Annual Report of 2014

Transcription

Annual Report 2014
CONTENTS
002
HIGHLIGHT
003
MESSAGE TO THE SHAREHOLDERS
013
HISTORY AND ORGANIZATION
HISTORY AND ORGANIZATION OF OUR BANK
ORGANIZATION CHART FOR HUA NAN BANK
BOARD OF DIRECTORS AND SUPERVISORS
TOP MANAGEMENT AND DEPARTMENT MANAGERS IN HEAD OFFICE
HUA NAN FINANCIAL HOLDINGS GROUP ORGANIZATION
HNFHC DIRECTOR AND MANAGEMENT TEAM
023
OPERATING PERFORMANCE OF THE MOST RECENT TWO YEARS
025
BUSINESS PLAN FOR 2015
028
MARKET ANALYSIS
031
FINANCIAL STATEMENT
132
RISK MANAGEMENT AFFAIRS
141
APPOINTED OFFICES HANDLING INTERNATIONAL BUSINESS
150
DISTRIBUTION OF CORRESPONDENT BANKS AND OVERSEAS OFFICES
HIGHLIGHT
The Bank and Subsidiaries
Dec.31,2013
CAPITAL ADEQUACY RATIO (%)
Dec.31,2014
12.72
Dec.31,2014
12.96
Millions of U.S.
Dollar
Millions of N.T. Dollar
Dec.31,2013
Dec.31,2014
Dec.31,2014
Total Assets
2,117,674
2,211,066
69,816
Deposits and Remittances
1,739,937
1,830,324
57,794
Discounts and loans, net
1,406,613
1,477,976
46,668
130,694
139,920
4,418
22,787
25,023
790
8,426
8,973
283
11,214
14,646
462
9,571
12,435
393
FINANCIAL ITEMS:
BALANCE SHEET ITEMS:
Equity
STATEMENT OF COMPREHENSIVE INCOME ITEMS:
Net Interest
Net revenues other than interest
Net profit before Income Tax from
Continuing Operations
Net profit
N.T. Dollar
U.S. Dollar
PROFITABILITY:
Earnings Per Share
1.41
1.84
7,196
7,034
186
186
1
1
10
10
1
1
ADDITIONAL DATA:
Employees
Domestic Branches
Offshore Banking Unit
Overseas Branches
Overseas Representative Offices
Note：The Exchange Rate as of December 31, 2014 was NT$31.67 to US$1.
002
HIGHLIGHT
0.06
CHAIRMAN
Ming-Cheng Lin
1. Operating Report for 2014
(1)Domestic and overseas financial and economic conditions in 2014
In 2014, the U.S. economy proved reasonably robust, Europe headed for a moderate recovery, and China and
other emerging economies also stayed on growth track. Global demand picked up, and there was a continual
update of mobile devices. Taiwan’s electronics exports thus sustained a boost, with outbound shipments to
Europe and the U.S. growing 7.1% and 3.5% respectively from a year earlier and reversing the downward trend
of the previous two years. Taiwan’s total exports and imports rose 2.7% and 1.6% respectively in 2014, generating
a record trade surplus of US$39.6 billion.
Stabilization in external trade helped drive a recovery on the domestic side. In 2014, Taiwan’s stock market
witnessed more active trading as business prospects brightened. This optimism was reflected in expanded
investment and a generally more proactive approach toward increasing both jobs and wages. The 2014
unemployment rate of 3.96% was a seven-year low. Improved employment helped foster private consumption.
Driven both domestically and externally, Taiwan scored a year-on-year improvement in GDP growth to 3.74% in
2014.
2014 ANNUAL REPORT
003
HONESTY ● EFFICIENCY ● ACTIVENESS ● RESPONSIBILITY ● TEAMWORK
In 2014, Taiwan’s central bank kept its benchmark discount rate on hold as the local economy
recovered only moderately and inflation was largely kept in check. On the currency market, economic
strengthening and equity gains had pushed the Taiwan dollar from 30.7 against the greenback at the
beginning of the year to 29.8 by August. But things started to change from September. The greenback
strengthened as markets were increasingly braced for interest rates starting to rise in the U.S. Coupled
with the Bank of Japan’s further monetary easing, the yen staged another round of depreciation, in turn
forcing other Asian currencies to follow suit. The Taiwan dollar was no exception and closed the year at
31.718 against the greenback. On average, the local currency traded at 30.33 in 2014, compared with
29.77 in 2013.
(2)Overview of organizational changes
As far as its organizational structure is concerned, the Bank had four major business groups as of the
end of 2014: 1) Corporate Banking Group, which comprises the Corporate Banking Department and
International Banking Department; 2) Consumer Banking Group, which includes the Consumer Banking
Department, Trust Department and Wealth Management Department; 3) Financial Markets Group,
which includes the Financial Trading Department and Treasury Marketing Department; and 4) Business
Management Group, which comprises the Business Management Department, Electronic Banking
Department and Customer Service Department. Hua Nan’s headquarters maintains three back-end
management groups: 1) Risk Management Group, which comprises the Risk Management Department,
Credit Checking & Industrial/Economic Research Department, Overdue Loan Management Department,
Corporate Credit Department and Consumer Credit Department; 2) Information Technology Group,
which includes the IT Planning & Development Department and IT Operations & Service Department;
and 3) General Administration Group, which comprises the General Administration Department, Finance
& Accounting Department, Human Resources Department, Planning Department and Legal Affairs
Department as well as five Channel Management Centers.
(3)Results from implementing business plan and operating strategy
1)Continued strengthening the management of deposits both in quality and quantity, thereby keeping
Hua Nan’s ranking as No. 1 among Taiwan’s "Big 3" commercial banks.
2)Secured FSC approval to launch mobile ATM services.
3)Secured FSC approval to launch third-party payment services in Taiwan.
4)The Baoan Subbranch in Shenzhen launched online banking services.
5)Overseas branches introduced additional online banking services: the Macau Branch offered more
trading options; mainland Chinese branches (subbranches) allowed customers to convert demand
deposits into time deposits and transfer money to undesignated accounts.
004
PRESIDENT
Bruce, L. Y. Yang
6)Made available “Web access for all” services and won an “A+” label for fully accessible websites.
7)Expanded mobile banking services, giving customers the option of making tax and other payments from
their smartphones.
8)Initiated the “Cloud Operator Customer Service Project” across all departments of the Bank with the aim
of cutting back on phone bills and enhancing service quality.
9)Launched the “Financing Project for Promoting Investment by Taiwanese Companies” as an incentive for
firms operating abroad to return home. As it made available project financing to such companies, the
Bank also aimed to help promote local industrial and commercial development, increase employment,
and drive the national economy.
10)Modified the Bank’s regulations governing preferential loans for the cultural and creative industry, giving
operators easier access to funding in line with government policy.
11)Established a Chinese-language platform for cross-border yuan remittances with a view to enhancing the
Bank’s visibility in this line of business.
12)Ushered in sterling and won spot trading to increase income from forex transactions.
2014 ANNUAL REPORT
005
13)Began acting as an agent for yuan-denominated traveler’s checks to further bolster customer
service.
14)Optimized systematic services, enabling customers to undertake online outward remittances and
over-the-counter lump sum remittances by means of Financial Information Service Co., Ltd.’s foreign
currency settlement platform.
15)Computerized L/C notification procedures, thereby streamlining operations and reducing
operational risk.
16)Continued expanding outlets in China. The Shanghai Branch became operational on January 20,
2015; the Fuzhou Branch became oprational on May 13, 2015.
17)Further diversified the Bank’s personal banking package and integrated debt and wealth
management services to better cater to different customer segments:
(a)Introduced a “Going Beyond Mortgage” scheme that combines mortgages with other products
and services to maximize customer contribution. Promoted insurance-linked mortgages,
revolving mortgages, personal loans for revolving funds, unsecured loans, credit cards, and
regular mutual fund purchases at regular intervals, thereby enhancing earnings contribution and
strengthening customer relations.
(b)Targeted homeowners who enjoy reliable economic means and are accustomed to making
investments for mortgages linked to wealth management services. Identified their investment
needs and offered them incentives to activate their loans, thereby increasing the contribution of
quality customers.
(c)Solicited more target clients for unsecured loans and deepened relations with quality businesses
by providing their employees with unsecured loans and preferential financing for stock
subscription.
(d)Drew on the Small and Medium Enterprise Credit Guarantee Fund to attract potential financing
customers who are starting their own business or joining a franchise.
(e)Launched the Super Cash Reward Card and TPEx Winner Card, both of which were included as
primary targets of promotion for the year.
18)Strengthened segmented management and precision marketing and bolstered services rendered
to quality customers, thereby enhancing customer loyalty and boosting earnings:
(a)Geared mortgage loans mainly toward homeowners in urban areas of northern Taiwan and
sought to mitigate the loss of existing customers who were paying higher interest, thereby striking
a balance between asset quality and earnings capacity.
006
(b)Promoted insurance-linked mortgages among both new and existing customers. Encouraged higher
insurance coverage ratios to help grow fee income.
(c)Promoted higher-yielding products such as revolving mortgages, loans for margin buying of stock, loans
for revolving funds, and unsecured loans, and encouraged customers to activate their quotas, thereby
increasing the Bank’s average lending rate.
(d)Ushered in comprehensive credit card services and promoted credit cards by customer age and
occupation.
(e)Ushered in new cardholders by soliciting online applications and organizing promotional events on such
platforms as the Bank’s Delicious Indeed website and Facebook.
(f) Cemented cardholder loyalty by aiming promotional campaigns at such areas and items as food,
tourism, malls, 3Cs, and department stores.
(g)Introduced more large-scale campaigns on the Delicious Indeed website to promote cardholder
spending. Solicited more website visits to get across to cardholders information with regard to discounts
for good food and tourism products.
(h) Further promoted the Bank’s acquiring services for spending by China UnionPay cardholders to boost
competitiveness in the acquiring sector and increase income.
19)Increased the number of wealth management consultants to 390 and established the Bank’s Wealth
Management Academy for well-rounded training of professionals fitted with comprehensive financial
expertise.
20)Fine-tuned management of different segments of customers; hosted thematic presentations, promoted
the Prestige Club, and organized cultural and artistic events; focused on catering to high net worth
clients. Offered discounts for mutual fund subscription on the online banking platform to solicit more online
customers.
21)Provided major trust fund subscribers with financial health assessment services with a view to optimizing
allocation of customer assets and enhancing investment returns.
22)Launched a new wealth management official website with enhanced online banking features and
marketing capability.
23)Made available more investment options for customers to choose from by allowing OBU clients to invest in
foreign bonds through specified-purpose pecuniary trusts.
24)Introduced offshore stock index-tracking ETFs as an eligible investment target for specified-purpose
pecuniary trusts, thereby further diversifying trust offerings.
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25)On top of trading finance and banking products with customers, the Bank is engaged in the design
of new offerings before seeking regulatory approval. In 2014, the Bank conducted US$16.9 billion of
transactions in financial derivatives with clients and also launched a new structured product that features
foreign currency time deposits linked to both interest and exchange rates.
(4)Budget Execution
Item
Actual Figure for
2014
Budgeted Figure for
2014
Ratio of Attainment
Year-on-Year
Change (Amount)
Year-on-Year Change
(Percentage)
average outstanding
balance of deposits
(excluding interbank
deposits)
17,706
17,166
103.15%
971
5.80%
average outstanding
balance of loans
14,279
14,333
99.62%
524
3.81%
12,434,632
10,704,542
116.16%
2,863,719
29.92%
Net Profit
Note: The average outstanding balances of deposits and loans are expressed in NT$100 million terms while net profit, NT$1,000.
(5)Income, Expenditures and Profitability
In 2014, Hua Nan recorded total net income of NT$33.996 billion. Of this, net interest income accounted for
73.61% (interest income stood at NT$38.55 billion, while interest expense was NT$13.53 billion). Non-interest
net income accounted for 26.39% (including net fee income of NT$6.26 billion; asset and collateral disposal
gains of NT$4.11 billion; realized gains from the sale of financial assets of NT$324.87 million; foreign exchange
losses of NT$2.23 billion; losses of NT$4.89 million incurred by affiliated enterprises and recognized under the
equity method; revaluation gains of financial assets measured at cost of NT$204.02 million; and other noninterest net income of NT$312.21 million. Bad debt expenses and guarantee liability provisions amounted
to NT$1.63 billion, and operating expense was NT$17.72 billion (employee welfare expense was NT$11.59
billion, depreciation and amortization was NT$769.23 million, and other business and management expense
was NT$5.37 billion). Pretax profit amounted to NT$14.65 billion while income tax expense came in at
NT$2.21 billion. Net profit amounted to NT$12.43 billion, or NT$1.84 per share.
(6)Status of R&D
Hua Nan promotes R&D by encouraging all employees to get involved on this front. In 2014, employees
presented a total of 430 R&D proposals, with the Bank adopting 79 of them.
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2. Summary of Business Plan for 2015
In 2015, the Bank aims to continue its bid for doubling wealth management and credit card revenues in
three years, thereby boosting non-interest income and earnings capacity. Emphasis will also be placed on
optimizing the Bank’s asset-liability mix to widen the interest spread and increase net interest income, as well
as on setting up more outlets in China and strengthening cross-strait financial services. Given the advent of
an increasingly digitized banking market and a fast-aging population, the Bank is also ready to capitalize on
emerging opportunities by integrating the development and marketing of innovative products.
3. Development Strategies for the Future
(1)Diversify earnings sources and enhance the weighting of non-interest income, thereby boosting earnings
capacity.
(2)Further optimize the Bank’s asset-liability mix to widen the interest spread and increase net interest
income.
(3)Build a well-rounded presence in the Asia Pacific by making inroads into the Greater China market.
(4)Capitalize on trends and opportunities presenting themselves in financial markets; strengthen innovation
of financial products and services.
(5)Improve the Bank’s operational structure and consolidate its foundation for future growth.
4. Impact of the Macroeconomic, Regulatory and Competitive Environments
(1)The Macroeconomic and Competitive Environments
In 2015, solid U.S. growth and still weak crude oil prices are expected to help fuel a continued recovery
of the global economy, in turn giving a boost to Taiwan’s exports. On February 16, 2015, the Directorate
General of Budget, Accounting and Statistics (DGBAS) forecast that the Taiwan economy should be
able to expand 3.78% this year. Yet, cross-strait economic and trade relations have become increasingly
competitive as China has sought to foster self-sufficient supply chains in recent years. What’s worse,
the Fed’s anticipated start of a fresh rate hike cycle does not bode well for ASEAN countries, a market
that accounts for 20% of Taiwan’s exports. On the other hand, international financial markets are likely
to experience heightened volatility due to the monetary policy divergence among the U.S., Europe,
Japan, and China. Fortunately, Taiwan has long hoarded abundant foreign exchange reserves, kept
up a favorable current account balance, and maintained relatively stable interest and exchange
rates. Moreover, Taiwan has not attracted as massive capital inflows, relatively speaking, as most other
emerging economies. Combined, these should contribute to the stability of local stock and currency
2014 ANNUAL REPORT
009
markets. All in all, Taiwan’s banking industry needs to retain a prudent approach toward assessing the
macroeconomic environment of 2015.
According to statistics compiled by the Financial Supervisory Commission's Banking Bureau, a total of
39 domestic banks and 30 foreign banks (including branches of Chinese banks) operated in Taiwan as
of the end of September 2014. This sheer number of market participants readily translates into heated
competition. Given limited earnings prospects at home, banks have no choice but to look to the Greater
China market. Massive as the mainland Chinese financial services market may seem, Chinese banks
tend to focus their corporate banking services on bigger companies while adopting a more conservative
stance on lending to SMEs. As such, Taiwanese businesses operating on the mainland naturally need
provision of funds by Taiwanese banks. What can thus be expected is a win-win situation as Taiwanese
banks are accorded a new potential target of corporate financing. On the other hand, businesses are
now confronted with increasing labor costs as China gradually readjusts its industrial structure. Given
China’s changing investment climate, some businesses have begun relocating to Southeast Asia and
other emerging economies. For their part, Taiwanese banks are also evaluating the potential of other
parts of the Asia Pacific, Southeast Asia included. Of course, banks are accelerating their push into
Southeast Asia mainly to diversify earnings sources.
(2)The Regulatory Environment
1)Now that such laws and regulations as the Implementation Rules of Internal Audit and Internal
Control System of Financial Holding Companies and Banking Industries and Directions Governing
Anti-Money Laundering and Countering Terrorism Financing of Banking Sector have been amended
and implemented, banks are supposed to bolster their internal control mechanisms and enforce risk
management and internal control systems in accordance with the aforesaid regulations to combat
money laundering and counter funding of terrorism.
2)With the Foreign Account Tax Compliance Act (FATCA) and Dodd-Frank Act now in effect, local
banks must take seriously whether to adopt an accommodative stance toward taxing U.S. citizens by
the American government. They also have to better regulate derivatives trading and make plans to
readjust their U.S. branches accordingly. Given a major impact only to be expected, banks need to
keep track of relevant developments so as to keep to a minimum their risk of noncompliance.
010
3)Both the quantity and variety of banking operations in China are expanding by the day. There is every need
to learn more about China’s laws and regulations as well as legal practices in order to control and manage
the legal risk involved in promoting business there.
4)In Taiwan, other laws and regulations closely related to the banking sector, such as the Banking Act and
labor-related statutes, have also been revised. Banks need to set or modify internal guidelines to ensure
compliance.
5. Credit-rating Results
Rating Agency (Time of Rating)
Long-Term Rating
Short-Term Rating
Outlook
Taiwan Ratings (June 2015)
twAA
twA-1+
Stable
Fitch (March 2015)
BBB+
F2
Stable
A2
P1
Positive
Moody's (June 2015)
Chairman
Ming-Cheng Lin
President
Bruce, L. Y. Yang
2014 ANNUAL REPORT
011
H
012
onesty
HISTORY AND ORGANIZATION OF OUR BANK
Hua Nan Bank was founded in 1919 with capital of 10 million yen. Founders included the prominent local entrepreneur,
Mr. Lin Hsiung-cheng, and several Southeast Asian overseas Chinese investors. The founding ceremony was held on
January 29, 1919 and Mr. Lin Hsiung-cheng served as Chairman. The Bank was established for the purpose of promoting
both domestic and international investment, and maintained a head office in Taipei. The Bank started business in March
1919. Subsequently, the Bank set up branches in Canton, Haiphong, Saigon, Rangoon, Singapore, Tokyo and other cities
throughout Asia, helping to contribute to the development of trade between Taiwan and Southeast Asia. Private banks
in Taiwan ran into operational difficulties during the 1930’s Depression, and the government engineered some to merge.
Thanks to the efforts of Mr. Lin Hsiung-cheng and his partners, the Bank avoided being merged. Mr. Lin Hsiung-cheng
served as Chairman from 1919 to 1944. In 1944, Bank of Taiwan used its majority ownership in the bank to reassign Mr.
Akekula as Chairman, and Mr. Lin Hsiung-cheng became Chairman Emeritus.
Following the retrocession of Taiwan to China on October 25, 1945, Mr. Lin Hsiung-cheng, as Chairman of the
Commercial Association of Taiwan, was selected as Taiwan Province representative to participate in the ceremony that
reinstated the R.O.C. capital. He also carried out the important mission of seeking support from the R.O.C. authorities to
ensure the continued viability of Hua Nan Commercial Bank. He passed away on November 27, 1946. On February 22,
1947, the Bank held a shareholders’ meeting, during which Mr. Liu Chi-kuang was nominated by the board to become
Chairman. Upon its inception, the Bank mainly focused on business activities within Taiwan Province, serving with other
banks to help finance the construction of a new Taiwan. On May 3, 1947, the Bank merged with Taiwan Trust Company,
the latter becoming the Bank’s newly-formed Trust Department, and increased capital to 25 million Old Taiwan dollars
to enlarge the Bank’s scope of business and build a solid capital base. By June 1948 more than 60 branches staffed with
high caliber employees had been established throughout Taiwan. Hua Nan Commercial Bank thus became well-known
and highly regarded as a sound and solid financial institution.
In 1948 when Taiwan’s economy began to be seriously impacted by the economic slump in mainland China, the
Bank revised its business focus, reducing low yield business while promoting more profitable business. During this time,
the Bank again increased capital to 1 billion Old Taiwan dollars. In the period since monetary reform on June 15, 1949
through May 26, 2014, the Bank increased capital a number of times to reach the present amount of NT$67,676,000,000,
positioning it as one of the soundest and largest banks in Taiwan.
A large number of government-owned shares was released on January 22, 1998, enabling the Bank to complete
privatization and embark upon a new era. The Bank made a reinvestment and set up HNCB Insurance Agency Co., Ltd.
on January 31, 2001. In order to adapt to government financial reforms and changes in the financial environment, to
achieve synergy through diversification, and to meet long-term development needs, the Bank and Entrust Securities Co.
each convened extraordinary shareholders’ meetings on November 14, 2001 and passed a proposal to establish Hua
Nan Financial Holdings Co., Ltd. (HNFHC) via a 100% stock conversion. Mr. Lin Ming-cheng was elected as the Chairman
of the board. On December 19, 2001 HNFHC started business and its shares listed on the Taiwan Stock Exchange.
HNFHC, with registered capital of NT $100 billion, maintains its head office in Taipei. The Bank accordingly became a
subsidiary of HNFHC. For the purpose of elevating business efficiency and reducing costs, the Bank merged with Hua
Nan Bills Corp. on May 23, 2008. To facilitate business diversification and presence in Greater China, the Bank set up Hua
Nan International Leasing Co., Ltd. on July 13, 2012.
2014 ANNUAL REPORT
013
The Shareholders’ Meeting serves as the highest decision-making body of the important matters in the Bank’s
organizational structure. All matters including appointment of directors and supervisors, establishment and amendment
of internal rules and regulations, increase of capital, appropriation of earnings and dividends, and other matters, are
decided upon during Shareholders’ Meetings. The duties of the shareholder’s meeting are carried out by the Board of
Directors due to HNFHC is the sole shareholder of the Bank.
The Board of Directors and Board of Supervisors serve to formulate strategy, carry out bank policies, and execute
and supervise business activities. The Directors, who number fifteen at least and twenty-one at most (including four
independent directors), and Supervisors, who number five, are separately appointed by HNFHC.
The Directors among themselves elect five Managing Directors (including one independent director), who elect a
Chairman one another. Internally, the Chairman is the head of the Shareholders’ Meeting, Board of Directors and Board
of Managing Directors, while, externally, the Chairman represents the Bank.
A Board of Directors meeting is held once every three months. In case of emergency or if more than half of the Directors
so request, an Extraordinary Meeting may be held. When the Board of Directors is not in session, the Managing Directors
shall perform the functions of the Board of Directors by way of a meeting convened and presided by the Chairman of
the Board at any time. Under the Board of Directors, we established the Auditing Department with Chief Auditing Officer
being the department head responsible for all auditing related business.
The Board of Supervisors is formed by five Supervisors, who elect a Standing Supervisor one another. The Standing
Supervisor is resident in the Bank, where he or she is charged with execution of supervisory duties.
The Bank was established as a company limited by shares in accordance with the regulations set forth in the Banking
Laws. The head office is located in Taipei City. In terms of management, the Bank has one president who is responsible
for all business activities and who acts in accordance with resolutions passed at the Board of Directors meetings. Eight
Executive Vice Presidents are appointed to assist the President. As of May 2015, in accordance with internal regulations
governing organizational structure, the Bank maintained seven groups, twenty-one departments, five regional centers
and Compliance & Legal Department at the head office: Corporate Banking Group composed of Corporate Banking
Department and International Banking Department; Consumer Banking Group composed of Consumer Banking
Department, Trust Department and Wealth Management Department ; Financial Markets Group composed of
Financial Trading Department and Treasury Marketing Department; Business Management Group composed of Business
Management Department, Electronic Banking Department and Customer Service Department; Risk Management
Group composed of Risk Management Department, Credit Checking & Industrial/Economic Research Department,
Overdue Loan Management Department, Corporate Credit Department and Consumer Credit Department;
Information Technology Group composed of IT Planning & Development Department and IT Operation & Service
Department; General Administration Group composed of General Administration Department, Finance & Accounting
Department, Human Resource Department and Planning Department. The Bank further maintains 186 domestic
branches and one Offshore Banking Branch within Taiwan. Overseas branches are located in Los Angeles, New York,
Hong Kong, Singapore, London, Ho Chi Minh City, Sydney, Macau, Shenzhen, Shanghai, Fuzhou, and Shenzhen Baoan
Sub-Branch, with one representative office in Ha Noi. As of May 31, 2015, the Bank’s manpower resources totaled 7,034
personnel.
014
ORGANIZATION CHART FOR HUA NAN BANK
Shareholders’ Meeting
Board of Supervisors
Board of Directors
Standing Supervisor
Chairman of the Board
Supervisors
Managing Directors of
the Board
Chief Auditing
Officer
Auditing Department
Corporate Banking Department
Corporate Banking
Group
Directors of the Board
International Banking Department
Consumer Banking Department
Consumer Banking
Group
Trust Department
Wealth Management Department
Financial Trading Department
Financial Markets
Group
Treasury Marketing Department
Business Management Department
Business
Management Group
Electronic Banking Department
Head Office
Customer Service Department
President
Branches
Executive Vice
President
Risk Management Department
Credit Checking & Industrial/Economic
Research Department
Risk Management
Group
Overdue Loan Management Department
Corporate Credit Department
Consumer Credit Department
IT Planning & Development Department
Information
Technology Group
IT Operation & Service Department
General Administration Department
General
Administration Group
Finance & Accounting Department
Human Resource Department
Planning Department
Regional Centers
Executive Vice
President
Compliance & Legal Department
2014 ANNUAL REPORT
015
BOARD OF DIRECTORS AND SUPERVISORS
2015.02.26
NAME
CURRENT POSITION
EXPERIENCE
EDUCATION
Ming-Cheng Lin,
Chairman, Hua Nan Commercial Bank, Ltd.
Vice Chairman , Hua Nan Financial Holdings Co.,
Ltd.
Chairman, Memorial Scholarship Foundation to
Mr. Lin Hsiung-Chen
Director of Central Bank, Chairman of Hua Nan
Master of Laws, Keio
Financial Holdings Co., Ltd(HNFH), Vice Chairman University, Japan.
of Hua Nan Bank, Director of Taiwan,Asset
Management Corporation,Supervisor of Taiwan
Financial Asset Service Corporation,
Director of T. Y. Company Hsing Yeh Co., Ltd.
Bruce, L.Y. Yang
Managing Director & President, Hua Nan
Commercial Bank, Ltd.
Director, Hua Nan Financial Holdings Co., Ltd.
Director, Hua Nan Commercial Bank, Ltd
Supervisor, Hua Nan Commercial Bank, Ltd.
Executive Vice President, Bank of Taiwan.
Mao-Shyan Liu
Director & President, Hua
Executive Vice President, Hua Nan Financial
Nan Financial Holdings CO., Ltd.
Holdings Co., Ltd.
Managing Director, Hua Nan Commercial Bank,
Ltd.
M.A. in Department of
Economics,Chinese
Culture University.
Rung-Fu Hsieh
General Manager, Shin Hai Gas Gorp.
Managing Director, Hua Nan Commercial Bank, Managing Director, Industrial Bank of Taiwan.
Ltd.
President, The Great Taipei Gas Corp.
Business Dept.,
National Open
University.
Wai-Cho Tsui,
Independent & Managing Director, Hua Nan
Professor, Dept. of Accounting
Chinese Culture Univ.
Professor, Dept. of Public Finance, National
Cheng Chi Univ.
Ph.D. (Economics),
Southern Illinois
University at
Carbondale.
Chih-Wen Hsu,
Director,Hua Nan Commercial Bank,Ltd.
Senior Vice President & General Manager
Department of International Banking,Bank of
Taiwan.
Vice President & Deputy General Manager of
Dept. of Economics,
Singapore Branch, Bank of Taiwan.
Soochow University
Senior Vice President & General Manger of Hong Taiwan,ROC
Kong Branch, Bank of Taiwan.
Chien-Chung Nieh
Director,Hua Nan Commercial Bank, Ltd.
Professor of Dept.of Banking and Finance,
Tamkang University
Chairman of Dept. of Banking and Finance,
Tamkang University.
Ph.D. of Economics,
Rutgers Univ., (SUNJ)
U.S.A.
Shin-Hsin Huang
Director, Hua Nan Commercial Bank, Ltd.
Professor Dr., Department of Public Finance,
National Taipei University.
Supervisor, Public Television Service Foundation.
Dr. der Wirtschafts- u.
Sozialwissenschaften
Christian-Albrechts-Uni.
zu Kiel Germany.
Wei-Ling Yen,
Director & President, Wellin Investment Co., Ltd.
Director & President, Dade Construct Ltd. Co.,
Director & President, Wushin mental health
foundation
Director, China Electric Co., Ltd.
TOKAI University,
JAPAN
T. Lin
Fund Manager, Mercury Asset Management Co., MSc, Real Estate
Ltd.
Economics and
Finance, London
School of Economics
and Political Science
An-Lan Hsu Chen
Chairman, Hua Nan Securities Co., Ltd.
Chairman, Yuan Ding Investment Co., Ltd.
Chairman, En Trust Securities Co., Ltd.
Michael,
Yuan- Jen Hsu
Director, Hua Nan Securities Co., Ltd.
Executive VP of Brokerage Management Dept.
Hua Nan Securities Co., Ltd.
Avp of Chairman’s Office Hua Nan Securities Co., MBA
Ltd.
The Wharton school
University of
Pennsylvania.
016
Business
Administration Dept,
National Taiwan
University.
Western Culture &
Literature, Tung Hai
University
NAME
CURRENT POSITION
Chia- Chun Chiang, Director, Hua Nan Commercial Bank, Ltd.
EXPERIENCE
Pricewaterhouse Coopers Taiwan
EDUCATION
Fu Jen Catholic
University.
Kuei-Yang Liu,
Security information management,
Director,Hua Nan Financial Holdings Co., Ltd.
Hua Nan Commercial Bank, Ltd.
Workers’ Union.
Senior Manager,IT Operation & Service Hua Nan
National Taiwan
University of Science &
Technology
Neng-Ching Lo
Takming University of Science and Technoligy
Dean, College of Finance, Secretariat Professor
National ChengChi
University Dept. Public
Financial, Master
Shih-Tien Chiang,
Department of Planning SVP and General
Dept. Of International
Director,Hua Nan Commercial Bank, Ltd.
Manager of Central Trust of China
Trades Tamkang
Executive Vice President, Bank of Taiwan
Executive Vice President of Central Trust of China University
Director, Bank Taiwan Insurance Brokers Co., Ltd.
Sun-Yuan ,Lin
Independent Director, Hua Nan Commercial
Bank, Ltd.
Director, General of Dept. Foreign Exchange, The National Chung-Chi
Central Bank of China.
University Banking
Executive Director,Central America Bank for
Department
Economic Integration.
Director, Chinese Export-Import Bank.
Director, China Exteral Trade Promotion
Association.
Chung-Yuan Hsu
Independent Director, Hua Nan Financial
Holdings Co., Ltd.
Bank, Ltd.
Professor of Accounting, National Cheng Chi
University.
CPA, Professor in Accounting
Ph.D. in Accounting,
The University of
Memphis, U.S.A.
Chun-Pin Chen
Independent Director, Hua Nan Financial
Holdings Co., Ltd.
Bank, Ltd.
Attorney of Law of Lexpert Law Firm.
Attorney of Law, Lecturer of University
Master of Law,
National Taiwan
University.
Wen-Ping Kung,
Standing Supervisor , Hua Nan Commercial
Bank, Ltd.
Consultant , Agricultural Bank of Taiwan
General Manager, Agricultural Credit
Guarantee Fund
Director, National Agricultural nd financial
Information Centre
Master of Chinese
Culture Univerity
Deparment of Law
Wen-Yuh Tsai
Chairman of Sin-Jang CPAS office.
CPA, Audit, Tax- Planning, Business Management M.B.A. Cheng Chi
etc.
National University.
Instructor of University.
Hui-Chung Yen,
Chairman, Te- Ho Co., Ltd.
Supervisor,Tai-Shin Bill Co., Ltd.
University of Chinese
Culture
Kuo-Ping Chen
Senior Manager, Investment Dept.,
Yong-Sheng Investment Co., Ltd.
Senior Manager, Investment Dept.,
Ta-Yung Hsing Yeh Co., Ltd.
Dept., of Business
Administration,
National Taiwan
University
Yeh-Cheng Yang
Professor,Department of Accounting, Soochow
University
A member of petition and appreals
committee, MOF
Doctor of Public
Finance,National
Cheng Chi University
National Taipei College of Business Professor,
assistant director
2014 ANNUAL REPORT
017
TOP MANAGEMENT AND DEPARTMENT MANAGERS IN HEAD OFFICE
May.20.2015
018
Bruce, L.Y. Yang
President
Huei-Ien Lee
Senior Vice President & General Manager of
IT Operation & Service Dept.
Yun-Peng Chang
Executive Vice President
Su-Jung Hsu
Compliance & Legal Dept.
Tsung-Hsien Li
Tien-Yu Chen
Trust Dept.
Jung-Cheng Kao
Ber-Lin Hsu
Electronic Banking Dept.
Tony Jang
Ruey-Der Wang
Overdue Loan Management Dept.
Ming-Yow Lai
Tien-Li Cheng
Financial Trading Dept.
Donald, W.H. Hsu
Billy, C.P. Chiang
Consumer Banking Dept.
Jonathan Huang
Executive Vice President & General Manager of
Planning Dept.
Judy, J.D. Wang
Wealth Management Dept.
Hsin-Tien Ting
Ming-Chu Liao
Consumer Credit Dept.
Meng-Hsiung Chung
Chief Auditing Officer
Robert Li
Risk Management Dept.
Tracy Huang
Senior Vice President & Chief Secretary
Board of Directors
Joe Chiou
Corporate Credit Dept.
Nelson Chen
General Administration Dept.
Lisa Tsai
Treasury Marketing Dept.
Alice Liang
Business Management Dept.
Autumn C.C. Kung
Customer Service Dept.
Jonathan, Z.D. Liu
Corporate Banking Dept.
Gen-Shun Chen
Regional Center North I
Pau-Chu Lo
Senior Vice President & General Manager of Auditing
Dept.
Chien-Kun Tsai
Regional Center North II
King-Huo Lu
Finance & Accounting Dept.
Joyce Liu
Regional Center North III
Tzu-Chiang Sun
Human Resource Dept.
Wei-Chih Chen
Regional Center Central
Chi-Chun Lin
Senior Vice President & General Manager of Credit
Checking & Industrial/Economic Research Dept.
Buh-Chwang Hu
Regional Center South
Wen-Tzong Duh
IT Planning & Development Dept.
Thomson, N.T. Lin
International Banking Dept.
HUA NAN FINANCIAL HOLDINGS GROUP ORGANIZATION
Group Organization
Hua Nan
Commercial Bank
100%
Hua Nan
International
Leasing
Co., Ltd.
100%
Hua Nan
International
Leasing
Corporation(CN)
100%
HNCB
Insurance
Agency
100%
Hua Nan
Securities
100%
South China
Insurance
100%
Hua Nan
Securities
Management
99.95%
Hua Nan
(BVI)Holdings
100%
Hua Nan
Asset
Management
(Cayman)
100%
Hua Nan
Securities(H.K.)
100%
Hua Nan
Financial Holdings
Co., Ltd
Hua Nan
Investment Trust
100%
Hua Nan
Venture Capital
100%
Hua Nan
Futures
99.8%
Divided by Line of Business
Commercial Banking
Hua Nan
Assets
Management
100%
Securities / Investment Banking
Insurance
Assets Management
2014 ANNUAL REPORT
019
HNFHC DIRECTOR AND MANAGEMENT TEAM
(1)Directors
Apr. 14, 2015
Position
020
Name
Chairman
Teng-Cheng Liu
Vice Chairman
Ming-Cheng Lin
Director & President
Mao-Shyan Liu
Director
Yun Lin
Director
Ai Wei
Director
Ming-Jui Hsieh
Director
Teng-Lung Hsieh (Discharged on July 16, 2014.)
Director
Chih-Wen Hsu (Appointed on Sep. 9, 2014.)
Director
Shih-Tien Chiang
Director
En-Shiang Tai
Director
T. Lin
Director
Hui-jan Yen
Director
Rung-Fu Hsieh
Director
Hsu Chen, An-Lan
Director
Michale, Yuan Jen Hsu
Director
Vivien, Chia-Ying Shen
Independent director
A-Wang Huang
Chung-Yuan Hsu
Chun-Pin Chen
Ching-hsiou Chen
(2)Management team
Apr. 14, 2015
Position
Name
President
Mao-Shyan Liu
David, Y.C. Cheng
Executive Vice President & G.M. Risk Management
Department
James, H.J. Liu
Executive Vice President (Chief Compliance Officer)
& G.M. of Legal Compliance Department
Hsin-Tien Ting
Chief Internal Auditor & G.M. of Auditing
Department
Chih-Ho Shih
G.M. of General Administration Department
Sarah, C.T. Hsu
G.M. of Marketing Department
Tony Jang
G.M. of Finance Department
Ching-Huo Lu
G.M. of Information Technology Department
Michael Duh
2014 ANNUAL REPORT
021
E
022
fficiency
OPERATING PERFORMANCE OF THE MOST RECENT TWO YEARS
1.Deposits
Unit::NT$million
Year
2014.12.31
Category
Demand Deposits
Change
Amount
Percentage (%)
Amount
Percentage (%)
1,114,288
60.33
1,059,769
60.28
54,519
715,952
38.77
680,262
38.69
35,690
5.25
16,573
0.90
18,139
1.03
-1,566
-8.63
1,846,813
100.00
1,758,170
100.00
88,643
5.04
Time Deposits
Interbank Deposits
Total
2013.12.31
Amount
Percentage (%)
5.14
2.Loans
Unit:NT$million
Year
2014.12.31
Amount
Category
2013.12.31
Percentage (%)
Amount
Change
Percentage (%)
Amount
Percentage (%)
Short-Term Loans
452,189
30.31
394,326
27.81
57,863
14.67
Medium-Term Loans
372,136
24.95
387,926
27.36
-15,790
-4.07
Long-Term Loans
667,367
44.74
635,622
44.83
31,745
4.99
1,491,692
100.00
1,417,874
100.00
73,818
5.21
Total
Note: Including bills purchased and import/export negotiations
3. Foreign Exchange
Unit:US$million
Year
2014.12.31
Amount
Category
2013.12.31
Percentage (%)
Amount
Change
Percentage (%)
Amount
Percentage (%)
Import Negotiations
9,882
3.74
10,477
3.96
-595
-5.68
Export Negotiations
13,004
4.92
13,759
5.21
-755
-5.49
Cross-Border Remittances
241,306
91.34
240,083
90.83
1,223
0.51
Total
264,192
100.00
264,319
100.00
-127
-0.05
4. Operational Income
Overview of Operational Income By Line of Business
Year
2014.12.31
2013.12.31
Amount
Percentage
(%)
Corporate Banking
12,539
Consumer Banking
Line of Business
Unit:NT$million
Change
Amount
Percentage
(%)
Amount
26
12,605
29
-66
Percentage
(%)
-1
12,860
27
12,173
28
687
6
Financial Trading
5,546
12
4,707
11
839
18
Foreign Exchange
12,118
25
9,491
22
2,627
28
3,425
7
2,604
6
821
32
Trust and Wealth Management
Others
Total
1,553
3
1,658
4
-105
-6
48,041
100
43,238
100
4,803
11
Note : 1. The aforesaid operational income comprises all that derived from interest, fees, financial assets/liabilities, exchange, and realty
investment.
2. The consumer banking business includes credit and cash card operations; the foreign exchange business includes operations of the
Bank’s overseas branches and OBU.
2014 ANNUAL REPORT
023
A
024
ctiveness
(1) Boost competitiveness and enhance market share for gold passbook services by giving investors more options for
automatic deductions from their accounts.
(2) Keep up Hua Nan’s ranking among Taiwan’s top five banks in the demand deposits sector and make sure that the
Bank offers a lower average deposit interest rate than any other local bank.
(3) Take the initiative to bid for contracts for handling salary transfer on behalf of various agencies; organize campaigns
to attract more demand deposits, particularly those derived from salary payments and funds intended for stock
investment.
(4) Take full advantage of the Bank’s well-rounded network of retail outlets while promoting cross-selling of brokerage
services, property insurance, and mutual funds, in turn boosting fee income.
(5) Keep track of the government’s homeland planning as well as the shifting of commercial hubs in local counties and
cities while undertaking operational analysis of branches; readjust the Bank’s network of outlets wherever warranted
to effectively enhance operational efficiency.
(6) Take a proactive approach toward forging cross-sector strategic alliances so as to increase market share in
electronic banking.
(7) Introduce “Bank 3.0,” or digital banking, to enhance operational efficiency and usher in a new era for financial
services.
(8) Make available online banking whenever any new overseas branch is opened so as to further upgrade the Bank’s
electronic cash flow services worldwide.
(9) Further enhance the Bank’s competitiveness in electronic banking:
a.Consolidate the Bank’s physical and virtual outlets to come up with better-rounded services and operational
efficiency.
b.Better utilize social media in getting across to young people and online users.
(10)Plan and implement a customer service network marketing program (telemarketing included) to boost the volume
of sales generated by joint marketing and bolster customer loyalty and contribution.
(11)Devise a next-generation customer service initiative across online, mobile and print media to enhance service
quality across the board.
(12)Introduce a variety of preferential loans to support the government policy that fosters creative ventures, SME
innovation and the corporate community’s going international.
(13)Persist with promotion of electronic financing services to secure a greater presence in supply chains. Expand the
campaign to include existing customers who have yet to subscribe to this particular service, thereby enhancing
customer loyalty and boosting income at the same time.
(14)Vie for opportunities to serve as lead arranger of syndicated loans and partner with industry peers in international
projects, thereby enhancing Hua Nan’s reputation and competitiveness in the syndicated loans market.
(15)Capitalize on financial deregulation across the Taiwan Strait by promoting cross-border financial services that meet
customer needs. In the Pearl River Delta, the Shenzhen, Hong Kong and Macau branches have accumulated long
years of experience serving Taiwanese companies. For their part, the newly launched Shanghai Branch and Fuzhou
Branch are well-positioned to provide customers operating in the Yangzi River Delta and Haixi region with wellrounded financing solutions.
(16)Broaden and deepen the Bank’s presence across the Greater China market. to further expand the Bank’s presence
in Greater China.
(17)To date, Hua Nan has signed MOUs on bilateral cooperation with Fujian Haixia Bank, Bank of China, Bank of
Communications, China Merchants Bank, China Guangfa Bank, and China Construction Bank. Concrete
cooperation will be promoted in the days ahead to help the Bank grow earnings.
2014 ANNUAL REPORT
025
(18)To take advantage of the burgeoning ASEAN economy, Hua Nan is currently in the process of applying to upgrade
its representative office in Hanoi to branch status. It will also study the viability of setting up outposts in other ASEAN
countries to serve Taiwanese companies and share in their economic growth, thereby enhancing overall earnings.
(19)Persist with the campaign of doubling the credit card business in three years, with efforts made on all fronts: financial
strategy, product, cardholder spending, outlet promotion, customer service, and information service.
(20)Introduce a campaign to deepen relations with salary transfer clients; undertake data analytics to carry out
customer segmentation for reference of segmented marketing. Target homeowners who enjoy reliable economic
means and are accustomed to making investments for mortgages linked to wealth management services as well
as stock loans; identify their investment needs and offer them incentives to activate their loans, thereby increasing
the contribution of quality customers.
(21)Initiate a campaign to deepen relations with premium credit card holders. Make use of such tactics as “invitation
only” and “advanced benefits” in creating a sense of prestige and, in turn, forging the loyalty of big-spending
cardholders.
(22)Take full advantage of the Bank’s retail network and integrated marketing mechanism, and seek partnerships with
nonfinancial businesses and online vendors to maximize sales. Stick to segment marketing and deepen relations
with quality customers, thereby strengthening customer loyalty and growing earnings.
(23)Establish a marketing recommendation system under which well-rounded proposals can be submitted to customers
to increase the odds of closing deals.
(24)Further promote product diversification and seek out niche products. Join forces with quality mutual fund and
insurance companies with strong brand names to introduce more competitive products and campaigns.
(25)Further expand the wealth management sales team, bolster the capacity of senior wealth management
consultants, and set goals and offer incentives for branches to assist in marketing endeavors. The key is to establish
a well-rounded system under which every employee is involved in marketing.
(26)Introduce a greater variety of trust products with a niche, such as mutual funds with back-end sales charges and
individually managed trusts that draw on innovative investment models.
(27)Follow government policy that points to great potential for serving senior citizens and retirees, with emphasis placed
on promoting pension trusts and other standard offerings that meet the diverse needs of different stages in life, such
as children’s education trusts and life insurance trusts.
(28)Readjust the allocation of excess New Taiwan dollar liquidity whenever warranted to increase returns.
(29)Strengthen equities purchases and sales in accordance with changes across international financial markets to
expand capital gains and dividend income.
(30)Adopt a flexible approach toward conducting forex swaps to grow earnings.
(31)Launch structured products, mainly principal-guaranteed offerings, that comprise two to three of the following
components: interest rate, exchange rate, commodity and equity.
(32)Continue promoting TMU (Treasury Marketing Unit) businesses—primarily hedging businesses and secondly financial
operations—among larger clients that pose virtually zero risk; adopt a prudent approach toward promoting a
variety of financial derivatives (such as structured products with different underlying targets available in different
currencies and maturities), particularly low-interest, principal-guaranteed offerings, to meet customer needs and
increase market share.
026
R
esponsibility
2014 ANNUAL REPORT
027
MARKET ANALYSIS
1. Geographic Scope of Operations
Hua Nan deals in banking operations mainly in the domestic market. As of the end of 2014, it operated 186 domestic
branches and one offshore banking unit. In terms of overseas operations, the Bank’s Shanghai Branch became
operational in January 2015 and the Fuzhou Branch became oprational in may 2015. As such, the Bank now
operates 11 overseas branches (Hong Kong, Singapore, London, New York, Los Angeles, Ho Chi Minh City, Shenzhen,
Sydney, Macau, Shanghai and Fuzhou) and one subbranch (Baoan, Shenzhen) as well as one representative office
(Hanoi). In the days ahead, the Bank is set to build on what has been accomplished so far as it seeks to enhance
earnings and diversify revenue sources.
2. Future Supply and Demand in the Marketplace and Growth Prospects
Supply Side:
The sheer number of banks in Taiwan’s virtually saturated market readily translates into heated competition. Given
limited earnings prospects at home, banks have no choice but to set sights abroad. Besides opening shop in
Greater China, they have also made inroads into other Asia Pacific markets, such as Myanmar and other Southeast
Asian countries, to expand earnings sources. On the other hand, while Taiwan’s banks are now expanding their
presence on the Chinese mainland amid ongoing deregulation across the Taiwan Strait, they are also taking their
lead from a growing number of Taiwanese companies that have expanded to Southeast Asia. Given the proximity
of some of these new outposts, it is inevitable that Taiwanese banks will increasingly find themselves competing with
one another not only at home but also abroad.
Demand Side:
In 2015, capital demand among businesses is expected to pick up as the world economy heads for a moderate
recovery. Moreover, Taiwan’s Financial Supervisory Commission relaxed regulations governing offshore banking
unit (OBU) and offshore securities unit (OSU) operations in 2014, a move that is expected to stimulate demand for
financial services at large, in particular wealth management. On the other hand, the growing popularity of online
shopping points to greater demand for online cash flow services. Coupled with the prospect of mobile and thirdparty payments taking off in 2015, establishment of cross-platform cash flow management also holds great potential
for the banking industry.
As far as the mainland Chinese market is concerned, rapid economic growth has certainly nurtured a vast financial
services market there. As Chinese banks prefer to lend to bigger companies rather than SMEs, Taiwanese businesses
operating on the mainland naturally need provision of funds by Taiwanese banks. As such, Taiwanese banks
are accorded a new potential target of corporate financing. On the other hand, China’s investment climate is
changing in a direction unfavorable to export-oriented businesses, prompting some to relocate to Southeast Asia.
But it deserves special attention that Southeast Asia incurs greater risk than the home market. For banks, it is vital to
adopt a prudent approach toward overseas expansion. Above all, sound management and control is warranted
for lending operations.
028
MARKET ANALYSIS
3. Competitive Niche, Positive and Negative Factors for Future Development, and
Measures in Response
(1) Competitive Niche
1)Hua Nan owns an extensive service network and a broad customer base throughout Taiwan. This is a great
advantage for the development of various banking operations.
2)As one of Taiwan’s most established banks, Hua Nan has nurtured an exemplary corporate culture and enjoys
high regard in the community.
3)The Bank is famed for sound asset quality and well-rounded risk management.
4)The Bank’s continued expansion in Greater China will facilitate its forming a comprehensive service network
across the Asia Pacific and capitalizing on the region’s rapidly growing yuan market.
(2) Positive Factors
1)The world economy is expected to do better in 2015 than the year before, in turn giving a boost to the
Taiwanese economy. This prospect should drive corporate demand for capital and improve investor
sentiment, thereby underpinning banks’ lending operations and wealth management services.
2)Given the growing popularity of such innovations as mobile and third-party payments, establishment of crossplatform cash flow management holds great potential for the banking industry.
3)The government’s recent deregulation of banks’ overseas investments and branch outlets is certainly
conducive to their overseas expansion.
(3) Negative Factors
1)Excessive liquidity and global easing do not bode well for interest spread expansion.
2)The government’s recent string of restrictive measures to curb the property market is hardly conducive to
banks’ mortgage business.
3)Local banks’ rapidly growing risk exposure in mainland China is likely to squeeze their capacity for making
further inroads into that market.
4)The lowering of the interest rate ceiling on credit and cash cards to 15% from 20% is bound to undermine
banks’ interest income.
(4) Measures in Response
1)To counteract excessively low lending rates, Hua Nan will formulate a more rational strategy for pricing loans
while focusing on lending operations that offer a wider interest spread.
2)To prevent default risk early on, the Bank will bolster its lending policy, boost collateral, and strengthen the
training of lending officers.
3)Hua Nan will continue to bolster its risk management capabilities, enhance asset quality and put capital to
more efficient use.
4)With Taiwan as its home base, Hua Nan will take full advantage of the increasing financial deregulation across
the Taiwan Strait as the Bank hastens its expansion in the Asia Pacific.
2014 ANNUAL REPORT
029
T
030
eamwork
FINANCIAL STATEMENT
FINANCIAL STATEMENT
FIVE-YEARS FINANCIAL SUMMARY
1.IFRS
In thousands of NT$
Date
Item
The Bankand Subsidiaries
31.12.2012
31.12.2013
The Bank
31.12.2014
31.12.2012
31.12.2013
31.12.2014
Statements of Comprehensive Income
Net interest
Net revenues other than interest
Allowance for doubtful accounts and
guarantees
Operating expenses
Net profit before income tax from
continuing operations
Net profit from continuing operations
21,804,711
22,786,504
25,023,277
21,799,337
22,767,742
24,935,934
7,848,183
8,426,082
8,972,863
7,685,512
8,146,919
8,702,793
3,251,006
3,799,503
1,627,654
3,251,006
3,793,651
1,616,311
16,224,483
16,199,284
17,722,295
16,085,063
15,953,974
17,427,180
10,177,405
11,213,799
14,646,191
10,148,780
11,167,036
14,595,236
8,723,628
9,570,913
12,434,632
8,723,628
9,570,913
12,434,632
Net profit
8,723,628
9,570,913
12,434,632
8,723,628
9,570,913
12,434,632
Other comprehensive income
1,398,080
369,704
1,377,906
1,398,080
369,704
1,377,906
Total comprehensive income
10,121,708
9,940,617
13,812,538
10,121,708
9,940,617
13,812,538
1.33
1.41
1.84
1.33
1.41
1.84
158,886,211
170,228,684
190,540,673
158,875,946
170,216,109
190,535,026
40,125,581
40,288,320
50,430,123
40,125,581
40,288,320
50,430,123
Earning per share (by NT Dollar)
Balance Sheets
Cash and cash equivalents, Due from the
Central Bank and other banks
Financial assets at fair value through profit
or loss
Derivative financial assets for hedging
Receivables, net
Current tax assets
-
6,132
4,191
-
6,132
4,191
38,915,430
33,298,639
29,985,601
38,914,966
32,869,480
28,905,619
1,891,389
1,773,331
1,487,958
1,891,389
1,772,773
1,486,564
1,374,043,429
1,406,612,677
1,477,976,339
1,374,043,429
1,406,612,677
1,477,976,339
Available-for-sale financial assets, net
64,997,009
80,367,723
86,970,358
64,997,009
80,367,723
86,970,358
Held-to-maturity financial assets, net
283,007,275
310,881,004
266,974,564
283,007,275
310,881,004
266,974,564
Investments accounted for using equity
method, net
Other financial assets, net
81,050
75,532
70,641
1,327,605
1,420,459
2,011,107
23,556,884
35,115,925
64,611,905
23,535,884
35,013,074
63,624,870
Property and equipment, net
29,452,205
28,674,054
29,871,876
29,444,169
28,559,760
29,762,002
5,703,640
6,873,100
6,896,690
5,703,640
6,979,602
7,001,955
328,774
320,600
262,144
322,510
315,417
254,524
1,423,573
2,035,220
1,826,106
1,422,971
2,033,464
1,825,313
Investment properities, net
Intangible assets
Deferred tax assets
Other assets, net
Total assets
Deposits from the Central Bank and banks
Financial liabilities at fair value through
profit or loss
Derivative financial liabilities for hedging
951,893
1,123,312
3,157,000
938,108
1,114,025
3,138,041
2,023,364,343
2,117,674,253
2,211,066,169
2,024,550,482
2,118,450,019
2,210,900,596
89,799,416
131,875,899
100,435,752
89,799,416
131,875,899
100,435,752
23,217,504
20,656,004
22,640,898
23,217,504
20,656,004
22,640,898
113,294
86,820
41,968
113,294
86,820
41,968
Securities sold under agreements to
repurchase
22,099,286
18,183,206
26,912,231
22,169,286
18,253,206
26,982,231
Payables
35,493,749
20,806,659
25,275,575
35,454,918
20,729,911
25,206,036
Current tax liabilities
333,543
1,387,296
564,663
309,918
1,354,667
539,131
1,665,093,068
1,739,937,046
1,830,323,502
1,666,270,311
1,740,828,793
1,831,117,254
Bank debentures
38,650,000
31,650,000
37,450,000
38,650,000
31,650,000
37,450,000
Other financial liabilities
10,746,743
7,482,047
13,297,835
10,746,743
7,452,058
12,462,999
Provisions
6,064,942
5,907,404
6,291,692
6,066,294
5,909,186
6,293,411
Deferred tax liabilities
6,021,653
6,022,050
6,022,056
6,021,653
6,021,653
6,021,653
Other liabilities
2,956,906
2,985,917
1,889,618
2,956,906
2,937,917
1,788,884
Share capital
57,379,000
63,089,000
67,676,000
57,379,000
63,089,000
67,676,000
Capital surplus
24,694,777
24,694,777
24,694,777
24,694,777
24,694,777
24,694,777
Retained earnings
43,370,748
45,337,234
48,341,321
43,370,748
45,337,234
48,341,321
Deposits and remittances
Other equity
Total liabilities and equity
(2,670,286)
(2,427,106)
(791,719)
(2,670,286)
(2,427,106)
(791,719)
2,023,364,343
2,117,674,253
2,211,066,169
2,024,550,482
2,118,450,019
2,210,900,596
2014 ANNUAL REPORT
031
2. ROC GAAP
In thousands of NT $
Date
The Bank
31.12.2010
Item
31.12.2011
31.12.2012
Statements of Income
Interest income, net
16,880,076
19,574,630
21,165,409
Net income excluding interest income
10,611,579
10,459,868
9,798,737
Bad-debt expenses
6,559,251
4,760,831
5,467,323
Operating expenses
14,399,439
15,251,385
15,425,466
Income before income tax from continuing operations
6,532,965
10,022,282
10,071,357
Income after income tax from continuing operations
5,949,838
8,385,429
8,661,219
Net income
5,949,838
8,385,429
8,661,219
1.00
1.41
1.32
123,780,159
141,835,135
161,045,928
Financial assets at fair value through profit or loss, net
25,387,124
33,925,915
40,224,363
Bonds and bills purchased under resale agreements
1,773,814
349,905
-
28,254,316
43,493,032
40,723,487
1,245,812,985
1,309,023,543
1,374,043,429
Available-for-sale financial assets, net
61,402,251
65,908,870
64,997,009
Held-to-maturity financial assets, net
304,206,987
288,324,506
283,007,275
254,634
271,865
1,325,964
Other financial assets, net
10,044,891
17,342,436
21,267,120
Property and equipment, net
Earning per share (by NT Dollar)
Balance Sheets
Cash and cash equivalents, Due from the Central Bank and other banks
Receivables, net
Investments accounted for by the equity method
25,914,017
28,011,623
29,444,169
Intangible assets
559,868
417,574
322,510
Other assets, net
9,965,998
7,557,767
7,540,163
1,837,357,044
1,936,462,171
2,023,941,417
Due to the Central Bank and other banks
43,638,222
82,357,240
89,799,416
Financial liabilities at fair value through profit or loss
37,659,552
27,790,094
23,217,504
Bonds and bills sold under repurchase agreements
20,125,671
20,719,589
22,169,286
Payables
33,819,533
39,809,157
35,764,836
1,564,252,346
1,617,655,576
1,666,270,311
Total assets
31,300,000
33,650,000
38,650,000
Accrued pension liability
Financing from Central Bank and other banks, Bank debentures payable
1,710,898
1,889,730
2,261,048
7,864,112
9,476,095
10,860,037
Other liabilities
6,977,161
7,531,450
9,210,719
Share capital
43,107,000
47,671,000
57,379,000
Capital surplus
12,618,085
12,694,777
24,694,777
Retained earnings
28,576,902
31,067,394
37,166,979
5,707,562
4,150,069
6,497,504
1,837,357,044
1,936,462,171
2,023,941,417
Other equity
Total liabilities and shareholders’ equity
032
FINANCIAL STATEMENT
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders
Hua Nan Commercial Bank, Ltd.
We have audited the accompanying consolidated balance sheets of Hua Nan Commercial Bank, Ltd. (the
“Company”) and its subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements
of comprehensive income, changes in equity and cash flows for the years ended December 31, 2014 and 2013.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements of Financial
Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China.
Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company and its subsidiaries as of December 31, 2014 and 2013 and their
consolidated financial performance and their cash flows for the years ended December 31, 2014 and 2013, in
conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, the guidelines
issued by the authority, and International Financial Reporting Standards (IFRS), International Accounting Standards
(IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission
of the Republic of China.
We have also audited the parent company only financial statements of the Company as of and for the years
ended December 31, 2014 and 2013 on which we have issued an unqualified report.
March 23, 2015
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial
position, financial performance and cash flows in accordance with accounting principles and practices generally
accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and
practices to audit such consolidated financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial
statements have been translated into English from the original Chinese version prepared and used in the Republic
of China. If there is any conflict between the English version and the original Chinese version or any difference
in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated
financial statements shall prevail.
2014 ANNUAL REPORT
033
HUA NAN COMMERCIAL BANK, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars)
2014
2013
Amount
%
Amount
%
ASSETS
CASH AND CASH EQUIVALENTS (Notes 4, 6 and 39)
$
63,700,489
3
126,840,184
6
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 39)
50,430,123
DERIVATIVE FINANCIAL ASSETS FOR HEDGING (Note 4)
4,191
RECEIVABLES, NET (Notes 4, 5 and 9)
29,985,601
CURRENT TAX ASSETS (Notes 28 and 39)
1,487,958
-
1,773,331
-
1,477,976,339
67
1,406,612,677
66
DUE FROM THE CENTRAL BANK AND OTHER BANKS (Notes 4, 6, 7 and 39)
DISCOUNTS AND LOANS, NET (Notes 4, 5, 10 and 39)
$
48,142,931
2
122,085,753
6
2
40,288,320
2
-
6,132
-
2
33,298,639
2
AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET (Notes 4, 11 and 41)
86,970,358
4
80,367,723
4
HELD-TO-MATURITY FINANCIAL ASSETS, NET (Notes 4, 5, 12 and 41)
266,974,564
12
310,881,004
15
INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD, NET (Notes 4 and 13)
70,641
-
75,532
-
OTHER FINANCIAL ASSETS, NET (Notes 4 and 14)
64,611,905
3
35,115,925
2
29,871,876
1
28,674,054
1
PROPERTY AND EQUIPMENT, NET (Notes 4, 15 and 40)
6,873,100
-
INTANGIBLE ASSETS (Notes 4, 17 and 40)
INVESTMENT PROPERTIES, NET (Notes 4, 16 and 40)
262,144
6,896,690
-
320,600
-
DEFERRED TAX ASSETS (Notes 4, 5 and 28)
1,826,106
-
2,035,220
-
OTHER ASSETS, NET (Notes 4, 18 and 41)
3,157,000
-
1,123,312
TOTAL
$
2,211,066,169
100
$ 2,117,674,253
100
DEPOSITS FROM THE CENTRAL BANK AND BANKS (Notes 19 and 39)
$
100,435,752
5
$131,875,899
6
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 39)
22,640,898
1
20,656,004
1
DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING (Note 4)
41,968
-
86,820
-
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
(Notes 4, 8, 11, 12, 14, 20 and 39)
26,912,231
1
18,183,206
1
PAYABLES (Note 21)
25,275,575
1
20,806,659
1
CURRENT TAX LIABILITIES (Notes 28 and 39)
564,663
-
1,387,296
-
1,830,323,502
83
1,739,937,046
82
BANK DEBENTURES (Note 23)
37,450,000
2
31,650,000
2
OTHER FINANCIAL LIABILITIES (Note 24)
13,297,835
1
7,482,047
1
-
LIABILITIES AND EQUITY
DEPOSITS AND REMITTANCES (Notes 22 and 39)
PROVISIONS (Notes 4, 5, 25 and 26)
6,291,692
-
5,907,404
-
DEFERRED TAX LIABILITIES (Notes 4 and 28)
6,022,056
-
6,022,050
-
OTHER LIABILITIES (Note 27)
Total liabilities
1,889,618
-
2,985,917
2,071,145,790
94
1,986,980,348
94
-
67,676,000
3
63,089,000
3
24,694,777
1
24,694,777
1
1
EQUITY (Notes 4 and 29)
Share capital
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
28,013,015
1
25,141,742
Special reserve
6,322,780
-
8,795,268
-
Unappropriated earnings
14,005,526
1
11,400,224
1
Total retained earnings
48,341,321
2
45,337,234
2
Other equity
Exchange differences on translating foreign operations
860,598
-
4,017
-
Unrealized loss on available-for-sale financial assets
(1,652,317)
-
(2,431,123)
-
(791,719)
-
(2,427,106)
-
139,920,379
6
130,693,905
6
$
100
$ 2,117,674,253
100
Total other equity
Total equity
TOTAL
The accompanying notes are an integral part of the consolidated financial statements.
034
FINANCIAL STATEMENT
2,211,066,169
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars, Except Per Share Amounts)
2014
Percentage
Increase
(Decrease)
%
2013
Amount
%
Amount
INTEREST REVENUE (Notes 4, 30 and 39)
$
38,551,086
114
INTEREST EXPENSE (Notes 4, 30 and 39)
(13,527,809)
NET INTEREST
$
%
34,584,556
111
11
(40)
(11,798,052)
(38)
15
25,023,277
74
22,786,504
73
10
Commission and fee revenues, net (Notes 4, 31 and 39)
6,262,383
18
5,299,890
17
18
Gain on financial assets and liabilities at fair value through
profit or loss (Notes 4 and 32)
4,107,291
12
2,991,501
9
37
Realized gain on available-for-sale financial assets
(Notes 4 and 33)
324,868
1
565,309
2
(43)
Foreign exchange loss, net (Note 4)
(2,233,016)
(7)
(1,197,930)
(4)
86
Share of loss of associate (Notes 4 and 13)
(4,891)
-
(5,518)
-
(11)
Gain on financial assets carried at cost, net
204,018
1
225,954
1
(10)
Other noninterest net revenues (Notes 4 and 34)
312,210
1
546,876
2
(43)
8,972,863
26
8,426,082
27
6
TOTAL NET REVENUES
33,996,140
100
31,212,586
100
9
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND GUARANTEES
(Notes 4, 9, 10, 14 and 25)
(1,627,654)
(5)
(3,799,503)
(12)
(57)
Employee benefits
(11,585,291)
(34)
(10,716,956)
(34)
8
Depreciation and amortization
(769,234)
(2)
(772,723)
(3)
Others
(5,367,770)
(16)
(4,709,605)
(15)
14
Total operating expenses
(17,722,295)
(52)
(16,199,284)
(52)
9
NET PROFIT BEFORE INCOME TAX
14,646,191
43
11,213,799
36
31
INCOME TAX EXPENSE (Notes 4 and 28)
(2,211,559)
(6)
(1,642,886)
(5)
35
NET PROFIT FOR THE YEAR
12,434,632
37
9,570,913
31
30
Exchange differences on translating
foreign operations
856,581
3
201,815
1
324
Unrealized gain on available-for-sale
financial assets
778,806
2
41,365
-
1,783
Actuarial (loss) gain arising from
defined benefit plans
(310,218)
(1)
152,439
-
(304)
Income tax relating to the components
of other comprehensive income
-
(25,915)
-
303
1,377,906
4
369,704
1
273
$
13,812,538
41
$
9,940,617
32
39
$
1.84
$
1.41
NET REVENUES OTHER THAN INTEREST
Total net revenues other than interest
OPERATING EXPENSES (Notes 26, 35, 36, 37 and 39)
-
OTHER COMPREHENSIVE INCOME
(Notes 4, 26, 28 and 29)
Other comprehensive income for the year
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR
52,737
EARNINGS PER SHARE (Note 38)
Basic
2014 ANNUAL REPORT
035
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital Surplus
Capital Stock
Share Premium
BALANCE AT JANUARY 1, 2013
$
57,379,000
$
Others
24,693,452
$
Total
1,325
$
24,694,777
Appropriation of 2012 earnings (Note)
Legal reserve
-
-
-
-
Special reserve
-
-
-
-
Cash dividends
-
-
-
-
Share dividends
5,710,000
-
-
-
-
-
-
-
Net profit for the year ended December 31, 2013
Other comprehensive income for the year ended
December 31, 2013
-
-
-
-
Total comprehensive income for the year ended
December 31, 2013
-
-
-
-
BALANCE AT DECEMBER 31, 2013
63,089,000
24,693,452
1,325
24,694,777
Legal reserve
-
-
-
-
Special reserve
-
-
-
-
Cash dividends
-
-
-
-
Share dividends
4,587,000
-
-
-
-
-
-
-
Appropriation of 2013 earnings (Note)
Net profit for the year ended December 31, 2014
Other comprehensive (loss) income for the year ended
December 31, 2014
-
-
-
-
Total comprehensive income for the year ended
December 31, 2014
-
-
-
-
BALANCE AT DECEMBER 31, 2014
$
67,676,000
$
24,693,452
$
1,325
Note: Employees bonus amounting to $539,280 and $618,472 had been charged against earnings of 2013 and 2012, respectively.
036
FINANCIAL STATEMENT
$
24,694,777
Retained Earnings
Legal Reserve
$
Special Reserve
22,543,375
$
10,463,319
Other Equity
Unappropri-ated
Earnings
$
10,364,054
Exchange
Differences on
Translating
Foreign
Operations
Total
$
43,370,748
($
Unrealized (Loss)
Gain on
Available-forsale Financial
Assets
197,798)
($
2,472,488)
Total
$
122,774,239
2,598,367
-
(2,598,367)
-
-
-
-
-
(1,668,051)
1,668,051
-
-
-
-
-
-
(2,020,951)
(2,020,951)
-
-
(2,020,951)
-
-
(5,710,000)
(5,710,000)
-
-
-
-
-
9,570,913
9,570,913
-
-
9,570,913
-
-
126,524
126,524
201,815
41,365
369,704
-
-
9,697,437
9,697,437
201,815
41,365
9,940,617
25,141,742
8,795,268
11,400,224
45,337,234
4,017
(2,431,123)
130,693,905
2,871,273
-
(2,871,273)
-
-
-
-
-
(2,472,488)
2,472,488
-
-
-
-
-
-
(4,586,064)
(4,586,064)
-
-
(4,586,064)
-
-
(4,587,000)
(4,587,000)
-
-
-
-
-
12,434,632
12,434,632
-
-
12,434,632
-
-
(257,481)
(257,481)
-
-
12,177,151
12,177,151
856,581
778,806
13,812,538
$
$
$
($
$
$
28,013,015
$
6,322,780
14,005,526
48,341,321
856,581
860,598
778,806
1,652,317)
2014 ANNUAL REPORT
1,377,906
139,920,379
037
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31
2014
2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before income tax
$
14,646,191
$
11,213,799
Adjustments for:
Depreciation expenses
Amortization expenses
Allowance for doubtful accounts and guarantees
640,122
647,813
135,632
137,401
1,627,654
3,799,503
Interest expense
15,545,855
13,343,922
Interest revenue
(39,817,845)
(35,830,042)
Gain on disposal of collaterals assumed
Share of loss of associate
Gain on disposal of property and equipment
Impairment loss on financial assets
Reversal of impairment loss on non-financial assets
-
(23,547)
4,891
5,518
(801)
(870)
3,421
-
-
(8,134)
7,740,493
1,842,338
(10,141,803)
(162,739)
1,941
(6,132)
Changes in operating assets and liabilities
Decrease in due from the Central Bank and other banks
Increase in financial assets at fair value through profit or loss
Increase in derivative financial assets for hedging
3,606,641
5,656,407
Increase in discounts and loans
Decrease in receivables
(72,688,595)
(36,232,320)
Increase in available-for-sale financial assets
(5,823,829)
(15,329,349)
43,906,440
(27,847,176)
Increase in other financial assets
(29,583,144)
(11,709,872)
(Decrease) increase in deposits from the Central Bank and banks
(31,440,147)
42,076,483
1,984,894
(2,561,500)
Decrease (increase) in held-to-maturity financial assets
Increase (decrease) in financial liabilities at fair value through profit or loss
Decrease in derivative financial liabilities for hedging
Increase (decrease) in securities sold under agreements to repurchase
Increase (decrease) in payables
Increase in deposits and remittances
Increase (decrease) in other financial liabilities
(44,852)
(26,474)
8,729,025
(3,916,080)
3,770,913
(13,952,498)
90,386,456
74,843,978
5,815,788
(3,264,696)
Decrease in provisions
(585,491)
(412,334)
(Decrease) increase in other liabilities
(1,096,299)
29,011
7,323,551
2,312,410
39,396,446
35,754,752
Interest paid
(15,167,222)
(13,681,846)
Income tax paid
(1,692,184)
(1,098,517)
29,860,591
23,286,799
(1,869,990)
(1,113,253)
914
1,774
(63,003)
(47,110)
Cash generated from operations
Interest received
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment
Proceeds from disposal of property and equipment
Acquisition of intangible assets
038
FINANCIAL STATEMENT
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31
2014
Proceeds from disposal of collaterals assumed
2013
-
31,681
Acquisition of investment properties
(1,930)
(2,870)
Increase in other assets
(2,037,109)
(157,287)
(3,971,118)
(1,287,065)
15,000,000
-
Repayment of bank debentures on maturity
(9,200,000)
(7,000,000)
Cash dividend
(4,586,541)
(2,021,686)
Net cash provided by (used in) financing activities
1,213,459
(9,021,686)
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES
949,550
206,763
28,052,482
13,184,811
100,712,675
87,527,864
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Bank debentures issued
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
$
128,765,157
$
100,712,675
Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the consolidated balance sheets
at December 31, 2014 and 2013:
December 31
2014
63,700,489
2013
Cash and cash equivalents in consolidated balance sheets
$
Due from the Central Bank and other banks that meet the definition
of cash and cash equivalents in IAS 7
65,064,668
52,569,744
Cash and cash equivalents in consolidated statements of cash flows
$
$
128,765,157
$
48,142,931
100,712,675
2014 ANNUAL REPORT
039
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1.ORGANIZATION
Hua Nan Commercial Bank, Ltd. (the “Company”) was established on March 1, 1947 through the restructuring of the
Hua Nan Bank, which was founded in 1919. The Company engages in (a) all commercial banking operations allowed
by the Banking Act; (b) offshore banking business; (c) overseas branch operations authorized by the respective foreign
governments; and (d) other operations as authorized by the central competent authorities.
The Company maintains its head office in Taipei. As of December 31, 2014, the Company had Banking, Financial Trading,
International Banking and Trust Departments as well as 186 domestic branches, an offshore banking unit (OBU), 9 overseas
branches, 1 overseas subbranch, and 1 overseas representative office.
The operations of the Company’s Trust Department are (1) trust business planning, managing and operating and (2)
custody of nondiscretionary trust funds in domestic and overseas securities and mutual funds. These operations are
regulated under the Banking Act and the Trust Enterprise Act.
Under the Financial Holding Company Act, the Company and EnTrust Securities Co., Ltd. (“EnTrust”) established Hua Nan
Financial Holdings Co., Ltd. (HNFH), a financial holding company, through stock conversion agreement on November 14,
2001. The parties established the holding company to maximize the benefit of their combined capital, pool their business
channels, and fully harness the synergy of the diversified business operations. The Company and EnTrust exchanged
issued shares with HNFH at ratios of 1:1 and 1.2821:1 (“1” refers to HNFH), respectively, and the stockholders approved this
share swap on November 14, 2001. The board of directors resolved the effective date of stock conversion agreement as
December 19, 2001. Thus, the shares of the Company became delisted on the Taiwan Stock Exchange Corporation (TSEC)
on December 19, 2001. EnTrust was renamed Hua Nan Securities Co., Ltd. (HNSC) in June 2003. The Company and HNSC
became wholly owned subsidiaries of HNFH.
HNCB Insurance Agency Co., Ltd. (HNCB Insurance Agency) was incorporated in accordance with the Company Law on
March 21, 2001 and mainly engages in the life insurance agency business. The Company holds 100% ordinary shares of
HNCB Insurance Agency.
Hua Nan International Leasing Co., Ltd. (HNILC) was incorporated in accordance with the Company Law on July 13, 2012
and mainly engages in financing leasing business. The Company holds 100% ordinary shares of HNILC.
Hua Nan International Leasing Corporation (HNILC Shenzhen) was established on October 25, 2012 and mainly engages in
financing leasing business. HNILC holds 100% ordinary shares of HNILC Shenzhen.
For the purposes of integrating resources, maximizing operating effectiveness, strengthening the capital structure and for
long-term development, the Company acquired Hua Nan Bills Finance Corporation (HNBF) upon approval of both board
of directors (acting on stockholders’ behalf). The acquisition was carried out by absorption treatment. The Company was
the surviving company while HNBF was the dissolved company. The reference date of acquisition was on May 23, 2008.
The Company purchased the rest of the outstanding stocks with $10 per share in cash. This acquisition was approved by
the Financial Supervisory Commission on April 21, 2008.
The Company’s ultimate parent is HNFH, which holds 100% ordinary shares of the Company.
The functional currency of the Company is New Taiwan dollars, and the consolidated financial statements are presented in
New Taiwan dollars.
As of December 31, 2014 and 2013, the Company and its subsidiaries had 7,034 and 7,196 employees, respectively.
2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the board of directors on March 23, 2015.
3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS
a. The Criteria Governing the Preparation of Financial Reports by Public Bank, the 2013 version of the International Financial
Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations
of IAS (SIC) in issue but not yet effective
040
Rule No. 10310006010 and 1030010325 issued by the FSC, stipulated that the Company and its subsidiaries should apply
the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments
to the Criteria Governing the Preparation of Financial Reports by Public Bank starting January 1, 2015.
FINANCIAL STATEMENT
New, Amended and Revised
Standards and Interpretations (the “New IFRSs”)
Effective Date
Announced by IASB (Note)
Improvements to IFRSs (2009) - amendment to IAS 39
January 1, 2009 and January 1, 2010, as appropriate
Amendment to IAS 39 “Embedded Derivatives”
Effective for annual periods ending on or after June 30, 2009
Improvements to IFRSs (2010)
July 1, 2010 and January 1, 2011, as appropriate
Annual Improvements to IFRSs 2009-2011 Cycle
January 1, 2013
Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7
Disclosures for First-time Adopters”
July 1, 2010
Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed Dates
for First-time Adopters”
July 1, 2011
Amendment to IFRS 1 “Government Loans”
January 1, 2013
Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial
Liabilities”
January 1, 2013
IFRS 10 “Consolidated Financial Statements”
January 1, 2013
Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets”
July 1, 2011
IFRS 11 “Joint Arrangements”
January 1, 2013
IFRS 12 “Disclosure of Interests in Other Entities”
January 1, 2013
Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated Financial
Statements, Joint Arrangements and Disclosure of Interests in Other Entities:
Transition Guidance”
January 1, 2013
Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment Entities”
January 1, 2014
IFRS 13 “Fair Value Measurement”
January 1, 2013
Amendment to IAS 1 “Presentation of Other Comprehensive Income”
July 1, 2012
Amendment to IAS 12 “Deferred Tax: Recovery of Underlying Assets”
January 1, 2012
IAS 19 (Revised 2011) “Employee Benefits”
January 1, 2013
IAS 28 (Revised 2011) “Investments in Associates and Joint Ventures”
January 1, 2013
Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities”
January 1, 2014
IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”
January 1, 2013
Note:Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.
Except for the following, the initial application of the above 2013 IFRSs version and the related amendments to the Criteria
Governing the Preparation of Financial Reports by Public Bank have not had any material impact on the Company and its
subsidiaries’ accounting policies:
1)IFRS 10 “Consolidated Financial Statements”
IFRS 10 replaces IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “Consolidation - Special Purpose
Entities”. The Company and its subsidiaries consider whether it has control over other entities for consolidation. The
Company and its subsidiaries have control over an investee if and only if it has i) power over the investee; ii) exposure,
or rights, to variable returns from its involvement with the investee and iii) the ability to use its power over the investee
to affect the amount of its returns. Additional guidance has been included in IFRS 10 to explain when an investor has
control over an investee.
2)IFRS 12 “Disclosure of Interests in Other Entities”
IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements,
associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more
extensive than in the current standards.
2014 ANNUAL REPORT
041
3)Revision to IAS 28 “Investments in Associates and Joint Ventures”
Revised IAS 28 requires when a portion of an investment in an associate meets the criteria to be classified as held
for sale, that portion is classified as held for sale. Any retained portion that has not been classified as held for sale is
accounted for using the equity method. Under current IAS 28, when a portion of an investment in associates meets the
criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity
method.
4)IFRS 13 “Fair Value Measurement”
IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework
for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13
are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures
based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13
to cover all assets and liabilities within its scope.
The fair value meaurements under IFRS 13 will be applied prospectively from January 1, 2015.
5)Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not
be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on
related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such
requirements.
The Company and its subsidiaries will retrospectively apply the above amendments starting from 2015. Items not
expected to be reclassified to profit or loss are the actuarial gain (loss) arising from defined benefit plans and share of
the actuarial gains (loss) arising from defined benefit plans of associates accounted for using the equity method. Items
expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized
valuation gains (loss) on available-for-sale financial assets, and share of the other comprehensive income (except the
share of the actuarial gains (loss) arising from defined benefit plans) of associates and joint ventures accounted for using
the equity method. However, the application of the above amendments will not result in any impact on the net profit for
the year, other comprehensive income for the year (net of income tax), and total comprehensive income for the year.
6)Revision to IAS 19 “Employee Benefits”
Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets
when they occur, and hence eliminates the “corridor approach” permitted under current IAS 19 and accelerate the
recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized
immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of
the plan deficit or surplus.
All actuarial gains and losses of the Company and its subsidiaries, which happened during the period, had immediately
recognized in other comprehensive profit and loss. As a result, this does not cause any changes in accounting treatment after excluding “corridor approach”.
Furthermore, the interest cost and expected return on plan assets used in current IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition,
the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more
extensive disclosures.
On initial application of the revised IAS 19 in 2015, the changes in cumulative employee benefit costs as of December
31, 2013 resulting from the retrospective application have no effect to net defined benefit assets, deferred tax assets
and retained earnings.
In preparing the consolidated financial statements for the year ended December 31, 2015, the Company and its
subsidiaries would elect not to present 2014 comparative information about the sensitivity of the defined benefit
obligation.
The anticipated impact of the initial application of the revised IAS 19 is detailed as follows:
Impact on Assets, Liabilities and Equity
Carrying Amount
Adjustments Arising
from Initial Application
Adjusted Carrying
Amount
December 31, 2014
Deferred tax assets
$
1,826,106
$
-
$
1,826,106
Total effect on assets
$
1,826,106
$
-
$
1,826,106
042
FINANCIAL STATEMENT
Impact on Assets, Liabilities and Equity
Carrying Amount
Adjustments Arising
Adjusted Carrying
Amount
Defined benefit liabilities
$
4,815,804
$
-
$
4,815,804
Total effect on liabilities
$
4,815,804
$
-
$
4,815,804
Retained earnings
$
48,341,321
$
-
$
48,341,321
Total effect on equity
$
48,341,321
$
-
$
48,341,321
Deferred tax assets
$
2,035,220
$
-
$
2,035,220
Total effect on assets
$
2,035,220
$
-
$
2,035,220
Defined benefit liabilities
$
4,737,726
$
-
$
4,737,726
Total effect on liabilities
$
4,737,726
$
-
$
4,737,726
Retained earnings
$
45,337,234
$
-
$
45,337,234
Total effect on equity
$
45,337,234
$
-
$
45,337,234
January 1, 2014
Impact on Total Comprehensive Income
Carrying Amount
Adjustments Arising
Adjusted Carrying
Amount
For the year ended December 31, 2014
Operating expense
$
17,722,295
$
8
$
17,722,303
Income tax expense
$
2,211,559
($
1)
$
2,211,559
Total effect on net profit for the year
$
12,434,632
($
7)
$
12,434,625
$
8
($
($
1)
$
52,736
Items that will not be reclassified to profit or loss:
Remeasurements of the defined benefit plan
($
310,218)
Income taxes relating to items that will not be reclassified
$
52,737
Total effect on other comprehensive
income for the year, net of income tax
$
1,377,906
$
7
$
1,377,913
Total effect on total comprehensive income for the year
$
13,812,538
-
$
13,812,538
310,210)
7)Amendments to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities”
The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as
collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar
arrangements.
8)Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”
The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities.
Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and
“simultaneous realization and settlement”.
2014 ANNUAL REPORT
043
9)Recognition and measurement of financial liabilities designated as at fair value through profit or loss
In accordance with the amendments to the Regulations Governing the Preparation of Financial Reports by Public Bank,
for financial liabilities designated as at fair value through profit or loss, the amount of change in the fair value attributable
to changes in the credit risk of that liability is presented in other comprehensive income and the remaining amount
of change in the fair value of that liability is presented in profit or loss. Changes in fair value attributable to a financial
liability’s credit risk are not subsequently reclassified to profit or loss. If the above accounting treatment would create or
enlarge an accounting mismatch, all gains or losses on that liability are presented in profit or loss.
The Company and its subsidiaries had issued bank debentures and designated the financial liabilities as at fair value
through profit or loss. Upon application of the above amendments, as of January 1, 2014, the anticipated impact is a
decrease in retained earnings and an increase in other equity by $222,820.
b. New IFRSs in issue but not yet endorsed by FSC
The Company and its subsidiaries has not applied the following New IFRSs issued by the IASB but not yet endorsed by the
FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their
effective dates.
New IFRSs
Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 4)
IFRS 9 “Financial Instruments”
January 1, 2018
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures”
January 1, 2018
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture”
January 1, 2016 (Note 3)
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: Applying the Consolidation
Exception”
January 1, 2016
Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations”
January 1, 2016
IFRS 14 “Regulatory Deferral Accounts”
January 1, 2016
IFRS 15 “Revenue from Contracts with Customers”
January 1, 2017
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and
Amortization”
January 1, 2016
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants”
January 1, 2016
Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions”
July 1, 2014
Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial
Assets”
January 1, 2014
Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting”
January 1, 2014
IFRIC 21 “Levies”
January 1, 2014
Note 1:Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2:The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business
combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual
periods beginning on or after July 1, 2014.
Note 3:Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, 2016.
Note 4:The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the
remaining amendments are effective for annual periods beginning on or after January 1, 2016.
The initial application of the above New IFRSs has not had any material impact on Company and its subsidiaries
accounting policies, except for the following:
1)IFRS 9 “Financial Instruments”
With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments:
Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the
requirement for the classification of financial assets is stated below.
For the Company and its subsidiaries’ debt instruments that have contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding, their classification and measurement are as follows:
a)For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows,
the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment
loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest
method;
044
FINANCIAL STATEMENT
b)For debt instruments, if they are held within a business model whose objective is achieved by both the collecting
of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through
other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit
or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive
income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments
are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is
reclassified from equity to profit or loss.
Except for above, all other financial assets are measured at fair value through profit or loss. However, the Company
and its subsidiaries may make an irrevocable election to present subsequent changes in the fair value of an equity
investment (that is not held for trading) in other comprehensive income, with only dividend income generally
recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss
previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.
The impairment of financial assets
IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”.
The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily
measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with
Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month
expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial
recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has
increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected
credit losses is required for trade receivables that do not constitute a financing transaction.
For purchased or originated credit-impaired financial assets, the Company and its subsidiaries take into account the
expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently,
any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in
profit or loss.
Hedge accounting
The main changes in hedge accounting amended the application requirements for hedge accounting to better
reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing
types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting
of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or
loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship
between the hedging instrument and the hedged item.
2)Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in
IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of
an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required
only when an impairment loss has been recognized or reversed during the period. Furthermore, the Company and its
subsidiaries are required to disclose the discount rate used in measurements of the recoverable amount based on fair
value less costs of disposal measured using a present value technique.
3)Annual Improvements to IFRSs: 2010-2012 Cycle
Several standards including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating
Segments” were amended in this annual improvement.
The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions
for “performance condition” and “service condition”. The amendment clarifies that a performance target can be
based on the operations (i.e. a non-market condition) of the Company and its subsidiaries or another entity in the
same Company and its subsidiaries or the market price of the equity instruments of the Company and its subsidiaries or
another entity in the same Company and its subsidiaries (i.e. a market condition); that a performance target can relate
either to the performance of the Company and its subsidiaries as a whole or to some part of it (e.g. a division); and that
the period for achieving a performance condition must not extend beyond the end of the related service period. In
addition, a share market index target is not a performance condition because it not only reflects the performance of
the Company and its subsidiaries, but also of other entities outside the Company and its subsidiaries.
IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether
the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should
be recognized in profit or loss.
2014 ANNUAL REPORT
045
The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation
criteria to operating segments, including a description of the operating segments aggregated and the economic
indicators assessed in determining whether the operating segments have “similar economic characteristics”. The
amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should
only be provided if the segments’ assets are regularly provided to the chief operating decision-maker.
IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables
and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is
immaterial.
IAS 24 was amended to clarify that a management entity providing key management personnel services to the
Company and its subsidiaries is a related party of the Company and its subsidiaries. Consequently, the Company
and its subsidiaries are required to disclose as related party transactions the amounts incurred for the service paid or
payable to the management entity for the provision of key management personnel services. However, disclosure of the
components of such compensation is not required.
Several standards, including IFRS 3, IFRS 13 and IAS 40 “Investment Property”, were amended in this annual improvement.
IFRS 3 was amended to clarify that IFRS 3 does not apply to the accounting for the formation of all types of joint
arrangements in the financial statements of the joint arrangement itself.
The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial
liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted
for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial
liabilities within IAS 32.
IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may
be required to determine whether the investment property acquired is acquisition of an asset or a business combination.
5)Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”
The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future
economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the
entity.
The amended IAS 16 “Property, Plant and Equipment” requires that a depreciation method that is based on revenue
that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not
provide any exception from this requirement.
The amended IAS 38 “Intangible Assets” requires that there is a rebuttable presumption that an amortization method
that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate.
This presumption can be overcome only in the following limited circumstances:
a)In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the
entity’s use of the intangible asset will expire upon achievement of a revenue threshold); or
b)When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset
are highly correlated.
An entity should apply the aforementioned amendments prospectively for annual periods beginning on or after the
effective date.
The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement
in a transferred asset.
Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the
Company and its subsidiaries are continuingly assessing the possible impact that the application of other standards
and interpretations will have on the Company and its subsidiaries’ financial position and financial performance, and will
disclose the relevant impact when the assessment is complete.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
Statement of Compliance
The consolidated financial statements have been prepared in accordance with Regulations Governing the Preparation of
Financial Reports by Public Banks, the guidelines issued by the authority, and IFRS endorsed by the FSC.
Basis of Preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial instruments
measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for
assets.
046
FINANCIAL STATEMENT
Since the operating cycle in the banking industry cannot be reasonably identified, the accounts included in the Company
and its subsidiaries financial statements were not classified as current or noncurrent. Nevertheless, accounts were properly
categorized in accordance with the nature of each account and sequenced by their liquidity. Please refer to Note 44 for
the maturity analysis of assets and liabilities.
The significant accounting policies are set out as below.
Principles for Preparing Consolidated Financial Statements
The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by
the Company (i.e. its subsidiaries).
When necessary, adjustments are made to the financial statements of its subsidiaries to bring its accounting policies into
line with those used by the Company.
All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.
The consolidated entities as of December 31, 2014 and 2013 were as follows:
Investor
Investee
Main Business
% of Ownership
December 31
2014
2013
Hua Nan Commercial Bank Ltd.
HNCB Insurance Agency Co., Ltd.
Life insurance agency
100
100
Hua Nan Commercial Bank Ltd.
Hua Nan International Leasing Co., Ltd.
Financial leasing
100
100
Hua Nan International Leasing Co., Ltd.
Hua Nan International Leasing Corporation
Financial leasing
100
100
Foreign Currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions.
At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates
prevailing at that date.
Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured at historical cost in
a foreign currency are not retranslated. Exchange differences on monetary items arise from settlement or translation are
recognized in profit or loss in the period in which they arise.
Exchange differences arising on the retranslation of nonmonetary assets (such as equity instruments) or liabilities measured
at fair value are included in profit or loss for the period at the rates prevailing at the end of reporting period except for
exchange differences arising on the retranslation of nonmonetary items in respect of which gains and losses are recognized
directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other
comprehensive income.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company and its
subsidiaries’ foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of
each reporting period. Income and expense items are translated at the average exchange rates for the period. Unless
exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions
are used. Exchange differences arising are recognized in other comprehensive income and accumulated in equity.
Cash and Cash Equivalents
Cash and Cash equivalents include cash on hand, demand deposits, time deposits that can be readily terminated without
deduction of principal, and highly liquid investments that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. For consolidated statement of cash flows, cash and cash equivalents
include cash and cash equivalents in consolidated balance sheets, and those amounts of due from the Central Bank and
other banks and securities purchased under agreements to resell that meet the definition of cash and cash equivalents in
IAS 7, etc.
Investment in Associates
An associate is an entity over which the Company and its subsidiaries have significant influence and that is neither a
subsidiary nor an interest in a joint venture.
The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the
equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and
adjusted thereafter to recognize the Company and its subsidiaries’ share of the profit or loss and other comprehensive
income of the associate. The Company and its subsidiaries also recognize the changes in the Company and its
subsidiaries’ share of equity of associates.
2014 ANNUAL REPORT
047
The additional impairment loss of an associate was measured and recognized by using IAS 39 “Financial Investments:
Recognition and Measurement”.
The entire carrying amount of the investment is tested for impairment as a single asset by comparing its recoverable
amount with its carrying amount (the higher of fair value less costs to sell and value in use) with its carrying amount under
IAS 36 “Impairment of Assets”. Any impairment loss recognized forms part of the carrying amount of the investment. Any
reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently
increases under IAS 36 “Impairment of Assets”.
Financial Instruments
Financial assets and financial liabilities are recognized when the Company and its subsidiaries become a party to the
contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Trade
date basis means that when financial assets are purchased or sold, the delivery date was within the period prescribed by
regulation or market practice.
a. Measurement category
Financial assets are classified into the following specified categories: Financial assets at fair value through profit or loss,
held-to-maturity investments, available-for-sale financial assets and loans and receivables.
1)Financial assets at fair value through profit or loss
Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is
designated as at fair value through profit or loss.
A financial asset is classified as held for trading if:
a)The main purpose to obtain those financial assets is to sell in a short term;
b)The financial assets recognized initially are part of the identified financial instruments combined for management and
were held for short-term profit; or
c)Derivative financial instruments (except for financial guarantee contracts and derivative financial instruments
designated for hedge).
A financial asset may be designated as at fair value through profit or loss upon initial recognition if:
a)Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise; or
b)The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed in
accordance with the Company and its subsidiaries’ documented risk management or investment strategy, and
evaluated on a fair value basis, and information about the grouping is provided internally on that basis.
Furthermore, the contract contains one or more embedded derivatives so that the entire hybrid (combined) contract
can be designated as at fair value through profit or loss.
Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend
or interest earned on the financial asset.
Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows: Publicly
traded stocks - at closing prices; open-end mutual funds - at net asset values; domestic bonds - at prices quoted
by the Taiwan GreTai Securities Market; overseas bonds - at prices quoted by the Bloomberg, the Reuters or the
counterparty in transactions and financial assets and financial liabilities without quoted prices in an active market - at
values determined using valuation techniques.
2)Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity
dates that the Company and its subsidiaries have the positive intent and ability to hold to maturity other than those that
the Company and its subsidiaries upon initial recognition designate as at fair value through profit or loss, or designate as
available for sale, or meet the definition of loans and receivables.
048
FINANCIAL STATEMENT
Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective
interest method less any impairment.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees and points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
3)Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified
as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale
monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using
the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss.
Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive
income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss that previously
accumulated in the investments revaluation reserve is reclassified to profit or loss.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company and its subsidiaries’
rights to receive the dividends are established.
Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted
equity investments are measured at cost less any identified impairment loss at the end of each reporting period and
are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the
financial assets cannot be reliably measured, the financial assets are remeasured at fair value. The difference between
carrying amount and fair value is recognized in other comprehensive income on financial assets and recognized in profit
or loss when impairment loss is identified.
4)Loans and receivables
Loans and receivables are non-derivatives with fixed or determinable payments that do not have a quoted market
price in an active market.
Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.
Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect
of discounting is immaterial.
b. Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash
flows of the investment have been affected.
In determining the allowance for credit losses and provision for losses on guarantees, the Company and its subsidiaries
assess the collectability of discounts and loans, receivables, and other financial assets (remittance purchased and
nonperforming loans transferred from other than loans), as well as guarantees and acceptances as of the balance
sheet date.
Loans and receivables are assessed for impairment at the end of each reporting period and considered to be impaired
when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the
foregoing discounts and loans, receivables, and other financial assets, the estimated future cash flows of the asset have
been affected. Objective evidence of impairment could include:
• Overdue loans;
• Loans reclassified as nonperforming loans;
• Debt consultation/debt clearance/individual consultation; or
• The poverty-relief household handled the renewal of matured loans, repayment deferral, and negotiation of
repayment plan under “The Bankers Association of the Republic of China (BAROC) Member Self-Discipline System for
Negotiation with Debtors”.
Discounts and loans, receivables, and other financial assets that are assessed as not impaired individually are further
assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of discounts and loans,
receivables, and other financial assets could include the Company and its subsidiaries’ past experience of collecting
payments and an increase in the number of delayed payments, as well as observable changes in national or local
economic conditions that correlate with defaults on loans and receivables.
2014 ANNUAL REPORT
049
The amount of the impairment loss recognized is the difference between the asset carrying amount and the present
value of estimated future cash flows, after taking into account the related collaterals and guarantees, discounted at
the original effective interest rates. The carrying amount of the discounts and loans, receivables, and other financial
assets is reduced through the use of an allowance account.
Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with
Nonperforming/Nonaccrual Loans” (the “Regulations”), the Company and its subsidiaries evaluates credit losses on the
basis of the estimated collectability. In accordance with the Regulations, credit assets are classified as normal assets,
assets that require special mentioned, assets with substandard, assets with doubtful collectability, and assets on which
there is loss.
Based on the above Regulations, the minimum allowance for credit losses and provision for losses on guarantees for the
normal assets, assets that require special mentioned, assets that are substandard, assets with doubtful collectability, and
assets on which there is loss should be 1%, 2%, 10%, 50% and 100% of outstanding, respectively.
In addition, for improvement of risk affordability, FSC issued No. 10300329440 letter that requires domestic banks allocate
at least 1.5% allowance of repairing loans and construction loans before 2016.
The Company and its subsidiaries recognized allowance for loans and receivables in accordance with “Regulations
of the Procedures for Banking Institutions to Evaluate Assets and Deal with Past - Due/Non-Performing Loans” and the
test of impairment for financial assets. The larger amounts will be set as the standard of recognizing the allowance for
doubtful accounts.
The Company and its subsidiaries wrote off bad loans based on the possibilities of recovering overdue receivables as
well as non-performing loans and the values of collateral after the revaluation was approved by the board of directors.
When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized
in other comprehensive income are reclassified to profit or loss in the period.
In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive
income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale
debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the
investment can be objectively related to an event occurring after the recognition of the impairment loss.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced through the book value except for discounts and loans which is
reduced through the use of allowance account. When those discounts and loans are considered uncollectible, they
are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or
loss.
c. Derecognition of financial assets
The Company and its subsidiaries derecognize a financial asset only when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum
of the consideration received and receivable and the cumulative gain or loss that had been recognized in other
comprehensive income and accumulated in equity is recognized in profit or loss.
Financial liabilities
a. Measurement and recognition
Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest
method:
Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or
it is designated as at fair value through profit or loss.
A financial liability is classified as held for trading if:
1)The main purpose is to repurchase in a short term;
2)The financial liabilities recognized initially are part of the identified financial instruments combined for management
and were held for short-term profit; or
3)Derivative financial instruments (except for financial guarantee contracts and derivative financial instruments
designated for hedge).
050
FINANCIAL STATEMENT
A financials liability may be designated as at fair value through profit or loss upon initial recognition if the recognition
results in more relevant information and if:
1) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise; or
2) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed in
accordance with the Company and its subsidiaries’ documented risk management or investment strategy and is
evaluated on a fair value basis and information about the grouping is provided internally on that basis.
Furthermore, the contract contains one or more embedded derivatives so that the entire combined contract (asset
or liability) can be designated as at fair value through profit or loss.
Financial liabilities at fair value through profit or loss are stated at fair value with any gains or losses arising on
remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends
paid on the financial liability.
b. Derecognition of financial liabilities
The difference between the carrying amount of the financial liability derecognized and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
Derivative Financial Instruments
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized
in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event
the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value
of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of
derivative financial instruments is negative, the derivative is recognized as a financial liability.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the
definition of a derivative. Their risks and characteristics are not closely related to those of the host contracts and the
contracts are not measured at fair value through profit or loss.
Hedge Accounting
Hedge accounting is as follows:
a. Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit or
loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to
the hedged risk are recognized in profit or loss in the line item relating to the hedged item.
Hedge accounting is discontinued prospectively when the Company and its subsidiaries revokes the designated
hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer
meets the criteria for hedge accounting. The fair value adjustment to the carrying amount of the hedged instrument
arising from the hedged risk for which the effective interest method is used is amortized to profit or loss from the date
of hedge accounting is discontinued. The adjustment is based on a recalculated effective interest rate at the date
amortization begins and will be amortized fully by maturity of the financial instrument.
b. Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized
immediately in profit or loss.
c. Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on
the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income
and accumulated under the heading of foreign currency translation reserve. The gain or loss relating to the ineffective
portion is recognized in profit or loss immediately.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign
currency translation reserve are reclassified to profit or loss on the disposal or partial disposal of the foreign operation.
Fair value hedges undertaken by the Company and its subsidiaries are mainly designated to hedge the risk of the
change in fair value of the interest earning assets or interest bearing liabilities with fixed interest rate, which is attributable
to the fluctuations in interest rates or foreign exchange rates.
At the inception of the hedge relationship, Company and its subsidiaries document the relationship between
the hedging instrument and the hedged item, along with their risk management objectives and their strategy for
2014 ANNUAL REPORT
051
undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis,
Company and its subsidiaries document whether the hedging instrument is highly effective in offsetting the exposure of
changes in fair values or cash flows of the hedged item attributable to the hedged risk.
The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit
or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged
item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial
asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income
are removed from equity and are included in the initial cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued prospectively when the Company and its subsidiaries revoke the designated
hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it no
longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has
been previously recognized in other comprehensive income from the period when the hedge was effective remains
separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in equity is recognized immediately in profit or loss.
Overdue Loans
Under “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/
Non-accrual Loans”, nonperforming loans should be reclassified as overdue loans within performing period of 6 months.
However the non-performing loans paid by installments after negotiation are exempted from the aforementioned rules.
Overdue loans transferred from loans should be recorded under discounts and loans. For other loans transferred from
accounts other than loans, such as guarantees, acceptances, receivables factoring and credit card receivables should
be recorded under other financial assets.
Repurchase and Reverse Repurchase Transactions
Securities purchased under agreements to resell (reverse repurchase) agreements and securities sold under agreements
to repurchase are generally treated as collateralized financing transactions. Interest earned on reverse repurchase
agreements or interest incurred on repurchase agreements is recognized as interest income or interest expense over the
life of each agreement.
Property and Equipment
Property and equipment are hold for offering labor service, leasing to others or management purpose and can be used
for a period. Property and equipment are stated at cost, less subsequent accumulated depreciation and subsequent
accumulated impairment loss when it is probable that future economic benefits associated with the item will flow to the
Company and its subsidiaries and the cost of the item can be measured reliably.
Depreciation of property and equipment is recognized so as to write off the cost of assets less their residual values over
their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a
prospective basis under IAS 8 “Accounting Policies Changes in Accounting Estimates and Errors”.
Property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of property and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Investment Properties
Investment properties are properties held to earn rentals and/or for capital appreciation. Additionally, investment
properties whose future usage is currently undecided and thus deemed held for capital appreciation.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition,
investment properties are measured at cost less accumulated depreciation and accumulated impairment loss.
Depreciation is recognized so as to write off the cost of assets less their residual values over their useful lives, using the
straight-line method.
Investment properties are derecognized when are disposed or when no future economic benefits are expected to arise from
the continued use of the asset. Any gain or loss arising on the disposal or retirement of investment properties is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Intangible Assets
Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently
measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a
straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each
reporting period, with the effect of any changes in estimate being accounted for on a prospective basis under IAS 8
“Accounting Policies Changes in Accounting Estimates and Errors”.
052
FINANCIAL STATEMENT
Intangible assets are derecognized upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of intangible assets is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Impairment of Tangible and Intangible Assets
At the end of each reporting period, the Company and its subsidiaries review the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have incurred an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company and its subsidiaries
estimate the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and
consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating
units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In evaluating the value in use, the
estimated future cash flows are discounted by pre-tax discount rate, the rate that reflects the market’s revaluation on time
value of money and unadjusted future cash flows of specific asset risks.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its recoverable amount.
When an impairment loss is reversed subsequently, the carrying amount of the asset or cash-generating unit is increased
to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been
determined without impairment loss (less amortization or depreciation) that been recognized for the asset or cashgenerating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
Collaterals Assumed
Collaterals assumed are recorded at cost. Impairment losses shall be recognized in profit or loss by the difference between
the original cost and the fair value evaluated on the balance sheet date.
Provisions
The Company and its subsidiaries recognized provisions when the Company and its subsidiaries have a present obligation
arising from past events (legal or constructive obligation) and the amounts of obligation can be estimated reliably and
can be settled. Provisions are measured at the best estimate of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
Employee Benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered
service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit
Credit Method. Any actuarial gains and losses generated from retirement benefit obligation are recognized in other
comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested,
and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.
The retirement benefit obligation recognized in the consolidated balance sheets represents the present value of the
defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets.
Any asset resulting from this calculation is limited to the unrecognized past service cost, plus the present value of available
refunds and reductions in future contributions to the plan.
Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement
occurs.
The Company and its subsidiaries offered preferential interest rate to its current employees and retired employees for their
deposits within a prescribed amount. The preferential interest rate in excess of market interest rate is considered employee
benefits.
Under Article 28 of the Criteria Governing the Preparation of Financial Reports by Public Bank, if the Bank’s preferential
deposit interest rate for as stated in the employment contract exceeds the market interest rate, the excess will be subject
to IAS 19 “Employee Benefits” upon the employee’s retirement. The actuarial valuation assumptions and parameters are
based on those announced by authority, if any.
2014 ANNUAL REPORT
053
Income Tax
Income tax expense represents the sum of the current tax and deferred tax.
a. Current tax
According to the Income Tax Act, an additional tax at 10% of unappropriated earnings is provided for as income tax in
the year the shareholders approve to retain the earnings.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
b. Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for propable deductible temporary differences and unused loss carry forward that taxable profits will be available
against those deductible temporary differences.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted
by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences
that would follow from the manner in which the Company and its subsidiaries expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
c. Current and deferred tax for the period
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in
other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in
other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included in the accounting for the business combination
d. Linked-tax system
The Company, HNFH, and HNFH’s subsidiaries chose to adopt the linked-tax system income tax returns filling. Under
Interpretation 2003-240 issued by Accounting Research and Development Foundation (ARDF), the linked-tax system
requires a reasonable and systematic method for tax allocation. The tax allocation is recorded as receivables or payables.
Recognition of Interest Revenue and Interest Expense
The transaction costs of acquisition of loans and receivables or additional service fee on generation or acquision of the
loans and receivables are served to adjust the book value of loans and receivables and thereby revise the effective
interest rate.
Interest revenue generated from discounts and loans are recognized based on accrual basis. When the loans become
past due and are considered uncollectible, the principal and interest receivable are transferred to nonperforming loan
accounts, and the accrual of interest revenue is ceased. Interest revenue will be recognized when the interest of the
nonperforming loan is collected. According to the regulations issued by Ministry of Finance, if the repayment of loan is
extended under an agreement, the related interest should be recognized as deferred revenue and recognized as revenue
when collected.
Recognition of Commission Fee Revenue and Commission Fee Expense
Commission fee revenue and expense are recognized when loans or other services are provided. Service fees on
significant projects are recognized when the project has been completed, for instance, loan syndication fees are
recognized as revenue when the syndication has been completed. If fee revenue and expense are related to provide
service on loans, fee revenue and expense are either recognized over the period that service is performed or as an
adjustment to the effective interest rate on the loans and receivables, mainly depend on their materiality.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
a. The Company and its subsidiaries as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease unless
054
FINANCIAL STATEMENT
another systematic basis is more representative of the time pattern of the lessee’s benefit from the use of the leased
asset than the origin.
Lease incentives included in the operating lease are recognized as an asset. The aggregate cost of incentives is
recognized as a reduction of rental income on a straight-line basis over the lease term unless another systematic basis is
more representative of the time pattern over which the benefit of the leased asset is diminished.
b. The Company and its subsidiaries as lessee
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a
liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed.
Stock-based Compensation
Stock-based compensation is performed byHNFH that the Act that 15% cash capital increase was reserved for employees
provided by the parent company, HNFH that is pursuant to Article 267 of Company Act and Article 30 of Financial Holding
Company Act. The service received should be measured by reference to the fair value of the equity instruments granted,
the Company and its subsidiaries shall measure the fair value of equity instruments granted at the grant date, based on
market prices, and account for those amounts as payroll expense during the vesting period (or the grant date if vesting
period not available).
Contingencies
A contingent liability is a possible obligation depending on whether some uncertain future event occurs, or a present
obligation but payment is not probable or the amount cannot be measured reliably. A contingent liability is not
recognized but disclosed in certain circumstances.
A contingent asset is a possible asset that arises from past event and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company and
its subsidiaries. A contingent asset is not recognized but disclosed only when the economic benefit is probably realized.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company and its subsidiaries’ accounting policies, which are described in Note 4, management
is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods.
a. Held-to-maturity financial assets
Management has reviewed the Company and its subsidiaries’ held-to-maturity financial assets in light of their capital
maintenance and liquidity requirements and has confirmed the Company and its subsidiaries’ positive intention and
ability to hold those assets to maturity. Please refer to Note 12 for related information on held-to-maturity financial
assets.
b. Income tax
As of December 31, 2014 and 2013, the carrying amount of deferred tax assets please refer to Note 28. The utility of the
deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available
in the future. In cases where the actual future profits generated are less than expected, a material reversal of deferred
tax assets may arise, and the amount would be recognized in profit or loss for the period in which such reversal takes
place.
c. Impairment loss of receivables
The Company and its subsidiaries consider the estimation of future cash flows when there is observable data indicating
that an impairment loss occurs. The amount of impairment loss measured is the difference between the assets carrying
amount and the present value of estimated future cash flows (excluding the future credit loss that might arise),
discounted at the financial asset’ original effective interest rate.
When the actual future cash flows are less than expected, a material impairment loss may arise. The book value of
receivables and its allowance for credit losses please refer to Note 9.
2014 ANNUAL REPORT
055
d. Impairment loss of discounts and loans
The Company and its subsidiaries review loan portfolios to assess impairment periodically. In determining whether an
impairment loss should be recorded, the Company and its subsidiaries make judgments as to whether there is any
observable data indicating that impairment is occurred. This evidence may include observable data indicating that
there has been an adverse change in the payment status of borrowers (e.g. payment delinquency or default), or
economic conditions that correlate with defaults on assets. For the purpose of assessing impairment, the management
uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence
of impairment similar to those in the portfolio when estimating expected future cash flows. The methodology and
assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly in order to
decrease the difference between estimated loss and actual loss. Discounts and loans with allowance for credit losses,
please refer to Note 10.
e. Fair value of derivative and other financial instruments
The Company and its subsidiaries’ managements use their judgment in selecting an appropriate valuation technique for
financial instruments that do not have quoted market price in an active market. Valuation techniques commonly used
by market practitioners are applied. For derivative financial instruments, assumptions were based on quoted market
rates adjusted for specific features of the instruments. Other financial instruments were valued using a discounted cash
flow analysis that includes assumptions based on quoted market prices or rates (if available). The measurement for the
fair value of unlisted equity investments includes assumptions not based on observable market prices or rates. Note 43
provides detail information about the key assumptions used in the determination of the fair value of financial instrument.
The Company and its subsidiaries’ managements believe that the chosen valuation techniques and assumption used
are appropriate in determining the fair value of financial instruments.
f. Employee benefit obligation provision
The present value of defined benefit obligation and preferential interest on employees’ deposits are based on several
actuarial assumptions. Any changes on these assumptions will influence the fair value of the employee benefit
obligations. Employee benefit obligation provision please refer to Note 26.
One of the assumptions used to determine net pension cost (income) pertains to the discount rate.The company and
its subsidiaries’ determined the approriate discount rate at the end of each year and use the rate to calculate the
present value of cash outflow of emplyee benefit obligation provision. To deciede proper discount rate, the Company
and its subsidiaries are required to consider the rate of high-quality corporate or government bonds. The currency
denominated in those bonds are identical to the currency paid for employee benefit obligation provision and the
period of the maturity dates of those bonds shall be the same with the maturity dates of the related pension liabilities.
The other significant assumptions of employee benefit obligation provision are based on the current market
condition.
6. CASH AND CASH EQUIVALENTS
December 31
2014
Cash on hand
$
Foreign currencies
10,849,814
$
9,503,113
1,473,024
1,401,015
43,440,086
31,755,764
7,855,277
5,337,692
82,288
145,347
$
$
Due from other banks
Notes and checks for clearing
Excess margin of future
2013
63,700,489
48,142,931
Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the
consolidated balance sheets as of December 31, 2014 and 2013:
056
FINANCIAL STATEMENT
December 31
2014
2013
Cash and cash equivalents in consolidated balance sheets
$
63,700,489
Due from the Central Bank and other banks that meet the definition
of cash and cash equivalents in IAS 7
65,064,668
52,569,744
Cash and cash equivalents in consolidated statement of cash flows
$
$
128,765,157
$
48,142,931
100,712,675
7. DUE FROM THE CENTRAL BANK AND OTHER BANKS
December 31
2014
Call loans to banks
$
2013
56,464,233
$
51,891,612
Reserve - checking accounts
17,241,612
21,910,053
Reserve - demand accounts
47,951,325
45,429,743
339,657
287,712
28,378
65,634
Reserve - foreign-currency deposit
Due from the Central Bank
Interbank settlement funds
4,814,979
$
126,840,184
2,500,999
$
122,085,753
Under the relevant regulations, the Company maintains a certain amount of deposit in the reserve - demand accounts at
a prescribed percentage of the daily average of the Company’s deposits. The reserve is subject to withdrawal restrictions
and adjusted monthly. The reserve - demand accounts yields interest at a rate announced by the Central Bank.
Reserve - checking accounts and reserve - foreign-currency deposit are not interest bearing and may be withdrawn
anytime.
8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31
2014
2013
Held-for-trading financial assets
Investments in bill
Currency swap
$
31,692,692
$
20,046,559
2,784,586
995,559
Options
998,402
328,809
Interest swap
499,689
649,999
Government bonds
350,397
-
Cross currency swap
263,237
42,381
Forward
206,823
159,230
Listed stocks
91,587
429,294
Negotiable certificates of deposits
14,325
-
-
497,357
Treasury bills
Bank debentures
Others
-
318,736
71
182
36,901,809
23,468,106
2014 ANNUAL REPORT
057
December 31
2014
2013
Financial assets designated as at fair value through profit or loss
Bank debentures
$
9,375,140
Corporate bonds
Government bonds
$
10,359,058
4,153,174
6,005,304
-
455,852
13,528,314
16,820,214
$
$
50,430,123
40,288,320
Held-for-trading financial liabilities
Cross currency swap
$1,545,999
$12,423
Options
998,355
328,613
Currency swap
637,391
400,984
Forward
448,123
95,300
Interest swap
173,545
326,448
4,145
10,260
3,807,558
1,174,028
18,833,340
19,481,976
$
$
Others
Financial liabilities designated as at fair value through profit or loss
Bank debentures
22,640,898
20,656,004
Financial liabilities designated as at fair value through profit or loss were influenced by interest paid by financial liabilities,
fluctuation of market interest rate and credit spread. As of December 31, 2014 and 2013, accumulated fair value changes
were $483,340 and $631,976, respectively. For the years ended December 31, 2014 and 2013, fair value changes due to
credit spread risk were loss $88,865 and $98,131, respectively.
The Company and its subsidiaries entered into derivative contracts during the years ended December 31, 2014 and 2013
to manage exposures due to exchange rate and interest rate fluctuations. The financial risk management objective of the
Company and its subsidiaries is to minimize risks due to changes in fair value or cash flows.
The nominal principal of outstanding derivative contracts as of December 31, 2014 and 2013 were as follows:
December 31
2014
Forward contracts and currency swap
Options
$
2013
196,314,537
$
148,949,774
121,399,018
86,538,989
Cross currency swap
57,408,243
6,295,492
Interest swap
36,072,351
36,935,634
253,360
1,520,660
Asset swap
As of December 31, 2014 and 2013, the principal of bond investments amounting to $6,733,042 and $0, respectively had
been sold under repurchase agreements, as well as bill investments amounting to $3,710,000 and $6,630,000, respectively,
had been sold under repurchase agreements.
058
FINANCIAL STATEMENT
9. RECEIVABLES, NET
December 31
2014
Receivables factoring - without recourse
$
2013
10,105,938
$
16,460,443
Receivables from PEM Group incident (Note 47)
5,889,019
5,888,957
Credit card receivables
4,667,342
3,419,954
Acceptances
4,613,276
5,080,996
Interest receivables
4,322,105
3,900,706
Account receivables
1,980,009
1,671,041
1,494,664
92,538
Others
Option receivables - nominal amounts
888,597
748,559
33,960,950
37,263,194
Allowance for credit losses
(3,975,349)
(3,964,555)
Net amount
$
$
29,985,601
33,298,639
The changes in the allowances for credit losses were as follows:
For the Year Ended December 31
2014
Balance, beginning of year
$
3,964,555
Provision
Sell and write-off
2013
$
3,969,607
149,896
29,683
(117,002)
(22,515)
Reclassification
(23,240)
(17,718)
Effect of exchange rate changes
1,140
5,498
Balance, end of year
$
$
3,975,349
3,964,555
Please refer to Note 44 for information relating to impairment loss analysis of receivables as of December 31, 2014 and
2013.
10. DISCOUNTS AND LOANS, NET
December 31
2014
Import and export bill negotiation
$
2013
8,541,424
$
9,354,740
Discounts and unsecured overdraft
138,420
99,440
Secured overdraft
158,690
96,025
248,843,287
214,656,732
Short-term loans
Receivables financing
256,137
231,982
Secured short-term loans
194,210,254
169,854,207
Medium-term loans
263,321,792
281,406,158
Secured medium-term loans
108,814,519
106,520,305
Long-term loans
19,630,198
20,526,759
647,736,325
615,095,329
2,927,565
5,877,318
1,494,578,611
1,423,718,995
(16,735,211)
(17,294,135)
132,939
187,817
Secured long-term loans
Nonperforming loans transferred from loans
Adjustment of premium or discount
$
1,477,976,339
$
2014 ANNUAL REPORT
1,406,612,677
059
The unrecognized interest revenue on nonperforming loans transferred from loans amounted to $116,573 and $168,942 for
the years ended December 31, 2014 and 2013, respectively.
Except for the Los Angeles branch which wrote off specific credits to comply with local authority for the year ended
December 31, 2013, the Company and its subsidiaries wrote off credits only after completing the required legal procedures
for the year ended December 31, 2014 and 2013.
The changes in the allowances for credit losses were as follows:
2014
Specific Risk
2013
General Risk
6,272,615
(55,251)
1,486,644
1,431,393
1,285,628
2,331,628
3,617,256
Sale
(45,421)
-
(45,421)
-
-
-
Write-off
(3,290,611)
-
(3,290,611)
(1,626,575)
-
(1,626,575)
-
(201,981)
(201,981)
-
11,567
11,567
1,452,175
-
1,452,175
1,762,495
-
1,762,495
18,761
76,760
95,521
11,313
19,419
30,732
$
$
$
$
$
$
12,382,943
17,294,135
16,735,211
$
4,839,754
6,272,615
$
Total
(Reversal) provision
4,352,268
$
General Risk
$
Recovery of write-off credits
11,021,520
Specific Risk
Balance, beginning of the year
Reclassification
$
Total
8,658,906
11,021,520
$
13,498,660
17,294,135
Please refer to Note 44 for information relating to impairment loss analysis of discounts and loans as of December 31, 2014
and 2013.
11. AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET
December 31
2014
Government bonds
$
2013
43,207,587
$
31,467,739
Corporate bonds
14,714,170
15,904,583
Bank debentures
14,192,543
20,340,822
Listed stocks
9,173,848
9,851,013
4,557,815
1,630,440
1,124,395
1,173,126
$
$
Beneficiary certificates
86,970,358
80,367,723
The principal of bond investments amounting to $9,951,380 and $3,920,900 as of December 31, 2014 and 2013, respectively,
The amounts of the available-for-sale financial assets pledged as of December 31, 2014 and 2013 are disclosed in Note 41.
060
FINANCIAL STATEMENT
12. HELD-TO-MATURITY FINANCIAL ASSETS, NET
December 31
2014
$
2013
230,215,000
Government bonds
$
287,800,000
30,777,667
16,790,063
Corporate bonds
3,895,960
4,120,531
Bank debentures
2,006,904
2,170,410
Treasury bills
79,033
$
$
266,974,564
310,881,004
The amounts of the held-to-maturity financial assets pledged as of December 31, 2014 and 2013 are disclosed in Note 41.
13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD, NET
December 31
2014
Amount
Chung-Hua Real Estate Management Co., Ltd.
$
2013
%
70,641
Amount
30.00
$
%
75,532
30.00
The summarized financial information in respect of the Company and its subsidiaries’ associate was set out below:
December 31
2014
2013
Total assets
$
238,458
$
254,587
Total liabilities
$
2,989
$
2,813
2014
2013
Revenue
$
19,365
$
16,033
Profit for the year
($
16,304)
($
18,393)
Other comprehensive income
$
-
$
-
The Company and its subsidiaries’ share of loss and other comprehensive income of associate for the years ended
December 31, 2014 and 2013 were based on the associate’s financial statements audited by the auditors for the same
years.
2014 ANNUAL REPORT
061
14. OTHER FINANCIAL ASSETS, NET
December 31
2014
Time deposits not qualified for cash equivalents
$
2013
33,405,462
Debt investments with no active market, net
Financial assets carried at cost
Long-term accounts receivables
Nonperforming loans transferred from other than loans
Remittance purchased
$
6,400,658
26,780,031
25,133,873
3,428,045
3,422,045
957,864
82,677
66,159
210,983
40,794
32,664
-
180
Short-term advancement
Accumulated impairment
(3,421)
(63,029)
(167,155)
Net amount
$
$
64,678,355
64,611,905
35,283,080
-
35,115,925
The changes in the allowances for credit losses of other financial assets were as follows:
2014
$
2013
167,155
$
123,908
Provision
47,943
152,276
Write-off
(191,290)
(107,584)
Reclassification
39,221
(1,445)
$
$
63,029
167,155
Management believed that the above unlisted equity investments (included in financial assets carried at cost) held by the
Company and its subsidiaries, whose fair value cannot be reliably measured due to the significant variability of reasonable
fair value estimates; therefore, the equity investments were measured at cost less impairment at the end of reporting
period.
The Company and its subsidiaries evaluate some financial assets carried at cost whose recoverable amounts were less
than their book value, therefore, recognizing impairment loss amounting to $3,421.
15. PROPERTY AND EQUIPMENT, NET
December 31
2014
Land
$
Buildings
2013
18,150,870
$
18,205,908
6,643,658
6,900,293
522,360
495,918
91,360
79,467
249,518
251,604
Lease improvements
76,737
82,036
Construction in progress and prepayment for equipment, land and
buildings
4,137,373
2,658,828
$
$
Office equipment
Transportation equipment
Other equipment
062
FINANCIAL STATEMENT
29,871,876
28,674,054
The movements of property and equipment were as follows:
For the Year Ended December 31, 2014
Office Equipment
Transportation
Equipment
$
$
Land
Buildings
$ 18,205,908
$12,213,898
Additions
-
6,847
178,131
23,202
Decrease
-
-
(228,932)
(59,614)
Reclassification
(55,038)
(9,496)
48,276
14,699
Effect of exchange rate
changes
-
5,243
18,150,870
12,211,249
Balance, beginning of
year
-
5,313,605
Depreciation
-
264,806
200,948
26,249
Decrease
-
-
(228,932)
(59,614)
Construction in
Progress and
Lease
Prepayment for
Improvements
Equipment, Land
and Buildings
Other
Equipment
Total
Cost
year
-
4,694,542
869,380
$2,237,559
$ 218,631
$ 2,658,828
$
41,098,746
48,559
12,597
1,600,654
1,869,990
(62,881)
(58,057)
-
(409,484)
26,107
20,583
(122,109)
(76,978)
1,051
2,151
7,461
-
15,906
4,697,260
848,718
2,251,495
201,215
4,137,373
42,498,180
4,198,624
789,913
1,985,955
136,595
-
12,424,692
76,449
39,616
-
608,068
(62,801)
(58,024)
-
(409,371)
Accumulated
depreciation
Reclassification
changes
-
(10,820)
-
-
-
-
-
(10,820)
-
-
4,260
810
2,374
6,291
-
13,735
-
5,567,591
4,174,900
757,358
2,001,977
124,478
-
12,626,304
Net amount
$ 18,150,870
$ 6,643,658
$
$
$ 249,518
$
76,737
$ 4,137,373
Other
Equipment
Lease
Improvements
Construction in
Progress and
Prepayment for
Equipment, Land
and Buildings
892,017
$ 2,178,482
$ 254,975
$ 1,887,061
923,310
1,114,462
522,360
91,360
$
29,871,876
Transportation
Office Equipment
Equipment
Land
Buildings
$ 19,157,294
$12,612,352
$ 4,786,889
-
11,556
94,706
21,303
53,507
10,080
Total
Cost
year
Additions
Decrease
$
$
41,769,070
-
-
(191,572)
(45,477)
(34,953)
(52,912)
-
(324,914)
Reclassification
(951,386)
(410,010)
2,350
1,311
39,789
1,879
(151,543)
(1,467,610)
changes
-
2,169
226
734
4,609
-
7,738
18,205,908
12,213,898
4,694,542
869,380
2,237,559
218,631
2,658,828
41,098,746
year
-
5,247,114
4,181,263
805,834
1,940,522
142,132
-
12,316,865
Depreciation
-
266,011
207,278
29,152
78,848
46,733
-
628,022
Decrease
-
-
(191,572)
(45,357)
(34,169)
(52,912)
-
(324,010)
Reclassification
-
(199,520)
-
-
-
-
-
(199,520)
-
Accumulated
depreciation
changes
-
-
1,655
284
754
642
-
3,335
-
5,313,605
4,198,624
789,913
1,985,955
136,595
-
12,424,692
Net amount
$ 18,205,908
$ 6,900,293
$
$
$ 251,604
$
$ 2,658,828
495,918
79,467
82,036
$
2014 ANNUAL REPORT
28,674,054
063
a. Depreciation expense $3,068 was included in the account of employees’ training expense for both the years ended
December 31, 2014 and 2013. Apportionment of depreciation expenses for landlord were $641 and $301 for the year
ended December 31, 2014 and 2013, respectively. Apportionment of depreciation expense for HNFH and its subsidiaries
were $990 and $3,790 for the years ended December 31, 2014 and 2013, respectively.
b. No property and equipment had been pledged as collateral as of December 31, 2014 and 2013.
c. The above items of property and equipment were depreciated on straight line basis over the estimated useful life of the
asset:
Buildings
6-56 years
Office equipment
4-6 years
4-9 years
Other equipment
4-16 years
Lease improvements
The shorter of 5 year or lease period
16. INVESTMENT PROPERTIES, NET
December 31
2014
2013
Land
$
6,282,157
Buildings
614,533
645,980
$
$
6,896,690
$
6,227,120
6,873,100
The movements of investment properties were as follows:
2014
2013
Cost
$
Additions
7,522,529
$
6,133,758
1,930
2,870
Reclassification
64,534
1,385,901
7,588,993
7,522,529
649,429
430,118
32,054
19,791
Reclassification
10,820
199,520
692,303
649,429
$
$
Accumulated depreciation
Depreciation
064
FINANCIAL STATEMENT
6,896,690
6,873,100
a. The investment properties held by the Company and its subsidiaries were depreciated over 6-56 years, using the
straight-line method.
b. The fair value of the Company and its subsidiaries’ investment properties as of December 31, 2014 and 2013 were
$25,280,404 and $19,047,889, respectively. The fair value was not performed by independent qualified professional
valuers. Management of the Company and its subsidiaries used the valuation model that market participants would
use to determine the fair value, or used the valuation by reference to market evidence of transaction prices for similar
properties and estimated by the Indices of Urban Land Price.
c. For the years ended December 31, 2014 and 2013, the rental income from investment properties were $259,636 and
$261,414, respectively. For the years ended December 31, 2014 and 2013, the direct operating expense excluding
depreciation expense were $53,931 and $49,166, respectively.
17. INTANGIBLE ASSETS
December 31
2014
2013
Computer software
$
261,344
$
Others
800
800
$
$
262,144
319,800
320,600
Computer Software
Others
Total
Cost
$
1,783,972
$
800
$
1,784,772
Additions
63,003
-
63,003
Reclassification
12,444
-
12,444
3,050
-
3,050
1,862,469
800
1,863,269
1,464,172
-
1,464,172
135,632
-
135,632
Accumulated amortization
Amortization
1,321
-
1,321
1,601,125
-
1,601,125
$
$
261,344
800
$
2014 ANNUAL REPORT
262,144
065
Computer Software
Others
Total
Cost
$
1,844,858
$
800
$
1,845,658
Additions
47,110
-
47,110
Decrease
(182,352)
-
(182,352)
Reclassification
81,709
-
81,709
-
(7,353)
1,783,972
800
1,784,772
1,516,884
-
1,516,884
(7,353)
Accumulated amortization
137,401
-
137,401
Decrease
Amortization
(182,352)
-
(182,352)
(7,761)
-
(7,761)
1,464,172
-
1,464,172
$
$
319,800
800
$
320,600
Apportionment of amortization expenses for HNFH and its subsidiaries were $1,821 and $5,332 for the years ended
December 31, 2014 and 2013, respectively.
The computer software held by the Company and its subsidiaries was amortized over 3 to 5 years using the straight-line
method.
18. OTHER ASSETS, NET
December 31
2014
Prepayments
$
2013
2,720,277
$
236,528
Refundable deposits
240,194
Temporary payment and suspense accounts
191,545
683,462
4,984
6
$
$
Others
3,157,000
203,316
1,123,312
19. DEPOSITS FROM THE CENTRAL BANK AND BANKS
December 31
2014
Call loans from banks
$
Overdraft
Deposits from banks
Deposits from the Central Bank
Deposits from Chunghwa Post Co., Ltd.
066
FINANCIAL STATEMENT
2013
93,075,048
$
123,083,091
3,755,355
4,593,317
535,241
171,651
63,718
62,760
3,006,390
3,965,080
$
$
100,435,752
131,875,899
20. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
December 31
2014
Government bonds
$
2013
11,643,076
$
9,594,337
Bank debentures
8,790,205
611,048
Commercial papers
3,701,071
6,114,597
Corporate bonds
Treasury bills
$
2,777,879
1,363,224
-
500,000
26,912,231
$
18,183,206
As of December 31, 2014 and 2013, the maturity date of securities sold under agreements to repurchase held by the
Company and its subsidiaries were June 2015 and December 2014, respectively and the agreed repurchase price were
$26,938,297 and $18,199,489, respectively.
21.PAYABLES
December 31
2014
Notes and checks in clearing
$
2013
7,855,205
$
5,333,125
Acceptances
4,794,221
5,232,217
Accrued expenses
3,776,931
2,977,188
Interest payables
2,520,377
2,142,729
Options payables - nominal amounts
1,495,565
208,650
Accounts payables
1,088,274
1,068,715
Collections for others
1,048,989
1,007,558
Dividend payables
293,770
294,248
Payables - factoring
216,522
722,628
Collections of checks for others
168,248
179,294
2,017,473
1,640,307
$
$
Others
25,275,575
20,806,659
22. DEPOSITS AND REMITTANCES
December 31
2014
Checking account deposits
$
2013
56,411,018
$
54,376,289
Demand deposits
473,207,946
454,228,393
Time deposits
343,991,583
308,849,245
5,399,694
3,637,800
950,435,457
918,048,239
877,804
797,080
$
$
Savings deposits
Remittances
1,830,323,502
2014 ANNUAL REPORT
1,739,937,046
067
23. BANK DEBENTURES
December 31
2014
95-2A term eight-year subordinated debenture; floating rate;
maturity on September 15, 2014
$
2013
-
$
1,000,000
95-3 term twelve-year subordinated debenture; 2.6% fixed rate;
1,050,000
1,050,000
95-5 term ten-year subordinated debenture; 2.45% fixed rate;
maturity on November 27, 2016
1,700,000
1,700,000
96-2 term subordinated debenture without maturity dates; floating rate;
redeemable after September 20, 2014
-
4,500,000
96-3 term seven-year subordinated debenture; floating rate; maturity
on September 20, 2014
-
1,200,000
on December 20, 2014
-
2,500,000
on May 9, 2015
1,700,000
1,700,000
3,000,000
3,000,000
5,000,000
5,000,000
100-1 term seven-year subordinated debenture; 1.63% fixed rate;
maturity on December 6, 2018
5,000,000
5,000,000
101-1A term seven-year subordinated debenture; 1.43% fixed rate;
1,300,000
1,300,000
101-1B term ten-year subordinated debenture; 1.55% fixed rate;
3,700,000
3,700,000
maturity on March 28, 2024
4,300,000
-
3,900,000
-
4,000,000
-
900,000
-
98-3 term subordinated debenture without maturity dates; from the first
year to the tenth year: 3.3%; after the tenth year: 4.3%; redeemable
after December 9, 2019
1,900,000
$
$
37,450,000
-
31,650,000
24. OTHER FINANCIAL LIABILITIES
December 31
2014
Principal of structured products
$
2013
12,293,323
$
7,224,259
Short-term borrowings
435,000
-
Commercial paper payables
399,836
29,989
169,676
227,799
$
$
Appropriated loan funds
068
FINANCIAL STATEMENT
13,297,835
7,482,047
25.PROVISIONS
December 31
2014
Provisions for employee benefits
$
5,873,323
Reserve for losses on guarantees
Others
2013
$
5,673,665
402,626
217,996
15,743
15,743
$
$
6,291,692
5,907,404
The changes of reserve for losses on guarantees were as follows:
2014
2013
$
(Reversal) provision
(1,578)
217,996
Reclassification
$
217,626
288
186,000
-
208
82
$
$
402,626
217,996
26. PROVISIONS FOR EMPLOYEE BENEFITS
December 31
2014
2013
Recognized in consolidated balance sheet
Defined benefit plans
$
Preferential interest on employees’ deposits
1,057,519
4,815,804
935,939
$
$
5,873,323
$
4,737,726
5,673,665
a. Defined contribution plans
The Company and its subsidiaries adopted a pension plan under the Labor Pension Act (the “LPA”), which is a statemanaged defined contribution plan. Under the LPA, the Company and its subsidiaries make monthly contributions to
employees’ individual pension accounts at 6% of monthly salaries and wages.
The total expenses of defined contribution plans recognized in profit or loss for the years ended December 31, 2014 and
2013 were $120,594 and $111,598, respectively, represents contributions payable to these plans by the Company and its
subsidiaries at rates specified in the rules of the plans.
b. Defined benefit plans
The Company and its subsidiaries adopted the defined benefit plan under the Labor Standard Law, pension benefits
are calculated on the basis of the length of service and average monthly salaries of the six months before retirement.
The Company and its subsidiaries contributes amounts equal to 12% or 10% of total monthly salaries and wages to a
pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank
of Taiwan in the committee’s name.
The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The investment
is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the mandated management.
However, in accordance with Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement
Fund the return generated by employees’ pension contribution should not be below the interest rate for a 2-year time
deposit with local banks.
The total expenses of defined benefit plans recognized in profit or loss for the years ended December 31, 2014 and 2013
were $393,582 and $402,261, respectively.
The latest actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by
qualifying actuaries. The principal assumptions used for the purposes of the actuarial valuations on valuation date were
as follows:
2014 ANNUAL REPORT
069
Valuation at
December 31
2014
2013
Discount rate
1.75%-1.88%
1.75%
Expected return on plan assets
1.75%-2.00%
1.75%-2.00%
Expected rate of salary increase
2.00%-2.75%
2.00%-2.75%
The assessment of the overall expected rate of return was based on historical return trends and analysts’ predictions of the
market for the asset over the life of the related obligation, by reference to the aforementioned use of the plan assets and
the impact of the related minimum return.
Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:
2014
Current service cost
$
316,022
Interest cost
2013
$
331,946
160,348
143,814
(82,788)
(73,499)
$
$
393,582
402,261
The pension expenses were included in employee benefits expenses.
Actuarial gains and losses recognized in other comprehensive income for the years ended December 31, 2014 and 2013
were loss of $257,481 and gain of $126,524, respectively. The cumulative amount of actuarial gains and losses recognized
in other comprehensive income as of December 31, 2014 and 2013 were loss of $255,019 and gain of $2,462, respectively.
The amount included in consolidated balance sheets arising from the Company and its subsidiaries obligation in respect of
their defined benefit plans were as follows:
December 31
2014
2013
Present value of defined benefit obligation
$
9,369,132
Fair value of plan assets
(4,553,328)
(4,941,814)
Deficit
4,815,804
4,737,726
The provision of defined benefit plans
$
$
4,815,804
$
9,679,540
4,737,726
The movements in the present value of the defined benefit obligations were as follows:
2014
Opening defined benefit obligation
$
2013
9,679,540
$9,701,929
Current service cost
316,022
331,946
Interest cost
160,348
143,814
Actuarial gains (losses)
340,621
(164,833)
Benefits paid
(1,134,132)
(336,972)
Others
6,733
3,656
Closing defined benefit obligation
$
$
The movements in the fair value of the plan assets were as follows:
070
FINANCIAL STATEMENT
9,369,132
9,679,540
2014
Opening fair value of plan assets
2013
$
4,941,814
$
4,804,624
82,788
73,499
Actuarial gains (losses)
30,403
(12,394)
632,455
412,635
Benefits paid
(1,134,132)
(336,550)
Closing fair value of plan assets
$
$
Contributions from the employer
4,553,328
4,941,814
For the years ended December 31, 2014 and 2013, the actual return on plan assets were $113,191 and $61,105,
respectively.
The major categories of plan assets at the end of the reporting period for each category were disclosed based on the
information announced by Bureau of Labor Funds, Ministry of Labor:
December 31
2014
2013
Equity instruments
50%
36%
Debt instruments
28%
39%
22%
25%
100%
100%
Others
The Company and its subsidiaries chose to disclose the history of experience adjustments as the amounts determined for
each accounting period prospectively from the date of transition to IFRSs:
December 31, 2014
December 31, 2013
December 31, 2012
January 1, 2012
$
9,369,132
$
9,679,540
$
9,701,929
$
9,070,664
$
4,553,328
$
4,941,814
$
4,804,624
$
4,601,910
Deficit
$
4,815,804
$
4,737,726
$
4,897,305
$
4,468,754
Experience adjustments on plan liabilities
($
340,582)
($
135,969)
$
3,909
$
-
Experience adjustments on plan assets
$
30,403
($
12,394)
($
30,625)
$
-
c. Preferential interest on employees’ deposits
The Company and its subsidiaries offers preferential interest on employees’ deposits to both current and retired
employees.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Valuation at
December 31
2014
2013
Discount rate
4.00%
4.00%
Expected return on employees’ deposits
2.00%
2.00%
Account decline rate
1.00%
1.00%
50.00%
50.00%
The probability of preferential interest on employees’ deposits changed
2014 ANNUAL REPORT
071
Amounts recognized in profit or loss in respect of these employee’s preferential deposits were as follows:
2014
2013
Interest cost
$
35,223
Actuarial losses
320,848
181,318
$
$
356,071
$
35,228
216,546
The amount included in consolidated balance sheets arising from the Company and its subsidiaries’ obligations in respect
of their preferential deposits were as follows:
December 31
2014
$
The provision of defined benefit plans
$
2013
1,057,519
1,057,519
$
935,939
-
$
935,939
The movements in the present value of the obligation of the preferential interest on employees’ deposits were as follows:
2014
Opening obligation of preferential interest on employees’ deposits
$
2013
935,939
Interest cost
$
935,477
35,223
Actuarial losses
35,228
320,848
181,318
Benefits paid
(234,491)
(216,084)
Closing obligation of preferential interest on employees’ deposits
$
$
1,057,519
935,939
27. OTHER LIABILITIES
December 31
2014
Guarantee deposits received
$
2013
915,996
$
792,309
Advance receipts
726,045
1,222,939
Temporary receipt and suspense accounts
242,663
963,403
4,914
7,266
$
$
Others
1,889,618
2,985,917
28. INCOME TAX
Under a Ministry of Finance directive, a financial holding company and its domestic subsidiaries in which over 90% of issued
shares was held by the financial holding company for 12 months within the same taxation year may adopt the linked-tax
system for income tax filing. In 2002, HNFH and its qualified subsidiaries, including the Company, adopted the linked-tax
system for income tax filings.
The principle adopted by the Company, HNFH, HNSC, South China Insurance Co., Ltd. (SCIC), Hua Nan Investment Trust
Corporation (HNIT), Hua Nan Venture Capital Co., Ltd. (HNVC), Hua Nan Asset Management Corp. (HNAMC), and Hua
Nan Management & Consulting Co., Ltd. (HNMC) (collectively, the “Group”) under the linked-tax system is to reduce the
income tax liabilities of the Group reasonably and to consider the fairness of the tax borne by all the companies in order to
maximize the synergy of the Group.
072
FINANCIAL STATEMENT
a. Income tax recognized in profit or loss
The major components of tax expense were as follows:
2014
2013
Current tax
In respect of the current year
$
1,460,412
Income tax on unappropriated earnings
$
1,900,489
12,559
-
In respect of prior periods
(41,805)
(50,377)
Income tax of overseas branches
518,536
429,939
1,949,702
2,280,051
261,857
(637,165)
$
$
Deferred tax
Income tax expenses recognized through profit or loss
2,211,559
1,642,886
A reconciliation of accounting profit and income tax expenses is as follows:
2014
Income tax expenses calculated at the statutory rate (17%)
$
2013
2,489,852
$
1,906,346
Tax effect of adjusting items:
Permanent differences
Tax-exempt income
(394,683)
(317,172)
Valuation gains of financial instruments
(2,986)
(8,372)
(401,081)
(316,630)
(231,771)
636,317
518,536
429,939
1,081
-
12,559
-
Others
Temporary differences
Income tax of overseas branches
Difference of income tax rate applicable to consolidated entity
Income tax on unappropriated earnings
Adjustments for prior years’ tax
(41,805)
(50,377)
Current tax
1,949,702
2,280,051
Deferred tax
261,857
(637,165)
Income tax expenses recognized in profit or loss
$
$
2,211,559
1,642,886
b. Income tax recognized in other comprehensive income
2014
2013
Deferred tax
Actuarial gains and losses on defined benefit plan
$
52,737
($
2014 ANNUAL REPORT
25,915)
073
c. Current tax assets and liabilities
2014
2013
Current tax assets
Tax refund receivables
$
Others
45,814
1,442,144
$
46,933
1,726,398
$
1,487,958
$
1,773,331
$
564,663
$
1,387,296
Current tax liabilities
Income tax payable
d. Deferred tax assets and liabilities
The components of deferred tax assets and liabilities were as follows:
December 31
2014
2013
Deferred tax assets
Provisions for bad debts and losses on guarantees over limitation
$
961,673
Employee benefit plan
$
1,206,148
843,507
810,670
20,926
18,402
$
1,826,106
$
2,035,220
Land value increment tax
$
6,021,653
$
6,021,653
Others
403
397
$
$
Others
6,022,056
6,022,050
The movements of deferred tax assets and deferred tax liabilities were as follows:
Recognize
in Other
Comprehensive
Income
Recognized
inProfit or Loss
Opening Balance
Closing Balance
Deferred tax assets
Provisions for bad debts and losses on
guarantees over limitation
Employee d benefit plan
Others
$
1,206,148
244,475)
$
-
$
961,673
(19,900)
2,524
52,737
-
843,507
20,926
($
261,851)
$
52,737
$
$
6,021,653
397
$
6
$
-
$
6,021,653
403
$
$
$
-
$
$
810,670
18,402
($
2,035,220
1,826,106
Others
074
FINANCIAL STATEMENT
6,002,050
6
6,022,056
Recognized
in Other
Comprehensive
Income
Recognized in
Profit or Loss
Opening Balance
Closing Balance
Deferred tax assets
Provisions for bad debts and losses on guarantees
over limitation
$
567,738
$
837,826
(1,241)
(25,915)
18,009
393
$
$
($
Employee d benefit plan
Others
1,423,573
638,410
637,562
$
-
25,915)
$
1,206,148
810,670
18,402
$
Recognized
in Other
Comprehensive
Income
Recognized in
Profit or Loss
Opening Balance
-
2,035,220
Closing Balance
$
Others
$
6,021,653
-
6,021,653
$
$
-
$
397
-
-
397
$
$
-
$
397
6,021,653
6,022,050
e. The information on the integrated income tax system was as follows:
The information on the imputation credit accounts of the Company was as follows:
December 31
2014
Imputation credit accounts
$
2013
79,292
$
65,868
The Company’s estimated creditable tax ratio for distribution of earnings of 2014 was 0.57%, and actual creditable tax ratio
for cash dividend and stock dividend in 2013 were 0.84% and 2.35%.
The actual imputation credits allocated to shareholders of the Company was based on the balance of the Imputation
Credit Accounts as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2014 earnings may
differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders.
HNCB Insurance Agency
December 31
2014
Creditable tax ratio
$
2013
25,789
$
16,682
The Expected Creditable Tax
Ratio Generated in 2014
The Actual Creditable Tax
Ratio Generated in 2013
20.48%
20.48%
2014 ANNUAL REPORT
075
HNILC
December 31
2014
$
2013
389
$
-
HNILC’s estimated creditable tax ratio for distribution of earning of 2014 was 16.62%. Because of net loss in 2013, the
balance of imputation credit accounts is $0.
f. The information on the unappropriated earnings was as follows:
The Company
December 31
2014
Unappropriated earnings generated on and after January 1, 1998
$
2013
14,005,526
$
11,400,224
HNCB Insurance Agency
December 31
2014
$
2013
234,516
$
234,428
HNILC
December 31
2014
$
2013
2,338
$
-
g. As of December 31, 2014 income tax returns through 2008 have been assessed by the tax authorities. The amortization
of bond premiums of 2003, 2004, 2005, 2006 and 2007 were adjusted to decrease $31,628, $334,313, $1,080,446, $704,010
and $421,929 by the tax authorities. The Company disagreed with above assessments and had applied for a reexamination. In case the Company lose the lawsuit, the Company still can use loss carryforwards of 2002. Income tax
returns of the HNCB Insurance Agency and the HNILC through 2012 had been assessed by the tax authorities.
29.EQUITY
Capital Stock
On May 27, 2013, the Company’s board of directors, exercising the power and the authority of stockholder’s meeting,
resolved to capitalize $5,710,000 of retained earnings and to issue 571,000 thousand shares. After the issuance, the
Company’s authorized capital stock increased to $63,089,000. The registration of the capitalization with the Securities and
Futures Bureau was effective. The Company set August 7, 2013 as the effective date of capitalization.
On May 26, 2014, the Company’s board of directors, exercising the power and the authority of stockholder’s meeting,
resolved to capitalize $4,587,000 of retained earnings and to issue 458,700 thousand shares. After the issuance, the
Company’s authorized capital stock increased to $67,676,000. The registration of the capitalization with the Securities and
Futures Bureau was effective. The Company set August 4, 2014 as the effective date of capitalization.
Capital Surplus
The capital surplus from the issuance of new shares at a premium (additional paid-in capital from issuance of common
shares, conversion of bonds and treasury stock transactions) and endowments received by the Company may be used to
offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividend or
transferred to capital (limited to a certain percentage of the Company’s paid-in capital every year).
The capital surplus from long-term equity investments under equity method and from employee share options may not be
used for any purpose.
076
FINANCIAL STATEMENT
The components of the Company’s capital surplus were as follows:
December 31
2014
Share premium
$
2013
24,616,760
Stock-based compensation
$
24,616,760
76,458
Stock-based compensation accounted for by the equity method
Others
76,458
234
234
1,325
1,325
$
$
24,694,777
24,694,777
The above stock-based compensation is performed byHNFH that the Act that 15% cash capital increase was reserved
for employees provided by the parent company, HNFH that is pursuant to Article 267 of Company Act and Article 30 of
Financial Holding Company Act.
Special Reserve
Under Financial Supervisory Commission (FSC) guidelines No. 10010000440, the securities default reserve and trading loss
reserve set up as of December 31, 2010 are transferred to special reserve. The special reserve may be used to offset a
deficit and may be appropriated when legal reserve reaches 50% of the Company’s paid-in capital.
Under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers
for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special
reserve. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and
thereafter distributed. However, at the date of transitions to IFRSs, if the increase in retained earnings that resulted from all
IFRSs adjustments is not enough for this appropriation, only the increase $6,265,422 in retained earnings that resulted from
all IFRSs adjustments will be appropriated to special reserve.
Dividend Policy and Appropriation of Retained Earnings
The Articles of Incorporation stipulates that from annual net income net of any accumulated deficit, 30% should be
appropriated as legal reserve until the reserve equals the Company’s paid-in capital. A special reserve based on business
needs may then be appropriated. Any remainder should be appropriated as follows:
Under the Financial Holding Company Act, the board of directors is empowered to execute the authority of the
stockholders’ meeting, which is under no jurisdiction in the related regulations in the Company Act.
a. 1% to 8% as bonuses to employees. The board of directors (BOD) is authorized to resolve the bonus percentage.
b. Dividends. The BOD is authorized to appropriate dividends according to the economic environment and the
Company’s development needs. The cash dividend should be at least one third of total dividends and approved by
the stockholder.
For the years ended December 31, 2014 and 2013, the bonus to employees were $758,644 and $539,280, respectively.
The bonus to employees were within 8% of net income (net of the bonus) minus appropriation of legal and special
reserve for the years ended December 31, 2014 and 2013, respectively. If the actual amounts subsequently resolved by
the shareholders differ from the proposed amounts, the differences are recorded in the year of shareholders’ resolution
as a change in accounting estimate.
The board of directors which executes the rights and functions of the stockholder resolved the appropriation of earnings
for 2013 and 2012 on May 26, 2014 and May 27, 2013, respectively. The appropriations and dividends per share were as
follows:
Appropriation of Earnings
Dividends Per Share (NT$)
For
For
For
For
Year 2013
Year 2012
Year 2013
Year 2012
Legal reserve
$
2,871,273
$
2,598,367
$
-
$
Cash dividends
4,586,064
2,020,951
0.73
0.35
Stock dividends
4,587,000
5,710,000
0.73
1.00
2014 ANNUAL REPORT
-
077
The bonus to employees amounting to $539,280 and $618,472 for 2013 and 2012 were approved by the BOD on behalf of
the stockholders’ meeting on May 26, 2014 and May 27, 2013. The bonus to employees was all cash bonus. There is no
difference between the approved amounts of the bonus to employees and the accrual amounts reflected in the financial
statement for the years.
Information of earnings appropriation which had been approved by the BOD and the stockholders can be accessed
online through the MOPS website of the Taiwan Stock Exchange.
Legal reserve shall be appropriated until it has reached the Company’s paid-in capital. This reserve may be used to offset
a deficit. If the Company had no deficit, and when the legal reserve has exceeded 25% of the Company’s paid-in capital,
the excess may be transferred to capital or distributed in cash. In addition, the Banking Act provides that, before the
balance of legal reserve reaches the aggregate par value of the outstanding capital stock, annual cash dividends should
not exceed 15% of aggregate par value of the outstanding capital stock of the Company.
Under Article 50-2 of the Banking Law revised on April 30, 2012, when legal reserve meet the total capital reserve or well
financial position and setting aside, legal reserve under company law is not limited to the restriction of setting aside 30%
of remaining earnings as legal reserve, and the appropriation of the remainder and retained earnings from previous year
was limited to 15% of total capital reserve when legal reserve has not meet the total capital reserve. The requirements for
financial position of banks to be established in accordance with this Act shall be as prescribed by the Financial Supervisory
Commission, Executive Yuan, ROC.
Except for non-ROC resident stockholders, all stockholders receiving the dividends are allowed a tax credit equal to their
proportionate share of the income tax paid by the Company.
Unrealized Gain or Loss on Available-for-sale Financial Assets
2014
($
2013
2,431,123)
Unrealized gain arising on revaluation of available-for-sale financial
assets
($
2,472,488)
857,914
402,526
Cumulative gain or loss reclassified to profit or loss on impairment
of available-for-sale financial assets
(79,108)
(361,161)
($
($
1,652,317)
2,431,123)
30. INTEREST REVENUE, NET
2014
2013
Interest income
Discounts and loans
$
Securities investments
Others
29,548,158
$
27,895,862
4,143,761
3,959,351
4,859,167
2,729,343
38,551,086
34,584,556
11,053,333
9,945,698
855,676
597,259
1,618,800
1,255,095
13,527,809
11,798,052
$
$
Interest expense
Deposits
Due to the Central Bank and banks
Others
078
FINANCIAL STATEMENT
25,023,277
22,786,504
31. COMMISSION AND FEE REVENUE, NET
2014
2013
Commission and fee revenue
HNCB insurance agency commission
$
2,209,630
Trust business
$
1,673,698
2,063,748
1,666,786
Remittance business
694,724
690,422
Credit card business
685,708
531,344
Loan business
315,960
325,828
Foreign exchange and import/export business
284,023
294,477
Guarantee business
268,065
276,554
643,765
623,850
7,165,623
6,082,959
383,017
262,830
Business promotion expense
149,567
158,988
Trust business
69,446
73,250
Credit investigating expense
57,195
57,114
Remittance business
52,511
48,981
191,504
181,906
903,240
783,069
$
$
Others
Commission and fee expense
Others
6,262,383
5,299,890
32. GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
2014
2013
Realized gain or loss on financial assets at fair value through profit or loss
Currency swap
$
Cross currency swap
Others
3,956,969
$
321,820
404,223
215,917
(22,607)
203,162
4,338,585
740,899
1,552,817
2,077,734
148,636
338,017
Unrealized gain or loss on financial assets at fair value through profit
or loss
Currency swap
Issuance of bank debentures
Foreign exchange options
31,915
10,318
Interest swap
21,419
(96,670)
Commercial papers
8,280
(2,725)
Assets swap
6,161
15,684
Cross currency swap
(1,312,720)
32,967
Forward
(305,267)
(8,278)
Corporate bonds
(81,737)
(60,654)
Bank debentures
(74,604)
(138,711)
Listed stocks
(13,266)
13,938
Government bonds
(9,163)
(22,368)
Others
(592)
3,184
(28,121)
2,162,436
Dividend income on financial assets at fair value through profit or loss
20,445
8,809
Interest revenue on financial asset at fair value through profit or loss
1,266,759
1,245,486
Interest expense on financial liabilities at fair value through profit or loss
(1,490,377)
(1,166,129)
$
$
4,107,291
2,991,501
When the Company and its subsidiaries designated financial instruments measure at fair value through profit or loss, fair
value change in derivate instruments is also listed in “financial assets and liabilities at fair value through profit or loss”.
2014 ANNUAL REPORT
079
33. REALIZED GAINS ON AVAILABLE-FOR-SALE FINANCIAL ASSETS
2014
Dividend income
$
2013
245,760
$
204,148
Gain from disposal
Stocks
247,313
404,102
Government bonds
98,429
73,314
56,763
53,842
Corporate bonds
27,426
9,470
Bank debentures
14,724
23,824
444,655
564,552
Stocks
($
($
Government bonds
(44,824)
(53,502)
(42,383)
(21,629)
(365,547)
(203,391)
$
$
Loss from disposal
278,340)
324,868
128,260)
565,309
34. OTHER NON INTEREST NET REVENUES
2014
Rental income of investment properties
$
Gain on hedging instruments
2013
259,636
$
261,414
21,255
36,380
Direct operating expense of investment properties
(53,931)
(49,166)
Loss on hedged items
(21,130)
(42,383)
-
206,386
106,380
134,245
$
$
Reversal income due to unpaid payables
Others
080
FINANCIAL STATEMENT
312,210
546,876
35. EMPLOYEE BENEFITS EXPENSE
2014
Salaries and wages
$
2013
5,801,126
Incentives and bonus
$
5,721,237
3,510,856
2,894,097
Labor insurance and national health insurance
591,848
571,156
Pension and compensation
531,424
535,574
1,150,037
994,892
$
$
Others
11,585,291
10,716,956
36. DEPRECIATION AND AMORTIZATION EXPENSE
2014
2013
Depreciation expense
Buildings
$
Office equipment
261,738
$
262,943
199,958
203,488
26,249
29,152
Other equipment
76,449
78,848
Lease improvements
38,975
46,432
603,369
620,863
32,054
19,791
635,423
640,654
133,811
132,069
$
$
Investment properties
Amortization expenses
769,234
2014 ANNUAL REPORT
772,723
081
37. OTHER OPERATING EXPENSE
2014
Taxation and government fee
$
2013
1,760,012
$
1,186,755
Rent
949,403
898,986
Insurance
480,560
467,765
Membership fee
475,372
415,428
Advertisement
249,970
211,201
Maintenance
249,056
266,846
Postage fee
230,553
221,349
Professional services
194,761
186,019
778,083
855,256
$
$
Others
5,367,770
4,709,605
38. EARNINGS PER SHARE
Basic earnings per share is calculated by earnings on the Company’s stockholders divide by weighted average number of
ordinary shares outstanding.
2014
2013
Basic earnings per share
From continuing operations
$
1.84
$
1.41
The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from
continuing operations were as follows:
Net Profit for the Year
2014
Profit for the year attributable to owner of the Company
$
2013
12,434,632
$
9,570,913
Shares
Weighted average number of ordinary shares in computation of
basic earnings per share
2014
2013
6,767,600
6,767,600
The weighted average number of shares outstanding used for earnings per share calculation has been retroactively
adjusted for the issuance of bonus shares. This adjustment caused the basic earnings per share for the year ended
December 31, 2013 to decrease from $1.52 to $1.41.
082
FINANCIAL STATEMENT
39. RELATED PARTY TRANSACTIONS
a. Name and relationship with related parties were as follows:
Related Party
Relationship with the Company
Hua Nan Financial Holdings Co., Ltd. (HNFH)
Parent company
Bank of Taiwan Co., Ltd. (BOT)
Majority stockholder of parent company
Bank Taiwan Life Insurance Co., Ltd. (BTLI)
Majority stockholder of parent company (the related information and
proportionate share in investees with BOT).
South China Insurance Co., Ltd. (SCIC)
Subsidiary of the parent company
Hua Nan Investment Trust Corporation (HNIT)
Hua Nan Securities Corp. (HNSC)
Hua Nan Venture Capital Co., Ltd. (HNVC)
Subsidiary of the parent company (Note 1)
Hua Nan Asset Management Corp. (HNAMC)
Hua Nan Futures Co., Ltd. (HNFC)
Hua Nan Securities (HK) Limited (“Hua Nan Securities HK”)
Hua Nan Holdings Corp.
Hua Nan Asset Management Corp.
Hua Nan Investment Management Co., Ltd. (HNIM)
Hua Nan Global Henry Fund
Managed by subsidiary of the parent company (HNIM)
National Credit Card Center of R.O.C. (NCCC)
The chairman of the parent company is its chairman (Notes 2 and 3)
Yuan-Ding Investment Co., Ltd. (Yuan-Ding Investment)
The Company’s director is its chairman
Yung-Cheong Investment Co., Ltd. (Yung-Cheong Investment)
The Company’s director is its chairman
Yung-Chi Asset Management Corp. (Yung-Chi AMC)
The director of the parent company is its chairman (Note 2)
Shiun-You Co., Ltd. (Shiun-You)
The director of the parent company is its chairman (Note 2)
The Company’s associate
Others
Directors, supervisors, managers, their relatives, companies under their
control, and other related parties in substance
Note 1:HNVC and HNMC had merged on December 25, 2013. HNVC was the surviving company while HNMC was the dissolved company.
Note 2:The parent company (HNFH) of the Company and its subsidiaries elected directors in June 2013, and this company’s chairman was not the directors or chairman
of HNFH. Consequently, this company is not the related party after July 1, 2013.
Note 3:The chairman of the HNFH took over the chairman of this company in November 2013. Consequently, this company remain the related party with the Company
and its subsidiaries after November 2013.
b. Substantial transactions with related parties were as follows:
1) Due from other banks
December 31
2014
Amount
$
BOT
2013
%
182,879
Amount
0.42
$
%
388,945
1.22
2) Deposits from banks
December 31
2014
Amount
BOT
$
2013
%
5,578
Amount
1.04
$
%
6,745
2014 ANNUAL REPORT
3.93
083
3) Call loans to banks
BOT
Highest
Ending
Interest
Interest Rate
Balance
Balance
Income
(%)
$
13,033,740
$
305,940
$
23,313
0.388-4.05
BOT
Highest
Ending
Interest
Interest Rate
Balance
Balance
Income
(%)
$
11,453,725
$
-
$
505
0.26-2.70
4)Call loans from banks
BOT
Highest
Ending
Interest
Interest Rate
Balance
Balance
Expense
(%)
$
21,346,139
$
4,433,800
$
26,331
0.03-1.50
BOT
Highest
Ending
Interest
Interest Rate
Balance
Balance
Expense
(%)
$
21,751,792
$
2,229,060
$
24,919
0.05-1.30
5)Excess margin of futures
2014
2013
$
HNFC
56,100
$
56,007
6)Deposits
December 31
2014
Ending
Balance
HNSC
$
2013
Interest
Rate (%)
Interest
Expense
0-1.345
837,882
0-1.345
413,427
0-1.345
1,834
503,887
0-1.345
2,737
HNFH
324,659
0-0.17
1,254
253,734
0-0.17
3,418
HNFC
269,052
0-1.345
886
356,194
0-1.345
793
HNVC
224,720
0-1.345
1,037
208,328
0.05-1.345
822
NCCC
104,769
0-0.32
441
201,677
0-0.32
544
Hua Nan Securities HK
87,112
0.04
103
141,542
0.17
123
HNIT
41,127
0.17
41
4,108
0.17
16
HNIM
26,852
0.17-1.345
326
25,971
0.17-1.345
326
Hua Nan Holding Corp.
24,312
0.05-1
220
22,768
0.17-1.00
172
4,084
0-0.17
26
26,276
0-0.17
35
805
0.05
-
876
0.17
-
0-13
87,454
12,769,454
0-13
60,713
$
$
Others
10,697,098
$
084
FINANCIAL STATEMENT
12,682,002
95,324
$
Interest
Expense
463,985
Hua Nan Asset Management Corp.
1,702
Interest
Rate (%)
SCIC
HNAMC
$
Ending
Balance
15,352,697
$
$
1,704
71,403
7)Loans
Type
Account Volume or
Name of Related Party
Consuming loan
3
Households
mortgages
21
Others
Highest
Balance
Ending
Balance
Payment Status
Type of Collaterals
Normal
Overdue
Is the Transaction
at Arm’s Length
Commercial Term
2,032
2,032
2,032
-
No
Yes
198,681
195,264
195,264
-
Real estate
Yes
Yuan-Ding
Investment
24,000
24,000
24,000
-
Real estate
Yes
Others
Yung-Cheong
Investment
50,000
30,000
30,000
-
Listed stocks
Yes
Others
Others
46,565
24,295
24,295
-
Real estate
Yes
Type
Account Volume or
Name of Related Party
Consuming loan
5
Households
mortgages
20
Others
Highest
Balance
Ending
Balance
Payment Status
Type of Collaterals
Normal
Overdue
Is the Transaction
at Arm’s Length
Commercial Term
2,886
1,315
1,315
-
No
Yes
223,015
185,454
185,454
-
Real estate
Yes
Yuan-Ding
Investment
24,000
24,000
24,000
-
Real estate
Yes
Others
Yung-Cheong
Investment
50,000
50,000
50,000
-
Listed stocks
Yes
Others
Others
49,053
40,675
40,675
-
Real estate and
time deposits
Yes
8) Sales or purchases of bills and bonds
Bills and Bonds
Purchased from
Related Parties
HNSC
$
749,319
Bills and Bonds
Sold to Related
Parties
$
500,869
Bills and Bonds
Bills and Bonds Sold
Purchased Under
Under Repurchase
Resale Agreement
Agreement from
from Related
Related Parties
Parties
(Ending Balance)
(Ending Balance)
$
-
$
-
Interest Expense
$
1
Bills and Bonds
Purchased from
Related Parties
HNSC
$
844,040
Bills and Bonds
Sold to Related
Parties
$
598,141
Bills and Bonds
Bills and Bonds Sold
Purchased Under
Under Repurchase
Resale Agreement
Agreement from
from Related
Related Parties
Parties
(Ending Balance)
(Ending Balance)
$
-
$
-
Interest Expense
$
2014 ANNUAL REPORT
-
085
9)Commission and fee revenue
2014
Amount
SCIC
$
2013
%
Amount
59,878
0.84
HNSC
30,888
HNIT
BTLI
51,941
0.85
0.43
23,068
0.38
24,910
0.35
18,018
0.30
1,534
0.02
2,359
0.04
HNAMC
372
0.01
266
-
HNVC
311
-
324
0.01
3
-
28
-
Shiun-You
-
-
73
-
$
117,896
$
%
$
96,077
Preceding commission and fee revenue are the rewards from SCIC, HNSC, HNIT, HNVC and HNAMC under the
collaborative marketing agreement, the rewards from Shiun-You under the credit card business, the rewards from
Chung-Hua Real Estate Management Co., Ltd. under commission revenue, the rewards from BTLI to HNCB Insurance
Agency under commission revenue.
There is no similar kind of transaction that can be compared with.
10)Lease
The Company had leased office space to HNSC, with rentals received monthly under an operating lease agreement
expiring in November 2017. Rentals income amounted to $18,416 and $21,518 for the years ended December 31,
2014 and 2013, respectively.
The Company had leased office space from Yung-Chi AMC, with rentals paid monthly under an operating lease
agreement expiring in April 2017. Both rental expenses amounted to $1,946 for the year ended December 31, 2013.
The Company had leased office space and dormitory to HNFH, with rentals received monthly under an operating
lease agreement expiring in September 2017 and August 2016, respectively. Rentals income amounted to $9,394
and $8,012 for the years ended December 31, 2014 and 2013, respectively.
The Company had leased office space to HNIT, with rentals received monthly under an operating lease agreement
expiring in May 2015. Rental expenses amounted to $623 for the years ended December 31, 2014 and 2013.
The Company had leased office space to SCIC, with rentals received monthly under an operating lease agreement
expiring in December 2015. Rental expenses amounted to $2,972 for the years ended December 31, 2014 and 2013.
The Company had leased office space to HNAMC, with rentals received monthly under an operating lease
agreement expiring in July 2017. Rental expenses amounted to $6,604 and $6,684 for the years ended December 31,
2014 and 2013, respectively.
086
FINANCIAL STATEMENT
11)Commission and fee expenses
2014
Amount
NCCC
$
%
Amount
35,926
3.98
682
0.08
264
27
HNSC
SCIC
HNFC
2013
$
19,143
2.44
710
0.09
0.03
277
0.04
-
26
-
36,899
$
%
$
20,156
The commission and fee expenses are fees paid to NCCC for credit card business and the rewards paid to HNSC,
SCIC and HNFC under the collaborative marketing agreement. There is no similar kind of transaction that can be
compared with.
12)Other noninterest net revenue - others
2014
Amount
HNAMC
2013
%
$
-
Amount
-
$
%
31,332
5.73
13)Other operating expenses - apportionment of other expense
2014
Amount
2013
%
Amount
%
HNSC
$
84,435
1.57
$
75,993
1.61
HNFC
997
0.02
944
0.02
$
85,432
$
76,937
Preceding expense is paid by the Company and its subsidiaries for using operating space and facilities of HNSC and
HNFC. The related expense is recorded as other general and operating expenses - distribution of other expense.
14)Other operating expenses - insurance expense
2014
Amount
SCIC
$
2013
%
32,301
Amount
0.60
$
%
27,344
0.58
15)Other operating expenses - investigation expense
2014
Amount
HNIM
$
2013
%
7,560
Amount
0.14
$
%
7,560
2014 ANNUAL REPORT
0.16
087
16)Other operating expenses - outsourcing fee
2014
2013
Amount
%
$
HNAMC
-
Amount
-
$
%
10,491
0.22
17)Other operating expenses - consulting fee
2014
2013
Amount
$
HNSC
%
10,329
Amount
0.19
$
%
9,075
0.19
18)Derivative financial instruments
December 31, 2014
Contract
Term
Contract
(Nominal)
Amounts
Gains (Losses)
on Valuation
Balance Sheet Accounts
Account Balance
Adjustment for the change in
value of financial assets at fair
value through profit or loss
$1,426
Mutual funds managed by HNIT
Hua Nan Global Henry Fund -
Currency swap contract
2014.10.242015.02.27
$
53,987
$
1,426
December 31, 2013
Contract
Term
Contract
(Nominal)
Amounts
Gains (Losses)
on Valuation
Account Balance
BOT
2013.12.302014.02.05
$
595,600
($
2,819)
value of financial liabilities at
fair value through profit or loss
$
2,819
2013.12.302014.02.05
$ 1,042,300
($
4,794)
value of financial liabilities at
fair value through profit or loss
$
4,794
088
FINANCIAL STATEMENT
December 31, 2013
Contract
(Nominal)
Amounts
Contract Term
Gains (Losses)
on Valuation
Account
Balance
2013.02.192014.02.21
$
297,800
$
2,674
$
2,674
2013.02.212014.02.25
$
297,800
$
2,268
$
2,268
2013.10.242014.02.27
$
73,588
$
1,055
$
1,055
Mutual funds managed by HNIT
Hua Nan Global Henry Fund Currency swap contract
19)Receivable (payable) to related party for allocation under the linked-tax system
2014
2013
Amount
Tax receivable (payable) to the parent
company
$
%
3,578
Amount
0.24
($
%
969,634)
69.89
20)Compensation of key management personnel
2014
2013
Salaries and other short - term employee benefits
$
78,147
Post - employment benefits
3,332
3,692
$
$
81,479
$
75,868
79,560
21)Others
In compliance with Banking Act, credits, except for customer loans and government loans, credits extended to any
related party should be 100% secured, and terms of the preceding credits should be no better than those extended
to third parties.
The terms of transactions with related parties, except for preferential interest rate for employees with limited amounts,
were similar to those with third parties.
40. NON-CASH TRANSACTION
For the years ended December 31, 2014 and 2013, the Company and its subsidiaries entered into the following non-cash
investing and financing activities which were not reflected in the consolidated statement of cash flows:
2014
2013
Property and equipment transferred into intangible assets
$
12,444
$
81,709
Property and equipment transferred into investment properties
$
53,714
$
1,186,381
2014 ANNUAL REPORT
089
41. PLEDGED ASSETS
The pledged assets as of December 31, 2014 and 2013 were as follows:
December 31
2014
Held-to-maturity financial assets - negotiable certificates of deposits
$
2013
43,000,000
$
39,000,000
Available-for-sale financial assets - bonds investment- par value
1,473,307
1,418,738
Held-to-maturity financial assets - bonds investment - par value
658,200
733,000
7,500
7,500
$
$
Other assets - bonds investment- par value
45,139,007
41,159,238
As of December 31, 2014 and 2013, negotiable certificates of deposits which was pledged had been served as reserves to
comply with Central Bank’s clearing system of real-time gross settlement and provided as collateral for due to the Central
Banks in foreign currencies.
Information on pledged bonds as of December 31, 2014 and 2013 as was follows:
December 31
2014
Reserve for loans
$
2013
1,266,800
$
1,191,200
Guarantee deposit for provisional seizure of collaterals due to loan
defaults and others
375,600
475,400
Guarantee deposit for trust business compensation reserve
230,000
230,000
Guarantee deposit for clearing reserve
90,000
90,000
Guarantee deposit for securities trading operations
50,000
50,000
Guarantee deposits for bills trading operations
50,000
50,000
76,607
72,638
$
$
Others
2,139,007
2,159,238
42. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS
a. As of December 31, 2014 and 2013, the Company and its subsidiaries had commitments as follows:
December 31
2014
Undrawn loan commitment (Note)
$
2013
100,426,938
$
143,383,428
Undrawn credit card commitment
73,948,338
69,293,887
Standby letters of credit
27,852,200
29,820,861
Guarantees issued
37,429,613
36,587,399
116,907,547
116,515,439
1,354
138,689
322,419
342,440
45,131,507
41,151,738
368,608,196
381,034,708
11,341,532
9,086,960
Collections for customers
Agency loans payable
Travelers’ checks consigned-in
Guarantee notes payable
Trust assets
Marketable securities under custody
Agent for book-entry government bonds
Agent for short-term bills under custody
Note: Only disclose irrevocable undrawn loan commitment.
090
FINANCIAL STATEMENT
126,703,200
89,842,700
77,488,713
81,493,330
b. HNCB Insurance Agency engaged in insurance agent contracts with insurance companies, and the content of the
contracts was as follows:
Insurance Company
Contract Date
Calculation of Commission
Period
Sing Kong Life Insurance
2014.06.13
(The contract extends
automatically)
Based on regulations
of the contract
The effective date is the contract date, one year
period. 1 month before the expiration date without
disagreements between both sides, the contract
extends a year automatically.
Allianz Insurance
2014.06.13
automatically)
of the contract
Taiwan Life Insurance
2014.06.13
automatically)
of the contract
Cathay Life Insurance
2014.06.13
automatically)
of the contract
period. 30 days before the expiration date without
Hon Tai Life Insurance
2014.06.13
automatically)
of the contract
Chaoyang Life Insurance
2014.06.13
automatically)
of the contract
Fubon Life Insurance
2014.06.13
automatically)
of the contract
TransGlobe Life Insurance
2014.06.13
automatically)
of the contract
Cardif Assurance Vie
2014.06.13
automatically)
of the contract
Nan Shan Life Insurance
2014.06.13
automatically)
of the contract
Farglory Life Insurance
2014.06.13
automatically)
of the contract
Mass Mutual Mercuries Life
Insurance
2014.06.13
automatically)
of the contract
2014 ANNUAL REPORT
091
Insurance Company
Contract Date
Period
Bank Taiwan Life Insurance
2014.06.13
automatically)
of the contract
CTBC Life Insurance
2014.06.13
of the contract
CIGNA Life Insurance
2014.06.13
of the contract
ACE Life Insurance
2014.06.13
of the contract
AIA Life Insurance
2014.06.13
of the contract
Yuanta Life Insurance
2014.06.13
of the contract
Prudential Life Insurance
2014.06.13
of the contract
China Life Insurance
2014.06.13
of the contract
092
FINANCIAL STATEMENT
c. HNCB Insurance Agency authorized HNSC’s business units to collect insurance fees and signed the contract of rewards
on collection. The commission was paid under the agreement and was recognized as consulting fees under operating
expenses. The content of the contract was as follows:
Company Name
HNSC
Contract Date
2014.07.14
Period
After the deduction for operation tax and
stamp tax, 80% of the remaining commission in
the first year, commission received since Jan,
1, 2014, external rebate, and project incentive
award were paid to HNSC.
However, additional promotional expenses
agreed by both parties are required to
deduct from project incentive award, and
the remaining of it would be paid to HNSC
proportionally.
From the contract date, if there is any
modification of the rule that influences
the rights or obligations, the counterparty
should be informed in written form in 2
months before the modification to avoid the
loss between the counterparty. All will be
retroactive and effective on Jan, 1, 2014.
43. DISCLOSURES OF FINANCIAL INSTRUMENTS
a. Fair value of financial instruments
December 31, 2014
Carrying Amount
Fair Value
Financial assets
Cash and cash equivalents
Due from the Central Bank and other banks
Financial assets at fair value through profit or loss
Receivables
$
63,700,489
$
63,700,489
126,840,184
126,840,184
50,430,123
50,430,123
4,191
4,191
29,985,601
29,985,601
1,477,976,339
1,477,976,339
86,970,358
86,970,358
266,974,564
267,417,445
70,641
70,641
26,780,031
26,831,137
3,424,624
-
34,407,250
34,407,250
240,194
240,194
100,435,752
100,435,752
22,640,898
22,640,898
41,968
41,968
Securities sold under agreements to repurchase
26,912,231
26,912,231
Payables
25,275,575
25,275,575
1,830,323,502
1,830,323,502
Bank debentures
37,450,000
38,013,356
13,297,835
13,297,835
915,996
915,996
Discounts and loans
Available-for-sale financial assets
Held-to-maturity financial assets
Investments accounted for using equity method
Other financial assets - debt investments with no active market
Other financial assets - financial assets carried at cost
Other financial assets - others
Other assets - refundable deposits
Other liabilities - guarantee deposits reserved
2014 ANNUAL REPORT
093
December 31, 2013
Carrying Amount
Fair Value
Financial assets
Due from the Central Bank and other banks
$
48,142,931
$
48,142,931
122,085,753
122,085,753
40,288,320
40,288,320
6,132
6,132
33,298,639
33,298,639
1,406,612,677
1,406,612,677
80,367,723
80,367,723
310,881,004
311,091,253
75,532
75,532
25,133,873
25,109,938
Other financial assets - financial assets carried at cost
3,422,045
-
Other financial assets - others
6,560,007
6,560,007
203,316
203,316
131,875,899
131,875,899
20,656,004
20,656,004
86,820
86,820
Securities sold under agreements to repurchase
18,183,206
18,183,206
Payables
20,806,659
20,806,659
1,739,937,046
1,739,937,046
31,650,000
32,001,614
7,482,047
7,482,047
792,309
792,309
Receivables
Discounts and loans
Investments accounted for using equity method
Other financial assets - debt investments with no active market
Other assets - refundable deposits
Bank debentures
Other liabilities - guarantee deposits reserved
b. Fair value of financial instruments not carried at fair value
The Company and its subsidiaries apply the following methods and assumptions to determine the fair values of financial
instruments not carried at fair value:
1) The carrying amounts of the following short-term financial instruments approximate to their fair values because of their
short-term maturity: Cash and cash equivalents, due from the Central Bank and other banks, receivables, refundable
deposits, deposits from the Central Bank and banks, securities sold under agreements to repurchase, payables,
guarantee deposits received.
094
FINANCIAL STATEMENT
2) Discounts and loans (include nonperforming loans): The interest rate of the Company and its subsidiaries’ loan are
determined by the base rate and the added/deducted margin, i.e. the floating rate which can represent market
rate. Thus, it’s reasonable to estimate the fair value using the carrying amount with the consideration to the possibility
of the collection.
The fair value of the fixed rate mid-term and long-term loans should be determined by the discounted present value
of the future cash flows. However, the mid-term and long-term loans is not significant in this item; thus, it’s reasonable
to estimate the fair value using the carrying amount in consideration of the possibility of collection.
3) Held-to-maturity financial assets: Held-to-maturity financial assets with quoted price in an active market are using
market price as fair value; held-to-maturity financial assets with no quoted price in an active market are estimated by
valuation methods or counterparties’ price.
4) Deposits and remittances: Considering banking industry’s characteristic, maturity within deposits have one year
and measured by market rate (market value), using carrying value to assess fair value is reasonable. Because
deposits with three years maturity are measured by discounted cash flow, using carrying value to assess fair value is
reasonable.
5) Bank debenture: The fair value of bank debenture are determined by their expected future cash flow discounted
at borrowing rate of debt instruments with equivalent term. The discount rates adopted by the Company and its
subsidiaries were from 1.391% to 3.3%.
6) Other financial assets - debt investments with no active market: The fair value of debt investments with no active
market is determined by the discounted cash flow approach. The discount rates of the Company and its subsidiaries
are identical to the return of financial instruments with the same terms and properties.
The terms and the properties include the credits condition of the debtor, the fixed interest bearing period, the
remaining period of the principle and the currency of the payments, etc. The discount rates of the Company and its
subsidiaries range from 0.9% to 2%.
7) Other financial assets - financial assets carried at cost: The fair value of unquoted equity investments cannot be
reliably measured because those investments do not have quoted price in an active market, the variability interval
of fair value measurements is significant or the probability of the estimations in the variability interval cannot be
reasonably assessed. Hence, the fair value is not disclosed.
c. Financial instruments measured at fair value
Financial instruments at fair value through profit or loss, available-for-sale financial assets and derivative financial
instruments for hedging with quoted price in an active market are using market price as fair value; financial instruments
above with no quoted price in an active market are estimated by valuation methods. The estimation and assumption
of valuation method that the Company and its subsidiaries used are the same with market participants. The Company
and its subsidiaries can obtain this information.
The basis of fair value estimation used by the Company and its subsidiaries is shown as follows.
Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows: Publicly
traded stocks - at closing prices; open-end mutual funds - at net asset values; domestic bonds - at prices quoted by the
Taiwan GreTai Securities Market; overseas bonds - at prices quoted by the Bloomberg, the Reuters or the counterparty
in transactions and financial assets and financial liabilities without quoted prices in an active market - at values
determined using valuation techniques.
If there is no active market price for derivatives, except from part of them estimated by the quotation from
counterparties, the derivatives are determined at the foreign exchange rate (the closing rates published by BOT),
market yield curve and volatility curve by the Reuters. The fair value of forward and interest swap contracts are
determined by discounted cash flow, and option contracts are determined by Black-Scholes model, binomial model, or
Monte Carlo Method.
d. Hierarchy information of fair value of financial instruments
1) The definition of the hierarchy is listed below:
a)Level one
Level 1 financial instruments are traded in active market and have the identical price for the same financial
instruments. “Active market” should fit the following characteristics:
i. All financial instruments in the market are homogeneous;
ii. Willing buyers and sellers exist in the market all the time;
iii.The public can access the price information easily.
2014 ANNUAL REPORT
095
b)Level two
The products categorized in this level have the prices that can be inferred from either direct or indirect observable
inputs other than active market’s prices. Examples of these inputs are:
i. Quoted prices from the similar products in the active market refers to the fair value that can be derived from
the current trading prices of similar products. It is also noted that whether they are similar products should be
judged by the characteristics and trading rules. The fair value valuation in this circumstance may make some
adjustment due to time lags, trading rule’s differences, related parties’ prices, and the correlation of price
between itself and the similar goods.
ii. Quoted prices for identical or similar financial instruments in inactive markets.
iii. When marking-to-model, the input of model in this level should be observable (such as interest rates, yield
curves and volatilities). The observable inputs mean that they can be attained from market and can reflect
the expectation of market participants.
iv. Inputs which can be derived from other observable prices or whose correlation can be verified through other
observable market data.
c)Level three
The fair prices of the products in this level are based on the inputs other than the direct market data. For example,
historical volatility used in valuing options is an unobservable input, because it cannot represent the entire market
participants’ expectation towards future volatility.
2) The fair value hierarchy of the Company and its subsidiaries’ financial instruments was as follows:
December 31, 2014
Total
Level 1
Level 2
Level 3
Non-derivative financial instruments
Assets
Held for trading financial assets
Investment in stocks
Investment in bonds
Others
$
91,587
$
91,587
$
-
$
-
350,397
350,397
-
-
31,707,017
-
31,707,017
-
13,528,314
470,325
13,057,989
-
Financial assets designated as at fair value through
profit or loss
Investment in bonds
9,173,848
9,173,848
-
-
Investment in bonds
72,114,300
27,013,256
45,101,044
-
5,682,210
1,124,395
4,557,815
-
18,833,340
-
18,833,340
-
4,752,808
-
4,752,808
-
4,191
-
4,191
-
3,807,558
-
3,806,415
1,143
41,968
-
41,968
-
Others
Liabilities
Derivative financial instruments
Assets
Liabilities
096
FINANCIAL STATEMENT
December 31, 2013
Total
Level 1
Level 2
Level 3
Non-derivative financial instruments
Assets
Held for trading financial assets
Investment in bonds
$
429,294
$
429,294
$
-
$
-
318,736
-
318,736
-
20,543,916
-
20,543,916
-
16,820,214
716,797
16,103,417
-
9,851,013
9,851,013
-
-
Investment in bonds
67,713,144
23,530,070
44,183,074
-
2,803,566
1,173,126
1,630,440
-
19,481,976
-
19,481,976
-
2,176,160
-
2,175,978
182
6,132
-
6,132
-
1,174,028
-
1,174,028
-
86,820
-
86,820
-
Others
Financial assets designated as at fair value through
profit or loss
Investment in bonds
Others
Liabilities
Derivative financial instruments
Assets
Liabilities
2014 ANNUAL REPORT
097
The NTD government bonds held by the Company and its subsidiaries are classified as bond investment in inactive market.
Therefore, parts of the bonds are transferred from Level 1 to Level 2.
3)Reconciliation of Level 3 items of financial assets
Gains (Losses) on Valuation
Name
Beginning
Balance
Increase
Other
Profit and Loss Comprehensive
Income
Purchase/
Issued
Decrease
Transfer to
Level 3
Disposed/
Sold
Ending
Balance
Transfer Out
of Level 3
Assets
Financial assets at fair value through
profit or loss
Assets swap
$
182
($
164)
$
-
$
-
$
-
$
18
$
-
$
-
Name
Beginning
Balance
Increase
Other
Income
Purchase/
Issued
Decrease
Transfer to
Level 3
Disposed/
Sold
Ending
Balance
Transfer Out
of Level 3
Assets
profit or loss
Assets swap
$
-
($
9)
$
-
$
191
$
-
$
-
$
-
$
182
As of December 31, 2014 and 2013, the valuation gain included in profit and loss for assets still held were $0 and $182,
respectively.
4)Reconciliation of Level 3 items of financial liabilities
Name
Beginning
Balance
Increase
Other
Income
Purchase/
Issued
Decrease
Transfer to
Level 3
Disposed/
Sold
Transfer Out
of Level 3
Ending
Balance
Liabilities
Financial liabilities at fair value
through profit or loss
Held-for-trading financial
liabilities
Assets swap
$
-
$
-
$
-
($
1,125)
$
-
$
18
As of December 31, 2014, the valuation loss included in profit and loss for assets still held was $1,143.
098
FINANCIAL STATEMENT
$
-
($ 1,143)
5)Sensitivity analysis of Level 3 fair value if reasonably possible alternative assumptions used.
The Company and its subsidiaries evaluate the fair value of financial instruments reasonably. Nevertheless, the outcome
of the evaluation may vary because of the adoption of different valuation models and parameters. For the Level 3
financial instruments, if the parameters (e.g. interest rate) increase or decrease by 1 percent, the influence of the current
net income or other comprehensive income was as follows:
Items
The Change in Fair Value Influence
Current Net Income
Favorable
Other Comprehensive Income
Unfavorable
Favorable
Unfavorable
December 31, 2014
Liabilities
Held-for-trading financial liabilities
Assets swap
$
Items
31
($
31)
Current Net Income
Favorable
$
-
$
-
Other Comprehensive Income
Unfavorable
Favorable
Unfavorable
December 31, 2013
Assets
Assets swap
$
12
($
12)
$
-
$
-
Favorable or unfavorable changes of the Company and its subsidiaries refer to the fluctuation of fair value, which is
calculated by different unobserved parameters.
If the fair value of financial instruments are affected by more than one parameter, the preceding table only takes a single
parameter into account.
2014 ANNUAL REPORT
099
44. FINANCIAL RISK MANAGEMENT
a. Overview
The major risks confronted by the Company and its subsidiaries include credit risk, market risk, liquidity risk, and
operational risk regarding to on-balance and off-balance business.
To improve and reinforce the ability as well as the culture of risk management, the Company and its subsidiaries have
established related risk management policies approved by the board of directors and developed risk measurement
instruments to identify, estimate, monitor and control all types of risk reasonably.
b. Risk management framework
The board of directors is the top risk supervisor of the Company and its subsidiaries and is responsible for the review of
related policies and the approval of risk report etc.
After authorized by the board of directors, senior and related managers set up various committee including risk
management, business loan audit, overdue loan review and asset management committee to establish mechanisms
for risk managing and supervise the execution of risks management policies.
Audit division takes charge of inspecting and evaluating the feasibility as well as the effectiveness of internal control.
c. Credit risk
1) Sources and definitions of credit risk
Credit risk is the risk of default loss that a customer or counterparty fails to meet the contract because of deterioration
of it’s financial condition.
2) Policies and strategies
To ensure the sound development and establish the consistent credit management culture, the Company and
its subsidiaries have stipulated “Hua Nan Commercial Bank Corporate Finance Risk Management Policy”, “Hua
Nan Commercial Bank Personal Finance Risk Management Policy”, “Hua Nan International Leasing Co., Ltd. Risk
Management Policy” and “Hua Nan International Leasing Corporation Risk Management Policy” as the basis of
credit risk regulations.
Credit risk management procedures and measurements are as follows:
a)Loan business (includes loan commitment and guarantee)
Loan business classification and credit quality level are shown as follows:
Classification
The Company and its subsidiaries’ loans are classified into 5 classes. Except for normal credits classified as the
Class 1, the remaining unsound credit assets are classified as Class 2 “Assets that require special mention”, Class 3
“Assets that are substandard”, Class 4 “Assets that are doubtful and Class 5 “Assets for which there is loss” based
on the status on collaterals and the length of time overdue. To manage the problematic loans, the Company
set up “Evaluation of Asset Classification Guidelines”, “Overdue Loans, Non-performing Loans and Bad Debt
Management Guidelines” and the subsidiaries established “Overdue Receivables, Non-performing Receivables
and Bad Debt Management Guidelines”. All regulations are the basis to manage the problematic and overdue
debts.
Credit quality level
In order to measure clients’ credit risks, the Company and its subsidiaries established credit rating model and the
personal finance scorecard on the basis of the statistic method and judgment of the professionals.
According to internal credit ratings, scorecard, and the possibility of long-term default on individual asset groups,
the Company and its subsidiaries classified the credit quality of the undue and unimpaired loans as well as
receivables into 4 level. Level 1 has the lowest credit risk and the level 4 has the highest one.
Based on the actual occurrence of default, the model and scorecard are examined and revised, if necessary, to
ensure the effectiveness of the related risk measurement.
100
FINANCIAL STATEMENT
b)Due from the Central Bank and others banks
The Company and its subsidiaries will evaluate the counterparties’ credit status and refer to the information issued
by credit agencies. The Company and its subsidiaries will set different credit limits based on different ratings.
c)Debt investment and derivative financial instruments
The Company and its subsidiaries manage and identify credit risks of debt investment through credit ratings by
external institution, credit quality of the debt, regional conditions and counterparties’ risks.
The Company and its subsidiaries categorized the credit quality of debt investment instruments into 3 groups as
follows:
“The instruments beyond certain ratings assigned by authorized credit agencies”;
“The instruments below certain ratings assigned by authorized credit agencies” and,
“The instruments without ratings assigned by authorized credit agencies”.
The Company and its subsidiaries set the related regulations on the qualification of the counterparties and the
credit exposures. The related regulations are as follows:
i: The clients’ credit limit should be approved within the limitation on credit risk according to the regulation on
conducting the derivative instruments business.
ii: The financial institutions with long-term credit ratings assigned by authorized credit agency’s are granted the
credit limit.
iii:The derivative transactions between the Company and its subsidiaries and the Central bank as well as the
transactions in the stock exchange market are exempted from the aforementioned regulations.
3) Credit risk hedging or mitigation policies
a)Collateral
To reduce the loss of credit risk and ensure that the Company and its subsidiaries are able to dispose the collateral
and mitigate the credit risk effectively. The Company and its subsidiaries have set up several mechanisms, such
as collateral valuation, the use of credit guarantee fund, the supervision of valuation method and after-loans
management.
Through the build of the system and the management mechanism, the Company monitors the fluctuation of the
collateral price to ensure the effectiveness.
Additionally, the Company stated related agreements on debt preservation and the rule of setting off etc. to
ensure the enforcement of debt preservation and thereby reduce the credit risk.
The subsidiaries established the guidelines on loan business, loan examination and loan review to ensure the
qualities of assets and thereby reduce the credit risk. To take credit risk into consideration, the subsidiaries
are entitled to require the clients to provide collateral. In terms of managing the assessment of collateral, the
subsidiaries established the guiding principles of classification of assets that can served as collateral, collateral
management, to ensure the enforcement of debt preservation.
b)Credit risk limits and credit risk concentration control
The Company and its subsidiaries have set the limitation on credit exposure to single counterparty, related parties
groups, corporations industries and nations respectively. The limitation on credit exposures includes loan and other
credit-risk-relate businesses. To achieve decentralization of risk, the Company supervise and review the feasibility
periodically.
To avoid over-concentration of risk, the subsidiaries’ guidelines of risk supervision set the maximum credit limit
toward the same institution, related party or related corporation to control the degree of risk concentration.
c)Agreement of net settlement
The Company and its subsidiaries often make transactions through gross settlement, reach net settlement contract
with other counterparties or cancel every transactions and make net settlement when default occurs to mitigate
credit risk.
2014 ANNUAL REPORT
101
4) The maximum credit exposure of the financial instruments
Maximum credit exposures of assets on consolidated balance sheet (excluding collaterals and other credit
enhancement instruments) are almost equivalent to its carrying amount. The Company and its subsidiaries’ maximum
credit exposures (excluding collaterals) off balance sheet are shown as follows:
The Maximum Credit Exposure
Off-balance Sheet Items
December 31
2014
Undrawn loan commitment
$
2013
100,426,938
$
143,383,428
73,948,338
69,293,887
27,852,200
29,820,861
Guarantees issued
37,429,613
36,587,399
Total
$
239,657,089
$
279,085,575
Because the payments of these loan business and financial instruments won’t be disbursed before maturity, therefore,
the amounts of these contracts do not represent future outflows, namely that the demand of future cash is lower than
the amounts stated in contract.
If the credit line is reached and the collateral is of little value, the credit risk equals the contract amounts, the greatest
possible losses.
5) Credit risk concentration of the Company and its subsidiaries
To manage credit assets portfolio, enhance the assets quality as well as the efficiency of utility of capital, and thereby
prevent material effect from negative credit events, the Company and its subsidiaries stipulate various credit limits
and monitor the appropriateness periodically.
a)By industry
December 31
Industries
2014
Amount
Private enterprise
$
2013
%
Amount
652,633,114
44
Nature person
568,278,822
Foreign institution
Government agency
Public enterprise
Non-profit organization
Total
102
$
FINANCIAL STATEMENT
$
%
607,286,078
43
38
544,984,607
38
189,893,503
13
171,253,547
12
72,533,339
5
78,578,597
6
7,551,175
-
15,052,750
1
761,093
-
686,098
-
1,491,651,046
100
1,417,841,677
100
$
b)By region
According to the country risk statistics of transnational debt rights (excluding Taiwan), the proportions of total
oversea exposure in Asia, America, Europe and others are 61%, 22%, 12% and 5%, respectively. Europe has
relatively low proportion because of asset allocation responding to European debt crisis. In compliance with the
conservatism principles, the Company and its subsidiaries invest in subjects above the investment grade with lower
country risk as the guideline of expanding business. Currently, the country risk exposure in all region is under the
tolerance of the Company and its subsidiaries.
c)By collateral
December 31
Collateral
2014
2013
Amount
Credit
$
%
Amount
471,894,508
31
Stocks
22,932,187
Liabilities
$
%
454,402,482
31
1
18,216,865
1
29,874,428
2
26,580,807
2
877,655,575
57
832,509,762
57
Movables
45,807,328
3
49,400,379
3
Receivables
11,377,896
1
10,601,870
1
Guarantees
51,701,804
3
48,230,218
3
Others
25,384,664
2
25,597,048
2
1,536,628,390
100
1,465,539,431
100
Secured
Real estate
Total
$
$
6) Credit quality and impairment assessment of financial assets
Some financial assets such as cash and cash equivalents, due from Central Bank and other banks, financial assets at
fair value through profit or loss, securities purchased under agreement to resell and refundable deposits are regarded
as very low credit risk owing to the good credit rating of counterparties. Except for the aforementioned, other
analyses of financial assets are summarized as follows:
a)Discounts, loans and receivables
Neither Past Due Nor Impaired
December 31,
2014
Level 1
Level 2
Level 3
Loss Recognized (D)
Subtotal
(A)
Level 4
Past Due Not
Impaired (B)
Impaired
(C)
Total
(A)+(B)+(C)
With
Objective
Evidence of
Impairment
With No
Objective
Evidence of
Impairment
Net Total
(A)+(B)+(C)-(D)
Receivables
Credit card
business
Discounts and
loans
$ 3,843,294 $
843,410,698
350,996 $
575,016,232
- $
27,682,788
370,447 $
42,108,705
4,564,737 $
1,488,218,423
4,491 $
24,762
104,706 $ 4,673,934 $
22,973,199 1,511,216,384
42,288 $
12,033,859
10,517 $
4,621,129
5,024,608
1,494,157,917
2014 ANNUAL REPORT
103
December 31,
2013
Level 1
Level 2
Level 3
Loss Recognized (D)
Subtotal
(A)
Level 4
Past Due Not
Impaired (B)
Impaired
(C)
Total
(A)+(B)+(C)
With
Objective
Evidence of
Impairment
Net Total
(A)+(B)+(C)(D)
With No
Objective
Evidence of
Impairment
Receivables
Credit card
business
Discounts and
loans
$ 2,610,912 $
853,353,081
497,303 $
481,779,948
65,575 $
34,259,270
133,103 $
48,141,683
3,306,893 $
1,417,533,982
9,086 $
93,584
113,861 $
29,668,571
3,429,840 $
1,447,296,137
41,629 $
13,855,530
10,881 $
3,782,079
3,377,330
1,429,658,528
Note: Neither past due nor impaired were ordered by credit risk. Level 1 had the lowest risk while level 4 had the highest risk.
Loss Recognized (D)
December 31,
2014
Excellent
Good
Acceptable
Subtotal (A)
Past
Impaired
Due Not
(C)
Impaired (B)
Total
(A)+(B)+(C)
With Objective
Evidence of
Impairment
With No
Objective
Evidence of
Impairment
Net Total
(A)+(B)+(C)-(D)
Receivables
Others
$ 232,089,708 $ 238,800 $ 2,251,515 $ 234,580,023 $
- $ 5,987,926 $ 240,567,949 $
December 31,
2013
Excellent
Good
$188,694,235
$ 176,581
Acceptable
3,657,343 $
4,974 $
236,905,632
Loss Recognized (D)
Subtotal (A)
Past Due Not
Impaired (B)
Impaired
(C)
Total
(A)+(B)+(C)
$
$6,128,493
$ 195,560,510
With No
With Objective
Objective
Evidence of
Evidence of
Impairment
Impairment
Net Total
(A)+(B)+(C)-(D)
Receivables
Others
104
$
561,201
FINANCIAL STATEMENT
$ 189,432,017
-
$
3,729,846
$
5,881
$
191,824,783
b)Credit quality analysis for neither past due nor impaired discounts and loans by client type are as follows:
December 31, 2014
Level 1
Level 2
Level 3
Level 4
Total
Consumer banking
Mortgage
$
406,394,655
Cash card
$
96,086,888
$
1,494,337
$
-
$
503,975,880
-
-
-
31,154
31,154
Consumer loans
1,835,156
10,875,675
-
-
12,710,831
Others
6,956,149
43,075,858
-
-
50,032,007
428,224,738
424,977,811
26,188,451
42,077,551
921,468,551
42,108,705
$ 1,488,218,423
Corporate banking
Total
$
843,410,698
$
575,016,232
$
27,682,788
$
December 31, 2013
Level 1
Level 2
Level 3
Level 4
Total
Consumer banking
Mortgage
$
Cash card
428,897,366
$
49,244,434
$
8,796,811
$
1,223,978
$
488,162,589
-
-
-
50,013
50,013
Consumer loans
1,862,124
9,310,113
-
-
11,172,237
Others
5,807,138
38,839,017
-
-
44,646,155
416,786,453
384,386,384
25,462,459
46,867,692
873,502,988
48,141,683
$1,417,533,982
Corporate banking
Total
$
853,353,081
$
481,779,948
$
34,259,270
$
2014 ANNUAL REPORT
105
c)Credit quality analysis for marketable securities
December 31, 2014
The
The Instruments
The Instruments
Instruments
Without
Beyond Certain Below Certain
Certain Ratings
Ratings Assigned
Ratings
Assigned by
by Authorized
Assigned by
Authorized
Credit Agencies
Authorized
Credit
(Note)
Credit
Agencies
Agencies
Subtotal
(A)
Total
(A)+(B)+(C)
Loss
Recognized
(D)
-
$ 72,114,300
$
Past Due Not Impaired
Impaired (B)
(C)
Net Total
(A)+(B)+(C)-(D)
Investment in bonds
$
71,757,625
$
254,950
$
101,725
$ 72,114,300
$
-
$
-
$
72,114,300
7,436,866
1,736,982
-
9,173,848
-
-
9,173,848
-
9,173,848
Others
4,557,815
-
1,124,395
5,682,210
-
-
5,682,210
-
5,682,210
230,215,000
-
-
230,215,000
-
-
230,215,000
-
230,215,000
36,680,531
-
-
36,680,531
-
-
36,680,531
-
36,680,531
79,033
-
-
79,033
-
-
79,033
-
79,033
-
-
3,424,624
3,424,624
-
3,421
3,428,045
3,421
3,424,624
Investment in bonds
24,780,031
-
2,000,000
26,780,031
-
-
26,780,031
-
26,780,031
Negotiable certificates of
deposits
Investment in bonds
Others
Other financial assets
December 31, 2013
The
The Instruments
The Instruments
Instruments
Without
Beyond Certain Below Certain
Certain Ratings
Ratings Assigned
Ratings
Assigned by
Subtotal (A)
by Authorized
Assigned by
Authorized
Credit Agencies
Authorized
Credit
(Note)
Credit
Agencies
Agencies
Past Due Not Impaired
Impaired (B)
(C)
Total
(A)+(B)+(C)
Loss
Recognized
(D)
$
-
$ 67,713,144
$
Net Total
(A)+(B)+(C)-(D)
Investment in bonds
$
67,199,613
$
-
$
513,531
$ 67,713,144
-
$
-
$
67,713,144
7,364,295
2,486,718
-
9,851,013
-
-
9,851,013
-
9,851,013
Others
1,630,440
-
1,173,126
2,803,566
-
-
2,803,566
-
2,803,566
287,800,000
-
-
287,800,000
-
-
287,800,000
-
287,800,000
22,854,941
-
226,063
23,081,004
-
-
23,081,004
-
23,081,004
-
-
3,422,045
3,422,045
-
-
3,422,045
-
3,422,045
Investment in bonds
23,133,873
-
2,000,000
25,133,873
-
-
25,133,873
-
25,133,873
Negotiable certificates of
deposits
Investment in bonds
Note:The Banking Act provides that investments beyond certain rating assigned by authorized credit agency have one of the following characteristics:
1) By Standard & Poor’s, short-term credit ratings reach at least A-3 level or long-term credit ratings reach at least BBB-.
2) By Moody’s Investors Service, short-term credit ratings reach at least P-3 level or long-term credit ratings reach at least
Baa3.
106
FINANCIAL STATEMENT
3) By Fitch, Inc. short-term credit ratings reach at least F3 level or long-term credit ratings reach at least BBB-.
4) By Taiwan Ratings, short-term credit ratings reach at least twA-3 level or long-term credit ratings reach at least twBBB-.
5) By Fitch Ratings Taiwan, short-term credit ratings reach at least F3(twn) level or long-term credit ratings reach at least
BBB-(twn).
6) By Moody’s Ratings, short-term credit ratings reach at least TW-3 level or long-term credit ratings reach at least Baa3.
tw.
7) Aging analysis for overdue but not yet impaired financial assets of the Company and its subsidiaries
Delayed procedures by borrowers and other administrative reasons could result in financial assets overdue but not
yet impaired. According to the Company and its subsidiaries’ internal risk management policies, financial assets
overdue within 90 days are not considered impairment loss unless other evidences provided.
Aging analysis for overdue but not yet impaired financial assets was as follows:
December 31, 2014
Items
Overdue One to Two
Month
Overdue Two
to Three Months
Overdue Above
Three Months
Total
Receivables
$
4,491
$
-
$
-
$
4,491
Discounts and loans
Consumer banking
Mortgage
-
265
-
265
Consumer loans
-
-
-
-
Cash card
-
-
-
-
-
1
-
1
22,920
1,576
-
24,496
Others
Corporate banking
December 31, 2013
Items
Overdue One to Two
Month
Overdue Two
to Three Months
Overdue Above
Three Months
Total
Receivables
$
6,330
$
2,756
$
-
$
9,086
Discounts and loans
Consumer banking
Mortgage
1
178
-
179
Consumer loans
162
214
-
376
Cash card
525
523
-
1,048
-
674
-
674
34,702
56,605
-
91,307
Others
Corporate banking
Note 1:“Overdue but not yet impaired” with no objective evidence of impairment and overdue reasonable period was evaluated by IAS 39 “impairment loss of loans and
receivables”.
Note 2:“Overdue reasonable period” refer to loans whose repayment of principal or interest have been overdue less than one month.
a)Overdue one to two months refer to loans whose repayment of principal or interest have been overdue one to
two months.
b)Overdue two to three months refer to loans whose repayment of principal or interest have been overdue two to
three months.
c)Overdue above three months refer to loans whose repayment of principal or interest have been overdue
exceeding three months.
2014 ANNUAL REPORT
107
8)Analysis of impairment for financial assets of the Company and its subsidiaries
Analysis of impairment for discounts and loans and receivables was summarized as follows:
Items
Discounts and Loans
Allowance for Credit Losses
December 31
December 31
2014
Individual
assessment
With objective evidence
of impairment
Combined
assessment
With no objective evidence
of impairment
Combined
assessment
Corporate banking
$
2013
14,252,748
$
Combined
assessment
Combined
assessment
2,235,871
$
4,235,908
-
15,845
-
Corporate banking
4,727,999
5,592,690
1,692,490
1,575,554
Consumer banking
3,717,838
3,519,965
463,699
522,973
Corporate banking
921,493,047
873,594,293
4,688,500
3,501,608
Consumer banking
571,319,366
547,349,252
346,625
291,352
Corporate banking
Consumer banking
Collectively assessed
by business nature
Assessed by aging
Zero risk
With no objective evidence
of impairment
$
379,320
Receivables
Allowance for Credit Losses
December 31
December 31
2014
With objective evidence
of impairment
20,669,777
2013
Consumer banking
Items
Individual
assessment
2014
Lower risk evaluated
by general agency
Assessed by aging
$
2013
18,784
$
2014
140,862
$
2013
18,784
$
101,691
5,957,388
5,982,957
3,499,245
3,505,463
2,008
3,304
735
1,866
996
922
880
863
204,872,253
163,140,875
-
-
27,456,254
25,729,941
-
-
2,260,266
561,649
4,974
5,881
d. Liquidity risk
1) Source and definition of liquidity risk
Liquidity risk means that the Company and its subsidiaries cannot provide sufficient funding acquired on a reasonable
price for obligations and then cause earnings or capital losses. Sources of liquidity risk include unexpected changes
or decrement of funds and the indiscretion or incapacity of handling the changes the market, resulting in the
condition that can not liquidate assets promptly.
2) Strategies of the Company and its subsidiaries’ liquidity risk management
Liquidity risk management is to maintain stability of liquidity under the premise that the cost of capital and return of
assets would be both considered.
108
FINANCIAL STATEMENT
The Company and its subsidiaries have stipulated rules incorporating identification measurement and supervision of
risk, etc. To control the extent of exposure, the Company and its subsidiaries establish suspension mechanism and set
liquidity ratio or cash flow for reference of estimation on liquidity cushion. Besides, the rule should be set to handle
urgent liquidity crisis.
The information about liquidity risk management will be reported to “Asset and Liabilities Committee” and boards of
directors periodically. And the information will be independently reviewed by internal auditor.
3) Maturity analysis of non-derivative financial liabilities
Cash outflow analyses of the Company and its subsidiaries’ non-derivative financial assets and liabilities are
summarized as follows. Because short-term holding period of non-derivative financial assets and liabilities in financial
assets and liabilities at fair value through profit or loss, they are categorized into the shortest term group. The amounts
disclosed in the following table are based on undiscounted contract cash flow; hence, parts of disclosed amounts of
some items will not match the related items in consolidated balance sheet.
December 31, 2014
0-30 Days
31-90 Days
181 Days
to 1 Year
91-180 Days
Over 1 Year
Total
Main capital inflow on maturity
$ 110,262,250
$
-
$
-
$
-
$
-
$ 110,262,250
Due from the Central Bank and other
banks
135,138,879
80,006,796
13,413,593
8,852,299
26,375,626
263,787,193
profit or loss
32,624,053
316,844
633,441
2,818,798
9,064,747
45,457,883
164,365,494
168,751,960
146,183,540
156,894,763
855,438,139
1,491,633,896
579,095
1,989,407
1,487,068
4,454,729
79,780,955
88,291,254
209,800,000
6,400,000
4,379,033
13,460,000
33,055,000
267,094,033
977,466
813,133
676,403
2,334,787
29,044,438
33,846,227
653,747,237
258,278,140
166,773,078
188,815,376
1,032,758,905
2,300,372,736
149,850,621
90,534,706
7,975,787
405,373
1,583,500
250,349,987
-
-
2,300,000
-
16,050,000
18,350,000
205,870,498
206,652,954
184,646,037
306,698,436
926,371,520
1,830,239,445
6,877,897
7,113,703
2,455,129
50,378
-
16,497,107
-
-
1,700,000
-
35,750,000
37,450,000
11,114,851
1,241,794
489,751
996,613
805,824
14,648,833
373,713,867
305,543,157
199,566,704
308,150,800
980,560,844
2,167,535,372
$ 280,033,370
($ 47,265,017)
($ 32,793,626)
($119,335,424)
52,198,061
$ 132,837,364
Loans (excluding nonperforming loans)
Other capital inflow
Subtotal
Main capital outflow on maturity
Deposits from the Central Bank and
banks
Financial liabilities at fair values through
profit or loss
Deposits
repurchase
Bank debentures
Other capital outflow
Subtotal
Gap
$
2014 ANNUAL REPORT
109
December 31, 2013
0-30 Days
31-90 Days
181 Days
to 1 Year
91-180 Days
Over 1 Year
Total
Main capital inflow on maturity
$
68,200,148
$
-
$
-
$
-
$
-
$
68,200,148
Due from the Central Bank and other
banks
112,992,756
45,451,417
11,505,236
8,533,523
24,494,355
202,977,287
profit or loss
21,086,610
314,842
1,234,150
1,675,660
13,124,899
37,436,161
169,312,045
157,248,720
134,381,457
95,938,690
860,993,176
1,417,874,088
1,425,967
891,663
3,741,691
3,319,216
72,884,643
82,263,180
224,648,953
30,798,363
23,152,700
9,075,000
23,200,000
310,875,016
2,431,894
769,665
397,331
506,560
28,815,697
32,921,147
600,098,373
235,474,670
174,412,565
119,048,649
1,023,512,770
2,152,547,027
159,462,141
60,600,324
5,560,247
1,083,852
-
226,706,564
-
-
-
500,000
18,350,000
18,850,000
191,319,903
190,785,583
177,640,035
305,826,385
874,459,810
1,740,031,716
9,986,342
5,903,630
2,246,008
117,226
-
18,253,206
-
-
-
9,200,000
22,450,000
31,650,000
6,034,151
1,810,159
916,608
451,661
786,097
9,998,676
366,802,537
259,099,696
186,362,898
317,179,124
916,045,907
2,045,490,162
$ 233,295,836
($ 23,625,026)
($ 11,950,333)
($198,130,475)
$ 107,466,863
$ 107,056,865
Loans (excluding nonperforming loans)
Other capital inflow
Subtotal
Main capital outflow on maturity
Deposits from the Central Bank and
banks short-term borrowings
Financial liabilities at fair values through
profit or loss
Deposits
repurchase
Bank debentures
Other capital outflow
Subtotal
Gap
110
FINANCIAL STATEMENT
Demand deposit included in deposits on the table was allocated to each time zone according to historical
experience of the Company and its subsidiaries.
4) Maturity analysis of derivative financial assets and liabilities
Derivative instruments consist of forward contracts, currency swap contracts, non-deliverable forward contracts,
exchange rate option, interest rate swap contracts, cross-currency swap contracts, and interest rate option.
The amounts of forward contracts, currency swap contracts and cross-currency swap contracts are based on
contractual cash flow, and the others are based on fair value.
Maturity analysis of derivative financial assets and liabilities was as follows:
0-30 Days
31-90 Days
91-180 Days
181 Days
to 1 Year
$ 146,128,356
$ 46,422,965
$ 48,760,197
$ 11,804,570
147,624,831
47,023,525
47,215,285
308
-
-
Total cash outflow
Total cash inflow
December 31, 2014
Over 1 Year
Total
Derivative financial instrument at fair value
Cash outflow
332,843
$ 253,448,931
11,798,948
692,779
254,355,368
5,030
3,782
34,819
43,939
-
-
-
4,191
4,191
$ 146,128,664
$ 46,422,965
$ 48,765,227
$ 11,808,352
$
367,662
$ 253,492,870
$ 147,624,831
$ 47,023,525
$ 47,215,285
$ 11,798,948
$
696,970
$ 254,359,559
0-30 Days
31-90 Days
91-180 Days
181 Days
to 1 Year
$ 70,751,007
$ 56,296,094
$ 19,734,925
71,188,179
56,566,435
19,772,890
Cash outflow
-
1,257
Cash inflow
-
Total cash outflow
Total cash inflow
Cash inflow
$
Derivative instrument for hedging
Cash outflow
Cash inflow
December 31, 2013
Over 1 Year
Total
Derivative financial instrument at fair value
Cash outflow
Cash inflow
$
7,695,282
$
302,804
$ 154,780,112
7,684,533
663,572
155,875,609
5,027
3,058
581,042
590,384
-
-
-
506,132
506,132
$ 70,751,007
$ 56,297,351
$ 19,739,952
$
7,698,340
$
883,846
$ 155,370,496
$ 71,188,179
$ 56,566,435
$ 19,772,890
$
7,684,533
$
1,169,704
$ 156,381,741
Derivative instrument for hedging
2014 ANNUAL REPORT
111
5) The maturity analysis of off-balance sheet items
The maturity analysis of off-balance sheet items shows irrevocable undrawn credit card commitment, undrawn
loan commitment, standby letters of credit and guarantee issued amounts. The amounts in the table below were
prepared on contractual cash flow basis; therefore, some disclosed amounts will not match the consolidated
balance sheet.
December 31, 2014
0-30 Days
$
31-90 Days
-
$
5,402,249
181 Days
to 1 Year
91-180 Days
$
4,092,124
$
Over 1 Year
Total
9,084,916
$ 55,369,049
$ 73,948,338
3,029,548
6,059,096
9,088,644
18,187,243
64,062,407
100,426,938
7,838,573
14,932,761
1,774,649
1,114,631
2,191,586
27,852,200
Guarantee issued
3,628,249
3,704,852
4,580,510
6,727,829
18,788,173
37,429,613
$ 14,496,370
$ 30,098,958
$ 19,535,927
$ 35,114,619
$ 140,411,215
$ 239,657,089
0-30 Days
31-90 Days
91-180 Days
181 Days
to 1 Year
Over 1 Year
Total
1,287,501
$ 20,960,718
$ 45,731,753
$ 69,293,887
Total
December 31, 2013
$
-
$
1,313,915
$
6,322,809
12,618,912
20,702,760
38,717,495
65,021,452
143,383,428
7,409,699
18,892,774
2,562,380
688,593
267,415
29,820,861
Guarantee issued
2,474,442
3,422,609
4,031,984
7,585,296
19,073,068
36,587,399
$ 16,206,950
$ 36,248,210
$ 28,584,625
$ 67,952,102
$ 130,093,688
$ 279,085,575
Total
6) Maturity analysis of lease commitments
The lease commitments of the Company and its subsidiaries are operating lease commitments.
Operating lease commitment is the minimum lease payment when the Company and its subsidiaries are lessee or
lessor with non-cancelling condition.
112
FINANCIAL STATEMENT
Maturity analysis of operating lease commitments is summarized as follows:
December 31, 2014
Less Than 1 Year
1-5 Years
Over 5 Years
Total
Operating lease commitments
Operating lease expense (lessee)
$
Operating lease income (lessor)
602,189
$
1,382,234
247,234
Total
$
December 31, 2013
354,955
$
365,118
417,065
$
Less Than 1 Year
965,169
$
1-5 Years
$
2,349,541
105
664,404
365,013
$1,685,137
Over 5 Years
Total
Operating lease commitments
Operating lease expense (lessee)
$
Operating lease income (lessor)
541,355
$
1,266,867
220,874
Total
$
320,481
$
291,720
145,233
$
1,121,634
$
$
2,099,942
-
366,107
291,720
$1,733,835
7) Disclosures prepared in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks
a)Maturity analysis of assets and liabilities of the Company (New Taiwan dollars)
December 31, 2014
Main capital inflow
on maturity
Main capital
outflow on maturity
Gap
Total
0-10 Days
11-30 Days
31-90 Days
91-180 Days
181 Days
to 1 Year
Over 1 Year
$1,879,676,513
$ 213,921,167
$ 262,702,260
$ 156,036,152
$ 143,807,301
$ 151,767,106
$ 951,442,527
2,643,496,467
123,261,390
187,311,955
268,716,214
297,289,241
544,163,656
1,222,754,011
75,390,305
($112,680,062)
($153,481,940)
($392,396,550)
($271,311,484)
181 Days
to 1 Year
Over 1 Year
($763,819,954)
$
90,659,777
$
December 31, 2013
Main capital inflow
on maturity
Main capital
outflow on maturity
Gap
Total
0-10 Days
11-30 Days
31-90 Days
91-180 Days
$1,783,825,935
$ 213,289,572
$ 250,154,264
$ 164,248,656
$ 133,280,437
2,371,796,702
103,151,353
146,953,714
258,189,648
($587,970,767)
$ 110,138,219
$ 103,200,550
($ 93,940,992)
$
94,278,774
$ 928,574,232
264,551,870
508,652,619
1,090,297,498
($131,271,433)
($414,373,845)
($161,723,266)
Note:The amounts listed above represent the funds denominated in New Taiwan Dollars only, i.e. excluding foreign currencies, for both head office and domestic
branches.
2014 ANNUAL REPORT
113
b)Maturity analysis of assets and liabilities of the Company (U.S. dollars)
(In Thousands of U.S. Dollars)
December 31, 2014
Total
Main capital inflow
on maturity
$
Main capital
outflow on maturity
Gap
18,271,545
0-30 Days
$
21,953,894
($
3,682,349)
8,074,918
31-90 Days
$
7,462,876
$
612,042
3,892,545
91-180 Days
$
1,492,826
4,598,685
($
706,140)
181 Days to 1 Year
$
2,090,522
($
597,696)
877,726
Over 1 Year
$
2,174,690
($
1,296,964)
3,933,530
5,627,121
($
1,693,591)
(In Thousands of U.S. Dollars)
December 31, 2013
Total
Main capital inflow
on maturity
$
Main capital
outflow on maturity
Gap
14,919,148
0-30 Days
$
15,613,640
($
694,492)
5,133,096
31-90 Days
$
5,778,928
($
645,832)
3,506,549
91-180 Days
$
3,013,560
$
492,989
1,562,512
181 Days to 1 Year
$
1,419,465
$
143,047
775,234
Over 1 Year
$
1,250,323
($
475,089)
3,941,757
4,151,364
($
209,607)
e. Market risk
1) Source and definition of market risk
Market risk is the risk of potential decrease in values of trading position due to changes in market risk factors, such as
interest rate, foreign exchange rate, price of equity securities, fluctuation or other factors.
2) Management structure and plan of market risk
To manage the market risk of the financial instrument transactions, the Company and its subsidiaries implement
market risk limit control scheme and regularly conduct the measurement, analysis, reporting and disclosure of the
exposure amounts of the market risk factors faced by the Company’s financial instrument transactions. Besides, the
Company and its subsidiaries implemented mechanism for control of market risk to manage financial market risk
appropriately.
3) Market risk management
To manage market risk, the Company and its subsidiaries set up limits on holding positions, losses of all financial
instruments and value at risk (VaR) based on current year’s budget. The Company and its subsidiaries has insignificant
market risk since gain or loss on change of market interest rate or foreign exchange rate are offset by those of
hedged items or other assets or liabilities.
a)Value at risk
The Company and its subsidiaries employ VaR to measure the investment portfolio of trading book and banking
book. Banking book comprises available-for-sale financial assets and financial assets at fair value through profit or
loss.
114
FINANCIAL STATEMENT
VaR is the statistics of potential losses on holding positions arising from unfavorable market condition changes.
Within a 99% confidence interval, VaR refers to the greatest potential loss in one day, namely that there is one
percent chance to incur the losses greater than VaR. VaR model assumes that the Company and its subsidiaries
hold the positions at least one days (one month) before the positions can be settled and that the market fluctuation in one day is similar to that in the past.
The Company and its subsidiaries calculated VaR of their positions using historical simulation method. Based on
the data in the past year used in assessing historical market fluctuations, the outcome will be used to monitor and
examine the correctness of the assumptions and parameters. The aforementioned method can’t prevent the loss
resulted from significant market fluctuations.
VaR information of trading book is shown below:
2014
Trading Book
Portfolio
Exchange rate risk
Average
$
5,466
2013
Highest
$
15,643
Lowest
$
Average
1,100
$
6,780
Highest
$
38,930
Lowest
$
1,219
Interest rate risk
3,678
13,510
905
4,562
10,831
1,037
Equity risk
9,253
16,777
932
7,639
15,120
2,615
10,878
20,235
1,953
10,977
37,475
5,074
Diversified risk
VaR information of banking book is shown below:
2014
Banking Book
Portfolio
Exchange rate risk
Average
$
346,374
2013
Highest
$
551,898
Lowest
$
174,023
Average
$
441,306
Highest
$
550,227
Lowest
$
6,348
Interest rate risk
561,958
649,370
473,387
453,564
698,183
107,210
Equity risk
429,707
615,566
261,052
669,729
746,632
551,733
Diversified risk
683,582
1,018,472
405,557
869,862
1,013,140
711,107
Limitation of VaR:
i. Historical data may not be the best estimates of future risk factors, and cannot capture the extremely
unfavorable market trend.
ii. VaR cannot capture the market risk position that can not be convertible or be hedged.
iii.The loss calculated by using 99% confidence level can’t reflect the part over 99% confidence level. To take
trading book for example, trading book can neither assure that the loss of financial instruments would not
surpass VaR, nor confirm that the loss per day within 99 days would not surpass VaR.
b)Stress testing is used to measure the greatest potential losses of the portfolio of risk assets under the worst scenario.
The Company and its subsidiaries perform stress testing assuming the situation in which changes in interest rate + 200
bps, decrease in securities 40%, changes in exchange rate of USD or EUR + 10%, and changes in exchange rate of
other currency + 10% and report the outcome to the management and Risk Management Committee.
2014 ANNUAL REPORT
115
4)Information of exchange rate risks
December 31, 2014
Foreign Currencies
Exchange Rate
New Taiwan Dollars
Financial assets
Currency items
352,300
26.0250
CAD
AUD
$
42,836
27.3200
1,170,269
CHF
7,364
32.0450
235,972
CNY
15,070,372
5.0990
76,843,829
EUR
354,237
38.5400
13,652,303
GBP
61,868
49.3400
3,052,550
HKD
4,288,772
4.0820
17,506,769
JPY
35,585,474
0.2656
9,451,502
NZD
54,234
24.8500
1,347,717
SGD
61,856
24.0000
1,484,550
USD
9,472,903
31.6700
300,006,838
VND
347,236,537
0.0015
517,628
1,674,420
2.7400
4,587,910
27,484
31.6700
870,430
AUD
453,795
26.0250
11,810,010
CAD
64,889
27.3200
1,772,776
CHF
8,000
32.0450
256,375
CNY
9,926,219
5.0990
50,613,793
EUR
461,212
38.5400
17,775,112
GBP
184,120
49.3400
9,084,479
HKD
3,933,287
4.0820
16,055,676
JPY
36,872,216
0.2656
9,793,261
NZD
123,841
24.8500
3,077,460
SGD
35,356
24.0000
848,534
USD
11,250,176
31.6700
356,293,077
VND
367,109,686
0.0015
547,253
1,950,210
2.7400
5,343,574
32,344
31.6700
1,024,340
ZAR
$
9,168,608
Noncurrency item
USD
Currency items
ZAR
Noncurrency item
USD
116
FINANCIAL STATEMENT
December 31, 2013
Foreign Currencies
Exchange Rate
New Taiwan Dollars
Financial assets
Currency items
AUD
367,376
26.5850
CAD
93,309
27.9800
2,610,786
CNY
7,993,562
4.9130
39,272,369
EUR
327,983
41.1200
13,486,662
GBP
65,797
49.1400
3,233,281
HKD
4,289,870
3.8400
16,473,101
JPY
35,091,338
0.2840
9,965,940
NZD
51,598
24.5000
1,264,155
SGD
74,856
23.5200
1,760,624
USD
9,671,621
29.7800
288,020,885
VND
565,081,347
0.0014
800,009
1,848,832
2.8600
5,287,660
8,795
29.7800
261,913
AUD
418,765
26.5850
11,132,879
CAD
92,882
27.9800
2,598,828
CNY
7,779,691
4.9130
38,221,622
EUR
301,193
41.1200
12,385,054
GBP
60,056
49.1400
2,951,151
HKD
4,161,698
3.8400
15,980,919
JPY
28,417,866
0.2840
8,070,674
NZD
51,099
24.5000
1,251,931
SGD
21,282
23.5200
500,544
USD
11,386,877
29.7800
339,101,196
VND
563,569,548
0.0014
797,869
1,846,217
2.8600
5,280,180
18,585
29.7800
553,455
ZAR
$
$
9,766,681
Noncurrency item
USD
Currency items
ZAR
Noncurrency item
USD
2014 ANNUAL REPORT
117
5)Disclosures prepared in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks
a)Interest rate sensitivity information (New Taiwan dollars)
December 31, 2014
1 to 90 Days
(Included)
Items
91 to 180 Days
(Included)
Interest -sensitive assets
$ 1,351,477,322
$
114,419,599
Interest -sensitive liabilities
1,459,340,494
71,306,987
Interest -sensitive gap
(107,863,172)
43,112,612
181 Days to One
Year (Included)
$
118,127,963
Over One Year
$
Total
184,553,561
$ 1,768,578,445
84,307,768
58,566,228
1,673,521,477
33,820,195
125,987,333
95,056,968
Net assets
124,181,635
Ratio of interest - sensitive assets to liabilities (%)
105.68%
Ratio of interest - sensitive gap to net assets (%)
76.55%
December 31, 2013
1 to 90 Days
(Included)
Items
91 to 180 Days
(Included)
$ 1,359,805,816
$
71,640,027
1,382,515,377
68,771,253
(22,709,561)
2,868,774
181 Days to One
Year (Included)
$
85,551,743
Over One Year
$
Total
172,172,551
$ 1,689,170,137
89,283,990
46,149,480
1,586,720,100
(3,732,247)
126,023,071
102,450,037
Net assets
119,663,115
106.46%
85.62%
Note 1:The above amounts include only New Taiwan dollars held by head office and domestic branches of the Company and exclude contingent assets and contingent
liabilities.
Note 2:Interest sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities whose revenues or costs are affected by interest rate changes.
Note 3:Interest sensitivity gap = Interest sensitive assets - Interest sensitive liabilities.
Note 4:Ratio of interest sensitive assets to liabilities = Interest sensitive assets/Interest sensitive liabilities (in New Taiwan dollars).
b)Interest rate sensitivity information (U.S. dollars)
December 31, 2014
1 to 90 Days
(Included)
Items
$
15,862,201
91 to 180 Days
(Included)
$
1,384,378
181 Days to One
Year (Included)
$
Over One Year
231,729
$112,716
Total
$
17,591,024
14,439,097
1,253,394
904,721
272,500
16,869,712
1,423,104
130,984
(672,992)
(159,784)
721,312
Net assets
454,956
104.28%
158.55%
118
FINANCIAL STATEMENT
December 31, 2013
1 to 90 Days
(Included)
Items
12,266,608
91 to 180 Days
(Included)
$
1,526,758
181 Days to One
Year (Included)
$
219,062
Over One Year
$
Total
$
214,515
$
14,226,943
12,165,487
989,919
684,408
399,200
14,239,014
101,121
536,839
(465,346)
(184,685)
(12,071)
Net assets
329,117
99.92%
(3.67%)
Note 1:The above amounts include only USD held by head office, domestic branches, OBU and overseas branches of the Company and exclude contingent assets and
contingent liabilities.
Note 2:Interest sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities whose revenues or costs are affected by interest rate changes.
Note 3:Interest sensitive gap = Interest sensitive assets - Interest sensitive liabilities.
Note 4:Ratio of interest sensitive assets to liabilities = Interest sensitive assets/Interest sensitive liabilities (in U.S. dollars)
f. Reclassification information
On July 1, 2008, the Company and its subsidiaries reclassified their financial assets. The fair values at the reclassification
date were as follows:
Before
Reclassification
Financial assets at fair value through profit or loss - held for trading
$
After
Reclassification
6,418,826
-
$
6,418,826
$
-
6,418,826
$
6,418,826
In view of the Company’s intention of not selling the abovementioned financial assets held for trading within a short
period of time as a result of the economic instability and deterioration of the world’s financial markets that occurred in
the third quarter of 2008, the Company reclassified these held for trading financial assets to available-for-sale financial
assets.
As of December 31, 2014 and 2013, the carrying amounts and fair values of the reclassified financial assets were as
follows:
December 31
2014
Carrying Value
$
2013
Fair Value
5,229,323
$
Carrying Value
5,229,323
$
Fair Value
4,897,201
$4,897,201
The gain or loss recorded for the reclassified financial assets (excluding those that had been derecognized before
December 31, 2014 and 2013, respectively) for the years ended December 31, 2014 and 2013 and the pro forma gain or
loss assuming no reclassifications had been made were as follows:
2014
Pro Forma
Information Assuming
No Reclassifications
Recognized in
Profit and Loss
$
2013
-
$
332,122
Pro Forma
Information Assuming
No Reclassifications
Recognized in
Profit and Loss
$
-
$
551,031
g. Fair value hedge
The investment in foreign bonds could bear the risk of the changes in interest rate as a result of movements or
fluctuations in the fair value. The Company and its subsidiaries assessed the risk that could be significant and therefore
signed interest rate swap contracts designated as fair value to hedge.
2014 ANNUAL REPORT
119
Designated as a Hedge Tool
Fair Value
The Hedged Item
December 31
2014
2013
Investment in foreign bonds
($
Interest rate swap contracts
37,777)
($
80,688)
h. Asset quality
Disclosures prepared in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks
1) The Company asset quality of overdue loans and receivables.
December 31, 2014
Overdue
Amounts
(Note 1)
Items
Corporate
banking
Secured
Overdue Ratio
(Note 2)
Allowance
Amounts
Coverage Ratio
(Note 3)
1,469,704
401,491,613
0.37%
4,640,398
315.74%
Unsecured
793,349
522,161,119
0.15%
5,496,187
692.78%
Mortgage (Note )
429,646
490,201,487
0.09%
5,531,596
1,287.48%
49
123,192
0.04%
80,334
163,946.94%
Small amount of credit loans (Note )
44,342
12,974,047
0.34%
195,437
440.75%
Secured
50,095
61,229,860
0.08%
690,028
1,377.44%
69,684
6,397,293
1.09%
101,231
145.27%
2,856,869
1,494,578,611
0.19%
16,735,211
585.79%
Cash card
Consumer
banking
Total Loans
Others
(Note )
Unsecured
Total
Overdue
Amounts
Items
Credit card
Receivables
Balance
Overdue Ratio
Allowance
Amounts
Coverage
Ratio
1,735
4,673,934
0.04%
52,805
3,043.52%
-
10,105,938
-
135,837
-
Receivable factoring-without recourse (Note 7)
December 31, 2013
Overdue
Amounts
(Note 1)
Items
Corporate
banking
Overdue Ratio
(Note 2)
Allowance
Amounts
Coverage Ratio
(Note 3)
Secured
3,332,790
365,773,441
0.91%
5,555,826
166.70%
Unsecured
1,819,145
510,355,431
0.36%
5,887,766
323.66%
522,233
478,338,502
0.11%
4,946,966
947.27%
54
174,455
0.03%
89,520
165,777.78%
84,560
11,310,815
0.75%
185,119
218.92%
Secured
65,164
51,251,747
0.13%
532,618
817.35%
Unsecured
91,266
6,514,604
1.40%
96,320
105.54%
1,423,718,995
0.42%
Mortgage (Note 4)
Cash card
Consumer
banking
Total Loans
Small amount of credit loans (Note 5)
Others
(Note 6)
Total
5,915,212
Overdue
Amounts
Items
Credit card
Receivable factoring-without recourse (Note 7)
Receivables
Balance
Overdue Ratio
17,294,135
Allowance
Amounts
292.37%
Coverage
Ratio
2,983
3,429,840
0.09%
52,510
1,760.31%
-
16,460,443
-
124,221
-
Note 1:The amounts recognized as overdue amounts are in compliance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and
Deal with Non-performing/Non-accrual Loans”. The amounts included in overdue amounts for credit cards are in compliance with the Banking Bureau (4) Letter
No. 0944000378 dated July 6, 2005.
Note 2:Overdue ratio = Overdue amounts/Total loans. Overdue ratio of credit cards = Overdue amounts of credit cards/balance of accounts receivable.
Note 3:Coverage ratio for loans = Allowance amounts of loans/Overdue loans. Coverage ratio for accounts receivable of credit cards = Allowance amounts for accounts
receivable of credit cards/Overdue amounts of credit cards.
Note 4:For mortgage loans, the borrower provides his/her (or spouse’s or minor child’s) house as collateral in full and mortgages it to the financial institution for the purpose
of obtaining funds to purchase or add improvements to own house.
Note 5:Small amount of credit loans apply to the norms of the Banking Bureau (4) Letter No. 09440010950 dated December 19, 2005, excluding credit card and cash card
services.
Note 6:Other consumer loan is specified as secured or unsecured consumer loans other than mortgage loans, cash card services and small amount of credit loans, and
excluding credit card services.
Note 7:Pursuant to the Banking Bureau (5) Letter No. 094000494 dated July 19, 2005, the amount of receivable factoring-without recourse will be recognized as overdue
amounts within three months after the factor or insurance company resolves not to compensate the loss.
120
FINANCIAL STATEMENT
2) Overdue loans and accounts receivable that are exempted from being reported as past-due items
December 31
2014
Overdue Loans That
Are Exempted from
Being Reported as
Past-due Items
Item
Amount that are exempted from being
reported after negotiations (Note 1)
$
Amount that are exempted from being
reported according to the law of consumer
liquidate(Note 2)
Total
27,045
2013
Account Receivable
That Are Exempted
from Being Reported as
Past-due Items
$
27,483
44,603
$
71,648
Overdue Loans That
Are Exempted from
Being Reported as
Past-due Items
$
58,472
$
85,955
Account Receivable
That Are Exempted
from Being Reported as
Past-due Items
39,938
$
37,643
43,281
$
83,219
57,391
$
95,034
Note 1:The disclosure of exempted NPLs and exempted overdue receivables resulting from debt consultation and loan agreements is based on the Banking Bureau letter
dated April 25, 2006 (Ref. No. 09510001270).
Note 2:The disclosure of exempted NPLs and exempted overdue receivables resulting from consumer debt clearance is based on the Banking Bureau letter dated
September 15, 2008 (Ref. No. 09700318940).
3)Concentration of credit extensions
Year
Rank (Note 1)
December 31, 2014
Industry of the Corporation or Group (Note 2)
Total Amount of Credit,
Endorsement or Other
Transactions (Note 3)
$
Percentage
of the Company’s
Equity (%)
1
A Group of petroleum and coal products manufacturing
2
B Company of railway transportation
25,272,705
37,140,337
26.54
18.06
3
C Group of retail sale in general merchandise stores
23,657,505
16.91
4
D Group of aviation transportation
19,346,022
13.83
11.79
5
E Group of real estate development
16,491,200
6
F Group of other financial intermediation
13,205,830
9.44
7
G Group of automobile wholesaling
10,340,584
7.39
8
H Group of smelting and refining of iron and steel
8,652,017
6.18
9
I Group of real estate development
8,507,555
6.08
10
J Group of wire and cable manufacturing
7,010,504
5.01
Year
Rank (Note 1)
December 31, 2013
Industry of the Corporation or Group (Note 2)
1
A Group of petroleum and coal products manufacturing
2
B Company of railway transportation
Total Amount of Credit,
Endorsement or Other
Transactions (Note 3)
$
Percentage
of the Company’s
Equity (%)
31,123,917
23.81
25,461,026
19.48
3
C Group of retail sale in general merchandise stores
16,657,160
12.75
4
D Group of aviation transportation
14,753,339
11.29
5
E Group of other financial intermediation
12,878,290
9.85
6
F Group of real estate development
10,245,600
7.84
7
G Group of liquid crystal panel and components manufacturing
9,802,148
7.50
8
H Group of building completion and finishing
8,604,999
6.58
9
I Group of automobile wholesaling
8,059,914
6.17
10
J Group of smelting and refining of iron and steel
7,758,412
5.94
Note 1:The list shows rankings by total amount of credit, endorsement or other transactions but excludes government-owned or state-run enterprises. If the borrower is a
member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code
and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry
should be described in accordance with the Standard Industrial Classification System of the Republic of China published by the Directorate-General of Budget,
Accounting and Statistics under the Executive Yuan.
Note 2:Group enterprise refers to a group of corporate entities as defined by Article 6 of “Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for
Review of Securities Listings.”
Note 3:Total loans balances are the sum of balances of all types of loans (including import negotiation, export negotiation, bills discounted, overdraft, short-term
unsecured loan, short-term secured loan, margin loans receivable, medium-term unsecured loans, medium-term secured loan, long-term unsecured loan, longterm secured loan and overdue loan), purchases in remittances, receivable factoring-without recourse, acceptance receivable and guarantees.
2014 ANNUAL REPORT
121
45. CAPITAL MANAGEMENT
a. Principle of capital management
In compliance with “Regulation Governing the Capital Adequacy and Capital Category of Banks”, the Company and
its subsidiaries calculate eligible capital and risk-weighted assets ratio, disclose relating information and report to the
authorities. Under “Regulations Governing the Capital Adequacy and Capital Category of Banks’, eligible capital are
categorized into two tiers as follows: Tier 1 Capital, common equity and other tier 1 capital, and Tier 2 Capital. Riskweighted assets are calculated using standardized approach stated in “Methods for Calculating Bank’s Regulatory
Capital and Risk-Weighted Assets”.
To maintain sufficient eligible capital and withstand the possible losses, the Company and its subsidiaries not only
meet the minimum requirements set by the authorities but assess the extent of capital adequacy through advanced
simulation as well as subsequent supervision and analysis, given the business scheme, risk status and composition of
eligible assets, thus, the Company and its subsidiaries are capable of developing countermeasures in a timely manner.
b. Eligible capital and risk-weighted assets.
The Company and its subsidiaries’ information on eligible capital and risk-weighted assets were presented in the
following table. All figures meet the authorities-regulation of minimum capital adequacy rate.
(In Thousands of New Taiwan Dollars, %)
December 31
Year
Analysis
2014
Common equity
Eligible capital
$
Other Tier 1 capital
Eligible capital
Standardized approach
Risk-weighted assets
Operational risk
Market risk
Capital adequacy rate
$
117,888,157
593,180
55,222,495
48,453,891
182,398,629
166,935,228
1,346,470,793
1,254,044,882
Internal rating-based approach
-
-
Securitization
-
-
Basic indicator approach
-
-
Standardized approach/ alternative
standardized approach
52,761,750
48,691,938
Advanced measurement approach
-
-
8,636,596
9,380,262
Standardized approach
Internal models approach
Total risk-weighted assets
Common equity-based capital ratio
126,960,875
215,259
Tier 2 capital
Credit risk
2013
-
-
1,407,869,139
1,312,117,082
12.96%
12.72%
9.02%
8.98%
Tier 1 risk-based capital ratio
9.03%
9.03%
Leverage ratio
3.85%
3.74%
Note 1:The above table was prepared in accordance with the “Regulations Governing the Capital Adequacy Ratio of Banks” and related calculation tables.
Note 2:The annual reports disclose capital adequacy rate in the current and prior year. The interim financial statements are required to disclose the capital adequacy
ratio in the end of the prior year in addition to the disclosed in current and prior years.
Note 3:The formula:
1)Eligible capital = Common equity + Other Tier 1 capital + Tier 2 capital.
2)Total risk-weighted asset = Risk-weighted assets for credit risk + (Capital requirements for operational risk + Capital requirement for market risk) × 12.5.
3)Ratio of capital adequacy = Eligible capital/Total risk-weighted assets.
4)Common equity-based capital ratio = Common equity/Total risk-weighted assets.
5)Tier 1 risk-based capital ratio = (Common equity + Other Tier 1 capital)/Total risk-weighted assets.
6)Leverage ratio = Tier 1 capital/Total exposure.
122
FINANCIAL STATEMENT
46. INFORMATION REGARDING THE TRUST BUSINESS UNDER THE TRUST LAW
The balance sheets, income statement and trust properties of trust accounts were as follows:
Balance Sheet of Trust Accounts
December 31
2014
2013
Trust assets
Bank deposits
$
7,460,098
$
7,580,914
Bonds
1,299,465
1,182,730
Stocks
14,182,828
15,897,975
172,936,170
174,473,176
Real estate
8,051,766
6,280,226
Credit right trust
5,642,080
2,982,840
158,346,127
171,782,932
Collective investment trust fund account net assets
689,662
853,915
Total trust assets
$
368,608,196
$
381,034,708
$
220
$
220
Mutual funds
Custodial securities
Trust liabilities
Other liabilities
Custodial securities payable
158,346,127
171,782,932
Monetary trust
186,839,143
186,232,090
Securities trust
12,600,085
14,357,554
8,922,502
7,175,508
Collective investment trust fund account
689,662
853,915
Accumulated deficit
(33,406)
(677,118)
Net income
Total trust liabilities
$
Trust capital
Real estate trust
1,243,863
368,608,196
$
1,309,607
381,034,708
Note: Trust account including OBU’s foreign currency mutual funds that invested in foreign securities amounted to $2,360,790 as of December 31, 2014. Additionally,
foreign currency mutual funds that invested in domestic securities amounted to $19,869 as of December 31, 2014.
Trust account including OBU’s foreign currency mutual funds that invested in foreign securities amounted to $1,941,239 as of December 31, 2013. Additionally,
foreign currency mutual funds that invested in domestic securities amounted to $345 as of December 31, 2013.
2014 ANNUAL REPORT
123
Trust Properties of Trust Accounts
December 31
2014
2013
Investment portfolio
Bank deposits
$
7,460,098
$
7,580,914
Bonds
1,299,465
1,182,730
Stocks
14,182,828
15,897,975
172,936,170
174,473,176
5,642,080
2,982,840
8,011,936
6,226,566
9,772
15,215
Mutual funds
Credit right trust
Real estate, net
Land
Building
Construction in progress
30,058
38,445
158,346,127
171,782,932
689,662
853,915
$
$
Custodial securities
Collective investment trust fund account net assets
368,608,196
381,034,708
Trust Income Statement
2014
2013
Trust income
Interest income
$
Rental income
Realized investment income - bonds
Cash dividends
Realized investment income - stocks
Other income
Realized investment income - mutual funds
Income apportion from beneficiary certificate
80,839
$
77,034
1,010
956
13,412
14,608
298,906
411,908
49,467
862
832,960
857,881
1,595
1,772
968
855
Capital surplus transferred to cash dividends
7,916
85
-
878
1,287,073
1,366,839
29,051
29,164
387
365
Gains from asset trading
Total trust income
Trust expense
Trust administrative expenses
Inspection expense
Custodial fees
Tax expenses
Interest expenses
Health insurance fees
31
46
3,398
5,973
2
3
4,600
6,074
Realized investment loss - stocks
127
2
Realized investment loss - bonds
817
4,516
Income tax expense
2,297
1,927
Other expense
2,329
8,269
Realized investment loss - mutual funds
171
890
-
3
43,210
57,232
$
$
Insurance expenses
Total trust expense
Net income before income tax
124
FINANCIAL STATEMENT
1,243,863
1,309,607
47. SIGNIFICANT LITIGATION
According to the report of the Wall Street Journal on April 27, 2009 and the indictment presented by U.S. Securities
and Exchange Commission (SEC) to United States Court, the properties under the names of Danny Pang, Private Equity
Management Group, Inc. and Private Equity Management Group LLC had been frozen by United States Court. PEM Group
is the parent group of GVEC Resource II Inc., which issued the structured products that the Company and its subsidiaries
manages the investment. The Company and its subsidiaries had sold five structured notes issued by GVEC Resource II
Inc. subordinate to PEM Group from July 2007 to February 2008. Those financial instruments mentioned above amounted
to US$205,800 thousand. On May 8, 2009, the Company and its subsidiaries determined to buy back those financial
instruments from investors and claimed for damage to protect the reputation of the Company and its subsidiaries and the
rights of clients. On December 27, 2010 the board of directors resolved to comply with the court’s appointment of the PEM
Group receiver to take insurance policy at the price of approximately US$39,469 thousand. As of December 31, 2014, the
Company and its subsidiaries recognized allowance for expected loss amounting to NT$3,645,914. The Company and its
subsidiary has submitted the follow-up scheme to the authorities on January 3, 2011. The Company and its subsidiaries
has established the Trustee with other financial institution to take the insurance policy transferred from the receiver, and
prolonged the insurance premium payment to keep the validity of insurance policy.
48. COLLABORATIVE MARKETING
The Company and its subsidiaries, HNSC, SCIC, HNIT, HNVC, HNAMC, HNMC and HNFC signed an agreement and the term
of the agreement was from January 2012 to December 2012. (Based on agreement regulation 9, the term stated that the
agreement would extend a year automatically). The scope of the collaboration includes sharing their workplace, human
resource and business information. The calculation of related proportionate expense and remuneration was based on “The
Instruction of the Distribution pm Collaboration Marketing Fees Between HNFH’s Subsidiaries” and “The Instruction of the
Distribution on Commission Service Expense and Related Fees.”
In addition, the Company and its subsidiaries also signed into a commission agreement with SCIC in March 2005. The
calculation of related commission and remuneration was stated in the agreements.
In July 2005, the Company and its subsidiaries, HNFH, HNSC, SCIC, HNIT, HNVC, HNAMC, HNMC signed an agreement to the
use of information equipment, including system planning, development, management, and expense allocation.
Income and expense under the above agreement are disclosed in Note 39.
49.PROFITABILITY
December 31
Items
2014
2013
Before income tax
0.68%
0.54%
After income tax
0.57%
0.46%
10.82%
8.85%
9.19%
7.55%
36.58%
30.66%
Return on total assets
Before income tax
Return on equity
After income tax
Profit margin
Note 1:Return on total assets = Income before (after) income tax/Average total assets.
Note 2:Return on equity = Income before (after) income tax/Average equity.
Note 3:Profit margin = Income after income tax/Total net revenues.
Note 4:Income before (after) income tax represents income for the years ended December 31, 2014 and 2013.
2014 ANNUAL REPORT
125
50. DISCLOSURES UNDER STATUTORY REQUIREMENTS
a. Significant transactions
1) Accumulated acquisition and disposal of same investee’s marketable security over NT$300 million or 10% of the issued
capital: Table 5
2) Acquisition of individual real estate over NT$300 million or 10% of the issued capital: None
3) Disposal of individual real estate over NT$300 million or 10% of the issued capital: None
4) Allowance for service fee to related parties over NT$5 million: Table 7
5) Receivables from related parties over NT$300 million or 10% of the issued capital: None
6) Sale of nonperforming loans: Table 6
7) Securitized instruments and related information which are approved in accordance with the Statute for financial
assets securitization and the statute for real estate securitization: None
8) Related parties significant transactions: Table 9
9) Other significant transactions which may affect decisions of the users of the financial statements: None
b. Information on the Company’s investees
1) Financing provided, endorsements/guarantees provided, acquisition and disposal of marketable securities over
NT$300 million or 10% of the issued capital, and derivative transactions: Tables 3 and 4
2) Marketable securities held by investees: Table 2
c. The related information and proportionate share in investees: Table 1
d. Information on investment in Mainland China: Table 8
51. SEGMENT INFORMATION
Segments information is rendered to the chief operating decision marker for assets allocation and segment performance
evaluation. The aforementioned accounting standards and polices in Note 4 apply to all operating segment. The
Company and its subsidiary are required to disclose the segments as follows:
Domestic New Taiwan Dollar Business (DNTDB): Offers New Taiwan Dollar credit and deposit service, marketing, and
management business in the country.
Domestic Foreign Currency Business (DFCB): Offers planning, marketing, and management of domestic and oversea
foreign currencies business.
Financial Trading Business: Offers capital allocation, planning, investment, as well as the development and implementation
of financial products.
Trust Business: Offers planning, management and marketing of trust business.
Overseas and OBU Business: Deal with credit and deposits business, foreign exchange trading, and investments worldwide.
126
FINANCIAL STATEMENT
a. Segment revenue and operating outcomes
Revenue and the outcome of segments are reported as follows:
2014
DNTDB
Net interest
Commission and fee
revenues, net
Other noninterest net
revenue (loss)
$
17,531,380
Financial
Trading
DFCB
$
2,193,315
$
Overseas and
OBU
Trust
964,372
$
-
$
Others
4,246,868
$
Total
87,342
$
25,023,277
1,208,196
741,595
26,383
3,311,249
439,070
535,890
6,262,383
309,467
1,715,907
714,568
507
235,850
(265,819)
2,710,480
19,049,043
4,650,817
1,705,323
3,311,756
4,921,788
357,413
33,996,140
Allowance for
doubtful accounts
and guarantees
(1,580,546)
(12,601)
-
-
(23,163)
(11,344)
(1,627,654)
Operating expenses
(12,088,054)
(2,930,875)
(212,887)
(1,452,478)
(742,887)
(295,114)
(17,722,295)
Net profit before
income tax
$
$
$
$
$
$
$14,646,191
Net revenue
5,380,443
1,707,341
1,492,436
1,859,278
4,155,738
50,955
2013
DNTDB
Net interest
$
756,185
18,417
2,485,201
459,402
496,159
5,299,890
835,213
1,487,398
597,056
(293)
419,996
(213,178)
3,126,192
18,999,242
3,329,170
1,642,162
2,484,908
4,435,570
301,743
31,192,795
Allowance for
doubtful accounts
and guarantees
(3,171,653)
(151,749)
-
-
(470,249)
(5,852)
(3,799,503)
Operating expenses
(11,834,120)
(2,199,416)
(175,652)
(1,070,372)
(670,596)
(249,128)
(16,199,284)
Net profit before
income tax
$
$
$
$
$
$
$11,213,799
4,013,260
978,005
1,466,510
-
1,414,536
$
3,556,172
$
Total
1,084,526
Net revenue
$
Others
$1,026,689
Other noninterest net
revenue (loss)
$
Overseas and
OBU
Trust
1,085,587
Commission and fee
revenues, net
17,099,294
Financial
Trading
DFCB
3,294,725
18,762
46,763
$
22,786,504
b. Geographical information
The Company and its subsidiaries’ net revenues from external customer presented by geographical location are as
follows:
2014
2013
Taiwan
$
31,105,360
Other
2,890,780
2,846,823
$
$
33,996,140
$
28,365,763
31,212,586
c. Information about major customers: There is no revenue from any external customer that exceeded 10% of the
Company and its subsidiaries’ revenue.
2014 ANNUAL REPORT
127
TABLE 1
INFORMATION AND PROPORTIONATE SHARE IN INVESTEES
FOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Otherwise Specified)
Investee Company
Percentage
of Ownership
(%)
Main Businesses
and Products
Location
Consolidated Investment
Total
Imitated
Percentage of
Shares
Shares
Ownership (%)
Carrying
Amount
Investment
Gain (Loss)
(Note 2)
30.00
$70,641
($ 4,891)
7,670,160
-
7,670,160
30.00
Note 1
Shares
Note
Chung-Hua Real
Estate Management Taipei
Co., Ltd.
Construction plan review and
consulting
HNCB Insurance
Agency Co., Ltd.
Insurance agency
100.00
376,842
232,789
4,994,000
-
4,994,000
100.00
Note 1
Hua Nan International
Leasing Corporation Taipei
Ltd.
Leasing
100.00
1,563,624
33,061
150,000,000
-
150,000,000
100.00
Note 1
Chang Hwa Bank
Taichung
Commercial bank
0.93
1,331,600
-
73,366,375
-
73,366,375
0.93
-
Tang Eng Iron Works
Co., Ltd.
Kaohsiung
Iron and steel
4.59
667,896
-
16,074,512
-
16,074,512
4.59
-
Taipei
Taiwan Power Co., Ltd. Taipei
Power generation
0.45
1,184,504
-
148,281,465
-
148,281,465
0.45
-
Taiwan Stock
Exchange Corp.
Taipei
Trading market
3.00
72,000
23,569
19,326,645
-
19,326,645
3.00
-
Taiwan Sugar Corp.
Tainan
Sugar manufacturing
0.14
26,569
4,003
8,006,499
-
8,006,499
0.14
-
Taipei Foreign
Exchange Inc.
Taipei
Foreign exchange trade
3.53
7,000
2,800
700,000
-
700,000
3.53
-
Lian An Services Co.,
Ltd.
Taipei
ATM repairing, trading, leasing,
and installing service and
surveillance equipment leasing
service
5.00
1,250
125
125,000
-
125,000
5.00
-
CDIB & Partners
Investment Holding
Corp.
Taipei
Investment business
4.95
500,000
24,300
54,000,000
-
54,000,000
4.95
-
Taipei
Planning and developing the
information system of across
banking institution and
managing the information web
system
1.15
46,358
14,537
5,191,875
-
5,191,875
1.15
-
Taipei
Venture capital investment
4.44
6,667
-
666,666
-
666,666
4.44
-
Taipei
Futures exchange and settlement
1.00
20,000
5,115
5,701,180
-
5,701,180
1.97
-
Taipei
Evaluating, auctioning, and
managing for financial
institutions’ loan
11.35
1,500,000
129,461
150,000,000
-
150,000,000
11.35
-
2.94
50,000
-
5,000,000
-
5,000,000
2.94
-
1.84
3,579
-
404,936
-
404,936
1.84
Note 2
1.16
697
108
69,740
-
69,740
1.16
-
1.10
6,000
-
600,000
-
600,000
1.10
-
Financial Information
Service Co., Ltd.
Fuyu Venture Capital
Investment Corp.
Taiwan Futures
Exchange
Taiwan Asset
Management
Corporation
Taiwan Financial Asset
Service Corporation
Financial eSolution
Corp.
Sunny Asset
Management Corp.
Taiwan Mobile
Payment Co.,
Taipei
Taipei
Taipei
Taipei
Auction
Financial system integration and
consulting
Purchasing for financial
institutions’ loan assets
Installation of computer
equipments
Note 1:Investment gain (loss) was based on the investee’s audited financial statements for the year ended December 31, 2014
Note 2:Investment book value amounts to $7,000 deducted accumulated impairment amounting to $3,421.
Note 3:Investment gain (loss) refers to the share of gain (loss) of associate and the net gain of financial assets carried at cost.
TABLE 2
MARKETABLE SECURITIES HELD BY INVESTEES
DECEMBER 31, 2014
Holding Company
Name
Marketable Securities
Type and Name
HNCB Insurance
Agency Co., Ltd.
Government
Construction Bond 89-7
Relationship
with the
Company
-
Financial
Statement
Account
Refundable
deposits
December 31, 2014
Carrying
Amount
Shares
7,500
$
7,869
Percentage of
Ownership
Market Value or
Net Equity (Note)
-
$
Note:The market values of bonds are based on the reference prices of the over-the-counter securities exchange as of December 31, 2014.
128
FINANCIAL STATEMENT
9,336
Note
TABLE 3
FINANCING PROVIDED
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
No.
1
Financier
Counterparty
Hua Nan
Teacham
International
Estate
Leasing
Corporation
Corporation Ltd.
Financial
Maximum
Related
Ending
Statement
Balance for the
Parties
Balance
Account
Period
Amount
Actually
Drawn
Interest
Rate
(%)
Financing
Type
6-10
Short-term
financing
Transaction
Amount
Financing
Reasons
-
Operating
use
Value
Operating
use
-
Real
estate
210,000
234,543
1,563,624
-
Operating
use
-
Real
estate
289,000
234,543
1,563,624
Short-term
financing
-
Operating
use
-
Real
estate
137,740
234,543
1,563,624
Short-term
financing
-
Operating
use
-
Real
estate
120,000
234,543
1,563,624
Other
receivable
No
148,000
148,000
148,000
6-10
Short-term
financing
-
Other
receivable
No
200,000
200,000
200,000
6-10
Short-term
financing
I-Hwa Industrial
Other
Co., Industrial
receivable
Co., Ltd.
No
70,000
49,000
70,000
6-10
Plaza Hotel
Corporation
Ltd.
No
30,000
30,000
30,000
6-10
Other
receivable
Item
Financing
Financing
Limit for Each Company’s
Borrowing
Financing
Company Amount Limit
Real
estate
No
Yi Tai
Construction
Co., Ltd.
Sheng Mah
Construction
Co., Ltd.
Collateral
-
Other
receivable
$ 145,000 $ 140,875 $ 145,000
Allowance
for Bad
Debt
$
$
$172,600 $ 234,543 $ 1,563,624
Note:According to Hua Nan International Leasing Corporation Ltd.’s “Operating Procedures of Fund Lending”, the credit limits of the lending which arises from business
dealings cannot surpass 15% of the lender’s recent audited net worth. The credit limits of the lending because of operating use without business dealings cannot
surpass 15% of the lender’s recent audited net worth. If operating use is of necessity, the credit limits cannot surpass 40% of the lender’s recent audited net
worth. If the borrowers is Hua Nan International Leasing Corporation Ltd’s subsidiary, the credit limits cannot surpass 15% of the lender’s recent audited net worth.
Additionally, the lending amounts under preceding two circumstances cannot surpass 100% of the lenders’ recent audited net worth.
TABLE 4
ENDORSEMENT/GUARANTEE PROVIDED
Counterparty
No.
1
Endorsement /
Guarantee Provider
Name
Limits on
Individual
Maximum
Nature of Endorsement/ Balance for
Relationship Guarantee the Period
Amounts
Leasing Corporation
Subsidiary
Leasing Corporation Ltd.
Ltd.
$
Ending
Balance
7,818,120 $ 316,700 $ 316,700 $
Ratio of Accumulated
Endorsement/
Amount of Endorsement/
Guarantee Amount
Guarantee to Net Asset
Collateralized by
Value of the Latest
Properties
Financial Statement
Amount
Actually
Drawn
316,700 $
-
Maximum
Endorsement/
Guarantee Amounts
Allowable
(Note)
20.25% $
14,072,616
Note:According to Hua Nan International Leasing Corporation Ltd.’s “Operating Procedures to Fund Endorsement and Guarantee”, Hua Nan International Leasing
Corporation Ltd. can only endorse or guarantee its subsidiaries. The so called subsidiaries refer to the direct investment Hua Nan International Leasing Corporation
Ltd.’s or indirect investment which it holds more than 50% voting rights of the invested company. The endorsement limit to single company cannot surpass 5 times
Hua Nan International Leasing Corporation Ltd.’s audited net worth. The endorsement limits to all subsidiaries cannot surpass 9 times Hua Nan International Leasing
Corporation Ltd.’s audited net worth.
TABLE 5
ACQUIRED AND DISPOSED OF INVESTMENT AT COST OR PRICES OF AT LEAST NT$300 MILLION OR 10% OF
THE ISSUED CAPITAL
(MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF, AT COST OR PRICES OF AT LEAST NT$300 MILLION
OR 10% OF THE ISSUED CAPITAL)
(In Thousands of New Taiwan Dollars or Shares, Unless Stated Otherwise)
Company
Name
Type and Name of
Marketable Securities
Account
Counterparty
Nature of
Relationship
Beginning Balance (Note)
Units
Amount
Acquisition
Units
Disposal
Amount
Ending Balance (Note)
Carrying Gain on
Units Amount
Value Disposal
Units
Amount
(Note)
Equity investment
Hua Nan
Commercial
Leasing Corporation Ltd.
Bank, Ltd.
Equity investments
- equity method
Subsidiary
of the
Company
100,000,000 $1,000,000 50,000,000 $ 500,000
- $
- $
- $
- 150,000,000 $1,500,000
Note:Excluded the adjustment of original investing cost and the valuation of available-for-sale financial assets.
2014 ANNUAL REPORT
129
TABLE 6
SALE OF NONPERFORMING LOANS
(In Thousands of US Dollars)
Date
February 27, 2014
February 27, 2014
June 26, 2014
Counter-parties
SC Lowy Primary
Investment Ltd.
SC Lowy Primary
Investment Ltd.
SC Lowy Primary
Investment Ltd.
Carrying Amount
(Note)
Loans
Syndicated loan mortgage of ships
Syndicated loan mortgage of ships
US$
2,133
(Note 1)
2,198
(Note 2)
1,500
(Note 3)
US$
US$
Syndicated Loan
Selling Price
(Note)
Gain or (Loss)
on Disposal
Attachment
Relation
US$
3,665
US$
1,532
-
None
US$
3,778
US$
1,580
-
None
US$
5,870
US$
4,370
-
None
Note 1:The origin credit balance is $4,256 and deducts recorded allowance for bad debts $2,123.
Note 2:The origin credit balance is $4,386 and deducts recorded allowance for bad debts $2,188.
Note 3 The origin credit balance is $10,000 and deducts recorded allowance for bad debts $8,500.
TABLE 7
ALLOWANCE FOR SERVICE FEE TO RELATED PARTIES OVER NT$5 MILLION
Company Name
Hua Nan Securities Corp.
Account
Amount
Allowance of brokerage commission fee
Note
$
9,290
TABLE 8
INFORMATION ON INVESTMENT IN MAINLAND CHINA
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, and US Dollars)
The information about the Company investing in Mainland China is as follows:
Main
Investee
Businesses
Company Name
and
Products
Hua Nan
Commercial
Bank Shenzhen
Branch
(Including
Boan Branch)
Hua Nan
Commercial
Bank Shanghai
Branch
Hua Nan
International
Leasing
Corporation
Outflow
Inflow
Deposits,
loans,
foreign
exchange
$2,308,769 Direct
(US$76,990) investments
2,308,769
(Note 1)
(US$ 76,990)
Deposits,
loans,
foreign
exchange
2,442,748 Direct
-
2,442,748
(Note 2)
(US$78,500)
Leasing
879,840 Direct
590,100
(Note 3)
(US$ 20,000)
289,740
(Note 4)
(US$ 9,700)
$
Accumulated
Outflow of
% Ownership
Investment from Investee’s
of Direct
Taiwan as of
Net Income or Indirect
December 31,
Investment
2014
Investment Flows
Accumulated
Total
Outflow of
Amount Investment
Investment from
of Paid-in
Type
Taiwan as of
Capital
January 1, 2014
$
-
$
2,308,769
(Note 1)
(US$ 76,990)
$
154,672
(US$ 4,884)
100
$
154,672
(US$ 4,884)
-
2,442,748
(Note 2)
(US$ 78,500)
( Preparation)
100
( Preparation)
-
879,840
(Note 3 and 4)
(US$ 29,700)
25,529
100
25,529
-
$
Investment
Gain
Carrying
Amount as of
December 31,
2014
Accumulated
Inward
Remittance of
Earnings as of
December 31,
2014
$
(US$
2,825,579
89,219)
(US$
2,442,748
78,500)
-
943,520
-
$
Accumulated Investment in Mainland
China as of December 31, 2014
Investment Amounts Authorized by
Investment Commission, MOEA
Upper Limit on Investment
$5,631,357
(US$185,190)
$5,631,357
(US$185,190)
$83,952,227
-
Note 1:According to the Investment Commission of the Ministry of Economic Affairs October 11, 2010 audited (Ref. No. 09900349890) approved investment amount (CNY300
million) and the Investment Commission of the Ministry of Economic Affairs March 30, 2012 audited (Ref. No. 10100014380) approved investment amount (CNY200
million), by the remittance date of announcement of the Peoples Bank of China reference exchange rates, the working capital for the establishment of registration
branch is US$76,990 thousand.
Note 2:According to the Investment Commission of the Ministry of Economic Affairs February 5, 2014 audited (Ref. No. 10300024640) approved investment amount (US$78.50
million).
Note 3:According to the Investment Commission of the Ministry of Economic Affairs August 13, 2012 audited (Ref. No. 10100314860) approved investment amount (US$20
million).
Note 4:According to the Investment Commission of the Ministry of Economic Affairs March 26, 2014 audited (Ref. No. 10300067600) approved investment amount (US$9.7
million).
130
FINANCIAL STATEMENT
TABLE 9
RELATED PARTIES TRANSACTIONS
2014
Description of Transactions
No.
(Note 1)
Transaction
Company
0
Hua Nan Commercial
Bank
1
2
3
HNCB Insurance
Agency Co., Ltd.
Leasing Corporation
Ltd
Leasing Corporation
Counter-party
Nature of
Relationship
(Note 2)
Financial
Statement Account
a
Commission and fee
revenues
a
Deposits and
remittances
a
Securities sold under
agreements to
repurchase
a
Interest expense
Transaction Amount
Transaction Term
(Note 4)
$
Percentage of
Consolidated
Revenue/Assets
(Note 3)
1,616,472
Note 5
4.75
345,936
Note 5
0.02
70,000
Note 5
-
1,439
Note 5
-
a
Lease income
4,368
Note 5
0.01
Hua Nan International Leasing Corporation Ltd
a
Deposits and
remittances
13,094
Note 5
-
a
Lease income
1,822
Note 5
0.01
a
Interest expense
106
Note 5
-
a
Deposits and
remittances
434,722
Note 5
0.02
a
Interest expense
11,347
Note 5
0.03
Hua Nan Commercial Bank
b
1,616,472
Note 5
4.75
b
314,436
Note 5
0.01
b
31,500
Note 5
-
b
Securities purchased
under agreements to
resell
70,000
Note 5
-
b
Interest revenue
1,439
Note 5
-
b
Lease expenses
4,368
Note 5
0.01
b
Cash and cash
equivalents
13,094
Note 5
-
b
Lease expenses
1,822
Note 5
0.01
b
Interest revenue
106
Note 5
-
b
Cash and cash
equivalents
327,643
Note 5
0.01
107,079
Note 5
-
11,347
Note 5
0.03
Other operating
expenses
Cash and cash
equivalents
b
b
Interest revenue
Note 1:Transactions between parent company and subsidiaries should be distinguished as follows:
a.Parent company: 0.
b.Subsidiaries are numbered in sequence from 1.
Note 2:Types of transactions with related parties were classified as follows:
a.Parent company to subsidiaries.
b.Subsidiaries to parent company.
c. Subsidiaries to subsidiaries.
Note 3:In the computation of percentage of consolidated revenue/assets, if the amount is the ending balance of assets or liabilities, the accounts percentage will be
calculated by dividing the consolidated assets or liabilities; if the amount is the amount of income or expense, the accounts percentage will be cumulated by
dividing the consolidated revenues in the same period.
Note 4:For the transactions between the Bank and its subsidiaries, the amounts will be eliminated when the reports were prepared.
Note 5:For the transactions between the Bank and related parties, the terms are similar to those transacted with unrelated parties.
2014 ANNUAL REPORT
131
1. Information on the Nature and Amount of All Types of Risk
(1)Credit Risk Management System and Capital Charges:
Credit Risk Management System
2014
Item
Content
1.Credit Risk Strategies
Goals, Policies and
Procedures
1. Hua Nan has set forth policies governing corporate banking credit risk and consumer banking credit risk to
ensure the Bank’s health and maintain a consistent credit risk management culture. These guidelines serve to
govern the Bank’s credit risk-related affairs, and all units must comply with the content of these policies.
2. The ultimate goal of the Bank’s credit risk management is to establish the best capital allocation policies,
and gradually adopt the internal ratings-based approach in measuring assets with credit risk for internal
management. Hua Nan aims to conform to internationally recognized best credit risk management practices,
pursuing the maximum profits within a specific amount of acceptable risk.
3. Hua Nan’s credit risk management procedures can be divided into credit checking, appraisal of collateral,
credit rating, application, analysis and screening, obtaining deeds, registration of loan amount, disbursement
of loan, credit monitoring and early warning, credit re-screening and other post-disbursement management
measures that make use of information systems and related reports. This enables Hua Nan to always be aware
of the actual counterparty risk, thereby achieving its risk management objective.
2.Credit Risk Management
Organization and
Framework
Hua Nan’s credit risk management organization and framework is as follows:
1. Board of Directors:
This is the Bank’s highest decision-making unit in terms of credit risk. The Board is responsible for reviewing all of
the Bank’s credit risk management-related policies and affairs.
2. Risk Management-related Committees:
(1)Risk Management Committee:
This committee reviews credit risk-related issues and is responsible for establishing a comprehensive credit
risk management system and culture.
(2)Credit Review Committee:
This committee is charged with evaluating the credit risk of large-sized loans in order to ensure the Bank’s
rights as creditor.
(3)Overdue Loans Screening Committee:
This committee is responsible for mapping out means to recover large and complicated cases of overdue
loans and making decisions on writing off specific loans. This unit also maximizes the Bank’s capability in
collecting loans in arrears.
3. Credit Checking & Industrial/Economic Research Department:
This department is responsible for drafting credit checking policies and carrying out industrial & economic
research.
4. Corporate Credit Department:
This department is charged with screening, planning, management of corporate loans, and early warning, rescreening of loans already extended.
5. Consumer Credit Department:
This department is responsible for screening & planning, as well as management of consumer loans.
6. Overdue Loan Management Department:
This department is responsible for collection and cleaning up of overdue loans (including bad debt), and
analysis of asset risk associated with nonperforming loans.
7. Risk Management Department:
This department is charged with planning and management of credit risk.
3.Scope and Features of
Credit Risk Reporting
and Measurement
Systems
1. Risk management-related units provide different styles of reports and with different frequency to persons or
units within the Bank. Reports include asset portfolio risk assessments, credit grading reports, reports on industrial
topics and loan losses, and reports to be screening by regulatory agencies.
2. Hua Nan has adopted initiatives to measure customer credit risk and assess expected losses. It has established
internal credit rating models to effectively measure customer probability of default. This is effective in setting
limits on the amount of credit extended to a customer, managing asset portfolios, allocating economic
capital, and pricing loan products. The Bank also utilizes a wide range of computerized data to measure loss
given default and exposure at default.
3. Hua Nan has established a Bank “Equity and Risk Assets Capital Charge System.” In compliance with rules set
forth by regulators, Hua Nan calculates weighted risk-based assets and statutory capital on a regular basis. The
results, along with other data, are used for reference in carrying out internal management.
4.Credit Risk Avoidance
or Mitigation Polices,
and Monitoring the
Continued Effectiveness
of Risk Avoidance and
Mitigation Tools
1. Hua Nan takes measures to effectively reduce credit risk or potential credit risk. The Bank seeks collateral or
third party guarantees in accordance with guidelines set forth by the Bank or regulations of credit guarantee
organizations, to avoid losses caused by the default of a borrower or trading counterparty.
2. The Bank complies with the following regulations to ensure the continued effectiveness of risk mitigation tools:
(1)Hua Nan has rules governing the management of collateral and guidelines for the appraisal and reappraisal of collateral it has obtained. Should the collateral depreciate in value or if there are concerns
of a possible depreciation in value, the Bank will immediately seek an increase in collateral or recover a
portion of the disbursed loan.
(2)Bank credit risk management regulations set forth qualifications for a guarantor and monitoring of the status
of that guarantor. Should the economic or credit status of the guarantor deteriorate, making that person
unsuited to act as a guarantor, the Bank will seek to have the guarantor replaced with a more appropriate
person.
(3)The Bank’s related credit risk management regulations are forwarded to credit guarantee organizations.
Guarantee operations, loan disbursement and post-disbursement screening are carried out to ensure the
effectiveness of the guarantee and that guarantees comply with regulations set forth by the Bank and
credit guarantee organizations.
5.Approach Adopted
for Statutory Capital
Charges
132
Hua Nan adopts the credit risk Standardized Approach in making capital charges.
Exposure after Risk Mitigation and Capital Charges via Credit Risk Standardized Approach
December 31, 2014
Unit: NT$1,000
Type of Exposure
Exposure After Risk Mitigation
Sovereign States
Capital Charge
434,511,936
22,208
95,082,819
2,123,307
Banks (including multilateral development
banks)
175,986,404
5,279,314
Corporates (including securities and insurance
companies)
822,425,633
59,337,900
Retail Claims
181,170,676
9,861,797
Residential Real Estate
477,339,958
24,698,963
6,893,426
1,957,593
48,201,562
4,221,188
2,241,612,413
107,502,268
Non-central Government Public Sector
Equities Investment
Other Assets
Total
(2)Securitization Risk Management System, Exposure and Capital Charges:
Securitization Risk Management System
2014
Item
Content
1.Securitization Management Strategies and
Procedures
1. Hua Nan only invests in securities. It has not been a founding bank for any securities
products.
2. Investment in securities products, management strategies and procedures are made based
on the Bank’s regulations regarding such.
2.Securitization Management Organization
and Framework
Hua Nan does not act as a founding bank in this line of business. Possible risks associated
with investment in securities (credit risk, liquidity risk and interest rate risk) are managed in
accordance with the Bank’s credit risk- and market risk-related organization and framework.
3.Scope and Features of Securitization Risk
Reporting and Measurement Systems
Hua Nan re-screens and carries out risk assessments on a regular basis with regards to the
purchase and sale of securities products.
4.Securitization Risk Hedging or Mitigation
Policies, and Monitoring the Continued
E f f e c t i v e n e s s o f R i s k Av o i d a n c e a n d
Mitigation Tools
Hua Nan does not act as a founding bank in this line of business. Risk hedging and assessment
associated with investment in securities are carried out in line with related regulations set forth
by the Bank.
5.Approach Adopted for Statutory Capital
Charges
Standardized Approach
State of Securitization
December 31, 2014
Type of Security
Issued Amount
Amount in Circulation
Amount Re-purchased
None
2014 ANNUAL REPORT
133
Securitization Risk Exposure and Capital Charges
December 31, 2014
Unit: NT$1,000
Traditional Style
Exposure
Type
Exposure
Asset
Type
Book
Portfolio Style
Bank Role
Capital
Existing or
Providing
Providing
Charge
Purchased
Subtotal
Liquidity
Credit
(2)
(1)
Securitized
Facility Enhancement
Product
Exposure
Existing or
Purchased
Securitized
Product (3)
Capital
Charge
(4)
Total
Exposure
(5)=(1)+(3)
Capital
Charge
(6)=(2)+(4)
Capital
Charges PreSecuritization
Banking
Book
Nonfounding
Bank
Trading
Book
Subtotal
Banking
Book
Founding
Bank
None
Trading
Book
Subtotal
Total
Information on Securitized Products
December 31, 2014
A. Table of Securitized Products Held by Hua Nan
Unit: NT$1,000
Item (Note 1)
Accounting Category
Original Cost
Total Fair Value
Profit/Loss
Total Impairment
Book Value
None
Note 1:This table includes domestic and overseas securitized products, with the types of securities and category in which these items are listed in
the ledger:
(1)Mortgage-based Securities (MBS): Includes residential mortgage-backed securitized beneficiary certificates or RMBS, commercial
mortgage-backed securitized beneficiary certificates or CMBS, collateralized mortgage obligations, and other real estate collateralized
securities.
(2)Beneficiary certificates or asset-backed securities (ABS): Includes corporate loan-backed securitized beneficiary certificates or CLO,
collateralized bond obligation securitized beneficiary securities or CBO, credit card obligation securitized beneficiary securities or
asset-backed securities, auto loan obligation securitized beneficiary certificates or asset-backed securities, consumer loan/cash card
obligation securitized beneficiary securities or asset-backed securities, lease obligation securitized beneficiary certificates or assetbacked securities, and other securitized beneficiary certificates or asset-backed securities.
(3)Short-term beneficiary securities or asset-backed commercial paper (ABCP).
(4)Collateralized Debt Obligations (CDO).
(5)Real estate securitization refers to real estate asset trust beneficiary certificates (REAT).
(6)Bills and bonds issued as structured investment vehicles.
(7)Other securitized products.
Note 2: The table details Hua Nan as a founding bank, as well as the beneficiary securities and asset-backed securities held by the Bank.
134
B. (a)Disclosure of Investments in Securitized Products with an Original Value Over NT$300 Million (excluding those
held by the Bank in the capacity as the founding institution with a view to strengthened credit):
Unit: NT$1,000
Name of
Security
(Note 2)
Accounting
Category
Currency
Issuer
Date of
and
Purchase
Location
Date of
Maturity
Credit
Rating
(Note3)
Coupon
Method
of Interest
Payment
& Principal
Repayment
Original
Cost
Total Fair
Total
Value
Impairment
Profit/Loss
Face
Value
Content
Attachment
of Asset
Point
Pool
(Note 4)
(Note 5)
None
Note 1：This table includes domestic and overseas securitized products.
Note 2：Different offerings of the same securities product are listed separately.
Note 3：The latest credit rating is used.
Note 4：The attachment point means the percentage accounted for by the total issued value of the subordinate securities of which the priority
of claim is second only to those held by the bank over the total issued value of the securitized commodity. For example: The bank holds
through purchase security A of certain CDO. That CDO has two subordinate securities, security BBB and a sub-beneficiary security, of
which the priority of claim is second to security A. The sum of the issued dollar amount of these two subordinate securities accounts for
12% of the total issued value of the CDO so the attachment point of security A will be 12%.
Note 5：Asset pool refers to the pool of the tranches of assets which the founding institution trusts to the trustee institution or assigned to a specialpurpose company. Please include such particulars as the type (and the respective priority), breakdown, book value accounted for in the
original currency and lots of each asset tranche.
(b)Disclosure of Information on the Positions Held by the Bank in the Capacity as the Founding Bank with a
View to Strengthened Credit:
Unit: NT$1,000
Name of
Security
(Note)
Accounting
Category
Currency
Date of
Purchase
Date of
Maturity
Coupon
Credit
Rating
Method
of Interest
Payment
& Principal
Repayment
Original
Cost
Total Fair
Value Profit/
Loss
Total
Impairment
Face
Value
Attachment
Point(Note 4)
Content of
Asset Pool
None
Note: The definitions of the columns for this table are the same as the above table.
(c)Disclosure of Information of the Discredited or Liquidated Securitized Commodities Held by the Bank in the
Capacity as the Buyer Institution:
Unit: NT$1,000
Name of Security
Currency
Founding Institution
Maturity Date
Content of Contract
State of Contract Implementation (Note)
None
Note: The Bank lists the cost of the asset as the purchase price.
C. Disclosure of Hua Nan Serving as Guaranteeing Institution or Liquidity Provider for Securitized Product, and
Amount:
Unit: NT$1,000
Name of
Security
Currency
Founding
Institution
Maturity Date
Coupon
Credit Rating
Role (Note 1)
Amount
(Note 2)
Attachment
Point
Content of
Asset Pool
None
Note 1: Designate “guaranteeing institution” if serving as the guaranteeing institution of the securitized product; designate “liquidity provider” if
providing liquidity financing.
Note 2: If serving as the guaranteeing institution, designate the amount of guaranty; if providing liquidity financing, designate the amount.
Note 3: The definitions of the columns of this table are the same as the above table.
2014 ANNUAL REPORT
135
(3)Operational Risk Management System and Capital Charges:
Operational Risk Management System
2014
Disclosed Item
Content
1.Operational Risk Management
Strategies and Procedures
1. Operational Risk Management Strategies:
Strategic development with regards to operational risk management centers on creating an
appropriate operational risk management environment that minimizes related risks. The Board
of Directors and senior management are actively involved in establishing an operational risk
management framework and mechanism. With this operational risk management mechanism,
which is employed in everyday operations, the Bank is able to identify, assess, monitor, and
control operational risks, and reduce the probability of operational risk occurring and the level of
operational losses.
2. Operational Risk Management Procedures:
(1)According to the levels of operational risk, the Bank schedules all units in headquarters
for executing operational risk management tools. Thereafter, relevant action plans are
developed, monitored, and reported to the Risk Management Committee on a quarterly
basis.
(2)For branch operations, the Bank designs and executes the Full Rollout Risk Self-Assessment
System. The headquarters and branches jointly engage in assessing the likelihood and impact
of risk. The results are used as reference in developing action plans.
(3)Hua Nan has established key risk indicators in order to monitor the trend of risk development.
Risk mitigation actions are immediately implemented whenever indicators exceed thresholds.
2.Operational Risk Management
Organization and Framework
Hua Nan’s organizational framework of operational risk management includes the Board of
Directors, Risk Management Committee, Headquarters Business Group and Management Group,
Headquarters Risk Management Department, and the Auditing Department. The Auditing
Department under the Board is responsible for carrying out independent audits.
1. Board of Directors: The Board screen the operational risk management framework and bears the
highest responsibility for carrying out operational risk management.
2. Risk Management Committee: The committee examines the Bank’s operational risk management
guidelines and regulations, discusses operational risk-related topics, monitors the operational risk
management framework and its implementation. The committee also provides suggestions on
how to adjust and improve related frameworks and mechanisms.
3. The headquarters’ Risk Management Department sets forth operational risk management
regulations, as well as designs and implements operational risk management projects,
mechanisms, and tools. It also carries out training programs to boost the awareness of risk
management and ability to monitor operational risk throughout the Bank. The department
reports to the Board of Directors and Risk Management Committee on a regular basis.
3.Scope and Features of Operational Risk 1. Scope:
Reporting and Measurement Systems
(1)Hua Nan employs an operational risk loss database to serve as the basis of risk reporting and
measurement. Any operational risk-related losses should be reported to loss database after it
occurred.
(2)Reviews will be carried out regularly on loss events and their current controls. Thereafter,
reports will be submitted to the Risk Management Committee.
2. Features: The way to declare operational risk-related loss accompanied by education and
training, helps to boost risk awareness. Any action plans initiated for loss events also could
strengthen the quality of and ability to manage operational risk.
4.Operational Risk Hedging or Risk
Mitigation Policies, and Monitoring
the Continued Effectiveness of Risk
Hedging and Mitigation Tools
5.Approach Adopted for Regulatory
Capital Charges
136
1. Operational Risk Hedging or Mitigation Policies:
Hua Nan analyzes loss events according to their level of impact and likelihood. After considering
risk mitigation benefits and costs, it will adopt measures to avoid, transfer, control or bear risk.
2. Monitoring the Effectiveness of Risk Hedging and Mitigation Tools:
Hua Nan implements some management mechanisms and tools to avoid or mitigate risk. Any
risk mitigating plan will be closely implementing, following and monitoring, to ensure all plans be
carried out effectively and efficiently.
Hua Nan received approval from regulators to adopt the Standardized Approach starting from
fiscal 2008.
Operational Risk Capital Charges
December 31, 2014
(Unit: NT$1,000)
Year
Gross Income
Capital Charges
2012
27,914,275
2013
29,713,373
2014
32,983,308
Total
90,610,956
4,182,399
(4)Market Risk Management System and Capital Charges:
Market Risk Management System
2014
Item
Content
1.Market Risk
Management
Strategies and
Procedures
1. Management Strategies:
(1)Hua Nan has a comprehensive financial product pre-trade management and post-trade risk monitoring
mechanism to effectively utilize and manage capital. This ensures that market risk exposure is maintained with
levels acceptable to the Bank, ensuring that the Bank reaches its profit target.
(2)Hua Nan establishes and implements risk management in accordance with market risk regulations, including
market risk framework、market risk stop loss limit、new product approval process、after-hours & off-premises
trading management、stress test(scenario analysis)、back test、model validation、marketable securities
holding period management、trading book management and procedure、financial instrument evaluation
and market data resources, which set forth by Board of Directors, and Risk Management Committee, to
optimize market risk management.
2. Management Procedures:
Hua Nan carries out market risk management procedures in accordance with related standards and regulations,
including mechanisms and tools to recognize, measure, control and disclose market risk. In addition, the Risk
Management Department regularly submits reports to the Risk Management Committee. High-level managers
will supervise risk and issue guidance. The Bank will assess trading performance to ensure that it conforms to
operational strategies and that market risk exposure is maintained within acceptable limits.
2.Market Risk
Management
Organization and
Framework
Hua Nan’s market risk management organization and framework includes:
Board of Directors approves market risk limits, management-related policies and frameworks, and reviews risk
management reports.
2. Risk Management Committee
(1)The Committee screens market risk management policies, market risk management-related guidelines, and
related procedures.
(2)The Committee coordinates and confirms all risk countermeasures and provides suggestions to the Board.
3. The Risk Management Department remains abreast of market risk planning and management:
(1)Designs market risk management standards.
(2)Plans and implements market risk-related control mechanisms.
(3)Establishes market risk management-related systems.
(4)Submits Bank-wide financial transaction market risk exposure data and related issues to the Risk Management
Committee.
3.Scope and Features of
Market Risk Reporting
and Measurement
Systems
1. The objective of market risk measurement is to set forth clear standards to define and measure the market risk of
the Bank’s trading book and to employ a standardized framework to measure market risk exposure. This enables
the ability to make effective comparisons, monitor risk and analyze all activities that exhibit market risk.
2. Scope of Market Risk Reports: Reports carry out risk exposure measurement and analysis on all market risk factors,
such as interest rates, foreign exchange rates, and equities associated with financial transactions made by
the Bank. These reports are compiled regularly to disclose Bank-wide market risk information and provide highranking managers with data for reference in their decision-making.
3. Features:
(1)The Bank sets market risk limits on each financial product according to the nature of the product and the
ability to tolerate risk. It implements a Bank-wide risk limits framework and management mechanism.
(2)Hua Nan has established a “Bank Equity and Risk Assets Capital Charge System” and in accordance with rules
set forth by regulatory agencies regularly calculates market risk weighted risk assets and statutory capital. It
uses related data to carry out internal management.
4.Market Risk Hedging
1. Hua Nan has established market risk-related limits and management mechanisms.
or Mitigation Policies,
2. At times when it is anticipated that approved limits will be breached, business units are to apply for additional
and Monitoring the
limits or temporary limits, or adopt risk mitigation measures.
Continued Effectiveness 3. The Bank manages the period that it holds underwritten positions in the primary market and trading positions in
of Risk Hedging and
the secondary market in order to reduce the number of positions in holdings that exhibit insufficient liquidity.
Mitigation Tools
5.Approach Adopted
for Statutory Capital
Charges
Hua Nan adopts the Standardized Approach in capital charges for market risk.
2014 ANNUAL REPORT
137
Market Risk Capital Charges
December 31, 2014
Unit: NT$1,000
Category of Risk
Capital Charges
Interest Rate Risk
214,227
Equity Risk
14,654
Foreign Exchange Risk
462,047
Commodity Risk
0
Option Risk
0
Total
690,928
(5)Liquidity Risk
Liquidity Risk Management System
2014
Item
Content
1.Liquidity Risk Management
Strategies and Procedures
1. Management of liquidity risk is aimed at preventing losses due to insufficient liquidity and impacting
present or future profits or interests of shareholders. The aim of management in this regard is mainly
to achieve a balance between minimizing funding costs and maximizing assets returns, while at the
same time maintaining appropriate liquidity in the event of a crisis.
2. Hua Nan sets forth liquidity risk management regulations to recognize, measure, control and
disclose liquidity risk, and implements mechanisms of supervision of risk limitation. In addition, the Risk
Management Department submits reports to the Asset and Liability Committee and the Board of
Directors periodically.
2.Liquidity Risk Management
Organization and Framework
Board of Directors is the highest ruling authority on liquidity risk management and takes key
responsibilities for approving policies and frameworks of liquidity risk management, and reviewing risk
reports.
2. Asset and Liability Committee(ALCO):
Authorized by Board of Directors to set up the risk management mechanisms and supervise to
execute, including approving risk management procedures, reviewing level of exposures periodically
and screening related risk strategies.
3. Risk Management Department and the funding units:
Risk Management Department drafts risk management-related regulations and submits the risk
reports periodically. The funding units maintain adequate short-term liquidity positions to meet the
requirement for daily operations.
3.Scope, Features and Frequency
of Liquidity Risk Reporting and
Measurement Systems
1. Risk assessment is carried out on two levels, namely on a business as usual basis and stress testing.
The main tools used in examining risk in this regard are liquidity ratio and cash flow gaps, as well as
analyzing changes in the degree to which funding sources are diversified and stress tests. In addition,
the Bank formulates and complies with contingency funding plans to provide liquidity in the event of
a crisis.
2. Prepare the risk reports, disclosing major risk information and the compliance of risk limitation. And the
reports will be submitted to the ALCO and the Board monthly and quarterly respectively.
4.Liquidity Risk Hedging or Mitigation
Policies, and Monitoring the
Continued Effectiveness of Risk
Hedging and Mitigation Tools
To properly manage risk exposures and timely response, Hua Nan has established management
mechanisms of liquidity risk and the risk indicators are monitored periodically. In the case of breach of
the limitations , the authorities concerned are responsible for making the corresponding proposals and
submitting to the ALCO for approval.
138
A. Structural Analysis of the Maturity of NT Dollars
December 31, 2014
Unit: NT$1,000
Amount for the Remaining Period Prior to the Maturity Date
Total
0-10Days
11-30 Days
31-90 Days
91-180 Days
181 Days to 1 Year
Over 1 Year
Primary Inflow
upon Maturity
1,879,676,513
213,921,167
262,702,260
156,036,152
143,807,301
151,767,106
951,442,527
Primary Outflow
upon Maturity
2,643,496,467
123,261,390
187,311,955
268,716,214
297,289,241
544,163,656
1,222,754,011
-763,819,954
90,659,777
75,390,305
-112,680,062
-153,481,940
-392,396,550
-271,311,484
Gap
B. Structural Analysis of the Maturity of US Dollars
December 31, 2014
Unit: US$1,000
Amount for the Remaining Period Prior to the Maturity Date
Total
0-30 Days
31-90 Days
91-180 Days
181 Days to 1 Year
Over 1 Year
Primary Inflow
upon Maturity
18,271,545
8,074,918
3,892,545
1,492,826
877,726
3,933,530
Primary Outflow
upon Maturity
21,953,894
7,462,877
4,598,685
2,090,521
2,174,690
5,627,121
Gap
-3,682,349
612,041
-706,140
-597,695
-1,296,964
-1,693,591
2. Risks Derived from Concentration of Operations, and Countermeasures:
(1)Concentration of Operations:
As of the end of 2014, consumer financing accounted for 36.10% of Hua Nan’s loan portfolio, while corporate
financing comprised 63.90%. The Bank’s corporate clients are spread across all industries. Loans disbursed to
the manufacturing sector of NT$354.1 billion accounted for the highest proportion of total loan assets. Hua Nan
carefully examines the business of its commercial customers and the products that they trade, and it has not
overly concentrated loans with regards to any specific product. Hua Nan’s lending does not exhibit the risk of
being overly concentrated.
2014 ANNUAL REPORT
139
(2)Concentration of Exposure in Specific Areas:
According to data compiled by the Bank on Hua Nan’s exposure to various nations or areas(not including
Taiwan), exposure to Asia, the Americas, Europe and other areas accounts for 61%, 22%, 12%, and 5% of total
overseas exposure, respectively. This does not indicate over-concentration in any specific area. Hua Nan will
stress stable operations and select investment grade or above, low risk nations as areas where it will expand
operations. Presently, sovereign risk exposure in each area is within acceptable limits.
(3)Concentration of Exposure to Conglomerates:
Hua Nan seeks to diversify credit risk associated with the Bank’s lending to any one business grouping. At the end
of 2014, Hua Nan had exposure of over NT$1.5 billion to a total of 65 conglomerate customers. It has adopted
a mechanism to regularly monitor and review lending to these groups. Should any fiscal irregularity arise within
a conglomerate, Hua Nan will immediately implement necessary measures to protect its interests and ensure its
rights as a creditor. Currently, Hua Nan’s exposure to each conglomerate is within acceptable limits.
(4)Hua Nan has drafted, implemented and carried out comprehensive controls with respect to exposure limits for
specific industries, areas (nations), and business conglomerates. These controls and mechanisms will be adjusted
accordingly based on the economic and financial environment.
140
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
101
CHUXU BRANCH
160, Sec. 2, Nanjing E. Rd., Zhongshan Dist.,
Taipei City, Taiwan, R.O.C
Tel:(02)25076131
Fax:(02)25072810
HNBKTWTP101
102
INTERNATIONAL BANKING
DEPARTMENT
38 Sec.1,Chung-King S. Rd., Zhongzheng Dist.,
Taipei City, Taiwan, R.O.C.
Tel:(02)23717988
Fax:(02)23881194
HNBKTWTP
103
CHEN NEI BRANCH
93, Boai Rd., Zhongzheng Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)23818780
Fax:(02)23613028
HNBKTWTP103
104
TATAOCHEN BRANCH
96, Sec.2,Yen-Ping N. Rd., Datong Dist., Taipei
City, Taiwan, R.O.C.
Tel:(02)25556280
Fax:(02)25591573
HNBKTWTP104
105
CHIENCHEN BRANCH
228. Nanking West Rd., Datong Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)25563110
Fax:(02)25584245
HNBKTWTP105
106
CHUNGSHAN BRANCH
18, Sec.1,Chang An East Rd., Zhongshan Dist.,
Tel:(02)25611121
Fax:(02)25232072
HNBKTWTP106
107
YUAN SHAN BRANCH
112, Chungshan North Rd., Zhongshan Dist.,
Sec.2, Taipei City, Taiwan, R.O.C.
Tel:(02)25619588
Fax:(02)25418154
HNBKTWTP107
108
CHENG TUNG BRANCH
146, Sung Chiang Rd., Zhongshan Dist., Taipei
Tel:(02)25512111
Fax:(02)25362764
HNBKTWTP108
109
HSIMEN BRANCH
173, Hsi Ning South Rd., Wanhua Dist., Taipei
Tel:(02)23149978
Fax:(02)23832866
HNBKTWTP109
110
NAN SUNG SHAN BRANCH
293, Sec.5, Chung-hsiao East Rd., Xinyi Dist.,
Tel:(02)27695957
Fax:(02)27688428
HNBKTWTP110
111
JEN AI ROAD BRANCH
25, Sec.4, Jen Ai Rd., Da’an Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27722090
Fax:(02)27110276
HNBKTWTP111
112
NANKING EAST ROAD BRANCH
217, Sec.3, Nanking East Rd., Zhongshan Dist.,
Tel:(02)27155111
Fax:(02)27129350
HNBKTWTP112
113
HSINSHENG BRANCH
48, Sec.1, Hsinsheng South Rd., Zhongzheng
Dist., Taipei City, Taiwan, R.O.C.
Tel:(02)23934211
Fax:(02)23211338
HNBKTWTP113
114
TATUNG BRANCH
276, Sec.3, Chung-King N. Rd., Datong Dist.,
Tel:(02)25917767
Fax:(02)25912924
HNBKTWTP114
115
SUNGSHAN BRANCH
654, Sec.4,Pateh Rd., Songshan Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27652132
Fax:(02)27614818
HNBKTWTP115
116
CHUNG LUN BRANCH
145, Sec.3, Pateh Rd., Songshan Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)25780377
Fax:(02)25783902
HNBKTWTP116
117
NANMEN BRANCH
11, Sec.2, Roosevelt Rd., Zhongzheng Dist., Taipei
Tel:(02)23217111
Fax:(02)23510410
HNBKTWTP117
118
GONGGUAN BRANCH
216, Sec.3, Roosevelt Rd., Zhongzheng Dist.,
Tel:(02)23622141
Fax:(02)23623500
HNBKTWTP118
119
SIN YI BRANCH
183, Sec. 2, Xinyi Rd., Zhongzheng Dist., Taipei
Tel:(02)23943141
Fax:(02)23937089
HNBKTWTP119
120
CHUNGSHIAO EAST ROAD
BRANCH
212, Sec.4, Chung Hsiao East Rd., Da’an Dist.,
Tel:(02)27733577
Fax:(02)27410336
HNBKTWTP120
121
HO PING BRANCH
93, Sec.2, Ho Ping-East Rd., Da’an Dist., Taipei
Tel:(02)27002405
Fax:(02)27099230
HNBKTWTP121
2014 ANNUAL REPORT
141
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
122
SHUANGYUAN BRANCH
127, Xizang Rd., Wanhua Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)23071122
Fax:(02)23055954
HNBKTWTP122
123
SHIHLIN BRANCH
246, Sec.4, Chen Teh Rd., Shilin Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02) 28819500
Fax:(02)28827737
HNBKTWTP123
124
TUNG-TAIPEI BRANCH
50, Sec.4, Nanking East Rd., Songshan Dist.,
Tel:(02)25794141
Fax:(02)25788352
HNBKTWTP124
125
DA AN BRANCH
458, Kuang Fu S. Rd., Da’an Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27039851
Fax:(02)27088441
HNBKTWTP125
126
MING SHEN BRANCH
54, Sec. 4, Ming Shen East Rd., Songshan Dist.,
Tel:(02)27155011
Fax:(02)27121484
HNBKTWTP126
127
FUSHING BRANCH
337, Fushing North Rd., Songshan Dist., Taipei
Tel:(02)27171781
Fax:(02)27184582
HNBKTWTP127
128
LUNGCHIANG BRANCH
145, Sec.2, Minquan East Rd., Zhongshan Dist.,
Tel:(02)25045341
Fax:(02)25044487
HNBKTWTP128
129
YONGJI BRANCH
800, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei
Tel:(02)27593111
Fax:(02)27595757
HNBKTWTP129
130
TUNHUA BRANCH
2, Sec.2, Tunhua S. Rd., Da’an Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27557467
Fax:(02)27066043
HNBKTWTP130
132
DAZHI BRANCH
56, Lequn 3rd Rd., Zhongshan Dist., Taipei
City,Taiwan, R.O.C.
Tel:(02)85020818
Fax:(02)85026101
HNBKTWTP132
133
TUNHO BRANCH
107, Sec.2, Tun Hua S. Rd., Da’an Dist., Taipei
Tel:(02)27010900
Fax:(02)27042811
HNBKTWTP133
134
DONGHU BRANCH
456, Sec. 5, Chenggong Rd., Neihu Dist., Taipei
Tel:(02)26315550
Fax:(02)26328296
HNBKTWTP134
136
DONGXING BRANCH
239, Sec.5, Nanjing E. Rd., Songshan Dist., Taipei
Tel:(02)25289567
Fax:(02)25288359
HNBKTWTP136
137
PEINANKANG BRANCH
2F-10,No.3, Yuancyu St., Nangang DIST., Taipei
Tel:(02)26558788
Fax:(02)26558778
HNBKTWTP137
138
MUZHA BRANCH
4, Sec.3, Muzha Rd., Wenshan Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)29361769
Fax:(02)29361759
HNBKTWTP138
139
BANQIAO WENHUA
BRANCH
1F., No.67, Sec. 1, Wenhua Rd., Banqiao Dist.,
New Taipei City, Taiwan , R.O.C.
Tel:(02)22723999
Fax:(02)22721010
HNBKTWTP139
143
NAN-NEIHU BRANCH
130, Xingai Rd., Neihu Dist., Taipei City, Taiwan,
R.O.C
Tel:(02)27968288
Fax:(02)27968299
HNBKTWTP143
145
CHANG AN BRANCH
205, Sec.2, Pateh Rd., Zhongshan Dist., Taipei
Tel:(02)87722778
Fax:(02)87722775
HNBKTWTP145
147
HUAI SHENG BRANCH
247, Sec.3, Chung-Hsiao E. Rd., Da’an Dist.,
Tel:(02)27727211
Fax:(02)27318743
HNBKTWTP147
148
ZHONG HUA ROAD BRANCH
59, Sec.2, Zhonghua Rd., Zhongzheng Dist., Taipei
Tel:(02)23822078
Fax:(02)23318355
HNBKTWTP148
149
HSIN WEI BRANCH
2F., No.6, Sec.4, Hsin yi Rd., Da’an Dist., Taipei
Tel:(02)27015123
Fax:(02)23258122
HNBKTWTP149
142
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
151
PU CHIEN BRANCH
37, Sec.2, San Min Rd., Banqiao Dist., New Taipei
Tel:(02)29646911
Fax:(02)29570930
HNBKTWTP151
152
SHIH PAI BRANCH
78, Sec.1, Shipai Rd., Beitou Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)28223822
Fax:(02)28216268
HNBKTWTP152
153
JUI HSIANG BRANCH
145, Sec.5, Ming Shen East Rd., Songshan Dist.,
Tel:(02)27641407
Fax:(02)27619254
HNBKTWTP153
154
TAITA BRANCH
1, Sec.4, Roosevelt Rd., Da’an Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)23631478
Fax:(02)23639657
HNBKTWTP154
156
SHIH MAO BRANCH
458, Sec.4, Xinyi Rd., Xinyi Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27581392
Fax:(02)27581389
HNBKTWTP156
157
WAN HUA BRANCH
149, Kangding Rd., Wanhua Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)23812922
Fax:(02)23817634
HNBKTWTP157
158
NAN KANG BRANCH
52, Sec.3, Nankang Rd., Nankang Dist., Taipei
Tel:(02)27885966
Fax:(02)27885725
HNBKTWTP158
159
HUA JIANG BRANCH
80, Sec. 2, Wenhua Rd., Banqiao DIST., New
Tel:(02)22512581
Fax:(02)22524900
HNBKTWTP159
160
PANCHIAO BRANCH
73, Chung Hsiao Rd., Banqiao Dist., New Taipei
City, Taiwan, R.O.C
Tel:(02)29511101
Fax:(02)29615496
HNBKTWTP160
161
SANCHUNG BRANCH
5-1, Sec. 2, Chongxin Rd., Sanchong Dist., New
Tel:(02)29824101
Fax:(02)29713685
HNBKTWTP161
162
PEI SAN CHUNG BRANCH
1, Lung Men Rd., Sanchung Dist., New Taipei
City, Taiwan, R.O.C
Tel:(02)29880011
Fax:(02)29717564
HNBKTWTP162
163
HSIN CHUANG BRANCH
100,Chung Cheng Rd., Xinzhuang Dist., New
Tel:(02)29944761
Fax:(02)29975920
HNBKTWTP163
164
YUNG HO BRANCH
147, Sec.2, Yung-ho Rd., Yonghe Dist., New Taipei
Tel:(02)29214111
Fax:(02)29275188
HNBKTWTP164
165
CHUNGHO BRANCH
257, Jungshan Rd., Sec.2, Zhonghe Dist., New
Tel:(02)2495555
Fax:(02)22498520
HNBKTWTP165
166
HSIN TIEN BRANCH
108, Sec.2, Pei Hsin Rd., Xindian Dist., New Taipei
Tel:(02)29136661
Fax:(02)29155547
HNBKTWTP166
167
DANSHUI BRANCH
28, Zhongzheng Rd., Danshui Dist., New Taipei
Tel:(02)26219680
Fax:(02)26232275
HNBKTWTP167
168
XIZHI BRANCH
101, Zhongzheng Rd., Xizhi Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)26416411
Fax:(02)26420866
HNBKTWTP168
169
NAN YUNGHO BRANCH
220, Chung Cheng Rd., Yonghe Dist., New Taipei
Tel:(02)89423288
Fax:(02)89423289
HNBKTWTP169
170
SHI-SANCHUNG BRANCH
237, Sec. 4, Sanhe Rd., Sanchong Dist., New
Tel:(02)28575211
Fax:(02)28575228
HNBKTWTP170
171
NAN -SANCHUNG BRANCH
52, Sec. 1, New Taipei Blvd., Sanchong Dist., New
Taipei City 241, Taiwan, R.O.C.
Tel:(02)29888001
Fax:(02)29831367
HNBKTWTP171
172
SHUANGHO BRANCH
320, Junghe Rd., Junghe Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)29261771
Fax:(02)29293971
HNBKTWTP172
2014 ANNUAL REPORT
143
Branch
Code
Branch Name
TEL/FAX
Country Code:886
Address
SWIFT CODE
173
HSINTAI BRANCH
887-16, Zhongzheng Rd., Xinzhuang Dist., New
Tel:(02)29071181
Fax:(02)29071190
HNBKTWTP173
174
ERH CHUNG BRANCH
88, Sec.1, Kuang-Fu Rd., Sanchung Dist., New
Tel:(02)29991166
Fax:(02)29991678
HNBKTWTP174
175
PAN HSIN BRANCH
30, Quyun Rd., Banqiao Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)29631777
Fax:(02)29631797
HNBKTWTP175
176
WU KU BRANCH
219, Sec. 2, New Taipei Blvd., Xinzhuang Dist.,
New Taipei City, Taiwan, R.O.C.
Tel:(02)85218788
Fax:(02)85216649
HNBKTWTP176
178
BEITOU BRANCH
13, Sec.2, Beitou Rd., Beitou Dist., Taipei City,
Taiwan, R.O.C
Tel:(02)28934166
Fax:(02)28960184
HNBKTWTP178
179
HSI HU BRANCH
392, Sec.1, Nei-Hu Rd., Neihu Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27977189
Fax:(02)27979169
HNBKTWTP179
180
CHI SUI BRANCH
562, Jungshan Rd., Sec.2, Zhonghe Dist., New
Tel:(02)22220603
Fax:(02)22214405
HNBKTWTP180
182
FUHE BRANCH
158,Fuhe Rd.,Yonghe Dist.,
Taiwan, R.O.C
Tel:(02)89280491
Fax:(02)89266004
HNBKTWTP182
183
NAN SHIH CHIAO BRANCH
342, Jingxin St., Zhonghe Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)29421722
Fax:(02)29415816
HNBKTWTP183
184
PEI LUZHOU BRANCH
213, Changrong Rd., Luzhou Dist., New Taipei
Tel:(02)28470606
Fax:(02)28471052
HNBKTWTP184
185
LU ZHOU BRANCH
161, Zhongshan 1st Rd., Luzhou Dist., New Taipei
Tel:(02)22886888
Fax:(02)22830959
HNBKTWTP185
186
TU CHENG BRANCH
15,Qiansui Rd., Tucheng Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)22672345
Fax:(02)22694219
HNBKTWTP186
187
PEI HSIN BRANCH
129,Min Chuan Rd., Xindian Dist., New Taipei
Tel:(02)22180111
Fax:(02)22188883
HNBKTWTP187
189
TIANMU BRANCH
109, Sec 1, Zhongcheng Rd., Shilin Dist., Taipei
Tel:(02)28380777
Fax:(02)28355410
HNBKTWTP189
190
NEI HU BRANCH
157, Sec.4, Cheng Gung Rd., Neihu Dist., Taipei
Tel:(02)27961266
Fax:(02)27935380
HNBKTWTP190
191
SHULIN BRANCH
189, Sec.1, Chung Shan Rd., Shulin Dist., New
Tel:(02)26870656
Fax:(02)26870659
HNBKTWTP191
192
CHANG SHU WAN BRANCH
276, Sec.1,Tatung Rd., Xizhi Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)26472611
Fax:(02)26472656
HNBKTWTP192
193
TAISHAN BRANCH
99, Sec. 2, Ming Zhi Rd., Taishan Dist., New Taipei
Tel:(02)22968388
Fax:(02)22968343
HNBKTWTP193
194
SAN HSIA BRANCH
65,Heping St.,Sanshia Dist.,New Taipei City,
Taiwan, R.O.C
Tel:(02)26747711
Fax:(02)26747171
HNBKTWTP194
195
WENSHAN BRANCH
52, Sec. 1, Muzha Rd., Wenshan Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)22360288
Fax:(02)22365655
HNBKTWTP195
196
YINGGE BRANCH
101, Guoqing St., Yingge Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)26777711
Fax:(02)26775511
HNBKTWTP196
144
New Taipei City,
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
197
NORTH HSIN CHUANG BRANCH
211, Sec.2, Zhonghua Rd.,
Xinzhuang Dist., New Taipei City, Taiwan, R.O.C.
Tel:(02)66371688
Fax:(02)66371066
HNBKTWTP197
198
PEI TUCHENG BRANCH
149,Yumin Rd., Tucheng Dist., New Taipei City,
Taiwan, R.O.C.
Tel:(02)22635656
Fax:(02)22635916
HNBKTWTP198
199
LINKOU STATION BRANCH
331, Sec. 1, Wenhua 3rd Rd., Linkou Dist., New
Tel:(02)26098399
Fax:(02)26006811
HNBKTWTP199
200
KEELUNG BRANCH
305, Ren 1st Rd., Ren’ai Dist., Keelung City,
Taiwan, R.O.C.
Tel:(02)24222192
Fax:(02)24272114
HNBKTWTP200
201
KEELUNG KANGKO BRANCH
46, Zhong 2nd Rd., Ren’ai Dist., Keelung City,
Taiwan, R.O.C.
Tel:(02)24282121
Fax:(02)24289665
HNBKTWTP201
211
QIDU BRANCH
81, Mingde 1st Rd., Qidu Dist., Keelung City,
Taiwan, R.O.C.
Tel:(02)24567101
Fax:(02)24562215
HNBKTWTP211
220
LOTUNG BRANCH
85,Gongzheng Rd., Luodong Township,Yilan
County, Taiwan, R.O.C.
Tel:(03)9543611
Fax:(03)9566050
HNBKTWTP220
221
YILAN BRANCH
140, Sec. 3, Zhongshan Rd., Yilan City, Yilan
County , Taiwan, R.O.C.
Tel:(03)9354911
Fax:(03)9326056
HNBKTWTP221
240
TAOYUAN BRANCH
79, Nan-Hua St., Taoyuan Dist., Taoyuan City,
Taiwan, R.O.C.
Tel:(03)3321121
Fax:(03)3354999
HNBKTWTP240
241
CHUNGLI BRANCH
35, Minchu Rd., Chungli Dist., Taoyuan City ,
Taiwan, R.O.C.
Tel:(03)4936999
Fax:(03)4939853
HNBKTWTP241
242
YANG MEI BRANCH
95, Dancheng Rd., Yangmei Dist., Taoyuan City,
Taiwan, R.O.C.
Tel:(03)4755131
Fax:(03)4752439
HNBKTWTP242
243
LI-CHANG BRANCH
175, Zhongzheng Rd., Zhongli Dist., Taoyuan City,
Taiwan, R.O.C.
Tel:(03)4253151
Fax:(03)4252201
HNBKTWTP243
244
PEI-TAOYUAN BRANCH
94, Sec. 2, Daxing W. Rd., Taoyuan Dist., Taoyuan
Tel:(03)3011234
Fax:(03)3025555
HNBKTWTP244
245
NAN KAN BRANCH
99, Sec. 1, Nankan Rd., Luzhu Dist., Taoyuan City,
Taiwan, R.O.C.
Tel:(03)3521212
Fax:(03)3526969
HNBKTWTP245
246
PINGZHEN BRANCH
265,Sec.2,Huannan Rd., Pingzhen Dist., Taoyuan
Tel:(03)4689688
Fax:(03)4683368
HNBKTWTP246
247
PA TEH BRANCH
307, Sec. 2, Jieshou Rd., Bade Dist., Taoyuan City
, Taiwan, R.O.C.
Tel:(03)3679911
Fax:(03)3676367
HNBKTWTP247
248
GUEISHAN BRANCH
1227, Sec. 2, Wanshou Rd., Guishan Dist.,
Taoyuan City, Taiwan, R.O.C.
Tel:(03)3505822
Fax:(03)3198195
HNBKTWTP248
249
LONGTAN BRANCH
8, Zhongzheng Rd., Longtan Dist., Taoyuan City,
Taiwan, R.O.C.
Tel:(03)4090666
Fax:(03)4090667
HNBKTWTP249
250
DAXI BRANCH
87,Cihu Rd., Daxi Dist., Taoyuan City, Taiwan,
R.O.C.
Tel:(03)3878833
Fax:(03)3879922
HNBKTWTP250
251
NEI LI BRANCH
260,Huanzhong E.Rd.,Zhongli Dist., Taoyuan City,
Taiwan, R.O.C.
Tel:(03)4626969
Fax:(03)4629797
HNBKTWTP251
252
LINKOU BRANCH
38-11、12, Wenhua 2nd Rd., Guishan Dist.,
Tel:(03)3183456
Fax:(03)3182345
HNBKTWTP252
2014 ANNUAL REPORT
145
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
260
GUANYIN BRANCH
780, Sec. 2, Zhongshan Rd., Guanyin Dist.,
Tel:(03)4081731
Fax:(03)2824612
HNBKTWTP260
262
DAYUAN BRANCH
108, Zhongzheng E. Rd., Dayuan Dist., Taoyuan
City , Taiwan, R.O.C.
Tel:(03)3867272
Fax:(03)3857373
HNBKTWTP262
300
HSINCHU BRANCH
131, Tung Men St., East Dist., Hsinchu City,
Taiwan, R.O.C.
Tel:(03)5217111
Fax:(03)5233445
HNBKTWTP300
301
ZHUDONG BRANCH
9, Chaoyang Rd., Zhudong Township, Hsinchu
County,Taiwan, R.O.C.
Tel:(03)5969372
Fax:(03)5969379
HNBKTWTP301
302
CHU KO BRANCH
172, Guanxin Rd., East Dist., Hsinchu City, Taiwan,
R.O.C.
Tel:(03)6687888
Fax:(03)6687066
HNBKTWTP302
310
HSIN FENG BRANCH
155-16, Sec. 1, Jiansing Rd., Sinfong Township,
Hsinchu County , Taiwan, R.O.C.
Tel:(03)5592130
Fax:(03)5592237
HNBKTWTP310
313
LIOUJIA BRANCH
6,Ziqiang S. Rd., Zhubei City,
Hsinchu County, Taiwan, R.O.C.
Tel:(037)6673289
Fax:(037)6676025
HNBKTWTP313
320
CHUNAN BRANCH
10, Boai St., Zhunan Township, Miaoli County,
Taiwan, R.O.C.
Tel:(037)472651
Fax:(037)472374
HNBKTWTP320
321
TOUFEN BRANCH
922, Zhonghua Rd., Toufen Township, Miaoli
Tel:(037)663577
Fax:(037)673447
HNBKTWTP321
322
MIAOLI BRANCH
686,Zhongzheng Rd.,Miaoli City, Miaoli
Tel:(037)353711
Fax:(037)353722
HNBKTWTP322
323
CHUPEI BRANCH
159, Sian Jheng 9th Rd., Chupei City, Hsinchu
Tel:(03)5542277
Fax:(03)5542727
HNBKTWTP323
351
TACHUNG BRANCH
118, Shida Rd., East Dist., Hsinchu City, Taiwan,R.
O.C.
Tel:(03)5212191
Fax:(03)5267348
HNBKTWTP351
400
FENG YUAN BRANCH
95, Hsin Yi St., Fengyuan Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)25273180
Fax:(04)25270214
HNBKTWTP400
401
TUNGSHIH BRANCH
282, Sanmin St., Dongshi Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)25871180
Fax:(04)25875611
HNBKTWTP401
402
CHINGSHUI BRANCH
241, Zhongshan Rd., Qingshui Dist.,Taichung City,
Taiwan, R.O.C.
Tel:(04)26237171
Fax:(04)26227581
HNBKTWTP402
403
SHI-FENGYUAN BRANCH
225, Yuanhuan S. Rd., Fengyuan Dist.,Taichung
Tel:(04)25275123
Fax:(04)25270744
HNBKTWTP403
420
TAICHUNG BRANCH
174, Minchuan Rd., Central Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)22261111
Fax:(04)22275063
HNBKTWTP420
422
NAN TAICHUNG BRANCH
53, Sec.4, Fuxing Rd., East Dist., Taichung City,
Taiwan, R.O.C
Tel:(04)22294471
Fax:(04)22283866
HNBKTWTP422
423
PEI-TAICHUNG BRANCH
338, Wuchyuan Rd., North Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)22025131
Fax:(04)22015755
HNBKTWTP423
424
TAICHUNGKANG ROAD BRANCH
689, Sec. 2, Taiwan Blvd., Xitun Dist., Taichung
Tel:(04)23266555
Fax:(04)23267241
HNBKTWTP424
425
DALI BRANCH
37, Dongrong Rd., Dali Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)24835151
Fax:(04)24835393
HNBKTWTP425
146
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
426
SHUI NAN BRANCH
81, Sec.4, Wenhsin Rd., Taichung City, Taiwan,
R.O.C.
Tel:(04)22924456
Fax:(04)22924121
HNBKTWTP426
427
WU CHYUAN BRANCH
270, Jung Ming South Rd., Taichung City, Taiwan,
R.O.C.
Tel:(04)23755981
Fax:(04)23760420
HNBKTWTP427
429
TA CHIA BRANCH
6, Hsincheng Rd., Tajia Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)26805111
Fax:(04)26805122
HNBKTWTP429
430
TAIPING BRANCH
58, Zhongxing E. Rd., Taiping Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)22771919
Fax:(04)22770707
HNBKTWTP430
431
ZHONGKE BRANCH
16, Gongyequ 1st Rd., Xitun Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)23591778
Fax:(04)23594800
HNBKTWTP431
451
SHALU BRANCH
112, Shatian Rd., Shalu Dist., Taichung City,
Taiwan, R.O.C.
Tel:(04)26629951
Fax:(04)26622248
HNBKTWTP451
500
CAOTUN BRANCH
317, Sec 2, Taiping Rd., Caotun Township, Nantou
County, Taiwan, R.O.C
Tel:(04)2323881
Fax:(04)2367949
HNBKTWTP500
501
NANTOU BRANCH
236, Fu Hsing Rd., Nantou City, Nantou County,
Taiwan, R.O.C.
Tel:(04)2222701
Fax:(04)2231593
HNBKTWTP501
520
CHANGHUA BRANCH
152, Guangfu Rd., Changhua City, Changhua
Tel:(04)7242151
Fax:(04)7223146
HNBKTWTP520
521
HEMEI BRANCH
300, Sec. 5, Zhangmei Rd., Hemei Township,
Changhua County, Taiwan, R.O.C.
Tel:(04)7556101
Fax:(04)7552383
HNBKTWTP521
522
YUANLIN BRANCH
753, Sec. 1, Chung Shan Rd., YuanLin, Changhua
Tel:(04)8358161
Fax:(04)8358044
HNBKTWTP522
523
LUGANG BRANCH
279, Minquan Rd., Lugang Township, Changhua
Tel:(04)7745988
Fax:(04)7745995
HNBKTWTP523
524
XIHU BRANCH
250, Xihuan Rd., Xihu Township, Changhua
Tel:(04)8821811
Fax:(04)8821222
HNBKTWTP524
540
DOULIU BRANCH
45, Datong Rd., Douliu City, Yunlin County,
Taiwan, R.O.C
Tel:(05)5339711
Fax:(05)5326741
HNBKTWTP540
541
HUWEI BRANCH
50, Zhongzheng Rd., Huwei Township, Yunlin
Tel:(05)6334901
Fax:(05)6334907
HNBKTWTP541
542
XILUO BRANCH
239,Guangfu W. Rd., Xiluo Township,Yunlin
Tel:(05)5882868
Fax:(05)5882875
HNBKTWTP542
600
CHIAYI BRANCH
320, Zhongshan Rd., West Dist., Chiayi City,
Taiwan, R.O.C.
Tel:(05)2232050
Fax:(05)2248860
HNBKTWTP600
601
CHIA NAN BRANCH
469, Lanjing St., West Dist., Chiayi City, Taiwan,
R.O.C.
Tel:(05)2236321
Fax:(05)2230712
HNBKTWTP601
602
PUZI BRANCH
2,Wenhua S.Rd., Puzi City, Chiayi County, Taiwan,
R.O.C.
Tel:(05)3701133
Fax:(05)3705111
HNBKTWTP602
620
XINYING BRANCH
109, Sec. 2, Xinjin Rd., Xinying Dist.,Tainan City,
Taiwan,R.O.C.
Tel:(06)6322295
Fax:(06)6323276
HNBKTWTP620
621
MADOU BRANCH
36, Zhongshan Rd., Madou Dist.,Tainan
City,Taiwan, R.O.C.
Tel:(06)5727241
Fax:(06)5721647
HNBKTWTP621
2014 ANNUAL REPORT
147
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
622
YUNG KANG BRANCH
800, Zhonghua Rd., Yongkang Dist.,Tainan
City,Taiwan, R.O.C.
Tel:(06)2015531
Fax:(06)2338644
HNBKTWTP622
640
TAINAN BRANCH
154, Sec.2, Yong-fu Rd., West Central Dist., Tainan
Tel:(06)2222111
Fax:(06)2252134
HNBKTWTP640
642
TUNG-TAINAN BRANCH
90, Sec.2, Linsen Rd., East Dist., Tainan City,
Taiwan, R.O.C.
Tel:(06)2747027
Fax:(06)2747175
HNBKTWTP642
643
SHI-TAINAN BRANCH
156, Kangle St., West Central Dist.,Tainan
City,Taiwan, R.O.C.
Tel:(06)2211622
Fax:(06)2243620
HNBKTWTP643
644
PEI-TAINAN BRANCH
294, Chenggong Rd., North Dist., Tainan City,
Taiwan, R.O.C.
Tel:(06)2221171
Fax:(06)2221170
HNBKTWTP644
645
NANDU BRANCH
203, Sec. 1, Changrong Rd., East Dist.,Tainan
City,Taiwan, R.O.C.
Tel:(06)2360789
Fax:(06)2756169
HNBKTWTP645
646
ANNAN BRANCH
467-1, Sec. 4, Anhe Rd., Annan Dist., Tainan City,
Taiwan, R.O.C.
Tel:(06)3567272
Fax:(06)3564122
HNBKTWTP646
647
JEN DER BRANCH
511, Jungshan Rd., Rende Dist., Tainan City,
Taiwan, R.O.C.
Tel:(06)2490651
Fax:(06)2490621
HNBKTWTP647
648
HSIN SHIH BRANCH
232-1, Chung Cheng Rd., Xinshi Dist., Tainan City,
Taiwan, R.O.C.
Tel:(06)5893535
Fax:(06)5895242
HNBKTWTP648
681
JINHUA BRANCH
172, Sec. 2, Jinhua Rd., South Dist., Tainan City,
Taiwan, R.O.C.
Tel:(06)2911835
Fax:(06)2632694
HNBKTWTP681
700
KAOHSIUNG BRANCH
178, Wu-Fu 4th Rd., Yancheng Dist., Kaohsiung
Tel:(07)5611241
Fax:(07)5517832
HNBKTWTP700
701
TUNG LING BRANCH
120, Jungjeng 1st Rd., Lingya Dist., Kaohsiung
Tel:(07)7130701
Fax:(07)7130673
HNBKTWTP701
702
HSINSHING BRANCH
117, Zhongshan 1st Rd., Xinxing Dist., Kaohsiung
Tel:(07)2864191
Fax:(07)2867641
HNBKTWTP702
703
KAOHSIUNG SANMIN BRANCH
189, Qixian 2nd Rd., Qianjin Dist., Kaohsiung City,
Taiwan, R.O.C.
Tel:(07)2859161
Fax:(07)2859157
HNBKTWTP703
704
LINGYA BRANCH
489, Zhongshan 2nd Rd., Lingya Dist., Kaohsiung
Tel:(07)3353141
Fax:(07)3353149
HNBKTWTP704
705
QIANZHEN BRANCH
33, Yixin 2nd Rd., Qianzhen Dist., Kaohsiung City,
Taiwan, R.O.C.
Tel:(07)3358231
Fax:(07)3358229
HNBKTWTP705
706
KAOHSIUNG PO-AI BRANCH
150, Jiuru 2nd Rd.,Sanmin Dist., Kaohsiung City,
Taiwan, R.O.C.
Tel:(07)3113531
Fax:(07)3117297
HNBKTWTP706
707
NAN-KAOHSIUNG BRANCH
153, Sanduo 3rd Rd., Qianzhen Dist., Kaohsiung
Tel:(07)3368101
Fax:(07)3319473
HNBKTWTP707
708
TUNG-KAOHSIUNG BRANCH
78, Liu Ho 1st Rd., Xinxing Dist., Kaohsiung City,
Taiwan, R.O.C.
Tel:(07)2385901
Fax:(07)2369016
HNBKTWTP708
709
DA CHANG BRANCH
57, Dachang 2nd Rd., Sanmin Dist., Kaohsiung
City, Taiwan, R.O.C
Tel:(07)3806150
Fax:(07)3805050
HNBKTWTP709
710
PEI-KAOHSIUNG BRANCH
6, Boai 3rd Rd., Zuoying Dist., Kaohsiung City,
Taiwan, R.O.C.
Tel:(07)3464601
Fax:(07)3459682
HNBKTWTP710
148
Branch
Code
Branch Name
Address
TEL/FAX
Country Code:886
SWIFT CODE
711
NANZI BRANCH
336, Xingnan Rd., Nanzi Dist., Kaohsiung City,
Taiwan, R.O.C.
Tel:(07)3513299
Fax:(07)3512511
HNBKTWTP711
712
ZUOYING BRANCH
160,Boai 4th Rd.,Zuoying Dist., Kaohsiung
City,Taiwan, R.O.C
Tel:(07)3438911
Fax:(07)3431617
HNBKTWTP712
719
GANGSHAN BRANCH
331, Gangshan Rd., Gangshan Dist., Kaohsiung
City, Taiwan, R.O.C
Tel:(07)6211091
Fax:(07)6215435
HNBKTWTP719
720
FENGSHAN BRANCH
145, Zhongshan Rd., Fengshan Dist., Kaohsiung
City, Taiwan, R.O.C
Tel:(07)7472121
Fax:(07)7425282
HNBKTWTP720
721
LUCHU BRANCH
90-2,Dashe Rd., Luzhu Dist., Kaohsiung City,
Taiwan, R.O.C
Tel:(07)6072233
Fax:(07)6072299
HNBKTWTP721
722
RENWU BRANCH
41,Zhongzheng Rd., Renwu Dist., Kaohsiung City,
Taiwan, R.O.C
Tel:(07)3711101
Fax:(07)3712638
HNBKTWTP722
751
LI TSU NEI BRANCH
132, Banchao Rd., Qianzhen Dist., Kaohsiung
City, Taiwan, R.O.C
Tel:(07)7112366
Fax:(07)7611267
HNBKTWTP751
752
WU CHIA BRANCH
642, Wujia 2nd Rd., Fengshan Dist., Kaohsiung
City, Taiwan, R.O.C
Tel:(07)8414495
Fax:(07)8110602
HNBKTWTP752
753
KUANG HUA BRANCH
148-19, Guanghua 1st Rd., Lingya Dist.,
Kaohsiung City, Taiwan, R.O.C
Tel:(07)7161601
Fax:(07)7161323
HNBKTWTP753
760
XIAOGANG BRANCH
180, Erling Rd., Xiaogang Dist., Kaohsiung City,
Taiwan, R.O.C
Tel:(07)8013993
Fax:(07)8062293
HNBKTWTP760
765
KAOHSIUNG GUILIN BRANCH
44,Guiyang Rd., Xiaogang Dist., Kaohsiung City,
Taiwan, R.O.C
Tel:(07)7913916
Fax:(07)7915898
HNBKTWTP765
800
PINGTUNG BRANCH
36, Fuxing Rd., Pingtung City, Pingtung County,
Taiwan, R.O.C
Tel:(08)7323831
Fax:(08)7325474
HNBKTWTP800
801
NEI PU BRANCH
187, Guangji Rd., Neipu Township, Pingtung
Tel:(08)7799911
Fax:(08)7790944
HNBKTWTP801
802
CHAOZHOU BRANCH
71,Xinsheng Rd., Chaozhou Township, Pingtung
Tel:(08)7883001
Fax:(08)7892002
HNBKTWTP802
813
JIADONG BRANCH
155,Jiachang Rd., Jiadong Township,Pingtung
Tel:(08)8662811
Fax:(08)8664970
HNBKTWTP813
820
HUALIEN BRANCH
78, Zhongshan Rd.,Hualien City, Hualien County,
Taiwan, R.O.C
Tel:(038)323181
Fax:(038)355105
HNBKTWTP820
830
TAITUNG BRANCH
347, Sec. 1, Zhonghua Rd., Taitung City, Taitung
County Taiwan, R.O.C
Tel:(089)310121
Fax:(089)327050
HNBKTWTP830
888
BUSINESS CENTER BRANCH
1F., No.123, Songren Rd., Xinyi Dist., Taipei City,
Taiwan, R.O.C.
Tel:(02)27206988
Fax:(02)27205656
HNBKTWTP888
2014 ANNUAL REPORT
149
DISTRIBUTION OF CORRESPONDENT BANKS
AND OVERSEAS OFFICES
LONDON BRANCH
London
Europe(774)
Africa(40)
SHANGHAI BRANCH
Middle East(98) China(160)
South Asia(50)
Shen Zhen
Hanoi
Korea(42)
Japan(136)
R.O.C.(Taipei)(77)
Hong Kong(127)
Macau
Ho Chi Minh City
SHENZHEN BRANCH
SHENZHEN BAOAN SUB-BRANCH
South East Asia(266)
HO CHI MINH CITY BRANCH
MACAU BRANCH
HANOI REPRESENTATIVE OFFICE
Note. Head Office
Overseas Branches
Overseas Representative Offices
150
Singapore
Oceania(71)
Sydney
NEW YORK AGENCY
Canada(26)
U.S.A.(202)
New York
LOS ANGELES BRANCH
FUZHOU BRANCH
Los Angeles
HONG KONG BRANCH
Latin America(89)
SYDNEY BRANCH
SINGAPORE BRANCH
2014 ANNUAL REPORT
151
OVERSEAS OFFICES
Name
General
Manager
Address
Tel
Fax
LOS ANGELES BRANCH
Eric D. Chen
707 Wilshire Blvd., Suite 3100, Los Angeles, CA 90017, U.S.A. 1-213-3626666
1-213-3626617
NEW YORK AGENCY
Wen-Tang Wang
330 Madison Ave., 38th Floor, New York, NY 10017, U.S.A.
1-212-2861999
1-212-2861212
LONDON BRANCH
Jack C.C.Huang
6th Floor, 140 Fenchurch Street, London EC3M 6BL, U.K.
44-20-72207979
44-20-76261515
SYDNEY BRANCH
Rudy Chang
Suite 603 Level 6, 60 Carrington Street, Sydney NSW 2000 ,
Australia
61-2-82960100
61-2-82960188
SINGAPORE BRANCH
Loong Lin
80 Robinson Road, #14-03, Singapore 068898
65-63242566
65-63242155
HO CHI MINH CITY BRANCH
Jui-Yen Huang
10th Floor, Royal Tower, 235 Nguyen Van Cu Street, District
1, Ho Chi Minh City, Vietnam
84-8-38371888
84-8-38371999
Wen-Tang Wang
Suite 303, DMC Tower, 535 Kim Ma Street, Ba Dinh, Hanoi,
Vietnam
84-4-22203168
84-4-22203169
HONG KONG BRANCH
Albert Tsai
Suite 5601-05, 56th Floor, Central Plaza, 18 Harbour Road,
Wanchai, Hong Kong
852-28240288
852-28242515
MACAU BRANCH
Hsiao, Ya-Chin
Avenida Doutor Mario Soares, Finance and IT Center of
Macau, 17th Floor B, C, Macau
853-28757136
853-28755915
SHANGHAI BRANCH
Wan-Fu Lin
Unit 03-04, 35 Floor, No.1788 Nan-Jing West Road, Jing-An
District, Shanghai, China 200040
86-21-60100855
86-21-60100850
FUZHOU BRANCH
Jeng-Hua Huang
Suite 2808, 28 Floor, Sheng Long Building, No. 1,
Guangming South Road, Taijiang District, Fuzhou City,
Fujian Province, PRC
86-591-28301688
86-591-28301500
SHENZHEN BRANCH
Hsin-Kai Wang
Room 03-04, 18th Floor Tower One, Kerry Plaza, 1
Zhongxinsi Road, Futian District, Shenzhen, China 518048
86-755-25832208
86-755-25832398
San-Lang Luoh
Unit 1901A.B.C, Block D, Wealth Harbour Building,
Baoyuan Road, Xixiang Street, Baoan District, Shenzhen,
China 518101
86-755-23007117
86-755-23007127
HANOI REPRESENTATIVE
OFFICE
SHENZHEN BAOAN
SUB-BRANCH
152
HONESTY. EFFICIENCY. ACTIVENESS. RESPONSIBILITY.TEAMWORK
No. 123, Songren Rd., Xinyi District, Taipei, Taiwan, R.O.C
TEL : 886-2-23713111
WEB : http://www.hncb.com.tw

Annual Report of 2014

Transcription

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