2022 BPI Direct BanKo Inc. Audited FS

www.pwc.
com/ph
BPI Direct
BanKo, Inc.,
A Savings Bank
(Formerly BPI Direct Savings
Bank, Inc.)
Financial Statements
As at and for the years ended December 31, 2022 and 2021
Independent Auditor’s Report
To the Board of Directors and Shareholder of

BPI Direct BanKo, Inc., A Savings Bank
(Formerly BPI Direct Savings Bank, Inc.)
G/F BanKo Center Building
Ortigas Avenue, North Greenhills
San Juan, Metro Manila
Report on the Audits of the Financial Statements
Our Opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of BPI Direct BanKo, Inc., A Savings Bank (the “Bank”) as at December 31, 2022 and 2021, and its
financial performance and its cash flows for the years then ended in accordance with Philippine Financial
Reporting Standards (PFRSs).
What we have audited
The financial statements of the Bank comprise:
• the statements of condition as at December 31, 2022 and 2021;

• the statements of income for the years ended December 31, 2022 and 2021;
• the statements of comprehensive income for the years ended December 31, 2022 and 2021;
• the statements of changes in capital funds for the years ended December 31, 2022 and 2021;
• the statements of cash flows for the years ended December 31, 2022 and 2021; and
• the notes to the financial statements, which include a summary of significant accounting policies.
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Bank in accordance with the Code of Ethics for Professional Accountants in the
Philippines (Code of Ethics), together with the ethical requirements that are relevant to our audit of the
financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and Code of Ethics.
Isla Lipana & Co., 29th Floor, Philamlife Tower, 8767 Paseo de Roxas, 1226 Makati City, Philippines
T: +63 (2) 8845 2728, F: +63 (2) 8845 2806, www.pwc.com/ph
Isla Lipana & Co. is the Philippine member firm of the PwC network. PwC refers to the Philippine member firm, and may sometimes refer to the PwC network. Each
member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
Page 2
Other Information
Management is responsible for the other information. The other information comprises the Annual Report,
but does not include the financial statements and our auditor’s report thereon. The Annual Report is
expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we will not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above when it becomes available and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with PFRSs, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Bank’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Bank or to cease operations,
or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
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As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Bank to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
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Report on the Supplementary Information Required by the Bangko Sentral ng Pilipinas

(BSP) and the Bureau of Internal Revenue (BIR)
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken
as a whole. The supplementary information required under BSP Circular No. 1074 in Note 24 and BIR
Revenue Regulations No. 15-2010 in Note 25 to the financial statements is presented for the purposes of
filing with the BSP and the BIR, respectively, and is not a required part of the basic financial statements.
Such information is the responsibility of management of the Bank. The information has been subjected to
the auditing procedures applied in our audits of the basic financial statements. In our opinion, the
information is fairly stated, in all material respects, in relation to the basic financial statements taken as a
whole.
Isla Lipana & Co.
Ruth F. Blasco
Partner
CPA Cert No. 112595
P.T.R. No. 0018519, issued on January 9, 2023, Makati City
SEC A.N. (individual) as general auditors 112595-SEC, Category A; valid to audit 2020 to 2024
financial statements
SEC A.N. (firm) as general auditors 0142-SEC, Category A; valid to audit 2020 to 2024
financial statements
TIN 235-725-236
BIR A.N. 08-000745-133-2020, issued on June 5, 2020; effective until June 4, 2023
BOA/PRC Reg. No. 0142, effective until November 14, 2025
Makati City
March 22, 2023
Statements of Condition
December 31, 2022 and 2021
(All amounts in Philippine Peso)
Notes 2022 2021
RESOURCES
Cash and other cash items 2 250,147,358 288,788,443

Due from other banks 2 767,097,024 1,088,893,413
Interbank loans receivable 2,3 135,594,884 362,630,232
Due from Bangko Sentral ng Pilipinas 2,4 4,334,661,084 4,326,564,677
Investment security at fair value through other
comprehensive income 5 14,939 17,123
Loans and advances, net 6 15,679,134,887 10,966,782,236
Assets held for sale 77,880,288 89,666,684
Bank premises, furniture, fixtures and equipment, net 7 496,808,502 598,285,340
Deferred income tax assets, net 8 490,516,905 505,013,516
Other resources, net 9 216,515,286 250,325,170
Total resources 22,448,371,157 18,476,966,834
LIABILITIES AND CAPITAL FUNDS
Deposit liabilities 10 16,792,441,424 14,277,235,315

Accrued taxes, interest and other expenses 11 345,969,454 223,239,533
Other liabilities 12 1,129,339,083 773,669,248
Total liabilities 18,267,749,961 15,274,144,096
CAPITAL FUNDS 13
Share capital 1,405,572,100 1,405,572,100
Accumulated other comprehensive loss (29,772,580) (29,151,745)
Other reserves (269,815,403) (269,815,403)
Surplus 3,074,637,079 2,096,217,786
Total capital funds 4,180,621,196 3,202,822,738
22,448,371,157 18,476,966,834
(The notes on pages 1 to 58 are an integral part of these financial statements.)

Statements of Income
For the years ended December 31, 2022 and 2021
Notes 2022 2021

INTEREST INCOME
Loans and advances 6 3,974,308,405 3,304,862,303
Deposits with BSP and other banks 2,4 56,390,204 63,758,112
Interbank loans receivable 3 13,739,745 15,620,275
4,044,438,354 3,384,240,690
INTEREST EXPENSE ON DEPOSITS 10 86,929,058 122,864,229
NET INTEREST INCOME 3,957,509,296 3,261,376,461
PROVISION FOR IMPAIRMENT 6,9,20 702,139,263 569,241,172
NET INTEREST INCOME AFTER
PROVISION FOR IMPAIRMENT 3,255,370,033 2,692,135,289
OTHER INCOME
Service fee income 526,085,439 455,415,974
Profit on assets sold 7,484,831 4,283,824
Miscellaneous income 14 123,814,886 96,391,640
657,385,156 556,091,438
OTHER EXPENSES
Compensation and fringe benefits 17,18 984,514,746 1,035,000,497
Occupancy and equipment-related
expenses 983,805,225 1,104,097,458
Other operating expenses 15 635,624,168 509,389,668
2,603,944,139 2,648,487,623
INCOME BEFORE PROVISION FOR
INCOME TAX 1,308,613,312 598,478,690
PROVISION FOR INCOME TAX 16
Current 327,101,725 93,177,678
Deferred 8 3,092,294 156,419,133
330,194,019 249,596,811
NET INCOME FOR THE YEAR 978,419,293 348,881,879

Statements of Comprehensive Income

Note 2022 2021

NET INCOME FOR THE YEAR 978,419,292 348,881,879
OTHER COMPREHENSIVE INCOME (LOSS) 13
Item that will be subsequently reclassified to profit or loss
Change in fair value reserve on debt securities at fair value
through other comprehensive income, net of tax -
Items that will not be subsequently reclassified to profit or loss
Change in fair value reserve on equity securities at fair
value through other comprehensive income, net of tax (2,184) 7,209
Remeasurement (loss) gain on retirement benefit obligation,
net of tax (618,651) 11,692,400
Total other comprehensive (loss) income (620,835) 11,699,609
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 977,798,457 360,581,488
(The notes on pages 1 to 58 are an integral part of the financial statements.)

Statements of Changes in Capital Funds

Accumulated
other
comprehensive
Share capital income (loss) Other Surplus
(Note 13) (Note 13) reserves (Note 13) Total
BALANCE, JANUARY 1, 2021 905,572,100 (40,851,354) (269,815,403) 1,747,335,907 2,342,241,250
TRANSACTION WITH OWNER
Additional capital contributions 500,000,000 - - - 500,000,000
COMPREHENSIVE INCOME
Net income for the year - - - 348,881,879 348,881,879
Other comprehensive income - 11,699,609 - - 11,699,609
Total comprehensive income for the
year - 11,699,609 - 348,881,879 360,581,488
BALANCE, DECEMBER 31, 2021 1,405,572,100 (29,151,745) (269,815,403) 2,096,217,786 3,202,822,738
COMPREHENSIVE INCOME
Net income for the year - - - 978,419,293 978,419,293
Other comprehensive loss (620,835) - - (620,835)
Total comprehensive income (loss)
for the year - (620,835) - 978,419,293 977,798,458
BALANCE, DECEMBER 31, 2022 1,405,572,100 (29,772,580) (269,815,403) 3,074,637,079 4,180,621,196
(The notes on pages 1 to 58 are an integral part of the financial statements.)

Statements of Cash Flows

Notes 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES
Income before provision for income tax 1,308,613,612 598,478,690
Adjustments for:
Interest income (4,044,457,585) (3,384,241,723)
Interest expense on deposit and lease liabilities 10,19 104,526,498 159,490,390
Depreciation and amortization 7 326,863,466 369,079,635
Profit on assets sold (7,484,831) (4,596,429)
Retirement benefit expense 17 22,443,240 56,688,229
Provision for impairment 6,9,20 702,356,232 570,502,619
Interest received 3,892,925,729 3,366,848,363
Interest paid (85,808,182) (180,300,709)
Increase in:
Loans and advances (5,258,769,789) (796,273,684)
Assets held for sale 19,271,227 1,763,228
Other resources 39,792,109 126,586,522
Increase (Decrease) in:
Deposit liabilities 2,515,206,109 (3,570,851,947)
Accrued taxes, interest and other expenses 257,045,498 26,651,222
Other liabilities 321,935,043 (624,958,569)
Net cash from (used in) operations 114,458,376 (3,290,134,163)
Retirement plan contributions 17 (23,947,095) (44,700,923)
Income tax paid (480,017,613) (75,837,842)
Net cash used in operating activities (389,506,332) (3,410,672,929)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in:
Bank premises, furniture, fixture, and equipment 7 (48,256,312) (140,063,608)
Net cash used in investing activities (48,256,312) (140,063,608)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt of additional capital contribution from
Parent Bank 13 - 500,000,000
Payment of principal portion of lease liabilities 19 (140,383,071) (121,340,642)
Net cash (used in) from financing activities (140,383,071) 378,659,358
NET DECREASE IN CASH AND CASH EQUIVALENTS (580,801,237) (3,172,077,179)
CASH AND CASH EQUIVALENTS
January 1 6,066,876,765 9,238,953,944
December 31 2 5,487,500,350 6,066,876,765
December 31 2 5,125,184,005 9,952,4 07,411

Notes to the Financial Statements

As at and for the years ended December 31, 2022 and 2021
(In the notes, all amounts are shown in Philippine Peso unless otherwise stated)
Note 1 - General information
1.1 Business information
BPI Direct BanKo, Inc., A Savings Bank (the “Bank”) was incorporated in the Philippines and registered with the
Securities and Exchange Commission (SEC) on March 17, 1956 primarily to engage in and carry on the general
business of savings and mortgage banking.
The Bank is a wholly-owned subsidiary of Bank of the Philippine Islands (“BPI” or the “Parent Bank”),
a domestic commercial bank with an expanded banking license, which is also its ultimate parent.
The Bank’s registered office address, which is also its principal place of business, is BanKo Center Building, Ortigas
Avenue, North Greenhills, San Juan, Metro Manila.
The Bank has 2,376 regular employees as at December 31, 2022 (2021 - 2,727).
Coronavirus (COVID-19) pandemic
As the Philippine economy fully reopens and society shifts into its new normal, the Bank’s business model and
operating environment have now fully integrated various business continuity plans enacted during the pandemic.
These include, but are not limited to, changes in the workforce arrangements and set-up of corporate offices,
allowing for hybrid schedules, split operations, and alternative work sites, all duly supported by the use of mobility
tools and virtual communications. The Bank’s accelerated digital transformation has also ensured continuous
client service through its various distribution platforms while maintaining back-office efficiency. The Bank’s robust
risk management continues to guard against increasing cybersecurity risks heightened by remote and virtual work
arrangements.
The Bank upholds a stringent credit process while also enhancing aspects of its underwriting, monitoring, and
collections, in consideration of the changes in regulatory, economic, and competitive environment, and customer
behaviors post-crisis. Monitoring vulnerable industries and sectors that have been affected by COVID-19 and
having regular conversations with clients also continues.
Thus, the Bank’s asset quality has remained resilient and more favorable than industry averages, displaying an
improving trend across key metrics. The Bank’s robust capital and liquidity levels also serve as sufficient buffers
for any adverse scenario post-pandemic.
1.2 Approval of the Bank’s financial statements
These financial statements have been approved and authorized for issuance by the Board of Directors (BOD) on
March 22, 2023.
Note 2 - Cash and cash equivalents
The account as at December 31 consists of:
Notes 2022 2021

Cash and other cash items 250,147,358 288,788,443
Due from other banks 767,097,024 1,088,893,413
Interbank loans receivable 3 135,594,884 362,630,232
Due from BSP 4 4,334,661,084 4,326,564,677
5,487,500,350 6,066,876,765
For the year ended December 31, 2022, interest income earned on Due from other banks amounts to P1,086,593
(2021 - P582,352).
Cash and cash equivalents are classified as current as at December 31, 2022 and 2021.
Note 3 - Interbank loans receivable
The account at December 31, 2022 consists of transactions with the BSP amounting to P135,594,884.
Interbank loans receivable maturing within 90 days from the date of acquisition are classified as cash equivalents
in the statement of cash flows (Note 2).
Government bonds are pledged by the BSP as collaterals under reverse repurchase agreements. The face value of
securities pledged is equivalent to the total balance of outstanding placements as at reporting date. All collateral
agreements mature within 12 months.
Average interest rate on interbank loans receivable in 2022 is 6% (2021 - 2%). Total interest earned on interbank
loans receivable amounts to P13,739,745 (2021 - P15,620,275) for the year ended December 31, 2022.
Interbank loans receivable is classified as current.
Note 4 - Due from BSP
2022 2021
Special deposit accounts 1,485,661,084 3,850,000,000
Clearing accounts 2,849,000,000 476,564,677
4,334,661,084 4,326,564,677
Special deposit accounts classified as cash equivalents are fixed-term demand Philippine Peso deposits maintained
mainly for liquidity purposes and in compliance with the simplified minimum reserve requirements of the BSP
(Note 10).
Clearing accounts represent temporary deposit accounts wherein funds flow from cleared checks are credited against
or debited for.
As at December 31, 2022, Due from BSP includes special deposit placements of P2.85 billion (2021 - P3.85 billion)
with maturities of not more than 28 days. Average interest rate on due from BSP at December 31, 2022 is 6.16%
(2021 - 1.73%). Total interest earned on due from BSP amounts to P55,503,611 for the year ended December 31, 2022
(2021 - P63,175,760).
Due from BSP is classified as current as at December 31, 2022 and 2021.
(2)
Note 5 - Investment security at fair value through other comprehensive income (FVOCI)
The account consists of listed equity security which amounts to P14,939 as at December 31, 2022
(2021 - P17,123).
Movements in investment security at FVOCI for the years ended December 31 are as follows:
2022 2021
At January 1 17,123 9,914
Fair value adjustment (2,184) 7,209
At December 31 14,939 17,123
Investment security at FVOCI as at December 31, 2022 and 2021 is classified as current.
Note 6 - Loans and advances, net
2022 2021
Retail customers
Real estate mortgagers 1,275,017,499 1,484,945,818
Auto loans 368,324 595,216
Others 15,693,634,928 10,975,891,900
Corporate entities
Large corporate customers 58,246,232 -
Small and medium enterprises 7,252,624 -
17,034,519,607 12,461,432,934
Accrued interest receivable 543,880,208 393,451,158
Unearned discount (54,475) (54,475)
17,578,345,340 12,854,829,617
Allowance for impairment (1,899,210,453) (1,888,047,381)
15,679,134,887 10,966,782,236
Average effective interest rate on loans and advances is 14.66% at December 31, 2022 (2021 - 32.48%). Interest
income from loans and advances amounts to P3,974,308,405 for the year ended December 31, 2022
(2021 - P3,304,862,303).
Maturity profile of loans and advances, net of accrued interest receivable and unearned discount as at December 31
follows:
2022 2021
Current (within 12 months) 8,500,364,660 4,859,043,593
Non-current (over 12 months) 9,077,980,680 7,995,786,023
17,578,345,340 12,854,829,617
(3)
Movements in allowance for impairment for the years ended December 31 are as follows:
2022 2021
Balance, January 1 1,888,047,381 2,041,531,797
Provision for loan impairment 696,846,189 573,079,294
Write-offs (684,478,998) (725,332,651)
Transfers/other movements (1,204,119) (1,231,059)
Balance, December 31 1,899,210,453 1,888,047,381
In 2022, the Bank purchased the personal loan portfolio of its Parent Bank amounting to P3,623,586,925
(2021 - P3,771,385,733).
Note 7 - Bank premises, furniture, fixtures and equipment, net
The movements in the account for the years ended December 31 are summarized as follows:
2022
Leasehold
Furniture, Leasehold rights and
fixtures, and rights and Computer improvements
equipment improvement equipment in progress Buildings Total
Cost
January 1, 2022 483,501,301 711,705,546 56,413,600 - 553,637,270 1,805,257,717
Additions 13,050,661 21,207,966 2,003,152 11,745,784 179,111,487 227,119,050
Pre-termination (212,389) - - - (4,085,142) (4,297,531)
December 31, 2022 496,339,573 732,913,512 58,416,752 11,745,784 728,663,615 2,028,079,236
Accumulated depreciation
and amortization
January 1, 2022 378,524,617 444,285,657 45,807,422 - 338,354,681 1,206,972,377
Depreciation and
amortization 68,440,042 126,697,550 6,085,188 123,740,928 324,963,708
Pre-termination (212,289) - - - (453,062) (665,351)
December 31, 2022 446,752,370 570,983,207 51,892,610 - 461,642,547 1,531,270,734
Net book value,
December 31, 2022 49,587,203 161,930,305 6,524,142 11,745,784 267,021,068 496,808,502
2021
Leasehold
Furniture, Leasehold rights and
fixtures, and rights and Computer improvements
equipment improvement equipment in progress Buildings Total
Cost
January 1, 2021 387,725,983 691,097,466 41,998,321 2,034,811 521,150,271 1,644,006,852
Additions 95,775,317 20,608,080 14,415,279 (2,034,811) 32,486,999 161,250,865
Pre-termination - - - - - -
December 31, 2021 483,501,301 711,705,546 56,413,600 - 553,637,270 1,805,257,717
Accumulated depreciation
and amortization
January 1, 2021 256,322,145 315,455,227 37,531,680 - 218,363,759 827,672,811
Depreciation and
amortization 122,202,472 128,830,430 8,275,742 - 119,990,922 379,299,566
Pre-termination - - - - - -
December 31, 2021 378,524,617 444,285,657 45,807,422 - 338,354,681 1,206,972,377
Net book value,
December 31, 2021 104,976,684 267,419,889 10,606,178 - 215,282,589 598,285,340
(4)
Effective January 1, 2019, the Bank has recognized right-of-use assets from the long-term leases of spaces for its main
office and branches (Note 19).
Depreciation and amortization is included in Occupancy and equipment-related expenses in the statement of income.
Bank premises, furniture, fixtures and equipment are all considered non-current assets.
Note 8 - Deferred income tax assets, net
Deferred income tax assets and liabilities at December 31 consist of:
2022 2021
Deferred income tax assets
Allowance for impairment 479,104,440 475,107,667
Expense accruals and provisions 12,671,005 15,730,730
Amortization of past service cost 20,472,887 20,420,061
512,248,332 511,258,458
Deferred income tax liabilities
Retirement benefit asset 21,731,427 6,244,942
Deferred income tax assets, net 490,516,905 505,013,516
Movements in the net deferred income tax assets for the years ended December 31 are summarized below:
2022 2021
At January 1 505,013,516 716,192,409
Amounts charged to statement of income (3,092,295) (156,419,133)
Amounts charged to other comprehensive income (11,404,316) (5,497,583)
Recognition of MCIT - (49,262,177)
At December 31 490,516,905 505,013,516
The deferred tax credit in the statement of income for the years ended December 31 comprises the following
temporary differences:
2022 2021
Allowance for impairment (3,996,773) 157,149,474
Net operating loss carry-over (NOLCO) - 3,829,196
Others 7,089,068 (4,559,537)
3,092,295 156,419,133
(5)
Note 9 - Other resources, net
The account at December 31 consists of:
Notes 2022 2021

Accounts receivable 22,958,088 68,072,562
Rental deposits 33,383,616 31,932,832
Pension asset 17 27,321,996 24,979,767
Prepaid expenses 17 34,838,920 23,997,921
Injunction bond 44,111,052 8,604,565
Membership shares 2,500,000 2,500,000
Accrued interest receivable 1,528,191 471,898
Computer software 2,909,569 1,944,656
Miscellaneous 62,590,304 98,951,910
232,141,736 261,456,111
Allowance for impairment (15,622,429) (11,130,941)
216,519,307 250,325,170
Other resources are expected to be realized as follows:
2022 2021
Current 202,197,922 232,031,688
Non-current 29,943,814 29,424,423
232,141,736 261,456,111
Accounts receivables mainly include employee cash advances, commissions and other receivables.
Miscellaneous assets include returned checks and float items which are expected to clear in one to two days.
Allowance for impairment pertains to accounts receivables that are doubtful of collection.
The movements in the allowance for impairment as at December 31 are as follows:
2022 2021
At January 1 11,130,941 15,697,166
Provision for (reversal of) impairment 4,491,488 (4,566,225)
At December 31 15,622,429 11,130,941
Reversal of impairment in 2021 is due to collections of previously impaired accounts receivables.
Note 10 - Deposit liabilities
2022 2021
Demand 512,886,649 504,554,170
Savings 12,464,620,234 12,772,789,716
Time 3,814,934,541 999,891,429
16,792,441,424 14,277,235,315
(6)
Deposit liabilities are expected to be settled as follows:
2022 2021
Current 12,977,506,883 13,277,344,886
Non-current 3,814,934,541 999,890,429
16,792,441,424 14,277,235,315
Related interest expense on deposit liabilities for the years ended December 31 is broken down as follows:
2022 2021
Demand 319,820 1,545,476
Savings 61,260,369 84,692,592
Time 25,348,869 36,626,161
86,929,058 122,864,229
Under current and existing BSP regulations, the Bank should comply with a minimum reserve requirement.
Further, BSP requires all reserves be kept at the central bank.
In 2019, the reserve ratio decreased to 4% from 8% following the BSP’s decision to reduce the requirements. In
2020, the BSP approved the further reduction in reserves which brought the requirement down to 3% for thrift
banks effective July 31, 2020 by virtue of BSP Circular No. 1092. The same reserve requirement is applicable for
2022 and 2021.
The required reserve as reported to BSP as at December 31, 2022 amounts to P486,830,544 (2021 - P421,937,252), which
is included in Due from BSP (Note 4). The Bank is in full compliance with the reserve requirement as at
December 31, 2022 and 2021.
Note 11 - Accrued taxes, interest and other expenses
2022 2021
Accrued expenses 139,569,620 131,510,962
Accrued income tax 171,109,462 17,340,120
Accrued taxes and licenses 34,938,418 16,321,620
Accrued interest 351,955 59,066,831
345,969,454 223,239,533
Accrued expenses mainly pertain to accruals for utilities, penalties and outsourced services by the Bank.
The above accrued expenses are all considered current.
Note 12 - Other liabilities
The account at December 31 consists of:
Note 2022 2021

Accounts payable 805,587,216 485,403,347
Lease liabilities 19 284,416,142 238,062,374
Withholding taxes payable 5,517,507 4,936,093
Miscellaneous 33,818,218 45,267,434
Total 1,129,339,083 773,669,248
(7)
The lease liabilities are measured at the present value of the remaining lease payments using an incremental
borrowing rate applied by the Bank (Note 19).
Miscellaneous liabilities mainly include mandatory contributions payable to SSS, Medicare and Philhealth, and
float items which are expected to clear in one to two days.
Other liabilities are considered current, except for the non-current portion of the lease liabilities disclosed in
Note 19.
Note 13 - Capital funds
Details of share capital at December 31, 2022 and 2021 are as follows:
Authorized Issued and outstanding

Number of Number of
shares Amount shares Amount
Common shares, at P100 par value per share
Class A 37,400,000 3,740,000,000 13,455,721 1,345,572,100
Class B 2,000,000 200,000,000 600,000 60,000,000
39,400,000 3,940,000,000 14,055,721 1,405,572,100
Preferred shares, at P100 par value per share,
12% cumulative, participating and redeemable
Class A 200,000 20,000,000 - -
Class B 400,000 40,000,000 - -
600,000 60,000,000 - -
40,000,000 4,000,000,000 14,055,721 1,405,572,100
The Class A (common and preferred) shares are available only to Philippine nationals while the Class B (common
and preferred) shares may be issued to non-Filipinos. The Bank, at its option, may redeem the preferred shares
after ten years from issue date.
On December 29, 2020, the SEC approved the Bank's increase in authorized capital stock from P470 million in
2019 to P4 billion in 2020. On September 30, 2020, the Bank received P500 million from the Parent Bank as a
capital infusion to strengthen the Bank's capital position against the economic effects of the COVID-19 pandemic.
In March 2021, the Bank received additional capital infusion from the Parent Bank amounting to P500 million to
assist on its capital requirements. The said capital infusion has been duly approved by the BSP.
Surplus
As at December 31, 2022, the Bank has surplus in excess of its paid-up capital amounting to P1,669,067,527
(2021 - P690,645,686.) The Bank intends to use its excess surplus for future branch expansions which are
expected to materialize within the next twelve months after year end.
(8)
Other comprehensive income
The movements in the account for the years ended December 31 are summarized below:
2022 2021
Fair value reserve on investment securities at FVOCI
At January 1 711 (6,498)
Unrealized fair value (loss) gain before tax (2,184) 7,209
Deferred income tax effect - -
At December 31 (1,473) 711
Remeasurement (loss) gain on defined benefit plan, net
At January 1 (29,152,456) (40,844,856)
Remeasurement (loss) gain before tax (824,867) 14,809,038
Deferred income tax effect 206,216 (3,116,638)
At December 31 (29,771,107) (29,152,456)
(29,772,580) (29,151,745)
Note 14 - Miscellaneous income
The account for the years ended December 31 consists of:
2022 2021
Recoveries 132,798,796 103,438,791
Other income 312,006 193,564
Gross receipts tax (9,295,916) (7,240,715)
123,814,886 96,319,640
The Bank was able to recover collections on personal loans purchased from the Parent Bank and the amounts
received were recognized as income for the years ended December 31, 2022 and 2021.
Note 15 - Other operating expenses
The account for the years ended December 31 consists of:
Note 2022 2021

Shared operating costs 18 231,044,941 192,189,972
Stationery and supplies used 101,346,043 47,687,567
Travel and communications 98,081,887 81,176,524
Insurance 55,284,809 63,292,108
Taxes and licenses 46,866,065 24,703,446
Fines, penalties, and other charges 26,336,485 11,192,466
Advertising and publicity 11,079,739 10,098,279
Litigation expenses 3,898,231 7,429,269
Membership fees 5,993,620 5,957,470
Regulatory examination fees 4,706,098 5,210,688
Others 50,986,250 60,451,879
635,624,168 509,389,668
Other operating expenses pertain mainly to professional fees, representation and entertainment, freight expenses and
other outsourced service costs.
(9)
Note 16 - Income taxes
A reconciliation between the provision for income tax at the statutory income tax rate to the actual provision for
income tax for the years ended December 31 is presented below:
2022 2021
Amount % Amount %
Statutory income tax 327,153,328 25.00 149,619,672 25.00
Effect of items not subject to statutory tax rate
Income subject to lower tax rates (3,536,578) (0.27) (83,347,378) (13.93)
Effect of change in tax rates - - 121,509,857 20.30
Others 6,577,269 0.50 61,814,660 10.34
Provisions for income tax 330,194,019 25.23 249,596,811 41.71
Others mainly consist of various permanent and temporary non-deductible differences.
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act which provides for lower corporate
income tax rates and rationalized fiscal incentives had been signed into law by the President of the Philippines on
March 26, 2021 and with a retroactive effect of July 1, 2020. As a result of the CREATE Act, the Bank recognized
an adjustment in 2021 pertaining to the December 31, 2020 balances which resulted in a net increase of
P121.5 million.
Note 17 - Retirement plan
BPI and its subsidiaries, which include the Bank, have a trustee, non-contributory retirement benefit plans covering
all qualified officers and employees.
Effective January 1, 2016, the Bank implemented a defined contribution plan which is accounted for as a defined
benefit plan with minimum guarantee. The description of the plans follows:
Under the plan, the normal retirement age is 60 years. Normal retirement benefit consists of a lump sum benefit
equivalent to 200% of the basic monthly salary of the employee at the time of his retirement for each year of
service, if he has rendered at least 10 years of service, or up to 150% of his basic monthly salary, if he has rendered
less than 10 years of service. For voluntary retirement, the benefit is equivalent to 112.50% of the employee’s basic
monthly salary for a minimum of 10 years of service with the rate factor progressing to a maximum of 200% of
basic monthly salary for service years of 25 or more. Death or disability benefit, on the other hand, shall be
determined on the same basis as in voluntary retirement.
For the defined contribution plan, the defined benefit 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 Republic Act (RA) No. 7641. All non-unionized employees hired on or after
October 1, 2016 are automatically under the new defined contribution (DC) plan. Employees hired prior to
October 1, 2016 shall have the option to elect to become members of the new DC plan.
The net defined benefit cost and contributions to be paid by the Bank are determined by an independent actuary.
Plan assets are held in trusts, governed by local regulations and practice in the Philippines.
(10)
Following are the amounts recognized that relate to the Bank based on the recent actuarial valuation reports:
Defined benefit retirement plan
(a) Pension asset as at December 31 recognized under Other resources in the statement of condition follows:
2022 2021
Fair value of plan assets 48,311,534 52,075,799
Present value of defined benefit obligation (11,603,395) (13,095,439)
Surplus 36,708,139 38,980,360
Effect of the asset ceiling (9,386,143) (14,000,593)
Pension asset recognized in the statement of condition 27,321,996 24,979,767
The movements in plan assets for the years ended December 31 are summarized as follows:
2022 2021
At January 1 52,075,799 49,839,130
Asset return at net interest cost 2,590,444 1,993,664
Contributions 1,247,650 440,526
Benefits paid from plan assets (2,926,550) -
Remeasurement loss (4,675,809) (197,521)
At December 31 48,311,534 52,075,799
The carrying value of the plan assets as at December 31, 2022 is equivalent to its fair value of P48 million
(2021 - P52 million).
The plan assets at December 31 are comprised of the following:
2022 2021
Amount % Amount %
Debt securities 25,121,998 52% 32,432,808 62%
Equity securities 18,358,383 38% 14,018,805 27%
Others 4,831,153 10% 5,624,186 11%
48,311,534 100% 52,075,799 100%
The plan assets of the unified retirement plan include investment in BPI’s common share with aggregate
fair value of P159 million at December 31, 2022 (2021 - P485 million). An officer of the Parent Bank
exercises the voting rights over the plan’s investment in BPI’s common shares.
The movements in the present value of defined benefit obligation for the years ended December 31 are summarized
as follows:
2022 2021
At January 1 13,095,439 14,232,590
Current service cost 1,630,094 1,218,984
Past service cost 163,696 -
Interest cost 645,605 563,611
Benefits paid from plan assets (2,926,550) -
Remeasurement gain (loss)
Changes in financial assumptions (1,129,797) (1,153,055)
Changes in demographic assumptions (186,487)
Experience adjustments 124,908 (1,580,204)
At December 31 11,603,395 13,095,439
(11)
The Bank has no further transactions with the plan other than the contributions for the years ended
The retirement benefit expense recognized in the statement of income for the year ended December 31, 2022
amounts to P538,795 (2021 - retirement benefit income of P263,009).
The principal assumptions used for the actuarial valuations of the defined benefit plan of the Bank at December 31
are as follows:
2022 2021
Discount rate 7.15% 4.93%
Salary increase rate 6.00% 5.00%
Discount rate
The discount rate is determined by reference to PHP Bloomberg Valuation (BVAL) rates and adjusted to reflect
the term similar to the estimated term of the benefit obligation as determined by the actuary as at the end of the
reporting period as there is no deep market in high quality corporate bonds in the Philippines.
Future salary rate increases
This is the expected long-term average rate of salary increase taking into account inflation, seniority, promotion
and other market factors. Salary increases comprise of the general inflationary increases plus a further increase
for individual productivity, merit and promotion. The future salary increase rates are set by reference over the
period over which benefits are expected to be paid.
Demographic assumptions
Assumptions regarding future mortality and disability experience are based on published statistics generally used
for local actuarial valuation purposes.
The defined benefit plan typically exposes the Bank to a number of risks such as investment risk, interest rate risk
and salary risk. The most significant of which relate to investment and interest rate risks. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
government bonds 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 pension liability. A decrease in government bond yields will
increase the defined benefit obligation although this will also be partially offset by an increase in the value of the
plan’s fixed income holdings. Hence, the present value of defined benefit obligation is directly affected by the
discount rate to be applied by the Bank. However, the Bank believes that due to the long-term nature of the pension
liability and the strength of the Bank itself, the mix of debt and equity securities holdings of the plan is an
appropriate element of the Bank’s long term strategy to manage the plan efficiently.
The Bank ensures that the investment positions are managed within an asset-liability matching framework that has
been developed to achieve long-term investments that are in line with the obligations under the plan. The Bank’s
main objective is to match assets to the defined benefit obligation by investing primarily in long-term debt
securities with maturities that match the benefit payments as they fall due. The asset-liability matching is being
monitored on a regular basis and potential change in investment mix is being discussed with the trustor, as
necessary, to better ensure the appropriate asset-liability matching.
The average remaining service life of employees under the BPI unified retirement plan as at December 31, 2022
is 27 years (2021 - 24.1 years). The Bank contributes to the plan depending on the suggested funding contribution as
calculated by an independent actuary. The expected contributions for the year ending December 31, 2023 for the Bank
amount to P3,939,807.
The weighted average duration of the defined benefit obligation as at December 31, 2022 is 7.72 years
(2021 - 8.55 years).
(12)
The projected maturity analysis of retirement benefit payments as at December 31 is as follows:
2022 2021
Between 1 to 5 years 1,736,508 3,172,237
Between 5 to 10 years 11,020,253 14,026,752
Between 10 to 15 years 18,841,942 -
Between 15 to 20 years 40,242,881 -
Over 20 years 363,372,960 17,198,989
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions follows:
Impact on defined benefit obligation

Change in Increase in Decrease in
December 31, 2022 assumption assumption assumption
Discount rate 1.0% Decrease by 8.2% Increase by 7.1%
Salary growth rate 1.0% Increase by 8.2% Decrease by 7.3%
Impact on defined benefit obligation
Change in Increase in Decrease in
December 31, 2021 assumption assumption assumption
Discount rate 0.5% Decrease by 8.0% Increase by 9.1%
Salary growth rate 1.0% Increase by 9.0% Decrease by 8.1%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions
constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When
calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method
(present value of the defined benefit obligation calculated with the projected unit credit method at the end of the
reporting period) has been applied as when calculating the retirement benefit obligation recognized within the
statement of condition.
Defined contribution retirement plan subject to the requirements of RA No. 7641
2022 2021
Fair value of plan assets 158,575,093 141,918,792
Present value of defined benefit obligation under RA No. 7641 (59,503,334) (58,008,911)
Deficit 99,071,759 83,909,881
Effect of asset ceiling (99,071,759) 83,909,881
Pension liability recognized in the statement of condition - -
The movements in the present value of the defined benefit obligation for the years ended December 31 follow:
2022 2021
At January 1 58,008,911 102,853,859
Current service cost 18,282,644 41,130,456
Past service cost 4,022,005 -
Interest cost 2,854,038 4,062,727
Benefits paid from plan assets (7,087,565) (2,910,906)
Remeasurement gain (loss)
Changes in financial assumptions (18,480,523) (12,856,774)
Changes in demographic assumptions - (21,951,758)
Experience adjustments 1,903,824 (52,318,693)
At December 31 59,503,334 58,008,911
(13)
The movements in the fair value of plan assets for the years ended December 31 follow:
2022 2021
At January 1 141,918,792 89,024,300
Benefits paid (7,087,565) (2,910,906)
Asset return at net interest cost 7,382,608 4,297,919
Contributions 22,699,445 44,260,397
Remeasurement gain - return on plan assets (6,338,187) 7,247,082
At December 31 158,575,093 141,918,792
Total retirement benefit expense for the year ended December 31, 2022 under the defined contribution plan
amounts to P21,904,445 (2021 - P56,425,220).
The principal assumptions used for the actuarial valuation of the defined contribution plan of the Bank at
December 31 are as follows:
2022 2021
Discount rate 7.38% 4.92%
Salary increase rate 5.00% 5.00%
The major categories of plan assets as a percentage of the fair value of total plan assets at December 31 follow:
2022 2021
Amount % Amount %
Debt securities 87,216,301 55% 79,403,564 56%
Equity securities 63,430,037 40% 60,102,608 42%
Others 7,928,755 5% 2,412,620 2%
158,575,093 100% 141,918,792 100%
The asset allocation of the plan is set and reviewed from time to time by the plan trustees taking into account the
membership profile, the liquidity requirements of the plan and risk appetite of the plan sponsor.
Contributions are determined on the plan provisions. The expected contributions of the Bank for the year ending
December 31, 2023 amount to P40,893,295.
(14)
Note 18 - Related party transactions
In the ordinary course of business, the Bank has transactions with its directors, officers, stockholders and related
interests (DOSRI) and with its Parent Bank such as cash deposit arrangements, purchase of investment securities and
outsourcing of certain services, primarily loans operations, branch operations and human resource-related functions.
Significant related party transactions are summarized below:
As at and for the year ended December 31, 2022
Transactions for the Outstanding Terms and conditions

year balance
Deposits to:
Parent Bank (267,624,606) 740,107,032 These are demand, savings and time
Fellow subsidiary deposits bearing the following average
interest rates:
Savings - 0.66% to 1.11%
Time - 1.68% to 2.83%
Deposits from:
Fellow subsidiary 2,500,000,000 2,500,000,000 These are time deposits bearing
average interest rates of 5.25% to
5.75%.
Accounts receivable:
Parent Bank - - - Unsecured, unguaranteed and non-
interest bearing advances
Accounts payable:
Parent Bank 310,713,395 769,227,467 - Shared operating costs, occupancy
Fellow subsidiary - - and equipment related costs and
office rental
- Unsecured, unguaranteed and non-
interest bearing
- Payable in cash at gross amount and
on demand but not later than 12
months from reporting period
Refer to Notes (a), (b) and (c) below
(15)
As at and for the year ended December 31, 2021
Transactions for the Outstanding

year balance Terms and conditions
Deposits to:
Parent Bank 252,031,831 956,238,552 These are demand, savings and time
Fellow subsidiary 14,021,013 51,493,086 deposits bearing the following average
interest rates:
Savings - 0.66% to 1.11%
Time - 1.68% to 2.83%
266,052,844 1,007,731,638
Deposits from: These are time deposits bearing
Fellow subsidiary (1,700,000) - average interest rates of 1.13% to
1.14%.
(1,700,000) -
Accounts receivable:
Parent Bank 2,621,091 2,621,091 - Unsecured, unguaranteed and non-
interest bearing advances
2,621,091 2,621,091
Accounts payable:
Parent Bank 528,954,661 458,514,072 - Shared operating costs, occupancy
Fellow subsidiary 31,546,437 and equipment related costs and
office rental
- Unsecured, unguaranteed and non-
interest bearing
- Payable in cash at gross amount and
on demand but not later than 12
months from reporting period
Refer to Notes (a), (b) and (c) below
560,501,098 458,514,072
(16)
The aggregate amounts included in the determination of income before income tax for the years ended
December 31 that resulted from transactions with each class of related parties are as follows:
Notes 2022 2021

Interest income 2
Parent Bank 1,082,881 393,402
Fellow subsidiaries - 16,187
Interest income 1,082,881 409,589
Interest expense
Fellow subsidiaries - -
Shared operating costs [Refer to Note (a) below]
Parent Bank 231,044,941 191, 962, 466
15 231,044,941 192,189,972
Occupancy and equipment related costs [Refer to
Note (b) below]
Parent Bank 147,186,032 298,541,468
Office rental [Refer to Note (c) below]
Parent Bank 7,812,673 9,306,833
7,812,673 9,896,174
Other income
Fellow subsidiaries 2,469,250 3,096,712
Other expense
Parent Bank 17,687,452 29,143,894
Fellow subsidiaries 32,825,820 30,729,589
50,513,272 59,873,483
Retirement benefits 634,820 642,173
Salaries, allowances and other short-term benefits
Key management personnel 10,259,443 8,267,126
Directors’ remuneration 5,550,000 5,850,000
(a) Shared operating costs
These pertain to the Parent Bank’s outsourcing of services relating to anti-money laundering services, accounting and
securities administration services, loan operations, treasury operations, human resource-related functions and
information systems. Shared operating costs are billed based on rate and terms agreed by the parties. The agreement
remains in force unless terminated by the parties.
(b) Occupancy and equipment related costs
These pertain to the Parent Bank’s services relating to shared technology costs. It is billed based on rate and terms
agreed by the parties. The agreement remains in force unless terminated by the parties.
(c) Office rental
In 2017, the Bank transferred its office premise at BPI Greentop Condominium building, a property of the Parent
Bank, for a lease period of 5 years from December 1, 2014 to November 30, 2019. The rent shall increase by 5% yearly
starting on the second year and by 7% on the fourth year thereafter. The security deposit in relation to the lease is
presented as part of Other resources, net in the statement of condition. The lease was renewed for another 5 years
with the same terms and conditions.
The Bank has no DOSRI loans at December 31, 2022 and 2021.
(17)
The Bank is in full compliance with the General Banking Act as at December 31, 2022 and 2021.
Personal loans were purchased from the Parent to support unsecured lending system and the core business of the
Bank.
Note 19 - Other commitments and contingent liabilities
As a result of the merger that took place in 2016, the existing lease agreements by BanKo was assumed by the Bank
effective December 29, 2016. The lease term of the Bank’s main office space commenced on December 1, 2014 and
ended on November 30, 2019 but was renewed thereafter. Likewise, the branch office spaces have various lease
agreements that are renewable under certain terms and conditions. The rent is subject to 5% to 10% escalation
rate. This agreement requires the Bank to pay security deposit which is presented at Other resources, net in the
statement of condition.
Lease terms are negotiated either on a collective or individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets
that are held by the lessor. Leased assets cannot be used as security for borrowing purposes.
The balances arising from these leases are presented below:
a) Right-of-use assets and lease liabilities (PFRS 16)
The Bank has recognized right-of-use assets and lease liabilities from its long-term leases.
Details of right-of-use assets and lease liabilities at December 31 are as follows:
Notes 2022 2021

Right-of-use assets
(included in Bank premises, furniture and equipment, net 7
under Building) 267,021,068 215,282,589
Lease liabilities (included in Other liabilities) 12
Current 32,105,608 19,918,646
Non-current 252,310,534 218,143,728
284,416,142 238,062,374
Additions to the right-of-use assets in 2022 aggregated P179 million (2021 - P32 million) (Note 7).
Movements in lease liabilities for the years ended December 31 are as follows:
2022 2021
Balance, January 1 238,062,374 330,620,134
Additions during the year
Lease liabilities on contracts entered 190,499,762 28,396,648
Interest accretion on lease liabilities 17,597,440 20,598,803
Pre-terminated lease (3,880,928) -
Payments during the year
Principal portion of lease liabilities (140,383,071) (121,340,642)
Interest on lease liabilities (17,479,435) (20,212,569)
Balance, December 31 284,416,142 238,062,374
Total cash outflow for leases in 2022 amounted to P157.9 million (2021 - P141.6 million).
(18)
Amounts recognized under Occupancy and equipment-related expenses in the statement of income for the years
ended December 31 relating to leases:
2022 2021
Depreciation expense
Building (Note 7) 123,740,928 119,990,922
Interest expense on lease liabilities 17,597,440 20,598,803
Expenses relating to low-value leases 17,437,212 16,876,749
158,775,580 157,466,474
Note 20 - Critical accounting estimates and judgments
The Bank makes judgments, estimates and assumptions that affect the reported amounts of resources and liabilities.
Judgments, estimates and assumptions are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. It is
reasonably possible that the outcomes within the next financial year could differ from judgments, estimates and
assumptions made at reporting date and could result in the adjustment to the carrying amount of affected assets and
liabilities.
20.1 Critical accounting estimates
(i) Measurement of the expected credit loss (ECL) allowance
The measurement of the ECL for loans and advances is an area that requires the use of complex models and significant
assumptions about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the
resulting losses).
A number of significant judgements are also required in applying the accounting requirements for measuring ECL,
such as:
• Determining criteria for significant increase in credit risk (SICR);

• Choosing appropriate models and assumptions for the measurement of ECL;
• Establishing the number and relative weightings of forward-looking scenarios for each type of product and the
associated ECL; and
• Establishing groups of similar financial assets for the purposes of measuring ECL.
Forward-looking scenarios
Three distinct macroeconomic scenarios (baseline, upside and downside) are considered in the Bank’s estimation of
ECL in Stage 1 and Stage 2. These scenarios are based on assumptions supported by economic theories and historical
experience. The downside scenario reflects a negative macroeconomic event occurring within the first 12 months,
with conditions deteriorating for up to two years, followed by a recovery for the remainder of the period. This
scenario is grounded in historical experience and assumes a monetary policy response that returns the economy to
a long-run, sustainable growth rate within the forecast period. The probability of each scenario is determined using
expert judgment and recession probability tools provided by reputable external service providers. The baseline case
incorporates the Bank’s outlook for the domestic and global economy. The best and worst case scenarios take into
account certain adjustments that will lead to a more positive or negative economic outcome.
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of
any regulatory, legislative or political changes is likewise considered, if material.
(19)
The Bank has performed historical analyses and identified the key economic variables impacting credit risk and
ECL for each portfolio. The most significant period-end assumptions used for the ECL estimate at December 31 are
set out below. The scenarios “base”, “upside” and “downside” were used for all portfolios.
2022
Base Scenario Upside Scenario Downside Scenario
Next 12 2 to 5 years Next 12 2 to 5 years Next 12 2 to 5 years
Months (Average) Months (Average) Months (Average)
Real GDP growth (%) 5.5% 5.1% 6.7% 6.8% 4.3% 3.45
Inflation Rate (%) 3.9% 2.8% 2.9% 1.5% 5.0% 4.0%
PDST-R2 5Y (%) 7.3% 5.8% 5.1% 3.2% 9.4% 8.4%
US Treasury 5Y (%) 5.5% 4.2% 3.4% 1.5% 7.6% 6.8%
Exchange Rate 56.73 56.55 56.38 53.16 57.07 60.15
2021
Base Scenario Upside Scenario Downside Scenario
Next 12 2 to 5 years Next 12 2 to 5 years Next 12 2 to 5 years
Months (Average) Months (Average) Months (Average)
Real GDP growth (%) 7.4% 6.3% 8.4% 7.3% 4.4% 3.3%
Inflation Rate (%) 3.5% 3.2% 2.5% 2.2% 4.5% 4.2%
PDST-R2 5Y (%) 4.6% 3.7% 4.3% 3.4% 6.1% 5.2%
US Treasury 5Y (%) 1.5% 2.8% 1.2% 2.3% 1.8% 3.0%
Exchange Rate 52.50 55.23 51.92 53.93 53.10 56.59
Sensitivity analysis
The Bank’s loan portfolio has different sensitivities to movements in macroeconomic variables (MEVs), so the above
three scenarios have varying impact on the ECL of the Bank’s portfolio. The allowance for impairment is calculated as
the weighted average of ECL under the baseline, upside and downside scenarios. The impact of weighting these
multiple scenarios was an increase in the allowance for impairment by P0.0047 million from the baseline scenario as
at December 31, 2022 (2021 - P0.68 million).
Transfers between stages
Transfers from Stage 1 and Stage 2 are based on the assessment of SICR from initial recognition. The impact of
moving from 12 months ECL to lifetime ECL, or vice versa, varies by product and is dependent on the expected
remaining life at the date of the transfer. Stage transfers may result in significant fluctuations in ECL. Assuming all
Stage 2 accounts are considered as Stage 1, allowance for impairment would have decreased by P1.4 million as at
December 31, 2022 (2021 - P2.2 million).
(ii) Fair value of financial instruments (Note 21.6)
The fair values of financial instruments that are not quoted in active markets are determined by using generally
accepted valuation techniques. Where valuation techniques (for example, discounted cash flow models) are used to
determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area
that created them. Inputs used in these models are from observable data and quoted market prices in respect of
similar financial instruments.
All models are approved by the BOD before they are used, and models are calibrated to ensure that outputs reflect
actual data and comparative market prices. Changes in assumptions about these factors could affect reported fair
value of financial instruments.
The Bank 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.
(20)
(iii) Pension liability on defined benefit plan (Note 17)
The Bank estimates its pension benefit obligation and expense for defined benefit pension plans based on the
selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described
in Note 17 and include, among others, the discount rate and future salary increases. The 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 benefit obligation.
The present value of the defined benefit obligation of the Bank at December 31, 2022 and 2021 are determined
using the market yields on Philippine government bonds with terms consistent with the expected payments of
employee benefits. Plan assets are invested in either equity securities, debt securities or other forms of
investments. Equity markets may experience volatility, which could affect the value of pension plan assets. This
volatility may make it difficult to estimate the long-term rate of return on plan assets. Actual results that differ
from the Bank’s assumptions are reflected as remeasurements in other comprehensive income. The Bank’s
assumptions are based on actual historical experience and external data regarding compensation and discount rate
trends.
The sensitivity analysis on key assumptions is disclosed in Note 17.
(iv) Valuation of assets held for sale
In determining the fair value of assets held for sale, the Bank analyzed the sales prices by applying appropriate
units of comparison, adjusted by differences between the subject asset or property and related market data. Should
there be a subsequent write-down of the asset to fair value less cost to sell, such write-down is recognized as
provision for impairment in the statement of income.
In 2022, the Bank has recognized provision for impairment loss on its foreclosed assets amounting to
P801,586 (2021 - P728,103) as a result of the decline in fair market values of properties.
surrounding the fair value of assets held for sale.
(v) Useful lives of bank premises, furniture, fixtures and equipment (Note 7)
The Bank determines the estimated useful lives of its bank premises, furniture, fixtures and equipment based on
the period over which the assets are expected to be available for use. The Bank annually reviews the estimated
useful lives of bank premises, furniture, fixtures and equipment based on factors that include asset utilization,
internal technical evaluation, technological changes, environmental and anticipated use of assets tempered by
related industry benchmark information. It is possible that future results of operations could be materially affected
by changes in these estimates brought about by changes in the factors mentioned.
surrounding the carrying values of bank premises, furniture, fixtures and equipment.
(vi) Determination of incremental borrowing rate (Note 19)
To determine the incremental borrowing rate, the Bank:

• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held which
do not have recent third-party financing, and
• makes adjustments specific to the lease, (e.g. term, currency and security).
The Bank’s weighted average incremental borrowing rates applied to the lease liabilities range from 2.97% to 7.71%
(2021 - 2.58% to 4.68%).
(21)
surrounding its lease liabilities.
20.2 Critical accounting judgments
(i) Determining the lease term (Note 19)
In determining the lease term, the Bank considers all facts and circumstances that create an economic incentive to
exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain
to be extended.
(ii) Classification of assets held for sale
Management follows the principles in PFRS 5 in classifying certain foreclosed assets (consisting of real estate and
auto or chattel) as assets held for sale when the carrying amount of the assets will be recovered principally through
sale. Management is committed to a plan to sell these foreclosed assets and the assets are actively marketed for sale at
a price that is reasonable in relation to their current fair value.
(iii) Realization of deferred income tax assets (Note 8)
Management reviews at each reporting date the carrying amounts of deferred tax assets. The carrying amount of
deferred tax assets is reduced to the extent that the related tax assets cannot be utilized due to insufficient taxable
profit against which the deferred tax losses will be applied. Management believes that sufficient taxable profit will be
generated to allow all or part of the deferred income tax assets to be utilized.
Note 21 - Financial risk and capital management
Risk management in the Bank covers all perceived areas of risk exposure, even as it continuously endeavors to
uncover hidden risks. Capital management is understood to be a facet of risk management. The BOD is the Bank’s
principal risk and capital manager, and the Bank’s only strategic risk taker. The BOD provides written policies for
overall risk management, as well as written procedures for the management of credit risk, foreign exchange risk,
interest rate risk, equity risk, liquidity risk, and contingency risk, among others.
The primary objective of the Bank is the generation of recurring acceptable returns to shareholders’ capital. To this
end, the Bank’s policies, business strategies, and business activities are directed towards the generation of cash flows
that are in excess of its fiduciary and contractual obligations to its depositors, and to its various other funders and
stakeholders.
To generate acceptable returns to its shareholders’ capital, the Bank understands that it has to bear risk, that risk-
taking is inherent in its business. Risk is understood by the Bank as the uncertainty in its future income - an
uncertainty that emanates from the possibility of incurring losses that are due to unplanned and unexpected drops in
revenues, increases in expenses, impairment of asset values, or increases in liabilities.
The possibility of incurring losses is, however, compensated by the possibility of earning more than expected income.
Risk-taking is, therefore, not entirely a bad step to be avoided. Risk-taking presents opportunities if risks are
accounted, deliberately taken, and are kept within rationalized limits.
The most important financial risks that the Bank manages are credit risk, liquidity risk and market risk.
(22)
21.1 Credit risk
The Bank takes on exposure to credit risk, which is the risk that may arise if a borrower or counterparty fails to meet
its obligations in accordance with agreed terms. Credit risk is the single largest risk for the Bank’s business;
management therefore carefully manages its exposure to credit risk as governed by relevant regulatory requirements
and international benchmarks.
Credit risk may also arise due to substantial exposures to a particular counterparty which the Bank manages by
adopting proper risk controls and diversification strategies to prevent undue risk concentrations from excessive
exposures to particular counterparties, industries, countries or regions.
The most evident source of credit risk is loans and advances; however, other sources of credit risk exist throughout
the activities of the Bank, including in credit-related activities recorded in the banking, investment securities in the
trading books and off-balance sheet transactions.
21.1.1 Credit risk management
The Credit Policy and Risk Management division of the Parent Bank supports the Credit Committees in
coordination with various business lending and operations units in managing credit risk, and reports are regularly
provided to the Bank’s Senior Management and the BOD. A rigorous control framework is applied in the
determination of ECL models. The Parent Bank has policies and procedures that govern the calculation of ECL and
such policies are consistently being observed by the Bank. All ECL models are regularly reviewed by the Risk
Management Office to ensure that necessary controls are in place and the models are applied accordingly.
The review and validation are performed by groups that are independent of the team that prepares the
calculations, e.g., Risk Models Validation and Internal Auditors. Expert judgements on measurement
methodologies and assumptions are reviewed by a group of internal experts from various functions.
The Bank employs a range of policies and practices to mitigate credit risk. The Bank monitors its portfolio based
on different segmentation to reflect the acceptable level of diversification and concentration. Credit concentration
arises from substantial exposures to particular counterparties. Concentration risk in credit portfolios is inherent in
banking and cannot be totally eliminated. However, said risk may be reduced by adopting proper risk control and
diversification strategies to prevent undue risk concentrations from excessive exposures to particular
counterparties, industries, countries or regions.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in
relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are
monitored on a regular basis and subjected to annual or more frequent review, when deemed necessary. Limits on
large exposures and credit concentration are approved by the BOD through the Risk Management Committee
(RMC).
The exposure to any one borrower is further restricted by sub-limits covering on- and off-balance sheet exposures.
Actual exposures against limits are monitored regularly.
Settlement risk arises in any situation where a payment in cash, securities, foreign exchange currencies, or equities is
made in the expectation of a corresponding receipt in cash, securities, foreign exchange currencies, or equities. Daily
settlement limits are established for each counterparty to cover the aggregate of all settlement risk arising from the
Bank’s market transactions on any single day. For certain securities, the introduction of the delivery versus payment
facility in the local market has brought down settlement risk significantly.
The Bank employs a range of policies and practices to mitigate credit risk. Some of these specific control and risk
mitigation measures include collateral or guarantees.
(23)
Collateral or guarantees
One of the most traditional and common practice in mitigating credit risk is requiring security particularly for
loans and advances. The Bank implements guidelines on the acceptability of specific classes of collateral for credit
risk mitigation. The Bank assesses the valuation of the collateral obtained as part of the loan origination process.
This assessment is reviewed periodically. The common collateral types for loans and advances are:
• Mortgages over physical properties (e.g., real estate and personal) and
• Mortgages over financial assets (e.g., guarantees).
In order to minimize credit loss, the Bank seeks additional collateral from the counterparty when impairment
indicators are observed for the relevant individual loans and advances.
The Bank’s policies regarding obtaining collateral have not significantly changed during the reporting period and
there has been no significant change in the overall quality of the collaterals held by the Bank since the prior period.
21.1.2 Credit risk rating
The Bank uses internal credit risk gradings that reflect its assessment of the probability of default (PD) of
individual counterparties. The Bank uses internal rating models tailored to the various categories of counterparty.
Borrower and loan specific information collected at the time of application (such as disposable income, and level of
collateral for retail exposures; and turnover and industry type for wholesale exposures) is fed into this rating
model. In addition, the models enable expert judgement from the Credit Review Officer to be fed into the final
internal credit rating for each exposure. This allows for considerations which may not be captured as part of the
other data inputs into the model.
The Bank has put in place a credit classification system to promptly identify deteriorating exposures and to
determine the appropriate credit losses. Classification is being done on the basis of Bank’s existing internal credit
risk rating system, credit models or determined using reputable external rating agencies. The following are the
considerations observed by the Bank in classifying its exposures:
• Standard monitoring refers to accounts which do not have a greater-than-normal risk and do not possess the
characteristics of special monitoring and defaulted loans. The counterparty has the ability to satisfy the obligation
in full and therefore minimal loss, if any, is anticipated.
• Special monitoring are accounts which need closer and frequent monitoring to prevent any further deterioration
of the credit. The counterparty is assessed to be vulnerable to highly vulnerable and its capacity to meet its
financial obligations is dependent upon favorable business, financial, and economic conditions.
• Default refers to accounts which exhibit probable to severe weaknesses wherein possibility of non-repayment of
loan obligation is ranging from high to extremely high severity.
The mapping of internal credit risk ratings with the Bank’s standard account classification is shown below:
(a) Loans and advances
The Bank’s internal credit risk rating system comprises a 30-scale rating with eighteen (18) ‘pass’ rating levels for large
corporate accounts; and 14-scale rating system with ten (10) ‘pass’ rating grades for loans mapped based on reputable
external rating agency.
The Bank uses automated scoring models to assess the level of risk for retail accounts. Behavioral indicators are
considered in conjunction with other forward-looking information (e.g., industry forecast) to assess the level of risk of
a financial asset. After the date of initial recognition, the payment behavior of the borrower is monitored on a periodic
basis to develop a behavioral score which is mapped to a PD.
(24)
Self-employed and
Classifications PL, Auto, Housing microentrepreneurs
Standard monitoring Current to 30 dpd Current to 7 dpd
Special monitoring 31-90 dpd -
Default >90, IL, Loss 8 dpd and up
(b) Treasury and debt securities
Investments in high grade securities are viewed as a way to gain better credit quality mix and at the same time,
maintain a readily available source to meet funding requirements. The level of credit risk for treasury and other
investment debt securities and their associated PD are determined using reputable external ratings and/or available
and reliable qualitative and quantitative information. In the absence of credit ratings, a comparable issuer or
guarantor rating is used. Should there be a change in the credit rating of the chosen comparable, evaluation is made
to ascertain whether the rating change is applicable to the security being assessed for impairment.
Classifications Credit Risk Grade following S&P or its equivalent

Standard monitoring Investment Grade (AAA to BBB-)
Special monitoring Non-Investment Grade (BB+ to C)
Default Default (D)
(b) Other financial assets
For other financial assets (accounts receivable and rental deposits), the Bank applies the simplified approach, as
permitted by PFRS 9, in measuring ECL which uses a lifetime ECL methodology. These financial assets are
grouped based on shared risk characteristics and aging profile. For some of these, impairment is assessed
individually at a counterparty level.
21.1.3 Maximum exposure to credit risk
The following tables contain an analysis of the credit risk exposure of each financial instrument for which an ECL
allowance is recognized. The gross carrying amount of financial assets below also represents the Bank’s maximum
exposure to credit risk on these assets at December 31.
Credit quality of loans and advances, net
2022
ECL Staging
Stage 1 Stage 2 Stage 3
12-month ECL Lifetime ECL Lifetime ECL Total
Credit grade
Standard monitoring 15,485,282,898 65,390,924 15,550,673,822
Special monitoring 579,435 170,832,187 171,411,622
Default - - 1,856,259,904 1,856,259,904
Gross carrying amount 15,485,862,333 236,223,111 1,856,259,904 17,578,345,348
Loss allowance (528,110,999) (7,088,513) (1,364,010,949) (1,899,210,461)
Carrying amount 14,957,751,334 229,134,598 492,248,955 15,679,134,887
(25)
2021
ECL Staging
Credit grade
Standard monitoring 10,700,783,295 128,926,894 - 10,829,710,189
Special monitoring 1,493,113 165,298,127 - 166,791,240
Default - 1,808,328,188 1,808,328,188
Gross carrying amount 10,702,276,408 294,225,021 1,808,328,188 12,804,829,617
Loss allowance 404,708,603 10,578,351 1,422,760,434 1,838,047,388
Carrying amount 11,106,985,011 304,803,372 3,231,088,622 14,642,877,005
Treasury and other investment securities
Credit risk exposures relating to treasury and other investment securities at December 31 are as follows:
2022 2021
Due from other banks 767,097,024 1,088,893,413
Interbank loans receivable 135,594,884 362,630,232
Due from BSP 4,334,661,084 4,326,564,677
5,237,352,992 5,778,088,322
Credit quality of other financial assets
2022
ECL Staging
Credit grade
Standard monitoring
Due from other banks 767,097,024 - - 767,097,024
Interbank loans receivables 135,594,884 - - 135,594,884
Due from BSP 4,334,661,084 - - 4,334,661,084
Gross carrying amount 5,237,352,992 - - 5,237,352,992
Loss allowance - - - -
Carrying amount 5,237,352,992 - - 5,237,352,992
2021
ECL Staging
Credit grade
Standard monitoring
Due from other banks 1,088,893,413 - - 1,088,893,413
Interbank loans receivables 362,630,232 - - 362,630,232
Due from BSP 4,326,564,677 - - 4,326,564,677
Gross carrying amount 5,778,088,322 - - 5,778,088,322
Loss allowance - - - -
Carrying amount 5,778,088,322 - - 5,778,088,322
The Bank’s other financial assets generally arise from transactions with various unrated counterparties with good
credit standing. The Bank applies the simplified approach, as permitted by PFRS 9, in measuring ECL which uses a
lifetime expected loss methodology for other financial assets.
(26)
To measure the ECL, other financial assets have been grouped based on shared credit risk characteristics and the
days past due. The expected loss rates are based on the payment profiles of receivables over a period of 36 months
and corresponding historical credit losses experienced within the said period. The impact of forward-looking
variables on macroeconomic factors is considered insignificant in calculating ECL provisions for other financial
assets.
21.1.4 Credit impaired loans and advances
The Bank closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more
likely that the Bank will take possession of collateral to mitigate potential credit losses. Financial assets that are
credit-impaired and related collateral held at December 31 in order to mitigate potential losses are shown below:
2022 2021
Impairment Carrying Impairment Carrying
Gross exposure allowance amount Gross exposure allowance amount
Credit-impaired assets
Corporate entities 50,000,000 (50,000,000) - 50,000,000 (50,000,000) -
Retail customers 1,806,259,904 (1,314,010,949) 492,248,955 1,656,162,074 (944,002,872) 712,159,202
Total credit-impaired assets 1,856,259,904 (1,364,010,949) 492,248,955 1,706,162,074 (994,002,872) 712,159,202
Fair value of collateral 114,072,466 157,870,509
As at December 31, 2022, the Bank acquired assets by taking possession of collaterals held as security for loans and
advances with carrying amount of P434,124,317 (2021 - P8,063,567). The related foreclosed collaterals at
December 31, 2022 have aggregate fair value of P114,072,466 (2021 - P9,694,350).
As at December 31, 2022, the allowance for impairment of foreclosed collateral amounts to P2,534,137
(2021 - P4,172,149). Foreclosed collaterals include real estate (land, building, and improvements) and chattel.
Repossessed properties are sold as soon as practicable and are classified as assets held for sale in the statement of
condition.
21.1.5 Loss allowance
The loss allowance recognized in the period is affected by a variety of factors, as described below:
• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or
decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step
down”) between 12-month and lifetime ECL;
• Additional allowances for new financial instruments recognized during the period, as well as releases for
financial instruments de-recognized in the period;
• Impact on the measurement of ECL due to changes in PDs, Exposure at Default (EAD) and Loss Given Default
(LGD) in the period;
• Impact on the measurement of ECL due to changes made to models and assumptions;
• Foreign exchange retranslations for assets denominated in foreign currencies and other movements; and
• Financial assets derecognized during the period and write-offs of allowances related to assets that were written
off during the period.
The following table summarizes the changes in the loss allowance for loans and advances between the beginning
and the end of the annual period.
(27)
For the year ended December 31, 2022

Loss allowance, beginning 413,613,075 10,578,351 1,463,855,956 1,888,047,382
Movements with P&L impact
Transfers:
Transfer in (out of) Stage 1 (395,113,286) 4,708,841 660,281,397 269,876,952
Transfer in (out of) Stage 2 721,708 (33,472,370) 46,388,601 13,637,939
Transfer in (out of) Stage 3 1,048,843 472,798 (16,486,704) (14,965,063)
New financial assets originated 714,490,301 - - 714,490,301
Financial assets derecognized during the year (238,989,657) (1,143,426) (104,255,590) (344,388,672)
Changes in assumptions and other movements
in provision 42,172,483 25,943,012 (9,920,765) 58,194,732
124,330,392 (3,491,145) 576,006,939 696,846,189
Write-offs and other movements (927,996) 1,307 (684,756,427) (735,683,116)
Loss allowance, ending 537,015,472 7,088,513 1,355,106,468 1,899,210,453
For the year ended December 31, 2021

Loss allowance, beginning 639,026,984 33,767,765 1,368,737,048 2,041,531,797
Movements with P&L impact
Transfers:
Transfer in (out of) Stage 1 (287,086,253) 3,499,818 471,327,980 187,741,545
Transfer in (out of) Stage 2 1,289,368 (20,957,305) 36,733,077 17,065,140
Transfer in (out of) Stage 3 7,105,715 2,355,433 (105,437,615) (95,976,467)
New financial assets originated 523,354,755 - - 523,354,755
Financial assets derecognized during the year (367,213,830) (3,772,425) 178,541,744 (549,527,999)
Changes in assumptions and other movements
in provision (96,869,300) (3,126,717) 590,418,338 490,422,321
(219,419,545) (22,001,196) 814,500,035 573,079,294
Write-offs and other movements (5,994,365) (1,188,218) (719,381,127) (726,563,710)
Loss allowance, ending 413,613,075 10,578,351 1,463,855,956 1,888,047,382
No movement analysis of allowance for impairment for other financial assets subject to impairment as the related
loss allowance is deemed insignificant for financial reporting purposes.
Write-off policy
The Bank writes off financial assets when it has exhausted all practical recovery efforts and has concluded there is
no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i)
ceasing enforcement activity and (ii) where the Bank’s recovery method is foreclosing on collateral and the value of
the collateral is such that there is no reasonable expectation of recovering in full.
The Bank may write-off financial assets that are still subject to enforcement activity. The write-off of loans is
approved by the Board of Directors in compliance with the BSP requirements. Loans written-off in 2022 and 2021
are fully covered with allowance.
(28)
21.1.6 Concentration of financial assets with credit exposure
The Bank’s main credit exposures based on carrying amounts and categorized by industry sectors are summarized
below:
Business
Financial services and Private Less -
Institutions Manufacturing real estate households Others Allowance Total
At December 31, 2022
Due from other banks 767,097,024 - - - - - 767,097,024
Due from BSP - - - - 4,334,661,084 - 4,334,661,084
Loans and advances,
net 66,263,113 489,299,468 1,298,628,773 - 15,724,153,987 (1,899,210,453) 15,729,134,888
Other resources, net - - - - 104,480,947 (15,622,429) 88,858,518
833,360,137 489,299,468 1,298,628,773 20,163,296,018 (1,914,832,882) 20,869,751,514
Business
Financial services and Private Less -
Institutions Manufacturing real estate households Others Allowance Total
At December 31, 2021
Due from other banks 1,088,893,413 - - - - - 1,088,893,413
Due from BSP - - - - 4,326,564,677 - 4,326,564,677
Loans and advances,
net 71,386,554 472,440,216 1,472,008,909 - 10,838,993,938 (1,888,047,380) 10,966,782,237
Other resources, net - - - - 101,075,260 (6,522,387) 94,552,873
1,160,279,967 472,440,216 1,472,008,909 - 15,266,633,875 (1,894,569,767) 16,476,793,200
21.2 Market risk
The Bank is exposed to market risk - the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk is managed by the Risk Management Office and confirmed
by the BOD.
Market risk management
Market risk management is incumbent on the Board of Directors through its Risk Management Committee. Market
risk management in the Bank covers managing exposures to trading risk, foreign exchange risk, counterparty credit
risk, interest rate risk of the banking book and liquidity risk. At the management level, the Bank’s market risk
exposure is managed by Risk Management Office, headed by the Bank’s Chief Risk Officer who reports directly to the
Risk Management Committee. In addition, Internal Audit is responsible for the independent review of risk
assessment measures and procedures and the control environment.
The Bank reviews and controls market risk exposures of both its trading and non-trading portfolios. Trading
portfolios include those positions arising from the Bank’s market-making transactions. Non-trading portfolios
primarily arise from the interest rate management of the Bank’s retail and commercial banking assets and
liabilities.
Value-at-Risk (VaR) measurement is an integral part of the Bank’s market risk control system. This metric
estimates, at 99% confidence level, the maximum loss that a trading portfolio may incur over a trading day. This
metric indicates as well that there is 1% statistical probability that the trading portfolios’ actual loss would be
greater than the computed VaR. In order to ensure model soundness, the VaR is periodically subject to model
validation and back testing. VaR is supplemented by other risk metrics and measurements that would provide
preliminary signals to Treasury and to the management to assess the vulnerability of Bank’s positions. To control
the risk, the RMC sets risk limits for trading portfolios which are consistent with the Bank’s goals, objectives, risk
appetite, and strategy.
(29)
Stress tests indicate the potential losses that could arise in extreme conditions that would have detrimental effect
to the Bank’s positions. The Bank periodically performs stress testing (price risk and liquidity risk) to assess the
Bank’s condition on assumed stress scenarios. Contingency plans are frequently reviewed to ensure the Bank’s
preparedness in the event of real stress. Results of stress tests are reviewed by senior management and by the
RMC.
The average daily VaR for the trading portfolios in 2022 is at 501,054 (2021 - 342).
21.3 Interest rate risk
There are two types of interest rate risk - (i) fair value interest rate risk and (ii) cash flow interest rate risk. Fair value
interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market
interest rates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its
fair value and cash flow risks. Interest margins may increase as a result of such changes but may also result in losses
in the event that unexpected movements arise.
The BOD sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored
daily by the RMO.
Interest rate risk in the banking book arises from the Bank’s core banking activities. The main source of this type of
interest rate risk is repricing risk, which reflects the fact that the Bank’s assets and liabilities are of different
maturities and are priced at different interest rates.
Over 1 year and Over

Up to 1 year up to 3 years 3 years Non-repricing Total
As at December 31, 2022
Financial assets
Cash and other cash
items - - - 250,147,358 250,147,358
Due from other banks - - - 767,097,024 767,097,024
Due from BSP - - - 4,334,661,084 4,334,661,084
Financial assets at 14,939 - - - -
FVOCI
Loans and advances,
net 893,089,329 392,718,091 (8,193,392) 14,401,520,811 15,679,134,839
Other resources, net - - - 104,480,947 104,480,947
Total financial assets 1,131,442,121 392,718,091 (8,193,392) 19,753,428,277 5,351,905,481
Financial liabilities
Deposit liabilities 16,736,971,030 55,470,394 - - 16,792,441,424
Accrued interest and
other expenses - - - 223,239,533 223,239,533
Other liabilities - - - 773,669,248 773,669,248
Total financial liabilities 16,736,971,030 55,470,394 - 996,908,781 996,908,781
Total interest gap (15,605,528,909) 337,247,697 (8,193,392) 18,756,517,496 4,354,996,700
(30)
Over 1 year and Over
Up to 1 year up to 3 years 3 years Non-repricing Total
As at December 31, 2021
Financial assets
Cash and other cash
items - - - 288,788,443 288,788,443
Due from other banks - - - 1,088,893,413 1,088,893,413
Due from BSP - - - 4,326,564,677 4,326,564,677
Financial assets at - - - - -
FVOCI
Loans and advances, net 1,157,092,053 249,702,102 104,799,488 11,343,290,448 12,854,884,092
Other resources, net - - - 101,075,260 101,075,260
Total financial assets 1,157,092,053 249,702,102 104,799,488 17,148,612,241 18,660,205,885
Deposit liabilities 7,493,037,073 4,142,020,075 6,213,030,113 - 17,848,087,261
Accrued interest and
other expenses - - - 223,239,533 223,239,533
Other liabilities - - - 773,669,248 773,669,248
Total financial liabilities 7,493,037,073 4,142,020,075 6,213,030,113 996,908,781 18,844,996,042
Total interest gap (6,335,945,020) (3,892,317,973) (6,108,230,625) 16,151,703,460 (184,790,157)
The Bank uses a simple version of the Balance Sheet VaR (BSVaR) whereby only the principal and interest payments
due and relating to the banking book as at particular valuation dates are considered. The BSVaR assumes a static
balance sheet, i.e., it is assumed that there will be no new transactions moving forward, and no portfolio rebalancing
will be undertaken in response to future changes in market rates.
The BSVaR is founded on re-pricing gaps, or the difference between the amounts of rate sensitive assets and the
amounts of rate sensitive liabilities. An asset or liability is considered to be rate-sensitive if the interest rate applied
to the outstanding principal balance changes (either contractually or because of a change in a reference rate) during
the interval.
The BSVaR estimates the “riskiness of the balance sheet” and compares the degree of risk-taking activity in the banking
books from one period to the next. In consideration of the static framework, and the fact that income from the positions
is accrued rather than generated from marking-to-market, the probable loss (that may be exceeded 1% of the time) that
is indicated by the BSVaR is not realized in accounting income.
The cumulative BSVaR for the banking or non-trading book in 2022 amounts to P197,000,000 (2021 - P59,000,000).
(31)
21.4 Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future cash flows of financial instrument will fluctuate because
of changes in foreign exchange rates. It arises on financial instruments that are denominated in a foreign currency
other than the functional currency which they are measured.
The Bank takes on exposure to the effects of fluctuations in the prevailing exchange rates on its foreign currency
financial position and cash flows. The table below summarizes the Bank’s exposure to foreign currency exchange rate
risk relative to its financial assets and liabilities denominated in United States Dollar (US Dollar) at December 31.
2022 2021
Financial assets
Due from other banks 196,509,221 212,954,468
Other resources 145,082 121,230
196,654,303 213,075,698
Deposit liabilities 174,735,563 193,480,673
Accrued interest - -
174,735,563 193,480,673
Net foreign exchange exposure 21,918,874 19,595,025
At December 31, 2022, if the Philippine Peso had weakened/strengthened by 5% (2021 - 5%) against the US Dollar
based on historical information in the last five years with all other variables held constant, net income as at and for
the year ended December 31, 2022 would have been P821,958 higher/lower (2021 – P756,007higher/lower),
mainly as a result of foreign exchange gains/losses on translation of US Dollar-denominated deposits with other
banks and deposit liabilities.
21.5 Liquidity risk
Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial
liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to
meet obligations to repay depositors and fulfill commitments to lend.
The Bank’s liquidity profile is observed and monitored through its metric, the Minimum Cumulative Liquidity Gap
(MCLG). The MCLG is the smallest net cumulative cash inflow (if positive) or the largest net cumulative cash
outflow (if negative) over the next three (3) months. The MCLG indicates the biggest funding requirement in the
short term and the degree of liquidity risk present in the current cash flow profile of the Bank. The MCLG is
computed monthly and reported in the RMC meetings. A red flag is immediately raised and reported to
management and the RMC when the MCLG level projected over the next 3 months breaches the RMC prescribed
MCLG limit.
(32)
21.5.1 Liquidity risk management process
The Bank’s liquidity management process, as carried out within the Bank and monitored by the RMC and the RMO
includes:
• day-to-day funding, which includes replenishment of funds as they mature or are borrowed by customers,
managed by monitoring future cash flows to ensure that requirements can be met;
• maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any
unforeseen interruption to cash flow;
• monitoring balance sheet liquidity ratios against internal and regulatory requirements;
• managing the concentration and profile of debt maturities; and
• performing periodic liquidity stress testing on the Bank’s liquidity position by assuming a faster rate of
withdrawals in its deposit base.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and
month as these are key periods for liquidity management. The starting point for those projections is an analysis of
the contractual maturity of the financial liabilities and the expected collection date of the financial assets.
The Bank also monitors unmatched medium-term assets, the level and type of undrawn lending commitments, the
usage of overdraft facilities and the impact of contingent liabilities (if any).
Liquidity Coverage Ratio (LCR)
Pursuant to BSP Circular No. 905 issued in 2016, the Bank is required to hold and maintain an adequate level of
unencumbered High Quality Liquid Assets (HQLA) that are sufficient to meet its estimated total cash outflows
over a 30 calendar-day period of liquidity stress. The LCR is the ratio of HQLAs to total net cash outflows which
should be no lower than 100% on a daily basis. It is designed to promote short-term resilience of the Bank’s
liquidity risk profile to withstand significant liquidity shocks that may last over 30 calendar days. HQLA represent
the Bank’s stock of liquid assets that qualify for inclusion in the LCR which consist mainly of cash, regulatory
reserves and unencumbered high-quality liquid securities. HQLAs therefore, serve as defense against potential
stress events.
The main drivers of the Bank’s LCR comprise the changes in the total stock of HQLA as well as changes in net cash
outflows related to deposits, unsecured borrowings and commitment facilities, if any.
Net Stable Funding Ratio (NSFR)
On January 1, 2019, the Bank adopted BSP Circular No. 1007 issued in 2018 regarding the NSFR requirement.
The NSFR is aimed at strengthening the Bank’s long-term resilience by maintaining a stable funding in relation to
its assets and off-balance sheet items as well as to limit the maturity transformation risk of the Bank. The NSFR is
expressed as the ratio of available stable funding and the required stable funding and complements the LCR as it
takes a longer view of the Bank’s liquidity risk profile. The Bank’s capital and retail deposits are considered as
stable funding sources whereas the Bank’s assets including, but not limited to, performing and non-performing
loans and receivables, HQLA and non-HQLA securities as well as off-balance sheet items form part of the required
stable funding. The Bank’s NSFR is well-above the regulatory minimum of 100%.
The Bank maintains a well-diversified funding base and has a substantial amount of core deposits, thereby
avoiding undue concentrations by counterparty, maturity, and currency. The Bank manages its liquidity position
through asset-liability management activities supported by a well-developed funds management practice as well as
a sound risk management system. As part of risk oversight, the Bank monitors its liquidity risk on a daily basis, in
terms of single currency and significant currencies, to ensure it is operating within the risk appetite set by the BOD
and to assess ongoing compliance with the minimum requirement of the liquidity ratios. Furthermore, the Bank
has a set of policies and escalation procedures in place that govern its day-to-day risk monitoring and reporting
processes.
(33)
The table below shows the actual liquidity metrics of the Bank as at December 31:
2022 2021
Liquidity coverage ratio 231.13% 286.33%
Net stable funding ratio 1.37% 1.65%
Leverage ratio 16.30% 14.41%
Total exposure measure 22,381,413,480 18,518,081,801
21.5.2 Funding approach
Sources of liquidity are regularly reviewed by the Bank to maintain a wide diversification by currency, geography,
counterparty, product and term.
21.5.3 Non-derivative cash flows
The table below presents the maturity profile of non-derivative financial instruments at December 31 based on
undiscounted cash flows, including interest, which the Bank uses to manage the inherent liquidity risk. The
analysis takes into account the maturity grouping based on the remaining period from the end of the reporting
period to the contractual maturity date or, if earlier, the expected date the financial asset will be realized or the
financial liability will be settled.
Over 1 up to
Up to 1 year 3 years Over 3 years Total
2022
Financial assets
Cash and other cash items 250,147,358 - - 250,147,358
Due from other banks 767,097,024 - - 767,097,024
Interbank loans 135,594,884 - - 135,594,884
Due from BSP 4,334,661,084 - - 4,334,661,084
Investment securities at FVOCI 14,939 - - 14,939
Loans and advances 893,089,329 392,718,091 (8,193,392) 1,277,614,028
Other resources 238,337,853 - - 238,337,853
Total financial assets 6,618,942,471 392,718,091 (8,193,392) 7,003,467,170
Deposit liabilities 16,736,971,030 55,470,394 - 16,792,441,424
Accrued interest and other
Expense 331,803,210 - - 331,803,210
Other liabilities - - 1,151,157,628 1,151,157,628
Total financial liabilities 17,068,774,240 55,470,394 1,151,157,628 1,482,960,838
Total maturity gap (10,449,831,769) 337,247,697 (1,159,351,020) 5,520,506,332
(34)
Over 1 up to
Up to 1 year 3 years Over 3 years Total
2021
Financial assets
Cash and other cash items 288,788,443 - - 288,788,443
Due from other banks 1,088,893,413 - - 1,088,893,413
Interbank loans 362,630,232 - - 362,630,232
Due from BSP 4,326,564,677 - - 4,326,564,677
Investment securities at FVOCI 17,123 - - 17,123
Loans and advances 1,157,092,053 249,702,102 11,448,089,937 12,854,884,092
Other resources 264,020,980 - - 264,020,980
Total financial assets 7,488,006,921 249,702,102 11,448,089,937 19,185,798,960
Deposit liabilities 7,493,037,073 4,142,020,075 6,213,030,113 17,848,087,262
Expense 208,171,365 - - 208,171,365
Other liabilities - - 773,669,250 773,669,250
Total financial liabilities 7,701,208,438 4,142,020,075 6,986,699,363 18,829,927,877
Total maturity gap (213,201,517) (3,892,317,973) 4,461,390,574 355,871,083
The maturity gap is being managed through the minimum cumulative liquidity gap.
21.6 Fair values of financial assets and liabilities
The table below summarizes the carrying amounts and fair values of those financial assets and liabilities at
December 31 not presented in the statement of condition at fair value.
Carrying value Fair value

2022 2021 2022 2021
Financial assets
Cash and other cash items 250,147,358 288,788,443 250,147,358 288,788,443
Due from other banks 767,097,024 1,088,893,413 767,097,024 1,088,893,413
Interbank loans receivable 135,594,884 362,630,232 135,594,884 362,630,232
Due from BSP 4,334,661,084 4,326,564,677 4,334,661,084 4,326,564,677
Loans and advances, net 15,679,134,887 10,966,782,236 15,679,134,887 10,966,782,236
Other resources, net 238,337,853 264,020,980 238,337,853 264,020,980
Deposit liabilities 16,792,441,424 14,277,235,315 16,792,441,424 14,277,235,315
expenses 331,803,210 208,171,365 331,803,210 208,171,365
Other liabilities 1,129,339,083 773,669,250 1,129,339,083 773,669,250
Cash and other cash items, due from BSP and other banks and interbank loans receivable
The fair value of floating rate placements and overnight deposits approximates their carrying amounts. The
estimated fair value of fixed interest-bearing deposits is based on discounted cash flows using prevailing money-
market interest rates for debts with similar credit risk and remaining maturity. All of these financial assets have a
maturity of one year, thus their fair values approximate their carrying amounts.
Loans and advances
The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows
expected to be received. Expected cash flows are discounted with the use of assumptions regarding appropriate
credit spread for the loan, derived from other market instruments.
(35)
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the
amount repayable on demand.
The estimated fair value of fixed interest-bearing deposits is based on discounted cash flows using interest rates for
new debts with similar remaining maturity.
Other resources and other liabilities
Carrying amounts of other resources and other liabilities which have no definite repayment dates are assumed to
be their fair values.
21.6.1 Fair value hierarchy
The following table presents the fair value hierarchy of the Bank’s financial assets and liabilities at December 31:
Fair value
2022 Level 1 Level 2 Total
Recurring measurements
Financial asset at FVOCI
Equity security 14,939 - 14,939
14,939 - 14,939
Non-recurring measurements
Assets held for sale, net - 77,880,288 77,880,288
Fair value
Financial assets
Cash and other cash items - 250,147,358 250,147,358
Due from other banks - 767,097,024 767,097,024
Due from BSP - 135,594,884 135,594,884
Loans and advances, net - 15,679,134,887 15,679,134,887
Other resources, net - 238,337,853 238,337,853
Deposit liabilities - 16,792,441,424 16,792,441,424
Accrued interest and other expenses - 331,803,210 331,803,210
Other liabilities - 1,129,339,083 1,129,339,083
Fair value
Recurring measurements
Financial assets at FVOCI
Equity security 17,123 - 17,123
17,123 - 17,123
Non-recurring measurements
Assets held for sale, net - 90,530,113 90,530,113
(36)
Fair value
Financial assets
Cash and other cash items - 288,788,443 288,788,443
Due from other banks - 1,088,893,413 1,088,893,413
Due from BSP - 4,326,564,677 4,326,564,677
Loans and advances, net - 10,966,782,236 10,966,782,236
Other resources, net - 247,944,225 247,944,225
Deposit liabilities - 14,277,235,315 14,277,235,315
Accrued interest and other expenses - 223,239,533 223,239,533
Other liabilities - 773,669,248 773,669,248
There are no transfers between the fair value hierarchy above for the years ended December 31, 2022 and 2021.
22 Capital management
Capital management is understood to be a facet of risk management. The primary objective of the Bank is the
generation of recurring acceptable returns to shareholder’s capital. To this end, the Bank’s policies, business
strategies and activities are directed towards the generation of cash flows that are in excess of its fiduciary and
contractual obligations to its depositors, and to its various funders and stakeholders.
Cognizant of its exposure to risks, the Bank understands that it must maintain sufficient capital to absorb
unexpected losses, to stay in business for the long haul, and to satisfy regulatory requirements. The Bank further
understands that its performance, as well as the performance of its various units, should be measured in terms of
returns generated vis-à-vis allocated capital and the amount of risk borne in the conduct of business.
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% and
7.5%, respectively. A capital conservation buffer of 2.5%, comprised of CET1 capital, was likewise imposed. The
minimum required capital adequacy ratio (CAR) remains at 10% which includes the capital conservation buffer.
The table below summarizes the Bank’s CAR under the Basel III framework for the years ended December 31:
2022 2021
Tier 1 capital 4,165,669,372 3,202,409,332
Tier 2 capital 141,119,944 104,489,865
Gross qualifying capital 4,306,789,316 3,306,899,197
Less: Required deductions 517,531,626 534,355,986
Total qualifying capital 3,789,257,690 2,772,543,211
Risk weighted assets 20,571,489,815 15,564,740,408

CET1 17.73% 17.14%
CAR (%) 18.42% 17.81%
The Bank has fully complied with the CAR requirement of the BSP as at December 31, 2022 and 2021.o
(37)
Note 23 - Summary of significant accounting policies
The principal accounting policies applied in the preparation of the Bank’s financial statements are set out below.
These policies have been consistently applied to both years presented, unless otherwise stated.
23.1 Basis of preparation
The financial statements of the Bank have been prepared in accordance with Philippine Financial Reporting
Standards (PFRSs). The term PFRSs in general includes all applicable PFRSs, Philippine Accounting Standards
(PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations Committee
(SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the
Financial and Sustainability Reporting Standards Council (FSRSC) and adopted by the SEC.
The financial statements comprise the statement of condition, statement of income and statement of
comprehensive income shown as two statements, statement of changes in capital funds, the statement of cash
flows and the notes.
These financial statements of the Bank have been prepared under the historical cost convention, as modified by the
revaluation of investment security at FVOCI and plan assets of the Bank’s pension plans measured at fair value.
The preparation of these financial statements in conformity with PFRSs requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the Bank’s
accounting policies. Changes in assumptions may have a significant impact on the financial statements in the
period the assumptions changed. Management believes that the underlying assumptions are appropriate and that
the financial statements therefore fairly present the financial position and results of the Bank. The areas involving
higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 20.
23.1.1 Changes in accounting policy and disclosures
(a) Amendments to existing standards adopted by the Bank
The Bank has adopted the following amendments to existing standards effective January 1, 2022:
• Amendment to PAS 16, ‘Property, Plant and Equipment’
The amendment prohibits an entity from deducting from the cost of an item of property, plant and equipment
any proceeds received from selling the items produced while the entity is preparing the asset for its intended use.
It also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical
and physical performance of the asset.
• PAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’
The amendment clarifies that the direct costs of fulfilling a contract include both the incremental costs of
fulfilling the contract and an allocation of other costs directly related to fulfilling the contract. Before
recognizing a separate provision for an onerous contract, the entity recognizes any impairment loss that has
occurred on assets used in fulfilling the contract.
(38)
• Annual Improvements to PFRSs 2018-2020
The following improvements were finalized in May 2020:
i. PFRS 9, ‘Financial Instruments’, clarifies which fees should be included in the 10% test for derecognition
of financial liabilities.
ii. PFRS 16, ‘Leases’, amendment to remove the illustration of payments from the lessor relating to leasehold
improvements, to remove any confusion about the treatment of lease incentives.
The adoption of the above amendments did not have a material impact on the financial statements of the Bank.
New standards and amendments to existing standards not yet adopted by the Bank
The following new accounting standards and amendments to existing standards are not mandatory for
December 31, 2022 reporting period and have not been early adopted by the Bank:
• Amendments to PAS 1, ‘Presentation of Financial Statements’
The amendments clarify that liabilities are classified as either current or non-current, depending on the rights
that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or
events after the reporting date (e.g. the receipt of a waiver or a breach of covenant). The amendments also
clarify what PAS 1 means when it refers to the ‘settlement’ of a liability.
In addition, PAS 1 requires entities to disclose their material rather than their significant accounting policies.
The amendments define what is ‘material accounting policy information’ and explain how to identify when
accounting policy information is material. They further clarify that immaterial accounting policy information
does not need to be disclosed. If it is disclosed, it should not obscure material accounting information.
• Amendment to PAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’
The amendment clarifies how companies should distinguish changes in accounting policies from changes in
accounting estimates. The distinction is important, because changes in accounting estimates are applied
prospectively to future transactions and other future events, but changes in accounting policies are generally
applied retrospectively to past transactions and other past events as well as the current period.
• Amendments to PAS 12, ‘Income Taxes
The amendments require entities to recognize deferred tax on transactions that, on initial recognition, give rise
to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions
such as leases of lessees and decommissioning obligations and will require the recognition of additional
deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after the
beginning of the earliest comparative period presented. In addition, entities should recognize deferred tax
assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities at the beginning of
the earliest comparative period for all deductible and taxable temporary differences associated with (a) right-
of-use assets and lease liabilities, and (b) decommissioning, restoration and similar liabilities, and the
corresponding amounts recognized as part of the cost of the related assets. The cumulative effect of
recognizing these adjustments is recognized in retained earnings, or another component of equity, as
appropriate.
The adoption of the above amendments is not expected to have a material impact on the financial statements of the
Bank.
(39)
23.2 Business combination between entities under common control
Business combinations under common control are accounted for using the predecessor cost method following the
guidance under the PIC Q&A No. 2011-02 and PIC Q&A 2012-01. Under this method, the Bank does not restate the
acquired businesses or assets and liabilities to their fair values. The net assets of the combining entities or businesses
are combined using the carrying amounts of assets and liabilities of the acquired entity. No amount is recognized in
consideration for goodwill or the excess of acquirer’s interest in the net fair value of acquired identifiable assets,
liabilities and contingent liabilities over their cost at the time of the common control combination.
The financial statements incorporated the net assets and results of operations of the combining entities or businesses
at the date of acquisition. The difference between the consideration given and the aggregate book value of the assets
and liabilities acquired as of the date of the transaction are included in “Other reserves” under the equity account.
23.3 Financial assets
23.3.1 Classification
Th Bank classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value through profit or loss (FVTPL);

• those to be measured subsequently at FVOCI; and
• those to be measured at amortized cost.
The classification depends on the Bank’s business model for managing the financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments
in equity instruments that are not held for trading, this will depend on whether Bank has made an irrevocable
election at the time of initial recognition to account for the equity investment at FVOCI.
The Bank reclassifies debt investments when and only when its business model for managing those assets changes.
In the determination of the business model, the Bank considers its past experience on how the cash flows for these
assets were collected, how the assets’ performance are evaluated and how risks are assessed and managed.
23.3.2 Recognition
Regular way purchases and sales of financial assets are recognized on trade date, the date on which the Bank
commits to purchase or sell the asset.
23.3.3 Measurement
The classification requirements for debt and equity instruments are described below:
At initial recognition, the Bank measures a financial asset at its fair value plus, in the case of a financial asset not at
FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of
financial assets carried at FVTPL are expensed in profit or loss.
The Bank classifies its debt instruments at amortized cost. As at December 31, 2022 and 2021, the Bank did not
have any debt instruments classified and measured at FVTPL or FVOCI.
Assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not
designated at FVTPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any ECL
allowance recognized and measured. Interest income from these financial assets is included in ‘Interest income’
using the effective interest rate method.
(40)
Financial assets at amortized cost at December 31, 2022 and 2021 include cash and other cash items, due from
BSP, due from other banks, interbank loans receivables, loans and advances, and other resources.
Cash and cash equivalents consist of cash and other cash items, due from BSP and other banks and interbank loans
receivable with maturities of less than three months from the date of acquisition and that are subject to
insignificant risk of changes in value.
Securities sold subject to repurchase agreements are reclassified in the 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 rate
method. Securities purchased under agreements to resell are recorded as loans and advances to other banks and
customers and included in the statement of condition under “Interbank loans receivable.” Securities lent to
counterparties are also retained in the financial statements.
Business model: The business model reflects how the Bank manages the assets in order to generate cash flows.
That is, whether the Bank’s objective is solely to collect the contractual cash flows from the assets or is to collect
both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable, then
the financial assets are classified as part of ‘other’ business model and measured at fair value through profit or loss.
Factors considered by the Bank in determining the business model for a group of assets include past experience on
how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key
management personnel, how risks are assessed and managed and how managers are compensated.
SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash
flows and sell, the Bank assesses whether the financial instruments’ cash flows represent solely payments of
principal and interest (the ‘SPPI test’). In making this assessment, the Bank considers whether the contractual cash
flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of
money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending
arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic
lending arrangement, the related financial asset is classified and measured at FVTPL.
The Bank reclassifies debt investments when and only when its business model for managing those assets changes.
The reclassification takes place from the start of the first reporting period following the change. Such changes are
expected to be very infrequent and none occurred during the period.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is,
instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s
net assets.
The Bank subsequently measures equity investments at FVTPL, except where the Bank’s management has elected,
at initial recognition, to irrevocably designate an equity investment at FVOCI. The Bank’s policy is to designate
equity investments as FVOCI when those investments are held for purposes other than to generate investment
returns. When this election is used, fair value gains and losses are recognized in other comprehensive income and
are not subsequently reclassified to profit or loss, even on disposal. Impairment losses and reversal of impairment
losses, if any, are not reported separately from other changes in fair value. Dividends, when representing a return
on such investments, continue to be recognized in profit or loss as other income when the Bank’s right to receive
payments is established.
The Bank’s investment in a listed equity security at December 31, 2022 and 2021 is measured at FVOCI.
(41)
23.3.4 Impairment of financial assets at FVOCI and at amortized costs
The Bank assesses impairment as follows:
• individually for loans that exceed specified thresholds - where there is an objective evidence of impairment,
individually assessed provisions will be recognized; and
• collectively for loans below the specified thresholds noted above or if there is no objective evidence of
impairment. These loans are included in a group of loans with similar risk characteristics and collectively
assessed for impairment. If there is objective evidence that the group of loans is collectively impaired,
collectively assessed provisions will be recognized.
The Bank assesses on a forward-looking basis the ECL associated with its debt instruments carried at amortized
cost and FVOCI and with the exposure arising from loan commitments. The Bank recognizes a loss allowance for
such losses at each reporting date. The measurement of ECL reflects:
• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• The time value of money; and
• Reasonable and supportable information that is available without undue cost or effort at the reporting date
about past events, current conditions and forecasts of future economic conditions.
PFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition as
summarized below:
• A financial instrument that is not credit-impaired on initial recognition is classified in “Stage 1” and has its credit
risk continuously monitored by the Bank.
• If a SICR since initial recognition is identified, the financial instrument is moved to “Stage 2” but is not yet
deemed to be credit-impaired. The Bank determines SICR based on prescribed benchmarks approved by the
Board of the Directors.
• If the financial instrument is credit-impaired, the financial instrument is then moved to “Stage 3”.
• Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that
results from default events possible within the next 12 months. Instruments in Stages 2 or 3 have their ECL
measured based on ECL on a lifetime basis.
• A pervasive concept in measuring ECL in accordance with PFRS 9 is that it should consider forward-looking
information.
The Bank assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at
amortized cost and FVOCI. The Bank recognizes a loss allowance for such losses at each reporting date.
The following diagram summarizes the impairment requirements under PFRS 9 (other than purchased originated
credit-impaired financial assets):
Change in credit quality since initial recognition

(Initial recognition) (Significant increase in credit (Credit-impaired assets)
risk since initial recognition)
12-month expected credit losses Lifetime expected credit losses Lifetime expected credit losses
For ECL provisions modelled on a collective basis, a grouping of exposures is performed on the basis of shared risk
characteristics, such that risk exposures within a group are homogeneous.
(42)
Determination of SICR
The Bank compares the probabilities of default occurring over its expected life as at the reporting date with the
probability of default occurring over its expected life on the date of initial recognition to determine significant
increase in credit risk. Since comparison is made between forward-looking information at reporting date against
initial recognition, the deterioration in credit risk may be triggered by the following factors:
• substantial deterioration in credit quality as measured by the applicable internal or external ratings, credit
score or shift from investment grade category to non-investment grade category;
• adverse changes in business, financial and/or economic conditions of the borrower;
• early warning signs of worsening credit where the ability of the counterparty to honor his obligation is
dependent upon favorable business or economic condition;
• the account has become past due beyond 30 days where an account is classified under special monitoring
category; and
• expert judgment for the other quantitative and qualitative factors which may result to SICR as defined by the
Bank.
Measuring ECL - Inputs, assumptions and estimation techniques
The ECL is measured on either a 12-month or lifetime basis depending on whether a significant increase in credit
risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. ECLs are the
discounted product of the PD, EAD and LGD, defined as follows:
• The PD represents the likelihood that the borrower will default (as per “Definition of default and credit-
impaired” above), either over the next 12 months (12M PD), or over the remaining life (lifetime PD) of the
asset.
• EAD is based on the amounts the Bank expects to be owed at the time of default, over the next 12 months (12M
EAD) or over the remaining life (lifetime EAD). For example, for a revolving commitment, the Bank includes
the current drawn balance plus any further amount that is expected to be drawn up to the current contractual
limit by the time of default, should it occur.
The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by
product type.
• For amortizing products and bullet repayment loans, this is based on the contractual repayments owed by
the borrower over a 12-month or lifetime basis.
• For committed credit lines, the exposure at default is predicted by taking current drawn balance and
adding a “credit conversion factor” which allows for the expected drawdown of the remaining limit by the
time of default.
• LGD represents the Bank’s expectation of the extent of loss on a defaulted exposure. LGD varies by type of
counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed
as a percentage loss per unit of exposure at the time of default.
The LGDs are determined based on the factors which impact the recoveries made post-default.
• For secured products, this is primarily based on collateral type and projected collateral values, historical
discounts to market/book values due to forced sales, time to repossession and recovery costs observed.
• For unsecured products, LGDs are typically set at product level due to the limited differentiation in
recoveries achieved across different borrowers. These LGDs are influenced by collection strategies and
historical recoveries.
(43)
The ECL is determined by multiplying the PD, LGD and EAD together for each individual exposure or collective
segment. This effectively calculates an ECL for each future year, which is then discounted back to the reporting
date and summed. The discount rate used in the ECL calculation is the original effective interest rate or an
approximation thereof.
The lifetime PD is developed by applying a maturity profile to the current 12M PD. The maturity profile looks at
how defaults develop on a portfolio from the point of initial recognition throughout the life of the loans. The
maturity profile is based on historical observed data and is assumed to be the same across all assets within a
portfolio and credit grade band.
Forward-looking economic information is also included in determining the 12-month and lifetime PD. These
assumptions vary by product type.
The assumptions underlying the ECL calculation such as how the maturity profile of the PDs and how collateral
values change are monitored and reviewed regularly.
The Bank’s forward-looking, point-in-time PD models are driven by internal forecasts of MEVs over the next five
years. These models were previously recalibrated annually, but in view of the COVID-19 pandemic, more frequent
review and update of these models were conducted starting April 2020 as MEV forecasts were revised quarterly in
response to changing macroeconomic conditions. Furthermore, the pandemic was expected to dampen demand for
auto and real estate collaterals and thus decrease market prices, so appropriate haircuts were applied on estimated
recoveries from collaterals. These haircuts, however, did not increase the Bank’s LGD as these were offset by the
Bank’s favorable collection experience.
Forward-looking information incorporated in the ECL models
The Bank incorporates historical and current information, and forecasts forward-looking events and key economic
variables that are assessed to impact credit risk and ECL for each portfolio. Macroeconomic variables that affect a
specific portfolio’s non-performing loan rate(s) are determined through statistical modelling and the application of
expert judgement. The Bank’s economics team establishes possible global and domestic economic scenarios. With
the use of economic theories and conventions, expert judgement and external forecasts, the economics team
develops assumptions to be used in forecasting variables in the next five (5) years, subsequently reverting to long
run-averages. The probability-weighted ECL is calculated by running each scenario through the relevant ECL
models and multiplying it by the appropriate scenario weighting.
The estimation and application of forward-looking information requires significant judgment. As with any
economic forecasts, the projections and likelihood of occurrences are subject to a high degree of inherent
uncertainty and therefore the actual outcomes may be significantly different to those projected. The scenarios and
their attributes are reassessed at each reporting date. Information regarding the forward-looking economic
variables and the relevant sensitivity analysis is disclosed in Note 21.
(44)
Financial assets with low credit risk
Loss allowance for financial assets at amortized cost and FVOCI that have low credit risk is limited to 12-month
ECLs. Management considers “low credit risk” for listed government bonds to be an investment grade credit rating
with at least one major rating agency. Other debt instruments are considered to be low credit risk when they have a
low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near
term.
Definition of default and credit-impaired assets
The Bank considers a financial instrument in default or credit-impaired, when it meets one or more of the
following criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments (with the exception of credit cards and
micro-finance loans where a borrower is required to be 90 days past due and over 7 days past due, respectively, to
be considered in default).
Qualitative criteria
The counterparty is experiencing significant financial difficulty which may lead to non-payment of loan as may be
indicated by any or combination of the following events:
• The counterparty is in long-term forbearance;

• The counterparty is insolvent;
• The counterparty is in breach of major financial covenant(s) which lead(s) to event of default;
• An active market for the security has disappeared;
• Granting of concession that would not be otherwise considered due to economic or contractual reasons
relating to the counterparty’s financial difficulty;
• It is becoming probable that the counterparty will enter bankruptcy or other financial reorganization; and
• Financial assets are purchased or originated at a deep discount that reflects the incurred credit losses.
The criteria above have been applied to all financial instruments held by the Bank and are consistent with the
definition of default used for internal credit risk management purposes. The default definition has been applied
consistently to model the PD, EAD, and LGD throughout the Bank’s ECL calculations.
The Bank’s definition of default is substantially consistent with non-performing loan definition of the BSP. For
treasury and debt securities, these are classified as defaulted based on combination of BSP and external credit
rating agency definitions.
(45)
23.3.5 Modification of loans
The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this
happens, the Bank assesses whether or not the new terms are substantially different to the original terms. The Bank
does this by considering, among others, the following factors:
• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to
amounts the borrower is expected to be able to pay.
• Significant extension of the loan term when the borrower is not in financial difficulty.
• Significant change in the interest rate.
• Change in the currency the loan is denominated in.x
• Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated
with the loan.
If the terms are substantially different, the Bank derecognizes the original financial asset and recognizes a ‘new’
asset at fair value and recalculates a new effective interest rate for the asset. The date of renegotiation is
consequently considered to be the date of initial recognition for impairment calculation purposes, including for the
purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses
whether the new financial asset recognized is deemed to be credit-impaired at initial recognition, especially in
circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed
payments. Differences in the carrying amount are also recognized in the statement of income as a gain or loss on
derecognition.
If the terms are not substantially different, the Bank recalculates the gross carrying amount of the financial asset
and recognizes a modification gain or loss in the statement of income. The gross carrying amount of the financial
asset shall be recalculated as the present value of the renegotiated or modified contractual cash flows that are
discounted at the financial asset’s original effective interest rate (or credit-adjusted effective interest rate for
purchased or originated credit-impaired financial assets.
Loan modifications in compliance with Bayanihan Acts 1 and 2, are treated in line with the Bank’s policies
discussed above.
23.3.6 Derecognition of financial assets other than modification
Financial assets, or a portion thereof, are derecognized when the contractual rights to receive the cash flows from
the assets have ceased, or when they have been transferred and either (i) the Bank transfers substantially all the
risks and rewards of ownership, or (ii) the Bank neither transfers nor retains substantially all the risks and rewards
of ownership and the Bank has not retained control.
The Bank derecognizes financial assets if the principal terms and conditions have been modified in accordance
with a new (restructured) agreement setting forth a new plan of payment or a schedule of payment on a periodic
basis. Derecognition of loan is necessary in cases where the deterioration in the financial position of the borrower
is such that the borrower can no longer service his debt, whether principal and/or interest, according to existing
terms and conditions. This would have been brought about by major operating losses and/or serious and sustained
impairment in cash flow, in turn caused by factors such as adverse economic and industry trends, contraction of
markets or revenue sources, heavy debt burden, poor business/financial management, labor unrest, and product
obsolescence which contributed to business financial difficulty.
(46)
The Bank enters into transactions where it retains the contractual rights to receive cash flows from assets but
assumes a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks
and rewards. These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the
Bank:
(i) Has no obligation to make payments unless it collects equivalent amounts from the assets;
(ii) Is prohibited from selling or pledging the assets; and
(iii) Has an obligation to remit any cash it collects from the assets without material delay.
23.3.7 Write-off policy
The Bank writes off financial assets when it has exhausted all practical recovery efforts and has concluded there is
no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i)
ceasing enforcement activity and (ii) where the Bank’s recovery method is foreclosing on collateral and the value of
the collateral is such that there is no reasonable expectation of recovering in full.
The Bank may write-off financial assets that are still subject to enforcement activity. The outstanding contractual
amounts of such assets written off during the year ended December 31, 2022 was P684.48 million.
(2021 - P725.33 million). The write-off of loans is being approved by the BOD in compliance with the BSP
requirements.
23.4 Financial liabilities
23.4.1 Classification
The Bank classifies its financial liabilities in the following categories: at FVTPL and at amortized cost. The Bank
has only financial liabilities at amortized cost as at December 31, 2022 and 2021.
Financial liabilities at amortized cost pertain to financial instruments not classified at FVTPL and contain
obligations to deliver cash or another financial assets to settle the obligations.
Financial liabilities measured at amortized cost include deposit liabilities, accrued interest and other expenses, and
other liabilities (except tax-related or statutory payables).
23.4.2 Recognition and measurement
Initial recognition and measurement
Financial liabilities at amortized cost are initially recognized at fair value less transaction costs.
Subsequent measurement
Financial liabilities at amortized cost are subsequently measured at amortized cost using the effective interest rate
method.
23.4.3 Derecognition
Financial liabilities are derecognized when they have been redeemed or otherwise extinguished (i.e. when the
obligation is discharged or is cancelled or has expired).
23.5 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 measurement date.
(47)
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.
Financial instruments
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. (PDEX), 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.
• Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
This level includes equity investments and debt instruments with significant unobservable components. This
hierarchy requires the use of observable market data when available. The Bank considers relevant and
observable market prices in its valuations where possible. The Bank has no assets or liabilities classified under
Level 3 as at December 31, 2022 and 2021.
The appropriate level is determined on the basis of the lowest level input that is significant to the fair value
measurement.
For financial instruments traded in active markets, the determination of fair values of financial assets and financial
liabilities is based on quoted market prices or dealer price quotations. This includes listed equity securities and
quoted debt instruments on major exchanges and broker quotes mainly from PDEX and Bloomberg.
A financial instrument is regarded as quoted in an active market 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. If the above criteria are not met, the
market is regarded as being inactive. Indications that a market is inactive are when there is a wide bid-offer spread
or significant increase in the bid-offer spread or there are few recent transactions.
For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair
values are estimated from observable data in respect of similar financial instruments, using models to estimate the
present value of expected future cash flows or other valuation techniques, using inputs (for example, LIBOR yield
curve, FX rates, volatilities and counterparty spreads) existing at reporting dates. The Bank uses widely recognized
valuation models for determining fair values of non-standardized financial instruments of lower complexity. For
these financial instruments, inputs into models are generally market observable.
In cases when the fair value of unlisted equity instruments cannot be determined reliably, the instruments are
carried at cost less impairment.
The fair value for loans and advances as well as liabilities to banks and customers are determined using a present
value model on the basis of contractually agreed cash flows, taking into account credit quality, liquidity and costs.
The fair values of contingent liabilities and irrevocable loan commitments correspond to their carrying amounts.
(48)
Non-financial assets or liabilities
The Bank 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 observable inputs, such as prices, broker quotes and other
relevant information generated by market transactions involving identical or comparable assets or group of
assets.
• Income approach - A valuation technique that converts 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).
The fair values were determined in reference to observable market inputs reflecting orderly transactions, i.e.
market listings, published broker quotes and transacted deals from similar and comparable assets, adjusted to
determine the point within the range that is most representative of the fair value under current market conditions.
The fair values of the Bank’s foreclosed assets (shown as Assets held for sale) fall under level 2 of the fair value
hierarchy using market approach. The Bank has no non-financial assets or liabilities classified under Level 3 as at
23.6 Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of condition when there is a
legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or
realize the asset and settle the liability simultaneously. As at December 31, 2022 and 2021, there are no financial
assets and liabilities that have been offset.
23.7 Bank premises, furniture, fixtures and equipment
Bank premises, furniture, fixtures and equipment are stated at historical cost less accumulated depreciation.
Historical cost includes expenditure that is directly attributable to the acquisition of an asset which comprises its
purchase price, import duties and any directly attributable costs of bringing the asset to its working condition and
location for its intended use.
Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of
the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the
financial year in which they are incurred. Depreciation on furniture, fixtures and equipment is calculated using the
straight-line method to allocate their cost less residual values over the useful lives of three to five years.
Depreciation on assets is calculated using the straight-line method to allocate cost of each asset less its residual
value over its estimated useful life as follows:
Estimated useful life

Based on lease term or life of the leased item
Leasehold, Rights and Improvements whichever is shorter
Furniture, Fixtures, and Equipment 36 months
FFE-Computer Equipment 36 months
(49)
Leasehold rights and improvements in progress are stated at cost. Costs are accumulated in the accounts until
these projects are completed upon which these are classified to the appropriate property accounts and
accordingly depreciated.
Major renovations are depreciated over the remaining useful life of the related asset. The assets’ residual values
and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell or value-in-use.
An item of Bank 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 profit or loss in the period the item is derecognized.
23.8 Computer software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the
specified software. These costs are amortized on a straight-line basis over the expected useful lives of three to five
years. Computer software is included in Other resources, net.
Costs associated with maintaining computer software programs are recognized as an expense as incurred.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Computer software is derecognized upon disposal or when no future economic benefits are expected from its use
or disposal.
(50)
23.9 Impairment of non-financial assets
Asset that have indefinite useful lives are not subject to amortization and depreciation and are tested annually for
impairment. Assets that have definite useful life are subject to amortization and are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For
purposes of assessing impairment, assets are grouped at the lowest levels for which there is a separately
identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment
are reviewed for possible reversal of the impairment at each reporting date.
23.10 Foreclosed asset
Assets foreclosed shown as Assets held for sale in the statement of condition 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.
These foreclosed assets are classified as assets held for sale since it is the intention of the Bank’s management to
principally recover the carrying amount through sale transactions and the sale is considered highly probable.
The sale is expected to be completed within one year from the date of classification. In case events or
circumstances may extend the period to complete the sale beyond one year, the extension of the period to complete
the sale does not preclude the asset from being classified as held-for-sale if the delay is caused by events or
circumstances beyond the Bank’s control and the Bank remains committed to its plan to sell the asset.
23.11 Accrued expenses and other liabilities
Accrued expenses and other liabilities are recognized in the period in which the related money, goods or services
are received or when a legally enforceable claim against the Bank is established.
Accrued expenses and other liabilities are derecognized upon settlement, or when discharged, cancelled or expired.
23.12 Provisions for legal or contractual obligations
Provisions are recognized when the Bank has a present legal or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using
a pre-tax rate that reflects the current market assessments of the time value of money and the risk specific to the
obligation. The increase in provision due to the passage of time is recognized as interest expense.
23.13 Interest income and expense
Interest income and expense are recognized in the statement of income for all interest-bearing financial
instruments using the effective interest rate method.
(51)
When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the
financial instrument but does not consider future credit losses. The calculation includes all fees paid or received
between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment
loss, interest income is recognized using the rate of interest used to discount future cash flows for the purpose of
measuring impairment loss.
23.14 Service fee income
The Bank recognized revenue when (or as) the Bank satisfies a performance obligation by transferring a promised
good or service to a customer (i.e. an asset). An asset is transferred when (or as) the customer obtains control of that
asset.
Fees and commissions are generally recognized over time when the service has been provided and the control over
the service is transferred to the customer. The service being rendered by the Bank represents a single performance
obligation.
Fees and commissions, mainly representing service fees, are recognized on an accrual basis when the service has
been provided. Fees and commission arising from loans, deposits and other banking transactions are recognized
as income based on agreed terms and conditions.
23.15 Foreign currency translation
Functional and presentation currency
Items in the financial statements of the Bank are measured using the currency of the primary economic
environment in which it operates (the functional currency). The financial statements are presented in Philippine
Peso, which is the Bank’s functional currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuations where items are remeasured. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognized in the statement of income.
23.16 Income taxes
The tax expense for the period comprises current and deferred income tax. Tax is recognized in profit or loss, except
to the extent that 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 income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
reporting date in the country where the Bank operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which the 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.
(52)
Deferred income tax
Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. The deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time
of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantively enacted at the reporting date and are expected to apply
when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax
losses (NOLCO) and unused tax credits (excess minimum corporate income tax or MCIT) to the extent that it is
probable that future taxable profit will be available against which the temporary differences, unused tax losses and
unused tax credits can be utilized.
Deferred income tax liabilities are recognized in full for all taxable temporary differences. Deferred income tax
liabilities are provided on taxable temporary differences except for deferred income tax liability where the timing
of the reversal of the temporary difference is controlled by the Bank and it is probable that the temporary
difference will not reverse in the foreseeable future.
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.
23.17 Employee benefits
(a) Short-term benefits
The Bank recognizes a liability, net of amount already paid and an expense for services rendered by employees
during the accounting period. Short-term benefits given to its employees include salaries and wages, social security
contributions, short-term compensated absences and bonuses, and
non-monetary benefits.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided.
(b) Defined benefit retirement plan
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement of condition in respect of defined benefit pension plan is the present value
of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit
obligation is calculated annually by an independent actuary using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of government bonds 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 pension liability.
The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan. The amount of pension asset recognized in the books is reduced
by the amount of asset ceiling, as applicable.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise.
(53)
Past-service costs are recognized immediately in profit or loss.
For individual financial reporting purposes, the unified plan assets are allocated based on the level of the defined
benefit obligation attributable to each entity to arrive at the net liability or asset that should be recognized in the
individual financial statements.
(c) Defined contribution retirement plan
The Bank also maintains a defined contribution plan that covers certain full-time employees. Under its defined
contribution plan, the Bank pays fixed contributions based on the employees’ monthly salaries. The Bank,
however, is covered under RA No. 7641, otherwise known as The Philippine Retirement Pay Law, which provides
for its qualified employees a defined benefit minimum guarantee. The defined benefit 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 No. 7641. Accordingly, the Bank accounts for its
retirement obligation under the higher of the defined benefit obligation relating to the minimum guarantee and the
obligation arising from the defined contribution plan.
For the defined benefit minimum guarantee plan, the liability is determined based on the present value of the
excess of the projected defined benefit obligation over the projected defined contribution obligation at the end of
the reporting period. The defined benefit obligation is calculated annually by a qualified independent actuary using
the projected unit credit method. The Bank determines the net interest expense (income) on the net defined
benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation
at the beginning of the annual period to the net defined benefit liability (asset) and then, it takes into account any
changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit
payments. Net interest expense and other expenses related to the defined benefit plan are recognized in the
statement of income.
The defined contribution liability is measured at the fair value of the defined contribution assets upon which the
defined contribution benefits depend, with an adjustment for margin on asset returns, if any, where this is
reflected in the defined contribution benefits.
Actuarial gains and losses arising from the remeasurements of the net defined contribution liability are recognized
immediately in other comprehensive income.
(d) Profit sharing and bonus plans
The Bank recognizes a liability and an expense for bonuses and profit-sharing, based on a formula that takes into
consideration the profit attributable to the Bank’s shareholder after certain adjustments. The Bank recognizes a
provision where contractually obliged or where there is a past practice that has created a constructive obligation.
23.18 Share capital; Surplus
Share capital represents common shares.
Incremental costs directly attributable to the issue of new shares are shown in capital funds as a deduction from
the proceeds, net of tax.
Surplus includes current and prior years’ results of operations, with the excess being declared for dividend payout
or reserved for the Bank’s future use.
23.19 Dividends on common shares
Dividends are recognized as a liability in the Bank’s financial statements in the year in which they are approved by the
Board of Directors.
(54)
23.20 Leases
The Bank recognizes leases as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use.
Assets and liabilities arising from long-terms leases are initially measured on a present value basis. The interest
expense is recognized in the statement of income over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the lease commencement date plus any initial direct costs
incurred, less any lease incentives received. The right-of-use asset is subsequently depreciated on a
straight-line basis over the lease term. The right-of-use asset may be reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the rate implicit in the lease or, if that rate cannot be readily determined,
the Bank’s incremental borrowing rate. Generally, the Bank uses its incremental borrowing rate as the discount
rate. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a
change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate,
changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a
termination option is reasonably certain not to be exercised.
Payments associated with leases of low-value assets are recognized on a straight-line basis as an expense in the
statement of income. Low-value assets comprise certain IT-equipment and office furniture.
23.21 Related party relationships and transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly through one or more
intermediaries, the other party or exercises significant influence over the other party in making financial and
operating decisions. Such relationship also exists between and/or among entities which are under common control
with the reporting enterprise, or between and/or among the reporting enterprise and its key management personnel,
directors, or its shareholders. In considering each possible related party relationship, attention is directed to the
substance of the relationship, and not merely the legal form.
23.22 Contingencies
Contingent assets are not recognized but are disclosed in the financial statements when an inflow of economic
benefits is probable. Contingent liabilities are not recognized in the financial statements but are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote.
23.23 Subsequent events (or Events after the reporting date)
Post year-end events that provide additional information about the Bank’s financial position at reporting date
(adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are
disclosed in the notes to the financial statements when material.
(55)
Note 24 - Supplementary information required by BSP Circular No. 1074
Presented below are the additional information required by BSP Circular No. 1074 issued on January 8, 2020. This
information is presented for BSP reporting purposes and is not required in the basic financial statements.
(i) Basic quantitative indicators of financial performance
The key financial performance indicators as at December 31 follow:
2022 2021
Return on average equity1 25.62% 11.65%
Return on average assets2 5.20% 1.82%
Net interest margin3 22.88% 19.08%
1Net income divided by average total equity for the period indicated. Average equity is based on the daily average balance of equity for the years ended
2Net income divided by average total assets as at period indicated. Average total assets are based on the daily average balance of total assets as at

Net interest income divided by average interest-earning assets. Average interest earning assets is based on the daily average balance of interest earning assets as
at December 31, 2022 and 2021.
(ii) Description of capital instrument issued
The Bank considers its common shares as capital instrument for the purpose of calculating its CAR as at December
31, 2022 and 2021.
(iii) Significant credit exposures
Details of the Bank’s loans and advances portfolio as to concentration to industry/economic sector (in %) at
December 31 are as follows:
2022 2021
Private household with employed persons 34.0 46.6
Wholesale and retail trade 29.0 32.3
Real estate, renting and other related activities 8.0 11.5
Manufacturing 19.0 3.6
Others 10.0 6.0
100.0 100.0
(iv) Breakdown of total loans
Details of the Bank’s loans and advances portfolio as to collateral (amounts net of unearned discounts and accrued
interest receivable) at December 31 are as follows:
2022 2021
Secured loans
Real estate mortgage 1,340,516,356 1,157,249,284
Chattel mortgage 313,850 540,741
1,340,830,206 1,157,790,025
Unsecured loans 15,693,634,928 11,303,588,435
17,034,465,134 12,461,378,460
(56)
Non-performing loans, net of allowance for credit losses, at December 31 are as follows:
2022 2021
Non-performing loans (NPL) 1,442,676,019 1,536.971,505
Accounts with specific allowance for credit losses (1,056,756,930) (944,002,872)
Net NPL 385,919,089 592,968,633
BSP Circular 941, Amendments to Regulations on Past Due and Non-Performing Loans, states that loans,
investments, receivables, or any financial asset shall be considered non-performing, even without any missed
contractual payments, when it is considered impaired under existing accounting standards, classified as doubtful or
loss, in litigation, and if there is an evidence that full repayment of principal and interest is unlikely without
foreclosure of collateral. All other loans, even if not considered impaired, shall be considered non-performing if any
principal and/or interest are unpaid for more than ninety (90) days from contractual due date, or accrued interests
for more than ninety (90) days have been capitalized, refinanced, or delayed by agreement. Microfinance and other
small loans with similar credit characteristics shall be considered non-performing after contractual due date or after
it has become past due. Restructured loans shall be considered non-performing. However, if prior to restructuring,
the loans were categorized as performing, such classification shall be retained.
(v) Information on related party loans
The Bank does not have DOSRI loans as at December 31, 2022 and 2021.
(vi) Liabilities and assets pledged as security
There are no loans and advances at December 31, 2022 and 2021 used as security for liabilities.
(vii) Contingencies and commitments arising from off-balance sheet items
The Bank does not have any contingencies and commitments arising from off-balance sheet items as at
Note 25 - Supplementary information required by the Bureau of Internal Revenue (BIR)
Below is the additional information required by Revenue Regulations No. 15-2010 that is relevant to the Bank. This
information is presented for the purposes of filing with the BIR and is not a required part of the basic financial
statements.
(i) Documentary stamp tax
2022 2021
Deposit and loan documents 122,923,600 109,919,951
Others 465,600 11,007,810
123,389,200 120,927,761
(57)
(ii) Withholding taxes
Withholding taxes paid/accrued and/or withheld for the year ended December 31, 2022 consist of:
Paid Accrued Total

Creditable income taxes withheld (expanded) 24,974,359 3,697,063 28,671,422
Final income taxes withheld on interest on deposits and
yield on deposit substitutes 5,019,893 631,120 5,651,013
Income taxes withheld on compensation 20,792,622 1,151,024 21,943,646
Final income taxes withheld on the amount withdrawn
from decedent’s deposit account 47,203 38,300 85,503
Final income taxes withheld on income payment 77,408 - 77,408
50,911,485 5,517,507 56,428,992
Withholding tax payable is presented as part of Accrued taxes, interest and other expenses in the statement of
condition.
(iii) All other local and national taxes
All other local and national taxes paid/accrued for the year ended December 31, 2022 consist of:
Paid Accrued Deferred Total

Gross receipts tax 243,554,562 - 74,212,659 317,767,221
Municipal taxes / Mayor’s permit 26,267,410 - - 26,267,410
Fringe benefits tax 141,446 18,846 - 160,292
Real property tax 1,275,383 - - 1,275,383
Others 69,075 - - 69,075
271,307,876 18,846 74,212,659 345,539,381
Except for the gross receipts tax which is netted against the related income, local and national taxes are presented as
part of taxes and licenses under Other operating expenses in the statement of income.
(iv) Tax cases and assessments
As at reporting date, the Bank has no outstanding tax cases under preliminary investigation, litigation and/or
prosecution in courts or bodies outside the BIR.
(58)

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To the Board of Directors and Shareholder of

Report on the Audits of the Financial Statements

What we have audited

The financial statements of the Bank comprise:

• the statements of condition as at December 31, 2022 and 2021;

Basis for Opinion

Auditor’s Responsibilities for the Audit of the Financial Statements

Report on the Supplementary Information Required by the Bangko Sentral ng Pilipinas

Isla Lipana & Co.

Notes 2022 2021

Cash and other cash items 2 250,147,358 288,788,443

LIABILITIES AND CAPITAL FUNDS

Deposit liabilities 10 16,792,441,424 14,277,235,315

(The notes on pages 1 to 58 are an integral part of these financial statements.)

Notes 2022 2021

(The notes on pages 1 to 58 are an integral part of these financial statements.)

Statements of Comprehensive Income

Note 2022 2021

(The notes on pages 1 to 58 are an integral part of the financial statements.)

Statements of Changes in Capital Funds

(The notes on pages 1 to 58 are an integral part of the financial statements.)

Statements of Cash Flows

Notes 2022 2021

December 31 2 5,125,184,005 9,952,4 07,411

Notes to the Financial Statements

Note 1 - General information

1.1 Business information

Coronavirus (COVID-19) pandemic

1.2 Approval of the Bank’s financial statements

The account as at December 31 consists of:

Notes 2022 2021

Note 3 - Interbank loans receivable

Interbank loans receivable is classified as current.

Note 4 - Due from BSP

The account as at December 31 consists of:

Note 6 - Loans and advances, net

The account as at December 31 consists of:

Note 7 - Bank premises, furniture, fixtures and equipment, net

Note 8 - Deferred income tax assets, net

Deferred income tax assets and liabilities at December 31 consist of:

The account at December 31 consists of:

Notes 2022 2021

Other resources are expected to be realized as follows:

The movements in the allowance for impairment as at December 31 are as follows:

Reversal of impairment in 2021 is due to collections of previously impaired accounts receivables.

Note 10 - Deposit liabilities

The account as at December 31 consists of:

Note 11 - Accrued taxes, interest and other expenses

The account as at December 31 consists of:

The above accrued expenses are all considered current.

Note 12 - Other liabilities

The account at December 31 consists of:

Note 2022 2021

Note 13 - Capital funds

Authorized Issued and outstanding

Note 14 - Miscellaneous income

The account for the years ended December 31 consists of:

Note 15 - Other operating expenses

The account for the years ended December 31 consists of: