SECURITIES AND EXCHANGE COMMISSION

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SECURITIES AND EXCHANGE COMMISSION
COVER SHEET
P W 1 0 5
S.E.C. Registration Number
P H I L T R U S T
B A N K
P H I L I P P I N E
T R U S T
C OMP A N Y
(Company's Full Name)
1 0 0 0
S A N
U N I T E D
N A T I ON S
MA R C E L I N O
C O R
A V E N UE
S T R E E T
MA N I L A
(Business Address: No. Street City / Town / Province)
MARTIN B. ISIDRO
524-9061
Contact Person
Company Telephone Number
ANNUAL REPORT
1 2
Month
3 1
Day
1 7 - A
0 4
FORM TYPE
Month
Fiscal Year
2 8
Day
Annual Meeting
Secondary License Type, If Applicable
CG F D
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I. D.
Cashier
STAMPS
Foreign
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1.
For the fiscal year ended
:
December 31, 2014
2.
SEC Identification Number
:
PW-105
3.
BIR Tax Identification Code :
4.
Exact name of issuer as
specified in its charter
:
Philtrust Bank
(Philippine Trust Company)
Province, Country of
Incorporation
:
Manila, Philippines
5.
034-000-541-102
6.
Industry Classification Code :
___________________
7.
Address of Principal Office :
Philtrust Bank Building
United Nations Avenue
corner San Marcelino Street,
Manila
8.
Telephone Number
(062) 524-90-61
9.
Former name, former address,
former fiscal year
:
10.
:
Not applicable
Securities registered pursuant to Sections 8 and 12 of the SRC:
The Bank's securities are exempt from registration.
11.
Are any or all of registrant's securities listed on a Stock Exchange?
The Bank's 1,000,000,000 total outstanding common shares are listed in the
Philippine Stock Exchange, Inc. (PSE).
1
12.
Check whether the issuer:
(a)
has filed all reports required to be filed by Section 17 of the SRC and SRC
Rule 17 thereunder and Sections 26 and 141 of The Corporation Code of the
Philippines during the preceding twelve (12) months (or for such shorter
period that the registrant was required to file such reports)?
Yes.
(b)
has been subject to such filing requirements for the past ninety (90) days?
No.
13.
State the aggregate value of the voting stock held by non-affiliates.
Not applicable.
2
I. BUSINESS
(A)
Description of Business
(1)
Business Development
Philtrust Bank, also known as Philippine Trust Company, was established on
October 21, 1916 and will celebrate its 99th anniversary this year. It is the second
oldest private commercial bank in the country. On June 5, 2007, the Bangko Sentral
ng Pilipinas granted Philtrust Bank authority to operate as a universal bank.
Throughout its 99 years in banking, Philtrust Bank has acquired a reputation
for conservatism and reliability and has enjoyed the trust and confidence of the
business community and the general public. With this policy as its guiding principle
throughout its banking history, the Bank has grown steadily since its establishment.
Philtrust Bank has been consistently rated as one of the most outstanding
banks in the country for its liquid position. It has not borrowed nor availed of any
rediscounting facility from the Bangko Sentral ng Pilipinas or other banks, instead it
has been a consistent lender to these institutions.
The principal office is located at Philtrust Bank Building, 1000 United Nations
Avenue corner San Marcelino Street, Manila. Aside from the Head Office, the Bank
has a network of fifty-eight (58) branches including the Santiago City Branch located
at Philtrust Building, Maharlika Highway corner Abueg Street, Santiago City, Isabela,
which opened on June 6, 2014, and Marikina City Branch located at Philtrust
Building, Sumulong Highway corner P. Burgos Street, Marikina City, which opened
on March 20, 2015.
The Bank looks forward to buying or leasing suitable locations in Metro
Manila and in other key cities and provinces to augment its 58 branches, 39 of which
are located in Metro Manila while 19 are in the provinces, and to optimize its market
presence and service availability felt in major financial, commercial and population
centers in the country. Greater emphasis is being given to regional operations and
financing of priority industries supportive of national economic growth.
The Bank does not anticipate any material reclassification, merger,
consolidation or purchase/sale of a significant amount of its assets outside the course
of its business.
Having officially listed on February 17, 1988, Philtrust Bank is one of the first
few banks that traded their shares in the then Manila Stock Exchange and Makati
Stock Exchange, presently known as the Philippine Stock Exchange, Inc. (PSE). Its
25th anniversary as a listed company was recognized in a fitting ceremony held at the
PSE trading floor on February 26, 2013 attended by its Chairman and President Dr.
Jaime C. Laya, Vice Chairmen Justice Josue N. Bellosillo and Basilio C. Yap,
Director Dr. Johnny C. Yap and Director/Corporate Secretary Martin B. Isidro, and
PSE Officers.
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(2)
Business of Issuer
The Bank offers domestic, international and trust services. Domestic services
include checking accounts, savings accounts, time deposits, money market
placements, business loans, transfer of funds and collections, remittances, securities
investments and safety deposit boxes. International transactions involve commercial
letters of credit, collections and remittances, foreign exchange, traveler’s checks and
FCDU transactions. Trust operations include trust placement, investment
management, estate administration/trustee of bond issues, savings and pension plan
administration, insurance trust, and acting as escrow agent and stock registrar and
transfer agent.
On June 5, 2007, the Bangko Sentral ng Pilipinas granted the Bank authority
to operate as a universal bank. The Securities and Exchange Commission approved
the registration of the Bank’s Amended Articles of Incorporation, with powers among
others, to engage in the business of expanded commercial banking as a universal
bank, to carry on the business of a trust company, exercise the powers of investment
houses as provided in pertinent laws and the power and authority to invest in the
equity of allied and non-allied corporations, businesses or undertakings, and to
perform such other acts and functions as may be permitted by law.
On October 14, 2014 and November 19, 2014, the BSP and SEC, respectively,
approved the extension of the Bank’s corporate life for another fifty (50) years from
and after October 21, 2016, thereby amending Article FOURTH of the Bank’s
Articles of Incorporation.
The establishment of Muralla Grande, Inc. as a wholly-owned subsidiary of
the Bank was approved by the Board of Directors on October 21, 2014. The
registration of its Articles of Incorporation and By-Laws was approved by SEC on
November 28, 2014.
The percentage of sales and net income of the Bank contributed by foreign
sales are as follows:
Details
Exchange Profits
Net Income
Percentage
2014
P34,456,597
P1,006,000,408
3.43
2013
P127,211,779
P1,357,021,712
9.37
2012
P21,866,398
P1,711,030,777
1.28%
The above-mentioned exchange profits/loss, net income and percentages
represent the consolidated sales of US Dollars, a significant percentage of which were
made to the Asian and European markets in that order.
In order to achieve better market access, the Bank has put up forty (40) on-site
Automated Teller Machines (ATM) distributed at its Head Office and branches and
eighteen (18) off-site ATMs as of December 31, 2014. The full computerization of all
branches will soon be in place.
4
These significant steps were taken by the Bank to serve the needs of its broadbased clientele.
The Bank’s principal competitors are the other universal and commercial
banks particularly those located within its vicinity.
The Bank's guiding principle which through the years has enabled the Bank to
effectively compete in the industry is principally anchored on conservatism,
efficiency and personalized service to its clients thereby gaining their trust,
confidence and continued patronage. It has proven to be an effective means of
generating more business and of making the Bank a worthy participant in the financial
community.
The Bank's operations have never been dependent on transactions with related
parties, or upon a single customer/client or a few customers/clients. No single
customer/client or group of clients accounts for twenty percent (20%) or more of the
Bank’s business operations.
Other than the licenses issued by the Bangko Sentral ng Pilipinas (BSP) and
the Securities and Exchange Commission (SEC), the Bank's operations do not depend
on any other patents, trademarks, copyrights, licenses, franchises, concessions or
royalties.
The Bank is not aware of any existing or probable governmental regulations
which will have a material effect on its business.
For the last three (3) fiscal years, the Bank has adequately invested on research
and development activities. The Directors and Key Officers have actively participated
in relevant seminars, trainings and conventions.
There was no matter submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended
December 31, 2014.
By year-end, manpower complement reached 745 consisting of 396 officers
and 349 rank-and-file employees. The Bank continues to pursue manpower
recruitment to effectively bring itself closer to clients by rendering efficient and
prompt services. Within the ensuing twelve (12) months, based on the number of new
branches that would be opened in 2015 and the previous years’ experience, the Bank
anticipates manpower to increase by at least 50 personnel for a projected total of 795,
consisting of 406 officers and 389 rank and file employees.
A collective bargaining agreement (CBA) was executed between the
Management and the Union on October 22, 2014 covering a five-year period from
January 1, 2015 to December 31, 2019.
5
The Bank maintains a plan for the retirement, death, disability and separation
of all its regular employees. The plan is being funded by the contributions of the
employees and the Bank.
The Bank gives a percentual bonus or profit sharing equivalent to ten percent
(10%) of the total yearly net profits of the Corporation before payment of income tax
which is distributed as follows: 4% to employees; 4% to officers and 2% to directors
as an incentive to them to help promote the business of the corporation. This is
provided for in the By-Laws.
Outstanding Warrants or Options
The Bank has no information on any outstanding warrant or option held by its
directors or officers.
Major Risks
As a conservatively managed institution, Bank Management believes that no
potential risk could affect the Bank’s liquidity or profitability. In particular, the loan
portfolio is sound and adequately secured. Available cash and assets are more than
sufficient to meet client requirements and other possible needs.
Risks from market, liquidity and credit considerations are constantly
monitored by management and the Board of Directors. These are kept to a minimum
with the establishment of prudent approval limits and careful day-to-day management
to ensure compliance with established controls and procedures and that target
performance levels are achieved and even exceeded.
Approved policy and procedure are constantly reviewed and strengthened,
involving legal, compliance, operations, operations/transactions processing, cash
accountability or management, accounting and financial, settlement, systems and
technology matters, with the aim of reducing to a minimum quantifiable and nonquantifiable risks.
Bank experience and the best practices of other institutions are routinely
evaluated as basis for improving the Bank’s risk management practices, including risk
objectives, policies, controls and reports, and detailed procedures.
6
(B)
Description of Property
Based on records, not a single Bank-owned building or lot is subject to
mortgage, lien or limitations on ownership or usage. The branch sites, whether owned
or leased, are all in good condition. Please refer to Annex “D” for the Description of
Bank Properties.
For the ensuing year 2015 or the next twelve (12) months, the Bank intends to
acquire by purchase or lease properties as future branch sites, located as follows:
1. Baguio City
2. Laoag City, Ilocos Norte
3. Sta. Rosa, Laguna
4. Puerto Princesa, Palawan
5. Tagum City
(C)
Legal Proceedings
Neither the Bank nor any of its properties is involved in any material legal
proceeding.
II. OPERATIONAL AND FINANCIAL INFORMATION
(A)
Market Price and Dividends on Registrant’s Common Equity and Related
Stockholder Matters
(1)
Market Information
The principal market of the Bank's equity is the Philippine Stock Exchange,
Inc. (PSE), where the Bank’s 1,000,000,000 common shares are listed. The market
price as of March 31, 2015 was P82.50 per share
(a)
Quarterly Sales Prices
2013
March 31
June 30
September 30
December 31
High
P72.00
72.00
72.00
82.00
Low
P72.00
72.00
72.00
82.00
2014
March 31
June 30
September 30
December 29
High
P82.00
82.00
82.05
95.00
Low
P82.00
82.00
82.05
95.00
7
(b)
The price information as of March 31, 2015 are as follows:
Open
P82.50
High
P82.50
Low
P82.50
Close
P82.50
Prev. Close
P82.50
No change has occurred since the last trading date of January 29, 2015
as published by PSE.
(2)
Holders
The Bank has an authorized capital stock of P22 Billion consisting
entirely of 2.2 Billion common shares with the par value of P10.00 per share. Paid-up
capital stands at P10 Billion. As of March 31, 2015, there are 72 holders of the
Bank’s 1,000,000,000 issued and outstanding shares, all of which are listed in the
Philippine Stock Exchange.
The Top Twenty Stockholders as of March 31, 2015 are as follows:
NAME OF STOCKHOLDER
1 PHILTRUST REALTY CORPORATION
2 U.S. AUTOMOTIVE CO., INC.
3 SEABREEZE ENTERPRISES, INC.
4 ORIENT ENTERPRISES, INC.
5 PIONEER INSURANCE & SURETY CORP.
6 MARKETSOURCE CORPORATION
7 PCD NOMINEE CORPORATION-FILIPINO
8 PIONEER LIFE, INC.
9 GAW, ROSALINDA Y.
10 TAN, TEODORA D.
11 PIONEER INTERCONTINENTAL INSURANCE
CORPORATION
12 PIONEER INSURANCE CO. RETIREMENT PLAN
13 YAP, BASILIO C.
14 GO, CARLOS S.
15 GO, ENRIQUE S.
16 GO, EUSEBIO S.
17 GO, VICTORIANO S.
18 CU, MIRIAM C.
19 GO, ARTURO S.
20 GO, DOMINADOR S.
8
TOTAL NUMBER
OF SHARES
SUBSCRIBED
AND PAID
269,000,014
209,873,774
194,746,709
184,783,230
70,950,694
20,077,690
19,019,161
8,031,881
6,946,221
4,321,814
2,697,384
1,411,116
1,369,722
683,352
683,352
683,352
683,352
548,881
536,920
536,920
%
26.9000
20.9874
19.4747
18.4783
7.0951
2.0078
1.9019
0.8032
0.6946
0.4322
0.2697
0.1411
0.1370
0.0683
0.0683
0.0683
0.0683
0.0549
0.0537
0.0537
(3)
Dividends
The Stockholders of the Bank, at their annual meeting held on April
26, 2011, approved, confirmed and ratified the declaration by the Board of
Directors on April 26, 2011 of stock dividend of Three Billion Three Hundred
Eighty Three Million Pesos (P3,383,000,000.00) worth of shares
(approximately 51.126%) out of the surplus profit of the Bank as of March 31,
2011, thereby increasing the paid-up capital from Six Billion Six Hundred
Seventeen Million Pesos (P6,617,000,000.00) to Ten Billion Pesos
(P10,000,000,000.00).
The Bangko Sentral ng Pilipinas (BSP) approved on June 30, 2011 the
foregoing stock dividend declaration and the Bank scheduled the payment date
on August 10, 2011.
On July 29, 2011, the Philippine Stock Exchange, Inc. (PSE) approved
to additionally list on August 10, 2011 the 338,300,000 common shares, with a
par value of P10.00 per share, to cover the 51.125887865% stock dividend
declaration to stockholders of record as of July 18, 2011.
There are no restrictions that would limit the ability of the Bank to pay
dividends on its common shares or likely to do so in the future.
(4)
Recent Sales of Securities
Date
January
29, 2015
Title
Amount
Common P4,125,000.00
To Whom Sold Terms
Marketsource
50,000 shares at
Corporation
P82.50 per share
The above data are based on PSE market quotations published in
major newspapers.
Following the standard PDTC lodgment and upliftment procedure, the
said transaction was recorded in the Bank’s Stock Transfer Book on February
24, 2015. No other sale transaction was recorded thereafter.
The latest issuance of securities constituting exempt transactions cover
the stock dividend declaration in April 2011 and the full payment of the
balance of subscription the issuance and listing of which were approved by the
PSE in April 2012.
9
III. FINANCIAL INFORMATION
(A)
Management's Discussion and Analysis or Plan of Operation
Please refer to Annexes “C1”, “C2” and “C3”.
(B)
Financial Statements
Please refer to Annexes “B” and “B1”
(C)
Changes in and disagreement with accountants on accounting and financial
disclosure
The stockholders, in their annual meeting held on April 29, 2014, authorized
and empowered the Board of Directors to appoint an external auditor who is duly
accredited by the Bangko Sentral ng Pilipinas and the Securities and Exchange
Commission to be the Bank’s external auditor for the year 2014.
Pursuant to the said authority, the Board, in its meeting on January 27, 2015,
approved the re-appointment of Maceda, Valencia & Co. (formerly Maceda Farnacio
& Co.), a BSP and SEC accredited auditing firm, as the Bank’s external auditor for
the year 2014.
In compliance with the SRC Rule 68 requiring the five-year rotation
of external auditors or engagement partners, Maceda Valencia and Co., has
assigned to the Bank an engagement partner who shall serve for not more than five
(5) years counted from the fiscal year 2013.
There had been no disagreement between the Bank and its external auditors,
Mercado Calderon Jaravata & Co. (MCJC) and Maceda Valencia and Co. (MVC),
concerning the respective years audited by them.
Representatives of Maceda Valencia and Co., the Bank’s external auditor for
the year 2014, are expected to be present at the Annual Stockholders’ Meeting on
April 28, 2015 and have the opportunity to make a statement, if they so desire,
regarding the 2014 Audited Financial Statements. They are likewise expected to be
available to respond to appropriate questions.
10
Information on Independent Accountant
The address of the Bank’s external auditor is as follows:
Maceda Valencia & Co.
Certified Public Accountants and
Management Consultants
Suite 705 Midland Mansions
839 A- Arnaiz Avenue, Makati City.
The aggregate fees billed for professional services rendered by MCJC and
MVC for the audit of the Bank’s annual financial statements or services that are
normally provided by the external auditors in connection with statutory and
regulatory filings or engagements are as follows:
SCHEDULE OF EXTERNAL AUDIT FEES AND SERVICES
MERCADO CALDERON JARAVATA & CO.
2012
Audit and Audit-Related
Fees (Retainer Fees and
Audit Engagement Fees)
2013
P 694,400.00
P336,000.00
P 56,000.00
-
-
-
351,841.81
8,400.00
130,932.16
P1,046,241.81
P344,400.00
P186,932.16
Tax Fees
All Other Fees
(Reimbursements of
various Audit-Related
Expenses)
Total
2014
11
MACEDA VALENCIA & CO.
2012
2013
2014
Audit and Audit-Related
Fees (Retainer Fees and
Audit Engagement Fees)
-
-
P1,524,000.00
Tax Fees
-
-
-
-
-
-
-
-
P1,524,000.00
All Other Fees
(Reimbursements of
various Audit-Related
Expenses)
Total
The scope of services to be rendered by the external auditor as well as the fees
to be charged therefor were previously considered and approved by the Board’s Audit
Committee composed of the following Directors, to wit:
Ernesto O. Chan
Dr. Johnny C. Yap
Tomas V. Apacible
-
Chairman (Independent Director)
Member
Member (Independent Director)
Mr. Ernesto O. Chan, an independent director, is the Chairman of the Board’s
Audit Committee as required under SEC Circular No. 6, Series of 2004.
The Chairman and members of the said Committee attended the last two (2)
Annual Meetings of the Stockholders.
Audit Committee’s Approval Policies and Procedures on Dealings with External
Auditors
The Audit Committee shall assist the Board of Directors in fulfilling its
oversight responsibilities for (1) the integrity of the company’s financial statements,
(2) the company’s compliance with legal and regulatory requirements, (3) the
independent auditor’s qualifications and independence, and (4) the performance of the
company’s internal audit function and independent auditors.
It shall have the authority to conduct or authorize investigations into any
matter within its scope of responsibility, to wit:
12
1. Appoint, compensate, and oversee the work of the public accounting firm
employed by the organization to conduct the annual audit. This firm will
report directly to the audit committee.
2. Resolve any disagreement between management and the auditor regarding
financial reporting.
3. Pre-approve all auditing and permit non-audit services performed by the
company’s external audit firm.
4. Retain independent counsel, accountants, or others to advise the committee
or assist in the conduct of an investigation.
5. Seek any information it requires from employees – all of whom are
directed to cooperate with the committee’s requests – or external parties.
6. Meet with company officers, external auditors, or outside counsel, as
necessary.
7. The committee may delegate authority to subcommittees, including the
authority to pre-approve all auditing and permit no-audit services,
provided that such decisions are presented to the full committee at its next
scheduled meeting.
IV.
(A)
MANAGEMENT AND CERTAIN SECURITY HOLDERS
Directors and Executive Officers as of March 31, 2015:
(1)
Hereunder are the incumbent Directors of the Bank. Please refer to Annex “A”
hereto attached for their qualifications and business affiliations:
Name
1. Dr. Jaime C. Laya
2. Senior Justice Josue N. Bellosillo (Ret.)
3. Basilio C. Yap
4. Dr. Emilio C. Yap III
5. Ernesto O. Chan
6. Tomas V. Apacible
7. Chief Justice Hilario G. Davide, Jr. (Ret.)
8. Jose M. Fernandez
9. Miriam C. Cu
10. Dr. Johnny C. Yap
11. Atty. Francis Y. Gaw
Position
Age Citizenship
Chairman
Vice Chairman
Vice Chairman
Vice Chairman
Independent Director
Independent Director
Independent Director
Director
Director
Director
Director
76
81
65
43
68
69
79
72
56
42
67
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
*Cognizant of SEC Memorandum Circular No. 9, Series of 2011, the five-year term
limit of Independent Directors Chan and Apacible shall be reckoned from their
election as such starting April 17, 2012, while that of Chief Justice Davide (Ret.)
shall be from April 30, 2013.
13
Length of Service
More than 5 years
More than 5 years
More than 5 years
More than 5 years
More than 5 years*
April 27, 2010-Present*
April 30, 2013-Present*
More than 5 years
More than 5 years
April 25, 2012-Present
June 30, 2014-Present
Independent Directors Chan, Apacible and Davide possess all the
qualifications and none of the disqualifications for an independent director under
SRC Rule 38.
As in the past, the Bank adopts and complies with the Requirements on
Nomination and Election of Independent Directors under SRC Rule 38.
No one of the Bank’s three (3) independent directors had served the Bank as
independent director for more than five (5) consecutive years counted from their
election in 2012 in compliance with SEC Memorandum Circular No. 9, Series of
2011.
Senior Justice Josue N. Bellosillo nominated them to the said positions as
recommended by the Board’s Nomination, Election and Compensation Committee.
Senior Justice Bellosillo is not related to any of them.
Pursuant to the SEC Notice dated October 20, 2006, the Certifications on the
Qualification of Independent Directors Chan, Apacible and Davide are hereto
attached as Annexes “A1”, “A2” and “A3”, respectively.
No one of the incumbent directors currently holds government position, or is
connected with the government.
At its Organizational Meeting held on May 27, 2014, the Board elected/reappointed the following corporate/executive officers for the year 2014-2015 and until
their successors are duly elected and qualified, to wit:
Name
1. Dr. Jaime C. Laya
2. Senior Justice Josue N.
Bellosillo (Ret.)
3. Basilio C. Yap
1. Dr. Emilio C. Yap III
5. Atty. Martin B. Isidro
6. Atty. Agnes B. Urbano
7. Virginia S. Choa-Shi
8. Paterno C. Bacani, Jr.
9. Benito D. Chua
10. Atty. Jacquelin S.
Tugonon
Position
Age
Citizenship
Chairman of the Board
and President (Former
Chairman, Monetary Board
and Governor, Central
Bank of the Philippines)
Vice Chairman of the Board
and Corporate Counsel
(Former Senior Justice of
the Supreme Court)
Vice Chairman of the Board
Vice Chairman of the Board
Corporate Secretary and
Asst. Corporate Counsel
Asst. Corporate Secretary
and Asst. Corporate Counsel
Executive Vice President
Executive Vice President
VP/Treasurer
VP/Compliance Officer
76
Filipino
81
Filipino
65
43
85
Filipino
Filipino
Filipino
53
Filipino
59
64
59
41
Filipino
Filipino
Filipino
Filipino
14
All the above officers have been corporate/executive officers of the Bank for
more than five (5) years. Please refer Annex “A” hereto attached for their
qualifications and business affiliations.
No one of the above officers has any substantial interest, direct or indirect, in
any matter to be acted upon by the stockholders.
No one of the incumbent officers currently holds government position, or is
connected with the government.
At the said Organizational Meeting, the Chairman and Members of the various
Board and Management Committees were likewise elected for a term of one (1) year
effective June 2, 2014 and until their successors are duly elected and qualified.
The Board’s Nomination, Election and Compensation Committee is composed
of the following:
Senior Justice Josue N. Bellosillo (Ret.)
Basilio C. Yap
Ernesto O. Chan
-
Chairman
Member
Member
(Independent Director)
The Chairman and members of the said Committee attended the last two (2)
Annual Meetings of the Stockholders.
For the ensuing year, the nominees for the positions of the eleven (11)
Directors of the Bank were formally nominated and endorsed by the Nomination,
Election and Compensation Committee to the Board of Directors.
In compliance with the requirements of the Bangko Sentral ng Pilipinas on the
minimun number of independent directors, Senior Justice Josue N. Bellosillo (Ret.),
Chairman of the said Committee, nominated three (3) independent directors, namely:
Ernesto O. Chan, Tomas V. Apacible and former Chief Justice Hilario G. Davide, Jr.
All of them possess all the qualifications and none of the disqualifications for an
independent director as required under SRC Rule 38. Chief Justice Davide currently
serves as an independent director of the Manila Bulletin Publishing Corporation.
Senior Justice Bellosillo is not related to any of the nominees for the positions
of independent directors.
The said Committee, in approving the nomination of the independent
directors, has taken into consideration, adopted and complied with the guidelines and
procedures prescribed under SRC Rule 38 (Requirements on Nomination and
Election of Independent Directors).
15
No one of the nominees for independent director had served the Bank as
independent director for more than five (5) consecutive years counted from their
election in 2012 in compliance with SEC Memorandum Circular No. 9, Series of
2011.
Hereunder are the nominees for the positions of the eleven (11) Directors of
the Bank for the ensuing year 2015-2016, all of whom are incumbent and with no one
of them declining his/her nomination:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Dr. Jaime C. Laya
Senior Justice Josue N. Bellosillo (Ret.)
Basilio C. Yap
Dr. Emilio C. Yap III
Chief Justice Hilario G. Davide, Jr. (Ret.), Independent Director
Ernesto O. Chan, Independent Director
Tomas V. Apacible, Independent Director
Jose M. Fernandez
Miriam C. Cu
Dr. Johnny C. Yap
Atty. Francis Y. Gaw
Please refer to Annex “A” for the business affiliations of the above nominees
for directors of the Bank and Annexes “A1”, “A2” and “A3”, for the Certifications on
Qualification of the nominees for Independent Directors.
No one of the above nominees for directors of the Bank has any substantial
interest, direct or indirect, in any matter to be acted upon by the stockholders other
than their election as directors of the Bank.
No one of the above nominees for directors of the Bank currently holds
government position, or is connected with the government.
The Bank’s corporate and executive officers for the ensuing year 2015-2016
will be elected by the Board of Directors in its organizational meeting to be held on a
later date. The incumbent officers are expected to be re-elected/re-appointed to their
respective positions with no one signifying his/her intention to decline the same.
Significant Employees
The Bank does not expect a significant contribution to its business from
employees who are not its corporate or executive officers.
16
Family Relations
Siblings Vice Chairman Dr. Emilio C. Yap III and Director Dr. Johnny C.
Yap are nephews of Vice Chairman Basilio C. Yap and Director Atty. Francis Y.
Gaw.
Involvement in Certain Legal Proceedings
The Bank has no knowledge that any of its directors and/or executive officers
is a party to, or any of their properties is subject of, a pending material legal
proceeding which occurred within the past 5 years.
(B)
Executive Compensation
Summary of Compensation
Name/Principal Position
Dr. Jaime C. Laya
Chairman of the Board and
President
Year
Salary
Bonus
Others
2015**
7,060,000.00
2,390,000.00
7,430,000.00
2014
6,885,461.61
2,361,920.55
10,932,190.97
2013
4,620,000.00
1,492,666.67
5,691,260.74
2015**
290,000,000.00
98,000,000.00
94,000,000.00
2014
275,165,552.35
95,322,407.88
138,107,995.53
2013
250,887,352.74
89,688,529.68
150,968,823.90
Ciriaco M. Dator*
EVP/Compliance Officer
Virginia S. Choa-Shi
Executive Vice President
Paterno C. Bacani, Jr.
Executive Vice President
Atty. Martin B. Isidro
SVP/Corporate Secretary
Jose M. Fernandez
SVP/Director
All Directors and Officers
As a group
_______________________________
*Retired effective May 31, 2013
**Estimated Compensation.
Each Director receives a per diem of P10,000.00 for his attendance in every
Board meeting. The Directors who are members of the Executive Committee receive
an additional per diem of P5,000.00 each for their attendance in Committee meeting.
There is no standard arrangement that would directly or indirectly compensate
the Bank’s Directors, other than their per diems and the allocated profit-sharing as
provided for in the By-Laws.
17
(C)
Security Ownership of Certain Record and Beneficial Owners and Management
as of March 31, 2015:
Title
of Class
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Name, Address
of Record Owner
and Relationship
to Issuer
Name of Beneficial
Owner and Relationship
to Record Owner
Citizenship
No. of
Shares
Held
Philtrust Realty Corp.
P.O. Box 1848,
Manila
Major Stockholder
U.S. Automotive Co., Inc.
Major Stockholder
Filipino
269,000,014 26.9000%
U.S. Automotive Co.,
Inc.
P.O. Box 3399,
Manila
Major Stockholder
Estate of Emilio T. Yap
Major Stockholder
Seabreeze
Enterprises, Inc.
P.O. Box 4279,
Manila
Major Stockholder
Basilio C. Yap
Nena Cheng Yap
Major Stockholders
Orient Enterprises,
Inc.
P.O. Box 3435,
Manila
Major Stockholder
Rosalinda Y. Gaw
Miriam C. Cu
Major Stockholders
Pioneer Insurance &
Surety Corporation
P.O. Box 1437 MCC,
Makati
Major Stockholder
Pioneer Inc.
Major Stockholder
Percent
Petronila M. Pasimanero
Authorized Representative
Filipino
209,873,774 20.9874%
Filipino
194,746,709 19.4747%
Filipino
184,783,230 18.4783%
Filipino
70,950,694 7.0951%
Basilio C. Yap
Authorized Representative
Purificacion M. Cipriano
Authorized Representative
Francis Y. Gaw
Authorized Representative
Ernesto O. Chan
Authorized Representative
18
(2)
Security Ownership of Management as of March 31, 2015:
DIRECTORS
Title of
Class
Name of Beneficial Owner
Common
Shares
Common
Shares
1. Dr. Jaime C. Laya
(Chairman and President)
2. Sr. Justice Josue N. Bellosillo (Ret.)
(Vice Chairman and Corporate
Counsel)
3. Basilio C. Yap
(Vice Chairman)
4. Dr. Emilio C. Yap III
(Vice Chairman)
5. Ernesto O. Chan
(Independent Director)
6. Tomas V. Apacible
(Independent Director)
7. Chief Justice Hilario G.
Davide, Jr. (Ret.)
(Independent Director)
8. Jose M. Fernandez
(Senior Vice President)
9. Miriam C. Cu
(Senior Vice President)
10. Dr. Johnny C. Yap
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Common
Shares
Common
Shares
11. Atty. Francis Y. Gaw*
Amount and Nature
of Beneficial
Ownership
P 333,250 Direct
Citizenship
Percent
of Class
Filipino
0.0033%
15,120 Direct
Filipino
0.0002%
13,697,220 Direct
Filipino
0.1370%
1,101,360 Direct
Filipino
0.0110%
175,660 Direct
Filipino
0.0018%
15,120 Direct
Filipino
0.0002%
10,000 Direct
Filipino
0.0001%
4,400 Direct
Filipino
0.0000%
5,488,810 Direct
Filipino
0.0549%
20,000 Direct
Filipino
0.0002%
105,190 Direct
Filipino
0.0011%
*Replaced Atty. Martin B. Isidro who voluntarily resigned as Director effective June 30, 2014.
OFFICERS
Title of
Class
Common
Shares
Common
Shares
Name of Beneficial
Owner
Amount of Beneficial
Ownership
Atty. Martin B. Isidro
(Senior Vice President
Corporate Secretary and
Asst. Corp. Counsel)
Virginia S. Choa-Shi
(Executive Vice President)
19
P3,202,090 Direct
P5,050
Direct
Citizenship
Percent
of Class
Filipino
0.0320%
Filipino
0.0000%
DIRECTORS AND OFFICERS AS A GROUP
Common
Shares
P24,173,270.00
0.2417%
=================
=========
Voting Trust Holders of 5% or more
The Bank has no voting trust holders.
Change in control since the beginning of the last fiscal year
No change in control has occurred since January 1, 2014.
(D)
Certain Relationships and Related Transactions
The Bank does not have a parent company and does not have any transaction
with promoters.
The Bank’s subsidiary, Muralla Grande Inc., was established on November 28,
2014. Its primary purpose, among others, is to invest in, acquire or dispose of real and
personal properties.
It has an authorized capital stock of P100 Million Pesos divided into
100,000,000 shares with the par value of P1.00 per share. Total subscription is P25
Million, while the paid-up capital is P18 Million.
Its stockholders and directors are as follows:
Name/Position
Nationality
1. Philtrust Bank
Filipino
2. Dr. Jaime C. Laya
Filipino
Chairman
3. Basilio C. Yap
Filipino
Director
4. Sr. Justice Josue N. Bellosillo (Ret.) Filipino
Director/Corporate Counsel
5. Dr. Emilio C. Yap III
Filipino
Director/President
6. Miriam C. Cu
Filipino
Director/Treasurer
TOTAL
20
Amount Subscribed
Amount Paid
P24,999,995.00
1.00
P17,999,995.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
P25,000,000.00
P18,000,000.00
===========
===========
The Bank had not undertaken any transaction during the last two (2) years
involving directly the material interest of any director, executive officer or
stockholder owning ten percent (10%) or more of total issued and outstanding shares,
and members of their immediate family. The Bank, however, in the ordinary course
of business, has transactions with related parties.
Parties are considered related if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in
making financial and operating decisions. Parties are also considered to be related if
they are subject to common control or common significant influence.
As indicated in the Notes to Financial Statements, the Bank’s transactions
with related parties such as Centro Escolar University, Euro-Med Laboratories Phil.,
Inc. Manila Bulletin Publishing Corporation, Café France Corporation, Cocusphil
Development Corporation and Muralla Grande Inc. consisted mostly of lease,
investment in shares of stock, savings and current deposits, advertising services and
advances to a subsidiary.
These transactions were made in the ordinary course of business and on
substantially the same terms as those prevailing at the time for comparable
transactions with other parties. These transactions also did not involve more than the
normal risk of collectability or present other unfavorable condition. They were duly
approved by the Board of Directors and where applicable, reported to the Bangko
Sentral ng Pilipinas.
(E)
Corporate Governance
Please refer to the Annual Corporate Governance Report (ACGR) and the
Secretary’s Certification on the Consolidated Changes thereto for the year 2014,
hereto attached as Annex “E”.
(F)
Current Reports (SEC Form 17-C)
Please refer to as Annex “F” hereto attached.
21
Annex “A”
BUSINESS EXPERIENCE OF DIRECTORS AND OFFICERS
(As of February 28, 2015)
Name
Address
Title
Corporation/Affiliation*
Profession/Occupation
1. Dr. Jaime C. Laya
76 years old
Filipino
11 Panay Avenue
Quezon City
Chairman and President
Former Governor
Former Chairman
Philtrust Bank
Central Bank of the Philippines, 1981- 1984
Monetary Board, Central Bank of the Philippines,
1981-1984
Don Norberto Ty Foundation, Inc.
Muralla Grande Inc. (November 28, 2014-Present)
Ph.D. - Financial Management
CPA
Chairman
Chairman
2. Senior Justice Josue N.
Bellosillo (Ret.)
81 years old
Filipino
13 Doña Ines,
Alabang Hills Village,
Muntinlupa City
Director
Philippine Ratings Services Corporation
Philippine AXA Life Insurance Co., Inc.
GMA Network, Inc. and GMA Holdings, Inc.
Ayala Land, Inc., 2010-present
Calata Corporation, 2011-present
Philippines-Mexico Business Council
Manila Polo Club, Inc.
Trustee
Cultural Center of the Philippines, 2010-present
Cofradia de la Inmaculada Concepcion
Heart Foundation of the Philippines, Inc.
Opera Guild of the Philippines
CIBI Foundation, Inc.
St. Paul’s University-Quezon City
Fundacion Santiago, Inc.
Metropolitan Museum of Manila
De La Salle University-Taft
Yuchengco Museum
Society for Cultural Enrichment, Inc., 2010-present
Vice Chairman
Corporate Counsel
Dean
Philtrust Bank
Philtrust Bank
Centro Escolar University-School of Law
and Jurisprudence
Director/
Corporate Counsel
Muralla Grande Inc. (November 28, 2014-Present)
Former Senior Justice
Supreme Court of the Philippines
*Current positions held for more than five (5) years unless otherwise indicated.
1
Lawyer
Name
Address
Title
Corporation/Affiliation*
Profession/Occupation
3. Basilio C. Yap
65 years old
Filipino
1000 United Nations Ave.
Manila
Vice Chairman
Chairman/President
Chairman/President
Chairman/President
Chairman
Chairman
Chairman
Chairman/President
Chairman/President
Chairman/President
Vice Chairman
Director
Philtrust Bank
Seabreeze Enterprises, Inc.
U.S. Automotive Co., Inc.
Philtrust Realty Corporation
Manila Hotel Corporation
Manila Bulletin Publishing Corp.
Centro Escolar University
Usautoco, Inc.
Manila Prince Hotel Corp.
Cocusphil Development Corporation
Euro-Med Laboratories Phil., Inc.
Muralla Grande Inc. (November 28, 2014-Present)
MBA / CPA
4. Dr. Emilio C. Yap III
43 years old
Filipino
1020 United Nations Ave.
corner San Marcelino St.
Manila
Vice Chairman
Vice Chairman/EVP
Chairman
Director/President
Director
Director
Director/Vice President
Director/Asst. Treasurer/
Asst. Corp. Sec.
Director/Vice President
Director
Director
Independent Director**
Chairman/Treasurer/SVP
Chairman
Director
Director/Treasurer
Director/Treasurer
Independent Director**
Former Congressman
Adviser
Fellow
Philtrust Bank
Manila Bulletin Publishing Corporation
Manila Prime Land Holdings, Inc.
Muralla Grande Inc. (November 28, 2014-Present)
Manila Hotel Corporation
Centro Escolar University
U.S. Automotive Co., Inc.
Usautoco, Inc.
Business Executive
Doctor of Philosophy
in Journalism
Honoris Causa
Doctor of Philosophy
in Business Administration
Honoris Causa
5. Ernesto O. Chan
68 years old
Filipino
60 Dapitan Street
Quezon City
6. Tomas V. Apacible
69 years old
Filipino
20 Lily corner Camia St.
Valle Verde II
Pasig City
Philtrust Realty Corporation
Cocusphil Development Corporation
Euro-Med Laboratories Phil., Inc.
Philtrust Bank
Pioneer Insurance and Surety Corp.
Pioneer Intercontinental Insurance Corp.
Pioneer Life, Inc.
Bancasia Financial and Investment Corp.
Bancasia Capital Corp.
Philtrust Bank (April 27, 2010 – Present)
Batangas, First District (June 2010 – June 2013)
Philippine Cancer Society (July 2013-Present)
Institute of Corporate Directors (July 2013-Present)
*Current positions held for more than five (5) years unless otherwise indicated.
**Per SEC Memorandum Circular No. 9, Series of 2011, the five-year term of independent directors shall be counted from their election in 2012.
2
Business Executive
MBA
Name
Address
Title
Corporation/Affiliation*
Profession/Occupation
7. Chief Justice Hilario G.
Davide, Jr. (Ret.)
79 years old
Filipino
2 H.C. Moncado Street
BF Homes, Quezon City
Independent Director
Independent Director/
Vice Chairman
Former Chief Justice
Chairman
Philtrust Bank (April 30, 2013-Present)
Manila Bulletin Publishing Corporation (2011-Present)
Lawyer
Member
Supreme Court of the Philippines
Kompass Credit and Financing Corporation
(2014-Present)
Chief Justice Claudio Teehankee Memorial
Foundation, Inc. (2013-Present)
Knights of Columbus Fraternal Association of the
Philippines, Inc. (KCFAPI) (2014-Present)
Keys Realty Development Corporation (2014-Present)
University of San Carlos, Cebu City (Sept. 2014-Present)
Foundation of Liberty and Prosperity (2013-Present)
Knights of Columbus Fr. George J. Willmann, SJ
Charities, Inc. (2013-Present)
Knights of Columbus of the Philippines Foundation, Inc.
(2013-Present)
Knights of Rizal-Council of Elders
Chairman
Vice Chairman
Director
Trustee
Trustee
Trustee
Trustee
8. Jose M. Fernandez
72 years old
Filipino
36 Leo St., Veraville
Homes I, Almanza
Las Piñas
Director
Senior Vice President
Chief Risk Officer
Philtrust Bank
Philtrust Bank
Philtrust Bank
CPA/MBA
9. Miriam C. Cu
56 years old
Filipino
36 4th Street
Quezon City
Director
Senior Vice President
Director
Vice President
Director/Vice President
Director
Director/Treasurer
Philtrust Bank
Philtrust Bank
Orient Enterprises, Inc.
Brightworld Int’l Trading, Inc.
Seabreeze Enterprises, Inc.
Cu Unjieng Realty, Inc.
Muralla Grande Inc. (November 28, 2014-Present)
CPA
10. Dr. Johnny C. Yap
42 years old
Filipino
1020 United Nations Ave.
Manila
Director
Director/CFO
Director/CFO
Director/CFO
Director/CFO
Chairman
Director
Philtrust Bank (April 25, 2012-Present)
Euro-Med Laboratories Phil., Inc.
Centro Escolar University
Manila Prime Land Holdings, Inc.
Maynila Properties & Management Inc.
Café France, Inc.
Cocusphil Development Corporation
Business Executive
Doctor of Humanitites
Honoris Causa
*Current positions held for more than five (5) years unless otherwise indicated.
3
Name
Address
Title
Corporation/Affiliation*
Profession/Occupation
11. Atty. Francis Y. Gaw
67 years old
Filipino
1637 Agoncillo Street,
Malate, Manila
Director
Director/Vice President
Chairman/President
Chairman/President
Director/Corp. Secretary
Director/Corp. Secretary
Director
Director
Director
Director
Director
Solo Practitioner
Philtrust Bank (June 30, 2014-Present)
Orient Enterprises, Inc.
Goldclass Inc.
Royal Bay Terrace Condominium Corporation
Manila Hotel Corporation
Manila Bulletin Publishing Corporation
Phil-Progress Securities Corp.
Manila Prince Hotel Corporation
U.N. Properties Development Corporation
MH F&B Ideas Inc.
Euro-Med Laboratories Phil., Inc.
Gaw Law Office
Lawyer
CPA
Ph.D.
*Current positions held for more than five (5) years unless otherwise indicated.
4
Name
Address
Title
Corporation/Affiliation*
Profession/Occupation
Atty. Martin B. Isidro
85 years old
Filipino
1513 Velasquez, Tondo
Manila
Corporate Secretary
Asst. Corporate Counsel
Corp. Information Officer
Senior Vice President
Director
Philtrust Bank
Philtrust Bank
Philtrust Bank
Philtrust Bank
Philtrust Bank (December 1, 2003-April 30, 2013;
April 29, 2014-June 30, 2014)
Philtrust Bank (January 2, 2002-July 1, 2007)
City of Manila
Lawyer
Philtrust Bank
Banker
Virginia S. Choa-Shi
59 years old
Filipino
Paterno C. Bacani, Jr.
64 years old
Filipino
Vice President
Former Congressman,
Vice-Mayor, and
Councilor
89-E Circumferential Road Executive Vice President
Araneta Vill., Malabon
10 Dama De Noche St.
Tahanan Village
Parañaque City
Executive Vice President
Director
Philtrust Bank
RTG & Company, Inc.
Banker
Business Executive
Atty. Agnes B. Urbano
53 years old
Filipino
U-1125 Vito Cruz Twr 2
720 Pablo Ocampo
Malate, Manila
U-327 Olivarez Cond.,
Juanita de Leon Street
Brgy. San Dionisio
Parañaque City
34 Havana St., BF Homes,
Phase III, Parañaque City
Philtrust Bank
Philtrust Bank
Philtrust Bank
Muralla Grande Inc. (December 2, 2014-Present)
Philtrust Bank
Philtrust Bank
Lawyer
Benito D. Chua
59 years old
Filipino
Asst. Corporate Secretary
Asst. Corporate Counsel
Vice President
Corporate Secretary
Treasurer
Vice President
Compliance Officer
Vice President
Former Asst. Vice
President
Philtrust Bank (June 3, 2013-Present)
Philtrust Bank (June 3, 2013-Present)
Legal Department, Philtrust Bank
Lawyer
Atty. Jacquelin S. Tugonon
41 years old
Filipino
*Current positions held for more than five (5) years unless otherwise indicated.
5
Banker
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting Entity
Philtrust Bank (Philippine Trust Company) (the “Parent Bank”) is one of the oldest private
commercial banks in the Philippines. Founded on October 21, 1916, the Bank’s history
parallels the growth of the Philippine banking system.
The Parent Bank was conferred full universal bank status on June 5, 2007. Its principal
activities are commercial and investment banking. It offers domestic, international and trust
services. Its domestic services are: savings, checking and time deposits, money market
placements, business loans, remittances, fund transfer, safety deposit services and securities
investments. International transactions include: travelers cheque, foreign exchange, Foreign
Currency Deposit Unit (FCDU) transactions, commercial letters of credit, international
remittances and collections through a network of 57 local branches.
The Parent Bank has its primary listing on the Philippine Stock Exchange, Inc. (PSE).
In order to achieve better market access, the Parent Bank has put up 57 automated teller
machines (ATMs): 40 on-site distributed at its head office and branches and 17 off-site as at
December 31, 2014.
The Parent Bank also provides investments management, estate administration, escrow
services, administration of savings, insurance and pension plans, stock registry and transfer
services.
On November 27, 2014, the Parent Bank established Muralla Grande, Inc. (MGI), as a whollyowned subsidiary. MGI is primarily engaged in the real estate acquisitions and development.
As at December 31, 2014, the MGI has not yet started its commercial operations.
The financial position and results of operations of the Parent Bank and its subsidiary
(collectively referred to as the “Group”) are consolidated in these financial statements.
The Parent Bank’s principal office is located at 1000 United Nation Avenue corner San
Marcelino St., Manila. It has 745 employees as at December 31, 2014 (2013 - 718 employees)
The subsidiary referred to in the accompanying consolidated financial statements and its
registered business activities and other information are discussed in Note 3.
These consolidated financial statements were approved and authorized for issuance by the
Board of Directors (BOD) on March 24, 2015.
2. Basis of Preparation
Statement of Compliance
The consolidated financial statements of the Group have been prepared in accordance with
Philippine Financial Reporting Standards (PFRS), which includes all applicable PFRS,
Philippine Accounting Standards (PAS), and interpretations issued by the Philippine
Interpretations Committee (PIC), Standing Interpretations Committee (SIC), and International
Financial Reporting Interpretations Committee (IFRIC), as approved by the Financial Reporting
Standards Council (FRSC) and adopted by the SEC.
These consolidated financial statements are the Group’s first consolidated financial statements.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Basis of Measurement
These consolidated financial statements have been prepared under the historical cost
convention, as modified by the revaluation of available-for-sale (AFS) investments.
Functional and Presentation Currency
These consolidated financial statements are presented in Philippine peso, which is the
functional and presentation currency of the Group. All values are rounded off to the nearest
thousands, except as otherwise indicated.
Presentation of Financial Statements
The Group presents its consolidated statements of financial position broadly in order of
liquidity.
Use of Estimates and Judgments
The preparation of the consolidated financial statements requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and
reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates.
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 and in any
future periods affected.
In particular, information about significant areas of estimation uncertainty and critical
judgments in applying accounting policies that have the most significant effect on the amounts
recognized in the consolidated financial statements are in Note 4.
3. Significant Accounting Policies
Adoption of New and Revised Standards, Amendments to Standards and Interpretations
The Financial Reporting Standards Council approved the adoption of new and revised
standards, amendments to standards, and interpretations issued by the PIC and IFRIC as part of
PFRS.
Amendments to Standards and New Interpretation adopted in 2014.
The following amendments to standards have been adopted by the Group effective
January 1, 2014 and may have a material impact on the Group:

PAS 32 (Amendment), Financial Instruments: Presentation - Asset and Liability Offsetting.
These amendments are to the application guidance in PAS 32, Financial Instruments:
Presentation, and clarify some of the requirements of offsetting financial assets and financial
liabilities on the statements of financial position.

PAS 36 (Amendment), Impairment of Assets - Recoverable Amount Disclosures for
Non-financial Assets. This amendment removed certain disclosures of the recoverable
amount of cash-generating units (CGUs) which had been included in PAS 36 by the issue of
PFRS 13.
-2-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

PFRS 10, 12, and PAS 27 (Amendment), Consolidation for Investment Entities. These
amendments mean that many funds and similar entities will be exempt from consolidating
most of their subsidiaries. Instead, they will measure them at fair value through profit or
loss. The amendments give an exception to entities that meet an ‘investment entity’
definition and which display particular characteristics. Changes have also been made in
PFRS 12 to introduce disclosures that an investment entity needs to make.
The Group also adopted all other issued and effective new and revised standards, amendments
to standards, and interpretations issued by the PIC and IFRIC beginning January 1, 2014,
which have no material impact to the consolidated financial statements.
New Standards and Amendments to Standards Not Yet Adopted
The following are the new and revised standards, and amendments to standards which are
issued but not yet effective for the year ended December 31, 2014 and have not been applied
in preparing the consolidated financial statements:
Effective July 1, 2014:

2012 Annual improvements. These annual improvements amend standards from the
2010- 2012 reporting cycle. It includes changes to:

-
PFRS 3, ‘Business Combinations’ and clarifies that an obligation to pay contingent
consideration which meets the definition of a financial instrument is classified as a
financial liability or equity, on the basis of the definitions of PAS 32, ‘Financial
Instruments: Presentation’. It also clarifies that all non-equity contingent consideration is
measured at fair value at each reporting date, with changes in value recognized in profit
or loss.
-
PFRS 8, ‘Operating Segment’ which is amended to require disclosure of the judgments
made by management in aggregating operating segments. It is also amended to require a
reconciliation of segment assets to the entity’s assets when segment assets are reported.
-
PFRS 13, ‘Fair Value’ which amended the basis of conclusions to clarify that it did not
intend to remove the ability to measure short term receivables and payables at invoice
amounts where the effect of discounting is immaterial.
-
PAS 16,’Property, Plant and Equipment’ and PAS 38,’Intangible Assets’ are amended to
clarify how the gross carrying amount and the accumulated depreciation are treated
where an entity uses the revaluation model.
-
PAS 24,’Related Party Disclosures’ is amended to include, as a related party, an entity
that provides key management personnel services to the reporting entity or to the parent
of the reporting entity (the ‘management entity’). Disclosure of the amounts charged to
the reporting entity is required.
2013 Annual improvements. These annual improvements amend standards from the
2011- 2013 reporting cycle. It includes changes to:
-
PFRS 3’ Business Combinations’ is amended to clarify that PFRS 3 does not apply to the
accounting for the formation of any joint venture under PFRS 11.
-
PFRS 13,’Fair Value Measurement’ is amended to clarify that the portfolio exception in
PFRS 13 applies to all contracts (including non-financial contracts) within the scope of
PAS 39 or PFRS 9.
-3-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-

PAS 40, ‘Investment Property’ is amended to clarify that PAS 40 and PFRS 3 are not
mutually exclusive. PAS 40 assists users to distinguish between investment property and
owner-occupied property. Preparers also need to consider the guidance in PFRS 3 to
determine whether the acquisition of an investment property is a business combination.
PAS 19, ‘Employee Benefits’ (Amendment). The amendment applies to contributions from
employees or third parties to defined benefit plans and clarifies the treatment of such
contributions. The amendment distinguishes between contributions that are linked to service
only in the period in which they arise and those linked to service in more than one period.
The objective of the amendment is to simplify the accounting for contributions that are
independent of the number of years of employee service, for example employee contributions
that are calculated according to a fixed percentage of salary. Entities with plans that require
contributions that vary with service will be required to recognize the benefit of those
contributions over employee’s working lives.
Effective January 1, 2016:

PAS 16, ‘Property, plant and equipment’ and PAS 38, ‘Intangible assets’ issued in
May 2014. This amendment clarifies that the use of revenue-based methods to calculate the
depreciation of an asset is not appropriate because revenue generated by an activity that
includes the use of an asset generally reflects factors other than the consumption of the
economic benefits embodied in the asset.

PAS 27, ‘Separate Financial Statements’, the amendment allow entities to use the equity
method to account for investments in subsidiaries, joint ventures and associates in their
separate financial statements.

PFRS 10, ‘Consolidated Financial Statements’ and PAS 28, ‘Investments in Associates’, the
amendment address an inconsistency between PFRS 10 and PAS 28 in the sale or
contribution of assets between an investor and its associate or joint venture. A full gain or loss
is recognised when a transaction involves a business. A partial gain or loss is recognized
when a transaction involve assets that do not constitute a business, even if those assets are in
a subsidiary.
Effective July 1, 2016:

2014 Annual improvements. These annual improvements amend standards from the
2012- 2014 reporting cycle. It includes changes to:
-
PFRS 7,’Financial instruments: Disclosures’ - There are two amendments: (1) Servicing
contracts – If an entity transfers a financial asset to a third party under condition which
allow the transferor to derecognize the asset, PFRS 7 requires disclosure of all types of
continuing involvement that the entity might still have in the transferred assets. The
standard provides guidance about what is meant by continuing involvement. The
amendment is prospective with an option to apply retrospectively. There is a
consequential amendment to PFRS 1 to give the same relief to first time adopters. (2)
Interim financial statements – the amendment clarifies that the additional disclosure
required by the amendments to PFRS 7, ‘Disclosure – Offsetting financial assets and
financial liabilities’ is not specifically required for all interim periods unless required by
PAS 34. This amendment is retrospective.
-
PAS 19,’Emplyee benefits’ - The amendment clarifies that, when determining the discount
rate for post-employment benefit obligations, it is the currency that the liabilities are
denominated in that is important, not the country where they arise. The assessment of
whether there is a deep market in high-quality corporate bonds is based on corporate
-4-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
bonds in that currency, not corporate bonds in a particular country. Similarly, where
there is no deep market in high-quality corporate bonds in that currency, government
bonds in the relevant currency should be used. The amendment is retrospective but
limited to the beginning of the earliest period presented.
Effective January 1, 2017:

PFRS 15, Revenue from Contracts with Customers issued in May 2014 and effective for
annual periods beginning January 1, 2017. This is the converged standard on revenue
recognition. It replaces PAS 11, ‘Construction contracts’, PAS 18,’Revenue’ and related
interpretations. Revenue is recognized when a customer obtains control of a good or
service. A customer obtains control when it has the ability to direct the use of and obtain
the benefits from the good or service. The core principle of PFRS 15 is that an entity
recognizes revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognizes revenue in accordance with that
core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
PFRS 15 also includes a cohesive set of disclosure requirement that will result in an entity
providing users of financial statements with comprehensive information about the nature,
amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts with customers.
Effective January 1, 2018:

PFRS 9, Financial Instruments issued in November 2009 and effective for periods beginning
January 1, 2018. The complete version of PFRS 9 replaces most of the guidance in PAS 39.
PFRS 9 retains but simplifies the mixed measurement model and establishes three primary
measurement categories for financial assets: amortized cost, fair value through OCI and
fair value through profit or loss. The basis of classification depends on the entity’s business
model and the contractual cash flow characteristics of the financial asset. Investments in
equity instruments are required to be measured at fair value through profit or loss with the
irrevocable option at inception to present changes in fair value in OCI. There is now a
new expected credit losses model that replaces the incurred loss impairment model used
in PAS 39.
For financial liabilities there were no changes to classification and measurement except for
the recognition of changes in own credit risk in other comprehensive income, for liabilities
designated at fair value, through profit or loss.
PFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between the hedged item and
hedging instrument and for the ‘hedged ratio’ to be the same as the one management
actually use for risk management purposes. Contemporaneous documentation is still
required but is different to that currently prepared under PAS 39.
The Group is yet to assess the full impact of PFRS 9 and intends to adopt the new standard
upon completion of the International Accounting Standards Board (IASB) project. Likewise, the
Group will consider the impact of the remaining phases of the PFRS 9 when issued.
-5-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The accounting policies set out below have been applied consistently to all periods presented
in the consolidated financial statements.
Foreign Currency Transactions and Translations
Items in the financial statements of each entity in the Group are measured using the currency of
the primary economic environment in which the entity operates (the “functional currency”).
The consolidated financial statements are presented in Philippine Peso, which is the Parent
Bank’s functional and presentation currency.
In the Parent Bank’s separate financial statements, the books of accounts of the RBU are
maintained in Philippine peso, while those of the FCDU are maintained in USD. For financial
reporting purposes, the monetary assets and liabilities of the FCDU and the foreign currencydenominated monetary assets and liabilities in the RBU are translated in Philippine peso based
on the Philippine Dealing System (PDS) closing rate prevailing at the consolidated statements of
financial position date. Foreign currency denominated income and expenses are translated at
the prevailing exchange rate at the date of transaction. Foreign exchange differences arising
from revaluation and translation of foreign currency-denominated assets and liabilities of the
RBU are credited or charged against operation in the period in which the rates change.
Non-monetary items that are measured in terms of historical cost are translated using the
exchange rates as the dates of initial transactions. Non-monetary items measured at fair value in
a foreign currency are translated using the exchange rates at the date when the fair value was
determined.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the
Parent Bank and the entity controlled by the Parent Bank (its subsidiary) up to December 31 of
each year. Control is achieved where the Parent Bank has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its activities.
Subsidiaries are consolidated from the date when control is transferred to the Parent Bank and
cease to be consolidated from the date when control is transferred out of the Parent Bank.
The interest of minority shareholders is stated at the minority’s proportion of the fair values of
the assets and liabilities recognized. Subsequently, any losses applicable to the minority interest
in excess of the minority interest are allocated against the interests of the Parent Bank.
The results of operations of subsidiaries acquired or disposed of during the year are included in
the consolidated statements of income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
The consolidated financial statements comprise the financial statements of the Group as at
December 31, 2014 and 2013. The consolidated financial statements are prepared using
uniform accounting policies for like transactions and other events in similar circumstances.
Inter-company balances and transactions, including inter-company profits and unrealized
profits and losses, are eliminated. When necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used in line with those used by the
Parent Bank. All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Subsidiaries
Subsidiaries are all entities over which the group has control. The Parent Bank controls an entity
when the Parent Bank is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity.
-6-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsidiaries are fully consolidated from the date on which control is transferred to the Parent
Bank. They are deconsolidated from the date that control ceases.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured
at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair
values of the identifiable net assets acquired is recognized as goodwill. Any deficiency of the
cost of acquisition below the fair values of the identifiable net assets acquired i.e. discount on
acquisition is credited to profit and loss in the period of acquisition. The interest of minority
shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities
recognized. Subsequently, any losses applicable to the minority interest in excess of the
minority interest are allocated against the interests of the Parent Bank.
Acquisition-related costs are expensed as incurred.
Details of the Parent Bank’s subsidiary as at December 31, 2014 are as follows:
Name of Company
Principal Activities
Real estate acquisitions and
development
Muralla Grande, Inc.
Disposal of subsidiary
When the Group ceases to have control, any retained interest in the entity is re-measured to its
fair value at the date when control is lost, with the change in carrying amount recognized in
profit or loss. The fair value is the initial carrying amount for purposes of subsequently
accounting for the retained interest as an associate, joint venture or financial asset. In addition,
any amounts previously recognized in other comprehensive income in respect of that entity are
accounted for as if the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognized in other comprehensive income are reclassified to
profit or loss.
Cash and Cash Equivalents
Cash and cash equivalents include notes and coins on hand, amounts due from Bangko
Sentral ng Pilipinas (BSP) and other banks and securities held under agreements to sell that are
convertible to known amounts of cash, with original maturities of three months or less from
dates of placements and that are subject to an insignificant risk of changes in value, and are
used by the Group in the management of its short-term commitments.
Financial Instruments
Date of recognition
Financial instruments are recognized in the consolidated statement of financial position when
the Group becomes a party to the contractual provisions of the instruments. Regular way
purchases or sales of financial assets that require delivery of assets within the time frame
established by the regulation or convention in the marketplace are recognized on the
settlement date, the date that an asset is delivered to or by the Group.
Classification, recognition and measurement of financial instruments
Financial instruments are recognized initially at fair value. Except for financial instruments at
FVPL, the initial measurement of financial assets and liabilities includes transaction cost.
The Group classifies its financial assets in the following categories: financial assets at fair value
through profit and loss (FVPL), held to-maturity (HTM) investments, AFS investments, and loans
and receivables. The Group classifies its financial liabilities as at fair value through profit and
loss and other financial liabilities.
-7-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The classification depends on the purpose for which the investments were acquired and
whether they are quoted in an active market. Management determines the classification of its
investments at initial recognition and, where allowed and appropriate, re-evaluates such
designation at every reporting date.
a) Financial assets or financial liabilities designated at FVPL
The Bank has designated financial assets and liabilities at FVPL when the following criteria are
met:
•
The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognizing gains or losses on
them on a different basis;
•
The assets and liabilities are part of the Bank’s financial assets, financial liabilities or both
which are managed and their performance evaluated on a fair value basis, in accordance
with a documented risk management or investment strategy; or
•
The financial instrument contains an embedded derivative, unless the embedded
derivative does not significantly modify the cash flows or it is clear, with little or no
analysis, that it would not be separately recorded.
Financial assets and liabilities designated at FVPL are recorded in the consolidated statement
of financial position at fair value. Changes in fair value on financial assets and liabilities
designated at FVPL are recorded in ‘Trading gains (losses) – net’ in the consolidated statements
of income. Interest earned or incurred is recorded in interest income or expense, while
dividend income is recorded in other operating income according to the terms of the contract,
or when the right of the payment has been established.
b) HTM investments
HTM investments are non-derivative financial assets with fixed or determinable payments and
fixed maturities for which management has the positive intention and ability to hold to
maturity. Where the Group sells other than an insignificant amount of HTM investments, the
entire category would be tainted and reclassified as AFS investments.
After initial measurement, these investments are subsequently measured at amortized cost
using the effective interest rate method, less of impairment in value. Amortized cost is the
amount at which the financial asset was recognized at initial recognition less any principal
repayments, plus accrued interest, less any impairment losses. Accrued interest includes
amortization of transaction costs deferred at initial recognition and of any premium/discount to
maturity amount using the effective interest method. The amortization is included in the
investment income in the consolidated statement of income. Accrued interest, including both
accrued coupon and amortized discount/premium, are presented under “Accrued interest
receivables” in the consolidated statements of financial position. Gains and losses are
amortized in income when the HTM investments are derecognized and impaired, as well as
through the amortization process. The losses arising from impairment of such investments are
recognized in the consolidated statements of income.
c) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments and fixed
maturities that are not quoted in an active market. They are not entered into with the intention
of immediate or short-term resale and are not classified as financial assets held for trading,
designated as AFS or FVPL. This financial asset category relates to the consolidated statement
of financial position caption: (a) cash and other cash items (b) due from BSP, (c) due from other
banks, and (d) loans and receivable.
-8-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
After initial measurement, loans and receivables are subsequently measured at amortized cost
using the effective interest rate method, less any allowance for impairment. Amortization cost
is calculated by taking into account any discount or premium on acquisition and fees that are
an integral part of the effective interest rate. The amortization is included in the interest
income in the consolidated statement of income. Accrued interest, including both accrued
coupon and amortized discount/premium, are presented under “Accrued interest receivables”
in the consolidated statements of financial position. The losses arising from impairment of such
loans and receivables are recognized in ‘Provision for credit losses’ in the consolidated
statements of income.
d) AFS investments
AFS investments are those which are designated as such or do not qualify to be classified as
designated as financial assets at FVPL, HTM investment or loans and receivables. They are
purchased and held indefinitely, and may be sold in response to liquidity requirement or
changes in market conditions. These include government securities, equity investments and
other debt instruments.
After initial measurement, AFS investments are subsequently measured at fair value.
The effective yield component of AFS debt securities, as well as the impact of restatement on
foreign currency-denominated AFS debt securities, is reported in profit or loss. Interest earned
on holding AFS investments are reported as interest income using the effective interest rate.
Accrued interests are presented under “Accrued interest receivables” in the consolidated
statements of financial position. Dividends earned on holding AFS investments are recognized
in the consolidated statement of income as ‘Dividend income’ when the right of the payment
has been established. The unrealized gains and losses arising from the fair valuation of AFS
investments are reported as ‘Unrealized gains and losses on available-for-sale investments’ in
the equity section of the consolidated statement of financial position. The losses arising from
impairment of such investments are recognized as ‘Provision on impairment losses’ in the
consolidated statement of income. When the security is disposed of, the cumulative gain or
loss previously recognized in equity is recognized as ‘Net realized gain on sale of AFS
investments’ in the consolidated statement of income.
When the fair value of AFS investments cannot be measured reliably because of lack of
reliable estimates of future cash flows and discount rates necessary to calculate the fair value
of unquoted equity instruments, these investments are carried at cost.
e) Classification of financial instruments between debt and equity
A financial instrument is classified as debt, otherwise as equity, if it has a contractual
obligation to:
•
Deliver cash or another financial asset to another entity, or
•
Exchange financial assets or financial liabilities with another entity under conditions that
are potentially unfavorable to the Bank.
If the Group does not have any unconditional right to avoid delivering cash or another
financial asset to settle its contractual obligation, the obligation meets the definition of a
financial liability.
Financial instruments are classified as liabilities or equity in accordance with the substance of
the contractual arrangement. Interest, dividends, gains and losses relating to a financial
instrument or a component that is a financial liability, are reported as expense or income.
Distributions to holders of financial instruments classified as equity are charged directly to
equity, net of any related income tax benefits.
-9-
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other financial liabilities
Issued financial instruments or their components, which are not designated as financial
liabilities at FVPL are classified as other financial liabilities, where the substance of the
contractual arrangement results in the Group having an obligation either to deliver cash or
another financial assets to the holder, or to satisfy the obligation other than by the exchange of
a fixed amount of cash or another financial asset for a fixed number of own equity shares. This
includes investment contracts which mainly transfer financial risk and has no or insignificant
insurance risk.
After initial measurement, other financial liabilities are subsequently measured at amortized
cost using the effective interest rate method. Amortization cost is calculated by taking into
account any discount or premium on the issue and fees that are an integral part of the effective
interest rate. Any effects of restatement of foreign currency-denominated liabilities are
recognized in the consolidated statements of income.
This accounting policy applies primarily to the Group’s accounts payable and accrued
expenses that meet the above definition (other than liabilities covered by other accounting
standards, such as pension liabilities and income tax payable).
Derecognition of Financial Assets and Liabilities
The Group recognizes a financial asset when the contractual rights to the cash flows from the
asset expired, or it transfers the rights to receive the contractual cash flows on the financial
asset in a transaction in which substantially all the risks and rewards of ownership of the
financial asset are transferred. Any interest in transferred financial assets that is created or
retained by the Group is recognized as a separate asset and liability.
The Group derecognizes a financial liability when the contractual obligations are discharged
or cancelled or have expired.
The Group enters into transactions whereby it transfers assets recognized on its balance sheet,
but retained either all risks or rewards of the transferred assets or a portion of them. If all or
substantially all risks and rewards are retained, then the transferred assets are not derecognized
from the consolidated statements of financial position. Transfers of assets with retention of all
or substantially all risks and rewards include, for example, securities lending and repurchase
transactions.
The Group also derecognizes certain assets when it charges off balances pertaining to the
assets deemed to be uncollectible.
Impairment of Financial Assets and Liabilities
At each reporting date, the Group assesses whether a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if,
and only if, there is objective evidence of impairment as a result of one or more events that
has occurred after the initial recognition of the asset (an incurred ‘loss event’ and that loss
event (or events) has an impact on the estimated future cash flows of the financial asset or the
group of financial assets that can be reliably estimated. Evidence of impairment may include
indications that the borrower or a group of borrowers is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganization and where observable data indicate
that there is measurable decrease in the estimated future cash flows, such as changes in arrears
or economic conditions that correlate with defaults.
- 10 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
a) Loans and receivables
For loans and receivables carried at amortized cost, the Bank first assesses whether objective
evidence of impairment exists individually for financial assets that are individually significant,
or collectively for financial assets that are not individually significant. If the Bank determines
that no objective evidence of impairment exists for individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar credit
risk characteristics and collectively assesses for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is, continues to be, recognized are
not included in a collective assessment for impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the asset’s carrying amount and the present value of the
estimated future cash flows. The carrying amount of the asset is reduced through use of an
allowance account and the amount of loss is charged to the consolidated statement of income.
Interest income continues to be recognized based on the original effective interest rate of the
asset. Loans, together with the associated allowance account, are written off when there is no
realistic prospect of future recovery and all collateral has been realized. If, in a subsequent
period, the amount of the estimated impairment loss decreases because of an event occurring
after the impairment was recognized, the previously recognized impairment loss is reversed.
Any subsequent reversal of an impairment loss is recognized in the consolidated statement of
income, to the extent that the carrying value of the asset does not exceed its amortized cost at
the reversal date.
The present value of the estimated future cash flows is discounted at the financial asset’s
original effective interest rate. Time value is generally not considered when the effect of
discounting is not material. If a loan has a variable interest rate, the discount rate for measuring
any impairment loss is the current effective interest rate, adjusted for the original credit risk
premium. The calculation of the present value of the estimated future cash flows of a
collateralized financial asset reflects the cash flows that may result from foreclosure less costs
for obtaining and selling the collateral, whether or not foreclosure is probable. For the purpose
of a collective evaluation of impairment, financial assets are group on the basis of such credit
risk characteristics as type of borrower, collateral type, past-due status and term.
Future cash flows in a group of financial assets that are collectively evaluated for impairment
are estimated on the basis of historical loss experience for assets with credit risk characteristics
similar to those in the group. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not affect the period on
which the historical loss experience is based and to remove the effects of conditions in the
historical period that do not exist currently. Estimates of changes in future cash flows reflect,
and are directionally consistent with changes in related observable data from period to period
(such changes in unemployment rates, property prices, commodity prices, payment status, or
other factors that are indicative of incurred losses in the group and their magnitude).
The methodology and assumptions used for estimating future cash flows are reviewed regularly
by the Group to reduce any differences between loss estimates and actual loss experience.
b) AFS investments carried at fair value
In case of equity investments classified as AFS investments, impairment indicators would
include a significant or prolonged decline in the fair value of the investments below its cost.
Where there is evidence of impairment, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognized in the consolidated statement of income – is removed
from the equity and recognized in the consolidated statement of income. Impairment losses
on equity investments are not reversed through the consolidated statement of income.
Increases in fair value after impairment are recognized directly in equity.
- 11 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In the case of debt instruments classified as AFS investments, impairment is assessed based on
the same criteria as financial assets carried at amortized cost. Interest continues to be accrued
at the original effective interest rate on the reduced carrying amount of the asset and is
recorded as part of ‘Investment income’ in the consolidated statement of income. If in
subsequent year, the fair value of a debt instrument increased and the increase can be
objectively related to an event occurring after the impairment loss was recognized in the
consolidated statement of income, the impairment loss is reversed through the consolidated
statement of income.
c) AFS investment carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is
not carried at fair value because its fair value cannot be reliably measured, or on a derivative
asset that is linked to and must be settled by delivery of such unquoted equity instrument has
been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the current
market rate of return for a similar asset.
d) HTM investments
For HTM investments, the Group assesses whether there is objective evidence of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future expected credit losses that have not yet been
incurred). The carrying amount of the asset is reduced through use of an allowance account
and the amount of loss is charged to the consolidated statement of income. Interest income
continues to be recognized based on the original EIR of the asset. If subsequently, the amount
of the estimated impairment loss decreases because of an event occurring after the impairment
was recognized, any amount formerly charged are credited to the ‘Provision for impairment
and credit losses’ in the consolidated statement of income and the allowance account,
reduced. The HTM investments, together with the associated allowance accounts, are written
off when there is no realistic prospect of future recovery and all collateral has been realized.
Offsetting
Financial assets and financial liabilities are offset and the net amount reported in the
consolidated statements of financial position if, and only if, the Group has a legal right to set
off the recognized amounts and intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously. This is generally the case with master netting agreements;
thus, the related assets and liabilities are presented gross in the consolidated statement of
financial position.
Income and expenses are presented on a net basis only when permitted by PFRS.
Repurchase and reverse repurchase agreements
Securities sold subject to repurchase agreements (‘repos’) are reclassified in the consolidated
financial statements as pledged assets when the transferee has the right by contract or custom
to sell or repledge the collateral; the counterparty liability is included in deposits from banks
or deposits from customers, as appropriate. The difference between sale and repurchase price
is treated as interest and accrued over the life of the agreements using the effective interest
method.
Securities purchased under agreements to resell (‘reverse repos’) are recorded as loans and
receivables to other banks or to customers and included in the consolidated statement of
financial position under “Interbank loans receivable and securities purchased under
agreements to resell”. Securities lent to counterparties are also retained in the consolidated
financial statements.
- 12 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Bank’s Premises, Furniture, Fixtures and Equipment
Land is stated at cost less any impairment in value and depreciable properties including
buildings, leasehold improvements and furniture, fixtures and equipment, are stated at cost less
accumulated depreciation and amortization, and any impairment in value. Historical cost
includes expenditure that is directly attributable to the acquisition of the items which comprises
its purchase price, import duties and any directly attributable costs of bringing the assets to its
working condition and location for its intended use.
Subsequent costs are included in the asset’s carrying amount or are recognized as separate
asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Group and the asset can be measured reliably. All other repairs and
maintenance are charged to profit or loss during the year in which they are incurred.
Depreciation for buildings and furniture, fixtures and equipment is calculated using the
straight-line to allocate cost or residual values over the estimated useful lives as follows:
Number of years
Building and improvements
Furniture, fixtures and equipment
Transportation equipment
25
5
5
Leasehold improvements are depreciated over the shorter of the lease term (normally ranging
from 5 to 10 years) and the useful lives of the related improvements (ranges from 5 to 10 years).
Major renovations are depreciated over the remaining life of the related assets.
The assets residual values and useful lives are reviewed and adjusted if appropriate, at each
reporting date. Assets are reviewed for impairment whenever assets or changes in
circumstances indicate that the carrying amount may not be recoverable.
An asset in carrying amount is written down immediately to its recoverable amount if the assets’
carrying amount is greater than the estimated recoverable amount. The recoverable amount is
the higher of an asset fair value less cost to sell.
Fully depreciated assets are retained in the accounts until they are no longer in use and no
further charge for depreciation is made in respect of those assets.
An item of Group’s premises, furniture, fixtures 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 derecognition of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the item) is included in the consolidated
statement of income, in the year the item is derecognized.
Investment Properties
Investment properties are measured initially at cost, including transaction costs. An investment
property acquired through an exchange transaction is measured at fair value of the asset
acquired unless the fair value of such an asset cannot be measured in which the case the
investment property acquired is measured at carrying amount of the asset given up. Foreclosed
properties are recorded as “Investment properties” upon: (a) entry of judgment in case of
judicial foreclosure; (b) execution of Sheriff’s Certificate of Sale in case of extra-judicial
foreclosure; or (c) notarization of the “Deed of Dacion” in case dation in payment (dacion en
pago). Subsequent to initial recognition, depreciable investment properties are carried at cost
less accumulated depreciation, and any impairment in value. Land is carried at cost less
impairment losses, if any.
- 13 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Expenditures incurred after the investment properties have been put into operations, such as
repairs and maintenance costs, are normally charged to profit or loss in the period in which the
costs are incurred.
Depreciation is calculated on a straight-line basis using the remaining useful lives from the time
of acquisition of the investment properties but not to exceed 10 years for both buildings and
condominium units.
Transfers are made to investment properties when, and only when, there is a change in use
evidenced by ending of owner occupation, commencement of an operating lease to another
party or ending of construction or development. Transfers are made from investment properties
when, and only when, there is a change in use evidenced by commencement of owner
occupation or commencement of development with view to sale.
Investment properties are derecognized when they have either been disposed of or when the
investment properties are permanently withdrawn from use and no future benefit is expected
from their disposal. Any gains or losses on the retirement or disposal of investment properties
are recognized in the statement of income under ‘Gain on sale of assets’ in the year of
retirement or disposal. Gains and losses on retirement or disposal are determined by comparing
proceeds with carrying amount.
Foreclosed Properties
Foreclosed properties of land or building are classified under investment properties from
foreclosure date, accounted for using cost model under PAS 40.
Assets foreclosed which are available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such assets (or disposal groups) and which sale is
highly probable, are recognized as non-current assets (or disposal groups) held for sale and are
accounted for at the lower of cost and fair value less cost to sell similar to the principles of
PFRS 5. The cost of assets foreclosed includes the carrying amount of the related loan less
allowance for impairment at the time of foreclosure. Impairment loss is recognized for any
subsequent write-down of the asset to fair value less cost to sell.
Other foreclosed non-financial assets which are not land or building, or to be used by the
Group for its operations are classified as Group-occupied property and is accounted for using
the cost model under PAS 16. Financial assets held as collaterals are classified as
available-for-sale under PAS 39 when foreclosed.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired is their fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization and any
accumulated impairment losses.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible assets may be impaired.
The amortization period and amortization method for an intangible asset with a finite useful life
are reviewed at least at each financial year-end. Changes in the expected useful life or the
expected pattern on consumption of future economic benefits embodied in the asset is
accounted for by changing the amortization period or method, as appropriate, and treated as
changes in accounting estimates. The amortization expense on intangible assets with finite life
is recognized in the consolidated statement of income.
- 14 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment
annually or more frequently, either individually or at the Cash Generating Unit (CGU) level.
The assessment of indefinite life is reviewed annually to determine whether the indefinite life
continues to be supportable. If not, the change in useful life from definite to fine is made on a
prospective basis.
Gains or losses arising from the derecognition of an intangible asset, upon disposal or when no
future economic benefits are expected to arise from the continued use of the asset, are
measured as the difference between the net disposal proceeds and the carrying amount of the
asset and are recognized in profit or loss when the asset is derecognized.
Intangible assets include capitalized software. Capitalized software acquired separately is
measured at cost at initial recognition. Following initial recognition, capitalized software is
carried at cost less accumulated amortization and any accumulated impairment losses.
The capitalized software is amortized over its estimated useful life of 5 years.
Impairment of Non-Financial Assets
At each reporting date, the Group assesses whether there is any indication of impairment on
Group’s premises, furniture, fixtures and equipment, investment properties, intangible asset and
investment in a subsidiary. When an indicator of impairment exists or when an annual
impairment testing for an asset is required, the Group makes a formal estimate of recoverable
amount. Recoverable amount is the higher of an asset’s (or cash-generating units) fair value less
costs to sell and its value in use and is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other assets or groups of
assets, in which case the recoverable amount is assessed as part of the cash-generating unit to
which it belongs. Where the carrying amount of an asset (or cash generating unit) exceeds its
recoverable mount, the asset (or cash-generating unit) is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset (or cash-generating
unit). In determining fair value lest cost to sell, recent market transactions are taken into
account, if available. If no such transaction can be identified, an appropriate valuation model is
used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded entities or other available fair value indicators.
An assessment is made at each reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss
is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognized. If that is the case, the
carrying amount of the asset is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined, net of depreciation and
amortization, had no impairment loss been recognized for the asset in prior years. Such reversal
is recognized in the consolidated statement of income unless the asset is carried at revalued
amount, in which case the reversal is treated as revaluation increase.
After such reversal, the depreciation and amortization expense is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over
its remaining useful life.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
- 15 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of a non-financial asset is measured based on its highest and best use. The
asset’s current use is presumed to be its highest and best use.
The fair value of financial and non-financial liabilities takes into account non-performance
risk, which is the risk that the entity will not fulfill an obligation.
The Bank classifies its fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the
following levels:
•
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
This level includes listed equity securities and debt instruments on exchanges
(for example, Philippine Stock Exchange, Inc., Philippine Dealing and Exchange Corp.,
etc.).
•
Level 2 - inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from
prices). This level includes the majority of the over-the-counter (“OTC”) derivative
contracts. The primary source of input parameters like LIBOR yield curve or counterparty
credit risk is Bloomberg. ; and
•
Level 3 - inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs).
The appropriate level is determined on the basis of the lowest level input that is significant to
the fair value measurement.
a) Financial instruments
The fair value of financial instruments traded in active markets is based on quoted market
prices at the reporting date. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing service, or
regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis. The quoted market price used for financial assets held by
the Bank is the current bid price. These instruments are included in Level 1.
The fair value of assets and liabilities that are not traded in an active market (for example,
over-the-counter derivatives) is determined by using valuation techniques. These valuation
techniques maximize the use of observable market data where it is available and rely as little
as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the asset or liability is included in Level 2. If one or more of the
significant inputs is not based on observable market data, the asset or liability is included in
Level 3.
For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques included net present value
techniques, comparison to similar instruments for which market observable prices exist, options
pricing models, and other relevant valuation models.
b) Non-financial assets or liabilities
The Group uses valuation techniques that are appropriate in the circumstances and applies the
technique consistently. Commonly used valuation techniques are as follows:
•
Market approach - A valuation technique that uses prices and other relevant information
generated by market transactions involving identical or comparable assets, liabilities or a
group of assets and liabilities, such as a business.
- 16 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
Income approach - Valuation techniques that convert future amounts (e.g., cash flows or
income and expenses) to a single current (i.e., discounted) amount. The fair value
measurement is determined on the basis of the value indicated by current market
expectations about those future amounts.
•
Cost approach - A valuation technique that reflects the amount that would be required
currently to replace the service capacity of an asset (often referred to as current
replacement cost).
Income and Expense Recognition
Income is recognized to the extent that it is probable that the economic benefits will flow to the
Group, the income can be reliably measured and when specific criteria have been met for each
of the Bank’s activities, as described below. Expense is recognized when a decrease in future
economic benefit related to a decrease in an asset or an increase of a liability has arisen to the
Group that can be measured reliably.
The following specific recognition criteria must also be met before income is recognized:
Interest Income and Interest Expense
Interest income and interest expense are recognized in the consolidated statement of income for
all financial instruments measured at amortized cost and interest-bearing financial instruments
classified as AFS investments as they accrue, using the effective interest rate (EIR).
EIR is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial instrument or a shorter period, where appropriate, to the net
carrying amount of the financial asset or financial liability. The calculation takes into account
all the contractual terms of the financial instruments including any fees or incremental costs that
are directly attributable to the instrument and are integral part of the effective interest rate, but
not future credit losses. The EIR is established on the initial recognition of the financial asset and
liability and is not revised subsequently. The carrying amount of the financial asset or liability is
adjusted if the Group revises its estimates of payments or receipts. The change in carrying
amount is recognized in profit or loss as interest income or expense.
Once the recorded value of a financial asset or group of similar financial assets has been
reduced due to impairment loss, interest income continues to be recognized using the original
EIR used to discount future cash flows.
Loan Fees, Service Charges and Penalties
Loan commitment fees are recognized as earned over the terms of the credit lines granted to
borrowers. Loan syndication fees are recognized upon completion of all syndication activities
where the Group does not have further obligations to perform under the syndication agreement.
Service charges and penalties are recognized only upon collection or accrued when there is a
reasonable degree of certainty as to its collectibility. When a loan commitment is not expected
to result in the draw-down of a loan, loan commitment fees are recognized on a straight-line
basis over the commitment period.
Rental Income
Rental income arising on leased properties is accounted for on a straight-line basis over the
lease terms of ongoing leases and is recorded in the consolidated statement of income under
‘Other Operating Income’.
Dividends
Dividend income is recognized when the Bank’s right to receive payment is established.
- 17 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Foreign Exchange Gains (Losses) - net
Foreign exchange gains and losses arising from the settlement of such transactions or from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the consolidated statement of income.
Other Income
Income from assets sold or exchanged is recognized when the title to the assets is transferred to
the buyer or when the collectibilty of the entire sales price is reasonably assured. Income from
sale of services is recognized upon rendition of the service. Other operating income is
recognized when earned and upon disposal of the investments.
Expenses
Expenses are recognized on the consolidated statement of income:



on the basis of direct association between the costs incurred and the earning of specific
items of income;
on the basis of systematic and rational allocation procedures when economic benefits are
expected to arise over several accounting periods and the association can be broadly or
indirectly determined; or
immediately when expenditures produces no future economic benefits or when, and to the
extent that, future economic benefits do not qualify or cease to qualify, for recognition in
the consolidated statement of financial position as an asset.
Expenses in the consolidated statement of income are presented using the nature of expense
method. General and administrative expenses are cost attributable to administrative activities of
the Bank.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance
of the arrangement at inception date, and requires an assessment of whether the fulfillment of
the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset. A reassessment is made after inception of the lease only if one
of the following applies:




there is a change in contractual terms, other than a renewal or extension of the
arrangement;
a renewal option is exercised or an extension is granted, unless that term of the renewal or
extension was initially included in the lease term;
there is a change in the determination of whether fulfillment is dependent on a specified
asset; or
there is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when
the change in circumstances gave rise to the reassessment for any of the scenarios above, and at
the date of renewal or extension period for the second scenario.
Bank as a lessee
Leases where the lessor retains substantially all the risks and rewards of ownership of the assets
are classified as operating leases. Operating lease payments are recognized as an expense in the
consolidated statement of income on a straight-line basis over the lease term.
Bank as a lessor
The Bank is also a party of operating leases as a lessor. Lease payments received are recognized
as income in the consolidated statement of income on a straight-line basis over the lease term.
Initial direct costs incurred in negotiating operating leases are added to the carrying amount of
- 18 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the leased asset and recognized over the lease term on the same basis as the rental income.
Contingent rents are recognized as revenue in the period in which they are earned.
Retirement Cost
Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided.
A provision is recognized for the amount expected to be paid under short-term cash bonus,
short-term compensated absences or profit-sharing plans if the Bank has a present legal or
constructive obligation to pay this amount as a result of past service provided by the employee
and the obligation can be measured reliably.
Post employment benefits
The Parent Bank operates a funded, contributory, and defined contribution (DC) plan covering
its regular employees wherein the Parent Bank pays a fixed contribution into a separate entity
known as the trustee; which administers, manages and invests the funds. The Bank, however, is
covered under Republic Act (RA) No. 7641, The Philippine Retirement Law, which provides for
its qualified employees a defined benefit (DB) minimum guarantee. The DB minimum
guarantee is equivalent to a certain percentage of the monthly salary payable to an employee at
normal retirement age with the required credited years of service based on the provisions of RA
7641.
Accordingly, the Parent Bank accounts for its retirement obligation under the higher of the DB
obligation relating to the minimum guarantee and the obligation arising from the DC plan. For
the DB minimum guarantee plan, the liability is determined based on the present value of the
excess of the projected DB obligation over the projected DC obligation at the end of the
reporting period. The DB obligation is calculated annually by a qualified independent actuary
using the projected unit credit method. The Parent Bank determines the net interest expense
(income) on the net DB liability (asset) for the period by applying the discount rate used to
measure the DB obligation at the beginning of the annual period to the then net DB liability
(asset), taking into account any changes in the net DB liability (asset) during the period as a
result of contributions and benefit payments. Net interest expense and other expenses related to
the DB plan are recognized in profit or loss.
The DC liability, on the other hand, is measured at the fair value of the DC assets upon which
the DC benefits depend, with an adjustment for any margin on asset returns where this is
reflected in the DC benefits.
Remeasurements of the net DB liability, which comprise actuarial gains and losses, the return
on unallocated plan assets (excluding interest) and the effect of the asset ceiling (if any,
excluding interest), are recognized immediately in other comprehensive income.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in
benefit that relates to past service or the gain or loss on curtailment is recognized immediately
in profit or loss. The Parent Bank recognizes gains or losses on the settlement of a DB plan
when the settlement occurs.
Termination benefits
Termination benefits are recognized as an expense when the Bank is demonstrably committed,
without realistic possibility of withdrawal, to a formal detailed plan to terminate employment
before the normal retirement date. Termination benefits for voluntary redundancies are
recognized if the Parent Bank has made an offer encouraging voluntary redundancy, it is
- 19 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
probable that the offer will be accepted, and the number of acceptances can be measured
reliably.
Provisions and Contingencies
Provision
Provisions are recognized when the Group has a present obligation (legal or constructive) as a
result of a past event; it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and a reliable estimate can be made of the amount of
the obligation. Where the Group expects some or all of a provision to be reimbursed, for
example under an insurance contract, the reimbursement is recognized as a separate asset but
only when the reimbursement is virtually certain. The expense relating to any provision is
presented in the consolidated statement of income net of any reimbursement. If the effect of the
time value of money material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money
and where appropriate, the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as a borrowing cost.
Contingencies
A contingent asset is not recognized in the consolidated financial statements but disclosed
when an inflow of economic benefits is probable. Contingent liabilities are not recognized in
the consolidated financial statements. They are disclosed unless the possibility of an outflow of
resources embodying economic benefits is remote.
Income Taxes
The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or
loss, except to the extent that it relates to items recognized in other comprehensive income or
directly in equity. In this case, the tax is also recognized in other comprehensive income or
directly in equity, respectively.
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted at the reporting date.
Management periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred tax is provided using the liability method on all temporary differences at the statement
of financial position date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences with certain
exceptions. Deferred income tax assets are recognized for all deductible temporary differences,
carry forward of unused tax credits from the excess of the minimum corporate income tax
(MCIT) over the regular corporate income tax and unused net operating loss carryover
(NOLCO), to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and carry forward of unused MCIT and unused NOLCO can
be utilized. Deferred tax, however, is not recognized when it arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss.
- 20 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The carrying amount of deferred income tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available
to allow all or part of the deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates applicable to the period
when the asset is realized or the liability is settled, based on tax rates (tax base) and regulations
that have been enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation authority on either the taxable
entity or different taxable entities where there is an intention to settle the balances on a net
basis.
Borrowings and Borrowing Costs
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings
are subsequently carried at amortized cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in profit or loss over the period of the
borrowings using the effective interest method.
General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of
time to get ready for their intended use or sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are
incurred.
Equity
Share capital is measured at par value for all shares issued.
Surplus free includes all current and prior period results as disclosed in profit or loss and which
are available for dividend declaration and not restricted for use by the Bank.
Reserves pertain to a portion of the Parent Company’s income from trust operations set-up on a
yearly basis in compliance with BSP regulations. Reserves also consist of reserve for
contingencies and self-insurance.
Net unrealized fair value gains (losses) on available-for-sale securities pertain to cumulative
mark-to-market valuation of AFS investments.
Dividends on Common Shares
Dividends on common shares are recognized as a liability and deducted from equity when
approved by the Board of Directors of the Parent Bank and to BSP. Dividends for the year that
are approved after the consolidated statement of financial position date are dealt with as an
event after the statement of financial position date.
Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly to control
the other party or exercise significant influence over the other party in making financial and
operating decisions. Parties are also considered to be related if they are subject to common
control or common significant influence. Related parties may be individuals or corporate
- 21 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
entities. Transactions between related parties are based on terms similar to those offered to nonrelated parties.
Earnings per Share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares.
Basic EPS is computed by dividing the profit or loss attributable to ordinary shareholders of the
bank by the weighted average number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares, if any.
Events after the Reporting Period
The Group identifies events after the end of the reporting period as those events, both
favorable and unfavorable, that occur between the end of the reporting period and the date
when the financial statements are authorized for issue. The financial statements of the Bank
are adjusted to reflect those events that provide evidence of conditions that existed at the end
of the reporting period. Non-adjusting events after the end of the reporting period are
disclosed in the notes to the consolidated financial statements when material.
Fiduciary Activities
Assets and income arising from fiduciary activities together with related undertakings to return
such assets to customers are excluded from the consolidated financial statements where the
Parent Bank acts in a fiduciary capacity such as nominee, trustee or agent.
4. Critical Accounting Judgments and Key Sources of Estimation
In the application of the Group's accounting policies, 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 the historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
Critical Accounting Estimates
a) Impairment of Loans and Receivables
The Group reviews its loans and receivables at each reporting date to assess whether an
additional provision for credit losses should be recorded in the consolidated statement of
income. In particular, judgment by management is required in the estimation of the amount and
timing of future cash flows when determining the level of allowance required. Such estimates
are based on assumptions about a number of factors and actual results may differ, resulting in
future changes to the allowance.
In addition to specific allowance against individually significant loans and receivables, the
Group also makes a collective impairment allowance against exposures which, although not
specifically identified as requiring a specific allowance, have a greater risk of default than when
originally granted. This collective allowance takes into consideration on any deterioration in the
loan or investment rating since it was granted or acquired. This collective allowance is based
on changes in factors that are indicative of incurred losses, such as deterioration in payment
status and underlying property prices, among others.
To the extent that the net present value of estimated cash flows of individually impaired
accounts and the estimated impairment for collectively assessed accounts differs by +/- 5%,
impairment provision for the year ended December 31, 2014 would be an estimated
P5.39 million (2013 – P3.39 million) higher or lower.
- 22 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2014 and 2013, loans and receivables of the Group are carried at P36.4
billion and P41.7 billion, respectively (see Note 8).
b) Impairment of bank’s premises, furniture, fixtures and equipment and investment properties
The Group assesses impairment on assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The factors that the
Group considers important which could trigger an impairment review include the following:



significant underperformance relative to expected historical or projected future
operating results;
significant changes in the manner of use of the acquired assets or the strategy for
overall business; and
significant negative industry or economic trends.
The Group considers that it is impracticable to disclose with sufficient reliability the possible
effects of sensitivities surrounding the fair value of its long-term non-financial assets.
As at December 31, 2014 and 2013, the carrying value of bank’s premises, furniture, fixtures
and equipment amounted to P2.6 billion and P2.5 billion, respectively, while the carrying
values of the Bank’s investment properties amounted to P2.8 billion (see Notes 12 and 13).
c) Retirement benefits under R.A. 7641
The present value of the excess of the projected DB minimum guarantee over the projected DC
obligation at the end of the reporting period depends on a number of factors that are
determined on an actuarial basis. The assumptions used in determining the net cost (income) for
pensions include the discount rate. Any changes in these assumptions will impact the carrying
amount of retirement obligations.
The Parent Bank determines the appropriate discount rate at the end of each year. This is the
interest rate that should be used to determine the present value of estimated future cash
outflows expected to be required to settle the retirement obligations. In determining the
appropriate discount rate, the Parent Bank considers the interest rates of government securities
that are denominated in the currency in which the benefits will be paid and that have terms to
maturity approximating the terms of the related retirement obligation.
Other key assumptions for retirement obligations are based in part on current market
conditions. Additional information is disclosed in Note 21.
Judgments
a) Contingencies
The Parent Bank is currently involved in various legal proceedings. The estimate of the probable
costs for the resolution of these claims has been developed in consultation with outside counsel
handling the Parent Bank’s defense in these matters and is based upon an analysis of potential
results. Management does not believe that these proceedings will have a material adverse effect
on its financial position. It is possible, however, that future results of operations could be
materially affected by changes in the estimates or in the effectiveness of the strategies relating to
these proceedings.
b) Functional Currency
PAS 21 requires management to use its judgment to determine the entity’s functional currency
such that it most faithfully represents the economic effects of the underlying transactions, events
and conditions that are relevant to the entity. In making this judgment, the Parent Bank
considers the following:

the currency that mainly influences sales prices for financial instruments and services;
- 23 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


the currency in which funds from financing activities are generated; and
the currency in which receipts from operating activities are usually retained.
c) Operating Leases
The Group has entered into various lease agreements either as a lessor or as a lessee.
Critical judgment was exercised by the management to distinguish each lease agreement as
either an operating lease of finance lease by looking at the transfer or retention of significant
risk and rewards of ownership of the properties covered by the agreements. All of the Group’s
lease agreements were determined as operating lease (see Note 22).
d) Fair Value of Financial Instruments
Where the fair values of financial assets and financial liabilities recorded on the consolidated
statement of financial position cannot be derived from active markets, they are determined
using a variety of valuation techniques that include the use of mathematical models. The input
to these models is taken from observable markets where possible, but where this is not feasible,
a degree of judgment is required in establishing fair values. The judgments include
considerations of liquidity and model inputs such as correlation and volatility.
The Group considers that it is impracticable to disclose with sufficient reliability the possible
effects of sensitivities surrounding the fair value of financial instruments that are not quoted in
active markets. The fair values of the Group’s financial instruments are presented in Note 5 to
the consolidated financial statements.
e) Impairment of AFS investments
The Group treats AFS equity investments as impaired when there has been significant or
prolonged decline in the fair value below its cost or where other objective evidence of
impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment.
The Group treats ‘significant’ generally as 20% or more of the original cost of investment, and
‘prolonged’, greater than 12 months. In addition, the Group evaluates other factors, including
normal volatility in share price for quoted equities and the future cash flows and the discounted
factors for unquoted equities.
As at December 31, 2014 and 2013, the carrying value of the Group’s AFS investments
amounted P43.5 billion and P38.5 billion, respectively (see Note 10). The Group assessed that
no allowance for impairment losses on AFS investments is necessary as at December 31, 2014
and 2013.
f)
Classification of HTM investments
The classification to HTM investment requires significant judgment. In making this judgment,
the Group evaluates its intention and ability to hold such investments to maturity. If the Group
fails to keep these investments to maturity other than in certain specific circumstances – for
example, selling a significant amount close to maturity – it will be required to reclassify the
entire portfolio as AFS investments. The investment would therefore be measured at fair value
and not amortized cost.
g) Distinction between investment properties and owner-occupied properties
The Group determines whether a property qualifies as investment property. In making its
judgment, the Group considers whether the property generates cash flows largely independent
of the other assets held by an entity. Owner-occupied properties generate cash flows that are
attributable not only to property but also to the other assets used in the production or supply
process.
Some properties consist of a portion that is held to earn rentals or for capital appreciation and
another portion that is held for use in the production of services or for administrative purposes.
If these portions cannot be sold separately, the property is accounted for as investment property
- 24 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
only if an insignificant portion is held for use in the production of services or for administrative
purposes. Judgment is applied in determining whether ancillary services are so significant that a
property does not qualify as investment property. The Group considers each property separately
in making judgment.
The Group classifies all properties which have a portion that is earning rentals and another
portion which are used in production of services or used in administrative purposes as owneroccupied properties based on the criterion above. In this case, such properties were included
in the account ‘Bank’s premises, furniture, fixtures and equipment’.
h) Realizability of Deferred Tax Assets
The Group reviews its deferred tax assets at each financial position date and reduces the
carrying amount to the extent that is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. Any deferred tax asset will
be re-measured if it might result in derecognition when the expected tax law to be enacted has
a possible risk on the realization. Management believes that sufficient taxable profit will be
generated to allow all or part of the deferred income tax assets to be utilized.
As at December 31, 2014 and 2013, the Group’s recognized deferred tax assets amounted to
P949.5 million and P770.4 million, respectively (see Note 26).
5. Financial Risk Management
Risk Management Framework
The Board of Directors (BOD) of the Group is responsible for establishing and maintaining a
sound risk management system. It is the primary responsibility of the BOD to establish the risk
culture and the risk management organization and incorporate the risk process as an essential
part of the corporate strategic planning.
The Group classifies the major risks that the Group manages between quantifiable risks such as
credit, liquidity and markets risks, and non-quantifiable risks such as operations risk among
others.
Through the direction of the BOD, the following comprise the risk management structure of the
Group:
Executive Committee
The Executive Committee plays the crucial role of analyzing, evaluating, and approving product
attributes such as: market, liquidity and credit risk; operations risk; control and compliance;
audit, legal and regulatory; and system and technology issues for new activities/products.
Risk Management Committee (RMC)
The RMC is responsible for the creation and oversight of the Group’s corporate risk policy.
It is tasked to identify and analyze the risks faced by the Group, to set and recommend to the
BOD the system of risk limits and controls, and to ensure that each business unit continuously
monitors the adequacy and soundness of policies, assumptions and practices.
Asset and Liability Committee (ALC)
The ALC ensures that at all times the Group maintains adequate liquidity, sufficient capital and
appropriate funding to meet all business requirements and complies with all regulatory
requirements.
- 25 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Credit Committee (CreCom)
The CreCom is primarily responsible for credit risk management of the Group. It establishes the
standards for credit analysis, define credit risk measurements, establish internal risk ratings and
review the credit risk infrastructure’s ability to support the Group’s risk policies.
Risk Management Group (RMG)
The RMG is an in independent business function to identify, analyze, and measure risks from
the Group’s trading, position-taking, lending, borrowing, and other transactional activities.
Audit Committee (AC)
The Audit Committee is responsible for monitoring compliance with the Group’s risk
management policies and procedures, and for reviewing the adequacy of the risk managements
system in placed in relation to the risks faced by the Group. The Group’s Audit Committee is
assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of which are reported to the
Audit Committee.
Credit Risk
Credit risk is the risk that a customer or counterparty will be unable or unwilling to pay
obligations on time or in full as expected or previously contracted, subjecting the Group to a
financial loss. The goal of the Group’s credit risk management is to maximize the risk-adjusted
rate of return by maintaining credit risk exposure within the approved parameters.
The Group’s credit risk covers mostly loan portfolio analysis, where the Group employs risk
management techniques to quantify and qualify cyclical versus specific risks for a given
portfolio under potentially adverse economic conditions. Diversification against loan
concentration, such as lending in a single geographic area or business sector, enables the
Group to manage risks associated with its largest exposures in the market.
Credit Risk Management
Measurement of Credit Risk
In measuring credit risk at a counterparty level, the Group mainly relies on its sound lending
philosophy and considers three components: (i) the probability of default by the client or
counterparty on its contractual obligations; (ii) current exposures to the counterparty and its
likely future development; and (iii) the likely recovery ratio on the defaulted obligations. The
Group uses two statistical-based credit risk methodology in measuring credit risk namely:
default-probability models, which predict future losses and thus anticipate provisioning and
capital needs, and risk-adjusted return on capital (RAROC) techniques, which incorporate credit
risk into the initial loan pricing and eventually evaluate the true economic capital needs of the
Group.
(a) Loans and receivables
The clients of the Group are segmented and internally rated into the following standards BSP
classifications:
•
Unclassified – these are loans that do not have any greater-than normal risk and do not
possess the characteristics of loans classified below. The counterparty has the ability to
satisfy the obligation in full and therefore minimal loss, if any, is anticipated.
•
Loans especially mentioned – these are loans that have potential weaknesses that deserve
management’s close attention. These potential weaknesses, if left uncorrected, may affect
the repayment of the loan and thus increase the credit risk of the Group.
- 26 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
Substandard - these are loans which appear to involve a substantial degree of risk to the
Group because of unfavorable record or unsatisfactory characteristics. Further, these loans
with well-defined weaknesses which may include adverse trends or development of a
financial, managerial, economic or potential nature, or a significant deterioration in
collateral.
•
Doubtful – these are loans which have the weaknesses similar to those of the Sub-standard
classification with added characteristics that existing facts, conditions, and values make
collection or liquidation in full highly improbable and substantial loss is probable.
•
Loss – these are loans which are considered uncollectible and of such little value that their
continuance as bankable assets is not warranted although the loans may have some
recovery or salvage value.
(b) Debt securities and other bills
For debt securities and other bills, external rating agencies such as Standard & Poor’s and
Moody’s ratings or their equivalents are used by the Group for managing credit exposures.
Likewise, investments in these securities and bills are reviewed through its regular meetings
with top management as a way to gain credit quality mix and maintain a readily available
source to meet funding requirements.
Risk Limit Control and Mitigation Policies
The Group, through a Credit Manual, established policies for sound credit granting process.
Sufficient client information, to enable a comprehensive assessment of the true risk profile of
the borrower or counterparty, are gathered and at a minimum certain factors are considered in
documentation and credit approvals.
Overall credit limits at individual borrower’s or counterparty’s level and groups of connected
counterparties that aggregate in a comparable and informative manner are established by the
Group as one of the core risk control. Subsequent credit administration and monitoring is also
maintained through a well-structured internal risk rating system, which allows a more accurate
determination of the overall characteristics of the credit portfolio, concentration of risk, problem
credits and adequacy of loan loss reserves.
The Group employs some of these specific control and mitigation measures as outlined below.
(a) Collateral
One of the most traditional and common practice in mitigating credit risk is requiring security
for loans and receivables. The Group implements guidelines on the acceptability of specific
classes of collateral for credit risk mitigation. The principal collateral types for loans and
receivables are:
•
•
Mortgage over real estate properties and chattels; and
Hold-out on financial instruments such as debt securities deposits, and equities
In order to preserve the collateral cover for loans and receivables, management monitors the
market value of real property collateral on an annual basis and as needed for marketable
securities. Key management considers the existing market value of collateral during the review
of the credit facilities and adequacy of the allowance for credit losses. Upon careful evaluation,
the Group may seeks additional collateral from the counterparty for the relevant individual
loans and receivables, in order to minimize credit loss or impairment.
- 27 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the breakdown of receivables from customers by type of security as
at December 31:
2014
Amount
Secured
Real estate mortgage
Hold-out
Shares of stock
Chattel mortgage
Others
Unsecured
Percentage
2013
Amount
Percentage
P6,465,418
2,337,719
2,028,023
61,541
9,527,000
17,352,664
17.12%
6.19%
5.37%
0.16%
25.22%
45.94%
P5,323,252
1,897,407
307,929
50,957
18,347,000
16,923,115
12.42%
4.43%
0.72%
0.12%
42.82%
39.49%
P37,772,365
100%
P42,849,660
100%
(a) Credit-related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as
required. Standby letters of credit carry the same risk as loans. Documentary and commercial
letters of credit – which are written undertaking by the Group on behalf of a customer
authorizing a third party to draw drafts on the Group up to a stipulated amount under specific
terms and conditions – are collateralized by the underlying shipments of goods to which they
relate and therefore carry less risk than a direct loan.
The Group monitors the term to maturity of credit commitments because longer-term
commitments generally have a greater degree of credit risk than shorter-term commitments.
Impairment and Provisioning Policies
The Group’s credit-quality mapping on loans and receivables is based on the standard BSP
classifications. Impairment provisions, however, are recognized for financial reporting purposes
only for losses that have been incurred at the reporting date based on objective evidence of
impairment.
Loans with renegotiated terms
Loans with renegotiated terms are loans that have been restructured due to deterioration in the
borrower’s financial position. In respect of some of these loans, the Group has made
concessions that it would not otherwise consider. Once the loan is restructured it remains in
this category independent of satisfactory performance after restructuring.
Write-off policy
The Group writes off a loan or an investment debt security balance, and any related allowances
for impairment losses, when Group’s Credit Department determines that the loan or security is
uncollectible. This determination is made after considering information such as the occurrence
of significant changes in the borrower’s/issuer’s financial position such that the borrower/issuer
can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay
back the entire exposure. For smaller balance standardized loans, write-off decisions generally
are based on a product-specific past due status. All write-offs are approved by the BOD.
- 28 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The table below shows the Group’s loans and receivable from customers and the related
allowance for credit losses and impairment.
Loans and
receivables
Unclassified
Loans especially mentioned
Substandard
Doubtful
Loss
2014
Allowance for
credit losses
Loans and
receivables
2013
Allowance for
credit losses
P31,034,176
605,015
5,004,979
327,080
801,115
P172,400
30,251
952,605
163,539
801,115
P31,631,637
6,800,548
3,123,430
1,040,424
253,621
P172,400
340,027
679,360
520,212
253,621
P37,772,365
P2,119,910
P42,849,660
P1,965,620
Maximum Exposure to Credit Risk before Collaterals Held or Other Credit Enhancements
Credit risk exposures relating to significant on-balance sheet financial assets are as follows
(amounts in millions):
Note
7
7
8
10
11
14
Due from BSP
Due from other banks
Loans and receivables
AFS investments - debt securities
HTM investments
Other assets
2014
2013
P31,907
1,972
36,405
42,965
5,148
-
P26,418
916
41,698
37,968
6,172
22
P118,397
P113,194
The above table represents the maximum credit exposure of the Group at December 31, 2014
and 2013 without taking into account any collateral held or other credit enhancements.
The exposures set out above are based on net carrying amounts as reported in the consolidated
statements of financial position.
Credit risk exposures relating to off-balance sheet items are as follows:
Trust department accounts
Unused commercial letters of credit
Bills for collection
Others
2014
2013
P845,334
362,778
12,413
62,835
P775,028
336,653
14,724
68,842
P1,283,360
P1,195,247
Credit Quality of Loans Receivable from Customers
Loans receivables from customers are summarized as follows:
Note
Neither past due nor impaired
Past due but not impaired
Impaired
Allowance for credit and impairment losses
- 29 -
8
9
2014
2013
P36,622,287
580,983
569,095
P41,700,854
566,910
581,896
37,772,365
(2,119,910)
42,849,660
(1,965,620)
P35,652,455
P40,884,040
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) Loans and receivables neither past due nor impaired
The table below shows loans and receivables that were neither past due nor impaired which
consist mainly of accounts with Unclassified rating and those loans accounts in a portfolio to
which an impairment has been allocated on a collective basis, per class that the Group held as
at December 31, 2014 and 2013 (amounts in millions).
Retail/Individuals
Small and medium enterprises
Private corporations
Bangko Sentral ng Pilipinas
2014
2013
P4,989
5,234
17,069
9,330
P2,529
3,140
17,882
18,150
P36,622
P41,701
(b) Loans and receivables past due but not impaired
The table below shows the aging analysis of past due but not impaired loans and receivables
per class that the Group held as at December 31, 2014 and 2013. Collateralized past due loans
are not considered impaired when the cash flows that may result from foreclosure of the related
collateral are higher than the carrying amount of the loans (amounts in millions).
Individuals
Past due up to 30 days
Past due 31 - 90 days
Past due 91 - 180 days
Over 180 days
Fair value of collateral
P 105
Fair value of collateral
P 130
P 346
Total
P 581
P105
P130
P346
P581
P43
P912
P336
P1,066
Individuals
Past due up to 30 days
Past due 31 - 90 days
Past due 91 - 180 days
Over 180 days
2014
Small and
medium
Private
enterprises
corporation
2013
Small and
medium
Private
enterprises
corporation
P 112
P105
P112
P350
P567
P43
P628
P333
P962
- 30 -
P 350
Total
P 105
P 567
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(c) Loans and receivables individually impaired
The table below shows the gross amount of individually impaired loans and receivables by
class that the Group held as at December 31, 2014 and 2013 (amounts in millions).
Retail/Individuals
Small and medium enterprises
Private corporation
Fair value of collateral
2014
2013
P196
68
305
P209
68
305
569
P582
P316
P155
Credit Quality of Other Financial Assets
(a) Due from Bangko Sentral ng Pilipinas
This account consists of fully performing balances at December 31, 2014 and 2013 as follows:
2014
Clearing account
Special deposit accounts
2013
P14,582,100
17,325,000
P13,367,998
13,050,000
P31,907,100
P26,417,998
(b) Due from other banks
This account consists of fully performing balances presented by credit ratings of counterparty
banks at December 31, 2014 and 2013:
AA- to AA+
A- to A+
BBB to BBUnrated
2014
2013
P1,440,234
479,646
52,719
-
P562,125
344,916
9,046
-
P1,972,599
P916,087
(c) Debt securities, treasury bills and other government securities
This account consists of fully performing balances presented by credit ratings based on Standard
& Poor’s at December 31, 2014 and 2013:
2014
BBB to BBUnrated
AFS investments
HTM investments
Total
P37,694,604
5,270,828
P5,147,778
-
P42,842,382
5,270,828
P42,965,432
P5,147,778
P48,113,210
- 31 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2013
BBB to BB Unrated
AFS investments
HTM investments
Total
P32,593,392
5,375,097
P6,171,861
-
P38,765,253
5,375,097
P37,968,489
P6,171,861
P44,140,350
(d) Other financial assets
The Group’s other financial assets as at December 31, 2014 and 2013 consist mainly of other
investments, other receivables and cash items from various unrated counterparties with good
credit standing.
Concentrations of Risk of Financial Assets with Credit Exposure
An analysis of concentration of credit risk by sector on due from banks, loans and receivables,
AFS investments and HTM investments as of December 31 are shown below (amounts in
millions):
2014
Due from banks
AFS investments
HTM investments
Loans and receivables
Sovereign
Bank
Retail/
Individuals
Total
P31,907
42,965
5,148
-
P1,973
-
P 36,405
P33,880
42,965
5,148
36,405
P80,020
P1,973
P36,405
P118,398
2013
Due from banks
AFS investments
HTM investments
Loans and receivables
Sovereign
Bank
Retail/
Individuals
Total
P26,418
37,968
6,172
-
P916
-
P 41,698
P27,334
37,968
6,172
41,698
P70,558
P916
P41,698
P113,172
- 32 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table presents information on the concentration of credit risk exposure on loans
receivables from customers as to industry as at December 31, 2014 and 2013:
2014
Amount
Financial intermediaries
Wholesale and retail trade
Real estate, renting and business
activities
Manufacturing
Construction
Agriculture
Accommodation and food
service activities
Arts, entertainment and
recreation
Transportation, storage and
communication
Health and social work
Information and communication
Education
Administrative and support
service activities
Professional, scientific and
technical activities
Private households with
employed persons
Mining and quarrying
Hotels and restaurants
Electricity, gas and water
Other community, social and
personal services
Other service activities
Percentage
2013
Amount
Percentage
P11,783,919
7,957,479
31.20%
21.07%
P20,550,740
7,910,138
47.96%
18.46%
5,305,426
3,230,431
2,156,522
1,938,929
14.05%
8.55%
5.71%
5.13%
4,535,122
2,472,485
2,038,097
2,342,259
10.58%
5.77%
4.76%
5.47%
1,360,759
3.60%
-
-
746,580
1.98%
-
-
693,578
415,187
299,635
205,048
1.84%
1.10%
0.79%
0.54%
129,521
0.34%
-
-
31,579
0.08%
-
-
8,309
4,015
-
0.02%
0.01%
-
27,000
510,473
3,600
0.06%
0.00%
1.19%
0.01%
1,505,448
3.99%
1,416,836
3.31%
P37,772,365
100%
P42,849,660
100%
648,443
234,575
159,892
1.51%
0.55%
0.37%
Foreclosed Collaterals
Repossessed properties are sold as soon as practicable and are classified initially under
‘Investment Properties’ in the consolidated statements of financial position until further assessed
and measured. As at December 31, 2014 and 2013, the related foreclosed collaterals have an
aggregate carrying amount of P2.7 billion and P2.8 billion, respectively. Foreclosed collaterals
include real estate (land, building and improvements), auto or chattel, bonds and stocks.
Liquidity Risk
Liquidity risk is generally defined as the current and prospective risk to earnings or capital
arising from the Group’s inability to meet its obligations in all currencies when they become
due without incurring unacceptable losses or costs. The Group’s liquidity management is
characterized by the following elements: a) good management information system, b) effective
analysis of funding requirements under alternative scenarios, c) diversification of funding
sources, and d) contingency planning.
Liquidity Risk Management
The Group’s liquidity management involves maintaining funding capacity to accommodate
fluctuations in asset and liability levels due to changes in the Group’s business operations or
unanticipated events created by customer behavior or capital market conditions. The Group
seeks to ensure liquidity through a combination of active management of liabilities, a liquid
asset portfolio composed substantially of deposits in primary and secondary reserves, and the
securing of money market lines and the maintenance of repurchase facilities to address any
unexpected liquidity situations.
- 33 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group’s net funding requirements are determined by analyzing its future cash flows based
on assumptions of the future behavior of assets, liabilities and off balance sheet items, and then
calculating the cumulative net excess on shortfall over the time frame for the liquidity
assessment. Such analysis of net funding requirements involves construction of a Maturity
Ladder and calculation of cumulative net excess or deficit. Furthermore, an internal liquidity
ratio has been set to determine sufficiency of liquid assets over deposit liabilities. Scenario stress
tests are conducted periodically wherein liquidity managers analyze the behavior of cash flows
under different conditions, i.e. from “normal” conditions to “extreme” situations. Finally, the
BOD sets the Maximum Cumulative Outflow (MCO) Limit in order to control liquidity gap for
each currency.
The table below shows the maturity profile of the Group’s assets and liabilities, based on
contractual undiscounted cash flows (amounts in millions):
2014
Financial Assets
Cash and other cash items
Due from BSP
Due from other banks
AFS investments - debt securities
HTM securities, net
Loans and advances, net
Financial Liabilities
Deposit liabilities
Manager’s checks and demand
drafts outstanding
Accrued interest, taxes and others
expenses
Deferred credits and other
liabilities
Total maturity gap
On demand
Less than
one year
1 to 5 years
Over
5 years
Total
P990
31,907
1,973
9,545
P 879
17,603
P 3,078
3,769
8,098
P 39,887
500
1,159
P990
31,907
1,973
42,965
5,148
36,405
44,415
18,482
14,945
41,546
119,388
70,809
24,953
2,361
4,585
102,708
-
64
-
-
64
-
193
-
-
193
-
-
70,809
-
25,373
163
2,361
4,585
103,128
163
(P26,394)
(P6,891)
P12,584
P36,961
P16,260
On demand
Less than
one year
1 to 5 years
Over
5 years
Total
P1,009
26,418
916
2
P 533
32,534
P 1,001
4,639
4,533
P 36,967
1,000
4,629
P1,009
26,418
916
37,968
6,172
41,698
28,345
33,067
10,173
42,596
114,181
69,271
25,286
2,069
3,718
100,344
2013
Financial Assets
Cash and other cash items
Due from BSP
Due from other banks
AFS investments - debt securities
HTM securities, net
Loans and advances, net
Financial Liabilities
Deposit liabilities
Manager’s checks and demand
drafts outstanding
Accrued interest, taxes and others
expenses
Deferred credits and other
liabilities
Total maturity gap
-
74
-
-
74
-
255
-
-
255
-
-
69,271
-
25,784
169
2,069
3,718
100,842
(P40,926)
P7,283
P8,104
P38,878
P13,339
- 34 -
169
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Market Risk
Market risk the risk of loss, immediate or overtime due to adverse fluctuations in the price or
market value of instruments, products, and transactions in the Group’s overall portfolio. The
value of these financial instruments may change as a result of changes in interest rate, foreign
exchange rate, and other market changes. The Group’s market risk originates from its inventory
of foreign exchange and debt securities. The objective of market risk management is to manage
and control the market risk exposures within acceptable parameters, while optimizing the
return on investments.
The Group manages market risk inherent in the Group’s portfolio using three measures namely:
a) sensitivity analysis of the position or portfolio to market factors, b) factor volatility norm for
estimating the expected movement in the market risk factor, and c) value-at-risk (VaR), which is
a tool for measuring the potential loss from an unlikely adverse event in a normal market
environment.
Interest rate risk
Interest rate risk involves the movements of rates across yield curves of one or more
instruments. The principal risk to which financial instruments are exposed is the risk of loss from
fluctuations in the future cash flows or fair values of financial instrument because of a change in
market interest rates. The Group manages its resources and liabilities so as to ensure that
exposure to fluctuations in interest rates are kept within acceptable limits. Interest rate risk is
managed principally through monitoring interest rate gaps and by having pre-approved limits
for interest rate repricing. Group’s management monitors compliance with these limits.
The details of the Group’s exposure to interest rate risk at the reporting date are shown below in
reference to their contractual repricing or maturity dates (amounts in millions):
2014
Repricing
Financial Assets
Due from BSP
Due from other banks
AFS investments - debt securities
HTM securities, net
Loans and advances, net
Financial Liabilities
Deposit liabilities
Manager’s checks and demand
drafts outstanding
Accrued interest, taxes and others
expenses
Deferred credits and other
liabilities
Less than
one year
1 to 5 years
Over
5 years
Nonrepricing
Total
P 35,894
P 25
P 486
P31,907
1,973
42,965
5,148
-
P31,907
1,973
42,965
5,148
36,405
35,894
25
486
81,993
118,398
95,762
2,361
4,585
102,708
-
-
-
64
64
-
-
-
193
193
-
-
-
163
163
420
103,128
95,762
Total interest gap
-
(P59,868)
- 35 -
2,361
4,585
(P2,336)
(P4,099)
P81,573
P15,270
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2013
Repricing
Less than
one year
Financial Assets
Due from BSP
Due from other banks
AFS investments - debt securities
HTM securities, net
Loans and advances, net
Financial Liabilities
Deposit liabilities
Manager’s checks and demand
drafts outstanding
Accrued interest, taxes and others
expenses
Deferred credits and other
liabilities
Total interest gap
1 to 5 years
P 40,884
Over
5 years
Nonrepricing
Total
P26,418
916
37,968
6,172
144
P26,418
916
37,968
6,172
41,698
71,618
113,172
P 5
P 665
40,884
5
665
94,557
2,069
3,718
-
100,344
-
-
-
74
74
-
-
-
255
255
-
169
169
94,557
-
2,069
-
3,718
498
100,842
(P53,673)
(P2,064)
(P3,053)
P71,120
P12,330
The Group computes stress test on interest sensitive assets and liabilities except for available
for-sale investments through gapping. The details of the reported stress testing on interest gaps at
the reporting date are shown below:
2014
Less than one
month
1 to 3 months
Over 3 months
Total
P56,634
69,353
8,530
2,626
P4,177
689
P69,341
72,668
(12,719)
5,904
3,488
(3,327)
Cumulative asset - liability gap
(P12,719)
(P6,815)
(P3,327)
P -
Foreign-denominated interest
sensitive assets and liabilities
Assets
Liabilities
P1,410
1,456
P179
19,332
P769
2,306
P2,358
23,094
(46)
(19,153)
(1,537)
(20,736)
(P46)
(P19,199)
(P20,736)
Peso-denominated interest
sensitive assets and liabilities
Assets
Liabilities
Gap
Gap
Cumulative asset - liability gap
- 36 -
P -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2013
Less than one
month
1 to 3 months
Over 3 months
Total
Peso-denominated interest
sensitive assets and liabilities
Assets
Liabilities
P55,831
67,688
P9,703
4,272
P1,528
686
P67,062
72,646
Gap
(11,857)
5,431
842
(5,584)
Cumulative asset - liability gap
(P11,857)
(P6,426)
(P5,584)
P -
Foreign-denominated interest
sensitive assets and liabilities
Assets
Liabilities
Gap
P1,213
1,027
186
P 19,172
(19,172)
P 1,711
(1,711)
P1,213
21,910
(20,697)
Cumulative asset - liability gap
P186
(P18,986)
(P20,697)
P -
The details of the reported impact of negative gaps on net interest income at the reporting date
are shown below (amounts in millions):
2014
Peso-denominated
50 bps increase in Php
interest rates
100 bps increase in Php
interest rates
Foreign-denominated
50 bps increase in USD
interest rates (in USD)
100 bps increase in USD
interest rates (in USD)
50 bps increase in USD
interest rates (in Php)
100 bps increase in USD
interest rates (in Php)
Peso-denominated
50 bps decrease in Php
interest rates
100 bps decrease in Php
interest rates
Foreign-denominated
50 bps decrease in USD
interest rates (in USD)
100 bps decrease in USD
interest rates (in USD)
50 bps decrease in USD
interest rates (in Php)
100 bps decrease in USD
interest rates (in Php)
2013
Amount
Percentage to
Net Income
Amount
Percentage to
Net Income
(P61.71)
(6.13%)
(P57.18)
(4.21%)
(123.42)
(12.26%)
(114.35)
(8.42%)
(0.39)
(0.15)
(0.77)
(0.30)
(17.43)
(1.73%)
(6.83)
(0.50%)
(34.86)
(3.46%)
(13.66)
(1.01%)
61.71
6.13%
57.18
4.21%
123.42
12.26%
114.35
8.42%
0.39
0.15
0.77
0.30
17.43
1.73%
6.83
0.50%
34.86
3.46%
13.66
1.01%
- 37 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Bank also calculates price volatility on available for-sale investments (thru Modified
duration) in case of changes in interest rates. The following details are shown below:
2014
Market value
- 50 bps
- 100 bps
+ 50 bps
+ 100 bps
P 151,743
735,415
5,915,913
4,413,925
P 2,020
13,833
217,712
260,658
P 4,039
27,666
435,424
521,316
P (2,020)
(13,833)
(217,712)
(260,658)
P (4,039)
(27,666)
(435,424)
(521,316)
P11,216,996
P494,223
P988,445
(P494,223)
(P988,445)
$ 15,531
33,429
315,834
344,827
$ 79
640
10,384
20,909
$ 158
1,280
20,768
41,818
$ (79)
(640)
(10,384)
(20,909)
$ (158)
(1,280)
(20,768)
(41,818)
$709,621
$32,012
$64,024
($32,012)
($64,024)
Total in Php
P31,748,436
P1,432,217
P2,864,434
(P1,432,217)
(P2,864,434)
Total (Peso and FX)
P42,965,432
P1,926,440
P3,852,879
(P1,926,440)
(P3,852,879)
4.48%
8.97%
(4.48%)
(8.97%)
Market value
- 50 bps
- 100 bps
+ 50 bps
+ 100 bps
P 313,465
4,966,607
5,023,890
P 5,962
196,414
301,350
P 11,924
392,828
602,700
P (5,962)
(196,414)
(301,350)
P (11,924)
(392,828)
(602,700)
P10,303,962
P503,726
P1,007,452
(P503,726)
(P1,007,452)
$ 15,485
259,730
347,888
$ 145
9,636
19,398
$ 290
19,272
38,796
$ (145)
(9,636)
(19,398)
$ (290)
(19,272)
(38,796)
$623,103
$29,179
$58,358
($29,179)
($58,358)
Total in Php
P27,664,527
P1,295,489
P2,590,978
(P1,295,489)
(P2,590,978)
Total (Peso and FX)
P37,968,489
P1,799,215
P3,598,430
(P1,799,215)
(P3,598,430)
4.74%
9.48%
(4.74%)
(9.48%)
Peso-denominated
Less than one year
1 to 3 years
3 to 5 years
5 to 15 years
Over 15 years
Foreign-denominated
Less than one year
1 to 3 years
3 to 5 years
5 to 15 years
Over 15 years
Total in USD
As percentage of AFS
2013
Peso-denominated
Less than one year
1 to 3 years
3 to 5 years
5 to 15 years
Over 15 years
Foreign-denominated
Less than one year
1 to 3 years
3 to 5 years
5 to 15 years
Over 15 years
Total in USD
As percentage of AFS
Foreign Exchange Risk
Foreign exchange risk arises on financial instruments that are denominated in a foreign
currency other than the functional currency in which they are measured. The Group takes on
exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its
financial position and cash flows.
- 38 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Information on the Group’s foreign-denominated monetary assets and liabilities in their
Philippine Peso equivalents follows (amounts in thousands):
2014
Financial Assets
Cash and other cash items
AFS investments
HTM investments
Loans and receivables
Financial Liabilities
Deposit liabilities
Savings
Time
Accrued interest payable
Deferred credits and other liabilities
Net foreign currency denominated assets
In Dollars
In Peso
$7,098
709,621
21,184
8,236
P317,579
31,748,436
947,778
368,652
746,139
33,382,445
$32,553
638,043
1,059
547
P1,456,437
28,546,059
47,381
24,656
672,202
30,074,533
$73,937
P3,307,912
2013
Financial Assets
Cash and other cash items
AFS investments
HTM investments
Loans and receivables
Financial Liabilities
Deposit liabilities
Savings
Time
Accrued interest payable
Deferred credits and other liabilities
Net foreign currency denominated assets
In Dollars
In Peso
$2,620
623,103
33,151
7,881
P116,310
27,664,527
1,471,861
349,513
666,755
29,602,211
23,125
599,831
1,296
506
1,026,682
26,631,300
57,556
22,166
624,758
27,737,704
$41,997
P1,864,507
Foreign currency liabilities generally consist of foreign currency deposits in the Group's FCDU,
which are generated from remittances to the Philippines by Filipino expatriates and overseas
Filipino workers who retain for their own benefit or for the benefit of a third party.
Foreign currency deposits are generally used to fund the Group's foreign currency denominated
loans and FCDU investment portfolio. Banks are required by the BSP to match foreign currency
assets with the foreign currency liabilities held through FCDUs. In addition, the BSP requires a
30% liquidity reserve on all foreign currency liabilities held through FCDUs.
Group policy is to maintain foreign currency exposure within acceptable limits and within
existing regulatory guidelines. The Group believes that its profile of foreign currency exposure
on its assets and liabilities is within conservative limits for a financial institution engaged in the
type of business in which the Group is engaged.
- 39 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Operational Risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes
associated with the Group’s processes, personnel, technology and infrastructure, and from
external factors other than credit, market, and liquidity risks such as those arising from legal and
regulatory requirements and generally accepted standards of corporate behavior. Operational
risks arise from Group operations.
The Group’s objective is to manage operational risk so as to balance the avoidance of financial
losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control
procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address
operational risk is assigned to senior management. This responsibility is supported by the
development of overall standards for the management of operational risk in the following areas:
•
•
•
•
•
•
•
•
•
•
Requirements for appropriate segregation of duties, including the independent
authorization of transactions;
Requirements for the reconciliation and monitoring of transactions;
Compliance with regulatory and other legal requirements;
Documentation of controls and procedures;
Requirements for the periodic assessment of operational risks faced, and the adequacy
of controls and procedures to address the risks identified;
Requirements for the reporting of operational losses and proposed remedial action;
Development of contingency plans;
Training and professional development;
Ethical and business standards; and
Risk mitigation, including insurance where this is effective.
Fair Value Estimation
The table below presents a comparison of carrying amounts and estimated fair values of all of
the Group’s financial instruments as at December 31:
2014
Carrying
amount
Financial Assets
Cash and other cash items
Due from BSP
Due from other banks
Available-for-sale securities
Held-to-maturity securities, net
Loans and advances, net
Financial Liabilities
Deposit liabilities
Manager’s checks and
demand drafts outstanding
Accrued interest, taxes and
others expenses
Deferred credits and other
liabilities
Fair value
2013
Carrying
amount
Fair value
P989,827
31,907,100
1,972,599
43,478,740
5,147,778
36,405,168
P989,827
31,907,100
1,972,599
43,478,740
5,558,939
36,405,168
P1,008,992
26,417,998
916,087
38,532,327
6,171,861
41,697,860
P1,008,992
26,417,998
916,087
38,532,327
6,739,503
41,697,860
P102,708,388
P102,708,388
P100,343,678
P100,343,678
64,110
64,110
73,995
73,995
192,703
192,703
254,956
254,956
162,636
162,636
169,117
169,117
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value:
Cash and other cash items, due from BSP and other banks - The carrying amounts approximate
their fair values in view of the relatively short-term maturities of these instruments.
- 40 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Debt securities - Fair values are generally based on quoted market prices. If the market prices
are not readily available, fair values are estimated using either values obtained from
independent parties offering pricing services or adjusted quoted market prices of comparable
investments or using the discounted cash flow methodology.
Equity securities - For publicly traded equity securities, fair values are based on quoted prices
published in the Philippine equity markets. For unquoted equity securities for which no reliable
basis for fair value measurement is available, these are carried at cost net of impairment, if any.
Loans and receivables, net - Fair values of loans and receivables are estimated using the
discounted cash flow methodology, using the Group’s current incremental lending rates for
similar types of loans and receivables.
Deposit liabilities (time, demand and savings deposits) - Fair values of time deposits are
estimated using the discounted cash flow methodology, using the Group’s current incremental
borrowing rates for similar borrowings with maturities consistent with those remaining for the
liability being valued. For demand and savings deposits, carrying amounts approximate fair
values considering that these are currently due and demandable.
Manager’s checks and accrued interest and other expenses - Carrying amounts approximate fair
values due to the short-term nature of the accounts.
Other liabilities - Quoted market prices are not readily available for these liabilities. These are
reported at cost and are not significant in relation to the Group’s total portfolio.
Fair Value Hierarchy
As at December 31, 2014 and 2013, the fair value hierarchy of the Group’s financial
instruments measured at fair values is presented below (amounts in millions):
Level 1
AFS investments
Government securities
Listed equity securities
Others
HTM investments
Government securities
P37,695
513
5,271
HTM investments
Government securities
P -
Level 3
Total
P -
P37,695
513
5,271
5,148
-
-
5,148
P48,627
P -
P -
P48,627
Level 1
AFS investments
Government securities
Listed equity securities
Others
2014
Level 2
P33,819
564
4,149
2013
Level 2
P -
Level 3
P -
Total
P33,819
564
4,149
6,172
-
-
6,172
P44,704
P -
P -
P44,704
There were no transfers between levels 1 and 2 during the year.
- 41 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Capital Risk Management
The primary objectives of the Group’s capital management are to ensure that it complies with
externally imposed capital requirements and that it maintains strong credit ratings and healthy
capital ratios in order to support its business and to maximize shareholders’ value.
The Group manages its capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of its activities. In order to maintain or adjust
the capital structure, the Group may adjust the amount of dividend payment to shareholders,
return capital to shareholders or issue capital securities. No changes were made in the
objectives, policies and processes as at December 31, 2014 and 2013.
Regulatory Qualifying Capital
The Parent Bank manages its capital following the framework of Basel Committee on Banking
Supervision Accord II (Basel II) and its implementation in the Philippines by the BSP. The BSP
through its Circular 538 requires each bank and its financial affiliated subsidiaries to keep its
Capital Adequacy Ratio (CAR) - the ratio of qualified capital to risk-weighted exposures - to be
no less than 10%. In quantifying its CAR, the Parent Bank currently uses the Standardized
Approach (for credit risk and market risk) and the Basic Indicator Approach (for operational
risk). Capital adequacy reports are filed with the BSP every quarter.
Under existing BSP regulations, the determination of the Parent Bank’s compliance with
regulatory requirements and ratios is based on the amount of the Bank’s unimpaired capital
(regulatory capital) as reported to the BSP.
In addition, qualifying capital and risk-weighted assets are computed based on BSP
regulations. The risk-based capital ratio of a bank, expressed as a percentage of qualifying
capital to risk-weighted assets, should not be less than 10% for head office and branches.
Risk-weighted assets consist of total assets less cash on hand, due from BSP, loans covered by
hold-out on or assignment of deposits, loans or acceptances under letters of credit to the extent
covered by margin deposits and other non-risk items determined by the Monetary Board of the
BSP.
On August 4, 2006, the BSP, under BSP Circular No. 538, issued the prescribed guidelines
implementing the revised risk-based capital adequacy framework for the Philippine banking
system to conform to the capital adequacy framework of Basel Committee on Banking
Supervision Accord II (Basel II). The BSP through its Circular 538 requires each bank and its
financial affiliated subsidiaries to keep its Capital Adequacy Ratio (CAR) - the ratio of qualified
capital to risk-weighted exposures - to be no less than 10%. The qualifying capital of the
Parent Bank consists of core tier 1 capital and tier 2 capital. Tier 1 capital comprises paid-up
capital stock, surplus including net income for the year, and surplus reserves, less deductions
such as deferred income tax, unsecured credit accommodations to DOSRI, and unrealized fair
value losses on available-for-sale investments. Tier 2 capital includes net unrealized fair value
gains on available-for-sale investments, unsecured subordinated debt, and general loan loss
provisions for BSP reporting purposes.
The Basel II framework following BSP Circular 538 took into effect on July 1, 2007 and was
relevant until 2013. As at December 31, 2013, the Bank’s CAR under BSP Circular No. 538 is
38.33%.
Effective January 1, 2014, the BSP, through its Circular 781, requires each bank and its
financial affiliated subsidiaries to adopt new capital requirements in accordance with the
provisions of Basel III. The new guidelines are meant to strengthen the composition of the
Bank's capital by increasing the level of core capital and regulatory capital. The Circular sets
out minimum Common Equity Tier 1 (CET1) ratio and Tier 1 Capital ratios of 6.0% and 7.5%,
- 42 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
respectively. A capital conservation buffer of 2.5%, comprised of CET1 capital, was likewise
imposed. The minimum required capital adequacy ratio remains at 10% which includes the
capital conservation buffer. In addition, existing capital requirements as at December 31, 2010
which do not meet the eligibility criteria for capital instruments under the revised capital
framework shall no longer be recognized as capital upon the effectivity of Basel III.
The CAR of the Parent Bank under the Basel III and Basel II framework for the years ended
December 31, 2014 and 2013, respectively, are shown in the table below.
2014
2013
P19,153
172
P16,588
172
Gross qualifying capital
Less: Regulatory adjustments/required deductions
19,325
-
16,760
-
Total qualifying capital
19,325
16,760
Risk weighted assets
CAR (%)
51,317
37.65%
43,726
38.33%
Tier 1 capital
Tier 2 capital
The Parent Bank has fully complied with the CAR requirement of the BSP for each of the
period presented.
In October 9, 2014, BSP’s Monetary Board approved the new minimum capitalization for
banks through Circular 854, amending Subsection X111.1 of the Manual of Regulation for
Banks (MORB). The Parent Bank, as a universal bank with 58 branches to date, including
Head Office, is required to maintain a minimum capital of P15 billion. As at December 31,
2014, the Parent Bank will comply with the required capitalization and will submit to the
Bangko Sentral ng Pilipinas (BSP) its capital build up program within the required period.
As part of the reforms of the Philippine Stock Exchange (PSE) to expand capital market and
improve transparency among listed firms, PSE requires listed entities to maintain a minimum of
ten percent (10%) of their issued and outstanding shares, exclusive of any treasury shares, held
by the public. The Parent Bank fully complied with this requirement.
7. Cash and Cash Equivalents
Cash and other cash items
Due from BSP
Due from other banks
2014
2013
P989,827
31,907,100
1,972,599
P1,008,992
26,417,998
916,087
P34,869,526
P28,343,077
Due from other banks represents balances of funds on deposit with other domestic and foreign
banks.
Effective interest earned on BSP deposits ranging from 2% to 2.50% and 2% to 3.66% in 2014
and 2013, respectively.
Effective interest earned on deposits with other banks is .05% in 2014 and 2013.
- 43 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. Loans and Receivables
This account consists of:
Note
5
Loans receivable from customers
Other receivables
Accrued interest receivables
Sales contract receivables
Accounts receivable
9
Allowance for credit and impairment losses
2014
2013
P37,772,365
P42,849,660
793,763
30,502
25,892
911,341
32,044
26,120
38,622,522
(2,217,662)
43,819,165
(2,121,305)
P36,404,860
P41,697,860
2014
2013
P25,781,498
P21,649,979
9,330,000
2,454,733
18,150,000
2,442,669
206,134
607,012
P37,772,365
P42,849,660
Receivable from customers consists of:
Loans and receivables
Repurchase agreements and certificate of
assignments
Agrarian reform
Customers’ liabilities under letter of
credit/trust receipts
Interest income on loans and receivables consists of:
Receivables from customers
Items in litigation
Sales contract receivables
2014
2013
2012
P2,036,359
25,158
1,711
P2,048,387
16,415
2,333
P2,506,197
15,312
2,690
P2,063,228
P2,067,135
P2,524,199
BSP Parent Bank’s Reporting
Past due loans amounted to P1.15 billion (3.04% of total loan portfolio) and P1.15 billion
(2.68% of total loan portfolio) as at December 31, 2014, and 2013, respectively.
BSP Circular 351 issued on September 19, 2002, authorizes banks that have no unbooked
useful valuation reserves and capital adjustments required by the said regulatory body, to
exclude from non-performing classification, loans classified as loss in the latest examination of
the BSP which are fully covered by allowance for probable losses, provided that, interest on
said loans shall not be accrued.
Non-performing accounts (over 30 days past due), net of accounts in the “loss” category and
covered with 100% reserves (excluded under BSP Circular 351), are as follows:
Non-performing accounts (NPL 30)
Loss category loans with 100% reserves
Net NPL 30
- 44 -
2014
2013
P1,114,639
(194,405)
P1,148,806
(253,621)
P920,234
P895,185
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Non-performing loans (NPLs) represented approximately 2.95% and 2.68% of the loan
receivable portfolio as at December 31, 2014 and 2013, respectively.
Under banking regulations, NPLs shall, as a general rule, refer to loan accounts whose principal
and/or interest is unpaid for thirty (30) days or more after due date or after they have become
past due in accordance with existing rules and regulations. This shall apply to loans payable in
lump sum and loans payable in quarterly, semi-annual, or annual installments, in which case,
the total outstanding balance thereof shall be considered non-performing.
In the case of receivables that are payable in monthly installments, the total outstanding
balance thereof shall be considered non-performing when three (3) or more installments are in
arrears. In the case of receivables that are payable in daily, weekly, or semi-monthly
installments, the total outstanding balance thereof shall be considered non-performing at the
same time that they become past due in accordance with existing BSP regulations, i.e., the
entire outstanding balance of the receivable shall be considered as past due when the total
amount of arrearages reaches ten percent (10%) of the total receivable balance. Restructured
receivables which do not meet the requirements to be treated as performing receivables shall
also be considered as NPLs.
As at December 31, 2014 and 2013, there were loans to Bank Directors, Officers, Stockholders
and Related Interests (DOSRI) amounted to P985 million and nil, respectively.
The range of average interest rates (%) of loans and receivables of the Bank for the years ended
December 31 follows:
Commercial loans
Peso
Foreign
Real estate mortgages
2014
2013
1.60% - 9.00%
4.50% - 9.00%
1.85% - 9.00%
1.85% - 9.00%
9. Allowance for Credit and Impairment Losses
Allowance for credit and impairment losses relate to the following:
Loans receivable from customers
Other receivables
Accrued interest receivable
Accounts receivable
Note
5
8
2014
2013
P2,119,910
P1,965,620
73,460
24,292
131,393
24,292
P2,217,662
P2,121,305
With the foregoing level of allowance for credit and impairment losses, management believes
that the Group has sufficient allowance to take care of any losses that the Group may incur
from the non-collection or non-realization of its receivables and other risk assets.
- 45 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The changes in the allowance for credit and impairment losses on loans and receivables were
as follows:
2014
2013
Balance at beginning of year
Provisions for the year
Reclassification (recovery)
P2,121,305
107,757
(11,400)
P2,053,177
67,836
292
Balance at end of year
P2,217,662
P2,121,305
2014
2013
P37,694,604
5,270,828
P33,819,070
4,149,419
42,965,432
37,968,489
513,140
168
563,670
168
513,308
563,838
P43,478,740
P38,532,327
2014
2013
P694,877
42,783,863
P 38,532,327
P43,478,740
P38,532,327
10. Available-for-sale Investments
This account consists of:
Debt securities
Government securities
Others
Equity securities
Listed
Unlisted
Current
Non-current
Unlisted equity securities
This account comprise of stocks of private corporations that are carried at cost since fair value
cannot be reliably estimated due to lack of reliable estimates of future cash flows and discount
rates necessary to calculate the fair value. There is currently no market for these investments
and the Group intends to hold them for the long term.
The movements in available-for-sale investments are summarized as follows:
Balance at beginning of year
Additions
Disposals
Amortization of discount - net
Foreign exchange gain
Unrealized fair value gain (loss)
- 46 -
2014
2013
P38,532,327
5,902,631
(3,340,881)
147,288
196,669
2,040,706
P38,934,750
10,491,171
(8,848,094)
25,495
1,834,558
(3,905,553)
P43,478,740
P38,532,327
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Net unrealized gain
AFS investments include net unrealized fair value gain of P4.3 billion and P2.3 billion as at
December 31, 2014 and 2013, respectively. The net unrealized fair value gains are recognized
in other comprehensive income. No impairment loss on permanent decline in value on AFS
investments was charged to operations in 2014, 2013 and 2012.
The movement in net unrealized gains (loss) on AFS investments is as follow:
2014
2013
2012
Beginning balance
Fair value adjustments for the year
P2,296,245
2,040,706
P6,201,798
(3,905,553)
P3,298,262
2,903,536
Ending balance
P4,336,951
P2,296,245
P6,201,798
The range of average interest rates (%) of AFS debt securities of the Group for the years ended
December 31 follows:
Peso-denominated
Foreign-denominated
2014
2013
3.25% - 6.25%
2.75% - 7.75%
3.25% - 6.25%
4.00% - 7.75%
11. Held-to-maturity Investments
This account consists of government securities amounting to P5,147,778 and P6,171,861 as at
December 31, 2014 and 2013, respectively.
The movement in held-to-maturity investments is summarized as follows:
Beginning balance
Maturities
Amortization of discount
Foreign exchange gain
Current
Non-current
- 47 -
2014
2013
P6,171,861
(1,036,880)
1,459
11,338
P6,861,786
(825,605)
25,724
109,956
P5,147,778
P6,171,861
2014
2013
P878,960
4,268,818
P532,776
5,639,085
P5,147,778
P6,171,861
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The range of average interest rates (%) of HTM investments of the Bank for the years ended
December 31 follows:
Peso-denominated
Foreign-denominated
2014
2013
6.38% - 8.38%
8.25% - 8.88%
5.00% - 9.00%
8.25% - 8.88%
12. Bank’s Premises, Furniture, Fixtures and Equipment
Land
Cost
January 1, 2013
Additions
For the Years Ended December 31, 2014 and 2013
Furniture,
Building and
Fixtures and
Transportation
Improvements
Equipment
Equipment
Total
P1,773,622
61,308
P833,123
20,899
P430,921
11,978
P121,509
17,302
P3,159,175
111,487
December 31, 2013
Additions
Disposals
1,834,930
99,577
(49,036)
854,022
81,350
(21,064)
442,899
27,768
(12,813)
138,811
9,191
(6,432)
3,270,662
217,886
(89,345)
December 31, 2014
1,885,471
914,308
457,854
141,570
3,399,203
Accumulated depreciation
and amortization:
January 1, 2013
Provision for the year
-
286,035
39,423
365,052
24,566
90,334
11,518
741,421
75,507
December 31, 2013
Provision for the year
Disposals
-
325,458
35,726
(21,064)
389,618
21,862
(12,813)
101,852
13,573
(6,432)
816,928
71,161
(40,309)
December 31, 2014
-
340,120
398,667
108,993
847,780
Carrying value:
December 31, 2014
P1,885,471
P574,188
P59,187
P32,577
P2,551,423
December 31, 2013
P1,834,930
P528,564
P53,281
P36,959
P2,453,734
13. Investment Properties
For the Years Ended December 31, 2014 and 2013
Building and
Land
Improvements
Total
Cost:
January 1, 2013
Additions
Disposals
P1,701,757
72,430
(60,670)
P1,592,523
9,714
(1,829)
P3,294,280
82,144
(62,499)
December 31, 2013
Additions
Disposals
1,713,517
1,600,408
3,313,925
4,794
(5,402)
9,731
(12,239)
14,525
(17,641)
December 31, 2014
1,712,909
1,597,900
3,310,809
P -
P435,406
23,466
(1,829)
P435,406
23,466
(1,829)
December 31, 2013
Provision for the year
Disposals
-
457,043
22,326
(7,463)
457,043
22,326
(7,463)
December 31, 2014
-
471,906
471,906
Accumulated depreciation and amortization:
January 1, 2013
Provision for the year
Disposals
- 48 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Land
Building and
Improvements
Total
Accumulated impairment losses:
January 1, 2013
Provision for the year
24,055
879
2,202
(1,171)
26,257
(292)
December 31, 2013
Provision for the year
24,934
-
1,031
-
25,965
-
December 31, 2014
24,934
1,031
25,965
December 31, 2014
P1,687,975
P1,124,963
P2,812,938
December 31, 2013
P1,688,583
P1,142,334
P2,830,917
Carrying Value:
The Group’s investment properties consist entirely of real estate properties acquired in
settlement of loans and receivables. The difference between the fair value of the investment
property upon foreclosure and the carrying value of the loan is recognized under ‘Gain on asset
foreclosure and dacion transactions’ in the consolidated statement of income.
The aggregate fair value of the investment properties amounted to P4.4 billion and P3.4 billion
in 2014 and 2013, respectively. Fair value has been determined based on valuations made by
independent and/or in-house appraisers. Valuations were derived on the basis of recent sales of
similar properties in the same area as the investment properties and taking into account the
economic conditions prevailing at the time the valuations were made.
Direct operating expenses from investment properties of the Group not generating rent income
amounted to P48.39 million and P69.12 million in 2014 and 2013, respectively.
14. Other Assets
This account consists of:
Prepaid expenses
Software cost
Documentary stamps
Other investments
Returned checks and other cash items
Inter-office float items
Miscellaneous
2014
2013
P103,886
59,807
22,110
21,323
3,770
23,398
P54,177
14,171
20,756
21,023
1,437
22,191
19,611
P234,294
P153,366
Inter-office float items represent net due from/to head office accounts which arise from timing
differences on recognition and are subsequently closed after the reporting date.
Prepaid expenses consist of advance payment for taxes, insurance premium and advertising
expenses.
Other investments represent required minimum amount of investment infused to the various
banking facilities to avail of its services and support the viability and sustainability of the
banking network system.
- 49 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Miscellaneous assets consist mainly of utility deposits, security deposits and bid amount on
auctioned properties.
Movements in software cost are as follows:
Cost:
Beginning balance
Additions
Accumulated amortization:
Beginning balance
Amortization
2014
2013
P29,811
52,107
P29,733
78
81,918
29,811
15,640
6,471
10,333
5,307
22,111
15,640
P59,807
P14,171
15. Deposit Liabilities
Non-FCDU deposit liabilities are subject to liquidity reserves equivalent to 11.00% starting
July 15, 2005 (under BSP Circular No. 491), and statutory reserve equivalent to 10.00%
starting August 5, 2011 (under BSP Circular No. 732). Prior to August 5, 2011, statutory
reserve equivalent was 9.00%. In accordance with BSP Circular No. 832 issued in 2014,
reserve requirement effective on the May 30, 2014 reserve week shall be 20.00% for deposits
and deposit substitutes and 4.00% for long-term negotiable certificates of deposits.
As at December 31, 2014 and 2013, the Bank is in compliance with such regulations.
Demand
Savings
Time
Current
Non-current
2014
2013
P1,195,265
68,632,255
32,880,867
P1,052,366
68,217,653
31,073,659
P102,708,387
P100,343,678
2014
2013
P95,761,694
6,946,693
P94,556,400
5,787,278
P102,708,387
P100,343,678
Available reserves of the Bank per 4th quarter report submitted to the BSP are as follows:
Cash and other cash items
Due from BSP
- 50 -
2014
2013
P989,827
31,907,100
P1,008,992
26,417,998
P32,896,927
P27,426,990
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Interest expense related to the deposit liabilities account consists of:
Savings
Time
2014
2013
2012
P1,510,161
989,086
P1,955,299
1,016,146
P2,138,080
953,356
P2,499,247
P2,971,445
P3,091,436
16. Accrued Taxes, Interest and Other Expenses
This account consists of:
Accrued interest payable
Accrued income and other taxes payable
Others
2014
2013
P51,865
19,543
121,295
P66,363
15,401
173,192
P192,703
P254,956
Others represent accrued employee incentives.
17. Deferred Credits and Other Liabilities
This account consists of:
Accounts payable
Deferred revenue
Marginal deposits
Due to the Treasurer of the Philippines
Inter-office float items
Outstanding acceptances
Cash letters of credit
Sundry credits
Others
2014
2013
P34,170
27,421
23,445
11,659
11,398
54,544
P41,619
20,494
311
11,659
20,564
109
17,928
56,433
P162,637
P169,117
Inter-office float items represent net due from/to head office accounts which arise from timing
differences on recognition and are subsequently closed after the reporting date.
Accounts payable comprise of accrued payroll and tellers’ honorarium.
Deferred revenue consists of unearned rental income and advance deposits.
Others consist mainly of withholding taxes payable, deposits, dormant deposit accounts and
other miscellaneous liabilities.
2014
Current
Non-current
- 51 -
2013
P140,489
22,148
P146,728
22,389
P162,637
P169,117
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Equity
The Group’s share capital consists of:
2014
2013
Authorized – 2.2 billion shares at P10 par value
P22,000,000
P22,000,000
Issued and fully paid:
Balance at beginning of year (1.0 billion shares)
Issuances
10,000,000
-
10,000,000
-
P10,000,000
P10,000,000
2014
2013
P320
33,342
38,658
P320
33,342
38,658
P72,320
P72,320
Balance at end of year (1.0 billion shares)
Reserve
The Bank’s reserves consist of:
Reserve for trust business
Reserve for self-insurance
Reserve for contingencies
In compliance with existing BSP regulations, 10.00% of the Parent Bank’s income from trust
business is appropriated to surplus reserves. This yearly appropriation is required until the
surplus reserve for trust business equals 20.00% of the Parent Bank’s regulatory net worth.
Reserve for self-insurance represents the amount set aside to cover losses due to fire,
defalcation by and other unlawful acts of the Parent Bank’s personnel or third parties.
19. Earnings Per Share
Basic EPS amounts are calculated by dividing the net income for the year by the weighted
average number of common shares outstanding during the year (adjusted for stock dividends).
The following reflects the income and share data used in the basic earnings per share
computations (in hundreds):
Net income
Weighted average of common
shares outstanding
2014
2013
2012
P1,006,000,407
P1,357,021,713
P1,711,030,778
1,000,000,000
1,000,000,000
1,000,000,000
P1.01
P1.36
P1.71
As at December 31, 2014, 2013 and 2012, there were no outstanding dilutive potential
common shares.
- 52 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Other Operating Income
This account consists of:
Gain on sale of investments
Rental income
Dividend income
Gain on sale of assets
Recovery from charged-off
assets
Loss from trust operations
Miscellaneous
2014
2013
2012
P284,320
33,070
19,409
18,361
P1,049,201
32,029
19,434
19,661
P979,927
35,844
12,509
29,474
(3,463)
19,980
(3,712)
38,409
69
(3,558)
7,306
P371,677
P1,155,022
P1,061,571
2014
2013
2012
P632,157
41,119
P644,795
39,105
P609,144
36,452
13,473
12,478
12,278
11,959
11,856
12,065
P699,227
P708,137
P669,517
21. Compensation and Employee Benefits
This account consists of:
Salaries and other employee benefits
Retirement
SSS, HDMF and Philhealth
premiums
Dental, medical and hospitalization
Retirement benefits
The Parent Bank has a funded, defined contribution (DC) plan for qualifying employees. Under
the plan, the employees are entitled to retirement benefits in relation to the proportion of the
fair value of the total contributions on their attainment of the retirement age. The assets of the
fund are being administered by trustees and are held separately from those of the Bank.
Under the R.A. 7641 – “The Retirement Pay Law”, the Parent Bank also provides for its
qualified employees a defined benefit (DB) minimum guarantee, which is equivalent to a
certain percentage of the monthly salary payable to an employee at normal retirement age
with the required credited years of service.
As at December 31, 2014 and 2013, the present value of the DB minimum guarantee under
the Retirement Pay Law amounted to P8.2 million and P8.1 million, respectively. The Parent
Bank has no unallocated DC plan assets as at December 31, 2014 and 2013.
The Parent Bank is exposed to the risk of changes in government securities yields, wherein a
decrease in government securities yields will increase the projected DB minimum guarantee,
although this will be partially offset by an increase in the value of any unallocated plan assets’
securities holdings.
- 53 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Following are the details of the present value of the DB minimum guarantee obligation:
Present value of obligation, beginning
Interest expense
Current service cost
Remeasurement loss (gain) on:
Experience adjustments
Changes in financial assumptions
2014
2013
P8,063
395
152
P8,116
438
117
(381)
2
(655)
47
P8,231
P8,063
Following are the details of the total retirement expense recognized for the DB minimum
guarantee obligation and DC plan contributions:
Interest expense
Current service cost
Additional retirement expense recognized
Retirement expense on DC plan
(contribution during the year)
2014
2013
P395
152
P438
117
547
555
40,572
38,550
P41,119
P39,105
The Parent Bank’s assumptions are based on actual historical experience and external data
regarding salary and discount rate trends. The Parent Bank’s considers that it is impracticable
to disclose with sufficient reliability the possible effects of sensitivities surrounding the
estimation of DB obligation.
22. Occupancy and Equipment - Related Expenses
This account consists of:
Depreciation and amortization
Rentals
2014
2013
2012
P99,958
78,011
P104,280
68,308
P86,029
62,675
P177,969
P172,588
P148,704
- 54 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Other Operating Expenses
This account consists of:
Insurance
Taxes and licenses
Security, messengerial and janitorial
Communication, light and water
Supervision and examination fees
Litigation on assets acquired
Promotion and business development
Information technology
Documentary stamps
Repairs and maintenance
Stationary and office supplies
Professional fees
Transportation
Magazines and periodicals
Donation and contribution
Miscellaneous
2014
2013
2012
P207,702
195,019
133,072
55,299
36,314
24,298
19,665
16,806
14,967
10,572
6,761
6,118
5,532
467
452
35,114
P189,924
170,726
114,178
54,272
31,214
26,519
14,419
13,977
5,240
10,562
7,237
3,455
4,725
470
1,312
21,381
P181,631
203,886
101,414
55,709
28,791
36,667
13,716
7,225
9,381
7,907
6,857
4,090
5,367
486
1,002
17,166
P768,158
P669,611
P681,295
24. Leases
Operating lease commitments - Group as a lessor
Included in Parent Bank’s premises are properties of which a portion is being leased out to earn
rentals. The Parent Bank determines that a significant portion of these leased properties is being
used for administrative purposes and or for Parent Bank operations. These non-cancellable
leases have escalation clauses based on prevailing market condition.
Rent income from leased properties which is included in ‘Miscellaneous income’ account in the
consolidated statement of income amounted to P33.0 million, P32.0 million and P35.8 million
for the years ended December 31, 2014, 2013 and 2012, respectively (see Note 20).
Future minimum rental receivables under operating leases as at December 31 are as follows:
Within one year
After one year but not more than five years
After more than five years
2014
2013
P25,894
98,400
265,550
P25,958
124,493
265,550
P389,844
P416,001
Operating lease commitments - Group as a lessee
The Parent Bank leases a number of branch and office premises under non-cancellable
operating leases. The leases typically run for a period up to 5 years, with the option to renew
the lease after that date. Lease payments are increased every three to five years to reflect market
rentals.
Rental expense which is included in “Occupancy and equipment-related expenses” amounted
to P78.01 million, P68.31 and P62.68 million for the years ended December 31, 2014, 2013
and 2012, respectively (see Note 22).
- 55 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Future minimum rental payables under operating leases as at December 31 are as follows:
Within one year
After one year but not more than five years
After more than five years
2014
2013
P144,385
86,593
50,529
P61,076
108,420
84,423
P281,507
P253,919
25. Related Party Transactions
In the ordinary course of business, the Group has transactions with related parties
summarized as follows:
The following transactions were carried out with related parties:
Related Party
Transactions
2014
Amount
Terms and conditions
Centro Escolar University - Under common control
Rent
Income
P24 million
Rental
expense
0.61 million
Investment in
shares of stock
Savings and
current
deposits
2.2 million
9.64 million
Lease transaction – lessor. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
Lease transaction – lessee. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
206,498 common shares; fully paid;
unimpaired.
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Euro-Med Laboratories, Inc. - Under common control
Savings and
current
deposits
Investment in
shares of stock
15 thousand
496.55 million
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
365,111,291 common shares; fully paid;
unimpaired.
Manila Bulletin Publishing Corp. - Under common
control
Advertising
services
7.43 million
Savings and
current
deposits
Rental income
30.64 million
1.54 million
Forward
- 56 -
Advertising rates charged are the same as
charged to regular customers; Unsecured
and will be settled in cash.
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Lease transaction – lessor. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Related Party
Transactions
2014
Amount
Terms and conditions
CafeFrance Corporation - Under common control
Savings and
current
deposits
Rental income
30 thousand
0.6 million
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Lease transaction – lessor. Lease term is for
one (1) year period and renewable
annually upon mutual agreement of the
parties.
Cocusphil Development Corporation - Under common control
Related Party
Savings and
current
deposits
15 thousand
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Rental expense
1.89 million
Lease transaction – lessee. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
Transactions
2013
Amount
Terms and conditions
Centro Escolar University - Under common control
Rent
Income
P 24 million
Lease transaction – lessor. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
Rental
expense
0.53 million
Lease transaction – lessee. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
Centro Escolar University - Under common control
Investment in
shares of stock
2.2 million
206,498 common shares; fully paid;
unimpaired.
Savings and
current
deposits
P6.5 million
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Euro-Med Laboratories, Inc. - Under common control
Savings and
current
deposits
Investment in
shares of stock
P127.81million
547.67 million
Forward
- 57 -
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
365,111,291 common shares; fully paid;
unimpaired.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Related Party
Transactions
2013
Amount
Terms and conditions
Manila Bulletin Publishing Corp. - Under common
control
Advertising
services
P2.10 million
Advertising rates charged are the same as
charged to regular customers; Unsecured
and will be settled in cash.
Savings and
current
deposits
17.83 million
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Rental income
1.20 million
Lease transaction – lessor. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
CafeFrance Corporation - Under common control
Savings and
current
deposits
Rental income
0.033 million
0.60 million
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Lease transaction – lessor. Lease term is for
one (1) year period and renewable
annually upon mutual agreement of the
parties.
Cocusphil Development Corporation - Under common control
Savings and
current
deposits
Rental expense
2.20 million
1.88 million
Earn interest at the prevailing bank deposit
rates; unimpaired; and unrestricted as to
withdrawals.
Lease transaction – lessee. Lease term is
for one (1) year period and renewable
annually upon mutual agreement of the
parties.
Compensation of Key Management Personnel
Compensation of key management personnel included under compensation and employee
benefits in the statements of income follows:
Short-term employee benefits
Post-employment pension benefits
2014
2013
2012
P143,484
25,929
P142,493
36,823
P123,188
24,281
P169,413
P179,316
P147,469
Regulatory Reporting
In the ordinary course of business, the Parent Bank has loans and other transactions with its
directors, officers, stockholders and related interests (DOSRI). Under the Parent Bank’s policy,
these loans and other transactions are made substantially on the same terms as with other
individuals and businesses of comparable risks. The amount of individual loans to DOSRI, of
which 70% must be secured, should not exceed the amount of their respective deposits and
book value of their respective investments in the Parent Bank. In the aggregate, loans to
DOSRI generally should not exceed the Parent Bank’s total capital funds or 15.00% of the
Parent Bank’s total loan portfolio, whichever is lower. As at December 31, 2014 and 2013, the
Parent Bank has complied with all these regulatory requirements.
- 58 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts.
In January 31, 2007, BSP Circular No. 560 was issued providing the rules and regulations that
govern loans, other credit accommodations and guarantees granted to subsidiaries and
affiliates of banks and quasi-banks. Under the said circular, the total outstanding exposures of
the bank shall not exceed 10.00% of the bank’s net worth, the unsecured portion of which
shall not exceed 5.00% of such net worth. Further, the total outstanding exposures to
subsidiaries and affiliates shall not exceed 20.00% of the net worth of the lending bank.
BSP Circular No. 560 is effective February 15, 2007.
As at December 31, 2014 and 2013, there were loans to Bank Directors, Officers, Stockholders
and Related Interests (DOSRI) amounting to P985 million and nil, respectively.
26. Income Taxes
Income taxes include corporate income tax and FCDU final taxes, as discussed below, and final
tax paid at the rate of 20.00% on gross interest income from government securities and other
deposit substitutes. These income taxes, as well as the deferred tax benefits and provisions, are
presented as ‘Income tax expense’ in the consolidated statement of income.
Effective in May 2004, RA No. 9294 restored the tax exemption of FCDUs and offshore banking
units (OBUs). Under such law, the income derived by the FCDU from foreign currency
transactions with nonresidents, OBUs, local commercial banks including branches of foreign
banks is tax-exempt while interest income on foreign currency loans from residents other than
OBUs or other depository banks under the expanded system is subject to 10.00% gross income
tax.
FCDU offshore income is tax-exempt while interest income on deposit placements with other
FCDU and offshore banking units (OBUs) is taxed at 7.50%. All other income of the FCDU is
subject to the 30.00% corporate tax.
The components of income tax expense (benefit) are as follows:
2014
Current taxes
Deferred income tax
2013
2012
P315,620
(16,927)
P303,079
138,726
P298,042
(120,714)
P298,693
P441,805
P177,328
The reconciliation of the statutory tax rate on income before income tax to the Bank’s effective
tax rate is as follows:
2014
2013
2012
Income before income tax
Statutory income tax
Tax effects of:
FCDU income
Interest income subjected to final tax
Non-taxable income
Non-deductible expenses
Unrecognized DTA and expiration
of NOLCO and MCIT
P1,304,693
P1,798,827
P1,888,358
P391,408
P539,648
P566,508
(162,248)
(461,681)
(8,416)
158,211
(321,274)
(559,417)
(16,919)
196,237
(364,393)
(493,550)
(17,093)
91,939
73,632
300,693
99,136
(9,094)
138,968
(117,453)
307,787
302,837
294,781
P298,693
P441,805
P177,328
Add: Final taxes
- 59 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets arise from the following:
Allowance for credit and impairment losses
MCIT
NOLCO
Retirement benefit obligation
Accrued rent expense
2014
2013
P673,088
11,335
99,135
2,469
1,144
P644,181
15,290
108,468
2,419
-
P787,171
P770,358
Details of MCIT are as follows:
Year of
incurrence
Year of
expiry
Amount
2011
2012
2013
2014
2014
2015
2016
2017
P11,787
3,261
242
7,832
P23,122
Applied
Expired
Balance
P -
P11,787
-
P 3,261
242
7,832
P -
P11,787
P11,335
The component of deferred tax assets not recognized by the Bank as at December 31, 2014 is
as follows:
Deductible
Temporary
Differences/ Unused
Tax Credits
Deferred Tax
Asset
P172,817
P51,845
NOLCO
Details of NOLCO are as follows:
Year of
incurrence
Year of
expiry
Amount
Applied
Expired
Balance
2011
2012
2013
2014
2014
2015
2016
2017
P31,114
330,452
470,689
172,817
P -
P31,114
-
P 330,452
470,689
172,817
P1,005,072
P -
P31,114
P973,958
27. Trust Operations
Securities and other properties (other than deposits) held by the Parent Bank in fiduciary or
agency capacities for clients and beneficiaries are not included in the accompanying
consolidated statements of financial position since these are not assets of the Bank
(see Note 28).
In compliance with the requirements of current banking regulations relative to the Parent Bank’s
trust functions: (a) government securities included under held to maturity investments in the
consolidated statements of financial position with a total face value of P10 million as at
December 31, 2014 and 2013 are deposited with the BSP as security for the Bank’s faithful
compliance with its fiduciary obligations; and (b) a certain percentage of the Bank’s trust fee
- 60 -
PHILTRUST BANK (PHILIPPINE TRUST COMPANY) AND ITS SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
income is transferred to surplus reserve. This yearly transfer is required until the surplus reserve
for trust function equals 20.00% of the Group’s authorized share capital.
28. Commitments and Contingent Assets and Liabilities
In the normal course of the Group’s operations, there are various outstanding commitments and
contingent liabilities which are not reflected in the accompanying consolidated financial
statements. Management does not anticipate any material losses as a result of these
transactions.
The following is a summary of contingencies and commitments of the Group with the
equivalent peso contractual amounts:
Trust department accounts
Unused commercial letters of credit
Late deposits/payments received
Inward bills for collection
Outstanding guarantees issued
Outward bills for collection
Items held as collateral
Others
Note
27
2014
2013
P845,334
362,778
61,922
12,370
909
43
4
-
P775,028
336,653
61,342
13,078
6,204
1,646
3
1,293
P1,283,360
P1,195,247
29. Financial Performance Ratios
The key financial performance indicators of the Bank are presented below:
Return on average equity
Return on average assets
Net margin
Capital to risk assets
- 61 -
2014
2013
4.65%
0.81%
2.23%
37.65%
6.35%
1.16%
1.89%
38.33%
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
INDEX TO THE FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
DECEMBER 31, 2014
Schedules Required under Securities Regulation Code Rule 68
Schedule
Part 1
I
II
III
IV
Part 2
A
B
C
D
E
F
G
H
Content
Reconciliation of Retained Earnings Available for Dividend Declaration
Financial Soundness Indicators
List of Effective Philippine Financial Reporting Standards and Interpretations
Map of the Relationships of the Companies within the Group
Financial Assets
Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders
Amounts of Receivable from Related Parties which are eliminated during the
consolidation of financial statements
Intangible Assets - Other Assets
Long-term Debt
Indebtedness to Related Parties
Guarantees of Securities of Other Issuers
Share Capital
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule I
RECONCILIATION OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
As of December 31, 2014
(Amounts in thousands)
Unappropriated Retained Earnings, beginning
Adjustments for:
(prior-year adjustments)
P7,728,849
(127,212)
Unappropriated Retained Earnings, as adjusted,
beginning
Net income during the period closed to Retained
Earnings
Less: Non-actual/unrealized income net of tax
Equity in net income of associate/joint venture
Unrealized foreign exchange gain - net (except
those attributable to Cash and Cash
Equivalents)
Unrealized actuarial gain
Fair value adjustments (M2M gains)
Fair value adjustment of Investment Property
resulting to gain adjustment due to deviation
from PFRS/GAAP-gain
Other unrealized gains or adjustments to the
retained earnings as a result of certain
transactions accounted for under the PFRS
Add: Non-actual losses
Depreciation on revaluation increment (after tax)
Adjustment due to deviation from PFRS/GAAPloss
Loss on fair value adjustment to investment
property (after tax)
Net income actually earned/realized during the period
Add (Less):
Dividend declarations during the period
Appropriations of Retained Earnings during the
period
Reversals of appropriations
Treasury shares
TOTAL RETAINED EARNINGS, END AVAILABLE FOR
DIVIDEND
7,601,637
1,006,310
P -
34,457
-
-
-
(34,457)
8,573,490
P8,573,490
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule II
Financial Soundness Indicators
As of December 31, 2014
Current Ratio(1)
Debt to Equity Ratio(2)
Asset to Equity Ratio(3)
Interest Coverage Ratio(4)
Net Interest Margin Ratio(5)
Return on Assets(6)
Return on Equity(7)
Solvency Ratio(8)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
2014
0.692
4.455
5.455
0.522
0.022
0.008
0.043
0.011
2013
0.696
5.016
6.016
0.605
0.019
0.011
0.016
0.014
Current ratio is measured as current assets divided by current liabilities.
Debt to equity ratio is measured as total liabilities divided by total equity.
Asset to equity ratio is measured as total assets divided by total equity.
Interest coverage ratio is measured by EBIT, or earnings before interest and taxes, divided by total financing
costs.
Net interest margin ratio is derived by dividing net interest income with average interest earning assets.
Return on assets is measured by dividing net income after tax with total assets.
Return on equity is measured by dividing net income after tax with total capital accounts.
Solvency ratio is measured by dividing net income after tax plus depreciation with total liabilities.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule III
List of Philippine Financial Reporting Standards (PFRS)
Effective as of December 31, 2014
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Effective as of December 31, 2014
Framework for the Preparation and Presentation of Financial Statements
Not
Adopted
Not
Applicable

Conceptual Framework Phase A: Objectives and qualitative characteristics
PFRS Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
(Revised)
PFRS 2
PFRS 3
First-time Adoption of Philippine Financial Reporting Standards

Amendments to PFRS 1 and PAS 27: Cost of an Investment in a
Subsidiary, Jointly Controlled Entity or Associate

Amendments to PFRS 1: Additional Exemptions for First-time
Adopters

Amendment to PFRS 1: Limited Exemption from Comparative
PFRS 7 Disclosures for First-time Adopters

Amendments to PFRS 1: Severe Hyperinflation and Removal of
Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

Amendments to PFRS 1: First time adoption of PFRS

Share-based Payment

Amendments to PFRS 2: Vesting Conditions and Cancellations

Amendments to PFRS 2: Group Cash-settled Share-based
Payment Transactions

Amendments to PFRS 2: Vesting Conditions

Business Combinations


Amendments to PFRS 3*
Insurance Contracts

Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts

Non-current Assets Held for Sale and Discontinued Operations

Amendments to PFRS 5*

PFRS 6
Exploration for and Evaluation of Mineral Resources

PFRS 7
Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets

Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets - Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about Financial
Instruments

Amendments to PFRS 7: Disclosures - Transfers of Financial

PFRS 4
PFRS 5
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Effective as of December 31, 2014
Not
Adopted
Not
Applicable
Assets
Amendments to PFRS 7: Disclosures – Offsetting Financial
Assets and Financial Liabilities
PFRS 8
PFRS 9
PFRS 10

Amendments to PFRS 7: Mandatory Effective Date of PFRS 9
and Transition Disclosures

Amendments to PFRS 7: Servicing contracts and Interim
Financial Statements*

Operating Segments

Amendments to PFRS 8*

Financial Instruments

Amendments to PFRS 9: Mandatory Effective Date of PFRS 9
and Transition Disclosures*

Consolidated Financial Statements

Amendments to PFRS 10: Sale or contribution of assets
between an investor and its associate or joint venture*
Amendments to PFRS 10:
PFRS 11
PFRS 12
PFRS 13


Joint Arrangements

Amendments to PFRS 11*

Disclosure of Interests in Other Entities

Amendments to PFRS 12

Fair Value Measurement


Amendments to PFRS 13*
PFRS 14
Regulatory Deferral Accounts*
PFRS 15
Revenue from Contracts with Customers*


Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income



PAS 2
Inventories
PAS 7
Statement of Cash Flows

PAS 8
Accounting Policies, Changes in Accounting Estimates and
Errors

PAS 10
Events after the Reporting Period

PAS 11
Construction Contracts
PAS 12
Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery of Underlying
Assets

Property, Plant and Equipment

PAS 16

PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Effective as of December 31, 2014
Not
Adopted

Amendments to PAS 16*
PAS 17
Leases

PAS 18
Revenue

PAS 19
PAS 19
(Amended)
Employee Benefits

Amendments to PAS 19: Actuarial Gains and Losses, Group
Plans and Disclosures

Amendments to PAS 19: Employee or Third Party Contributions
to defined benefit plans*

Amendments to PAS 19: Discount rate for post-employment
benefit obligations*

PAS 20
Accounting for Government Grants and Disclosure of
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates



Amendment: Net Investment in a Foreign Operation
PAS 23
(Revised)
Borrowing Costs
PAS 24
Related Party Disclosures
Not
Applicable



Amendments to PAS 24*
PAS 26
Accounting and Reporting by Retirement Benefit Plans

PAS 27
Consolidated and Separate Financial Statements

PAS 27
Separate Financial Statements

Amendments to PAS 27


PAS 27: Equity Method*
Investments in Associates

Investments in Associates and Joint Ventures

Amendments to PAS 28*

PAS 29
Financial Reporting in Hyperinflationary Economies

PAS 31
Interests in Joint Ventures

PAS 32
Financial Instruments: Disclosure and Presentation
PAS 28

Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

Amendments to PAS 32: Offsetting Financial Assets and
Financial Liabilities

Amendments to PAS 32: Offsetting Financial Assets and
Financial Liabilities

PAS 33
Earnings per Share

PAS 34
Interim Financial Reporting

Amendments to PAS 34: Information disclosed elsewhere in
the interim financial report

PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Effective as of December 31, 2014
Impairment of Assets

Amendments to PAS 36: Recoverable Amount Disclosures

PAS 37
Provisions, Contingent Liabilities and Contingent Assets

PAS 38
Intangible Assets

PAS 36
PAS 40
Financial Instruments: Recognition and Measurement

Amendments to PAS 39: Transition and Initial Recognition of
Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge Accounting of
Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts

Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets

Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets – Effective Date and Transition

Amendments to Philippine Interpretation IFRIC–9 and PAS 39:
Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Amendments to Pas 39: Recognition and Measurement on
Novation of Derivatives

Investment Property
Amendments to PAS 40*
PAS 41
Not
Applicable

Amendments to PAS 38*
PAS 39
Not
Adopted


Agriculture

Amendments to PAS 41*

Philippine Interpretations
IFRIC 1
Changes in Existing Decommissioning, Restoration and Similar
Liabilities

IFRIC 2
Members' Share in Co-operative Entities and Similar
Instruments

IFRIC 4
Determining Whether an Arrangement Contains a Lease

IFRIC 5
Rights to Interests arising from Decommissioning, Restoration
and Environmental Rehabilitation Funds

IFRIC 6
Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment

IFRIC 7
Applying the Restatement Approach under PAS 29 Financial
Reporting in Hyperinflationary Economies

IFRIC 8
Scope of PFRS 2

IFRIC 9
Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9 and PAS 39:
Embedded Derivatives

PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Effective as of December 31, 2014
Not
Adopted
Not
Applicable
IFRIC 10
Interim Financial Reporting and Impairment

IFRIC 11
PFRS 2- Group and Treasury Share Transactions

IFRIC 12
Service Concession Arrangements

IFRIC 13
Customer Loyalty Programmes

IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction

Amendments to Philippine Interpretations IFRIC- 14,
Prepayments of a Minimum Funding Requirement

IFRIC 16
Hedges of a Net Investment in a Foreign Operation

IFRIC 17
Distributions of Non-cash Assets to Owners

IFRIC 18
Transfers of Assets from Customers

IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments

IFRIC 20
Stripping Costs in the Production Phase of a Surface Mine

IFRIC 21
Levies
SIC-7
Introduction of the Euro

SIC-10
Government Assistance - No Specific Relation to Operating
Activities

SIC-12
Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13
Jointly Controlled Entities - Non-Monetary Contributions by
Venturers

SIC-15
Operating Leases - Incentives

SIC-21
Income Taxes – Recovery of Revalued Non-Depreciable Assets

SIC-25
Income Taxes - Changes in the Tax Status of an Entity or its
Shareholders

SIC-27
Evaluating the Substance of Transactions Involving the Legal
Form of a Lease
SIC-29
Service Concession Arrangements: Disclosures.

Revenue - Barter Transactions Involving Advertising Services

Intangible Assets - Web Site Costs

SIC-31
SIC-32


* These are standards, interpretations and amendments to existing standards that have been issued but
not yet effective as at December 31, 2014.
Philtrust Bank (Philippine Trust Company)
Schedule IV
Map of the Relationships of the Companies within the Group
December 31, 2014
Subsidiaries
Philtrust Bank (Philippine Trust Company)
Muralla Grande,
Inc.
100% owned
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule A – Financial Assets
December 31, 2014
Name of issuing entity and
association of each issue
Number of shares or
principal amount of bonds
or notes
Amount shown on the
balance sheet
Valued based on market
quotation at balance sheet date
P989,827,147
P1,008,992,095
31,907,099,896
1,954,599,392
26,417,997,780
916,086,724
298,326,569
2,925,828
P34,851,526,435
P28,343,076,599
P301,252,397
365,111,291 shares
206,498 shares
34,296 shares
2,883 shares
P496,551,356
2,168,229
8,779,776
212,765
P496,551,356
2,168,229
8,779,776
212,765
1,868 shares
1 share
5,428,408
120,200
5,428,408
120,200
1 share
1 share
27,000
20,700
27,000
20,700
365,356,839 shares
P513,308,434
P513,308,434
Cash and cash equivalents
Cash and other cash items
Due from Bangko Sentral ng
Pilipinas (BSP)
Due from other banks
AFS investments – equity
securities
Euromed Lab. Phil., Inc.
Centro Escolar University
Manila Electric Company
San Miguel Corp.
Philippine Long Distance
Corporation
Casino Espanol De Manila
Philippine Columbian
Association
Manila Executive Center
Income received
and accrued
P -
P 19,409,363
P19,409,363
Name of issuing entity and
association of each issue
AFS investments – debt securities
Peso-denominated
PIBD0718H511
PIBD0719D531
PIBD1022H562
PIBD1022I570
PIBD0517K719
PIBD0719K560
PIBD0721C574
PIBD1024H595
PIID1021J039
PIID1023H046
PIID1526J019
PIID1527C023
PIID2032C014
PIID2537J015
PIBD2032B183
PIBD2033C206
Forward
Number of shares or
principal amount of bonds
or notes
Amount shown on the
balance sheet
Valued based on market
quotation at balance sheet date
Income received
and accrued
P150,000,000
500,000,000
500,000,000
50,000,000
149,710,000
50,000,000
1,000,000,000
600,000,000
500,000,000
1,000,000,000
500,000,000
1,500,000,000
1,000,000,000
500,000,000
1,200,000,000
1,400,000,000
P157,019,700
527,397,000
526,397,500
52,170,900
151,742,762
50,999,200
995,312,000
610,387,200
545,740,000
951,431,000
584,485,000
1,649,989,500
1,145,461,000
601,572,500
1,345,366,800
1,321,524,400
P157,019,700
527,397,000
526,397,500
52,170,900
151,742,762
50,999,200
995,312,000
610,387,200
545,740,000
951,431,000
584,485,000
1,649,989,500
1,145,461,000
601,572,500
1,345,366,800
1,321,524,400
P7,458,333
24,861,111
24,239,583
2,361,806
6,141,229
1,926,736
27,125,000
8,868,750
28,590,278
32,319,444
31,076,389
80,177,083
58,423,611
30,454,861
70,108,333
50,468,056
P10,599,710,000
P11,216,996,462
P11,216,996,462
P484,600,604
Name of issuing entity and
association of each issue
Foreign-denominated
ISIN US718286BK23
ISIN US718286BN61
US718286BD89
US718286BG11
US718286BK23
USY7083VAD11
USY7083VAB54
US718286BW60
US718286BB24
US718286BN61
US718286BY27
PHY6972FTP53/ODTB1023L018
XS0579034223
XS0875298191
XS0876086975
XS0879849312
XS0894336907
XS0914313357
XS0908792277
XS0921226386
XS0975540211
Number of shares or
principal amount of bonds
or notes
Amount shown on the
balance sheet
Valued based on market
quotation at balance sheet date
Income received
and accrued
$8,000,000
10,000,000
76,000,000
84,000,000
88,300,000
31,898,000
28,000,000
65,000,000
13,500,000
17,375,000
39,500,000
31,300,000
15,000,000
6,135,000
20,000,000
36,375,000
9,000,000
11,160,000
4,500,000
9,500,000
6,350,000
P387,412,608
534,195,600
4,444,385,699
5,029,507,946
4,276,066,661
1,864,099,598
1,495,609,881
3,398,318,417
868,954,373
922,762,220
1,915,447,580
1,340,846,615
694,877,073
271,208,100
873,772,200
1,686,378,836
386,738,824
481,822,956
189,050,883
388,902,450
298,076,671
P387,412,608
534,195,600
P4,444,385,699
5,029,507,946
4,276,066,661
1,864,099,598
1,495,609,881
3,398,318,417
868,954,373
922,762,220
1,915,447,580
1,340,846,615
694,877,073
271,208,100
873,772,200
1,686,378,836
386,738,824
481,822,956
189,050,883
388,902,450
298,076,671
P14,316,800
136,706
P214,219,758
232,370,280
153,868,339
73,891,211
85,082,251
149,678,559
47,632,449
67,201,622
52,353,839
38,190,215
47,998,704
13,145,616
38,922,684
97,098,931
16,920,377
24,713,021
8,747,595
21,885,557
15,833,716
P31,748,435,191
P30,826,826,983
P1,199,988,472
P43,478,740,087
P43,478,740,087
P1,703,998,439
$592,893,000.00
Name of issuing entity and
association of each issue
HTM investments
Peso-denominated
PIBD0715E477
PIBD0717C493
PIBD1020B508
PIID0716I018
Foreign-denominated
ISIN US718286AW79
ISIN USY6972CAJ63
Number of shares or
principal amount of bonds
or notes
Amount shown on the
balance sheet
Valued based on market
quotation at balance sheet date
Income received
and accrued
P700,000,000
2,000,000,000
500,000,000
1,000,000,000
P700,000,000
2,000,000,000
500,000,000
1,000,000,000
P713,063,497
2,144,750,223
582,912,182
1,057,475,926
58,625,000
140,000,000
38,750,000
70,000,000
P4,200,000,000
P4,200,000,000
P4,498,201,828
P307,375,000
$4,000,000
P178,960,000
P182,675,210
17,224,000
768,818,302
878,062,175
P14,929,170
68,560,066
$21,224,000
P947,778,302
P1,060,737,385
P83,489,236
P5,147,778,302
P5,558,939,213
P390,864,236
Name of issuing entity and
association of each issue
Loans and receivables
Loans and discounts
Repurchase agreements and
certificate of assignments
Agrarian reform
Customer’s liabilities under letters
of credit/trust receipts
Sales contract receivables
Accrued interest receivable
Other receivable
Number of shares or
principal amount of bonds
or notes
Amount shown on the
balance sheet
Valued based on market
quotation at balance sheet date
Income received
and accrued
P23,679,727,839
23,679,727,839
23,679,727,839
P1,840,344,307
9,330,000,000
2,451,540,422
9,330,000,000
2,451,540,422
9,330,000,000
2,451,540,422
298,326,567
194,766,218
191,186,462
30,501,262
720,303,538
1,908,761
191,186,462
30,501,262
720,303,538
1,908,761
191,186,462
30,501,262
720,303,538
1,908,761
26,406,274
1,710,596
-
P36,405,168,284
P36,405,168,284
P2,361,553,962
P36,405,168,284
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule B –Amounts Receivable from Director, Officers, Employees,
Related Parties and Principal Stockholders (Other than Related Parties)
December 31, 2014
(Amounts in Thousands)
Name of Debtor
Centro Escolar
University
Balance at the beginning
of the period
Additions
Amounts
collected
P4,000
P24,000
P22,000
Amounts
written-off
P -
Current
Noncurrent
Balance at the
end of period
P6,000
P -
P6,000
Note: Receivables from Directors, Officers, Employees, Related Parties and Principal Stockholders are subject to usual terms in the normal
course of business.
This pertains to accrued three months rental income at P2 million per month.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule C – Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statement
December 31, 2014
Name of Debtor
Muralla Grande, Inc.
Balance at the
beginning of the period
P -
Additions
P17,999,995
Amounts
collected
(i)
P -
Amounts
written-off
(ii)
Current
P -
P17,999,995
Noncurrent
i. If collected was other than in cash, explain.
ii. Give reasons to write-off.
Note: There is receivable from related party amounting to P8 million but it is not eliminated since it is a stand-alone Company.
P -
Balance at the end
of period
P17,999,995
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule D – Intangible Assets – Other Assets
December 31, 2014
(Amounts in Thousands)
Description (i)
Software cost
Accumulated Depreciation
i.
Charged to
other accounts
Other charges
additions
(deduction) (iii)
Beginning
Balance
Additions at
Cost (ii)
Charged to cost
and expenses
Ending
Balance
P29,811
(15,640)
P52,107
-
P (6,471)
P -
P -
P81,918
(22,111)
P14,171
P52,107
(P6,471)
P -
P -
P59,807
The information required shall be grouped into (a) intangibles shown under the caption intangible assets and (b) deferrals shown under the
caption other assets in the related balance sheet. Show by major classifications.
ii. For each change representing other than an acquisition, clearly state the nature of the change and the other accounts affected. Describe cost
of additions representing other than cash expenditures.
iii. If provision for amortization of intangible assets is credited in the books directly to the intangible asset account, the amounts shall be stated
with explanations, including the amounts charged. Clearly state the nature of deductions if these represent anything other than regular
amortization.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule E – Long Term Debt
December 31, 2014
Title of issue and
type of obligation
(i)
Amount
authorized by
indenture
Amount shon under caption "Current
portion of long-term debt in related
balance sheet " (ii)
Amount shon under caption "Longterm debt in related balance sheet "
(iii)
None to report.
i. Include in this column each type of obligation authorized.
ii. This column is to be totalled to correspond to the related balance sheet caption.
iii. Include in this column details as to interest rates, amounts or numbers of periodic instalments, and maturity dates.
Interest
Rate %
Maturity
Date
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule F – Indebtedness to Related Parties
(included in the Consolidated Financial Statement of Position)
Name of Related Parties (i)
Balance at the beginning of the period
Balance at the end of the period (ii)
None to report.
i.
The related party shall be grouped as in Schedule D. The information called for shall be stated for any persons whose investments shown in
separately in such related schedule.
ii. For each affiliate named in the first column, explain in a note hereto the nature and purpose of any material increase during the period that
is in excess of 10% of the related balance at either the beginning or end of the period.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule G – Guarantees of Securities of Other Issuers
December 31, 2014
Name of the issuing entity of securities
guaranteed by the company for which this
statement is fled
Title of issue of each
class of securities
guaranteed
Total amount of
guaranteed and
outstanding (i)
Amount owned by
person of which
statement is filed
Nature of
Guarantee (ii)
None to report.
i.
Indicate in the note any significant changes since the date of the last balance sheet file. If this schedule is filed in support of consolidated
financial statements, there shall be set forth guarantees by any person included in the consolidation except such guarantees of securities
which are included in the consolidated balance sheet.
ii. There must be a brief statement of the nature of the guarantee, such as “Guarantee of Principal and Interest”’, “Guarantee of Interest” or
“Guarantee of Dividend”. If the guarantee is of interest, dividends, or both, state the annual aggregate amount of interest or dividends so
guaranteed.
PHILTRUST BANK (PHILIPPINE TRUST COMPANY)
Schedule H – Share Capital
December 31, 2014
Title of
Issue (i)
Common
Number of
shares
authorized
2,200,000,000
Number of shares issued and
outstanding as shown under Number of shares reserved
the related balance sheet for
options,
warrants,
caption
conversion and other rights
1,000,000,000
-
Number of shares
held by related
parties (ii)
-
Directors,
officers and Others
employees (iii)
2,499,035
-
i. Include in this column each type of issue authorized
ii. Related parties referred to include persons for which separate financial statements are filed and those included in the consolidated financial
statements, other than the issuer of the particular security.
iii. Indicate in a note any significant changes since the date of the last balance sheet filed.
ANNEX C1
Management’s Discussion and Analysis of Financial Condition and
Results of Operations for Calendar Year 2012
Financial Condition
The healthy growth and satisfactory results of operations for the year 2012
once more reaffirmed wisdom of strictly adhering to sound and conservative banking
policies. Our resources, deposits and capital funds rose to a level that reflect the
steady firming up of its new role as a meaningful participant in the banking sector of
our country. Total resources at year end of 2012 reached a new record high of
P111.188 Billion compared to P105.400 Billion, an increase of P5.788 Billion over
the previous year. Cash and Other Cash Items declined by 25.12% as funds were
shifted to higher yielding securities. Due from Bangko Sentral ng Pilipinas decreased
by 20.15% as the funds were invested in Reverse Repurchase Agreements with the
Bangko Sentral ng Pilipinas. Due from Other Banks decreased by 16.61% due to
lower working balances maintained with correspondent banks. Available for Sale
Securities increased by 20.78% as the Bank rationalized its holdings of investments
securities. Our Bank continued the expansion of its loans as Loans and Receivables
increased by 18.94% or by P5.603 Billion compared from last year’s level of P29.575
Billion. Movements on Other Asset accounts for less than 10% increase/decrease can
be accounted for by transactions in the ordinary course of business.
Deposit Liabilities stood at P88.816 Billion compared to P87.595 from last
year’s end level. The 13.07% decrease in Manager’s Checks represents lower volume
of outstanding checks issued. Accrued taxes and other expenses decreased by 14.71%
due to payments of fringe benefits and large volume of withholding taxes. Deferred
credits and other liabilities increased by 105.86% due to higher level of trade
transactions for the year. Deferred tax liabilities posted an increase of 336.93% due to
increase of net unrealized gain for the year.
Capital Funds reached the P20 Billion mark, now at P20.797 Billion, a P3.744
Billion increase compared from last year’s level of P17.053 Billion. This is the
impact of the P1.712 Billion earnings for the year and the P2.032 Billion increase in
net unrealized gains. The Capital Adequacy Ratio (CAR) for the period is 22.08%
which is Basel 2 compliant and is well above the Bangko Sentral ng Pilipinas (BSP)
maximum requirement of 10%.
The Bank has outstanding commitments, contingent liabilities and bank
guarantees that arise from the normal course of operations. The Bank does not
anticipate any losses that will materially affect its financial positions and results of
operations. Changes in nature and amounts in the financial statements were due more
to market related factors inherent in nature of the issuer’s business operations and
were not considered unusual.
Results of Operations
The Bank’s gross earnings amounted to P6.590 Billion compared to P7.076
Billion from previous year. Declining interest rates resulted in the decrease in interest
on loans and advances by 2.34%. Interest on deposits with the banks decreased by
35.96% due to result of decreasing interest rates by the Bangko Sentral ng Pilipinas
on SDA’s and due to non-interest bearing reserve deposits. The Bank continued to
adapt an aggressive stance in the market through sale of bonds and other securities.
Hence, gains from Available for Sale Securities increased by 15.77% while Held to
Maturity Securities decreased by 15.32% due to small amount of maturing securities
compared from last year’s level. Income from foreign exchange profit decreased by
28.75% due to lower exchange rate at year end. Other operating income increased by
16.15% due to higher profits on Sale or Redemption of Investments.
Depreciation/Amortization decreased by 25.33% due to some disposal of
transportation equipment. Taxes and licenses decreased by 14.66% because of lower
gross receipts tax compared from last year’s level. The provision for income tax
expense decreased by 22.34% due to lower income which was subjected to final tax
withheld at source. Net income closed at P1.712 Billion.
With solid performance and sustained growth over the past 96 years, the Bank
looks forward with keen anticipation to the incoming years. It will avail of
opportunities and meet it challenges with the same dedication and conservative
policies that have characterized its corporate life. The Bank will continue to focus on
its core business and to deepen its banking relationship with more prospective client’s
ad to offer more excellent customer service. We will further strengthen the corporate
governance and risk’s management structure.
We are confident that we can successfully meet the challenges of the times, as
we have proven in the past, and make the Bank an even stronger financial institution.
We will continue investing in technology and thereby fully support electronic
commerce in the coming years.
Key Performance Indicators
The performance of the bank is reflected in the following financial ratios:
Return on Average Equity
Return on Average Assets
Net Interest Margin
Capital to Risk Assets
Cost to Income Ratio
Dec. 31, 2012
8.41%
1.57%
2.45%
21.88%
42.83%
Dec. 31, 2011
14.43%
2.06%
2.90%
21.94%
40.57%
Dec.31, 2010
12.81%
1.70%
4.39%
22.78%
42.55%
The manner by which the Bank calculates the above indicators is as follows:
Key Performance Indicator
Formula
1. Return on Average Equity (%)
Net Income after Income Tax
Average Total Capital Accounts
2. Return on Average Assets (%)
Net Income after Income Tax
Average Total Assets
3. Net Interest Margin (%)
Net Interest Income
Average Interest Earning Assets
4. Capital to Risk Assets (%)
Total Qualifying Capital
Market and Credit Risk Weighted
Exposures
5. Cost to Income Ratio (%)
Total Operating Expenses
Net Interest Income + Other Income
Part II - Other Information
Our financial report for the year 2012 was prepared in compliance with Generally
Accepted Accounting Principles as set forth in Philippine Financial Reporting Standards
(PFRS). The term PFRS in general includes all applicable PFRS, PAS and SIC/IFRIC
interpretations which have been approved by the Financial Reporting Standards Council
(FRSC) and adopted by the SEC pronouncements. The same accounting policies and
methods of computation were consistently followed in our financial statements as
compared with the annual audited financial statements. There were no cash dividends
paid during the year of 2012. There were no material contingencies or any other unusual
events or transactions affecting our financial condition since December 31, 2011. There
are no known trends, demands, commitments, events or uncertainties that would have
had a material conflict on our financial condition or results of operations. There is no
material commitment for capital expenditures. There are no known trends, events or
uncertainties that have had a material favorable or unfavorable impact on net revenues
from continuing operations. Our Bank does not have any subsidiary. We don’t
anticipate any events that may cause any default or acceleration of an obligation. There
are no material off-balance sheet transactions, arrangements, obligations, including
contingent obligations with unconsolidated entities.
PFRS 9, Financial Instruments: Classification and Measurement. The standard
became effective for annual period or after January 1, 2013 but change the mandatory
effective date to January 1, 2015. The Bank opted not to implement early adoption of
PFRS 9 on its financial reporting. An evaluation was conducted early this year using the
outstanding balances of financial statements as of December 31, 2011. We believe that
there is no material impact in the financial statements for the adoption of PFRS 9.
For the year 2012, the Bank had no transactions that would require the following
information or disclosures:
.
a. Explanatory comments about the seasonality or cyclicality of interim
operations;
b. The nature and amount of items affecting assets, liabilities, equity, net income
or cash flows that are unusual because of their nature, size or incidents;
c. The nature and amount of changes in estimates of amounts reported in prior
interim periods of the current financial year or changes in estimates of
amounts reported in prior financial years, if those changes have a material
effect in the current interim period;
d. Issuances, repurchases and repayments of debt and equity securities;
e. Segment revenue and segment result for business segments or geographical
segments, whichever is the issuer’s primary basis of segment reporting;
f. Material events subsequent to the end of the interim period that have not been
reflected in the financial statements for the interim period.
g. The effect of changes in the composition of the issuer during the interim
period, including business combinations, acquisition or disposal of
subsidiaries and long term investments, restructurings, and discontinuing
operations;
h. Existence of material contingencies and any other events or transactions that
are material to an understanding of the current interim period.
i. Any significant elements of income or loss that did not arise from the issuer’s
continuing operations.
j. Any seasonal aspects that had a material effect on the financial condition or
results of operations.
ANNEX C2
Management’s Discussion and Analysis of Financial Condition and
Results of Operations for Calendar Year 2013
Financial Condition
The year 2013 proved to be another fruitful year for our Bank as Total
Resources reached a new record high of P120.954 Billion compared to P112.097
Billion in 2012. Growth in resources came primarily from deposit liabilities which
rose by 12.98% or by P11.528 Billion. Deposit growth came mainly from relatively
stable and low cost savings deposits and demand deposits. Due from Bangko Sentral
ng Pilipinas, representing 21.84% of Total Resources, went up by 18.33% or P4.092
Billion, arising from more effective management of reserve deposits and from higher
fixed term deposits or Special Deposits Accounts (SDA). The P342.250 Million
decrease in Due from Other Banks reflects lower operating balances maintained from
both local and foreign correspondent banks. Due to some maturing loans at year end,
loans and receivables from customers decreased by P5.265 Billion or by 19.57%
compared from last year’s level. Loans Arising from Repurchase Agreements
increased by P12.650 Billion as funds were invested with the Bangko Sentral ng
Pilipinas. Available for Sale Securities and Held to Maturity Securities decreased by
P402 Million and P689 Million respectively due to decrease in market value and the
effect of mark to market valuation at year end. Cash and other cash items decreased
by P185 Million as funds were invested at Special Deposit Account with the Bangko
Sentral ng Pilipinas. Deferred tax assets decreased by 15.28% due to unrecognized
deferred tax assets for 2014 net operating loss carry over. Movements in other asset
accounts can be accounted for by transactions in the ordinary course of business.
Deposit liabilities of P100.344 Billion increased by 12.98% compared to last
year’s level of P88.816 Billion. It continued to be the Bank’s main source of funding.
Deferred credits and other liabilities decreased by 39.76% due to lower level of trade
transactions. All payables were paid within stated terms.
Capital Funds reached the P20 Billion mark now at P20.104 Billion. Other
Comprehensive Income, Net Unrealized Gains/(Losses) decreased by P3.906 Billion
or 62.97% due largely on account of mark to market valuation of investments. The
Capital Adequacy Ratio (CAR) for the period is 34.81%, which is well above the BSP
minimum requirements of 10%, is indicative of the sufficiency of the Bank’s capital
to support the current level of its risk assets.
The Bank has outstanding commitments, contingent liabilities and bank
guaranties that arise from the normal course of operations. The Bank does not
anticipate any losses that will materially affect its financial positions and results of
operations.
Results of Operations
The Bank generated a P1.357 Billion net income for the year 2013. Gross
earnings amounted to P6.388 Billion compared to P6.590 Billion of last year’s level.
Declining interest rate on loans resulted in the decrease on interest on loans and
advances by 18.11%. Income from foreign exchange profits increased by P105
Million due to higher exchange rate compared from last year’s level. Service charges
and fees increased by 54.46% due to higher volume of transactions. Other operating
income increased by P93 Million due to higher profit on Sale or Redemption of
Investments.
Interest expense decreased by 3.88% due to lower average interest rates
compared form last year’s level. Occupancy and Equipment related expenses
increased by 16.06% due to advance payments of annual rentals of leased properties.
The provision for tax expense rose from P177 Million to P441 Million, a 149.15%
increase, as large portion of income earned were subjected to 20% final tax withheld
at source.
With solid performance and sustained growth over the past 97 years, the Bank
looks forward with keen anticipation and more productivity for the incoming years.
We will continue to focus on its core business and to deepen its banking relationship
with more prospective clients and to offer more excellent customer service.
Furthermore, more branches will be opened including ATM offsite in strategic
locations to provide access to our valued clients
Key Performance Indicators
The performance of the bank is reflected in the following financial ratios:
Return on Average Equity
Return on Average Assets
Net Interest Margin
Capital to Risk Assets
Cost to Income Ratio
Dec. 31, 2013
6.35%
1.16%
1.89%
38.33%
47.36%
Dec. 31, 2012
8.41%
1.57%
2.45%
21.88%
42.83%
The manner by which the Bank calculates the above indicators is as follows:
Key Performance Indicator
Formula
1. Return on Average Equity (%)
Net Income After Income Tax
Average Total Capital Accounts
2. Return on Average Assets (%)
Net Income After Income Tax
Average Total Assets
3. Net Interest Margin (%)
Net Interest Income
Average Interest Earning Assets
4. Capital to Risk Assets (%)
Total Qualifying Capital
Market and Credit Risk Weighted
Exposures
5. Cost to Income Ratio (%)
Total Operating Expenses
Net Interest Income + Other Income
Part II - Other Information
Our financial report for the year 2013 was prepared in compliance with Generally
Accepted Accounting Principles as set forth in Philippine Financial Reporting Standards
(PFRS). The term PFRS in general includes all applicable PFRS, PAS and SIC/IFRIC
interpretations which have been approved by the Financial Reporting Standards Council
(FRSC) and adopted by the SEC pronouncements. The same accounting policies and
methods of computation were consistently followed in our financial statements as
compared with the annual audited financial statements. There were no cash dividends
paid during the year of 2013. There were no material contingencies or any other unusual
events or transactions affecting our financial condition since December 31, 2012. There
are no known trends, demands, commitments, events or uncertainties that would have
had a material conflict on our financial condition or results of operations. There is no
material commitment for capital expenditures. There are no known trends, events or
uncertainties that have had a material favorable or unfavorable impact on net revenues
from continuing operations. Our Bank does not have any subsidiary. We don’t
anticipate any events that may cause any default or acceleration of an obligation. There
are no material off-balance sheet transactions, arrangements, obligations, including
contingent obligations with unconsolidated entities.
PFRS 9, Financial Instruments: Classification and Measurement. The standard
became effective for annual period or after January 1, 2013 but change the mandatory
effective date to January 1, 2015. The Bank opted not to implement early adoption of
PFRS 9 on its financial reporting. An evaluation was conducted early this year using the
outstanding balances of financial statements as of December 31, 2012. We believe that
there is no material impact in the financial statements for the adoption of PFRS 9.
For the year 2013, the Bank had no transactions that would require the following
information or disclosures:
.
a. Explanatory comments about the seasonality or cyclicality of interim
operations;
b. The nature and amount of items affecting assets, liabilities, equity, net income
or cash flows that are unusual because of their nature, size or incidents;
c. The nature and amount of changes in estimates of amounts reported in prior
interim periods of the current financial year or changes in estimates of
amounts reported in prior financial years, if those changes have a material
effect in the current interim period;
d. Issuances, repurchases and repayments of debt and equity securities;
e. Segment revenue and segment result for business segments or geographical
segments, whichever is the issuer’s primary basis of segment reporting;
f. Material events subsequent to the end of the interim period that have not been
reflected in the financial statements for the interim period.
g. The effect of changes in the composition of the issuer during the interim
period, including business combinations, acquisition or disposal of
subsidiaries and long term investments, restructurings, and discontinuing
operations;
h. Existence of material contingencies and any other events or transactions that
are material to an understanding of the current interim period.
i. Any significant elements of income or loss that did not arise from the issuer’s
continuing operations.
j. Any seasonal aspects that had a material effect on the financial condition or
results of operations.
ANNEX C3
Management’s Discussion and Analysis of Financial Condition and
Results of Operations for Calendar Year 2014
Financial Condition
The Bank closed the year 2014 with Total Resources reaching a new record
high of P126.287 Billion, an increase of P5.334 Billion or 4.41% over the previous
year. Due from Bangko Sentral ng Pilipinas (BSP) which rose by 20.78% from
P26.418 Billion to P31.907 Billion. The increase was attributable to higher placement
of Special Deposit Accounts (SDA) to Bangko Sentral ng Pilipinas. Due from Other
Banks increased by 113.36% from P916.0 Million to P1.955 Billion, mainly triggered
by higher volume of inward remittances from both local and foreign correspondent
banks. Available for sale securities increased by 12.84% or by P4.946 Billion as the
Bank rationalized its holdings of investment securities. Loans and Receivables
decreased by 12.69% or by P5.293 Billion, this was mainly due to decreased in
Reverse Agreement with the Bangko Sentral ng Pilipinas. Cash and Cash Items
declined by 1.90% as funds were shifted to higher yielding securities. Held to
Maturity Securities fell down by 16.59% or by P1.024 Billion as the Bank sold down
maturing securities for profit taking. Other resources increased by 52.77% as
movements in these asset accounts can be accounted for by transactions in the
ordinary course of business.
Deposit Liabilities of P102.708 Billion increased by 2.36% compared to last
year’s level of P100.344 Billion. Deposit growth came mainly from Current and
Time Deposits with a 13.58% and 5.82% increase respectively. The 13.36%
decreased in Treasurer’s, Cashier’s, and Manager’s Checks outstanding represents
lower volume of outstanding checks issued. Accrued Taxes and Other Expenses
decreased by 24.42% due to payment of fringe benefits such as annual leaves and
bonus incentives. Deferred credits and other liabilities posted less than 10% year to
date change but their total variance did not have any material impact on Total
Resources. All payables were paid within the stated terms.
Capital Funds reached the P23 Billion mark, now at P23.151 Billion,
reflecting a 15.16% or P3.047 Billion increase. This is the impact of the P1.006
Billion in earnings for the year and the increase in Net Unrealized Gains of P2.041
Billion. The Capital Adequacy Ratio (CAR) as of the year end is 37%, which is well
above the BSP minimum requirement of 10%, is also indicative of the sufficiency of
Bank’s Capital to support the current level of its risk assets.
The Bank has outstanding commitments, contingent liabilities and bank
guarantees that arise from the normal course of operations. The Bank does not
anticipate any losses that will materially affect its financial position and results of
operations. Changes in nature and amounts in the financial statements were due more
to market related factors inherent in nature of the issuers’ business operations and
were not considered unusual.
Results of Operations
Total Gross Earnings amounted to P5.557 Billion compared to P6.388 Billion
of the previous year. Total interest income increased by P525.395 Million from
previous year’s level of P2.082 Billion to P2.607 Billion. Interest income on
Available for Sale Securities increased by 5.34%, this was almost offset by the
decrease in Held to Maturity by 15.40%, due to Market volatility. Income from
foreign exchange profits decreased by P92.755 Million because of fluctuation of
exchange rate compared from last year’s level. Other operating income decreased by
67.82% because of lower transactions volume for the year.
Interest expense decreased by 15.89% due to lower interest compared from
last year’s level. Disposal of some transportation and other equipments resulted to
lower depreciation expense. Compensation and fringe benefits decreased by 1.26%.
Occupancy and equipment related expenses increased due to construction and
renovations of Branch sites. Taxes and licenses increased by 14.05% due to higher
GRT remittances and other related BIR payments. Other operating expenses
increased by 14.88% brought about by higher insurance and security services. The
provision for tax expense decreased by P143.111 Million compared from last year’s
level due to lower income which subjected to 20% final tax. Net income for the period
closed at P1.006 Billion.
With solid performance and sustained growth over the past 98 years, the Bank
looks forward with keen anticipation to the incoming years of the 21st century. It will
avail of opportunities and meet it challenges with the same dedication and
conservative policies that have characterized its corporate life. The Bank will
continue to focus on its core business and to deepen its banking relationship with
more prospective client’s ad to offer more excellent customer service. We will further
strengthen the corporate governance and risk’s management structure.
We are confident that we can successfully meet the challenges of the times, as
we have proven in the past, and make the Bank an even stronger financial institution.
We will continue investing in technology and thereby fully support electronic
commerce in the coming years.
Key Performance Indicators
The performance of the bank is reflected in the following financial ratios:
Return on Average Equity
Return on Average Assets
Net Interest Margin
Capital to Risk Assets
Cost to Income Ratio
Dec. 31, 2014
4.65%
0.81%
2.23%
37.65%
57.32%
Dec. 31, 2013
6.35%
1.16%
1.89%
38.33%
47.36%
The manner by which the Bank calculates the above indicators is as follows:
Key Performance Indicator
Formula
1. Return on Average Equity (%)
Net Income after Income Tax
Average Total Capital Accounts
2. Return on Average Assets (%)
Net Income after Income Tax
Average Total Assets
3. Net Interest Margin (%)
Net Interest Income
Average Interest Earning Assets
4. Capital to Risk Assets (%)
Total Qualifying Capital
Market and Credit Risk Weighted
Exposures
5. Cost to Income Ratio (%)
Total Operating Expenses
Net Interest Income + Other Income
Philippine Trust Company (Philtrust Bank)
Bank-Owned Properties (Land & Building) - Existing Bank Sites
As of December 31, 2014
Branch Office
Location
Improvements/Condition of
Properties
Mortgage, Lien or
Encumbrance and Limitations
on Ownership or Usage
Mabini Branch
Philtrust Bank Building, U.N. 4-storey building in good
Avenue cor. A. Mabini St.,
condition. The branch occupies
Ermita, Manila
only the ground floor.
None
Mandaluyong Branch
Philtrust Bank Building, Shaw 3-storey building in good
condition, fully occupied by the
Blvd. cor. Gen. Kalentong St.,
branch.
Mandaluyong City
None
Maypajo Branch
Philtrust Bank Building, A. 4-storey building in good
Mabini St., Maypajo, Caloocan
condition. The branch occupies
City
only the ground floor.
None
Morayta Branch
Philtrust Bank Building, 890- 2-storey building in good
condition, fully occupied by the
892 Dr. Nicanor Reyes cor. R.
branch.
Papa Sts., Sampaloc, Manila
None
Pasig Branch
Philtrust Bank Building, Dr. S. 1-storey building in good
Antonio Avenue, Caniogan, condition, fully occupied by the
Pasig City
branch.
None
Puyat Ave. Branch
Philtrust Bank Building, 259- 9-storey building in good
263 Sen. Gil Puyat Ave., condition. The branch occupies
Makati City
only a portion of the ground
floor.
None
Quezon Ave. Branch
Quezon Avenue cor. Sto. 2-storey building in good
Domingo St., Quezon City
condition. The branch occupies
only a portion of the ground
floor.
None
Reina Regente Branch Philtrust Bank Building, Reina 3-storey
Regente
cor.
Soler
building
in
good
None
and condition. The branch occupies
Alvarado Sts., Binondo, Manila only the ground floor.
Sta. Cruz Branch
Philtrust Bank Building, Rizal 5-storey building in good
Ave. cor. Plaza Lacson, Sta.
condition. The branch occupies
Cruz, Manila
only the ground floor.
None
Taguig Branch
Unit 101-A, One Global Place, The
branch
occupies
a
5th Ave. cor. 25th St., portion/unit of the ground floor
Bonifacio
South
District,
Bonifacio Global City, Taguig of a 25-storey building. The
building is in good condition.
None
2 of 4
Philippine Trust Company (Philtrust Bank)
Bank-Owned Properties (Land & Building) - Existing Bank Sites
As of December 31, 2014
Branch Office
Improvements/Condition of
Properties
Location
Mortgage, Lien or
Encumbrance and Limitations
on Ownership or Usage
Provincial Branches
Angeles Branch
Philtrust
Bank
Building, 1-storey building in good
McArthur Hi-Way cor. B. condition, fully occupied by the
Aquino St., Angeles City, branch.
Pampanga
None
Bacolod Branch
Philtrust
Bank
Building, 5-storey building in good
Gatuslao cor. Cuadra Sts.,
condition. The branch occupies
Bacolod City
only the ground floor.
None
Cabanatuan Branch
Philtrust Bank Building, Burgos 2-storey building in good
Ave.
cor.
Beedle
St., condition, fully occupied by the
Cabanatuan City
branch.
None
Philtrust
None
Cagayan De Oro Branch
Bank
Building,
S. 3-storey
building
in
good
Osmeña cor. J. Ramonal Sts., condition. The branch occupies
Cogon, Cagayan De Oro City
only the ground floor.
Cavite Branch
Philtrust Bank Building, Km. 41 1-storey building in good
Aguinaldo Highway, Silang, condition, fully occupied by the
Cavite
branch.
None
Cebu Colon Branch
Philtrust Bank Building, Colon 2-storey building in good
St., Cebu City
condition, fully occupied by the
branch.
None
Cebu Magallanes
Branch
Philtrust
Bank
Building, 4-storey building in good
Magallanes cor. F. Gonzales condition. The branch occupies
St., Cebu City
the ground floor and the 2nd
floor.
None
Davao Sta. Ana Branch Philtrust
Bank
Building, 2-storey building in good
Monteverde Ave. cor. F.
condition. The branch occupies
Bangoy St., Sta. Ana, Davao
only the ground floor.
City
None
Iloilo Branch
Limay Branch
Philtrust
Bank
Building, 5-storey building in good
Quezon cor. Delgado Sts.,
condition. The branch occupies
Iloilo City
only the ground floor.
None
Philtrust
None
Bank
Building, 1-storey building in good
condition, fully occupied by the
National Road, Limay, Bataan branch.
3 of 4
Philippine Trust Company (Philtrust Bank)
Bank-Owned Properties (Land & Building) - Existing Bank Sites
As of December 31, 2014
Branch Office
Naga Branch
Improvements/Condition of
Properties
Location
Philtrust
Bank
Building, 2-storey
building
in
good
Mortgage, Lien or
Encumbrance and Limitations
on Ownership or Usage
None
Caceres cor. E. Angeles Sts., condition. The branch occupies
Naga City, Camarines Sur
Roxas Branch
Santiago Branch
only the ground floor.
Philtrust Bank Building, Roxas 2-storey building in good
Ave. cor. Primero De Mayo St., condition, fully occupied by the
Roxas City, Capiz
branch.
None
Maharlika Highway cor.
Abauag St., Santiago City,
Isabela
None
5-storey building in good
condition. The branch occupies
only a portion of the ground floor
and the 2nd floor.
4 of 4
Philippine Trust Company (Philtrust Bank)
Leased Bank Sites
As of December 31, 2014
Branch Office
Location
Amount of Lease
Payment Per Month
Lease Expiration
Date
Lease Term
Metro Manila Branches
Ayala Branch
National Life Insurance Bldg.,
6762 Ayala Avenue, Makati
City
Php626,058.96
Dec. 31, 2015
1 year
Edsa-Muñoz Branch
EDSA cor. Roosevelt Ave.,
Quezon City
Php198,223.87
June 30, 2028
20 years
Ermita Branch
U.N. Avenue cor. Ma. Orosa
St., Ermita, Manila
Php410,576.25
Dec. 31, 2017
5 years
Grace Park Branch
225 Rizal Ave. Ext., Grace
Park, Caloocan City
Php517,415.53
Sept. 30, 2015
10 years
Makati-Pasay Road
Branch
Liberty Building, 835 A. Arnaiz
Ave., Makati City
Php396,748.91
Sept. 30, 2015
5 years
Malabon Branch
Rizal Avenue cor. Leoño St.,
Tañong, Malabon City
Php73,920.00
Feb. 28, 2017
5 years
Malate Branch
Remedios cor. M.H. Del Pilar
Sts., Malate, Manila
Php336,000.00
Dec. 31, 2015
1 year
Morayta Branch Ext.
(CEU - Mendiola)
Ground Floor, Generosa De
Leon Science Center Building,
Centro Escolar University, No.
9 Mendiola St., San Miguel,
Manila
Php49,278.40
March 31, 2016
5 years
NAIA Branch
(Terminal 1)
Departure
Level,
NAIA
Terminal 1, Parañaque City
Php3,607.30
-
Monthly
NAIA Branch Ext.
(Terminal 3)
No. 12 Arrival Level, NAIA
Terminal 3, Pasay City
Php45,808.00
Dec. 31, 2015
1 year
1 of 3
Philippine Trust Company (Philtrust Bank)
Leased Bank Sites
As of December 31, 2014
Branch Office
Location
Amount of Lease
Payment Per Month
Lease Expiration
Date
Lease Term
Ongpin Branch
Ongpin cor. Padilla
Binondo, Manila
Sts.,
Php352,800.00
Oct. 31, 2017
5 years
Ortigas Branch
Unit
San
Php330,950.00
April 9, 2015
5 years
No.
UG-2,
One
Miguel Avenue Condo., San
Miguel Ave. cor. Shaw Blvd.,
Ortigas Center, Pasig City
Paco Branch
Simplicia Bldg., Pedro Gil cor.
A. Linao Sts., Paco, Manila
Php59,360.00
-
Monthly
Padre Rada Branch
Padre Rada cor. Ilaya Sts.,
Tondo, Manila
Php214,032.00
Dec. 31, 2026
25 years
Quiapo Branch
Plaza Miranda, Hidalgo St.,
Quiapo, Manila
Php327,958.40
June 30, 2017
5 years
Sucat Branch
Dr. A. Santos Ave. cor. Sta.
Rita St., Parañaque City
Php114,279.00
July 1, 2018
10 years
Tabora Branch
Tabora cor. M. De Santos Sts.,
San Nicolas, Manila
Php156,800.00
Aug. 31, 2015
1 year
1844 Taft Avenue, Pasay City
Php226,043.94
May 31, 2015
1 year
Tordesillas Branch
Unit
101
Le
Metropole
Condominium, Sen. Gil Puyat
Ave. cor. Tordesillas St.,
Makati City
Php145,883.14
Aug. 31, 2018
5 years
Unimart Branch
Greenhills Commercial Center,
Ortigas Ave., San Juan, Metro
Manila
Php367,479.73
Dec. 31, 2014
1 year
Valenzuela Branch
Danding Bldg., Cecilio J.
Santos St., Malinta, Valenzuela
City
Php70,818.63
July 31, 2015
1 year
Taft Branch
2 of 3
Philippine Trust Company (Philtrust Bank)
Leased Bank Sites
As of December 31, 2014
Amount of Lease
Payment Per Month
Lease Expiration
Date
Lease Term
Rizal Avenue cor. P. Gomez
St., Batangas City
Php89,600.00
March 14, 2018
5 years
Bulacan Branch
Provincial Capitol Compound,
McArthur Highway, Malolos
City, Bulacan
Php127,628.15
-
Monthly
Cebu Fuente Branch
Osmeña Blvd. cor. J. Llorente
St., Cebu City
Php151,330.04
March 31, 2017
5 years
Davao Recto Branch
Caritas Building, C.M. Recto
St., San Pedro, Davao City
Php33,820.71
Oct. 1, 2015
1 year
La Union Branch
Diocesan Buildiing, P. Gomez
St., San Fernando City, La
Union
Php90,000.00
Dec. 31, 2015
4 years
Lucena Branch
Quezon Ave. cor. Don Queblar
Php67,200.00
Aug. 1, 2020
10 years
Branch Office
Location
Provincial Branches
Batangas Branch
St., Lucena City, Quezon
3 of 3
Philippine Trust Company (Philtrust Bank)
Bank-Owned Properties - Future Bank Sites
As of December 31, 2014
Branch Office
Mortgage, Lien or Encumbrance and Limitations
on Ownership of Usage
Location
Metro Manila Branches
Bambang Branch
1499 G. Masangkay cor. Bambang Sts.,
Tondo, Manila
None
Grace Park Branch
Rizal Avenue Ext., Grace Park, Caloocan
City
None
Marikina Branch
Sumulong Highway cor. P. Burgos St., Sto.
Niño, Marikina City
None
Novaliches Branch
486 Quirino Highway, Novaliches, Quezon
City
None
Parañaque Branch
NAIA
Road
cor.
Parañaque City
Avenue,
None
Roosevelt Branch
274 Roosevelt Avenue, San Francisco Del
Monte, Quezon City
None
Taft Avenue Branch
1812 Taft Avenue, Pasay City
None
Valenzuela Branch
McArthur Highway (Fronting Valenzuela
City Hall) Karuhatan, Valenzuela City
None
Bulacan Branch
Paseo Del Congreso, Malolos City, Bulacan
None
Dumaguete Branch
Silliman Avenue cor. Real St., Brgy.
Poblacion 007, Dumaguete City
None
Gen. Santos Branch
Roxas
Avenue
cor.
Osmeña
Dadiangas, General Santos City
St.,
None
La Union Branch
Quezon Avenue cor. Ancheta St., San
Fernando City, La Union
None
Mandaue Branch
A. Del Rosario & Zamora Sts., Centro,
Mandaue City, Cebu
None
Rizal cor. Juan Luna St., Ozamiz City
None
Tarlac Branch
McArthur Highway cor. R. Mercado St.,
Brgy. Sto. Cristo, Tarlac City
None
Urdaneta Branch
McArthur Highway, National Rd. cor.
Manuel Roxas St., Poblacion, Urdaneta
City, Pangasinan
None
Quirino
Provincial Branches
Ozamiz Branch
1 of 1
Philippine Trust Company (Philtrust Bank)
As of December 31, 2014
Branch Office
Location
Greenhills Branch
Metrosquare Management &
Services Building, Unit 1
Ground Floor, 224 Ortigas
Avenue, San Juan, Metro
Manila
Amount of Lease
Payment Per Month
Lease Expiration
Date
Lease Term
Php156,800.00
Jan. 15, 2019
5 years
1 of 1
SECURITIES AND EXCHANGE COMMISSION
SEC FORM – ACGR
ANNUAL CORPORATE GOVERNANCE REPORT
WITH CONSOLIDATED CHANGES FOR THE YEAR 2014
GENERAL INSTRUCTIONS
(A) Use the Form ACGR
This SEC Form shall be used to meet the requirements of the Revised Code of
Corporate Governance.
(B) Preparation of Report
These general instructions are not to be filed with the report. The instructions to the
various captions of the form shall not be omitted from the report as filed. The report
shall contain the numbers and captions of all items. If any item is inapplicable or the
answer thereto is in the negative, an appropriate statement to that effect shall be made.
Provide an explanation on why the item does not apply to the company or on how the
company’s practice differs from the Code.
(C) Signature and Filing of the Report
A. Three (3) complete set of the report shall be filed with the Main Office of the
Commission.
B. At least one complete copy of the report filed with the Commission shall be
manually signed.
C. All reports shall comply with the full disclosure requirements of the Securities
Regulation Code.
D. This Report is required to be filed annually together with the company’s annual
report.
(D) Filing an Amendment
Any material change in the facts set forth in the report occurring within the year shall
be reported through SEC Form 17-C. The cover page for the Form 17-C shall indicate
“Amendment to the ACGR”.
1
SECURITIES AND EXCHNAGE COMMISSION
SEC FORM-ACGR
CONSOLIDATED CORPORATE GOVERNANCE REPORT
1. Report is Filed for the Year -
2014
2. Exact Name of Registrant as Specified in its Charter -
Philippine Trust Company
also known as Philtrust Bank
3. United Nations Avenue corner San Marcelino Street, Manila
Address of Principal Office
4. SEC Identification Number -
PW-105
6. BIR Tax Identification Number
-
1007
Postal Code
5. (SEC Use Only)
Industry Classification Code
340-000-541-102
7. Issuer’s Telephone number, including area code
-
(02) 524-9061
8. Former name or former address, if changed from the last report
-
n/a
2
TABLE OF CONTENTS
A. BOARD MATTERS ………………………………………………………………………………….5
1) BOARD OF DIRECTORS ……………………………………………………………..5
(a) Composition of the Board ……………………………………………………….…5
(b) Directorship in Other Companies ………………………………………………….7
(c) Shareholding in the Company ………..………………………………….…………9
2) CHAIRMAN AND CEO ……………………………………………………………….9
3) OTHER EXECUTIVE, NON-EXECUTIVE AND
INDEPENDENT DIRECTORS ………………………………………………………..11
4) CHANGES IN THE BOARD OF DIRECTORS ………………………………………12
5) ORIENTATION AND EDUCATION PROGRAM …………………………………...20
B. CODE OF BUSINESS CONDUCT & ETHICS ……………………………………………………..21
1) POLICIES ……………………………………………………………………………...21
2) DISSEMINATION OF CODE ………………………………………………………...22
3) COMPLIANCE WITH CODE ………………………………………………………...22
4) RELATED PARTY TRANSACTIONS ……………………………………………....22
(a) Policies and Procedures ………………………………………………………...…22
(b) Conflict of Interest ………………………………………………………………..23
5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS ………………...24
6) ALTERNATIVE DISPUTE RESOLUTION …………………………………………26
C. BOARD MEETINGS & ATTENDANCE …………………………………………………………..26
1) SCHEDULE OF MEETINGS ………………………………………………………...26
2) DETAILS OF ATTENDANCE OF DIRECTORS …………………………………...26
3) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS …………………….27
4) ACCESS TO INFORMATION ………………………………………………………27
5) EXTERNAL ADVICE ……………………………………………………………….29
6) CHANGES IN EXISTING POLICIES ………………………………………………29
D. REMUNERATION MATTERS ……………………………………………………………………29
1) REMUNERATION PROCESS ………………………………………………………29
2) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS ……………29
3) AGGREGATE, REMUNERATION …………………………………………………30
4) STOCK RIGHTS, OPTIONS AND WARRANTS …………………………………..31
5) REMUNERATION OF MANAGEMENT …………………………………………..32
E. BOARD COMMITTEES …………………………………………………………………………..32
1) NUMBER OF MEMBERS, FUNCTIONS AND REPONSIBILITIES …………….32
2) COMMITTEE MEMBERS ………………………………………………………….34
3) CHANGES IN COMMITTEE MEMBERS …………………………………………36
4) WORK DONE AND ISSUES ADDRESSED ………………………………………36
5) COMMITTEE PROGRAM ………………………………………………………….37
F.
RISK MANAGEMENT SYSTEM …………………………………………………………………38
1) STATEMENT ON EFFECTIVENESS OF
RISK MANAGEMENT SYSTEM …………………………………………………..38
2) RISK POLICY ……………………………………………………………………….39
3) CONTROL SYSTEM ………………………………………………………………..40
G. INTERNAL AUDIT AND CONTROL ……………………………………………………………41
1) STATEMENT ON EFFECTIVENESS OF
INTERNAL CONTROL SYSTEM ………………………………………………….42
2) INTERNAL AUDIT …………………………………………………………………43
(a) Role, Scope and Internal Audit Function ……………………………………….43
(b) Appointment/Removal of Internal Auditor ……………………………………..43
(c) Reporting Relationship with the Audit Committee ……………………………..44
3
(d) Resignation, Re-assignment and Reasons ………………………………………44
(e) Progress against Plans, Issues, Findings and
Examination Trends …………………………………………………………….44
(f) Audit Control Policies and Procedures …………………………………………45
(g) Mechanisms and Safeguards ……………………………………………………45
H. ROLE OF STAKEHOLDERS ……………………………………………………………………..46
I.
DISCLOSURE AND TRANSPARENCY …………………………………………………………48
J.
RIGHTS OF STOCKHOLDERS …………………………………………………………………..51
1) RIGHT TO PARTICIPATE EFFECTIVELY IN
STOCKHOLDERS’MEETINGS ……………………………………………………51
2) TREATMENT OF MINORITY STOCKHODLERS ……………………………….57
K. INVESTORS RELATIONS PROGRAM ………………………………………………………….58
L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES ……………………………………..59
M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL …………………………………59
N. INTERNAL BREACHES AND SACTIONS ……………………………………………………...59
4
A. BOARD MATTERS
1) Board of Directors
Number of Directors per Articles of Incorporation
Eleven (11)
Actual number of Directors for the year
Eleven (11)
(a) Composition of the Board
Complete the table with information on the Board of Directors
As of December 31, 2014:
Director’s
Name
1. Dr. Jaime C.
Laya
Type
[Executive
(ED), NonExecutive
(NED) or
Independent
Director
(ID)]
If nominee,
identify the
principal
Nominator in
the last
election (If
ID, state the
relationship
with the
nominator)
Date first
elected
Date last
elected (If ID,
state the
number of
years served
as ID)1
n/a
Atty. Francis
Y. Gaw
Nov. 5, 1990 April 29, 2014
n/a
Atty. Francis
Y. Gaw
April 28,
2009
April 29, 2014
NED
n/a
Atty. Francis
Y. Gaw
April 24,
1990
April 29, 2014
4. Ernesto O.
Chan
ID
n/a
April 25,
1989
April 29, 2014
(3rd year ID)
5. Tomas V.
Apacible
ID
n/a
April 27,
2010
6. Chief Justice
Hilario G.
Davide, Jr.
(Ret.)
ID
n/a
7. Dr. Emilio
C. Yap III
NED
n/a
Atty. Francis
Y. Gaw (not
related to
Mr. Chan)
Atty. Francis
Y. Gaw (not
related to
Cong.
Apacible)
Atty. Francis
Y. Gaw (not
related to
Chief Justice
Davide)
Atty. Francis
Y. Gaw
8. Jose M.
Fernandez
ED
n/a
9. Dr. Johnny
C. Yap
NED
10. Miriam C.
Cu
2. Senior
Justice Josue
N. Bellosillo
(Ret.)
3. Basilio C.
Yap
11. Atty. Francis
Y. Gaw2
Elected when
(Annual/
Special
Meeting)
No. of
years
served
as
director
Annual
Stockholders’
Meeting
Annual
Stockholders’
Meeting
24 years
Annual
Stockholders’
Meeting
Annual
Stockholders’
Meeting
24 years
April 29, 2014
(3rd year ID)
Annual
Stockholders’
Meeting
4 years
April 30,
2013
April 29, 2014
(2nd year ID)
Annual
Stockholders’
Meeting
1 year
April 28,
2009
April 29, 2014
5 years
Atty. Francis
Y. Gaw
March 5,
2007
April 29, 2014
n/a
Atty. Francis
Y. Gaw
April 25,
2012
April 29, 2014
ED
n/a
Atty. Francis
Y. Gaw
April 28.
2009
April 29, 2014
NED
n/a
Mr. Tomas V.
Apacible
June 30,
2014
June 30, 2014
Annual
Stockholders’
Meeting
Annual
Stockholders’
Meeting
Annual
Stockholders’
Meeting
Annual
Stockholders’
Meeting
Board of
Directors’
Meeting of
June 30, 2014
ED
NED
5 years
25 years
7 years
2 years
5 years
Less
than 1
year
_______________________________________________________________________________
1
2
Reckoned from the election immediately following January 2, 2012.
Elected Director effective June 30, 2014 to serve the unexpired term of Atty. Martin B. Isidro
who voluntarily resigned as director effective June 30, 2014.
5
(b) Provide a brief summary of the corporate governance policy that the board of
directors has adopted. Please emphasize the policy/ies relative to the treatment of
all shareholders, respect for the rights of minority shareholders and of other
stakeholders, disclosure duties, and board responsibilities.
The Board of Directors is primarily responsible for the
governance of the corporation. Corollary to setting the policies for the
accomplishment of the corporate objectives, it shall provide an
independent check on Management.
It is the Board’s responsibility to foster the long-term success of
the corporation, and to sustain its competitiveness and profitability in a
manner consistent with its corporate objectives and the best interest of
the stockholders, employees, depositors and other stakeholders.
The Board should formulate the corporate vision, mission,
strategic objectives, policies and procedures that shall guide its
activities, including the means to effectively monitor Management’s
performance.
The Board of Directors and Management are committed to the
principles and best practices contained in its Manual on Corporate
Governance that guides it in attaining the corporate goals.
The Board respects the right of the stockholders to vote in all
matters that require their consent, pre-emptive right to all stock issuance
of the corporation/right to inspect corporate book and records, right to
information, right to dividends and appraisal right.
The Board has adopted the principle of “One share, one vote”
policy to ensure that all stockholders are treated equally. However in the
election of Directors every stockholder is entitled to cumulate his shares
in accordance with the provisions of the Corporation Code. Cumulative
voting enables minority stockholders to elect a representative in the
Board.
By having three (3) Independent Directors, the Board has
established an effective voting mechanism that protects the minority
stockholders against actions of the controlling stockholders.
Timely notices of the annual and special stockholders meetings
are sent to all stockholders within the required period and full
disclosures are made to the regulatory agencies and stock exchange so
that the general public and stakeholders are duly informed.
6
The Board ensures the external auditors and other relevant
individuals are present during the meeting to answer shareholders’
questions during the meeting.
(c) How often does the Board review and approve the vision and mission?
The Board reviews and approves the vision and mission of the
company annually during its organizational meeting.
(d) Directorship in Other Companies
(iii)Directorship in the Company’s Group2*
Director’s Name
Basilio C. Yap
Chief Justice Hilario G.
Davide, Jr. (Ret.)
Independent Director
Dr. Emilio C. Yap III
Dr. Johnny C. Yap
Miriam C. Cu
Corporate Name of the Group
Company*
Type of Directorship
(Executive, NonExecutive, Independent).
Indicate if director is also
the Chairman
Philtrust Realty Corporation
U.S. Automotive Co., Inc.
USAUTOCO, Inc.
Seabreeze Ent. Inc.
Manila Prince Hotel Corp.
Manila Bulletin Publishing
Corporation
ED
ED
ED
ED
ED
Manila Bulletin Publishing Corp.
Centro Escolar University
Manila Hotel Corporation
U.S. Automotive Co., Inc.
Philtrust Realty Corp.
USAUTOCO, Inc.
Manila Prime Land Holdings, Inc.
Centro Escolar University
Euro-Med. Laboratories, Inc.
Café France, Inc.
Manila Prime Land Holdings, Inc.
Maynila Properties & Mgmt. Inc.
Orient Enterprises, Inc.
ED
NED
NED
ED
ED
ED
ED/Chairman
ED
ED
ED/Chairman
ED
ED
NED
ID
*Includes related interests
(ii) Directorship in Other Listed Companies
Director’s Name
Dr. Jaime C. Laya
Name of Listed Company
GMA Network, Inc.
Type of Directorship
(Executive, Non-Executive,
Independent). Indicate if
director is also the
Chairman
Independent Director
___________________________
2
The Group is composed of the parent, subsidiaries, associates and joint ventures of the company.
7
(iii)Relationship within the Company and its Group
Director’s Name
Dr. Emilio C. Yap III
Dr. Johnny C. Yap
Atty. Francis Y. Gaw
Name of the Significant
Shareholder
Basilio C. Yap
Basilio C. Yap
Basilio C. Yap
Description of the
relationship
Uncle
Uncle
Brother-in-law
(iv) Has the company set a limit on the number of board seats in other companies
(publicly listed, ordinary and companies with secondary license) that an
individual director or CEO may hold simultaneously? In particular, is the limit
of five board seats in other publicly listed companies imposed and observed?
If yes, briefly describe other guidelines:
Guidelines
Executive Director
Non-Executive Director
CEO
The Board may consider the
adoption of guidelines on the
number of directorship that its
executive directors can hold in
stock and non-stock
corporations. The optimum
number should take into
consideration the capacity of
the director to diligently and
effectively perform his duties
and responsibilities
Non-executive directors, who,
at the same time, serve as fulltime executives in other
corporations, may be covered
by a lower indicative limit of
membership in other boards. In
any case, the capacity of the
directors to diligently and
efficiently perform their duties
and responsibilities should not
be compromised.
The Chief Executive Officer
may be covered by a lower
indicative limit of membership
in other boards. In any case,
the capacity of the directors to
diligently and efficiently
perform their duties and
responsibilities should not be
compromised.
Maximum Number of
Directorships in other
companies
No limit has yet been set on
the maximum number of
executive directorship in other
companies. However, for listed
companies, the maximum
number of executive
directorship is five (5) board
seats.
No limit has yet been set on
the maximum number of nonexecutive directorship in other
companies. However, for listed
companies, the maximum
number of non-executive
directorship is five (5) board
seats.
No limit has yet been set on
the maximum number of Chief
Executive Officer post in other
companies. However, for listed
companies, the maximum
number of Chief Executive
Officer is five (5) board seats.
8
(c) Shareholding in the Company
Name of Director
1. Dr. Jaime C. Laya
2. Senior Justice Josue N.
Bellosillo (Ret.)
3. Basilio C. Yap
Number of
Direct shares
33,325
1,512
Number of Indirect
shares/Through (name of
record owner)
0
0
1,369,722
% of Capital
Stock
0.0033%
0.0002%
0.1370%
Indirect: through 60% holdings
in Seabreeze Ent., Inc.
4. Ernesto O. Chan
5. Tomas V. Apacible
6. Chief Justice Hilario
G. Davide, Jr. (Ret.)
7. Dr. Emilio C. Yap III
17,566
1,512
1,000
110,136**
8. Jose M. Fernandez
9. Dr. Johnny C. Yap
10. Miriam C. Cu
11. Atty. Francis Y.
Gaw*
TOTAL
0.0018%
Indirect: through nominal
holdings in Pioneer Insurance
and Surety Corporation
0
0
440
2,000
548,881
10,519
0.0002%
0.0001%
0.0110%
Indirect: through nominal
holdings of less than 1% in
Philtrust Realty Corp. and U.S.
Automotive Co., Inc.
0
0
0.0000%
0.0002%
0.0549%
Indirect: through 30% holdings
in Orient Enterprises, Inc.
0
0.0011%
0
0.2097%
2,096,613
*Elected on June 30, 2014.
**Per Beneficial Ownership Report (SEC Form 23-B)
2) Chairman and CEO
(a) Do different persons assume the role of Chairman of the Board of Director and
CEO? If no, describe the checks and balances laid down to ensure that the Board
gets the benefit of independent views.
Yes
No
√
Identify the Chair and CEO:
Chairman of the Board
CEO/President
Dr. Jaime C. Laya
Dr. Jaime C. Laya
9
(b) Roles, Accountabilities and Deliverables
Define and clarify the roles, accountabilities and deliverables of the Chairman and
CEO.
Role
Accountabilities
Deliverables
Chairman
Maintain qualitative and timely
lines of communication and
information between the Board and
Management
Ensure that the meetings of the
stockholders and the Board are
held in accordance with the ByLaws or as he may deem
necessary.
Supervise the preparation of the
agenda of the meetings in
coordination with the Corporate
Secretary, taking into consideration
the suggestion of Management and
the directors.
To attend and preside at all
meetings of the Stockholders and
the Board of Directors, ensuring
the presence of a quorum for
transaction of corporate business.
Chief Executive Officer
Exercise general supervision and
control of the business affairs and
property of the corporation
See to it that all orders and
resolutions of the Board are duly
carried into full effect.
Perform such duties and functions
as may be imposed upon him by
the Board.
Preside over the meetings of the
Board in the absence of Chairman
and Vice Chairman.
Submit to the Board and to the
Stockholders a complete report of
operations for the preceding year
and the state of its affairs.
Report to the Board all matters
within his knowledge which the
interest of the corporation may
require to be brought to its notice.
3) Explain how the Board of Directors plan for the succession of the CEO/Managing
Director/President and the top key management positions?
The executive officers of the corporation are elected by the Board of
Directors in its organizational meeting held after the annual stockholders’
meeting. Unless re-elected, the executive officers shall serve for a term of
one (1) or until their successors are duly elected and qualified. Should any
vacancy occur, the same shall be filled up by an officer appointed by the
Board as recommended by the Nomination Committee.
10
4) Other Executive, Non-Executive and Independent Directors
Does the company have a policy of ensuring diversity of experience and background
of directors in the board? Please explain.
Yes, the corporation has three (3) independent directors that constitute
27% of the entire membership of the Board. Of the remaining eight (8), only
three are executive directors.
The company’s policy on diversity of experience and background is
further ensured with board members consisting of a former governor of the
Bangko Sentral ng Pilipinas, retired justices of the Supreme Court,
congressman, lawyer, certified public accountants and business executives.
Does it ensure that at least one non-executive director has an experience in the sector
or industry the company belongs to? Please explain.
Yes, the company’s non-executive directors possess such qualifications
and stature that world enable them to effectively participate in the
deliberations of the Board.
Define and clarify the roles, accountabilities and deliverables of the Executive, NonExecutive and Independent Directors:
Role
Accountabilities
Deliverables
Executive
To formulate, develop
and implement
corporate objectives,
risk strategy and
corporate governance
policies
Responsible for the
day-to-day operations
of the corporation,
including
board/management
committees and
personnel.
Recommends business
plans for consideration
of the board
Reports to the board
on a regular basis on
the results of
operations
Non-Executive
To constructively
challenge and contribute
to the formulation and
development of
corporate objectives, risk
strategy and corporate
governance policies
Responsible for
monitoring and
overseeing the
performance of senior
management.
Independent Director
To provide an outside
perspective and assist the
board in the formulation
and development of
corporate objective, risk
strategy and corporate
governance policies
Responsible for
evaluating management
performance and
ensuring that financial
information are accurate
and risk management
system is in place
Determines the
appropriate levels of
remuneration of
executive directors and
recommends to the board
appointments of senior
management including
succession planning
Membership in Audit
and Nomination
Committee and
performing the duties
mandated in the
committee charters
11
Provide the company’s definition of “independence” and describe the company’s
compliance to the definition.
The Company defines independence as the avoidance of being
unduly influenced by a vested interest and to being free from any
constraints that would prevent a correct course of action being taken. It
is the ability to “stand apart” from inappropriate influences in order to
make an impartial decision.
The corporation values independence by having three (3)
independent directors, or 27% of the entire membership of the board,
who possess qualifications and stature that would enable them to
effectively participate in the deliberations of the Board without being
influenced by any other director or group of directors.
Does the company have a term limit of five consecutive years for independent
directors? If after two years, the company wishes to bring back an independent
director who had served for five years, does it limit the term for no more than four
additional years? Please explain.
Yes, the company has adopted the term limit of five (5)
consecutive years for independent directors, counted from their election
immediately following January 2, 2012, as mandated by SEC
Memorandum Circular No. 9, Series of 2011.
After having served for five consecutive years and the lapse of a
two-year cooling off period, an independent director may be re-elected
for such number of years as the stockholders/board shall deem fit
without exceeding the maximum years prescribed in the said Circular.
5) Changes in the Board of Directors (Executive, Non-Executive and Independent
Directors)
(a) Resignation/Death/Removal
Indicate any changes in the composition of the Board of Directors that happened
during the period:
Name
Atty. Martin B. Isidro
Position
Executive Director
Date of Cessation
June 30, 2014
Reason
resignation
Voluntary
as director
12
(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement
and Suspension
Describe the procedures for the selection/appointment, re-election, disqualification,
removal, reinstatement and suspension of the members of the Board of Directors. Provide
details of the processes adopted (including the frequency of election) and the criteria
employed in each procedure:
Procedure
a. Selection/Appointment
(i) Executive Directors
Process Adopted
Criteria*
Evaluation by the
Board
on
the
recommendation of the
Nomination
Committee,
and
ratified at the Annual
Stockholders’ Meeting
a. College education or equivalent
academic degree;
b. Practical understanding of the business
of the corporation;
c. Membership in good standing in
relevant industry, business or professional
organizations; and
d. Previous business experience.
a. College education or equivalent
academic degree;
b. Practical understanding of the business
of the corporation;
c. Membership in good standing in
relevant industry, business or professional
organizations; and
d. Previous business experience.
a. College education or equivalent
academic degree;
b. Practical understanding of the business
of the corporation;
c. Membership in good standing in
relevant industry, business or professional
organizations; and
d. Previous business experience.
(ii) Non-Executive Directors
Evaluation by the
Board
on
the
recommendation of the
Nomination
Committee,
and
ratified at the Annual
Stockholders’ Meeting
(iii) Independent Directors
Evaluation by the
Board
on
the
recommendation of the
Nomination
Committee,
and
ratified at the Annual
Stockholders’ Meeting
b. Re-appointment/Re-election
(i) Executive Directors
Evaluation by the
Board
on
the
recommendation of the
Nomination
Committee,
and
ratified at the Annual
Stockholders’ Meeting
(ii) Non-Executive Directors
Evaluation by the
Board
on
the
recommendation of the
Nomination
Committee,
and
ratified at the Annual
Stockholders’ Meeting
(iii) Independent Directors
Evaluation by the
Board
on
the
recommendation of the
Nomination
Committee,
and
ratified at the Annual
Stockholders’ Meeting
a. College education or equivalent
academic degree;
b. Practical understanding of the business
of the corporation;
c. Membership in good standing in
relevant industry, business or professional
organizations; and
d. Previous business experience.
a. College education or equivalent
academic degree;
b. Practical understanding of the business
of the corporation;
c. Membership in good standing in
relevant industry, business or professional
organizations; and
d. Previous business experience.
a. College education or equivalent
academic degree;
b. Practical understanding of the business
of the corporation;
c. Membership in good standing in
relevant industry, business or professional
organizations; and
d. Previous business experience.
*The herein criteria are in addition to the qualifications for Board membership provided for in the Corporation Code,
Securities Regulation Code, and other relevant laws, including the Bangko Sentral ng Pilipinas Manual of Regulations for
Banks.
13
c. Permanent Disqualification
(i) Executive Directors
No director has been
permanently
disqualified
in
accordance with the
criteria
a. Any person convicted by final judgment
or order by a competent judicial or
administrative body of any crime that (i)
involves the purchase or sale of securities,
as defined in the Securities Regulations
Code; (ii) arises out of the person’s
conduct as an underwriter, broker, dealer,
investment adviser, principal, distributor,
mutual fund dealer, futures commission
merchant, commodity trading advisor, or
floor broker; or (iii) arises out his
fiduciary relationship with a bank, quasibank, trust company, investment house or
as an affiliated person of any of them;
b. Any person who, by reason of
misconduct, after hearing, is permanently
enjoined by a final judgment or order of
the Commission or any court or
administrative body of competent
jurisdiction
from:
(i)
acting
as
underwriter, broker, dealer, investment
adviser, principal distributor, mutual fund
dealer, future commission merchant,
commodity trading advisor, or floor
broker; (ii) acting as director or officer of
a bank, quasi-bank, trust company,
investment
house,
or
investment
company; (iii) engaging in or continuing
any conduct or practice in any of the
capacities mentioned in sub-paragraphs
(a) and (b) above, or willfully violating
the laws that govern securities and
banking activities.
c. Any person convicted by final judgment
or order by a court or competent
administrative body of an offense
involving
moral
turpitude,
fraud,
embezzlement,
theft,
estafa,
counterfeiting, misappropriation, forgery,
bribery, false affirmation, perjury or other
fraudulent acts;
d. Any person who has been adjudged by
final judgment or order of the
Commission,
court, or
competent
administrative body to have willfully
violated, or willfully aided, abetted
counseled, induced or produced the
violation of any provision of the
Corporation Code, Securities Code or any
other
law
administered
by
the
Commission or BSP, or any of its rule,
regulation or order;
e. Any person earlier elected as
independent director who becomes an
officer, employee or consultant of the
same corporation;
f. Any person judicially declared as
insolvent;
g. Any person found guilty by final
judgment or order of a foreign court or
equivalent financial regulatory authority
14
(ii) Non-Executive Directors
No director has been
permanently
disqualified
in
accordance with the
criteria
of acts, violations or misconduct similar to
any of the acts, violations or misconduct
enumerated in sub-paragraphs (a) to (e)
above;
h. Conviction by final judgment of an
offense punishable by imprisonment for
more than six (6) years, or a violation of
the Corporation Code committed within
five (5) years prior to the date of his
election or a appointment.
a. Any person convicted by final judgment
or order by a competent judicial or
administrative body of any crime that (i)
involves the purchase or sale of securities,
as defined in the Securities Regulations
Code; (ii) arises out of the person’s
conduct as an underwriter, broker, dealer,
investment adviser, principal, distributor,
mutual fund dealer, futures commission
merchant, commodity trading advisor, or
floor broker; or (iii) arises out his
fiduciary relationship with a bank, quasibank, trust company, investment house or
as an affiliated person of any of them;
b. Any person who, by reason of
misconduct, after hearing, is permanently
enjoined by a final judgment or order of
the Commission or any court or
administrative body of competent
jurisdiction
from:
(i)
acting
as
underwriter, broker, dealer, investment
adviser, principal distributor, mutual fund
dealer, future commission merchant,
commodity trading advisor, or floor
broker; (ii) acting as director or officer of
a bank, quasi-bank, trust company,
investment
house,
or
investment
company; (iii) engaging in or continuing
any conduct or practice in any of the
capacities mentioned in sub-paragraphs
(a) and (b) above, or willfully violating
the laws that govern securities and
banking activities.
c. Any person convicted by final judgment
or order by a court or competent
administrative body of an offense
involving
moral
turpitude,
fraud,
embezzlement,
theft,
estafa,
counterfeiting, misappropriation, forgery,
bribery, false affirmation, perjury or other
fraudulent acts;
d. Any person who has been adjudged by
final judgment or order of the
Commission,
court, or
competent
administrative body to have willfully
violated, or willfully aided, abetted
counseled, induced or produced the
violation of any provision of the
Corporation Code, Securities Code or any
other
law
administered
by
the
Commission or BSP, or any of its rule,
regulation or order;
e. Any person earlier elected as
15
(iii) Independent Directors
No director has been
permanently
disqualified
in
accordance with the
criteria
independent director who becomes an
officer, employee or consultant of the
same corporation;
f. Any person judicially declared as
insolvent;
g. Any person found guilty by final
judgment or order of a foreign court or
equivalent financial regulatory authority
of acts, violations or misconduct similar to
any of the acts, violations or misconduct
enumerated in sub-paragraphs (a) to (e)
above;
h. Conviction by final judgment of an
offense punishable by imprisonment for
more than six (6) years, or a violation of
the Corporation Code committed within
five (5) years prior to the date of his
election or a appointment.
a. Any person convicted by final judgment
or order by a competent judicial or
administrative body of any crime that (i)
involves the purchase or sale of securities,
as defined in the Securities Regulations
Code; (ii) arises out of the person’s
conduct as an underwriter, broker, dealer,
investment adviser, principal, distributor,
mutual fund dealer, futures commission
merchant, commodity trading advisor, or
floor broker; or (iii) arises out his
fiduciary relationship with a bank, quasibank, trust company, investment house or
as an affiliated person of any of them;
b. Any person who, by reason of
misconduct, after hearing, is permanently
enjoined by a final judgment or order of
the Commission or any court or
administrative body of competent
jurisdiction
from:
(i)
acting
as
underwriter, broker, dealer, investment
adviser, principal distributor, mutual fund
dealer, future commission merchant,
commodity trading advisor, or floor
broker; (ii) acting as director or officer of
a bank, quasi-bank, trust company,
investment
house,
or
investment
company; (iii) engaging in or continuing
any conduct or practice in any of the
capacities mentioned in sub-paragraphs
(a) and (b) above, or willfully violating
the laws that govern securities and
banking activities.
c. Any person convicted by final judgment
or order by a court or competent
administrative body of an offense
involving
moral
turpitude,
fraud,
embezzlement,
theft,
estafa,
counterfeiting, misappropriation, forgery,
bribery, false affirmation, perjury or other
fraudulent acts;
d. Any person who has been adjudged by
final judgment or order of the
Commission,
court, or
competent
administrative body to have willfully
16
violated, or willfully aided, abetted
counseled, induced or produced the
violation of any provision of the
Corporation Code, Securities Code or any
other
law
administered
by
the
Commission or BSP, or any of its rule,
regulation or order;
e. Any person earlier elected as
independent director who becomes an
officer, employee or consultant of the
same corporation;
f. Any person judicially declared as
insolvent;
g. Any person found guilty by final
judgment or order of a foreign court or
equivalent financial regulatory authority
of acts, violations or misconduct similar to
any of the acts, violations or misconduct
enumerated in sub-paragraphs (a) to (e)
above;
h. Conviction by final judgment of an
offense punishable by imprisonment for
more than six (6) years, or a violation of
the Corporation Code committed within
five (5) years prior to the date of his
election or a appointment.
d. Temporary Disqualification
(i) Executive Directors
No director has been
temporarily
disqualified
in
accordance with the
criteria
(ii) Non-Executive Directors
No director has been
temporarily
disqualified
in
accordance with the
criteria
a. Refusal to comply with the disclosure
requirements of the Securities Regulation
Code and its Implementing Rules and
Regulations. The disqualification shall be
in effect as long as the refusal persists.
b. Absence in more that fifty (50) percent
of all regular and special meetings of the
Board during his incumbency, or any
twelve (12) month period during the said
incumbency, unless the absence is due to
illness, death in the immediate family or
serious accident. The disqualification shall
apply for purposes of the succeeding
election.
e. Dismissal or termination for cause as
director of any corporation covered by
this Code. The disqualification shall be in
effect until he has cleared himself from
any involvement in the cause that gave
rise to his dismissal or termination
f. If the beneficial equity ownership of an
independent director in the corporation or
its subsidiaries and affiliates exceeds two
percent of its subscribed capital stock. The
disqualification shall be lifted if the limit
is later complied with.
g. If any of the judgments or orders cited
in
the
grounds
for
permanent
disqualification has not yet become final.
a. Refusal to comply with the disclosure
requirements of the Securities Regulation
Code and its Implementing Rules and
Regulations. The disqualification shall be
in effect as long as the refusal persists.
b. Absence in more that fifty (50) percent
of all regular and special meetings of the
17
(iii) Independent Directors
e. Removal
(i) Executive Directors
(ii) Non-Executive Directors
(iii) Independent Directors
No director has been
temporarily
disqualified
in
accordance with the
criteria
No directors has been
removed in accordance
with the criteria
No directors has been
removed in accordance
with the criteria
No directors has been
removed in accordance
with the criteria
Board during his incumbency, or any
twelve (12) month period during the said
incumbency, unless the absence is due to
illness, death in the immediate family or
serious accident. The disqualification shall
apply for purposes of the succeeding
election.
e. Dismissal or termination for cause as
director of any corporation covered by
this Code. The disqualification shall be in
effect until he has cleared himself from
any involvement in the cause that gave
rise to his dismissal or termination
f. If the beneficial equity ownership of an
independent director in the corporation or
its subsidiaries and affiliates exceeds two
percent of its subscribed capital stock. The
disqualification shall be lifted if the limit
is later complied with.
g. If any of the judgments or orders cited
in
the
grounds
for
permanent
disqualification has not yet become final.
a. Refusal to comply with the disclosure
requirements of the Securities Regulation
Code and its Implementing Rules and
Regulations. The disqualification shall be
in effect as long as the refusal persists.
b. Absence in more that fifty (50) percent
of all regular and special meetings of the
Board during his incumbency, or any
twelve (12) month period during the said
incumbency, unless the absence is due to
illness, death in the immediate family or
serious accident. The disqualification shall
apply for purposes of the succeeding
election.
e. Dismissal or termination for cause as
director of any corporation covered by
this Code. The disqualification shall be in
effect until he has cleared himself from
any involvement in the cause that gave
rise to his dismissal or termination
f. If the beneficial equity ownership of an
independent director in the corporation or
its subsidiaries and affiliates exceeds two
percent of its subscribed capital stock. The
disqualification shall be lifted if the limit
is later complied with.
g. If any of the judgments or orders cited
in
the
grounds
for
permanent
disqualification has not yet become final.
Any of the above instances for permanent
disqualification
Any of the above instances for permanent
disqualification
Any of the above instances for permanent
disqualification
18
f. Re-instatement
(i) Executive Directors
(ii) Non-Executive Directors
(iii) Independent Directors
g. Suspension
(i) Executive Directors
(ii) Non-Executive Directors
(iii) Independent Directors
No directors has been
re-instated
in
accordance with the
criteria
No directors has been
re-instated
in
accordance with the
criteria
No directors has been
re-instated
in
accordance with the
criteria
Any person who is permanently
disqualified as a director shall not be
eligible for re-instatement
No directors has been
suspended
in
accordance with the
criteria
No directors has been
suspended
in
accordance with the
criteria
No directors has been
suspended
in
accordance with the
criteria
Any of the above instances for
temporary disqualification
Any person who is permanently
disqualified as a director shall not be
eligible for re-instatement
Any person who is permanently
disqualified as a director shall not be
eligible for re-instatement
Any of the above instances for
temporary disqualification
Any of the above instances for
temporary disqualification
Voting Result of the last Annual General Meeting (April 29, 2014)
Name of Director
1. Dr. Jaime C. Laya
2. Senior Justice Josue N.
Bellosillo (Ret.)
3. Basilio C. Yap
4. Ernesto O. Chan
5. Tomas V. Apacible
6. Chief Justice Hilario G.
Davide, Jr. (Ret.)
7. Dr. Emilio C. Yap III
8. Jose M. Fernandez
9. Dr. Johnny C. Yap
10. Miriam C. Cu
11. Atty. Martin B. Isidro
Votes Received
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
Unanimous vote of all the shares present
represented at the Annual Stockholders’ Meeting
or
or
or
or
or
or
or
or
or
or
or
19
6) Orientation and Education Program
(a) Disclose details of the company’s orientation program for new directors, if any.
Within six months from his first election, a director is mandated
by the Bangko Sentral ng Pilipinas (BSP) to attend an orientation course
on corporate governance for bank directors. His election is likewise
subject to confirmation by the BSP Monetary Board.
(b) State any in-house training and external courses attended by Directors and Senior
Management3 for the past three (3) years:
For the past three (3) years, some of the Bank’s Directors and
Senior Officers attended various seminars or trainings which were
accredited by the Bangko Sentral ng Pilipinas, Bankers Institute of the
Philippines, Employers Confederation of the Philippines, Securities and
Exchange Commission or Philippine Stock Exchange, Inc.
(c) Continuing education programs for directors: program and seminars and
roundtables attended during the year.
Name of
Director/Officer
Atty. Martin B. Isidro
2. Senior Justice Josue
N. Bellosillo (Ret.)
Date of Training
Program
Jan. – Feb. 2012
Mandatory Continuing
Legal
Education
(MCLE)
2009-Present
Programs, seminars and
discussions in relation
to his being Dean of the
School of Law and
Jurisprudence
Name of Training
Institution
Arellano Law
Foundation
Centro Escolar
University
________________________
3
Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling
the activities of the company.
20
B. CODE OF BUSINESS CONDUCT & ETHICS
1) Discuss briefly the company’s policies on the following business conduct or ethics
affecting directors, senior management and employees:
Business Conduct &
Ethics
(a) Conflict of Interest
Senior Management
Employees
The
company’s
directors must ensure
that their personal
interest do not conflict
with the interest of the
company. If an actual
or potential conflict of
interest arises, the
director concerned is
required to fully and
immediately disclose it
to the Board and inhibit
himself in the decisionmaking process.
(b) Conduct of
The company adheres
Business and Fair
to the principle of
Dealings
fairness in the conduct
of its business and
dealings.
(c) Receipt of gifts
The company requires
from third parties
disclosure and regulates
the receipt of gifts from
third parties.
(d) Compliance with
The company requires
Laws & Regulations compliance
with
applicable laws and
regulations.
Personal interest of
senior
management
should not be in conflict
with the interest of the
company. If an actual or
potential conflict of
interest
arises,
the
officer concerned should
fully and immediately
inform the Board so as
to protect the interest of
the company.
The
employee
concerned should fully
and
immediately
inform management.
The company adheres to
the principle of fairness
in the conduct of its
business and dealings.
The company adheres
to the principle of
fairness in the conduct
of its business and
dealings.
The company requires
disclosure
and
regulates the receipt of
gifts from third parties.
The company requires
compliance
with
applicable laws and
regulations.
The directors should
have
a
working
knowledge
of
the
statutory and regulatory
requirements affecting
the company.
Senior
management
should have a working
knowledge
of
the
statutory and regulatory
requirements affecting
the company.
Directors should also
keep
abreast
with
industry developments
and business trends in
order to promote the
company’s
competitiveness.
The company treats as
confidential
trade
secrets and regulates
the use of non-public
information.
The company treats as
confidential
trade
secrets and regulates the
use
of
non-public
information.
The company treats as
confidential
trade
secrets and regulates
the use of non-public
information.
A director should not
reveal
confidential
information he may
have
acquired
by
An officer should not
reveal
confidential
information he may
have acquired by reason
A director should not
reveal
confidential
information he may
have
acquired
by
(e) Respect for Trade
Secrets/Use of
Non-public
Information
Directors
The company requires
disclosure and regulates
the receipt of gifts from
third parties.
The company requires
compliance
with
applicable laws and
regulations.
21
(f) Use of Company
Funds, Assets and
Information
(g) Employment &
Labor Laws &
Policies
(h) Disciplinary action
(i) Whistle Blower
(j) Conflict Resolution
reason of his position
without the authority of
the Board.
The company only
allows the authorized
use of its funds, assets
and information.
The company requires
compliance with laws,
rules and policies on
employment and labor.
The company observes
due
process
in
enforcing its rules and
regulations.
No whistle blower
policy is in place.
Undertaken by the
Board of Directors
of his position without
the authority of the
Board.
The company only
allows the authorized
use of its funds, assets
and information.
The company requires
compliance with laws,
rules and policies on
employment and labor.
The company observes
due process in enforcing
its rules and regulations.
No
whistle
blower
policy is in place.
Undertaken
by
the
Management/Board.
reason of his position
without the authority
of the Board.
The company only
allows the authorized
use of its funds, assets
and information.
The company requires
compliance with laws,
rules and policies on
employment and labor.
The company observes
due
process
in
enforcing its rules and
regulations.
No whistle blower
policy is in place.
Undertaken
by
Management
taking
into consideration the
provisions
of
the
Collective Bargaining
Agreement (CBA).
2) Has the code of ethics or conduct been disseminated to all directors, senior
management and employees?
Yes, the company’s Code of Ethics have been disseminated
to all directors, officers and employees.
3) Discuss how the company implements and monitors compliance with the code of
ethics or conduct.
Each new director, officer and employee is furnished a
copy of the company’s code of ethics to guide him in the
performance of his duties. Any alleged violation of the said code is
immediately acted upon after observance of due process.
4) Related Party Transactions
(a) Policies and Procedures
Describe the company’s policies and procedures for the review, approval or
ratification, monitoring and recording of related party transactions between and
among the company and its parent, joint ventures, subsidiaries, associates,
affiliates, substantial stockholders, officers and directors, including their spouses,
children and dependent siblings and parents and of interlocking director
relationships of members of the Board.
22
Related Party Transactions
(1) Parent Company
(2) Joint Ventures
(3) Subsidiaries
(4) Entities Under Common Control
(5) Substantial Stockholders
(6) Officers including
spouse/children/siblings/parents
(7) Directors including
spouse/children/siblings/parents
(8) Interlocking director relationship of Board
of Directors
Policies and Procedures
Not applicable.
The corporation has no parent company.
Not applicable.
The corporation is not under joint venture with
any company.
Not applicable.
The corporation has no subsidiary.
The company regulates transactions with
entities under common control in accordance
with the requirements of the Bangko Sentral ng
Pilipinas and other relevant rules.
The company regulates transactions with
substantial stockholders in accordance with the
requirements of the Bangko Sentral ng Pilipinas
and other relevant rules.
The company regulates transactions with
officers
including
spouse/children/siblings/parents in accordance
with the requirements of the Bangko Sentral ng
Pilipinas and other relevant rules.
The company regulates transactions with
directors
including
spouse/children/siblings/parents in accordance
with the requirements of the Bangko Sentral ng
Pilipinas and other relevant rules.
The company regulates transactions with
involving
interlocking
directorship
in
accordance with the requirements of the
Bangko Sentral ng Pilipinas and other relevant
rules.
(b) Conflict of Interest
(i) Directors/Officers and 5% or more Shareholders
Identify any actual or probable conflict of interest
directors/officers/5% or more shareholders may be involved.
Name of Director/s
Name of Officer/s
Name of Significant Shareholders
to
which
Details of Conflict of Interest
(Actual or Probable)
None. There is no actual or probable conflict of
interest involving any director.
None. There is no actual or probable conflict of
interest involving any officer.
None. There is no actual or probable conflict of
interest involving any stockholder having 5% or more
ownership.
23
(ii) Mechanism
Describe the mechanism laid down to detect, determine and resolve any
possible conflict of interest between the company and/or its group and their
directors, officers and significant shareholders.
Company
Group
Directors/Officers/Significant Shareholders
It is the responsibility of each director and
senior officer to promptly notify the Board,
through the company’s Corporate Secretary, of
any possible conflict of interest involving its
directors, officers or significant shareholder in
order to obtain prior Board approval in
accordance with BSP requirements on
transactions with or loans granted to the
company directors, officers or shareholders.
The company does not have a parent,
subsidiary, associate or joint venture. However,
the company has transactions with related
interests where possible conflicts of interests are
resolved in the same manner or above.
5) Family, Commercial and Contractual Relations
(a) Indicate, if applicable, any relation of a family4, commercial, contractual or
business nature that exists between the holders of significant equity (5% or more),
to the extent that they are known to the company:
Names of Related
Type of Relationship
Significant Shareholders
None. There is no known
family,
commercial, Not applicable
contractual or business
relations
between
any
holder of significant equity
Brief Description of the
Relationship
Not applicable
_________________________
4
Family relationship up to the fourth civil degree either by consanguinity or affinity.
24
(b) Indicate, if applicable, any relation of a commercial, contractual or business nature
that exists between the holders of significant equity (5% or more) and the
company:
Names of Related Significant
Shareholders
Philtrust Realty Corporation
Type of Relationship
Depository bank
U.S. Automotive Co., Inc.
Depository bank
Seabreeze Enterprises, Inc.
Depository bank
Orient Enterprises, Inc.
Depository bank
Brief Description
Transactions made in the
ordinary course of banking
operations on substantially the
same terms and interest as
those
prevailing
for
comparable transactions with
other parties.
Transactions made in the
ordinary course of banking
operations on substantially the
same terms and interest as
those
prevailing
for
comparable transactions with
other parties.
Transactions made in the
ordinary course of banking
operations on substantially the
same terms and interest as
those
prevailing
for
comparable transactions with
other parties.
Transactions made in the
ordinary course of banking
operations on substantially the
same terms and interest as
those
prevailing
for
comparable transactions with
other parties.
(c) Indicate any shareholder agreements that may impact on the control, ownership
and strategic direction of the company:
Name of Shareholders
% of Capital Stock affected
(Parties)
Brief Description of the
Transaction
None. There is no known
shareholder agreement that
may impact on the control,
ownership
and
strategic
direction of the company
25
6) Alternative Dispute Resolution
Describe the alternative dispute resolution system adopted by the company for the last
three (3) years in amicably settling conflicts or differences between the corporation
and its stockholders, and the corporation and third parties, including regulatory
authorities.
Alternative Dispute Resolution System
The company prefers to amicably resolve disputes
involving stockholders.
The company prefers to amicably resolve disputes
involving third parties.
The company prefers to amicably resolve disputes
involving authorities. Resort to higher authority
should be made after the dispute has not been
resolved within a reasonable time.
Corporation & Stockholders
Corporation & Third Parties
Corporation & Regulatory Authorities
C. BOARD MEETINGS & ATTENDANCE
1) Are Board of Directors’ meetings scheduled before or at the beginning of the year?
Yes, the Board of Directors meetings are scheduled before
the beginning of the year.
2) Attendance of Directors in 2014 Board Meetings
Board
Chairman (ED)
Vice Chairman
(NED)
Vice Chairman
(NED)
Vice Chairman
(NED)
Independent
Independent
Independent
Member (ED)
Member (ED)
Member (NED)
Member (NED)
Date of
Election
No. of
Meetings Held
during the
year (2014)
No. of
Meetings
Attended
(2014)
1. Dr. Jaime C. Laya
2. Senior Justice Josue
N. Bellosillo (Ret.)
3. Basilio C. Yap
April 29, 2014
April 29, 2014
13
13
13
13
100
100
April 29, 2014
13
13
100
4.Dr. Emilio C. Yap III
April 29, 2014
13
13
100
5. Ernesto O. Chan
6. Tomas V. Apacible
7. Chief Justice Hilario
G. Davide, Jr. (Ret.)
8. Jose M. Fernandez
9. Miriam C. Cu
10. Dr. Johnny C. Yap
11. Atty. Francis Y.
Gaw*
Atty. Martin B.
Isidro**
Mariano L.
Crisostomo***
April 29, 2014
April 29, 2014
April 29, 2014
13
13
13
11
13
8
85
100
75
April 29, 2014
April 29, 2014
April 29, 2014
June 30, 2014
13
13
13
7
7
13
13
7
70
100
100
100
April 29, 2014
2
2
100
April 30, 2013
4
1
25
Name
%
*Elected director effective June 30, 2014 to serve the unexpired term of Atty. Martin B. Isidro.
**Director from April 29 to June 30, 2014.
***Term as director expired on April 29, 2014.
26
3) Do non-executive directors have a separate meeting during the year without the
presence of any executive? If yes, how many times?
No, the non-executive directors did not have a separate
board meeting during the year without the presence of any
executive director.
4) Is the minimum quorum requirement for the Board decisions set at two-thirds of
board members? Please explain.
No, the company’s Amended By-Laws provides that a
majority of the directors at a meeting duly assembled shall be
necessary to constitute a quorum for the transaction of business.
5) Access to Information.
(a) How many days in advance are board papers5 for board of directors meetings
provided to the board?
Board papers are given to the directors at least one day
prior to the date fixed for the meeting.
(b) Do board members have independent access to Management and the Corporate
Secretary?
Yes, board members have independent
management and the Corporate Secretary.
access
to
(c) State the policy of the role of the company secretary. Does such role include
assisting the Chairman in preparing the board agenda, facilitating training of
directors, keeping directors updated regarding any relevant statutory and
regulatory changes, etc?
The Corporate Secretary should be a Filipino citizen and a
resident of the Philippines. In addition to such duties as may be
imposed upon him by the Board of Directors, the Corporate Secretary
shall perform of the following rules:
a) Be responsible for the safekeeping and preservation of the
integrity of the minutes of the meetings of the Board and its
committee, as well as the other official records of the
corporation;
b) Be loyal to the mission, vision and objectives of the
corporation;
c) Work fairly and objectively with the Board, Management
and stockholders;
_________________________
5
Board papers consist of complete and adequate information about the matters to be taken in the board meeting.
Information includes the background or explanation on matters brought before the Board, disclosure, budgets,
forecasts and internal financial documents.
27
d) Have appropriate administrative and interpersonal skills;
e) If he is not at the same time the corporation’s legal counsel,
be aware of the laws, rules and regulations necessary in the
performance of his duties and responsibilities;
f) Have a working knowledge of the operations of the
corporations;
g) Inform the members of the Board, in accordance with the
By-Laws, of the agenda of their meetings and ensure that
the members have before them accurate information that
will enable them to arrive at intelligent decisions on matters
that require their approval;
h) Attend all Board meetings, except when justifiable causes,
such as, illness, death in the immediate family and serious
accidents, prevent him from doing so;
i) Ensure that all Board procedures, rules and regulations are
strictly followed by the members; and
j) If he is also the Compliance Officer, perform all the duties
and responsibilities of the said officer as provided for in
this Manual.
(d) Is the company secretary trained in legal, accountancy or company secretarial
practices? Please explain should the answer be in the negative.
Yes, the Corporate Secretary is well trained in legal,
accountancy and company secretarial practices. He is a lawyer, former
congressman and former President and Corporate Secretary of other
corporations.
(e) Committee Procedures
Disclose whether there is a procedure that Directors can avail of to enable them to
get information necessary to be able to prepare in advance for the meetings of
different committees:
Yes
√
Committee
Executive
Audit
Nomination
Remuneration
No
Details of the procedures
Members of the Executive Committee are
given notice and agenda of their quarterly
meetings at least one week in advance of the
set meetings.
Members of the Audit Committee are given
notice and agenda of their quarterly meeting
at least one week in advance of the set
meetings.
Members of the Nomination, Election and
Compensation Committee are given notice
and agenda of their annual and special
meetings at least one week in advance of the
set meetings.
This committee has been merged with the
Nomination Committee above.
28
6) External Advice
Indicate whether or not a procedure exists whereby directors can receive external
advice and, if so, provide details:
Procedures
No procedures exists
Details
None
7) Change/s in existing policies
Indicate, if applicable, any change/s introduced by the Board of Directors (during its
most recent term) on existing policies that may have an effect on the business of the
company and the reason/s for the change:
Existing Policies
Election of two independent
directors or 20% of the entire
membership of the Board,
whichever is lesser.
Changes
Election
of
three
independent directors
(3)
Reason
In order to enhance the
effectiveness
of
independent
directors,
encourage infusion of new
ideas in the Board, and to
fully comply with recent
Bangko
Sentral
ng
Pilipinas requirement.
D. REMUNERATION MATTERS
1) Remuneration Process
Disclose the process used for determining the remuneration of the CEO and the four
(4) most highly compensated management officers:
Process
CEO
(1) Fixed remuneration
(2) Variable remuneration
(3) Per diem allowance
(4) Bonus
(5) Stock Options and other
financial instruments
(6) Others (specify)
Monthly Salary and Allowances
Not Applicable
Not Applicable
Midyear and Christmas Bonuses
Not Applicable
Top 4 Highest Paid
Management Officers
Monthly Salary and Allowances
Not Applicable
Not Applicable
Midyear and Christmas Bonuses
Not Applicable
Profit Sharing
Profit Sharing
2) Remuneration Policy and Structure for Executive and Non-Executive Directors
Disclose the company’s policy on remuneration and the structure of its compensation
package. Explain how the compensation of Executive and Non-Executive Directors is
calculated.
29
Remuneration Policy
Executive Directors
Fixed Remuneration,
Bonuses and Fees
Profit Sharing
Non-Executive
Directors
Fees
Profit Sharing
Structure of
Compensation
Packages
Monthly Salary and
allowances, Midyear and
Christmas Bonuses, and
Director’s Fee
Taken from the net
profits of the company
before
payment
of
income tax
Director’s Fees
Taken from the net
profits of the company
before
payment
of
income tax
How Compensation
is Calculated
Based
on
the
established company
salary structure
Distributed
in
proportion to the
number of Board
meetings attended
Based on established
company structure
Distributed
in
proportion to the
number of Board
meeting attended.
Do stockholders have the opportunity to approve the decision on total remuneration
(fees, allowances, benefits-in-kind and other emoluments) of board of directors?
Provide details for the last three (3) years.
Remuneration Scheme
Directors’ Fees and Profit Sharing
Date of Stockholders’ Approval
The director’s fee for every board meeting attended
was approved by the Board and duly ratified by the
stockholders.
The percentual bonus or profit sharing is provided
for in the company By-Laws which had been
approved, ratified and confirmed by the
stockholders.
3) Aggregate Remuneration
Complete the following table on the aggregate remuneration accrued during the most
recent year:
Remuneration Item
(a) Fixed Remuneration
(b) Variable Remuneration
(c) Per diem allowance
(d) Bonuses
(e) Stock Options and/or
other financial
instruments
(f) Others (Specify)
Total
Executive Directors
Non-Executive
Directors (other than
independent directors)
Independent
Directors
P 6,120,000.00
272,750.00
1,818,666.66
P 178,500.00
P
87,500.00
22,952,570.39
P31,163,987.05
9,630,427.41
P9,808,927.41
4,691,746.68
P4,779,246.68
30
Other Benefits
Executive Directors
(a) Advances
(b) Credit granted
(c) Pension Plan/s
Contributions
(d) Pension Plans,
Obligations incurred
(e) Life Insurance Premium
(f) Hospitalization Plan
(g) Car Plan
(h) Others (Specify)
Total
Not Applicable
Non-Executive
Director (other than
independent directors)
Not Applicable
Independent
Directors
Not Applicable
4) Stock Rights, Options and Warrants
(a) Board of Directors
Complete the following table, on the members of the company’s Board of
Directors who own or are entitled to stock rights, options or warrants over the
company’s shares:
Director’s Name
Not Applicable
Number of
Direct
Option/Rights/
Warrants
Not Applicable
Number of Indirect
Option/Rights/Warrants
Not Applicable
Number of
Equivalent
Shares
Not
Applicable
Total %
from
Capital
Stock
Not
Applicable
No member of the
company’s Board of
Directors owns or is
entitled to stock
rights, options or
warrants over the
company’s shares.
(b) Amendments of Incentive Programs
Indicate any amendments and discontinuation of any incentive programs
introduced, including the criteria used in the creation of the program. Disclose
whether these are subject to approval during the Annual Stockholders’ Meeting:
Incentive Program
Not Applicable. No incentive
program exists for directors or
officers
Amendments
Not Applicable
Date of Stockholders’
Approval
Not Applicable
31
5) Remuneration of Management
Identify the five (5) members of management who are not at the same time executive
directors and indicate the total remuneration received during the financial year:
Name of Officer/Position
1. Virginia S. Choa-Shi
2. Paterno C. Bacani, Jr.
3. Ciriaco M. Dator
4. Eliseo G. Hidalgo, Jr.
5. Luisa A. Lucin
Total Remuneration
P9,590,110.05
E. BOARD COMMITTEES
1) Number of Members, Functions and Responsibilities
Provide details on the number of members of each committee, its functions, key
responsibilities and the power/authority delegated to it by the Board:
Committee
No. of Members*
Executive Non-Executive Independent
Director
Director
Director (ID)
(ED)
(NED)
Committee
Charter
Functions
Key
Responsibilities
Executive
(EXCOM)
4
2
0
The role and
responsibilities
of the
EXCOM are
established by
the Board of
Directors in
accordance
with the ByLaws.
The EXCOM shall
act on behalf of the
Board during
intervals between
Board meetings in
order to provide a
degree of flexibility
and ability to respond
to time-sensitive
matters including the
grant of credit
accommodations.
The EXCOM
shall have the
authority to
exercise all the
powers of the
Board, except
those that are
made exclusive
to the Board by
applicable
laws/rules. All
actions of the
EXCOM as
reflected in the
Minutes of its
meetings shall be
submitted to the
Board for
confirmation.
Audit
0
1
2
(including the
Committee
Chairman)
The Audit
Committee
Charter sets
out the
policies,
responsibilities
/authority and
the rules/
procedures that
guide the
function of the
Audit
Committee.
The Audit Committee
shall assist the Board
of Directors in
fulfilling its oversight
responsibility for the
financial reporting
process, system of
internal control, audit
process, and
monitoring of
compliance with
applicable laws, rules
and regulations.
The Audit shall
provide
assistance to the
Board in
fulfilling the
Board’s oversight
responsibility to
the shareholders
relating to the
integrity of the
Company’s
financial
statements and
the financial
reporting process.
Power
As provided for
under Sec. 2 of
the By-Laws:
The EXCOM
shall, in the
interim between
meetings of the
Board of
directors,
exercise all the
powers of said
body in the
management,
direction and
conduct of the
affairs of the
Bank in
accordance with
the By-Laws,
general policies
set by the Board
of Directors and
the applicable
laws, rules and
regulations.
To deal with,
and where
applicable,
determine and
approve all
matters falling
to scope of
purpose,
function and
duties as set out
in its Charter
and such other
matters as may
be delegated by
the Board.
*Effective May 2, 2012
32
Committee
No. of Members*
Executive Non-Executive Independent
Director
Director
Director (ID)
(ED)
(NED)
Nomination,
Election
and
Compensation
0
2
Trust
and
Investment
(TRUSTCOM)
1
(Note: The
th
5 member
is the Trust
Officer
who is not
a director)
3
Board
Risk
Management
0
1
1
2
Committee
Charter
Functions
The Nomination,
Election and
Compensation
Committee
Charter, as
approved by the
Board of
Directors and
consistent with
the By-Laws, sets
out the functions,
responsibilities
and power of the
Committee
To assist the
Board in the
selection of
nominees for the
positions of
directors and
senior officers of
the company, the
determination
and review of
their
remuneration and
the evaluation of
their
performance.
The role and
responsibilities of
the TRUSTCOM
are established by
the Board of
Directors in
accordance with
the By-Laws.
The
TRUSTCOM
may assist the
Board on such
matters
pertaining to the
acceptance and
closing of trust
and other
fiduciary
accounts; the
review of assets
placed under the
trustee’s or
fiduciary’s
custody; the
investment,
reinvestment and
disposition of
funds or
property; the
review and
approval of
transactions
between trust
and/or fiduciary
accounts.
To assist the
Board in ensuring
that the company
is taking
appropriate
measures to
properly balance
risks and rewards
in the areas of
credit, market
liquidity,
operations and
technology
The functions,
responsibilities
and power of the
Board Risk
Management
Committee are
set out in its
Charter as
approved by the
Board of
Directors.
Key
Responsibilities
Power
To ensure that
the nominees
possess all the
qualifications
and none of the
disqualifications
as
director/officer
and that the
levels of their
remuneration
are sufficient as
to attract and
retain qualified
and competent
directors and
officers.
The
TRUSTCOM
shall be
responsible for
reviewing with
management the
strategies, plans,
policies, and
actions related
to the operations
of the Trust
Department.
To recommend
to the Board
nominees for
the positions
of the
members of
the Board of
Directors and
senior
executive
officers of the
company as
well as their
remuneration/
compensation
package.
To assist the
Board in
overseeing
Management’s
implementation
and
enforcement of
the Company’s
risk
management
policies and
procedures and
its compliance
with applicable
laws, rules and
regulations
To periodically
review the
company’s risk
management
framework and
recommend to
the Board
effective risk
management
policies,
processes and
procedures.
The
TRUSTCOM
shall assist the
Board in
fulfilling its
oversight
responsibilities
for the Trust
Department
and to ensure
the proper
exercise of the
Bank’s
fiduciary
powers.
*Effective May 2, 2012
33
2) Committee Members
(a) Executive Committee
Chairman (ED)
Dr. Jaime C. Laya
May 2, 2012*
4
No. of
Meetings
Attended
(2012)
4
Vice Chairman
(NED)
Member NED)
Member (ED)
Basilio C. Yap
May 2, 2012*
4
4
100
Dr. Emilio C. Yap III
Jose M. Fernandez
May 2, 2012
May 2, 2012*
4
4
3
4
75
100
Member (ED)
Member (ED)
Miriam C. Cu
Atty. Martin B. Isidro
May 2, 2012*
May 2, 2012*
4
4
4
4
100
100
Date of
Appointment
No. of
Meetings
Held (2012)
May 2, 2012*
4
No. of
Meetings
Attended
(2012)
4
May 2, 2012
May 2, 2012*
4
4
3
4
Office
Name
Date of
Appointment
No. of
Meetings
Held (2012)
%
100
Length of
Service in
the
Committee
More than
5 years
More than
5 years
1 year
More than
5 years
3 years
More than
5 years
*Re-appointment
(b) Audit Committee
Office
Name
Chairman (ID)
Ernesto O. Chan
Member NED)
Member (ID)
Basilio C. Yap
Cong. Tomas
Apacible
V.
%
100
75
100
Length of
Service in
the
Committee
More than
5 years
1 year
3 years
*Re-appointment
Disclose the profile or qualifications of the Audit Committee members.
Ernesto O. Chan
Chairman, Audit Committee
66 years old, Filipino
Business Executive
Basilio C. Yap
Member, Audit Committee
63 years old, Filipino
MBA/CPA
Tomas V. Apacible
Member, Audit Committee
67 years old, Filipino
MBA
Corporate Affiliation
Independent Director, Philtrust Bank
Chairman/Treasurer/SVP, Pioneer Insurance and Surety Corp.
Chairman, Pioneer Intercontinental Insurance Corp.
Director, Pioneer Asia Insurance Corporation
Director, Pioneer Life, Inc.
Director/Treasurer, Bancasia Financial and Investment Corp.
Director/Treasurer, Bancasia Capital Corp.
Vice Chairman, Philtrust Bank
President/Director, Seabreeze Enterprises, Inc.
President/Director, U.S. Automotive Co., Inc.
Vice President/Director, Philtrust Realty Corporation
President, Usautoco, Inc.
Vice President, Manila Prince Hotel Corporation
Independent Director, Philtrust Bank
Congressman, Batangas, First District (June 2010-Present)
Former Fellow, Institue of Corporate Directors
Former Fellow, Australian Institute of Company Directors
Former Adviser, Palo Alto Consultants in California; DBP Service Corp.
Former Commissioner, Bureau of Customs (1991-1992)
Former Undersecretary, Department of Finance (1990-1991)
Former Governor, Development Bank of the Philippines (1986-1990)
Former Director/EVP, Astro Builders Corporation (1977-1979)
Former Director/EVP, Stenhouse Technical Insurance Services (1976)
Former President/Gen. Manager, Dynamic Insurance Agencies (1971-1975)
34
Describe the Audit Committee’s responsibility relative to the external auditor.
The Audit Committee shall perform oversight function on the
company’s external auditor to ensure its independence and unrestricted
access to corporate records, properties and personnel.
(c) Nomination Election and Compensation Committee
Chairman
(NED)
Member (NED)
Senior Justice Josue
N. Bellosillo (Ret.)
Basilio C. Yap
May 2, 2012*
2
No. of
Meetings
Attended
(2012)
2
May 2, 2012*
2
2
100
Member (ID)
Cong. Tomas V.
Apacible
May 2, 2012
2
2
100
Date of
Appointment
No. of
Meetings
Held (2012)
100
Office
Name
Date of
Appointment
No. of
Meetings
Held (2012)
%
100
Length of
Service in
the
Committee
2 years
More than
5 years
1 year
*Re-appointment
(d) Corporate Governance Committee
Chairman (ED)
Dr. Jaimce C. Laya
May 2, 2012*
2
No. of
Meetings
Attended
(2012)
2
Member (ID)
Ernesto O. Chan
May 2, 2012*
2
2
100
Member (ID)
Cong. Tomas
Apacible
May 2, 2012*
2
2
100
Office
Name
V.
%
Length of
Service in
the
Committee
More than
5 years
More than
5 years
More than
5 years
*Re-appointment
(e) Board Risk Management Committee
Office
Name
Date of
Appointment
No. of
Meetings
Held (2012)
Chairman (ED)
Senior Justice Josue
N. Bellosillo (Ret.)
Basilio C. Yap
Cong. Tomas V.
Apacible
May 2, 2012*
7
No. of
Meetings
Attended
(2012)
7
May 2, 2012*
May 2, 2012
7
7
7
5
Member (NED)
Member (ID)
100
Length of
Service in
the
Committee
2 years
100
71
2 years
1 year
%
*Re-appointment
35
(f) Trust and Investment Committee
Name
Date of
Appointment
No. of
Meetings
Held (2012)
Senior Justice Josue
N. Bellosillo (Ret.)
Dr. Jaime C. Laya
Dr. Emilio C. Yap III
May 2, 2012*
6
No. of
Meetings
Attended
(2012)
6
May 2, 2012
May 2, 2012*
6
6
Dr. Johnny C. Yap
May 2, 2012
Adriano A. Tacata
May 2, 2012*
Office
Chairman
(NED)
Member (ED)
Member
(NED)
Member
(NED)
Trust Officer
100
Length of
Service in
the
Committee
3 years
3
6
50
100
1 year
3 years
6
3
50
1 year
6
6
100
2 years
%
*Re-appointment
3) Changes in Committee Members
Indicate any changes in committee membership that occurred in 2014 and the reason
for the changes:
Name of Committee
Executive
Audit
Nomination, Election and
Compensation
Trust
Name
Ernesto O. Chan
Dr. Johnny C. Yap
No Change
Board Risk Management
Atty. Francis y. Gaw
Reason
Replaced Atty. Martin B. Isidro
Replaced Basilio C. Yap
No Change
Replaced Atty. Martin B. Isidro who
replaced Basilio C. Yap
4) Work Done and Issues Addressed
Describe the work done by each committee and the significant issues addressed
during the year.
Name of Committee
Executive
Audit
Nomination, Election and
Compensation
Work Done
Quarterly approval/renewal of credit
accommodations in the interim
between meetings of the Board of
Directors
Evaluate and referred to the Board the
2012 Revision of Audit Committee
Charter
Reviewed and referred to the Board
the 2011 Audit Committee SelfAssessment
Recommended to the Board nominees
for directors and appointees for
corporate and executive officer
positions
Issues Addressed
Timely approval and renewal of
credit accommodations
Compliance with
requirements
regulatory
Compliance with
requirements
regulatory
Election and appointment of
highly qualified directors and
officers
36
Trust and Investment
Board Risk Management
Reviewed and referred to the Board
the Report on Trust Operations as of
Dec. 31, 2011
Evaluation and referral to the Board of
the Quarterly Reports and Annual
Risk Profile
Review and referral to the Board of
the Quarterly Compliance Reports
Corporate Governance
Deliberated on and referred to the
Board the result of the performance
evaluation on corporate governance
Discussed and referred to the Board
the updated Anti-Money Laundering
Rules and Regulations
More detailed presentation of
the trust operations
More
comprehensive
assessment
risk
Efficient
monitoring
of
corporate
governance
compliance within the entire
organization
Apprised the Board on recent
BSP Circular and its effect on
the operations of the Bank.
5) Committee Program
Provide a list of programs that each committee plans to undertake to address relevant
issues in the improvement or enforcement of effective governance for the coming
year.
Name of Committee
Executive
Audit
Planned Programs
Renewal
of
credit
accommodations as they fall
due and grant of loans in
between Board meeting.
Review of the results of
branch/department audit.
Nomination, Election and Selection, screening and
Compensation
recommendation of nominees
for members of the Board
and
senior
executive
positions.
Trust and Investment
Assessment of the Trust
Operations.
Board Risk Management
Revision of the
Risk
Management Manual.
Corporate Governance
Evaluation of the quarterly
and
annual
compliance
reports.
Evaluation of the annual
performance on corporate
governance
Issues to be Addressed
Timely approval and renewal
of credit facilities.
To apprise the Board on the
conduct of business of the
different
branches/departments.
Election of qualified officers
and members of the Board,
including 3 independent
directors in order to comply
with regulatory requirements.
Proper monitoring of trust
operations.
To review a revised manual
prior to endorsement to the
Board.
To apprise the Board on the
Bank’s compliance with
regulatory requirements.
To monitor the levels of
compliance by the Board,
Officers and Staff
37
F. RISK MANAGEMENT SYSTEM
1) Disclose the following:
(a) Overall risk management philosophy of the company;
In general, the bank will inculcate a risk/return consciousness
throughout the organization in order to preserve capital and ensure
adequate return on capital for the benefit of all stakeholders.
Particularly, the risk objectives will be to 1) identify, measure and
control risks inherent in the bank’s activities or embedded in its
portfolio, 2) define and disseminate the risk philosophy and policies,
3) assist risk-taking business and operating units in understanding
and measuring risk/return profiles, 4) develop risk and control
infrastructure, and 5) institutionalize the risk process.
(b) A statement that the directors have reviewed the effectiveness of the risk
management system and commenting on the adequacy thereof;
A risk assessment of the Bank’s risk profile in its balance
sheet and operations is done every quarter, the latest of which was
for the period December 31, 2012 to March 31, 2013.
(c) Period covered by the review;
The latest risk report was for the period December 31, 2012
to March 31, 2013. The risk assessment report is done every calendar
quarter.
(d) How often the risk management system is reviewed and the directors’ criteria for
assessing its effectiveness;
The risk management system is reviewed by the Board on an
annual basis and the criteria for assessing the effectiveness of bank’s
risk process are, 1) quality of management oversight, 2) adequacy of
risk processes, policies and procedures, 3) the appropriateness of
measurement system, risk limits, monitoring and information
system, and 4) the comprehensiveness and effectiveness of internal
controls, audit, and compliance program.
38
(e) Where no review was conducted during the year, an explanation why not.
Not applicable.
2) Risk Policy
(a) Company
Give a general description of the company’s risk management policy, setting out
and assessing the risk/s covered by the system (ranked according to priority),
along with the objective behind the policy for each kind of risk:
Risk Exposure
Credit
Market
Liquidity
Operations
(Compliance,
Systems, Personnel, Processes,
Reputational)
Risk Management Policy
Objective
The risk process is applied in
conjunction with and actually
reemphasizes the principles
and policies enshrined in the
Bank’s Credit Policy Manual
All risk taking activities are
subject to limits, which are
sponsored by the business unit
head, recommended by the
Risk Management Committee
and approved by Board of
Directors. In general, market
risks are bounded by a measure
of value-at-risk or earnings-atrisk. Strategic limits are set for
all risking taking activities for
which sub-limits are derived
i.e. factor sensitivity limits and
nominal
position
limits.
Further stress testing of
position is also done.
Liquidity management is a
fundamental precondition to
achieving all other banking
activities strategically mapped
by the Risk Management
Committee
through
the
Asset/Liability Committee, and
actively managed by the
Treasury and overseen by the
Risk Control and Compliance
(Audit) through a system of
limits and reports.
Operations risk as a qualitative
risk is controlled through
policies and procedures. The
Bank implements standards, a
comprehensive and effective
internal control, audit and
compliance program that must
be adhered to by management
and staff in its activities.
Through the application of the
Risk Process, the bank will
mitigate the risk inherent in
lending brought by adverse
selection and moral hazard.
Through the application of the
risk
process
specifically
prudent risk limits the bank
will monitor and control
exposure to volatility in
interest and foreign exchange
rates and the interaction of
these factors resulting to asset
price fluctuations.
Our management has achieved
a
stable
core
deposit.
Speculative
and
volatile
deposit is not significant in the
bank books.
The organization is set in such
a
way
that
effective
segregation of duties, internal
controls and accountabilities
are achieved.
39
(b) Group
Give a general description of the Group’s risk management policy, setting out and
assessing the risk/s covered by the system (ranked according to priority), along
with the objective behind the policy for each kind of risk:
Risk Exposure
Not applicable
Risk Management Policy
Objective
(c) Minority Shareholders
Indicate the principal risk of the exercise of controlling shareholders’ voting
power.
Risk to Minority Shareholders
No undue risk is borne by the minority shareholders. The bank is fully compliant with BSP
regulations affecting minority interest.
3) Control System Set Up
(a) Company
Briefly describe the control systems set up to assess, manage and control the main
issue/s faced by the company:
Risk Exposure
Credit
Market
Liquidity
Operations
Risk Assessment
(Monitoring and
Measurement Process)
Business development and
credit analysis
Bank’s focus on volatility of
interest rates, foreign exchange
rates and asset prices in
relation to its trading and
accrual positions; asset and
liability sensitivity.
Effective analysis of net
funding requirements
A function of internal controls,
information
systems,
employees
integrity
and
operating processes. The use of
key risks indicators.
Risk Management and
Control (Structures,
Procedures, Actions Taken)
Credit
execution
and
administration; Credit Review
All risk taking activities are
subject to limits.
Management
Information
System, diversification of
funding services, contingency
planning.
A comprehensive and effective
internal control, audit and
compliance program
40
(b) Group
Briefly describe the control systems set up to assess, manage and control the main
issue/s faced by the company:
Risk Exposure
Risk Assessment
(Monitoring and
Measurement Process)
Risk Management and
Control (Structures,
Procedures, Actions Taken)
Not applicable
(c) Committee
Identify the committee or any other body of corporate governance in charge of
laying down and supervising these control mechanisms, and give details of its
functions:
Committee/Unit
Risk Management Committee
Control Mechanism
Active Oversight of Risk
Management System
Risk Management Unit
Management
Information
System; Internal Control, Audit,
Compliance Program
Asset
and
Liability
Management Committee
Appropriate risk measurement,
prudent risk limits, monitoring
and management information
system. Funding and liquidity
plan.
Details of its Functions
Review of the reports
coming from CRO/Risk
Management Unit. Define
and disseminate the risk
philosophy and policies.
Institutionalize
the
risk
process in the bank.
Identify measure and control
risks inherent in the bank’s
activities. Assist risk-taking
business and operating units
in
understanding
ad
measuring
risk/return
profiles
Responsible for measuring
and monitoring interest rate
risk. Recommends pricing,
investment, funding, and
marketing
strategies
to
achieve the desired trade-off
between risk and expected
return.
G. INTERNAL AUDIT AND CONTROL
1) Internal Control System
Disclose the following information pertaining to the internal control system of the
company:
41
(a) Explain how the internal control system is defined for the company;
The Board of Directors and management is responsible for
implementing an internal control system that is designed to provide
reasonable assurance regarding the achievement of objectives in the
following categories: effectiveness and efficiency of operations,
reliability of financial reporting, and compliance with applicable laws
and regulations. To achieve this, the Bank has set up a control
environment that is able to identify, monitor and evaluate the different
risks it faces on a daily basis. These information are communicated
through designated channels and the appropriate course of action is
undertaken in order to manage or control the risk to which the business
was exposed or about to be exposed to.
(b) A statement that the directors have reviewed the effectiveness of the internal
control system and whether they consider them effective and adequate:
In Certifications submitted to SEC, the directors have attested,
among others, to the effectiveness and adequacy of the internal control
system, as evidenced by the following:
SEC Form MCG-2002 in compliance with SEC memorandum
Circular No. 6, Series 2009.
Self-Assessment Worksheet in compliance
Memorandum Circular No. 4, Series of 2012.
with
SEC
(c) Period covered by the review;
2011 and 2012
(d) How often internal controls are reviewed and the directors’ criteria for assessing
the effectiveness of the internal control system; and
Review of internal controls is a continuing process throughout the year
but status reports are regularly given to the Board of Directors for its
review, monitoring and information on quarterly and annual basis. Ad
hoc reports are only given as needed.
The criteria utilized for assessing effectiveness of internal control
system are largely aligned to the parameters set by COSO together
with other factors deemed relevant for the matters at hand.
42
(e) Where no review was conducted during the year, an explanation why not.
Not applicable.
2) Internal Audit
(a) Role, Scope and Internal Audit Function
Give a general description of the role, scope of internal audit work and other
details of the internal audit function.
Role
Scope
As reflected in the Audit
Charter and Internal Audit
Manual, and in addition to
such roles as may be
imposed by the Board of
Directors,
the
Internal
Auditor shall have the
following roles:
1) Responsible for helping
the organization accomplish
its objectives by bringing a
systematic,
disciplined
approach to evaluate and
improve the effectiveness of
risk management, control
and governance process.
2) Provide an independent
apparaisal activity within
the organization for the
review of operations as a
service to management and
the Audit Committee and
Board of Directors. Among
these appraisal activities are
measuring and evaluating
the effectiveness of other
controls.
As reflected in
the
Audit
Charter
and
Internal Audit
Manual.
1)
Every
activity,
department,
and office of
the Bank fall
within
the
scope of the
internal audit
for
independent
appraisal.
Indicate whether
In-house or
Outsource
Internal Audit
Function
In-house
function
Name of
Chief
Internal
Auditor/Aud
iting Firm
Amelita G.
Cua
Reporting
process
Internal
Audit
Department
reports directly to
the
Audit
Committee and
the
Audit
Committee
reports to the
Board
of
Directors.
(b) Do the appointment and/or removal of the Internal Auditor or the
accounting/auditing firm or corporation to which the internal audit function is
outsourced require the approval of the audit committee?
Yes, as provided for in the internal Audit Charter and Internal
Audit Manual.
43
(c) Discuss the internal auditor’s reporting relationship with the audit committee.
Does the internal auditor have direct and unfettered access to the board of
directors and the audit committee and to all records, properties and personnel?
Yes, Internal Audit has unfettered access to the Board and all
records, properties and personnel. This relationship and authority is
reflected in the Internal Audit Charter and Internal Audit Manual,
which has been approved by the Board of Directors.
(d) Resignation, Re-assignment and Reasons
Disclose any resignation/s or re-assignment of the internal audit staff (including
those employed b the third-party auditing firm) and the reason/s for them.
Name of Audit Staff
Arman P. Austria (re-assignment)
Reason
Strategic career move.
(e) Progress against Plans, Issues, Findings and Examination Trends
State the internal audit’s progress against plans, significant issues, significant
findings and examination trends.
Progress Against Plans
Issues6
Findings7
Examination Trends
Internal audit plans versus actual audit are being accomplished
as stated in the audit plans.
Issues are presented in quarterly audit status reports, annual
reports and ad hoc reports as needed to the Audit Committee.
Findings and their resolutions are presented in quarterly audit
status reports, annual reports and ad hoc reports as needed to the
Audit Committee.
Examination trends are presented in quarterly audit status
reports, annual reports and ad hoc reports as needed to the Audit
Committee.
[The relationship among progress, plans, issues and findings should be viewed as
an internal control review cycle which involves the following step-by-step
activities:
1)
2)
3)
4)
5)
Preparation of an audit plan inclusive of a timeline and milestones;
Conduct of examination based on the plan;
Evaluation of the progress in the implementation of the plan;
Documentation of issues and findings as a result of the examination;
Determination of the pervasive issues and findings (“examination trends”)
based on single year result and/or year-to-year results;
6) Conduct of the foregoing procedures on a regular basis.]
_________________________
6
“Issues” are compliance matters that arise from adopting different interpretations.
7
“Findings” are those with concrete basis under the company’s policies and rules.
44
(f) Audit Control Policies and Procedure
Disclose all internal audit controls, policies and procedures that have been
established by the company and the result of an assessment as to whether the
established controls, policies and procedures have been implemented under the
column “Implementation”.
Policies & Procedures
2012 Revision of Audit Committee Charter to
comply with the requirements of SEC
Memorandum Circular No. 4 (Series of 2012)
Internal Audit Charter
Internal Audit Manual
Implementation
September 2012
Implementation,
which
takes
effect
immediately, has been going on ever since its
original approval and revisions thereafter.
Implementation,
which
takes
effect
immediately, has been going on ever since its
original approval and revisions thereafter.
(g) Mechanism and Safeguards
State the mechanism established by the company to safeguard the independence of
the auditors, financial analysts, investment banks and rating agencies (example,
restrictions on trading in the company’s shares and imposition of internal approval
procedures for these transactions, limitation on the non-audit services that an
external auditor may provide to the company):
Auditors (Internal
and External)
Pertinent
policies
stated in the Internal
Audit Charter, Internal
Audit
Manual
regarding
Internal
Audit’s
authority,
scope
of
work,
independence
and
reporting
responsibilities.
Pertinent
policies
stated in the Bank’s
Risk
Management
Manual.
Pertinent
policies
stated in the Bank’s
Manual of Operations.
Pertinent policies in
the Bank’s Manual on
Corporate Governance.
Financial Analysts
Investment Banks
Rating Agencies
Pertinent
policies
stated in the Bank’s
Risk
Management
Manual.
Pertinent
policies
stated in the Bank’s
Risk
Management
Manual.
Pertinent
policies
stated in the Bank’s
Manual of Operations.
Pertinent policies in
the Bank’s Manual on
Corporate
Governance.
Pertinent
policies
stated in the Bank’s
Risk
Management
Manual.
Pertinent
policies
stated in the Bank’s
Manual of Operations.
Pertinent policies in
the Bank’s Manual on
Corporate
Governance.
Pertinent policies in
the Bank’s Manual on
Corporate
Governance.
SRC Rule 68 requiring
the 5-year rotation of
external auditors or
engagement partners.
45
(h) State the officers (preferably the Chairman and the CEO) who will have to attest
to the company’s full compliance with the SEC Code of Corporate Governance.
Such confirmation must state that all directors, officers and employees of the
company have been given proper instruction on their respective duties as
mandated by the Code and that internal mechanisms are in place to ensure that
compliance.
Dr, Jaime C. Laya, Chairman of the Board and President,
Atty. Martin B. Isidro, Corporate Secretary and Atty. Nemesio M.
Domingo, Asst. Compliance Officer
H. ROLE OF STAKEHOLDERS
1) Disclose the company’s policy and activities relative to the following:
Customers’ welfare
Supplier/contractor selection
practice
Environmentally friendly valuechain
Community interaction
Anti-corruption programmes and
procedures?
Safeguarding creditors’ rights
Policy
Efficiency and conservatism
Value for money purchases in
order to minimize expenses
Care for the environment
Social responsibility
Corporate
Governance
Policy/Anti-Money Laundering
Law
Right to receive payment
Activities
Personalized
and
efficient
service to gain/sustain the
depositors’ and borrowers’ trust
and confidence
Purchase of office supplies,
furniture and equipment
Proper waste disposal and resort
to recycling where applicable
College scholarship program
Proper
implementation
of
Corporate Governance Policy
and AMLA
Issuance of checks and payment
on due dates
2) Does the company have a separate corporate responsibility (CR) report/section or
sustainability report/section? No
3) Performance-enhancing mechanisms for employee participation.
(a) What are the company’s policy for its employees’ safety, health, and welfare?
In addition to the provisions of the Labor Code, the company
maintains a plan for the retirement, death, disability and separation of
its regular employees. The plan is being funded by the contribution of
both employees and the company.
All officers and staff are members of the Social Security
System, Philhealth and Pag-ibig Fund, unless excluded due to their
age.
46
The company likewise provides for health care benefits, annual
physical/dental check-ups, eyecare allowance, and calamity/burial
assistance.
Regular employees are also entitled to vacation/sick leaves and
may avail of calamity/maternity/paternity leaves.
(b) Show data relating to health, safety and welfare of its employees.
The Board approved on March 20, 2012 and July 31, 2012 the
renewal of the health cards of the officers, and rank and file
employees, respectively.
(c) State the company’s training and development programmes for its employees.
Show the data.
The company conducts bank-related in-house seminars and
encourages its officers and staff to attend relevant seminars sponsored
by BSP, BAP, ECOP, SEC, PSE and BAIPHIL.
(d) State the company’s renewal/compensation policy that accounts for the
performance of the company beyond short-term financial measures.
The Management and Employees’ Union signed on October
20, 2009 a five-year Collective Bargaining Agreement (CBA)
covering the period January 1, 2010 to December 31, 2014.
The said CBA provides for annual salary increases for 5 years,
signing bonus and other benefits.
The company likewise gives percentual bonus or profit sharing
equivalent to 10% of the yearly net profits before payment of income
tax distributable to the directors, officers and staff.
4) What are the company’s procedures for handling complaints by employees
concerning illegal (including corruption) and the unethical behavior? Explain how
employees are protected from retaliation.
The company adheres to the due process requirements in
administrative cases. The employees are afforded opportunities to be
heard prior to the determination of guilt and imposition of such penalty
in accordance with company policy and the Labor Code.
47
I. DISCLOSURE AND TRANSPARENCY
1) Ownership Structure
(a) Holding 5% shareholding or more
Shareholder
1. Philippine Realty
Corporation
2. U.S. Automotive Co., Inc.
3. Seabreeze Enterprises, Inc.
4. Orient Enterprises, Inc.
5. Pioneer Insurance &
Surety Corporation
Name of Senior
Management
Virginia S. Choa-Shi
Eliseo G. Hidalgo, Jr.
Corazon L. Ho
Victoria C. Lu
Luisa A. Lucin
George P. Castro
Benito D. Chua
Amelita G. Cua
Atty. Nemesio M. Domingo
Romana G. Lambengco
Atty. Agnes B. Urbano
TOTAL
Number of Shares
269,000,014
Percent
26.9000%
208,852,159
194,746,709
184,783,230
70,950,694
20.8852%
19.4747%
18.4783%
7.0951%
Number of Direct
shares
505
440
1,512
40,309
5,260
756
1,512
1,512
7,889
15,847
6,671
82,213
Beneficial Owner
Philtrust
Realty
Corporation
U.S. Automotive Co., Inc.
Seabreeze Enterprises, Inc.
Orient Enterprises, Inc.
Pioneer Insurance &
Surety Corporation
Number of
Indirect
shares/Through
(name of record
owner)
0
0
0
0
0
0
0
0
0
0
0
0
% of Capital
Stock
0.0000
0.0000
0.0002
0.0040
0.0005
0.0001
0.0002
0.0002
0.0008
0.0016
0.0007
0.0083
2) Does the Annual Report disclose the following:
Key risks
Corporate objectives
Financial performance indicators
Non-financial performance indicators
Dividend policy
Details of whistle-blowing policy
Biographical details (at least age, qualifications, date of first appointment,
relevant experience, and any other directorships of listed companies) of
directors/commissioners
Training and/or continuing education programme attended by each
director/commissioner
Number of board of directors/commissioners meetings held during the year
Attendance details of each director/commissioner in respect of meetings held
Details of remuneration of the CEO and each member of the board of
directors/commissioners
Yes
Yes
Yes
Yes
Yes
n.a.
Yes
Yes
Yes
Yes
Yes
48
Should the Annual Report not disclose any of the above, please indicate the reason for
the non-disclosure.
3) External Auditor’s fee (2013)
Name of auditor
Mercado Calderon Jaravata & Co.
(MCJC)
Maceda Valencia & Co. (formerly
Maceda, Farnacio & Co.)
Audit Fee
P 336,000.00
Non-audit Fee
P8,400.00
P1,120,000.00
-
In their special meeting held on March 18, 2014, the stockholders appointed
Maceda Valencia & Co., a Bangko Sentral ng Pilipinas-accredited auditing firm as the
Bank’s external auditor for the year 2013, vice MCJC whose renewal of accreditation
is still pending with the BSP.
In their annual meeting held on April 29, 2014, the stockholders authorized the
Board of Directors to appoint the Bank’s external auditor for the year 2014 from
among the BSP-accreditation external auditing firms.
4) Medium of Communication
List down the mode/s of communication that the company is using for disseminating
information.
a)
b)
c)
d)
e)
Online disclosures through PSE Edge
Press release
Company website
E-mail
Telephone/Fax
5) Date of release of audited financial report:
March 31, 2014
6) Company Website
Does the company have a website disclosing up-to-date information about the
following?
Business operations
Financial statements/reports (current and prior years)
Materials provided in briefings to analysts and media
Shareholding structure
Group corporate structure
Downloadable annual report
Notice of AGM and/or EGM
Company’s constitution (company’s by-laws, memorandum and articles of association)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Should any of the foregoing information be not disclosed, please indicate the reason
thereto.
49
7) Disclosure of Related Party Transaction (RPT)
RPT
1. Centro Escolar University
(Lessor)
Relationship
Affiliate under
common control
2. Centro Escolar University
(Lessee)
Affiliate under
common control
3. Centro Escolar University
Affiliate under
common control
Affiliate under
common control
Affiliate under
common control
4. Euro Med Laboratories Phil., Inc.
5. Euro Med Laboratories Phil., Inc.
6. Manila Bulletin Publishing Corp.
(Lessee)
Affiliate under
common control
7. Manila Bulletin Publishing Corp.
Affiliate under
common control
Affiliate under
common control
Affiliate under
common control
8. Manila Bulletin Publishing Corp.
9. Café France Corporation
(Lessee)
10. Café France Corporation
11 Cocusphil Development Corp.
(Lessor)
Affiliate under
common control
Affiliate under
common control
Nature
The Bank as lessee of
branch
office
at
Morayta, Manila
The Bank as lessor of
its bldg. at Gil Puyat
Avenue, Manila
Investment in CEU
shares listed at PSE
Depository bank
Value
P0.05M
Investment in EuroMed shares listed at
PSE
The Bank as lessor of
its bldg. at Libertad,
Pasay City
Depository bank
P657,200,324.00
Availment
of
Advertising Services
The Bank as lessor of
its bldg. at Ongpin St.,
Sta Cruz, Manila
Depository bank
P10.5M
The Bank as lessee of a
bldg. at Tabora St.,
Binondo, Manila
P0.063M
P23.7M
P2,461,456.16
P15.9M
P1.8M
P38.3M
P0.025M
P32.7M
When RPTs are involved, what processes are in place to address them in the manner
that will safeguard the interest of the company and in particular of its minority
shareholders and other stakeholders?
Parties are considered related if one party has the ability
directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to
common control or common significant influence.
The Bank’s transactions with related parties were made in the
ordinary course of business and on substantially the same terms,
including interest and collateral, as those prevailing at the time for
comparable transactions with other parties. These transactions also did
not involve more than the normal risk of collectability or present other
unfavorable condition. They were duly approved by the Board of
Directors and where applicable, reported to the Bangko Sentral ng
Pilipinas as DOSRI-loans or DOSRI real estate transactions.
50
J. RIGHTS OF STOCKHOLDERS
1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings
(a) Quorum
Give details on quorum required to convene the Annual/Special Stockholders’
Meeting as set forth in its By-laws.
Per Section 4 of the Amended By-Laws:
At any meeting of the stockholders, the holders of record
for the time being of a majority of the stock of the
corporation then issued and outstanding, represented in
person or by proxy, shall constitute a quorum for the
transaction of business, except as otherwise provided by
law.
Quorum Required
(b) System Used to Approve Corporate Acts
Explain the system used to approve corporate acts.
System Used
Description
Ratification of approved corporate acts
During Annual Stockholders’ Meeting, the stockholders present/represented
ratifies all acts and transacting of the Board of Director, Executive
Committee and Management from the previous Stockholders’ Meeting up to
the date of the next annual meeting.
(c) Stockholders’ Rights
List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting
that differ from those laid down in the Corporation Code.
Stockholders’ Rights under
The Corporation Code
Voting Right
Pre-emptive Right
Power of Inspection
Right to Information
Right to Dividends
Appraisal Rights
Stockholders’ Rights not in
The Corporation Code
None
None
None
None
None
None
Dividends
Declaration Date
Not applicable. No dividend
was declared in 2012
Record Date
Not applicable
Payment Date
Not applicable
51
(d) Stockholders’ Participation
1) State, if any, the measures adopted to promote stockholder participation in the
Annual/Special Stockholders’ Meeting, including the procedure on how
stockholders and other parties interested may communicate directly with the
Chairman of the Board, individual directors or board committees. Include in the
discussion the steps the Board has taken to solicit and understand the views of the
stockholders as well as procedures for putting forward proposals at stockholders’
meetings.
Measures Adopted
1. Disclosure to the public of the Notice,
Agenda and record date of the Annual
Stockholders’ Meeting (ASG)
2. Disclosure to the public of the company’s
Information Statement (IS)
3. Disclosure to the public of the list of
stockholder entitled to notice and to vote
4. Sending the Notice, Agenda, Proxy Form
and Definitive Information Statement
5. Other Matters of the Agenda include an open
forum
Communication Procedure
At least thirty (30) business days prior to the
ASM, the notice, agenda and record date
thereof are reported to the PSE through its
online disclosure system (Odisy) so that the
investing public and all interested parties are
notified of the forthcoming ASM.
At least twenty-five (25) business days prior to
the ASM, the Preliminary Information
Statement submitted to SEC is likewise
furnished the PSE thru Odisy for the general
public to have a detailed background of the
company.
At least fifteen (15) business days prior to the
Stockholders’ Meeting, a list of stockholders
entitled to notice and to vote is submitted to
PSE thru Odisy
At least fifteen (15) business days prior to the
Annual Stockholders’ Meeting, the Notice,
Agenda,
Proxy Form
and Definitive
Information Statement are sent to all
stockholders of record as provided for in the
By-Laws.
Before the adjournment of the meeting, the
stockholders are given the opportunity to direct
their questions to the members of the Board.
Likewise available to answer question on bank
operations and financial statements are the
company’s senior officers and the external
auditors.
8. State the company policy of asking shareholders to actively participate in corporate
decisions regarding:
a. Amendments to the company’s constitution
b. Authorization of additional shares
c. Transfer of all or substantially all assets, which in effect results in the sale of
the company
In all the above instances, the resolutions approved by the
majority of the members of the Board are submitted to the
stockholders during their annual or special meeting for the approval,
52
ratification and confirmation of the stockholders representing at least
two-thirds of the total outstanding capital stock.
9. Does the company observe a minimum of 21 business days for giving out of
notices to the AGM where items to be resolved by shareholders are taken up?
Yes, the company observes the above requirement.
a. Date of sending out notices: March 12, 2014
- Notice, Agenda and record
date are sent/disclosed to
the general public through
PSE’s EDGE
March 20, 2014
- Preliminary Information
Statement
(IS)
is
sent/disclosed to the public
through PSE’s EDGE
April 3, 2014
- Notice, Agenda, Proxy
Form
and
Definitive
Information Statement are
sent to all stockholders of
record
b. Date of the Annual Stockholders’ Meeting:
April 29, 2014
10. State, if any, question and answers during the Annual/Special Stockholders’
Meeting.
No questions pertaining to bank operations or the financial
statement was raised during the Annual Stockholders’ Meeting.
11. Result of Annual/Special Stockholders’ Meeting’s Resolutions
At the Annual Stockholders Meeting held on April 29, 2014,
the following resolutions were approved/ratified by the stockholders:
Resolution
Approving
Dissenting
Abstaining
1) Approval of the Minutes of
the Annual and Special
Meetings of the Stockholders
held on April 30, 2013 and
March 18, 2014, respectively
2) Approval of the Annual
Unanimous votes of all
the shares present or
represented
at
the
meeting.
0
0
Unanimous votes of all
0
0
53
Report to the Stockholders for
the year 2013
3) Ratification and approval of
all the acts and transactions of
the Board of Directors, the
Executive Committee and the
Management since the annual
meeting of the stockholders on
April 30, 2013
4) Granted the Board of
Directors authority to appoint
a BSP-accredited external
auditor for the year 2014
5) Election of Directors
6) Approval of the amendment
of Articles THIRD and
FOURTH of the Bank’s
Articles of Incorporation
the shares present or
represented
at
the
meeting.
Unanimous votes of all
the shares present or
represented
at
the
meeting.
Unanimous
the shares
represented
meeting.
Unanimous
the shares
represented
meeting.
Unanimous
the shares
represented
meeting.
0
0
votes of all
present or
at
the
0
0
votes of all
present or
at
the
0
0
votes of all
present or
at
the
0
0
12. Date of publishing of the result of the votes taken during the most recent AGM for
all resolutions:
The company does not publish the results of the votes taken
during the Annual Stockholders’ Meeting.
(e) Modifications
State, if any, the modifications made in the Annual/Special Stockholders’ Meeting
regulations during the most recent year and the reason for such modification:
Modifications
None. No modification was made in the
regulations for the March 18, 2014 and April
29, 2014 Special and Annual Meetings of the
Stockholders, respectively.
Reason for Modification
Not Applicable
(f) Stockholders’ Attendance
(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:
Type of
Meeting
Annual
Names of Board
Members/Officers
Present
Date of
Meeting
Voting
Procedure
(by poll,
show of
hands,
etc.)
% of SH
Attending
in Person
% of
SH in
Proxy
Total of
SH
attendance
Directors:
1. Dr. Jaime C. Laya
April 29, 2014
0.0033
54
2. Sr. Justice Josue N.
Bellosillo (Ret.)
3. Basilio C. Yap
4. Ernesto O. Chan
5. Tomas V. Apacible
6. Chief Justice
Hilario G. Davide,
Jr. (Ret.)
7. Dr. Emilio C. Yap
III
8. Miriam C. Cu
9. Dr. Johnny C. Yap
10. Atty. Martin B.
Isidro
11. Jose M.
Fernandez
(absent)
Sub-Total
April 29, 2014
0.0002
April 29, 2014
April 29, 2014
April 29, 2014
0.1370
0.0018
0.0002
April 29, 2014
April 29, 2014
April 29, 2014
April 29, 2014
April 29, 2014
The votes
of
the
shares
present or
represented
at
the
meeting
was
counted
viva voce
0.0001
0.0109
0.0549
0.0002
0.0320
0.2406
Senior Officers:
1. Virginia S. ChoaShi, EVP
April 29, 2014
0.0000
2. Eliseo G. Hidalgo,
Jr., SVP
3. Victoria L. Lu,
SVP
4. Luisa A. Lucin,
SVP
5. Corazon L. Ho,
SVP
6. Atty. Agnes B.
Urbano, VP/Asst.
Corp. Secretary
7. Other senior
officers
Sub-Total
April 29, 2014
0.0000
April 29, 2014
0.0040
April 29, 2014
0.0005
April 29, 2014
0.0002
April 29, 2014
0.0007
April 29, 2014
0.0029
Total
0.0083
0.2489
======
(ii) Does the company appoint an independent party (inspectors) to count and/or
validate the votes at the ASM/SSMs?
Yes, as provided in Section 6 of the Company’s By-Laws
(iii)Do the company’s common shares carry one vote for one share? If not,
disclose and give reasons for any divergence to this standard. Where the
company has more than one class of shares, describe the voting rights attached
to each class of shares.
Yes, the company’s common shares carry one vote for
one share. The company has only common shares for its entire
capital stock.
55
(g) Proxy Voting Policies
State the policies followed by the company regarding proxy voting in the
Annual/Special Stockholders’ Meeting.
Execution and acceptance of
proxies
Notary
Submission of Proxy
Several Proxies
Validity of Proxy
Proxies executed abroad
Invalidated Proxy
Validation of Proxy
Violation of Proxy
Company’s Policies
The proxy shall be appointed in writing by the stockholder or
his duly authorized representative
Notarization of Proxy is not required
Not later than five business days prior to the ASM
Only one proxy is allowed per stockholder
Valid only for the meeting for which it was issued by the
stockholder
No proxy executed abroad was received during the 2012 ASM
No proxy was invalidated during the 2012 ASM
Proxies are validated by comparing the same with the master
list of stockholders and specimen signatures
No proxy violation has been committed
(h) Sending of Notices
State the company’s policies and procedure on the sending of notices of
Annual/Special Stockholders’ Meeting.
Policies
To send notices of the annual or special meeting
of the stockholders in accordance with the
Company’s
By-Laws,
BSP/SEC/PSE
requirements, and other applicable rules and
regulations
Procedure
Notices are given to the stockholders of record
within the reglamatory period by sending them
notices by mail or by personal delivery.
The general public is informed of stockholders’
meeting through the company’s website and
PSE’s online disclosure system.
(i) Definitive Information Statements and Management Report
Number of Stockholders entitled to receive
Definitive Information Statements and
Management Report and other Materials
Date of Actual Distribution of Definitive
Information Statement and Management Report
and Other Materials held by market
participants/certain beneficial owners
Date of Actual Distribution of Definitive
Information Statement and Management Report
and Other Materials held by stockholders
State whether CD format or hard copies were
distributed
If yes, indicate whether requesting stockholders
were provided hard copies
79
April 3, 2014
April 3, 2014
Hard copies were distributed
Yes, all stockholders as of record date
(March 27, 2014 were given hard copies of
the Definitive Information Statement
56
(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:
Each resolution to be taken up deals with only one item.
Profiles of directors (at least age, qualification, date of first appointment,
experience, and directorships in other listed companies) nominated for
election/re-election.
The auditors to be appointed or re-appointed.
An explanation of the dividend policy, if any dividend is to be declared.
The amount payable for final dividend.
Documents required for proxy vote.
Yes
Yes
Yes
Yes
Yes
Yes
Should any of the foregoing information be not disclosed, please indicate the
reason thereto.
2) Treatment of Minority Stockholders
(a) State the company’s policies with respect to the treatment of minority
stockholders.
Policies
The Board shall be transparent and fair in the
conduct of the annual and special stockholders’
meetings of the corporation
The Board shall promote the rights of
stockholders, remove impediments to the
exercise of those rights and provide an
adequate avenue for them to seek timely
redress for breach of their rights
Accurate and timely information shall be made
available to stockholders to enable them to
make a sound judgment on all matters brought
to their attention for consideration or approval
Implementation
The stockholders are encouraged to personally
attend their annual and special meetings. If they
cannot attend, they should be timely apprised to
their right to appoint a proxy. Subject to the
requirements of the By-Laws, the exercise of
the said right is not unduly restricted and any
doubt on the validity of the proxy is resolved in
favor of the stockholder.
The Board takes appropriate steps to remove
excessive or unnecessary costs and other
administrative impediments to the stockholders’
meaningful participation in meetings, whether
in person or by proxy.
The Board gives minority stockholders the right
to propose the holding of meetings and the
items for discussion in the agenda that relate
directly to the business of the corporation.
(b) Do minority stockholders have a right to nominate candidates for board of
directors?
Yes, the minority stockholders have a right to nominate
candidates for board directors.
57
K. INVESTORS RELATIONS PROGRAM
1) Discuss the company’s external and internal communication policies and how
frequently they are reviewed. Disclose who reviews and approves major company
announcements. Identify the committee with this responsibility, if it has been assigned
to a committee.
The company adheres to BSP and PSE disclosure rules and
procedures. Major company announcements are approved by the
Board/Excom. Disclosures thereof are undertaken by the Corporate
Secretary/Corporate Information Officer
2) Describe the company’s investor relations program including its communications
strategy to promote effective communication with its stockholders, other stakeholders
and the public in general. Disclose the contract details (e.g. telephone, fax and email)
of the officer responsible for investor relations.
(1) Objectives
(2) Principles
(3) Modes of Communications
(4) Investors Relations Officer
Details
Full disclosure and transparency in all company’s investor
relations program in accordance with BSP, SEC and PSE rules
and regulations.
Timely and accurate disclosure of material information to the
stockholders, general public and other stakeholders.
Online disclosures to PSE, news releases, company website,
telephone, fax and e-mail.
Corporate Secretary and Corporate Information Officer
3) What are the company’s rules and procedures governing the acquisition of corporate
control in the capital markets, and extraordinary transactions such as mergers, and
sales of substantial portions of corporate assets?
Although no extra-ordinary transactions such as merger, sale of
substantial corporate assets or acquisition of corporate control in the
capital market has ever been discussed in the Board, the said corporate
acts would require the approval, ratification and confirmation of the
stockholders.
Name of the independent party the board of directors of the company appointed to
evaluate the fairness of the transaction price.
Not applicable.
58
L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
Discuss any initiative undertaken or proposed to be undertaken by the company.
Initiative
College Scholarship Grants
Beneficiary
Deserving students recommended by the school.
M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL
Disclose the process followed and criteria used in assessing the annual performance of
the board and its committee, individual director, and the CEO/President.
Board of Directors
Board Committees
Individual Directors
CEO/President
Process
Attendance and participation in the
deliberations during board meetings.
Attendance and participation in the
deliberations during committee meetings.
Contribution to the development of
business strategies, evaluation of strategic
plans
submitted
for
business
development.
Implementation of development plan
approved by the Board.
Criteria
Attendance to constitute a
quorum.
Attendance to constitute a
quorum.
Developed business strategies
are
aligned
to
attaining
corporate objectives, vision and
mission.
Effectiveness
of
the
implementation of the approved
plan.
N. INTERNAL BREACHES AND SANCTIONS
Discuss the internal policies on sanctions imposed for any violation or breach of the
corporate governance manual involving directors, officers, management and
employees
Violations
Breach of the Corporate
Governance Manual
Sanctions
After observance of due process, the sanctions that may be imposed range
from warning, reprimand, suspension to forfeiture of benefits and/or
termination of service depending on the gravity of the offense committed.
59
ANNEX “F”
ITEMS REPORTED UNDER CURRENT REPORT (SEC FORM 17-C)
FOR THE YEAR 2014
Date of Submission
Type of Report
February 4
-
Board of Directors’ approval on January 28, 2014 of
the holding of a special meeting of the stockholders on
March 18, 2014 to appoint a new external auditor for
the year 2013.
February 26
-
Board approval on February 25, 2014 of the extension
of the corporate life of the Bank for another 50 years
and the corresponding amendment of the Articles of
Incorporation.
March 19
-
Stockholders’ approval on March 18, 2014 of the
revocation of the appointment of Mercado, Calderon,
Jaravata & Co., and its replacement by Maceda,
Valencia & Co., as the Bank’s external auditor for the
year 2013.
April 1
-
Board approval on March 31, 2014 to comply with
SEC Memorandum Circular No. 6, Series of 2014, by
amending Article THIRD of the Articles of
Incorporation to specify the complete address of the
corporation.
April 30
-
Stockholders’ approval on April 29, 2014 to comply
with SEC Memorandum Circular No. 6, Series of 2014,
and to correspondingly amend Article THIRD of the
Articles of Incorporation.
April 30
-
Stockholders’ approval on April 29, 2014
extension of the corporate life of the Bank for
50 years from and after October 21, 2016
correspondingly amend Article FOURTH
Articles of Incorporation.
April 30
-
Stockholders’ approval on April 29, 2014 of authority
for the Board of Directors to appoint the Bank’s
external auditor for the year 2014.
April 30
-
Election of the eleven (11) Directors of the Bank for a
term of one year during the Annual Stockholders’
Meeting held on April 29, 2014.
May 28
-
Board approval on May 27, 2014 of:
of the
another
and to
of the
a) Election of corporate and executive officers
b) Re-organization of the Board and Management
Committees
July 1
-
Board’s acceptance, with regrets, of the resignation of
Atty. Martin B. Isidro as director of the Bank effective
June 30, 2014, and the approval of the election of
Atty. Francis Y. Gaw as director to serve the unexpired
term of Atty. Isidro.
July 30
-
Board approval on July 28, 2004 of the re-organization
of the Board Risk Management and the Corporate
Governance Committees.