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6 RCBC SAVINGS BANK, INC. (A Wholly Owned Subsidiry of Rizl Commercil Bnking Corportion) STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2017 AND 2016 (Amounts in Philippine Pesos) Notes R E S O U R C E S CASH AND OTHER CASH ITEMS 7 P 4,457,783,721 P 4,146,105,882 DUE FROM BANGKO SENTRAL NG PILIPINAS 7 10,332,553,346 14,712,658,644 DUE FROM OTHER BANKS 7 2,153,704,387 1,994,411,693 LOANS AND RECEIVABLES ARISING FROM REVERSE REPURCHASE AGREEMENT 7 2,313,002,922 2,958,465,090 TRADING AND INVESTMENT SECURITIES - Net 8 11,507,055,935 6,881,206,226 LOANS AND RECEIVABLES - Net 9 82,206,531,110 72,512,195,758 INVESTMENTS IN SUBSIDIARIES - Net ,611, ,140,355 BANK PREMISES, FURNITURE, FIXTURES AND EQUIPMENT - Net 11 1,057,519,864 1,114,831,988 INVESTMENT PROPERTIES - Net 12 1,353,306,060 1,124,068,737 ASSETS HELD-FOR-SALE AND DISPOSAL GROUP - Net ,884,186 1,875,562,556 DEFERRED TAX ASSETS ,385, ,234,865 OTHER RESOURCES - Net ,127, ,835,133 TOTAL RESOURCES P 117,871,467,137 P 108,920,716,927 LIABILITIES AND EQUITY DEPOSIT LIABILITIES 14 P 101,684,558,574 P 94,760,715,397 MANAGER'S CHECK PAYABLE ,530, ,972,467 ACCRUED INTEREST, TAXES AND OTHER EXPENSES ,001,380 1,039,359,692 OTHER LIABILITIES 18 2,595,451,920 2,054,022,379 Totl Libilities 105,891,542,703 98,376,069,935 EQUITY Cpitl stock 20 3,087,216,300 3,087,216,300 Additionl pid-in cpitl ,783, ,783,700 Revlution reserves 20 ( 19,041,261 ) ( 104,080,383 ) Reserve for trust business 24 42,092,142 36,788,410 Surplus 20 8,766,873,553 7,421,938,965 Totl Equity 11,979,924,434 10,544,646,992 TOTAL LIABILITIES AND EQUITY P 117,871,467,137 P 108,920,716,927 See Notes to Finncil Sttements.

7 RCBC SAVINGS BANK, INC. (A Wholly Owned Subsidiry of Rizl Commercil Bnking Corportion) STATEMENTS OF PROFIT OR LOSS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (Amounts in Philippine Pesos) Notes INTEREST INCOME Lons nd receivbles 9 P 6,308,195,299 P 5,754,894,522 Trding nd investment securities 8 386,826, ,350,276 Due from BSP nd other bnks 7 74,197,519 7,958,684 Lons nd receivbles rising from reverse repurchse greement 7 17,857,639 16,094,444 6,787,077,364 6,106,297,926 INTEREST EXPENSE Deposit libilities 14 1,558,950,516 1,248,052,887 Bills pyble 15 1,563,117 20,947,290 1,560,513,633 1,269,000,177 NET INTEREST INCOME 5,226,563,731 4,837,297,749 IMPAIRMENT LOSSES 9, ,335, ,718,818 NET INTEREST INCOME AFTER IMPAIRMENT LOSSES 4,433,228,397 4,029,578,931 OTHER OPERATING INCOME Service chrges, commissions nd fees 2 762,092, ,479,479 Gin on sle of ssets 8, 9, 11, 12, 13 90,325, ,618,150 Shre in net income of subsidiries 10 72,124,273 7,326,646 Other income 19 87,156,656 69,886,584 1,011,699,159 1,142,310,859 OTHER OPERATING EXPENSES Slries nd employee benefits 21 1,271,351,662 1,181,837,270 Occupncy ,513, ,059,606 Deprecition nd mortiztion 11, ,566, ,043,497 Txes nd licenses ,876, ,075,912 Insurnce 362,953, ,072,834 Litigtion 108,240, ,276,558 Loss on sle of securities 8-178,251,640 Miscellneous ,770, ,631,065 4,063,271,392 4,137,248,382 PROFIT BEFORE TAX 1,381,656,164 1,034,641,408 TAX EXPENSE 22 31,417,844 29,500,798 NET PROFIT P 1,350,238,320 P 1,005,140,610 See Notes to Finncil Sttements.

8 RCBC SAVINGS BANK, INC. (A Wholly Owned Subsidiry of Rizl Commercil Bnking Corportion) STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (Amounts in Philippine Pesos) Note NET PROFIT P 1,350,238,320 P 1,005,140,610 OTHER COMPREHENSIVE INCOME Remesurements of post-employment defined benefit pln 21 85,039,122 30,004,844 TOTAL COMPREHENSIVE INCOME P 1,435,277,442 P 1,035,145,454 See Notes to Finncil Sttements.

9 RCBC SAVINGS BANK, INC. (A Wholly Owned Subsidiry of Rizl Commercil Bnking Corportion) STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (Amounts in Philippine Pesos) Cpitl Additionl Revlution Reserve for Trust Notes Stock Pid In Cpitl Reserves Business Surplus Totl Blnce t Jnury 1, 2017 P 3,087,216,300 P 102,783,700 ( P 104,080,383 ) P 36,788,410 P 7,421,938,965 P 10,544,646,992 Trnsfer to reserve for trust business ,303,732 ( 5,303,732 ) - Totl comprehensive income for the yer ,039,122-1,350,238,320 1,435,277,442 Blnce t December 31, P 3,087,216,300 P 102,783,700 ( P 19,041,261 ) P 42,092,142 P 8,766,873,553 P 11,979,924,434 Blnce t Jnury 1, 2016 P 3,087,216,300 P 102,783,700 ( P 134,085,227 ) P 31,614,365 P 6,421,972,400 P 9,509,501,538 Trnsfer to reserve for trust business ,174,045 ( 5,174,045 ) - Totl comprehensive income for the yer ,004,844-1,005,140,610 1,035,145,454 Blnce t December 31, P 3,087,216,300 P 102,783,700 ( P 104,080,383 ) P 36,788,410 P 7,421,938,965 P 10,544,646,992 See Notes to Finncil Sttements.

10 RCBC SAVINGS BANK, INC. (A Wholly Owned Subsidiry of Rizl Commercil Bnking Corportion) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (Amounts in Philippine Pesos) Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tx P 1,381,656,164 P 1,034,641,408 Adjustments for: Interest income 7, 8, 9 ( 6,787,077,364 ) ( 6,106,297,926 ) Interest received 6,672,834,693 6,030,358,708 Interest pid ( 1,502,169,622 ) ( 1,188,734,776 ) Interest expense 14, 15 1,560,513,633 1,269,000,177 Impirment losses 9, ,335, ,718,818 Deprecition nd mortiztion 11, ,566, ,043,497 Gin on sle of ssets 8, 9, 11, 12, 13 ( 90,325,959 ) ( 120,618,150 ) Shre in net income of subsidiries 10 ( 72,124,273 ) ( 7,326,646 ) Operting profit before working cpitl chnges 2,415,208,640 2,142,785,110 Decrese in finncil ssets t fir vlue through profit or loss - 11,839 Increse in lons nd receivbles ( 9,911,664,373 ) ( 9,408,709,549 ) Decrese (increse) in investment properties ( 746,257,011 ) 183,383,529 Decrese (increse) in ssets held-for-sle nd disposl group 1,212,678,370 ( 253,796,710 ) Increse in other resources ( 219,634,557 ) ( 1,037,251,576 ) Increse in deposit libilities 6,923,843,177 14,785,909,199 Increse in mnger s check pyble 218,558,362 32,393,360 Increse (decrese) in ccrued interest, txes nd other expenses ( 159,004,488 ) 23,186,895 Increse in other libilities 628,514, ,819,939 Csh from opertions 362,242,889 7,164,732,036 Csh pid for income txes ( 116,461,389 ) ( 114,087,056 ) Net Csh From Operting Activities 245,781,500 7,050,644,980 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investment securities t mortized cost 8 ( 5,810,114,565 ) ( 715,359,120 ) Proceeds from mturity of investment securities t mortized cost 8 1,019,031,664 1,076,429,018 Acquisitions of bnk premises, furniture, fixtures nd equipment 11 ( 245,597,641 ) ( 223,675,048 ) Proceeds from redemption nd sle of investment securities t mortized cost 8 168,866,772 3,147,248,052 Proceeds from disposls of bnk premises, furnitures, fixtures nd equipment 11 45,782,686 11,872,979 Dividend received 10 21,652,651 72,175,500 Net Csh From (Used in) Investing Activities ( 4,800,378,433 ) 3,368,691,381 CASH FLOWS FROM FINANCING ACTIVITIES 15 Proceeds from bills pyble 820,000,000 67,980,981,051 Pyments of bills pyble ( 820,000,000 ) ( 67,980,981,051 ) Csh Used in Finncing Activities - - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 4,554,596,933 ) 10,419,336,361 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7 Csh nd other csh items 4,146,105,882 3,943,015,524 Due from Bngko Sentrl ng Pilipins 14,712,658,644 7,523,946,480 Due from other bnks 1,994,411,693 1,925,342,944 Lons nd receivbles rising from reverse repurchse greement 2,958,465,090-23,811,641,309 13,392,304,948 CASH AND CASH EQUIVALENTS AT END OF YEAR 7 Csh nd other csh items 4,457,783,721 4,146,105,882 Due from Bngko Sentrl ng Pilipins 10,332,553,346 14,712,658,644 Due from other bnks 2,153,704,387 1,994,411,693 Lons nd receivbles rising from reverse repurchse greement 2,313,002,922 2,958,465,090 P 19,257,044,376 P 23,811,641,309 See Notes to Finncil Sttements.

11 RCBC SAVINGS BANK, INC. (A Wholly Owned Subsidiry of Rizl Commercil Bnking Corportion) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016 (Amounts in Philippine Pesos) 1. CORPORATE MATTERS 1.1 Incorportion nd Opertions RCBC Svings Bnk, Inc. (the Bnk) ws incorported in the Philippines on Jnury 15, The Bnk provides trditionl consumer bnking products nd services such s deposit products, home mortgge lons, uto lons nd personl lons. The Bnk hs 154 bnking offices ntionwide. The Bnk is wholly owned subsidiry of Rizl Commercil Bnking Corportion (RCBC or the Prent Bnk), n entity incorported nd domiciled in the Philippines. RCBC is universl bnk engged in ll spects of bnking. It provides products nd services relted to trditionl lons nd deposits, trde finnce, domestic nd foreign fund trnsfers or remittnce, csh mngement, tresury, nd trust nd custodinship services. RCBC is publicly listed bnk t the Philippine Stock Exchnge. The Prent Bnk is 42.45% owned subsidiry of Pn Mlyn Mngement nd Investment Corportion (PMMIC or the ultimte prent compny), compny incorported nd domiciled in the Philippines. PMMIC is the holding compny of the flgship institutions of the Yuchengco Group of Compnies, with registered business ddress locted t 48th Floor, Yuchengco Tower, RCBC Plz, 6819 Ayl Avenue, Mkti City. As bnking institution, the Bnk s opertions re regulted nd supervised by the Bngko Sentrl ng Pilipins (BSP). As such, the Bnk is required to comply with bnking rules nd regultions such s those relting to mintennce of reserve requirements on deposit libilities nd deposit substitutes nd those relting to the doption nd use of sfe nd sound bnking prctices, mong others, s promulgted by the BSP. The Bnk s ctivities re subject to the provisions of the Generl Bnking Lw of 2000 [Republic Act (RA) No. 8791] nd other relted bnking lws. The Bnk s registered office, which is lso its principl plce of business, is locted t RCBC Svings Bnk Corporte Center, 26 th nd 25 th Streets, Bonifcio Globl City, Tguig City. The registered office of RCBC, which is lso its principl plce of business, is locted t Yuchengco Tower, RCBC Plz, 6819 Ayl Avenue cor. Sen Gil Puyt Avenue, Mkti City. 1.2 Approvl of Finncil Sttements The finncil sttements of the Bnk s of nd for the yer ended December 31, 2017 (including the comprtive finncil sttements s of nd for the yer ended December 31, 2016) were uthorized for issue by the Bnk s Bord of Directors (BOD) on Februry 19, 2018.

12 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significnt ccounting policies tht hve been used in the preprtion of these finncil sttements re summrized below. These policies hve been consistently pplied to ll the yers presented, unless otherwise stted. 2.1 Bsis of Preprtion of Finncil Sttements () Sttement of Complince with Philippine Finncil Reporting Stndrds The finncil sttements of the Bnk hve been prepred in ccordnce with the Philippine Finncil Reporting Stndrds (PFRS). PFRS re dopted by the Finncil Reporting Stndrds Council (FRSC) from the pronouncements issued by the Interntionl Accounting Stndrds Bord, nd pproved by the Philippine Bord of Accountncy. These finncil sttements hve been prepred using the mesurement bses specified by PFRS for ech type of sset, libility, income nd expense. The mesurement bses re more fully described in the ccounting policies tht follow. (b) Presenttion of Finncil Sttements The finncil sttements re presented in ccordnce with Philippine Accounting Stndrds (PAS) 1, Presenttion of Finncil Sttements. The Bnk presents ll items of income nd expenses in two sttements: sttement of profit or loss nd sttement of comprehensive income. The Bnk presents third sttement of finncil position s t the beginning of the preceding period when it pplies n ccounting policy retrospectively, or mkes retrospective resttement or reclssifiction of items tht hs mteril effect on the informtion in the sttement of finncil position t the beginning of the preceding period. The relted notes to the third sttement of finncil position re not required to be disclosed. (c) Functionl nd Presenttion Currency These finncil sttements re presented in Philippine pesos, the Bnk s functionl nd presenttion currency, nd ll vlues represent bsolute mounts except when otherwise indicted. Items included in the finncil sttements of the Bnk re mesured using its functionl currency, the currency of the primry economic environment in which the Bnk opertes. The finncil sttements of the Bnk s foreign currency deposit unit (FCDU), which re expressed in United Sttes (US) dollr s its functionl currency re trnslted to Philippine pesos bsed on Philippine Deling System closing rtes (PDSCR) t the end of the reporting period (for resources nd libilities) nd t the verge PDSCR for the period (for income nd expenses).

13 Adoption of New nd Amended PFRS () Effective in 2017 tht re Relevnt to the Bnk The Bnk dopted for the first time the following mendments nd nnul improvements to PFRS, which re mndtorily effective for nnul periods beginning on or fter Jnury 1, 2017: PAS 7 (Amendments) : Sttement of Csh Flows Disclosure Inititive PAS 12 (Amendments) : Income Txes Recognition of Deferred Tx Assets for Unrelized Losses Annul Improvements to PFRS ( Cycle) PFRS 12 : Disclosure of Interest in Other Entities Scope Clrifiction on Disclosure of Summrized Finncil Informtion for Interests Clssified s Held for Sle Discussed below nd in the next pge re the relevnt informtion bout these mendments nd improvements. (i) PAS 7 (Amendments), Sttement of Csh Flows Disclosure Inititive. The mendments re designed to improve the qulity of informtion provided to users of finncil sttements bout chnges in n entity s debt nd relted csh flows (nd non-csh chnges). They require n entity to provide disclosures tht enble users to evlute chnges in libilities rising from finncing ctivities. An entity pplies its judgment when determining the exct form nd content of the disclosures needed to stisfy this requirement. Moreover, they suggest number of specific disclosures tht my be necessry in order to stisfy the bove requirement, including: chnges in libilities rising from finncing ctivities cused by chnges in finncing csh flows, foreign exchnge rtes or fir vlues, or obtining or losing control of subsidiries or other businesses; nd, reconcilition of the opening nd closing blnces of libilities rising from finncing ctivities in the sttement of finncil position including those chnges identified immeditely bove. The ppliction of this mendment did not result in dditionl disclosure in the Bnk s finncil sttements s it hs no outstnding libilities rising from finncing ctivities s of December 31, 2017 nd 2016.

14 - 4 - (ii) PAS 12 (Amendments), Income Txes Recognition of Deferred Tx Assets for Unrelized Losses. The focus of the mendments is to clrify how to ccount for deferred tx ssets relted to debt instruments mesured t fir vlue, prticulrly where chnges in the mrket interest rte decrese the fir vlue of debt instrument below cost. The mendments provide guidnce in the following res where diversity in prctice previously existed: () existence of deductible temporry difference; (b) recovering n sset for more thn its crrying mount; (c) probble future txble profit ginst which deductible temporry differences re ssessed for utiliztion; nd, (d) combined versus seprte ssessment of deferred tx sset recognition for ech deductible temporry difference. The ppliction of this mendment hs hd no impct on the Bnk s finncil sttements. (iii) Annul Improvements to PFRS ( ) Cycle on PFRS 12, Disclosure of Interest in Other Entities Scope Clrifiction on Disclosure of Summrized Finncil Informtion for Interests Clssified s Held for Sle. The mendment clrifies tht the disclosure requirements of PFRS 12 pplies to interest in other entities clssified s held for sle with prcticl concession in the presenttion of summrized finncil informtion. The mendment sttes tht n entity need not present summrized finncil informtion for interests in subsidiries, ssocites, or joint ventures tht re clssified s held for sle. The ppliction of this mendment hs no significnt impct the Bnk s finncil sttements s the Bnk did not present nymore the finncil informtion for its interests in other entity clssified s held for sle. (b) Effective Subsequent to 2017 but not Adopted Erly There re new PFRS, mendments to nd interprettions of existing stndrds effective for nnul periods subsequent to 2017, which re dopted by the FRSC. Mngement will dopt the following relevnt pronouncements in ccordnce with their trnsitionl provisions; nd, unless otherwise stted, none of these re expected to hve significnt impct on the Bnk s finncil sttements: (i) (ii) PAS 40 (Amendment), Investment Property Reclssifiction to nd from Investment Property (effective from Jnury 1, 2018). The mendment sttes tht n entity shll trnsfer property to, or from, investment property when, nd only when, there is evidence of chnge in use. A chnge of use occurs if property meets, or ceses to meet, the definition of investment property. A chnge in mngement s intentions for the use of property by itself does not constitute evidence of chnge in use. The mendment provided non-exhustive list of exmples constituting chnge in use. PFRS 9 (2014), Finncil Instruments (effective from Jnury 1, 2018). This new stndrd on finncil instruments will replce PAS 39, Finncil Instruments: Recognition nd Mesurement, nd PFRS 9 (2009, 2010 nd 2013 versions herein referred to s PFRS 9). In ddition to the principl clssifiction ctegories for finncil ssets nd finncil libilities which were erly dopted by the Bnk on Jnury 1, 2014, PFRS 9 (2014) includes the following mjor provisions: limited mendments to the clssifiction nd mesurement requirements for finncil ssets introducing fir vlue mesurement for eligible debt securities; nd,

15 - 5 - n expected loss model in determining impirment of ll finncil ssets tht re not mesured t fir vlue through profit or loss (FVPL), which generlly depends on whether there hs been significnt increse in credit risk since initil recognition of finncil sset. In view of the Bnk s erly doption of PFRS 9, mngement hs conducted n ssessment nd comprehensive study of the Bnk s finncil ssets nd libilities s t December 31, 2017, which hs been limited to the fcts nd circumstnces existing t tht dte. Mngement hs determined the impct of PFRS 9 (2014) on the finncil sttements s indicted below: Debt securities held for collecting contrctul csh flows solely for pyment of principl nd interest (SPPI) will continue to be clssified s investment securities t mortized cost. In pplying the expected credit loss (ECL) methodology of PFRS 9 (2014), the Bnk hs dopted n ECL model for its lons nd receivbles in ccordnce with the prescription of the stndrd. On the other hnd, ECL on government bonds nd corporte bonds clssified s finncil sset t mortized cost shll be mesured using 12-month ECL s these finncil ssets re ssessed to hve low credit risk, considering their respective credit rtings. Mngement hs ssessed tht the ppliction of the ECL model will result in n increse in the required llownce for impirment of certin finncil instruments s t the beginning of the next reporting period nd in impirment losses in tht period s compred with the mount tht would hve been recognized under the impirment provisions of PAS 39. (iii) PFRS 15, Revenue from Contrct with Customers (effective from Jnury 1, 2018). This stndrd will replce PAS 18, Revenue, nd PAS 11, Construction Contrcts, the relted Interprettions on revenue recognition: Interntionl Finncil Reporting Interprettions Committee (IFRIC) 13, Customer Loylty Progrmmes, IFRIC 15, Agreement for the Construction of Rel Estte, IFRIC 18, Trnsfers of Assets from Customers nd Stnding Interprettions Committee 31, Revenue Brter Trnsctions Involving Advertising Services. This new stndrd estblishes comprehensive frmework for determining when to recognize revenue nd how much revenue to recognize. The core principle in this stndrd is for n entity to recognize revenue to depict the trnsfer of promised goods or services to the customer in n mount tht reflects the considertion to which the entity expects to be entitled in exchnge for those goods or services. Bsed on n ssessment of the Bnk s revenue strems s t December 31, 2017, which hs been limited to the fcts nd circumstnces existing t tht dte, mngement determined tht its significnt sources of revenues pertin to its lending nd investing ctivities which generte interest income, lon origintion fees nd service chrges nd penlties. Except for service chrges nd penlties, substntil mount of the Bnk s revenues re generted from finncil instruments which re outside the scope of PFRS 15.

16 - 6 - (iv) IFRIC 22, Foreign Currency Trnsctions nd Advnce Considertion Interprettion on Foreign Currency Trnsctions nd Advnce Considertion (effective from Jnury 1, 2018). The interprettion provides more detiled guidnce on how to ccount for trnsctions tht include the receipt or pyment of dvnce considertion in foreign currency. The Interprettion sttes tht the dte of the trnsction, for the purpose of determining the exchnge rte, is the dte of initil recognition of the non-monetry sset (rising from dvnce pyment) or libility (rising from dvnce receipt). If there re multiple pyments or receipts in dvnce, dte of trnsction is estblished for ech pyment or receipt. Mngement hs initilly ssessed tht this mendment hs no mteril impct on the Bnk s finncil sttements. (v) PFRS 9 (Amendment), Finncil Instruments Prepyment Fetures with Negtive Compenstion (effective from Jnury 1, 2019). The mendment clrifies tht prepyment fetures with negtive compenstion ttched to finncil instruments my still qulify under the SPPI test. As such, the finncil ssets contining prepyment fetures with negtive compenstion my still be clssified t mortized cost or t fir vlue through other comprehensive income. Mngement is currently ssessing the impct of this new stndrd on the Bnk s finncil sttements. (vi) PFRS 16, Leses (effective from Jnury 1, 2019). The new stndrd will eventully replce PAS 17, Leses. For lessees, it requires to ccount for leses on-blnce sheet by recognizing right-of-use sset nd lese libility. The lese libility is initilly mesured s the present vlue of future lese pyments. For this purpose, lese pyments include fixed, non-cncellble pyments for lese elements, mounts due under residul vlue gurntees, certin types of contingent pyments nd mounts due during optionl periods to the extent tht extension is resonbly certin. In subsequent periods, the right-of-use sset is ccounted for similr to purchsed sset subject to deprecition or mortiztion. The lese libility is ccounted for similr to finncil libility which is mortized using the effective interest method. However, the new stndrd provides importnt reliefs or exemptions for short-term leses nd leses of low vlue ssets. If these exemptions re used, the ccounting is similr to operting lese ccounting under PAS 17 where lese pyments re recognized s expenses on stright-line bsis over the lese term or nother systemtic bsis (if more representtive of the pttern of the lessee s benefit). For lessors, lese ccounting is similr to PAS 17 s. In prticulr, the distinction between finnce nd operting leses is retined. The definitions of ech type of lese, nd the supporting indictors of finnce lese, re substntilly the sme s PAS 17 s. The bsic ccounting mechnics re lso similr, but with some different or more explicit guidnce in few res. These include vrible pyments, sub-leses, lese modifictions, the tretment of initil direct costs nd lessor disclosures. Mngement is currently ssessing the impct of this new stndrd on the Bnk s finncil sttements.

17 - 7 - (vii) IFRIC 23, Uncertinty over Income Tx Tretments (effective from Jnury 1, 2019). The interprettion provides clrifiction on the determintion of txble profit, tx bses, unused tx losses, unused tx credits, nd tx rtes when there is uncertinty over income tx tretments. The core principle of the interprettion requires the Bnk to consider the probbility of the tx tretment being ccepted by the txtion uthority. When it is probble tht the tx tretment will be ccepted, the determintion of the txble profit, tx bses, unused tx losses, unused tx credits, nd tx rtes shll be on the bsis of the ccepted tx tretment. Otherwise, the Bnk hs to use the most likely mount or the expected vlue, depending on the surrounding circumstnces, in determining the tx ccounts identified immeditely bove. Mngement is currently ssessing the impct of this new stndrd on the Bnk s finncil sttements. (viii) Annul Improvements to PFRS Cycle (effective from Jnury 1, Among the improvements, the following mendments re relevnt to the Bnk but hd no mteril impct on the Bnk s finncil sttements s these mendments merely clrify existing requirements: PAS 12 (Amendments), Income Txes Tx Consequences of Dividends. The mendments clrify tht ll income tx consequence of dividend pyments should be recognized in profit or loss. PAS 23 (Amendments), Borrowing Costs Eligibility for Cpitliztion. The mendments clrify tht ny specific borrowing which remins outstnding fter the relted qulifying sset is redy for its intended purpose, such borrowing will then form prt of the entity s generl borrowings when clculting the cpitliztion rte for cpitliztion purposes. PFRS 3 (Amendments), Business Combintions nd PFRS 11 (Amendments), Joint Arrngements Remesurement of Previously Held Interests in Joint Opertion. The mendments clrify tht previously held interest in joint opertion shll be remesured when the Bnk obtins control of the business. On the other hnd, previously held interests in joint opertion shll not be remesured when the Bnk obtins joint control of the business. (ix) PFRS 10 (Amendments), Consolidted Finncil Sttements, nd PAS 28 (Amendments), Investments in Assocites nd Joint Ventures Sle or Contribution of Assets between n Investor nd its Assocites or Joint Venture (effective dte deferred indefinitely). The mendments to PFRS 10 require full recognition in the investor s finncil sttements of gins or losses rising on the sle or contribution of ssets tht constitute business s defined in PFRS 3, Business Combintions, between n investor nd its ssocite or joint venture. Accordingly, the prtil recognition of gins or losses (i.e., to the extent of the unrelted investor s interests in n ssocite or joint venture) only pplies to those sle of contribution of ssets tht do not constitute business. Corresponding mendments hve been mde to PAS 28 to reflect these chnges. In ddition, PAS 28 hs been mended to clrify tht when determining whether ssets tht re sold or contributed constitute business, n entity shll consider whether the sle or contribution of those ssets is prt of multiple rrngements tht should be ccounted for s single trnsction.

18 Seprte Finncil Sttements nd Investments in Subsidiries These finncil sttements re prepred s the Bnk s seprte finncil sttements. As llowed under existing finncil reporting stndrds, the Bnk hs not presented consolidted finncil sttements becuse it is itself wholly owned subsidiry of RCBC, which presents consolidted finncil sttements vilble for public use tht comply with PFRS. Moreover, the Bnk s debt or equity securities re not trded in orgnized finncil mrket nd the Bnk is not in the process of filing its finncil sttements with securities commissions or other regultory orgniztion for the purpose of issuing ny clss of instruments in n orgnized finncil mrket. Subsidiries re entities (including structured entities) over which the Bnk hs control. The Bnk controls n entity when (i) it hs power over the entity, (ii) it is exposed, or hs rights to, vrible returns from its involvement with the entity, nd, (iii) it hs the bility to ffect those returns through its power over the entity. Any goodwill rising from the cquisition of investments in subsidiries, representing the excess of the cquisition costs over the fir vlue of the Bnk s shre in the identifible net ssets of the cquired subsidiries or ssocites t the dte of cquisition, is included in the mount recognized s investments in subsidiries. The Bnk ressesses whether or not it controls n entity if fcts nd circumstnces indicte tht there re chnges to one or more of the three elements of controls indicted bove. The Bnk s investments in subsidiries re initilly recognized t cost nd subsequently ccounted for in these seprte finncil sttements using the equity method. Under the equity method, ll subsequent chnges to the ownership interest in the equity of the subsidiries re recognized in the Bnk s crrying mount of the investments. Chnges resulting from the profit or loss generted by the subsidiries re credited or chrged ginst the Shre in Net Income or Losses of Subsidiries ccount in the sttement of profit or loss. Dividends received re ccounted for s reduction in the crrying vlue of the investments. Chnges resulting from other comprehensive income of the subsidiries or items recognized directly in the subsidiries equity re recognized in other comprehensive income or equity of the Bnk, s pplicble. However, when the Bnk s shre of losses in subsidiries equls or exceeds its interest in the subsidiries, including ny other unsecured receivbles, the Bnk does not recognize further losses, unless it hs incurred obligtions or mde pyments on behlf of the subsidiries. If the subsidiries subsequently report profits, the investor resumes recognizing its shre of those profits only fter its shre of the profits exceeds the ccumulted shre of losses tht hs previously not been recognized. Impirment loss is provided when there is objective evidence tht the investments in subsidiries will not be recovered (see Note 2.18). 2.4 Finncil Assets Finncil ssets re recognized when the Bnk becomes prty to the contrctul terms of the finncil instrument. For purposes of clssifying finncil ssets, n instrument is considered s n equity instrument if it is non-derivtive nd meets the definition of n equity for the issuer in ccordnce with the criteri under PAS 32, Finncil Instruments: Presenttion. All other non-derivtive finncil instruments re treted s debt instruments. Regulr purchses nd sles of finncil ssets re recognized on their settlement dte.

19 - 9 - () Clssifiction, Mesurement nd Reclssifiction of Finncil Assets The clssifiction nd mesurement of finncil ssets is driven by the entity s business model for mnging the finncil ssets nd the contrctul csh flow chrcteristics of the finncil ssets. The clssifiction nd mesurement of finncil ssets re described below nd in the succeeding pges. (i) Finncil Assets t Amortized Cost Finncil ssets re mesured t mortized cost if both of the following conditions re met: the sset is held within the Bnk s business model whose objective is to hold finncil ssets in order to collect contrctul csh flows; nd, the contrctul terms of the instrument give rise on specified dtes to csh flows tht re SPPI on the principl mount outstnding. Finncil ssets meeting these criteri re mesured initilly t fir vlue plus trnsction costs. They re subsequently mesured t mortized cost using the effective interest method, less ny impirment in vlue. The Bnk s finncil ssets t mortized cost re presented in the sttement of finncil position s Csh nd Other Csh Items, Due from BSP, Due from Other Bnks, Lons nd Receivbles Arising from Reverse Repurchse Agreement, Lons nd Receivbles, Security deposits under Other Resources ccount nd Investment securities t mortized cost under Trding nd Investment Securities ccount. For purposes of csh flows reporting nd presenttion, csh nd csh equivlents comprise ccounts with originl mturities of three months or less, including csh nd other csh items nd unrestricted blnces due from BSP nd due from other bnks nd lons nd receivbles rising from reverse repurchse greement. These generlly include csh on hnd, demnd deposits nd short-term, highly liquid investments redily convertible to known mounts of csh nd which re subject to insignificnt risk of chnges in vlue. The Bnk my irrevocbly elect t initil recognition to clssify finncil sset tht meets the mortized cost criteri bove s t FVPL if tht designtion elimintes or significntly reduces n ccounting mismtch hd the finncil sset been mesured t mortized cost. In 2017 nd 2016, the Bnk hs not mde such designtion. (ii) Finncil Assets t Fir Vlue Through Profit or Loss Debt instruments tht do not meet the mortized cost criteri, or tht meet the criteri but the Bnk hs chosen to designte s t FVPL t initil recognition, re mesured t FVPL. Equity investments re clssified s finncil ssets t FVPL, unless the Bnk designtes n equity investment tht is not held for trding s t fir vlue through other comprehensive income (FVOCI) t initil recognition. The Bnk s finncil ssets t FVPL include government securities nd corporte bonds which re held for trding purposes.

20 A finncil sset is considered s held for trding if: it hs been cquired principlly for the purpose of selling it in the ner term; on initil recognition, it is prt of portfolio of identified finncil instruments tht the Bnk mnges together nd hs evidence of recent ctul pttern of short-term profit-tking; or, it is derivtive tht is not designted nd effective s hedging instrument or finncil gurntee. Finncil ssets t FVPL re mesured t fir vlue. Unrelized gins nd losses rising from chnges (mrk-to-mrket) in the fir vlue of the finncil ssets t FVPL ctegory re included in Trding gins or losses under Other Operting Income or Expenses ccount in the sttement of profit or loss in the period in which they rise, while relized gins or losses rising from disposls of these instruments re recognized s Gin or Loss on Sle of Assets in profit or loss. Interest erned on these investments is reported in profit or loss under Interest Income ccount, while dividend income is reported in profit or loss s prt of Other Income under Other Operting Income ccount. (iii) Finncil Assets t Fir Vlue Through Other Comprehensive Income At initil recognition, the Bnk cn mke n irrevocble election (on n instrument-per-instrument bsis) to designte equity investments s t FVOCI; however, such designtion is not permitted if the equity investment is held by the Bnk for trding. The Bnk hs not designted ny equity instruments s t FVOCI. Finncil ssets t FVOCI re initilly mesured t fir vlue plus trnsction costs. Subsequently, they re mesured t fir vlue, with no deduction for ny disposl costs. Gins nd losses rising from chnges in fir vlue, including the foreign exchnge component, re recognized in other comprehensive income, net of ny effects rising from income txes, nd re reported s prt of Revlution Reserves ccount in equity. When the sset is disposed of, the cumultive gin or loss previously recognized in the Revlution Reserves ccount is not reclssified to profit or loss, but is reclssified directly to Surplus ccount. Any dividends erned on holding these equity instruments re recognized in profit or loss s prt of Miscellneous under Other Operting Income ccount, when the Bnk s right to receive dividends is estblished in ccordnce with PAS 18, unless the dividends clerly represent recovery of prt of the cost of the investment. The Bnk cn only reclssify finncil ssets if the objective of its business model for mnging those finncil ssets chnges. Accordingly, the Bnk is required to reclssify finncil ssets (i) from mortized cost to FVPL, if the objective of the business model chnges so tht the mortized cost criteri re no longer met; nd, (ii) from FVPL to mortized cost, if the objective of the business model chnges so tht the mortized cost criteri strt to be met nd the chrcteristic of the instrument s contrctul csh flows meet the mortized cost criteri. A chnge in the objective of the Bnk s business model must be effected before the dte of the reclssifiction which pertins to the beginning of the next reporting period following the chnge in the business model.

21 Non-compounding interest, dividend income nd other csh flows resulting from holding finncil ssets re recognized in profit or loss when erned, regrdless of how the relted crrying mount of finncil ssets is mesured. Interest clculted using the effective interest method for ll ctegories of finncil ssets is recognized in the sttement of profit or loss (see Note 2.14). (b) Impirment of Finncil Assets The Bnk ssesses t the end of ech reporting period whether there is objective evidence tht finncil sset or group of finncil ssets is impired. A finncil sset or group of finncil ssets is impired nd impirment losses re incurred if, nd only if, there is objective evidence of impirment s result of one or more events tht occurred fter the initil recognition of the sset ( loss event) nd tht loss event (or events) hs n impct on the estimted future csh flows of the finncil ssets or group of finncil ssets tht cn be relibly estimted. Objective evidence tht finncil sset or group of ssets is impired includes observble dt tht comes to the ttention of the Bnk bout the following loss events: (i) (ii) significnt finncil difficulty of the issuer or obligor; brech of contrct, such s defult or delinquency in interest or principl pyments; (iii) the Bnk grnting the borrower, for economic or legl resons relting to the borrower s finncil difficulty, concession tht the lender would not otherwise consider; (iv) it becoming probble tht the borrower will enter bnkruptcy or other finncil reorgniztion; (v) the disppernce of n ctive mrket for tht finncil sset becuse of finncil difficulties; or, (vi) observble dt indicting tht there is mesurble decrese in the estimted future csh flows from group of finncil ssets since the initil recognition of those ssets, lthough the decrese cnnot yet be identified with the individul finncil ssets in the group, including: dverse chnges in the pyment sttus of borrowers in the group, or ntionl or locl economic conditions tht correlte with defults on the ssets in the group. For finncil ssets clssified nd mesured t mortized cost, the Bnk first ssesses whether objective evidence of impirment exists individully for finncil ssets tht re individully significnt nd individully or collectively for finncil ssets tht re not individully significnt. If the Bnk determines tht no objective evidence of impirment exists for n individully ssessed finncil sset, whether significnt or not, it includes the sset in group of finncil ssets with similr credit risk chrcteristics nd collectively ssesses them for impirment. Assets tht re individully ssessed for impirment nd for which n impirment loss is or continues to be recognized re not included in collective ssessment of impirment.

22 If there is objective evidence tht n impirment for individully ssessed finncil ssets hs been incurred, the mount of the loss is mesured s the difference between the sset s crrying mount nd the present vlue of estimted future csh flows (excluding future credit losses tht hve not been incurred) discounted t the finncil sset s originl effective interest rte. The crrying mount of the sset is reduced through the use of n llownce ccount nd the mount of the loss is recognized in profit or loss. If finncil sset hs vrible interest rte, the discount rte for mesuring ny impirment loss is the current effective interest rte determined under the contrct. As prcticl expedient, the Bnk my mesure impirment on the bsis of n instrument s fir vlue using n observble mrket price. The clcultion of the present vlue of the estimted future csh flows of collterlized finncil sset reflects the csh flows tht my result from foreclosure less costs for obtining nd selling the collterl, whether or not foreclosure is probble. For the purpose of collective evlution of impirment for lons nd receivbles, finncil ssets re grouped on the bsis of similr credit risk chrcteristics (i.e., on the bsis of the grding process of the Bnk tht considers sset type, industry, geogrphicl loction, collterl type, pst-due sttus nd other relevnt fctors). These chrcteristics re relevnt to the estimtion of future csh flows for groups of such ssets by being indictive of the debtors bility to py ll mounts due ccording to the contrctul terms of the ssets being evluted. Future csh flows in group of finncil ssets tht re collectively evluted for impirment re estimted on the bsis of the contrctul csh flows of the ssets in the group nd historicl loss experience for ssets with credit risk chrcteristics similr to those in the group. Historicl loss experience is djusted on the bsis of current observble dt to reflect the effects of current conditions tht did not ffect the period on which the historicl loss experience is bsed nd to remove the effects of conditions in the historicl period tht do not exist currently. Estimtes of chnges in future csh flows for groups of ssets should reflect nd be directionlly consistent with chnges in relted observble dt from period to period (for exmple, chnges in unemployment rtes, property prices, pyment sttus, or other fctors indictive of chnges in the probbility of losses in the group nd their mgnitude). The methodology nd ssumptions used for estimting future csh flows re reviewed regulrly by the Bnk to reduce ny differences between loss estimtes nd ctul loss experience. When possible, the Bnk seeks to restructure lons rther thn to tke possession of the collterl. This my involve extending the pyment rrngement nd greement for new lon conditions. Mngement continuously reviews restructured lons to ensure tht ll criteri evidencing the good qulity of the lon re met nd tht future pyments re likely to occur. The lons continue to be subject to n individul or collective impirment ssessment, clculted using the lon s originl effective interest rte. The difference between the recorded sle of the originl lon nd the present vlue of the restructured csh flows, discounted t the originl effective interest rte, is recognized s prt of Impirment Losses ccount in profit or loss.

23 When lon receivble is determined to be uncollectible, it is written off ginst the relted llownce for impirment. Such lon receivble is written off fter ll the prescribed procedures hve been completed nd the mount of the loss hs been determined. Subsequent recoveries of mounts previously written off decrese the mount of impirment losses in profit or loss. If, in subsequent period, the mount of the impirment loss decreses nd the decrese cn be relted objectively to n event occurring fter the impirment ws recognized (such s n improvement in the debtor s credit rting), the previously recognized impirment loss is reversed by djusting the llownce ccount. The mount of the reversl is recognized in sttement of profit or loss. (c) Derecognition of Finncil Assets A finncil sset (or where pplicble, prt of finncil sset or prt of group of finncil ssets) is derecognized when the contrctul rights to receive csh flows from the finncil instruments expire, or when the finncil ssets nd ll substntil risks nd rewrds of ownership hve been trnsferred to nother prty. If the Bnk neither trnsfers nor retins substntilly ll the risks nd rewrds of ownership nd continues to control the trnsferred sset, the Bnk recognizes its retined interest in the sset nd n ssocited libility for mounts it my hve to py. If the Bnk retins substntilly ll the risks nd rewrds of ownership of trnsferred finncil sset, the Bnk continues to recognize the finncil sset nd lso recognizes collterlized borrowing for the proceeds received. 2.5 Offsetting of Finncil Instruments Finncil ssets nd finncil libilities re offset nd the resulting net mount, considered s single finncil sset or finncil libility, is reported in the sttement of finncil position when the Bnk currently hs leglly enforceble right to set off the recognized mounts nd there is n intention to settle on net bsis, or relize the sset nd settle the libility simultneously. The right of set-off must be vilble t the end of the reporting period, tht is, it is not contingent on future event. It must lso be enforceble in the norml course of business, in the event of defult, nd in the event of insolvency or bnkruptcy; nd, must be leglly enforceble for both entity nd ll counterprties to the finncil instruments. 2.6 Bnk Premises, Furniture, Fixtures nd Equipment Lnd is stted t cost less impirment losses, if ny. All other bnk premises, furniture, fixtures nd equipment re crried t cost less ccumulted deprecition nd mortiztion nd ny impirment in vlue. The cost of bnk premises, furniture, fixtures nd equipment consists of its purchse price nd ny directly ttributble costs of bringing the sset to its working condition nd loction for its intended use. Expenditures for dditions, mjor improvements nd renewls re cpitlized, while expenditures for repirs nd mintennce re chrged to expense s incurred.

24 Deprecition is computed on the stright-line bsis over the estimted useful lives of the ssets s follows: Note _ Buildings 3.2 (d) 25 yers 20 yers Trnsporttion equipment 5 yers 5 yers Furniture, fixtures nd other equipment 5-10 yers 5-10 yers Lesehold rights nd improvements re mortized over the estimted useful lives of the improvements of 10 yers or the terms of the relted leses, whichever is shorter. An sset s crrying mount is written down immeditely to its recoverble mount if the sset s crrying mount is greter thn its estimted recoverble mount (see Note 2.18). The residul vlues, estimted useful lives nd method of deprecition nd mortiztion of bnk premises, furniture, fixtures nd equipment re reviewed nd djusted if pproprite, t the end of ech reporting period. An item of bnk premises, furniture, fixtures nd equipment, including the relted ccumulted deprecition, mortiztion nd impirment loss, is derecognized upon disposl or when no future economic benefits re expected to rise from the continued use of the sset. Any gin or loss rising on derecognition of the sset (clculted s the difference between the net disposl proceeds nd the crrying mount of the item) is included in profit or loss in the yer the item is derecognized. 2.7 Investment Properties Investment properties pertin to lnd, buildings or condominium units cquired by the Bnk, in settlement of lons from defulting borrowers through foreclosure or dcion in pyment. These properties re neither held by the Bnk for sle in the next 12 months nor used in the rendering of services or for dministrtive purposes. Investment properties re stted t cost, less ccumulted deprecition nd ny impirment losses (see Note 2.18). The cost of n investment property comprises its purchses price nd directly ttributble costs incurred such s legl fees, trnsfer txes nd other trnsction costs. Trnsfers from other ccounts (such s bnk premises, furniture, fixtures nd equipment) re mde to investment properties when nd only when, there is chnge in use, evidenced by ending of owner-occuption or commencement of n operting lese to nother prty or holding the property for cpitl pprecition, while trnsfers from investment properties re mde when, nd only when, there is chnge in use, evidenced by commencement of owner-occuption or commencement of development with view to sell. Deprecition nd impirment losses re recognized in the sme mnner s in bnk premises. Investment properties, including the relted ccumulted deprecition nd ny impirment losses, re derecognized upon disposl or when permnently withdrwn from use nd no future economic benefit is expected from its disposl. Any gin or loss on the retirement or disposl of investment properties is recognized in profit or loss s prt of the Gin on Sle of Assets ccount under Other Operting Income, in the yer of retirement or disposl. Investment property is derecognized upon disposl or when permnently withdrwn from use nd no future economic benefit is expected from its disposl.

25 Assets Held-for-Sle nd Disposl Group Assets held-for-sle pertin to trnsporttion equipment nd rel nd other properties cquired through repossession or foreclosure tht the Bnk intends to sell within one yer from the dte of clssifiction s held for sle nd remins committed to immeditely dispose the ssets through n ctive mrketing pln. Assets held for disposl group pertins to the Bnk s investments in the shres of stock of its subsidiries which the Bnk hs committed to liquidte under its equity divestment progrm in complince with the mndte of the BSP (see Note ). The Bnk clssifies n sset (or disposl group) s held-for-sle if its crrying mount will be recovered principlly through sle trnsction rther thn through continuing use. In the event tht the sle of the sset is extended beyond one yer, the extension of the period required to complete the sle does not preclude n sset from being clssified s held for sle if the dely is cused by events or circumstnces beyond the Bnk s control nd there is sufficient evidence tht the Bnk remins committed to its pln to sell the sset. Assets held-for-sle nd disposl group re mesured t the lower of their crrying mounts, immeditely prior to their clssifiction s held for sle, nd their fir vlue less costs to sell. These ssets re not subject to deprecition. If the Bnk hs clssified n sset s held-for-sle or disposl group, but the criteri for it to be recognized s held-for-sle or disposl group re no longer stisfied, the Bnk shll cese to clssify the sset s such. The Bnk recognizes n impirment loss for ny initil or subsequent write-down of the ssets held-for-sle nd disposl group to fir vlue less cost to sell, to the extent tht it hs not been previously recognized in profit or loss. On the other hnd, ny gin from ny subsequent increse in fir vlue less to costs to sell of n sset up to the extent of the cumultive impirment loss tht hs been previously recognized is recognized in profit or loss. Assets tht ceses to be clssified s held-for-sle is mesured t the lower of: () its crrying mount before the sset ws clssified s held for sle, djusted for ny deprecition, mortiztion or revlutions tht would hve been recognized hd the sset not been clssified s held for sle; nd, (b) its recoverble mount t the dte of the subsequent decision not to sell. Any djustment to the crrying mount of n sset tht ceses to be clssified s held for sle resulting in either gin or loss, is recognized in profit or loss. The gin or loss rising from the sle or remesurement of ssets held-for-sle or disposl group is recognized in profit or loss nd is included in the Gin on Sle of Assets or Miscellneous Expenses ccount under Other Operting Income or Other Operting Expenses in the sttement of profit or loss, respectively. 2.9 Intngible Assets Intngible ssets include goodwill nd softwre used in opertions nd dministrtion which re ccounted for under the cost model re reported under Other Resources ccount in the sttement of finncil position. The cost of the sset is the mount of csh or csh equivlents pid or the fir vlue of the other considertions given to cquire n sset t the time of its cquisition. Goodwill represents the excess of the cost of cquisition over the fir vlues of the net ssets purchsed from Cpitol Development Bnk in 1998.