, Quezon(042) 793-2329(042) 793-2205 (telefax)

MINDORO

Sablayan 420 P. Urueta StreetBrgy. Buenavista, SablayanOccidental Mindoro(043) 458-0012

PALAWAN

Puerto Princesa Aicon Plaza, National Highway, Brgy. San Roque Puerto Princesa City(048) 433-2066(048) 433-8187 (telefax)





CAMARINES SUR

Caramoan 41 Real Street, Tawog Caramoan, Camarines Sur(054) 238-5041(02) 697-2421

Goa Rizal corner Panday StreetBrgy. Poblacion, Goa Camarines Sur(054) 453-1523(054) 453-1524 (telefax)

Libmanan Bichara ArcadeT. Dilanco StreetLibmanan, Camarines Sur(054) 511-8222(054) 451-2048 (telefax)

Pili National Highway, Brgy. Old San Roque, Pili, Camarines Sur(054) 477-7752(02) 477-5170 (telefax)

VISAYAS

AKLAN

NumanciaEstrella Building, National Highway corner Zamora Street Poblacion, Numancia, Aklan(036) 265-6953(036) 265-6952 (fax)

CEBU

Naga-Cebu E. Sayson St., Central Poblacion, Naga City, Cebu(032) 272-6638(032) 505-6930 (telefax)

Tuburan Tabo-tabo Street, Poblacion Tuburan, Cebu City(032) 463-9088(032) 463-9151 (fax)

ILOILO

IloiloAngeles Arcade, De Leon Street, Iloilo City(033) 508-7090; 508-7490(033) 335-0422 (telefax)

LEYTE

Sogod Osmeña Street, Brgy. Zone IV Sogod, Southern Leyte(053) 382-2039(053) 382-3262 (telefax)

NEGROS OCCIDENTAL

Bacolod San Antonio Park SquareBrgy. MandalanganBacolod City(034) 709-7485 to 86(034) 441-2103 (telefax)

Escalante New Libra Mart, Victoria Building, North Avenue Escalante City(034) 724-8022; 724-8011(034) 454-0734 (telefax)

La Castellana Feria corner Roxas StreetsBrgy. Robles, La CastellanaNegros Occidental(034) 485-0160; 702-2511(034) 485-0059 (telefax)

SAMAR

Borongan E. Cinco St. Borongan City(055) 568-0010; (02) 782-1569

MINDANAO

BASILAN

Lamitan Quezon Boulevard Brgy. Malakas, Lamitan, Basilan(062) 936-0018

DAVAO

DavaoMK Central BuildingJ.P. Laurel AvenueBajada, Davao City(082) 300-0541; 226-3800(082) 224-4229 (telefax)

MISAMIS OCCIDENTAL

Aloran Jose Mutia StreetBrgy. Ospital, AloranMisamis Occidental(088) 545-4011 (telefax)

MISAMIS ORIENTAL

BuluaForever Books BuildingZone 6, BuluaCagayan de Oro CityMisamis Oriental(088) 858-8063(08822) 75-4519 (telefax)

Cagayan de OroCapistrano Cruz and Taal Sts.Barangay 7, Cagayan de Oro City(088) 857-2355; 852-4099(08822) 72-2695 (telefax)

Lapasan Market City, Agora, Lapasan Cagayan de Oro City(088) 880-8272 (088) 880-0885 – telefax

ZAMBOANGA

Glan182-C Enrique Yap StreetPoblacion, GlanSaranggani Province(083) 893-0080(083) 262-1010 (telefax)

Dipolog Everstrong Financing Inc. Bldg., Quezon Avenue, Miputak, Dipolog City(065) 212-1298 (065) 212-1300 (telefax)

UCPB SECURITIES, INC.

HEAD OFFICE7th Floor, UCPB Corporate Offices, 7907 Makati AvenueMakati City

Sales and Marketing(02) 811-9975; 811-9978 to 79

Operations(02) 811-9970 to 71

Trading Floor(02) 891-9735 to 37

2014 UCPB Annual Report

Documents

Transcript of 2014 UCPB Annual Report